As filed with the Securities and Exchange Commission on August 19, 1999
File No. 333-78489
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
Columbus Life Insurance Company Separate Account 1
(Exact Name of Trust)
Columbus Life Insurance Company
(Name of Depositor)
400 East Fourth Street
Cincinnati, Ohio 45202
(Complete Address of Depositor's Principal Executive Offices)
Please send copies of all
communications to:
Donald J. Wuebbling, Esq. Karen M. McLaughlin, Esq.
Columbus Life Insurance Company Frost & Jacobs LLP
400 East Fourth Street 2500 PNC Center
Cincinnati, Ohio 45202 201 East Fifth Street
(Name and Address of Agent for Service) Cincinnati, Ohio 45202
An Indefinite Amount of Interests in
Columbus Life Insurance Company Separate Account 1 Under
Columbus Life Flexible Premium Variable Universal Life Insurance Policies
(Title of Securities Being Registered)
As soon as practicable after the effective date of this Registration Statement
(Approximate Date of Proposed Public Offering)
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
RECONCILIATION AND TIE BETWEEN ITEMS IN
FORM N-8B-2 AND THE PROSPECTUS
COLUMBUS LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 1
FORM N-8B-2* CAPTION IN PROSPECTUS**
Item 1 Cover Page
Item 2 Columbus Life Insurance Company and Separate Account 1
Item 3 Not Applicable****
Item 4 Service Providers
Item 5 Columbus Life Insurance Company and Separate Account 1
Item 6 Columbus Life Insurance Company and Separate Account 1
Item 7 Not Required***
Item 8 Not Required***
Item 9 Not Applicable****
Item 10 Purchasing Your Policy
Borrowing Your Money
Withdrawing Your Money
Death Benefits
Payment of Policy Proceeds
Charges
Continuation of Your Policy
Other Information About Your Policy
Premium Payments
Voting Rights
Columbus Life Insurance Company and Separate Account 1
Information About the Investment Options
Allocation of Net Premiums
Transferring Your Money
Riders
Tax Matters
Item 11 Information About the Investment Options
Item 12 Service Providers
Item 13 Policy at a Glance
Borrowing Your Money
Withdrawing Your Money
Death Benefits
Charges
Riders
Information About the Investment Options
Service Providers
Item 14 Purchasing Your Policy
Riders
Other Information About Your Policy
<PAGE>
Item 15 Purchasing Your Policy
Premium Payments
Allocation of Net Premiums
Transferring Your Money
Other Information About Your Policy
Information About the Investment Options
Valuation of Your Investment
Item 16 Allocation of Net Premiums
Transferring Your Money
Borrowing Your Money
Withdrawing Your Money
Charges
Information About the Investment Options
Valuation of Your Investment
Item 17 Purchasing Your Policy
Borrowing Your Money
Withdrawing Your Money
Death Benefits
Payment of Policy Proceeds
Charges
Continuation of Your Policy
Other Information About Your Policy
Riders
Item 18 Valuation of Your Investment
Columbus Life Insurance Company and Separate Account 1
Item 19 Other Information About Your Policy
Item 20 Not Applicable****
Item 21 Borrowing Your Money
Continuation of Your Policy
Item 22 Not Applicable****
Item 23 Columbus Life Insurance Company and Separate Account 1
Item 24 Information About the Investment Options
Valuation of Your Investment
Item 25 Columbus Life Insurance Company and Separate Account 1
Item 26 Not Applicable****
Item 27 Columbus Life Insurance Company and Separate Account 1
Item 28 Columbus Life Insurance Company and Separate Account 1
Item 29 Columbus Life Insurance Company and Separate Account 1
Item 30 Not Applicable****
Item 31 Not Applicable****
Item 32 Not Applicable****
Item 33 Not Applicable****
Item 34 Not Applicable****
Item 35 Purchasing Your Policy
Service Providers
<PAGE>
Item 36 Not Required***
Item 37 Not Applicable****
Item 38 Service Providers
Item 39 Service Providers
Item 40 Not Applicable****
Item 41 Service Providers
Item 42 Not Applicable****
Item 43 Not Applicable****
Item 44 Charges
Valuation of Your Investment
Premium Payments
Item 45 Not Applicable****
Item 46 Payments of Policy Proceeds
Charges
Valuation of Your Investment
Item 47 Information about the Investment Options
Item 48 Not Applicable****
Item 49 Not Applicable****
Item 50 Columbus Life Insurance Company and Separate Account 1
Item 51 Columbus Life Insurance Company and Separate Account 1
Death Benefits
Riders
Other Information About Your
Policy Payment of Policy Proceeds
Purchasing Your Policy Premium
Payments Borrowing Your Money
Withdrawing Your Money
Continuation of Your Policy Other
Information About Your Policy
Charges Valuation of Your
Investment
Item 52 Information About the Investment Options
Item 53 Tax Matters
Item 54 Not Applicable****
Item 55 Not Applicable****
Item 56 Not Required***
Item 57 Not Required***
Item 58 Not Required***
Item 59 Not Required***
* Registrant includes this Reconciliation and Tie Statement in its
Registration Statement in compliance with Instruction 4 as to the
Prospectus as set out in Form S-6. Registrant filed a Notification of
Registration as an investment company on Form N-8A and a Form N-8B-2
Registration Statement under the Investment
<PAGE>
Company Act of 1940 on May 14, 1999 (File No. 811-9337). Pursuant to
Sections 8 and 30(b)(1) of the Investment Company Act of 1940,
Rule 30a-1 under that Act, and Forms N-8B-2 and N-SAR under that Act,
Registrant will keep its Form N-8B-2 Registration Statement current
through the filing of periodic reports required by the Securities and
Exchange Commission.
** Caption in Prospectus, to the extent relevant to this Form. Certain
items are not relevant pursuant to the administrative practice of the
Commission and its staff of adapting the disclosure requirements of the
Commission's registration statement forms in recognition of the
differences between variable life insurance policies and other periodic
payment plan certificates issued by investment companies and between
separate accounts organized as management companies and unit investment
trusts.
*** Not required pursuant to Instruction 1(a) as to the Prospectus as set
out in Form S-6.
**** Omitted from the Prospectus pursuant to Instruction 3 as to the
Prospectus as set out in Form S-6.
<PAGE>
Columbus Life Flexible Premium
Variable Universal Life Insurance Policy
Columbus Life Insurance Company
Separate Account 1
Prospectus
August _____, 1999
This Prospectus describes the Columbus Life Flexible Premium Variable Universal
Life Insurance Policy (Policy) and the investment options available to Policy
owners. It contains information you should know before purchasing a Policy and
selecting your investment options. Please read this Prospectus carefully and
keep it for future reference.
The Policy is issued by Columbus Life Insurance Company (Columbus Life). The
Policy is an investment alternative that offers you:
o Life insurance protection o Tax-deferred earnings
o Flexible premium payments o Access to your funds through
o Flexible benefits withdrawals and loans
o Optional coverages o 19 investment options
You tell us how to invest your premium payments among the investment options.
Your investment options include the following Sub-Accounts of Separate Account
1:
o AIM V.I. Growth o Touchstone International Equity
o AIM V.I. Government Securities o Touchstone Income Opportunity
o Alger American Small Capitalization o Touchstone High Yield
o Alger American Growth o Touchstone Value Plus
o MFS VIT Emerging Growth o Touchstone Growth & Income
o MFS VIT Growth with Income o Touchstone Enhanced 30
o PIMCO Long-Term U.S. Government o Touchstone Balanced
o Touchstone Small Cap Value o Touchstone Bond
o Touchstone Emerging Growth o Touchstone Standby Income
The Fixed Account is an additional investment option. It is a fixed-rate option,
backed by the general assets of Columbus Life.
The Securities and Exchange Commission maintains a web site (http://www.sec.gov)
that contains certain other material that is legally part of the registration
statement for Columbus Life Insurance Company Separate Account 1 (Separate
Account 1) and other information about Separate Account 1. You can view these
documents at the Public Reference Room of the Securities and Exchange Commission
or obtain copies, for a fee, by writing to the Public Reference Room of the
Securities and Exchange Commission, 450 Fifth Street N.W., Washington, D.C.
20549. You can also call the Securities and Exchange Commission at 800.SEC.0330.
<PAGE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Policies or determined if this
Prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
The Policy is not a deposit or obligation of any bank. No bank has guaranteed or
endorsed the Policy. The Policy is not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, the National Credit Union
Share Insurance Fund or any other agency.
Each Sub-Account invests in a corresponding Fund that may have a name and/or
investment objective that is very similar to the name of a publicly available
mutual fund managed by the same advisor and sub-advisor. The Funds in which the
Sub-Accounts invest are not publicly available and will not have the same
performance as those publicly available mutual funds. Different performance will
result from differences in various factors that affect the operation of a Fund,
such as implementation of the Fund's investment policies, Fund expenses and size
of the Fund. In addition, your investment return from your Policy will be less
than the investment return of a shareholder in the publicly available mutual
funds because you will pay additional charges related to your Policy, such as
premium tax charges and mortality and expense risk charges.
Investments in variable life insurance policies involve investment risk,
including possible loss of principal and interest.
<PAGE>
TABLE OF CONTENTS
TABLE OF CONTENTS..............................................................3
POLICY AT A GLANCE.............................................................4
SUMMARY........................................................................8
PURCHASING YOUR POLICY........................................................12
PREMIUM PAYMENTS..............................................................13
ALLOCATION OF NET PREMIUMS....................................................16
TRANSFERRING YOUR MONEY.......................................................18
BORROWING YOUR MONEY..........................................................20
WITHDRAWING YOUR MONEY........................................................21
DEATH BENEFITS................................................................23
PAYMENT OF POLICY PROCEEDS....................................................27
CHARGES.......................................................................30
CONTINUATION OF YOUR POLICY...................................................36
RIDERS........................................................................40
OTHER INFORMATION ABOUT YOUR POLICY...........................................44
INFORMATION ABOUT THE INVESTMENT OPTIONS......................................50
VALUATION OF YOUR INVESTMENT..................................................58
PERFORMANCE INFORMATION.......................................................59
VOTING RIGHTS.................................................................60
COLUMBUS LIFE INSURANCE COMPANY AND SEPARATE ACCOUNT 1........................60
SERVICE PROVIDERS.............................................................64
TAX MATTERS...................................................................65
OTHER GENERAL INFORMATION.....................................................74
SUPPLEMENT A - POLICY ILLUSTRATION...........................................A-1
SUPPLEMENT B - TABLE OF APPLICABLE DEATH BENEFIT FACTORS.....................B-1
SUPPLEMENT C - TABLE OF COST OF INSURANCE CHARGES............................C-1
SUPPLEMENT D - TABLE OF SURRENDER CHARGES....................................D-1
SUPPLEMENT E - CONTINUATION PROVISIONS.......................................E-1
SUPPLEMENT F - VALUATION PROCEDURES..........................................F-1
COLUMBUS LIFE INSURANCE COMPANY FINANCIAL STATEMENTS
GLOSSARY
3
<PAGE>
POLICY AT A GLANCE
The following is a snapshot of the Policy. Please refer to the Policy and the
remainder of the Prospectus for further details and other information. See
Supplement A for Illustrations of how various aspects of the Policy and
investment performance can affect your Policy.
<TABLE>
<CAPTION>
PREMIUM PAYMENTS AND WITHDRAWALS
- --------------------------------
<S> <C>
Minimum Amounts
Premiums Depends on the Insured's Attained Age, gender and underwriting class and the Specified
Amount of insurance coverage
Withdrawals $500
INSURANCE BENEFIT
- -----------------
Death Benefits
Option 1 Greater of Specified Amount or the applicable multiple of your Account Value
Option 2 Greater of Specified Amount plus Account Value or the applicable multiple of your
Account Value
Minimum Issue Limit
Preferred $100,000
Standard $25,000
Minimum Increase or Decrease in $25,000, subject to Minimum Issue Limit restrictions
Coverage
Riders
Included Rider* Accelerated Death Benefit
Optional Riders Accidental Death
Insured Insurability
Disability Credit
Children's Term
Other Insured
TRANSFERS
- ---------
Number of Free Transfers 12 times between Sub-Accounts per Policy Year; 1 time from the Fixed Account per
Policy Year (25% limitation in the first 4 years) or 1 time to the Fixed Account per
Policy Year (restrictions do not apply to transfers made under the Dollar Cost
Averaging Program)
Minimum Amount of Transfer $250 or the total amount in the Sub-Accounts, whichever is less
LOANS
- -----
Loan Amount
Minimum None
Maximum 90% of the Cash Surrender Value, less any Indebtedness and less the next 2 Monthly
Deductions and Monthly Expense Charges
Interest Rate 6.50% (maximum of 8.00%)
</TABLE>
* Where permitted by state law.
<PAGE>
<TABLE>
<CAPTION>
POLICY CHARGES AND DEDUCTIONS
- -----------------------------
<S> <C>
Percent of Premium Charges
Premium Expense Charges 4.75% (maximum of 5.50%) of premium payments
Tax Charges Varies by state of residence (maximum of 3.50% of premium payments)
Monthly Deductions from Account Value
Cost of Insurance Charges Depends on the Insured's Attained Age, gender and underwriting class,
and your Specified Amount, Account Value and death benefit option
Monthly Expense Charges $6.00 (maximum of $7.00)
Rider Charges
Accelerated Death Benefit No charge until advance of funds (and then the only charge is interest on the advance)
Accidental Death Depends on the Insured's Attained Age and selected Accidental Death Benefit Amount
Insured Insurability Depends on the Insured's Attained Age and selected Insured Insurability Option Amount
Disability Credit Depends on the Insured's Attained Age and selected Credit Amount
Children's Term Depends on selected Children's Term Benefit Amounts
Other Insured Depends on each Other Insured's Attained Age, gender and underwriting class and
selected Other Insured Benefit Amounts
Separate Account Charges
Mortality and Expense 0.90% effective annual rate (maximum of 1.00%) deducted daily from the
Risk Charge Accumulation Unit Value of each Sub-Account
Transaction Charges
Transfer Charges $0 for first 12 transfers among Sub-Accounts each Policy Year; $10 for
each additional transfer in a Policy Year--deducted from Account Value at time of transfer
Surrender Charges
Full Surrender Depends on the decrease in Specified Amount as shown in your most recent Policy Schedule
and in Supplement D (applies during the first 14 years since your Policy Date or since
the date of any increase in Specified Amount)--deducted from Account Value at time of
surrender (maximum of $44.90 per $1,000 decrease in Specified Amount)
Partial Surrender or A pro rata portion of the full surrender charge shown in your most recent Policy Schedule
Withdrawal and in Supplement D (applies during the first 14 years since your Policy Date or since
the date of any increase in Specified Amount) and a $50 withdrawal fee for your second
and each additional withdrawal in a Policy Year--deducted from Account Value at time of
surrender or withdrawal (maximum of $44.90 per $1,000 decrease in Specified Amount)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FUND EXPENSES
- -------------
Total Expenses Total Expenses
Other After Expense Before Expense
Advisor Fees Expenses Reimbursement Reimbursement
<S> <C> <C> <C> <C>
AIM Variable Insurance Funds, Inc.
(Advisor--AIM Advisors, Inc.)
AIM V.I. Growth Fund* 0.64% 0.08% 0.72% 0.72%
AIM V.I. Government Securities Fund* 0.50% 0.26% 0.76% 0.76%
The Alger American Fund
(Advisor--Fred Alger Management, Inc.)
Alger American Small Capitalization Portfolio* 0.85% 0.04% 0.89% 0.89%
Alger American Growth Portfolio* 0.75% 0.04% 0.79% 0.79%
MFS Variable Insurance Trust
(Advisor--Massachusetts Financial Services Company)
MFS VIT Emerging Growth Series* 0.75% 0.10% 0.85% 0.85%(a)
MFS VIT Growth with Income Series* 0.75% 0.13% 0.88% 0.95%(a)
PIMCO Variable Insurance Trust
(Advisor--Pacific Investment Management Company)
PIMCO Long-Term U.S. Government Portfolio* 0.40% 0.25% 0.65% 0.67%(b)
Touchstone Variable Series Trust
(Advisor--Touchstone Advisors, Inc.)
Touchstone Small Cap Value Fund+ 0.80% 0.20% 1.00% 2.70%(c)
Touchstone Emerging Growth Fund* 0.80% 0.35% 1.15% 1.49%(c)
Touchstone International Equity Fund* 0.95% 0.30% 1.25% 1.95%(c)
Touchstone Income Opportunity Fund* 0.65% 0.20% 0.85% 1.25%(c)
Touchstone High Yield Fund+ 0.60% 0.20% 0.80% 2.50%(c)
Touchstone Value Plus Fund+ 0.75% 0.40% 1.15% 7.49%(c)
Touchstone Growth & Income Fund+ 0.80% 0.05% 0.85% 1.37%(c)
Touchstone Enhanced 30 Fund+ 0.65% 0.10% 0.75% 2.45%(c)
Touchstone Balanced Fund* 0.80% 0.10% 0.90% 1.37%(c)
Touchstone Bond Fund+ 0.55% 0.20% 0.75% 1.32%(c)
Touchstone Standby Income Fund* 0.25% 0.25% 0.50% 0.95%(c)
</TABLE>
<PAGE>
* The fee and expense figures shown for the Fund are based on amounts
incurred during the fiscal year ended December 31, 1998.
+ Since the Touchstone Value Plus Fund started on May 1, 1998, the
Touchstone Growth & Income Fund and the Touchstone Bond Fund started on
January 4, 1999, and the Touchstone Small Cap Value Fund, the Touchstone
High Yield Fund and the Touchstone Enhanced 30 Fund started on May 1,
1999, expenses for these funds are based on estimates.
(a) The custodian for each of the MFS Funds has agreed to an expense offset
arrangement if expenses reach a certain level. The MFS Funds may also
have other agreements that reduce the expenses actually paid by the MFS
Funds. For example, prior to October 2, 1998, Massachusetts Financial
Services Company had agreed to waive certain fees or reimburse the MFS
Growth with Income Series so that its expenses did not exceed a
specified level.
(b) Pacific Investment Management Company has agreed to reduce its
administrative fee, subject to potential future reimbursement, to the
extent that the total expenses of the PIMCO Long-Term U.S. Government
Portfolio would exceed 0.65%.
(c) During 1998, fee waiver and expense reimbursement arrangements had the
effect of reducing expenses actually paid by the Touchstone Emerging
Growth Fund, the Touchstone International Equity Fund, the Touchstone
Income Opportunity Fund, the Touchstone Balanced Fund and the Touchstone
Standby Income Fund. Touchstone Advisors, Inc. has agreed to waive
certain fees or reimburse each Touchstone Fund so that the Fund's total
expenses do not exceed the percentage set forth in the "Total Expenses
After Expense Reimbursement" column for the Fund. These agreements will
remain in place until at least December 31, 1999.
<PAGE>
SUMMARY
This summary answers some basic questions about the Policy. Because this is a
summary, please read the Policy and the remainder of the Prospectus for more
details and other information. If the terms of your Policy differ from the
description of the Policy in this Prospectus, you should rely on the terms of
your Policy.
What Kind of Life Insurance is the Policy?
The Policy is a flexible premium, variable universal life insurance policy. The
Policy is called "flexible premium" because you can change the amount and
frequency of your premium payments, within certain limits. The Policy is called
"variable" life insurance because your Cash Surrender Value and your Death
Benefit can vary because your Account Value will vary.
Can I Obtain Personalized Illustrations Demonstrating How the Policy Might Work?
Yes, we will furnish, upon request and free of charge, a personalized
illustration reflecting the proposed Insured's Attained Age, gender and
underwriting class. We may charge a reasonable fee for additional illustrations.
How Do I Purchase a Policy?
You can apply for a Policy by contacting your insurance agent. We will not issue
a Policy that insures a person who does not meet our underwriting standards. We
will also not issue a Policy that insures a person who will be over 85 years of
age on the date the Policy is issued. Insurance coverage under your Policy
begins on the effective date of your Policy.
How Much Life Insurance Can I Purchase?
The minimum amount of life insurance you must purchase depends on which premium
classification applies to your application. If you qualify for our "preferred"
premium classification, the minimum amount of insurance you must purchase is
$100,000; otherwise it is $25,000. We call this minimum amount of insurance the
"Minimum Issue Limit."
We call the amount of insurance that you request the "Specified Amount."
You can request a change to your Specified Amount at any time after the first
Policy Year. We must approve each request. You cannot decrease your Specified
Amount below your Minimum Issue Limit. Surrender charges may apply to decreases
in your Specified Amount.
What Insurance Protection Does the Policy Offer?
The Policy provides life insurance on the Insured. We will pay the Beneficiary
the Death Proceeds when the Insured dies. The Death Proceeds include the Death
Benefit under the Policy plus any insurance provided by riders to the Policy.
<PAGE>
The Death Benefit will never be lower than your Specified Amount less any
Indebtedness. Depending on the Insured's age and your Account Value, the Death
Benefit could be higher than your Specified Amount. The amount of the Death
Benefit also depends on the death benefit option you selected. We offer 2 death
benefit options--Option 1 and Option 2.
Option 1 emphasizes the potential growth of your Account Value. If you select
Option 1, any increase in your Account Value will decrease the risk to us
relative to the death benefit we must pay when the Insured dies and will
decrease your cost of insurance.
Option 2 emphasizes the potential growth of your Death Benefit. If you select
Option 2, any increase in your Account Value will increase the amount of your
Death Benefit. Your cost of insurance will be higher under Option 2.
How Much are the Premium Payments?
When you purchase your Policy, you tell us how much you plan to pay and how
often you plan to pay. This is called your Planned Premium. The amount and
frequency of your Planned Premium is shown in your Policy Schedule. Generally,
you would continue to make Planned Premium payments until the Insured reaches
100 years of age or dies.
You are not required to make premium payments in set amounts or on a set
schedule. You may skip a Planned Premium payment and you may change the amount
and frequency of your Planned Premium. You must use this flexibility responsibly
to ensure that your insurance coverage continues. You may need to increase your
Planned Premium or make additional premium payments to keep your Policy in
force.
What Charges Will I Pay Under the Policy?
We assess charges to support the operation of your Policy and Separate Account
1, such as cost of insurance charges, rider charges, Monthly Expense Charges,
premium expense charges, tax charges and mortality and expense risk charges. In
addition, we assess administrative fees for processing withdrawals and certain
transfers among the Sub-Accounts and surrender charges on withdrawals made in
the first 14 years of the Policy or within 14 years following an increase in
your Specified Amount. Some charges are subtracted from your premium payments,
others reduce your Account Value or the Accumulation Unit Value.
What Factors Affect My Cost of Insurance Charges?
Your cost of insurance charges will depend on the Insured's age, gender and
underwriting class, your Account Value, your Indebtedness and the death benefit
option you select. The underwriting class depends on Insured's health, whether
the Insured uses tobacco and other factors that we use to determine the
insurability of the Insured. The maximum monthly cost of insurance charges will
never exceed the guaranteed monthly cost of insurance rates as shown in your
Policy Schedule.
<PAGE>
What are My Investment Options?
You have 19 investment options for your Net Premiums. You may allocate your Net
Premiums among the 18 Sub-Accounts of Separate Account 1 and the Fixed Account.
Each Sub-Account invests exclusively in a corresponding Fund of AIM Variable
Insurance Funds, Inc. (AIM), The Alger American Fund (Alger), MFS Variable
Insurance Trust (MFS), PIMCO Variable Insurance Trust (PIMCO) or Touchstone
Variable Series Trust (Touchstone). The Sub-Accounts provide an opportunity for
a higher rate of return than the Fixed Account but also expose you to a higher
risk of losing money. The Fixed Account provides a guaranteed minimum rate of
return.
How Do I Allocate My Net Premiums Among Investment Options?
You allocate your Net Premiums by specifying on your application the percentage
of your Net Premiums you would like us to allocate to each investment option.
You may change your allocation instructions at any time by notifying us either
by telephone or in writing. When we receive a premium payment from you, we
allocate the Net Premiums based on the most recent allocation instructions we
have received from you.
How Will My Account Value Vary?
Your Account Value will vary on a daily basis to reflect the investment
experience of the Sub-Accounts. Your Account Value will also reflect the amount
and frequency of premium payments, any withdrawals, any Indebtedness and charges
and deductions connected with your Policy. There is no guaranteed minimum
Account Value, which means that you bear the entire investment risk that your
Account Value could fall to zero.
Can I Transfer My Account Value Among Investment Options?
Yes, you can transfer your Account Value among the Sub-Accounts up to 12 times
per Policy Year without charge. We will charge you $10 for each additional
transfer you make among the Sub-Accounts in a Policy Year. You are also
permitted to make 1 transfer to the Fixed Account or 1 transfer from the Fixed
Account per Policy Year without charge. In the first 4 Policy Years, you cannot
transfer more than 25% of your money from the Fixed Account in a Policy Year.
How Do I Access My Account Value?
Generally, you can withdraw from your Policy part or all of your Account Value,
less any applicable withdrawal fees and surrender charges, and less any
Indebtedness. We generally assess a surrender charge for each partial or full
withdrawal. Partial withdrawals and related withdrawal fees and surrender
charges will reduce your Account Value. Depending upon your Account Value and
death benefit option, partial withdrawals and surrender charges may also reduce
your Specified Amount. A full surrender will terminate your Policy. A partial
withdrawal or surrender may also have tax consequences.
<PAGE>
Can I Borrow Against My Policy?
Yes, you can borrow money from us by using your Policy as the sole collateral
for the loan. The most you can borrow against your Policy is 90% of your Cash
Surrender Value, less any Indebtedness and less an amount sufficient to cover
the next 2 Monthly Deductions and Monthly Expense Charges. The maximum interest
rate we charge on loans is 8.00%. A loan, whether repaid or not, will have a
permanent negative effect on the Death Benefit and Account Value of your Policy.
What Will Cause the Policy to Lapse Without Value?
You Policy will lapse if your Net Cash Surrender Value is insufficient to pay
the Monthly Expense Charge and Monthly Deduction and none of the continuation
provisions applies and we do not receive sufficient premium payment during the
Grace Period. If your Policy lapses, you will not receive any money from us
because Net Cash Surrender Value will have been reduced to zero.
Will My Death Benefit and Account Value be Taxed?
The Policy is intended to meet the definition of a "life insurance contract"
under federal tax law. Therefore, the Death Proceeds should be fully excludable
from the Beneficiary's gross income. In addition, any earnings on your
investment in the Sub-Accounts should not be taxable to you while the Policy is
in effect unless you withdraw some or all of your Account Value. Under certain
circumstances, a loan may be treated as taxable income. We do not intend this
discussion to be tax advice. You should consult with your own tax advisor before
purchasing a Policy.
Do I Have a "Free Look" Right to Examine the Policy?
Yes, you may cancel the Policy within 10 days after receiving it, or such longer
period as state law may require. If you cancel the Policy during the free look
period, we generally will refund to you (1) the amount of your Net Premiums
allocated to the Fixed Account, plus (2) the value of your investments in the
Sub-Accounts as calculated on the date your notice of cancellation is received
by us or your insurance agent, plus (3) any charges.
<PAGE>
PURCHASING yOUR POLICY
To obtain an application to purchase a Policy, please contact your insurance
agent.
Eligible Purchasers
You can apply for a Policy if:
o You live in a state where we can issue a Policy.
o You are of legal age.
Your application will be processed through our underwriting process, which may
require the proposed Insured to have a medical exam. Any premium payment
received by us from you before we have completed the underwriting process will
be held by us in escrow. After we complete the underwriting process, we will
notify you of our decision regarding your application. If we approve your
application, the insurance coverage provided by your Policy will begin on the
effective date of your Policy. The effective date of your Policy will be the
later of
o The date we complete the underwriting process and approve your
application; or
o The date we receive the required minimum initial premium payment.
We will allocate your initial Net Premiums to your selected investment options
on the effective date of your Policy. We will send you a confirmation statement
indicating that your initial Net Premiums have been allocated and your Policy is
effective.
Even if you live in a state where we can issue a Policy, we will not issue a
Policy that insures a person who will be over 85 years of age on the date the
Policy is issued. We will also not issue a Policy that insures a person who does
not meet our underwriting standards. If we do not issue a Policy to you, we will
return any premium payments made by you and received by us.
Specified Amount and Minimum Issue Limit
If you meet our underwriting standards, you may purchase a Policy with a
Specified Amount as low as the Minimum Issue Limit. The Minimum Issue Limit
depends on the premium classification used and is shown on your Policy Schedule.
If you purchase a Policy with a Specified Amount equal to or near the Minimum
Issue Limit, you might not be able to
o Make partial withdrawals
o Reduce your Specified Amount
o Change your Death Benefit option
You should consider these limitations before you purchase a Policy with a
Specified Amount at or near the Minimum Issue Limit. You should discuss the
Specified Amount for your Policy with your insurance agent before purchasing a
Policy.
<PAGE>
10-Day Review Period
You have 10 days to review your Policy after you receive it. This 10-day review
period is called the free look period. The state where you live may require us
to give you a longer free look period.
If you are not satisfied with the Policy, you can cancel it during the free look
period. To cancel your Policy, you must return it either to us at Columbus Life
Variable Service Center, P.O. Box 2850, Cincinnati, Ohio 45201-2850, or to the
insurance agent who sold you the Policy within 10 days after you receive it. If
you cancel the Policy during the free look period, we will refund to you:
o The amount of your Net Premiums allocated to the Fixed Account, plus
o The value of your investments in the Sub-Accounts as calculated on the
date your notice of cancellation is received by us or your insurance
agent, plus
o Any charges.
However, some state laws may require us to refund your total premium payments.
PREMIUM PAYMENTS
Premium payments are payments that you make to purchase and maintain your
Policy. You can vary the amount and frequency of your premium payments. The
amount and frequency of your premium payments will affect your Account Value and
the duration of insurance coverage under your Policy. We reserve the right to
reject any premium payment if, in our opinion, accepting the payment would mean
the Policy would not qualify as life insurance under federal tax laws.
Your initial premium payment must equal at least 1/12th of the applicable
minimum annual premium. Your initial premium payment may be given to your
insurance agent. You should send your subsequent premium payments to the
Columbus Life Variable Service Center, P.O. Box 2850, Cincinnati, Ohio
45201-2850.
Generally each premium payment must be at least $50.
You can make premium payments through automatic or scheduled installment
payments, such as pre-authorized checking account deductions. If you use one of
these methods to make premium payments, we will accept premium payments in
amounts less than $50.
Federal tax law may limit your ability to make certain large premium payments.
We will monitor your premium payments to be sure that you do not exceed the
permitted amounts or inadvertently incur any tax penalties due to excess premium
payments.
<PAGE>
Planned Premium
When you purchase your Policy, you tell us how much you plan to pay and how
often you plan to pay. This is called your Planned Premium. The amount and
frequency of your Planned Premium is shown in your Policy Schedule. Generally,
you would continue to make Planned Premium payments until the Policy Anniversary
after the Insured reaches 100 years of age or dies. You are not required to make
a Planned Premium payment, but making Planned Premium payments increases the
likelihood that your insurance coverage under the Policy will continue.
You are not required to make premium payments in set amounts or on a set
schedule. You may find this flexibility attractive, but you are responsible for
making sufficient premium payments to ensure that your Policy continues.
Generally, your Policy continues so long as your Net Cash Surrender Value is
equal to or more than the Monthly Deduction plus the Monthly Expense Charge.
Your Net Cash Surrender Value will fluctuate depending on various factors
including the amount of your premium payments. Making Planned Premium payments
increases the likelihood that your Net Cash Surrender Value will be sufficient
to continue your Policy. If you skip a Planned Premium payment or you stop
making Planned Premium payments, it is more likely that your Net Cash Surrender
Value will be insufficient to continue your Policy.
Making Planned Premium payments does not guarantee that your Policy will
continue. Because your Net Cash Surrender Value is affected by other factors,
such as the investment return of your Policy, the charges related to your
Policy, and the amount of loans and withdrawals you have made, your Planned
Premium payments may not be enough to keep your Policy in force. You may need to
increase your Planned Premium or make additional premium payments to keep your
Policy in force. We will monitor your Policy and notify you if your Net Cash
Surrender Value is no longer sufficient to maintain your Policy. Also, each year
we will send you a report that includes a projection, which is based upon
certain assumptions, that will indicate whether or not your Planned Premium is
likely to be sufficient to keep your Policy in force for the upcoming year.
An illustration is a useful tool for estimating, by assuming one or more
hypothetical investment returns, whether a given Planned Premium is likely to
achieve the goals you have set for your Policy. An illustration is available
upon request and free of charge.
More information about the continuation of your Policy, including certain
provisions of your Policy that guarantee continued coverage for a specific
period of time, is located on page 36 of this Prospectus.
Changing Your Planned Premium
PLANNED PREMIUM CHANGES BY PHONE. You can change the amount or frequency of your
Planned Premium over the phone by following these steps:
<PAGE>
Step 1: Fill out either the telephone authorization part of the application or a
Telephone Access Authorization Form. You can get a copy of this form by
contacting the Columbus Life Variable Service Center, P.O. Box 2850, Cincinnati,
Ohio 45201-2850. You must complete and return one of these telephone
authorizations before you call to change your Planned Premium.
Step 2: Call the Columbus Life Variable Service Center at 800.677.9595 between
8:00 a.m. and 4:00 p.m. Eastern Time.
Give the representative the following information:
o Your Social Security number
o Your Policy number or other precise information that identifies your
Policy
o Your new Planned Premium information
PLANNED PREMIUM CHANGES IN WRITING. You can also change the amount or frequency
of your Planned Premium by writing to the Columbus Life Variable Service Center,
P.O. Box 2850, Cincinnati, Ohio 45201-2850. Your written instructions must
include the following information:
o Your Policy number or other precise information that identifies your
Policy
o Your new Planned Premium information
o Your signature
Skipping Planned Premium Payments
You can skip Planned Premium payments and your Policy will continue to be
effective if the Net Cash Surrender Value of your Policy is sufficient to pay
the Monthly Deduction and the Monthly Expense Charge on the next Monthly
Anniversary Day or one of the continuation provisions described on page 36 is
applicable. If not, your Policy may terminate.
Investor Alert
o Your Net Cash Surrender Value is affected by various factors,
including the investment performance of the investment options you
select. Therefore, it is possible that, due to poor investment
performance, your Net Cash Surrender Value will not be sufficient
to continue coverage under your Policy even if you have paid your
Planned Premiums.
o Skipped premium payments, withdrawals and loans will reduce your
Net Cash Surrender Value and may prevent you from meeting the
conditions required to continue coverage under your Policy.
o Because of the relative size of the minimum annual premium for the
Term No-Lapse Guarantee and the surrender charge, your Net Cash
Surrender Value will likely be zero for at least 10 years if you
pay only that minimum annual premium.
<PAGE>
ALLOCATION OF NET PREMIUMS
Investment Options
You decide how to allocate your Net Premiums by selecting from the following
investment options:
Sub-Accounts
o AIM V.I. Growth
o AIM V.I. Government Securities
o Alger American Small Capitalization
o Alger American Growth
o MFS VIT Emerging Growth
o MFS VIT Growth with Income
o PIMCO Long-Term U.S. Government
o Touchstone Small Cap Value
o Touchstone Emerging Growth
o Touchstone International Equity
o Touchstone Income Opportunity
o Touchstone High Yield
o Touchstone Value Plus
o Touchstone Growth & Income
o Touchstone Enhanced 30
o Touchstone Balanced
o Touchstone Bond
o Touchstone Standby Income
Fixed Account
- --------------------------------------------------------------------------------
You should review your selected investment options and allocations periodically
to determine if they are appropriate considering market conditions and your
financial objectives.
- --------------------------------------------------------------------------------
Allocation of Net Premiums
Your initial allocation instructions are included in your application and are
shown in your Policy Schedule. You can change your allocation instructions by
contacting us either by phone or in writing. After we receive a premium payment
from you, we allocate your Net Premiums based on the most recent allocation
instructions we have received from you.
The following guidelines apply to the allocation of your Net Premiums:
o Allocate at least 1% of your Net Premiums to each investment option you
choose.
o Use whole percentages. For example, you can allocate 33% or 34% to an
investment option, not 33 1/3%.
o Make sure your percentages total 100%.
<PAGE>
ALLOCATION CHANGES BY PHONE. You can change the allocation of your future Net
Premiums over the phone by following these steps:
Step 1: Fill out either the telephone authorization part of the application or a
Telephone Access Authorization Form. You can get a copy of this form by
contacting the Columbus Life Variable Service Center, P.O. Box 2850, Cincinnati,
Ohio 45201-2850. You must complete and return one of these telephone
authorizations before you call to change your allocations over the phone.
Step 2: Call the Columbus Life Variable Service Center at 800.677.9595 between
8:00 a.m. and 4:00 p.m. Eastern Time.
Give the representative the following information:
o Your Social Security number
o Your Policy number or other precise information that identifies your
Policy
o Your allocation instructions
ALLOCATION CHANGES IN WRITING. You can also change the allocation of your future
Net Premiums by writing to the Columbus Life Variable Service Center, P.O. Box
2850, Cincinnati, Ohio 45201-2850. Your written instructions must include the
following information:
o Your Policy number or other precise information that identifies your
Policy
o Your allocation instructions
o Your signature
THIRD PARTY AUTHORIZATION. You can authorize a third party to allocate your Net
Premiums. To do so, you must complete the appropriate authorization forms.
Contact the Columbus Life Variable Service Center, P.O. Box 2850, Cincinnati,
Ohio 45201-2850 at 800.677.9595 for additional information.
Investor Alert
o There is no guaranteed minimum value for amounts allocated to the
Sub-Accounts. This means that you bear the entire investment risk
that your investment in a Sub-Account could fall to zero.
TRANSFERRING YOUR MONEY
After your free look period, you can transfer money from one investment option
to another. You can make transfers by phone or in writing.
The following guidelines apply to transfers other than dollar cost averaging
transfers:
<PAGE>
o Each transfer must be at least $250 or the total value of the
Sub-Accounts, if less than $250.
o The allocation to each investment option must be at least 1% of the
total transfer amount.
o You can transfer money among the Sub-Accounts up to 12 times in a
Policy Year without a charge. You will be charged $10 per transfer
for each additional transfer in a Policy Year.
o You can transfer from the Fixed Account or to the Fixed Account
only once each Policy Year.
o During the first 4 Policy Years, you can transfer up to 25% of
your money from the Fixed Account in a Policy Year. After your
4th Policy Year, you can transfer all of your money from the
Fixed Account at any time.
o You can transfer an unlimited amount to the Fixed Account.
All transfers requested on the same day will be considered a single transfer for
purposes of these guidelines and charges.
TRANSFERS BY PHONE. You can transfer your money by calling us and following
these steps:
Step 1: Fill out either the telephone authorization part of the application or a
Telephone Access Authorization Form. You can get a copy of this form by
contacting the Columbus Life Variable Service Center, P.O. Box 2850, Cincinnati,
Ohio 45201-2850. You must complete and return one of these telephone
authorizations before you call to transfer your money.
Step 2: Call the Columbus Life Variable Service Center at 800.677.9595 between
8:00 a.m. and 4:00 p.m. Eastern Time.
Give the representative the following information:
o Your Social Security number
o Your Policy number or other precise information that identifies your
Policy
o Your transfer instructions
TRANSFERS IN WRITING. You can also transfer your money by writing to the
Columbus Life Variable Service Center, P.O. Box 2850, Cincinnati, Ohio
45201-2850. Your written instructions must include the following information:
o Your Policy number or other precise information that identifies your
Policy
o Your transfer instructions
o Your signature
THIRD PARTY AUTHORIZATION. You can authorize a third party to transfer your
money for you. To do so, you must complete the appropriate authorization forms.
Contact the Columbus Life Variable Service Center, P.O. Box 2850, Cincinnati,
Ohio 45201-2850 at 800.677.9595 for additional information.
Dollar Cost Averaging Program
Dollar cost averaging is a method of investing equal amounts of money at regular
intervals. Dollar cost averaging allows you to purchase more when prices are low
and less when prices are high. For dollar cost averaging to be effective, you
should continue to invest during both market ups and downs. You should also
consider your financial ability to maintain a consistent level of investment
over time.
The Dollar Cost Averaging Program allows you to transfer amounts at regular
intervals from the Touchstone Standby Income Sub-Account or the Fixed Account to
the other Sub-Accounts. You can make the following transfers:
o A specific dollar amount
o A specific percentage of your money in the Touchstone Standby Income
Sub-Account or the Fixed Account
o Earnings in the Touchstone Standby Income Sub-Account or the Fixed
Account
You select the number and frequency of your transfers in the Dollar Cost
Averaging Program. We will transfer the money on your Monthly Anniversary Day.
The following guidelines apply to dollar cost averaging transfers:
o Dollar cost averaging transfers must continue for at least 12 months.
o Each transfer must be at least $100.
o The allocation to each Sub-Account must be at least 1% of the transfer
amount.
To set up dollar cost averaging transfers, contact the Columbus Life Variable
Service Center, P.O. Box 2850, Cincinnati, Ohio 45201-2850 at 800.677.9595. We
currently do not charge a fee for this service. However, we may charge a fee in
the future for your transfers in the Dollar Cost Averaging Program.
Dollar cost averaging transfers will stop if we complete the number of transfers
you requested, you ask us to stop after using the program for 12 months, you do
not have enough money in your accounts to complete the transfer, or we
discontinue the program. If we discontinue the program, you will be allowed to
complete the number of transfers you previously requested.
BORROWING YOUR MONEY
Your Policy is designed to provide insurance coverage and to help you achieve
your long-term financial goals. However, there may be times when you need to
borrow money against your Policy.
<PAGE>
Loans
You can borrow money against your Policy. We calculate the maximum loan amount
using the following procedure:
o We determine 90% of your Cash Surrender Value.
o We subtract any outstanding Indebtedness.
o We determine and subtract the next 2 Monthly Deductions and Monthly
Expense Charges.
Collateral for Loans
If you borrow money against your Policy, we will transfer the same amount of
money to your Loan Account. The money in your Loan Account is collateral for
your loan. We transfer money on a pro-rata basis from each of your investment
options. For example, if you have 25% of your money in the Touchstone Income
Opportunity Sub-Account and 75% of your money in the Touchstone Balanced
Sub-Account and you borrow $2,000, we will transfer $500 from the Touchstone
Income Opportunity Sub-Account (25% of $2,000) and $1,500 from the Touchstone
Balanced Sub-Account (75% of $2,000) to your Loan Account.
We pay interest on your Loan Account. The minimum interest we currently pay is
3.00% annually. Each month we transfer the interest on your Loan Account back to
your investment options on a pro-rata basis according to your current allocation
instructions at that time.
Interest on Borrowed Amounts
We charge interest on the amounts you borrow at the current rate shown in your
Policy Schedule. We may change the interest rate at any time, but the interest
rate will never be greater than the maximum interest rate that is listed in your
Policy Schedule.
Interest is due on each Policy Anniversary and on the date the loan is repaid.
If you do not pay the interest when it is due, we will treat it as an additional
loan and transfer it on a pro-rata basis from each of your investment options to
the Loan Account.
Investor Alert
Any loan, even if you repay the loan, will generally have a permanent negative
effect on the Death Benefit and Account Value because:
o Loan amounts will not be available for investment in the Sub-Accounts
or Fixed Account.
o Interest charged on borrowed amounts may be treated as an additional
loan.
o Outstanding Indebtedness is subtracted to determine your Death Benefit.
<PAGE>
Loan Repayments
You can repay all or part of your loan at any time while the Insured is living.
When you make a payment towards the principal amount of your loan, we transfer
the amount of the loan payment from your Loan Account back to your investment
options on a pro-rata basis according to your allocation instructions at that
time.
If you do not repay the loan before the Insured dies, we will deduct the
Indebtedness when determining your Death Benefit. If you do not repay the loan
before you surrender your Policy, we will deduct the Indebtedness to determine
the Net Cash Surrender Value proceeds.
Cancellation Based on Indebtedness
If the Indebtedness exceeds the Cash Surrender Value less the Monthly Deduction
and Monthly Expense Charge for the current month, we can terminate your Policy.
We will tell you that we intend to terminate your Policy by mailing a notice to
you at least 31 days before we terminate your Policy. This notice will tell you
the minimum amount that you must pay to keep your Policy in effect. We will mail
the notice to your address as shown on our records. If our records indicate that
someone holds your Policy as collateral, we will also mail a copy of the notice
to that person's address as shown on our records.
WITHDRAWING YOUR MONEY
There may be times when you need to withdraw money from your Policy. If you
withdraw money from your Policy or cancel your Policy, you may have to pay a
surrender charge. Surrender charges are explained on page 33.
Partial Withdrawals
After you have owned your Policy for one year, you may withdraw a portion of
your money from your Policy by sending written instructions to the Columbus Life
Variable Service Center, P.O. Box 2850, Cincinnati, Ohio 45201-2850. For help
with a partial withdrawal, please call the Columbus Life Variable Service Center
at 800.677.9595.
The following guidelines apply to partial withdrawals:
o You must include your Policy number or other information that
identifies your Policy and the amount to be withdrawn in your
instructions.
o Each withdrawal must be at least $500.
o No partial withdrawal may be made that would reduce your Net Cash
Surrender Value below $250.
o You will generally pay a surrender charge for each partial withdrawal
you make.
o You can make one withdrawal in a Policy Year without paying a
withdrawal fee. You will be charged a fee of $50 per withdrawal
for each additional withdrawal in that Policy Year.
<PAGE>
o If you have death benefit Option 1, each partial withdrawal will
generally reduce your Specified Amount by the amount withdrawn
plus any withdrawal fees and surrender charges.
o The amount of your partial withdrawal may be limited because your
Specified Amount cannot be reduced to less than the Minimum Issue
Limit by a partial withdrawal. As a result, if your Specified
Amount is equal to the Minimum Issue Limit for your Policy, you
will not be able to make partial withdrawals.
Processing Withdrawals
When we process your partial withdrawal, we will deduct the amount withdrawn
plus any withdrawal fees and surrender charges from your Account Value. We
withdraw money from each of your investment options on a pro-rata basis.
Canceling Your Policy
You can cancel your Policy at any time. When you cancel your Policy, we pay you
the Net Cash Surrender Value. This payment terminates your Policy and our
obligations under the Policy.
The Net Cash Surrender Value will equal your Account Value, less any
Indebtedness and any applicable surrender charge. Because investment
performance, Monthly Deductions and Monthly Expense Charges affect your Account
Value, loan activity affects your Indebtedness and surrender charges may apply,
the Net Cash Surrender Value may be much less than the total of your premium
payments.
To cancel your Policy, send written instructions to the Columbus Life Variable
Service Center, P.O. Box 2850, Cincinnati, Ohio 45201-2850. Include your Policy
number or other information that identifies your Policy and your signature in
your instructions. For assistance, please call the Columbus Life Variable
Service Center at 800.677.9595.
Payment of Withdrawals
We will generally send payments to you within 7 days of the date that we process
your request. We may delay calculating the amount of the payment from a
Sub-Account or sending a payment from a Sub-Account for any of the following
reasons:
o You have made a premium payment by a check that has not cleared the
banking system.
o The New York Stock Exchange is closed on a day that it normally would
be open.
o Trading on the New York Stock Exchange is restricted.
o Because of an emergency, it is not reasonably practicable for the
Sub-Accounts to sell securities or to fairly determine the value
of their investments.
o The Securities and Exchange Commission permits us to postpone payments
from the Sub-Accounts for your protection.
<PAGE>
As required by most states, we reserve the right to delay payments from the
Fixed Account for up to 6 months. We do not expect to delay payments from the
Fixed Account and we will notify you if there will be a delay.
DEATH BENEFITS
Death Benefit Options
Your Death Benefit depends on the death benefit option you select. When you
complete your application, you select one of 2 death benefit options (Option 1
or Option 2).
Option 1
What Your Beneficiary Receives
The Death Benefit will equal the greater of the following amounts:
o The Specified Amount, less any Indebtedness
o The Account Value multiplied by the Applicable Death Benefit
Factor(see Supplement B), less any Indebtedness
We calculate these amounts as of the date of the Insured's death.
Why Select This Option
Option 1 emphasizes the potential growth of your Account Value. Under
Option 1, any increase in your Account Value will decrease the risk to
us relative to the Death Benefit we must pay when the Insured dies. As
a result, all other things being equal, you will pay less in cost of
insurance charges under Option 1 for the same Specified Amount. These
lower charges may allow your Account Value to grow faster.
Example
Facts:
o The Insured is less than 40 years old (Applicable Death Benefit
Factor = 2.50).
o Your Policy's Specified Amount is $100,000.
o You have never borrowed money from your Policy.
o Your Account Value is $25,000.
Under Option 1, your Death Benefit would be the greater of $100,000 and
$62,500 ($25,000 multiplied by 2.50). Therefore, your Death Benefit
would be $100,000.
<PAGE>
Option 2
What Your Beneficiary Receives
The Death Benefit will equal the greater of the following amounts:
o The Specified Amount plus the Account Value, less any Indebtedness
o The Account Value multiplied by the Applicable Death Benefit
Factor (see Supplement B), less any Indebtedness
We calculate these amounts as of the date of the Insured's death.
Why Select This Option
Option 2 emphasizes the potential growth of your Death Benefit. Under
Option 2, any increase in your Account Value will increase the amount
of your Death Benefit. As a result, your Death Benefit under Option 2
will generally be greater than that under Option 1 for the same
Specified Amount. However, you will pay more in cost of insurance
charges under Option 2 for the same Specified Amount than you would
under Option 1.
Example
Facts:
o The Insured is less than 40 years old (Applicable Death Benefit
Factor = 2.50).
o Your Policy's Specified Amount is $100,000.
o You have never borrowed money from your Policy.
o Your Account Value is $25,000.
Under Option 2, your Death Benefit would be the greater of $125,000
($100,000 plus $25,000) and $62,500 ($25,000 multiplied by 2.50).
Therefore, your Death Benefit would be $125,000.
Changing Your Death Benefit Option
After you have owned your Policy for one year, you may change your death benefit
option by sending written notice to the Columbus Life Variable Service Center,
P.O. Box 2850, Cincinnati, Ohio 45201-2850. If you change your death benefit
option, your Specified Amount will also change unless you elect to keep the same
Specified Amount. The change in your Specified Amount insures that your Death
Benefit immediately after you change your death benefit option is the same as
your Death Benefit immediately before you change your death benefit option.
Also, a change in death benefit option will generally affect your cost of
insurance charges. However, you will not pay any surrender charges solely
because of a change in your death benefit option. If you change your death
benefit option, we will automatically make any other changes necessary to
preserve the status of the Policy as life insurance under the federal tax laws.
<PAGE>
We must approve any changes in your death benefit option. Changes in your death
benefit option are effective on the first Monthly Anniversary Day after we
approve your request. We will send you an amended Policy Schedule showing both
new minimum annual premiums and schedule of surrender charges applicable to your
Policy.
Changing from Option 1 to Option 2
If you change from Option 1 to Option 2, your previous Specified Amount
will be reduced by your Account Value at the time of the change. We
will not allow this change if it causes the new Specified Amount to
fall below the Minimum Issue Limit shown on your Policy Schedule.
If you elect to keep the same Specified Amount as before, you must
provide us with proof of insurability satisfactory to us.
Changing from Option 2 to Option 1
If you change from Option 2 to Option 1, your previous Specified Amount
will be increased by your Account Value at the time of the change.
Changing Your Specified Amount
After you have owned your Policy for one year, you may change your Specified
Amount by sending a written request to the Columbus Life Variable Service
Center, P.O. Box 2850, Cincinnati, Ohio 45201-2850. You may change the Specified
Amount of your Policy without changing your death benefit option. The Specified
Amount must be increased or decreased by at least $25,000.
We must approve any changes in your Specified Amount. Changes in your Specified
Amount are effective on the first Monthly Anniversary Day after we approve your
request. We will send you an amended Policy Schedule showing both new minimum
annual premiums and schedule of surrender charges applicable to your Policy.
Increasing the Specified Amount
If the Insured's Attained Age is 75 or less, you may apply for any
increase in your Specified Amount on a supplemental application. Before
the increase is effective, we will require proof of insurability
satisfactory to us. Any approved increase will be effective as of the
date shown on the amended Policy Schedule.
<PAGE>
Decreasing the Specified Amount
Only your written request is needed to decrease your Specified Amount.
However, you may not decrease your Specified Amount below the Minimum
Issue Limit shown on your Policy Schedule. We may also limit the amount
of the decrease in order to preserve the tax status of your Policy as
life insurance.
A decrease in your Specified Amount will be applied in the following
order:
(1) We will reduce the most recent increase in your Specified Amount,
if any.
(2) We will then reduce the next most recent increase in your
Specified Amount, if any.
(3) We will continue reducing any increases in your Specified
Amount until it has been reduced to your initial Specified Amount.
(4) Finally, any remaining decreases will reduce your initial
Specified Amount.
Charges for Changing Specified Amount
You will generally be charged a surrender charge any time you decrease your
Specified Amount. However, even though it may cause a decrease in your Specified
Amount, you will not be charged a surrender charge solely for changing your
death benefit option from Option 1 to Option 2.
The amount of your surrender charge will depend on the amount of the decrease in
Specified Amount, the number of years since the issuance of your Policy, whether
or not your Specified Amount has previously changed and when previous changes in
your Specified Amount occurred. If you are charged a surrender charge, the
applicable surrender charge will be deducted from your Account Value on the
effective date of the decrease.
<PAGE>
PAYMENT OF POLICY PROCEEDS
Policy Proceeds
We will pay the proceeds of this Policy in a lump sum or under one of
the Income Plans. We will generally pay one of 2 types of proceeds--Death
Proceeds or Net Cash Surrender Value proceeds. Proceeds applied under one of the
Income Plans no longer vary with the investment experience of the Sub-Accounts.
<TABLE>
<CAPTION>
Proceeds DEATH PROCEEDS NET CASH SURRENDER VALUE
<S> <C> <C>
When Paid? o Upon the death of the Insured. o Upon any cancellation of the Policy
during the lifetime of the Insured.
Who Receives o The Beneficiaries receive the o You receive the payments.
Payments or payments.
Who are o If the Beneficiaries are dead,
the Payees? the Contingent Beneficiaries who are
still alive receive the payments.
o If there are no surviving
Beneficiaries or Contingent
Beneficiaries, you or your estate
receive the payments.
Amount of Proceeds? o The proceeds equal your Death o The proceeds equal your Account Value
Benefit plus any insurance on the less any applicable Surrender Charges and
life of the Insured provided by less any Indebtedness on the date of
riders. cancellation.
o We will also pay you interest on o We will also pay you interest on the
the proceeds at not less than the proceeds at not less than the rate
rate required by law for the time required by law for the time between the
between the date of the Insured's date of the Policy is cancelled to the
death to the date of the lump-sum date of the lump-sum payment or the date
payment or the date on which we on which we apply the proceeds to the
apply the proceeds to the selected selected Income Plan.
Income Plan.
o If the Insured dies during a Grace
Period, we will reduce the
proceeds by the amount of any
unpaid charges, but not by more
than 3 times the sum of the
Monthly Deduction and the
Monthly Expense Charge.
How to Claim o The Beneficiary must contact us o You must write to us and tell us that
Proceeds? for instructions and provide proof you want to cancel your Policy.
of the Insured's death. o We may request other information
o We may request other information before we pay the proceeds.
before we pay the proceeds.
</TABLE>
<PAGE>
Selecting an Income Plan
While the Insured is alive, you may select an Income Plan under which we will
pay the proceeds of your Policy. If the Insured dies and you have not selected
an Income Plan, the Beneficiary may select an Income Plan. If you have selected
an Income Plan before the Insured's death, the Beneficiary may not change the
Income Plan after the Insured's death.
We will send you a separate written agreement putting the selected Income Plan
into effect. One of the following Income Plans may be selected:
<TABLE>
<CAPTION>
<S> <C>
Income Plan 1 o Payments for Fixed Period - we make monthly payments for a
fixed number of years.
Income Plan 2 o Payments for Life--Guaranteed Period - we make monthly payments
for a guaranteed period or the life of the Payee, whichever is
longer.
Income Plan 3 o Payments of a Fixed Amount - we make monthly payments of a
fixed amount until an amount equal to the proceeds plus accrued
interest has been paid.
Income Plan 4 o Life Annuity--No Guaranteed Period - we make monthly payments
for the life of the Payee.
Income Plan 5 o Joint and Survivor - we make monthly payments as long as one of
the two designated Payees is alive.
</TABLE>
In addition to these Income Plans, other Income Plans may be available in the
future or upon request.
If you or the Beneficiary do not select an Income Plan, we will make a lump-sum
payment of the proceeds. We generally make this lump-sum payment to a special
account retained by us. We will provide the Beneficiary with a checkbook to
access these funds from that special account.
The Income Plan selected and the time when the Income Plan is selected can
affect the tax consequences to you or the Beneficiary. You should consult your
tax advisor before selecting an Income Plan.
Summary of Income Plans
In the following summaries of the Income Plans, we use Payee to mean the person
who actually receives the payment of proceeds from us. Depending upon the
circumstances, the Payee might mean you, the Beneficiary, the Contingent
Beneficiary, your estate or another designated person.
The total amount to be applied under an Income Plan includes both the proceeds
and any interest we have paid on the proceeds.
<PAGE>
Income Plan 1
(Payments for Fixed Period)
We will pay the proceeds in equal monthly installments for a fixed
period of time, up to a maximum of 30 years. The installment payments
will remain the same throughout the period of years selected.
The amount of the monthly installment payment will depend on the
following:
o The total amount to be applied under this Income Plan
o The number of years selected for installment payments
Income Plan 2
(Payments for Life--Guaranteed Period)
You select a guaranteed payment period of 10 or 20 years. We will make
equal monthly payments for the selected guaranteed period or the life
of the Payee, whichever is longer. Before we make a payment, we may
require proof that the Payee is alive at the time a payment is due.
The amount of the monthly installment payment will depend on the
following:
o The total amount to be applied under this Income Plan
o The gender of the Payee
o The age of the Payee on the effective date of this Income Plan
o The selected guaranteed period
Income Plan 3
(Payments of a Fixed Amount)
We will pay the proceeds in equal monthly installment payments. You
select the amount of the monthly installment payment, which must be at
least $5 for every $1,000 of proceeds. For example, if the proceeds are
$60,000, the minimum monthly installment payment is $300 ($5 x 60). The
monthly installment payment will remain the same until the total amount
to be applied under this Income Plan is paid. The last payment will be
for the balance only. All monthly installment payments must be made in
30 years or less.
Income Plan 4
(Life Annuity--No Guaranteed Period)
We will make equal monthly payments as long as the Payee is alive. When
the Payee dies, we will stop making payments, even if we have only made
one payment. Before we make a payment, we may require proof that the
Payee is alive at the time a payment is due.
The amount of the monthly installment payment will depend on the
following:
o The total amount to be applied under this Income Plan
o The gender of the Payee
o The age of the Payee on the effective date of this Income Plan
<PAGE>
Income Plan 5
(Joint and Survivor)
You can select this Income Plan only if 2 persons are named as Payees.
We will make monthly payments to the Payee or Payees as long as at
least one Payee is alive. Before we make a payment, we may require
proof that at least one of the Payees is alive at the time a payment is
due.
The amount of the monthly installment payment will depend on the
following:
o The total amount to be applied under this Income Plan
o The gender of each of the Payees
o The age of each of the Payees on the effective date of this
Income Plan
CHARGES
Premium Expense Charges
The premium expense charge covers the cost of distributing the Policies. The
maximum premium expense charge is 5.50% of a premium payment. The current
premium expense charge is 4.75% of a premium payment.
We will deduct the premium expense charge from each premium payment that we
receive from you before we allocate the Net Premiums to your investment options.
Tax Charges
The tax charge covers state taxes on insurance premiums and certain federal
taxes. The maximum tax charge is 3.50% of a premium payment. The tax charge you
pay will reflect certain federal taxes plus the actual state premium tax charged
by the state in which you reside.
We will deduct the tax charge from each premium payment that we receive from you
before we allocate the payment to your investment options.
Cost of Insurance Charges
You pay us a monthly cost of insurance charge for providing you with life
insurance protection.
The cost of insurance charge that you pay to us depends on the your Specified
Amount and the age, gender and underwriting class of the Insured. Various risk
factors determine the underwriting class of the Insured. The cost of insurance
charge is also affected by your Account Value, Indebtedness and your death
benefit option.
Some examples showing how the cost of insurance charge varies are set forth
below:
<PAGE>
o The cost of insurance charge for a policy insuring a particular
person for a Specified Amount of $1,000,000 is generally more than
the cost of insurance charge for a policy insuring the same person
for a Specified Amount of $250,000 because the $1,000,000 policy
provides 4 times the amount of insurance as the $250,000 policy.
o If all other relevant factors are the same, the cost of insurance
on a 50-year old male is generally more than the cost of insurance
on a 35-year old female. The differences in age and gender between
the 2 persons affects the cost of insurance charge. The monthly
cost of insurance charge for the 50-year old man is higher because
he will probably die sooner than the 35-year old woman, which
means we will receive fewer payments for the insurance we provide
on the life of the 50-year old man.
o A person who does not smoke is in a different underwriting class
than a person who does smoke because smoking affects life
expectancy. If all other relevant factors are the same, the
monthly cost of insurance charge for the smoker is generally
higher.
o If your Account Value grows because of additional premium payments
or a positive return from your selected investment options, and
all other relevant factors are the same, the cost of insurance
charge will decrease. If your Account Value declines because of
partial withdrawals or a negative return from your investment
options and all other factors are the same, the cost of insurance
charge will increase. The fluctuations in cost of insurance charge
are related to the risk that we take in providing a death benefit
equal to at least the Specified Amount. You pay us to assume this
insurance risk. The less "at risk" we are, the lower the cost of
insurance charge. Therefore, as your Account Value increases and
our risk decreases, the cost of insurance charge decreases.
If all other relevant factors are the same, the monthly cost of insurance charge
is the same for all insured persons of the same Attained Age, gender and
underwriting classification whose policies have been in effect for the same
amount of time.
The table in Supplement C shows the maximum monthly cost of insurance charge if
the Insured under your Policy is in either a standard or preferred underwriting
class. Your monthly cost of insurance charge may be higher than that shown in
Supplement C if the Insured under your Policy is in a special or substandard
underwriting class.
The maximum monthly cost of insurance charge under your Policy is shown in your
Policy Schedule. At our option, we may charge less than the maximum shown in
your Policy Schedule.
Monthly Deduction and Monthly Expense Charge
The Monthly Deduction includes the cost of insurance charge described above plus
the cost of any additional benefits provided under your Policy by rider.
<PAGE>
The Monthly Expense Charge covers the cost of record keeping and administering
your Policy. The maximum Monthly Expense Charge is $7.00. The current Monthly
Expense Charge is $6.00.
We deduct the Monthly Deduction and the Monthly Expense Charge on each Monthly
Anniversary Day. We normally deduct the these charges from each of your
investment options on a pro-rata basis. You may elect to have these charges
deducted entirely from the Fixed Account or from a single Sub-Account that you
select. Please contact the Columbus Life Variable Service Center for assistance
in making this election.
Mortality and Expense Risk Charge
In addition to our insurance risk, we assume 2 other risks: a mortality risk and
an expense risk. We take a mortality risk that the Insureds will not live as
long as we expect and therefore the amount of the death benefits we pay under
the Policies will be greater than we expect. We take an expense risk that the
costs of issuing and administering the Policies will be greater than we expect.
You pay us to assume these risks by paying the mortality and expense risk
charge. The maximum mortality and expense risk charge is 1.00% annually. The
current effective annual rate of these charges is 0.90%. We can use any profit
we derive from the mortality and expense risk charge to pay for general
corporate expenses, including distribution and sales expenses.
On each Valuation Date, we deduct the mortality and expense risk charge from the
Accumulation Unit Value of each Sub-Account. We do not impose this charge on
your money in the Fixed Account.
Surrender Charges
A surrender charge will generally apply if:
o Your Policy is cancelled for any reason.
o The Specified Amount of your Policy decreases because
o You reduce the Specified Amount of your Policy.
o You withdraw money from your Policy and you have selected death
benefit Option 1.
o During the first 14 years after the issuance of your Policy.
o During the first 14 years after an increase in the Specified
Amount.
The maximum surrender charge under your Policy depends upon the Insured's age,
gender and underwriting class. The maximum surrender charge for each month in
the 14-year period is shown in your Policy Schedule and in Supplement D. The
surrender charge will be deducted from your Account Value. For example, if you
are a 35-year old male tobacco abstainer, you purchase a Policy with a Specified
Amount of $100,000 with you as the Insured and you cancel your Policy 3 years
after we issue it, we would deduct a surrender charge of $2,400 from your
Account Value.
<PAGE>
A separate 14-year period applies to the initial Specified Amount and each
increase in the Specified Amount. In this discussion, we will refer to the
initial Specified Amount and each increase as a layer of insurance. If your
Policy has more than one layer of insurance and you decrease the Specified
Amount, we will cancel layers of insurance (or a part of a layer) in order,
starting with the last layer of insurance that you purchased, until the amount
cancelled equals the amount of the decrease. We will apply the appropriate
surrender charge to each cancelled layer.
The following example should help you understand the surrender charges.
o You purchase a Policy with an initial Specified Amount of $200,000
on October 1, 2000. This is the first layer of insurance.
o You have selected death benefit Option 1.
o You increase the Specified Amount by $100,000 on October 1, 2012.
This is the second layer of insurance.
o Your total Specified Amount would then be $300,000.
o You withdraw $150,000 from your Policy on October 15, 2015. Since
the withdrawal amount is more than the amount of the second layer
of insurance, we would cancel that layer. In addition, we would
cancel a portion of the first layer of insurance.
o We would deduct the maximum applicable surrender charge on the
second layer from your Account Value. We would not apply a
surrender charge to the cancelled portion of the first layer
because the applicable 14-year period would have expired.
o If the maximum surrender charge were $2,400, your Account Value
would be reduced by $152,400.
Transfer Charges
We do not charge you for the first 12 transfers among Sub-Accounts in a Policy
Year. If you make more than 12 transfers among Sub-Accounts in a Policy Year, we
will charge you $10 per transfer for each additional transfer. We do not charge
you for transfers made in connection with the Dollar Cost Averaging Program and
we do not count these transfers when we determine the number of transfers you
have made in a Policy Year. We deduct the $10 transfer charge from your Account
Value.
<PAGE>
All transfers requested on the same day will be considered a single transfer for
purposes of determining transfer charges.
Withdrawal Fees
We do not charge you for the first withdrawal in a Policy Year. If you make more
than one withdrawal in a Policy Year, we will charge you $50 per withdrawal for
each withdrawal. We deduct the $50 transfer charge from your Account Value.
Summary of Charges
<TABLE>
<CAPTION>
- ------------------------- ----------------------- ----------------------- ------------------------- --------------------------
Premium Monthly Monthly
Expense Charge Tax Charge Deduction Expense Charge
- ------------------------- ----------------------- ----------------------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
When Charged? When you make a When you make a On each Monthly On each Monthly
premium payment. premium payment. Anniversary Day. Anniversary Day.
- ------------------------- ----------------------- ----------------------- ------------------------- --------------------------
How Much Charged? The maximum premium The maximum tax This charge is The maximum monthly
expense charge is charge is 3.50% of generally based on the expense charge is $7.00
5.50% of each premium each premium payment. cost of insurance and each month. The current
payment. The current The tax charge you cost of benefits monthly expense charge
premium expense pay will reflect provided by riders. See is $6.00 per month.
charge is 4.75% of certain federal taxes your Policy Schedule
each premium payment. plus the actual state for the maximum cost of
premium tax charged insurance charge
by the state in which applicable to your
you reside. Policy and the maximum
cost of benefits to be
provided by rider.
- ------------------------- ----------------------- ----------------------- ------------------------- --------------------------
- ------------------------- ----------------------- ----------------------- ------------------------- --------------------------
How Charged? We deduct this charge We deduct this charge We reduce your Account We reduce your Account
from each premium from each premium Value. Value.
payment before we payment before we
allocate the Net allocate the Net
Premiums to your Premiums to your
investment options. investment options.
- -------------------- ------------------------- ------------------------- -------------------------- --------------------------
<PAGE>
Mortality and
Expense Risk Charge Surrender Charges Transfer Charges Withdrawal Fees
- -------------------- ------------------------- ------------------------- -------------------------- --------------------------
When Charged? On each day the New When the Specified On transfers among On withdrawals after the
York Stock Exchange is Amount decreases for Sub-Accounts after the first withdrawal in a
open. any reason. first 12 transfers in a Policy Year.
Policy Year.
- -------------------- ------------------------- ------------------------- -------------------------- --------------------------
How Much Charged? The maximum charge is This charge is based on $10 per transfer. $50 per withdrawal.
1.00% annually. The a specific dollar
current effective amount, which is
annual rate of the applied to each $1,000
charge is 0.90%. decrease in the portion
of the Specified Amount subject
to the charge. The charge
decreases on a monthly basis
after the first 10 years in the
applicable 14-year period. See
your Policy Schedule for the
maximum surrender charges
applicable to your Policy.
- -------------------- ------------------------- ------------------------- -------------------------- --------------------------
How Charged? We deduct this charge We reduce your Account We reduce your Account We reduce your Account
from the Accumulation Value. Value. Value.
Unit Value of each
Sub-Account. We do not
impose this charge on
your money in the Fixed
Account.
- -------------------- ------------------------- ------------------------- -------------------------- --------------------------
</TABLE>
CONTINUATION OF YOUR POLICY
Continuation of Insurance Coverage
On each Monthly Anniversary Day, we determine whether your insurance coverage
will continue. If your Net Cash Surrender Value is equal to or more than the
monthly charges to be charged on that Monthly Anniversary Day, your Policy will
continue.
If your Net Cash Surrender Value is less than the monthly charges, then a Grace
Period related to the continuation of your Policy will start unless one of the
no-lapse guarantees described below applies. If neither of the no-lapse
guarantees applies, and you do not make the required additional premium payment
during the Grace Period, your Policy will lapse without value.
o Monthly charges include the Monthly Deduction and the Monthly
Expense Charge. The Monthly Deduction includes the amount deducted
for the cost of insurance plus the cost of any additional benefits
provided under your Policy by rider.
o Grace Periods, which are designed to give you time to make an
additional premium payment, are explained below.
<PAGE>
Continuation Under the Term No-Lapse Guarantee Provision
Even if your Net Cash Surrender Value on a Monthly Anniversary Day is not
sufficient to continue your Policy, your Policy may continue under the Term
No-Lapse Guarantee.
If the Term No-Lapse Guarantee applies, we guarantee that, for a specific period
of time, we will not terminate your Policy or start a Grace Period related to
continuation of your Policy. In this discussion, we call this specific period of
time the guaranteed minimum continuation period. The guaranteed minimum
continuation period applicable to your Policy is shown in your Policy Schedule.
On each Monthly Anniversary Day, we determine if your Policy meets the
conditions for the Term No-Lapse Guarantee as described in Supplement E. If your
Policy does not meet these conditions, then a Grace Period related to the Term
No-Lapse Guarantee will start. If you do not make the required additional
premium payment during this Grace Period, you will lose the Term No-Lapse
Guarantee. It cannot be reinstated. In addition, you will no longer be eligible
for the Lifetime No-Lapse Guarantee described below.
Continuation Under the Lifetime No-Lapse Guarantee Provision
Even if your Net Cash Surrender Value on a Monthly Anniversary Day is not
sufficient to continue your Policy and the guaranteed minimum continuation
period has expired, your Policy may continue under the Lifetime No-Lapse
Guarantee.
As long as the Lifetime No-Lapse Guarantee applies, we guarantee that we will
never terminate your Policy or start a Grace Period related to continuation of
your Policy.
The Lifetime No-Lapse Guarantee will apply only if:
o You met the conditions for maintaining the Term No-Lapse Guarantee
throughout the guaranteed minimum continuation period.
o The guaranteed minimum continuation period has expired.
On each Monthly Anniversary Day after the expiration of the guaranteed minimum
continuation period, we determine if your Policy meets the conditions for
Lifetime No-Lapse Guarantee as described in Supplement E. If your Policy does
not meet these conditions, then a Grace Period related to the Lifetime No-Lapse
Guarantee will start. If you do not make the required additional premium payment
during this Grace Period, you will lose the Lifetime No-Lapse Guarantee. It
cannot be reinstated.
<PAGE>
Additional Information About No-Lapse Guarantees
o Supplement E to this Prospectus contains a description of the
procedures we use to determine if your Policy meets the conditions
for the Term No-Lapse Guarantee or the Lifetime No-Lapse
Guarantee.
o Grace Periods, which are designed to give you time to make an
additional premium payment, are explained below.
Minimum Annual Premiums
Your minimum annual premiums for the Term No-Lapse Guarantee and the Lifetime
No-Lapse Guarantee are shown in your Policy Schedule. We use the minimum annual
premiums to determine if you have met the conditions for continuing your
insurance coverage under these provisions.
If you make any changes in your Policy that result in a change in the Monthly
Deduction, we will determine new minimum annual premiums. We will send you a new
Policy Schedule showing the new minimum annual premiums.
Grace Periods
A Grace Period is a 61-day period that starts on the day after we mail you the
applicable notice. Under certain circumstances, the Grace Periods related to the
continuation of your Policy and the continuation of the no-lapse guarantees may
overlap or start at the same time. The chart below shows how Grace Periods work.
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------- -------------------------------------- -------------------------------------
Continuation of Your Policy Maintenance of Term Maintenance of Lifetime
No-Lapse Guarantee No-Lapse Guarantee
<S> <C> <C> <C> <C> <C>
- ----------------------------------------- -------------------------------------- -------------------------------------
o A Grace Period related to the o A Grace Period related to o A Grace Period related to
continuation of your Policy will the Term No-Lapse Guarantee the Lifetime No-Lapse
start if: will start if Your Policy does Guarantee will start if:
not meet the conditions for
o Your Net Cash Surrender Value this guarantee. o You maintained your Term
is not sufficient on a Monthly No-Lapse Guarantee
Anniversary Day. throughout the guaranteed
o Neither No-Lapse Guarantee minimum continuation
applies. period.
o The guaranteed minimum
continuation period has
expired.
o Your Policy does not meet
the conditions for this
guarantee.
- -
- ----------------------------------------- -------------------------------------- -------------------------------------
o The notice will tell you the o The notice will tell you o The notice will tell you
amount of the minimum additional the amount of the minimum the amount of the minimum
premium you must pay to keep your additional premium you must pay additional premium you must
Policy in effect. to maintain the Term No-Lapse pay to maintain the Lifetime
Guarantee. No-Lapse Guarantee.
- ----------------------------------------- -------------------------------------- -------------------------------------
o If you make the required o If you make the required o If you make the required
additional premium payment during additional premium payment additional premium payment
the Grace Period, your Policy will during the Grace Period, the during the Grace Period, the
continue to be effective. Term No-Lapse Guarantee will Lifetime No-Lapse Guarantee
continue to be effective. will continue to be effective.
- ----------------------------------------- -------------------------------------- -------------------------------------
o If you do not make the o If you do not make the o If you do not make the
required additional premium required additional premium required additional premium
payment during the Grace Period, payment during the Grace payment during the Grace
your Policy will terminate at the Period, you will lose the Term Period, you will lose the
end of the Grace Period without No-Lapse Guarantee. Lifetime No-Lapse Guarantee.
value.
- ----------------------------------------- -------------------------------------- -------------------------------------
o If the Insured dies during the o In addition, if you do not o The no-lapse guarantee
Grace Period, we will reduce the make the required additional cannot be reinstated.
death proceeds by the amount of premium payment during the
any unpaid charges up to 3 times Grace Period, you will lose the
the sum of the Monthly Deduction Lifetime No-Lapse Guarantee.
and the Monthly Expense Charge.
- ----------------------------------------- -------------------------------------- -------------------------------------
o These no-lapse guarantees
cannot be reinstated.
- ----------------------------------------- -------------------------------------- -------------------------------------
</TABLE>
We will mail Grace Period notices to you at your address as shown on our
records. We will also mail these notices to anyone holding your Policy as
collateral as shown on our records at the collateral holder's address as shown
on our records.
Policy Lapse
If a Grace Period related to the continuation of your Policy ends, you have not
paid the minimum additional premium needed to continue your Policy and neither
no-lapse guarantee applies, your Policy will lapse and you will not receive any
money from us because Net Cash Surrender Value of your Policy will have been
reduced to zero.
<PAGE>
Reinstatement
If your Policy was terminated but the Insured is still living, you can ask us to
reinstate your Policy at any time during the 5-year period after the Grace
Period ended. We will reinstate your Policy if:
o We receive satisfactory evidence of insurability.
o You pay a premium that increases your Net Cash Surrender Value to
an amount equal to or greater than:
o All costs and charges that we would have deducted from
your Account Value on each Monthly Anniversary Day from
the date of termination to the date of reinstatement and
o The Monthly Deductions and Monthly Expense Charges for the
next 3 months
o You repay or reinstate any Indebtedness that was outstanding on
the date of termination.
If you do not maintain the Term No-Lapse Guarantee, we will not reinstate this
guarantee and you will not be eligible for the Lifetime No-Lapse Guarantee. If
you do not maintain the Lifetime No-Lapse Guarantee, we will not reinstate this
guarantee.
RIDERS
Each rider's description in this Prospectus is subject to the specific terms of
the rider as each contains definitions, contractual limitations and conditions.
You should review any rider before purchasing it.
Included Rider
The insurance benefit (or rider) summarized below is automatically included with
every Policy issued in a state where such an insurance benefit is permitted. You
should ask your insurance agent if this insurance benefit is available in your
state.
<PAGE>
Accelerated Death Benefit Rider
<TABLE>
<CAPTION>
<S> <C>
Benefit Summary: Enables you to obtain an advance against the Death Benefit upon diagnosis of fatal
illness
Benefit Description: When the Insured is diagnosed with a fatal illness, we will make you special loans
secured by your Death Benefits payable under the Policy. The maximum amount of these
special loans is the lesser of
o $250,000
o 60% of the difference between your Death Benefit and the maximum amount you
are able to borrow from your Policy
Multiple special loan advances are permitted
during the 12-month period from the date of the
first advance until you reach the maximum amount.
The minimum special loan is $5,000. We charge you
interest at an annual rate of 8% on all special
loans we make to you.
Some or all of the special loan advances may be
considered taxable by the Internal Revenue
Service. You should consult your tax adviser
before requesting an advance under this rider.
The Death Proceeds will be reduced by the amount
of all special loan advances, including interest,
upon the death of the Insured.
Excluded Coverage: This advance must be voluntarily elected. It is not available if:
o You are required to elect this benefit by law to meet the claims of creditors
o You are required to elect this benefit by a government agency in order to
apply, keep or maintain a government benefit
Cost of Benefits: No charge until elected (and then the only charge is interest on the advance)
Termination of The benefits terminate on the earliest of
Benefits: o When your Policy ends
o When the cumulative maximum amount has been advanced
Optional Riders
Subject to certain underwriting and other requirements, you may add one or more
of the following optional insurance benefits to your Policy by rider. We will
deduct the cost of any rider as part of the Monthly Deduction. Each available
optional insurance benefit (or rider) is summarized below.
Accidental Death Rider
Benefit Summary: Pays an additional death benefit if the Insured's death is caused by accidental bodily
injury
Benefit Description: You select the Accidental Death Benefit Amount. The Accidental Death Benefit Amount
will be added to the Death Proceeds and paid under the same Income Plan.
Under certain circumstances, we will pay 2 times
your Accidental Death Benefit Amount.
Excluded Coverage: We will not pay an Accidental Death
Benefit if the Insured's injury or death resulted
from certain risks, such as suicide, certain
travel in aircraft, certain use of drugs and
participation in an activity while intoxicated.
Cost of Benefits: Depends on the Insured's Attained Age and selected Accidental Death Benefit Amount
<PAGE>
Termination of The benefits terminate at the earliest of
Benefits: o When your Policy ends
o Upon cancellation of the rider
o The day before the Policy Anniversary on which the Insured is 70 years old
Insured Insurability Rider
Benefit Summary: Provides an option to purchase additional insurance on the life of the Insured without
evidence of insurability
Benefit Description: We provide you an option to purchase
additional insurance on the life of the Insured
without evidence of insurability. The Insured
Insurability Option Amount you select is the
amount of additional insurance you have the option
to purchase.
Under most circumstances, the options may be
exercised on each regular option date. The regular
option dates are the Policy Anniversaries that
occur after the Insured is ages 25, 28, 31, 34, 37
and 40.
The options may also be exercised on alternate option dates. An alternate option date
occurs on the 90th day following each of the following:
o Insured's marriage
o Birth of a living child of Insured
o Adoption of a child by Insured
The exercise of an option on an alternate option
date cancels the next regular option date still
available.
Excluded Coverage: N/A
Cost of Benefits: Depends on the Insured's Attained Age and selected Insured Insurability Option Amount
Termination of The benefits terminate on the earliest of
Benefits: o When your Policy ends
o Upon cancellation of the rider
o The Policy Anniversary on which the Insured is 40 years old
Disability Credit Rider
Benefit Summary: Makes premium payments equal to the "Credit Amount" while you are disabled
<PAGE>
Benefit Description: You select the Credit Amount. The Credit Amount is the annual amount of premium
payments we will pay under this optional policy benefit. The Credit Amount must always
be
o Greater than or equal to your minimum annual premium for the Term No-Lapse
Guarantee
o Less than or equal to your minimum annual premium for the Lifetime No-Lapse
Guarantee
Your Credit Amount may be adjusted if either
minimum annual premium changes.
We make a premium payment of 1/12 of the Credit
Amount for each month you are disabled. This
amount may or may not be sufficient to keep your
Policy in effect.
Excluded Coverage: Disabilities that result from the following are not covered:
o Self-inflicted injuries
o A declared or undeclared war
o Injuries or diseases that first manifest while this optional insurance
benefit is not in force
Cost of Benefits: Depends on the Insured's Attained Age and selected Credit Amount
Termination of The benefits terminate on the earliest of
Benefits: o When your Policy ends
o Upon cancellation of the rider
o The day before the Policy
Anniversary on which the Insured is 60 years
old, unless such benefits are being paid at that time
Children's Term Rider
Benefit Summary: Pays a death benefit if an Insured Child dies
Benefit Description: For each Insured Child that you name
in your application, you select the Children's
Term Benefit Amount that will be applicable to
each Insured Child. The Children's Term Benefit
Amount will be paid upon the death of an Insured
Child and can be paid under an Income Plan.
Under most circumstances, if the Insured dies, the
insurance on each Insured Child provided by this
rider will become fully paid-up nonparticipating
term insurance and will continue until each
Insured Child's 23rd birthday. After an Insured
Child is age 18, that Insured Child may convert
the term insurance policy to a whole life plan.
Excluded Coverage: This rider provides coverage only for
Insured Children of the Insured. An Insured Child
includes any child of the Insured who was at least
15 days old and less than 18 years old when named
in the application. An Insured Child also includes
any child at least 15 days old, who after the date
of application for this rider, was born of any
marriage of the Insured or was adopted by the
Insured when less than 18 years of age.
Cost of Benefits: Depends only on selected Children's Term Benefit Amounts
<PAGE>
Termination of The benefits terminate on the earliest of
Benefits: o When your Policy ends
o When you cancel the rider
o The day before the Policy Anniversary on which
the Insured is 65 years old
o On an Insured Child's 23rd birthday, for that Insured Child
o The day an Insured Child exercises the conversion option, for that Insured
Child
Other Insured Rider
Benefit Summary: Pays a death benefit if an Other Insured dies
Benefit Description: For each Other Insured that you name
in your application, you select an Other Insured
Benefit Amount. The Other Insured Benefit Amount
will be paid to the designated beneficiary upon
the death of an Other Insured and can be paid
under an Income Plan.
Under most circumstances, if the Insured dies,
each Other Insured has the right to convert the
coverage to a new life insurance policy.
Until the Policy Anniversary on which an Other
Insured is age 85, that Other Insured may convert
the coverage to any life insurance policy (other
than term insurance) that we regularly issue.
Excluded Coverage: N/A
Cost of Benefits: Depends on each Other Insured's Attained Age, gender and underwriting class and
selected Other Insured Benefit Amounts
Termination of The benefits terminate on the earliest of
Benefits: o When your Policy ends
o When you cancel the rider
o The day before the Policy Anniversary on which the Insured is 100 years old
o The day before the Policy Anniversary on which the Other Insured is 95 years
old, for that Other Insured
o The day an Other Insured exercises the conversion options, for that Other
Insured
</TABLE>
OTHER INFORMATION ABOUT YOUR POLICY
Policy is a Contract
The Policy is a legal contract between you and us to insure the life of the
person named in the application as the Insured. We provide the insurance
coverage and other benefits described in the Policy in exchange for your
completed application and your premium payments.
When we refer to the Policy, we mean the entire contract, which consists of:
o The basic policy
o The application
<PAGE>
o Any supplemental applications
o Any optional policy benefits, riders or endorsements that add
provisions or change the terms of the basic policy
The description of the Policy in this Prospectus is subject to the specific
terms of your Policy as it contains specific contractual provisions and
conditions. If the terms of your Policy differ from the description of the
Policy in the Prospectus, you should rely on the terms in your Policy.
The Policy is subject to the laws in the state in which it is issued. To the
extent that the Policy may not comply with the applicable state law, we will
interpret it so that it complies.
Modification of Policy
Upon notice to you, we may modify your Policy:
o If such modification is necessary to make the Policy comply with
any law or regulation issued by a governmental agency applicable
to the Policy
o If such modification 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 If such modification is necessary to reflect a change in the
operation of the Company, Separate Account 1 or the Sub-Accounts
o If such modification adds, deletes or otherwise changes
Sub-Account options
We also reserve the right to modify certain provisions of the Policy as stated
in those provisions. In the event of a modification, we may make appropriate
endorsement to the Policy to reflect the modification.
Your insurance agent cannot change any of the terms of your Policy, extend the
time for making premium payments or make any other agreement that would be
binding on us.
Extended Maturity Benefit
On the Policy Anniversary after the Insured turns age 100, the total of the then
current value of your Sub-Accounts and the then current value of your Loan
Account, plus interest due and unpaid, will be automatically transferred to the
Fixed Account. Your total value in the Fixed Account will then be reduced by the
amount of any outstanding Indebtedness. After that time, we will not accept any
further premium payments, we will not deduct further charges, we will not permit
you to transfer your money from the Fixed Account, we will not permit any
additional loans and your death benefit option will be changed to Option 2.
Unless you were older than age 75 on the Policy Date, we will not decrease your
Specified Amount by your Account Value when we change your death benefit option
to Option 2. Your Policy will continue in effect until the Insured's death or
until the Policy is surrendered for its Net Cash Surrender Value.
<PAGE>
Conversion to a Fixed Policy
You may elect to convert your Policy to a fixed policy at any time:
o Within 24 months of your Policy Date or
o Within 60 days of the later of
o notification of a change in the investment policy of Separate
Account 1, or
o the effective date of the change
If you elect to convert your Policy, we will transfer the entire value of your
investment in the Sub-Accounts to the Fixed Account. We will not charge you for
this transfer. After the date of your election to convert your Policy, Net
Premiums may not be allocated and transfers may not be made to any of the
Sub-Accounts. All other terms and charges of your Policy will continue to apply.
Confirmations and Statements
We will send you a confirmation of each premium payment and other financial
transactions, such as transfers and partial withdrawals. We will also send you a
statement each year showing the value of your investment in the Sub-Accounts and
the Fixed Account.
If you have invested money in a Sub-Account, you will also receive semi-annual
reports for the Fund in which the Sub-Account invests. These semi-annual reports
will include a list of portfolio securities held by the underlying Fund.
Processing Guidelines
We use certain guidelines to determine when we will process your Policy
application and other instructions. These processing guidelines determine your
Policy Date and the effective date of instructions that you send to us. The
effective date depends upon:
o Whether we receive your application or instructions before or
after the close of regular trading on the New York Stock Exchange
(typically 4:00 p.m. Eastern Time),
o Whether the New York Stock Exchange is open at that time, and
o Whether your application and instructions are in good order
Also, we cannot determine your Policy Date or the effective date of your Policy
until we have received the initial minimum premium required to issue your
Policy.
If you are the sole owner of the Policy, you must sign the Policy application
and other instructions. If you and another person are joint owners of your
Policy, you and your joint owner must both sign your Policy application and
instructions.
Required Note on Computations
Calculations are based on the mortality table shown in your Policy Schedule.
<PAGE>
We have filed a detailed statement of our computations with the applicable state
insurance departments. The values under this Policy are not less than those
required by the law of your state. Any benefit provided by an attached rider
will not increase these values unless stated in the rider.
The method used in calculating Policy values will be based on the actuarial
procedures that recognize the variable nature of this Policy.
Projection of Benefits and Values
In addition to any examples and illustrations provided to you by your insurance
agent, you may request that we send you a hypothetical illustration of Policy
benefits and values. We may charge a reasonable fee to provide this information
to you.
Incontestability
We issue the Policy in reliance on the answers you provided in the application
and any supplemental applications. These answers are considered representatives,
and not warranties. We have assumed that all these answers are true and
complete. If they are not, we may have the right to contest and void the Policy
as if it had not been issued. Except for cases involving termination of the
Policy or fraud, we will not contest:
o The Policy after the Policy has been in effect for 2 years during
the Insured's lifetime
o Any increase in Specified Amount after the increase has been in
effect for 2 years during the Insured's lifetime
o Any rider attached to the Policy after the rider has been in
effect for 2 years
During these 2-year periods, we may contest the validity of your Policy, any
increase in Specified Amount or the validity of any riders based on material
misstatements made in the application or any supplemental application. No
statement will be used in contesting a claim unless it is in an application or
supplemental application and a copy of the application is attached to the
Policy.
If your Policy is reinstated after termination, the 2-year period of
contestability begins on the reinstatement date. If the Policy has been in
effect for 2 years during the lifetime of the Insured, it will be contestable
only as to statements made in the reinstatement application. If the Policy has
been in force for less than 2 years, it will be contestable as to statements
made in the reinstatement application as well as the initial application and
supplemental applications.
Defending Against Claims
We will not use any statement you made to defend against a claim under your
Policy unless it is in an application or supplemental application and a copy of
the application is attached to the Policy.
<PAGE>
Suicide Exclusion
Your Policy does not cover suicide by the Insured, whether sane or insane,
during the 2-year period beginning with the Policy Date. If the Policy is in
effect and the Insured commits suicide during this 2-year period, we will pay
you the greater of the following amounts:
o Your premium payments, less any Indebtedness, less any previous
withdrawals, and less all monthly costs of insurance on all
persons other than the Insured ever covered by rider
o The Net Cash Surrender Value
We will not pay any Death Benefit in these circumstances.
With respect to any increase in Specified Amount, we will not pay death benefits
if the Insured, whether sane or insane, commits suicide within 2 years from the
effective date of the increase. If the Policy has been in effect for more than 2
years after the Policy Date but less than 2 years from an increase in Specified
Amount, we will return the monthly costs of insurance charged for the increase
and pay death benefits based on the previous Specified Amount (on which the
2-year suicide exclusion has expired).
This provision also applies to any rider attached to the Policy. The 2-year
period begins on the rider's date of issue.
If your Policy terminates and is later reinstated, we will measure the 2-year
time period from the effective date of reinstatement. Any premium payment refund
will be limited to premiums paid on or after the effective date of
reinstatement.
Termination of Your Policy
Your Policy will terminate and all insurance coverage under the Policy will stop
in the following instances:
o As of the date on which we receive notice from you requesting that
the Policy be cancelled
o As of the date the Insured dies (although some riders may provide
benefits for other covered persons beyond the Insured's death)
o As of the date a Grace Period related to the continuation of your
Policy expires
o As of 31 days after we mail you a notice that your Indebtedness
exceeds your Cash Surrender Value less the Monthly Deduction and
the Monthly Expense Charge for the current month unless you make
the necessary premium payment to continue the Policy
No Dividends
The Policies are "non-participating," which means that they do not pay
dividends.
<PAGE>
Misstatement of Age or Gender
If the age or gender of the Insured is misstated in information sent to us, we
will change any benefits under the Policy to those benefits that your cost of
insurance charge for the month of death would provide if the correct age and
gender had been stated. If we do not discover the misstatement until after the
payment of the Policy proceeds under one of the Income Plans has started, we
will deduct any overpayments, plus compound interest, from subsequent payments
and we will pay any underpayments, plus compound interest, in a lump sum.
Telephone Security Procedures
We have established security procedures for telephone transactions, such as
recording telephone calls. We may also require a personal identification number
(PIN) or other identifying information. We will not be liable for losses due to
unauthorized or fraudulent telephone instructions if we follow reasonable
security procedures and reasonably believe the instructions are genuine.
Year 2000 Information
Columbus Life began its effort to address the Year 2000 compliance issue prior
to 1990. As of January 1, 1999, the internal effort was completed. All computer
equipment and software systems, communications equipment and software, and any
building equipment and facilities are expected to properly calculate, process
and use dates before, during and after January 1, 2000, without error or
interruption. In addition to its internal efforts, Columbus Life has a Year 2000
Task Force in place to monitor the Year 2000 efforts of its critical business
partners and suppliers. Should this Task Force determine that the Year 2000
efforts of any of these partners or suppliers will not be adequate, Columbus
Life will develop contingency plans to address any issues that may arise.
Assignment
Generally, you may assign your Policy. We will not be bound by an assignment
until we receive and record written notice of the assignment at Columbus Life
Variable Service Center, P.O. Box 2850, Cincinnati, Ohio 45201-2850. Your rights
and the rights of your Beneficiary will be affected by an assignment. We are not
responsible for the validity or tax consequences of any assignment.
INFORMATION ABOUT THE INVESTMENT OPTIONS
The Sub-Accounts and the Funds
You can allocate your Net Premiums to one or more Sub-Accounts. You may also
transfer amounts among the Fixed Account and the Sub-Accounts. Each Sub-Account
invests in a corresponding Fund of the AIM Variable Insurance Funds, Inc. (AIM),
The Alger American Fund (Alger), MFS Variable Insurance Trust (MFS), PIMCO
Variable Insurance Trust (PIMCO) or Touchstone Variable Series Trust
(Touchstone).
<PAGE>
Each Sub-Account buys shares of the corresponding Fund at net asset value
without a sales charge. Dividends and capital gains distributions from a Fund
are reinvested at net asset value without a sales charge and held by the
Sub-Account as an asset. Each Sub-Account redeems Fund shares at net asset value
to the extent necessary to make payment of Death Proceeds or other payments
under the Policy.
The following table contains general information about the investment advisor,
investment objective and principal investment strategies of each Fund in which a
corresponding Sub-Account invests. The fund advisors and sub-advisors cannot
guarantee that the Funds will meet their investment objectives nor is there any
guarantee that your Account Value will equal or exceed the total of your Net
Premiums. More complete information about each Fund, including information about
its risks, performance and other investment strategies, is included in the
prospectus of each Fund. Please read each prospectus carefully before you
purchase a Policy or make other decisions about your investment options.
A Fund may have a name and/or investment objective that is very similar the name
of a publicly available mutual fund managed by the same advisor or sub-advisor.
The Funds in which the Sub-Accounts invest are not publicly available and will
not have the same performance as those publicly available mutual funds.
Different performance will result from differences in various factors that
affect the operation of a Fund, such as implementation of investment policies,
Fund expenses and size of the Fund. In addition, your investment return from
your Policy will be less than the investment return of a shareholder in the
publicly available funds because you will pay additional charges related to your
Policy, such as the mortality and expense risk charge.
AIM V.I. Growth Fund
(AIM V.I. Growth Sub-Account)
<TABLE>
<CAPTION>
<S> <C>
Fund Family: AIM Variable Insurance Funds, Inc.
Fund Advisor: AIM Advisors, Inc.
Investment Objective: The Fund seeks to achieve growth of
capital principally through investment in common
stocks of seasoned and better capitalized
companies considered to have strong earnings
momentum.
Principal Investment The Fund invests primarily in the common stocks of 2 types of companies:
Strategies: o "Core" companies that the portfolio manager believes have experienced
above-average consistent, long-term growth in earnings and have a good
chance to continue such growth in the future
o "Earnings Acceleration" companies that the portfolio manager believes
are currently enjoying a dramatic increase in profits.
AIM V.I. Government Securities Fund
(AIM V.I. Government Securities Sub-Account)
Fund Family: AIM Variable Insurance Funds, Inc.
Fund Advisor: AIM Advisors, Inc.
<PAGE>
Investment Objective: The Fund seeks to achieve a high level
of current income consistent with reasonable
concern for safety of principal by investing in
debt securities issued, guaranteed or otherwise
backed by the U.S. Government. The Fund intends to
maintain a dollar-weighted average portfolio
maturity between 3 and 10 years.
Principal Investment The Fund invests primarily in U.S. Treasury obligations and obligations issued or
Strategies: guaranteed by U.S. Government agencies and instrumentalities.
Alger American Small Capitalization Portfolio
(Alger American Small Capitalization Sub-Account)
Fund Family: The Alger American Fund
Fund Advisor: Fred Alger Management, Inc.
Investment Objective: The Fund seeks long-term capital appreciation.
Principal Investment The Fund invests primarily (up to 65% of total assets) in equity securities of
Strategies: companies that have a market capitalization within the range of companies included in
the Russell 2000 Growth Index or the S&P SmallCap
600 Index. The combined range of the market
capitalization of companies included in these
indices is approximately $20 million to $4.25
billion. The Fund may invest up to 35% of total
assets in companies with a market capitalization
outside the range provided by the indices.
Alger American Growth Portfolio
(Alger American Growth Sub-Account)
Fund Family: The Alger American Fund
Fund Advisor: Fred Alger Management, Inc.
Investment Objective: The Fund seeks long-term capital appreciation.
Principal Investment The Fund invests primarily (up to 65% of total assets) in equity securities of
Strategies: companies that have a market capitalization of $1 billion or greater. The Fund may
invest up to 35% of total assets in companies with
a market capitalization of less than $1 billion.
MFS VIT Emerging Growth Series
(MFS VIT Emerging Growth Sub-Account)
Fund Family: MFS Variable Insurance Trust
Fund Advisor: Massachusetts Financial Services Company
Investment Objective: The Fund seeks to provide long-term
growth of capital. Dividend and interest income
from portfolio securities, if any, is incidental
to the Fund's objective of long-term growth of
capital.
<PAGE>
Principal Investment The Fund invests primarily (at least 65% of total assets) in the common stocks of
Strategies: companies believed to be early in their life cycle but have the potential to become
major enterprises (emerging growth companies) or major enterprises whose rates of
earnings growth are expected to accelerate. In selecting its
investments, the portfolio manager focuses on
those companies it believes will grow faster than
the overall U.S. economy and the rate of inflation.
MFS VIT Growth with Income Series
(MFS VIT Growth with Income Sub-Account)
Fund Family: MFS Variable Insurance Trust
Fund Advisor: Massachusetts Financial Services Company
Investment Objective: The Fund seeks to provide reasonable current income and long-term growth of capital
and income.
Principal Investment The Fund invests primarily (at least 65% of total assets) in equity securities of
Strategies: companies that are believed to have long-term prospects for growth and income.
PIMCO Long-Term U.S. Government Portfolio
(PIMCO Long-Term U.S. Government Sub-Account)
Fund Family: PIMCO Variable Insurance Trust
Fund Advisor: Pacific Investment Management Company
Investment Objective: The Fund seeks to maximize total return, consistent with the preservation of capital
and prudent investment management.
Principal Investment The Fund invests primarily (up to 65% of net assets) in U.S. Government securities.
Strategies: The U.S. Government securities may be represented by options and futures contracts.
Touchstone Small Cap Value Fund
(Touchstone Small Cap Value Sub-Account)
Fund Family: Touchstone Variable Series Trust
Fund Advisor: Touchstone Advisors, Inc.
Fund Sub-Advisor: Todd Investment Advisors, Inc.
Investment Objective: The Fund seeks long-term growth of capital.
Principal Investment The Fund invests primarily (at least 75% of total assets) in the common stocks of
Strategies: small to medium capitalization companies that the portfolio manager believes are
undervalued. The portfolio manager looks for stocks that are priced lower than they
should be, and also contain a catalyst for growth. The Fund may also invest up to 5% of
its assets (at the time of purchase) in any one company. The Fund will limit its
investments so that the percentage of the Fund's assets invested in a particular
industry will not be more than double the percentage of the industry in the Russell 2000 Index.
<PAGE>
Touchstone Emerging Growth Fund
(Touchstone Emerging Growth Sub-Account)
Fund Family: Touchstone Variable Series Trust
Fund Advisor: Touchstone Advisors, Inc.
Fund Sub-Advisors: David L. Babson & Company, Inc.
Westfield Capital Management Company, Inc.
Investment Objective: The Fund seeks to increase the value of its shares as a primary goal and to earn
income as a secondary goal.
Principal Investment The Fund invests primarily (at least 65% of total assets) in the common stocks of
Strategies: smaller, rapidly growing (emerging growth) companies. In selecting its investments,
the portfolio managers focus on those companies
they believe will grow faster than the U.S.
economy in general. They also choose companies
they believe are priced lower in the market than
their true value.
Touchstone International Equity Fund
(Touchstone International Equity Sub-Account)
Fund Family: Touchstone Variable Series Trust
Fund Advisor: Touchstone Advisors, Inc.
Fund Sub-Advisor: Credit Suisse Asset Management
Investment Objective: The Fund seeks to increase the value of its shares over the long-term.
Principal Investment The Fund invests primarily (at least 80% of total assets) in equity securities of
Strategies: foreign companies and will invest in at least 3 countries outside the United States. A
large portion of those non-U.S. equity securities may be issued by companies active in
emerging market countries (up to 40% of total assets).
Touchstone Income Opportunity Fund
(Touchstone Income Opportunity Sub-Account)
Fund Family: Touchstone Variable Series Trust
Fund Advisor: Touchstone Advisors, Inc.
Fund Sub-Advisor: Alliance Capital Management L.P.
Investment Objective: The Fund seeks to achieve a high level
of current income as its main goal. The Fund may
also seek to increase the value of its shares, if
consistent with its main goal.
Principal Investment The Fund invests primarily in debt securities. These debt securities will generally be
Strategies: more risky non-investment grade corporate and government securities (up to 100% of
total assets). Non-investment grade debt securities are often referred to as "junk
bonds" and are considered speculative.
Touchstone High Yield Fund
(Touchstone High Yield Sub-Account)
Fund Family: Touchstone Variable Series Trust
Fund Advisor: Touchstone Advisors, Inc.
Fund Sub-Advisor: Fort Washington Investment Advisors, Inc.
<PAGE>
Investment Objective: The Fund seeks to achieve a high level of current income as its main goal. Capital
appreciation is a secondary consideration in achieving its goal.
Principal Investment The Fund invests primarily in debt securities. These debt securities will generally be
Strategies: more risky non-investment grade corporate and government securities (up to 100% of
total assets) issued primarily by U.S. issuers. Non-investment grade debt securities
are often referred to as "junk bonds" and are considered speculative.
Touchstone Value Plus Fund
(Touchstone Value Plus Sub-Account)
Fund Family: Touchstone Variable Series Trust
Fund Advisor: Touchstone Advisors, Inc.
Fund Sub-Advisor: Fort Washington Investment Advisors, Inc.
Investment Objective: The Fund seeks to increase the value of its shares over the long-term.
Principal Investment The Fund invests primarily (at least 65% of total assets) in common stock of larger
Strategies: companies that the portfolio manager believes are undervalued. In choosing undervalued
stocks, the portfolio manager looks for companies that have proven management and unique
features or advantages and are believed to be priced lower than their true value.
These companies may not pay dividends. The Fund may also invest in common
stocks of rapidly growing companies to enhance the Fund's return and vary its
investments to avoid having too much of the Fund's assets subject to
risks specific to undervalued stocks. Also, up to 70% of total assets may be
invested in large cap companies and up to 30% may be invested in mid cap companies.
Touchstone Growth & Income Fund
(Touchstone Growth & Income Sub-Account)
Fund Family: Touchstone Variable Series Trust
Fund Advisor: Touchstone Advisors, Inc.
Fund Sub-Advisor: Scudder Kemper Investments, Inc.
Investment Objective: The Fund seeks to increase the value of its shares over the long-term, while receiving
dividend income.
Principal Investment The Fund invests primarily (at least 65% of total assets) in dividend-paying common
Strategies: stocks, preferred stocks and convertible securities in a variety of industries. The
portfolio manager may choose to purchase securities that do not pay dividends (up to 35%)
but which are expected to increase in value or produce high income payments in the future.
In choosing securities for the Fund, the portfolio manager will follow a value oriented style,
generally buying securities with yields that areat least 20% higher than the average yield of
companies in the S&P 500. The portfolio manager focuses on investing in companies that have a
market capitalization of at least $1 billion, but may invest in companies of any size.
<PAGE>
Touchstone Enhanced 30 Fund
(Touchstone Enhanced 30 Sub-Account)
Fund Family: Touchstone Variable Series Trust
Fund Advisor: Touchstone Advisors, Inc.
Fund Sub-Advisor: Todd Investment Advisors, Inc.
Investment Objective: The Fund seeks to achieve a total
return which is higher than the total return of
the Dow Jones Industrial Average (DJIA).
Principal Investment The Fund's portfolio is based on the 30 stocks which comprise the DJIA. The portfolio
Strategies: manager seeks to enhance the total return of the Fund by substituting some rapidly
growing companies for those companies in the DJIA that appear to have slower growth.
The portfolio manager uses a database of 4,000 stocks from which
to choose the companies that will be substituted in the enhanced portion of the portfolio.
Touchstone Balanced Fund
(Touchstone Balanced Sub-Account)
Fund Family: Touchstone Variable Series Trust
Fund Advisor: Touchstone Advisors, Inc.
Fund Sub-Advisor: OpCap Advisors, Inc.
Investment Objective: The Fund seeks to achieve an increase in value and current income.
Principal Investment The Fund invests in both equity securities (generally about 60% of total assets) and
Strategies: debt securities (generally about 40%, but at least 25%). The debt securities will be
rated investment grade or at the highest levels of non-investment grade.
Touchstone Bond Fund
(Touchstone Bond Sub-Account)
Fund Family: Touchstone Variable Series Trust
Fund Advisor: Touchstone Advisors, Inc.
Fund Sub-Advisor: Fort Washington Investment Advisors, Inc.
Investment Objective: The Fund seeks to provide a high level of dividends and distributions.
Principal Investment The Fund invests primarily in higher quality investment grade debt securities (at
Strategies: least 65% of total assets). The Fund's investment in debt securities may be determined
by the direction in which interest rates are expected to move because the value of these
securities generally moves in the opposite direction from interest rates. The Fund
expects to have an average maturity between 5 and 15 years.
<PAGE>
Touchstone Standby Income Fund
(Touchstone Standby Income Sub-Account)
Fund Family: Touchstone Variable Series Trust
Fund Advisor: Touchstone Advisors, Inc.
Fund Sub-Advisor: Fort Washington Investment Advisors, Inc.
Investment Objective: The Fund seeks to provide a higher level of current income than a money market fund,
while also seeking to prevent large fluctuations in the value of the Sub-Account's initial
investment. The Fund does not try to keep a constant $1.00 per share net asset value.
Principal Investment The Fund invests mostly in various types of money market instruments. All investments
Strategies: will be rated at least investment grade. On average, the securities held by the Fund
will mature in less than one year.
</TABLE>
Neither AIM Advisors, Inc., Fred Alger Management, Inc., Massachusetts Financial
Services Company nor Pacific Investment Management Company is an affiliate of
Columbus Life.
Special Considerations
AIM, Alger, MFS and PIMCO offer shares to Separate Account 1 and other separate
accounts of unaffiliated life insurance companies to fund benefits under
variable annuity contracts and variable life insurance policies. Touchstone
offers its shares to the separate accounts of Columbus Life and Western-Southern
Life Assurance Company to fund benefits under the Policies, other variable life
insurance policies and variable annuity contracts. We do not foresee any
disadvantage to you arising out of these arrangements. Nevertheless, differences
in treatment under tax and other laws, as well as other considerations, could
cause the interests of various purchasers of contracts and policies to conflict.
For example, violation of the federal tax laws by one separate account investing
in a Fund could cause the contracts or policies funded through another separate
account to lose their tax-deferred status, unless remedial action were taken.
If a material irreconcilable conflict arises between separate accounts, a
separate account may be required to withdraw its investment in a Fund. If it
becomes necessary for a separate account to replace its shares of a Fund with
another investment, the Fund may have to liquidate portfolio securities on a
disadvantageous basis. At the same time, AIM, Alger, MFS, PIMCO and Columbus
Life are subject to conditions imposed by the SEC that are designed to prevent
or remedy any conflict of interest. Touchstone, which is not subject to such
conditions, has adopted certain procedures that substantially reflect and
implement the substance of these conditions. These conditions and procedures
require the Board of Trustees of each Fund has the obligation to monitor events
in order to identify any material irreconcilable conflict that may possibly
arise and to determine what action, if any, should be taken to remedy or
eliminate the conflict.
Changes in the Sub-Accounts and the Funds
We may add, delete or combine Sub-Accounts. New Sub-Accounts will invest in
Funds we consider suitable. We may also substitute a new Fund or similar
investment option for the Fund in which a Sub-Account invests. We would make a
substitution to ensure the underlying Fund continues to be a suitable
investment. A substitution may be triggered by unsatisfactory investment
performance, a change in laws or regulations, a change in the Fund's investment
objectives or restrictions, a change in the availability of the Fund for
investment, or any other reason. Before any substitution, we will obtain any
required approvals, including approval from the SEC or from Policy holders.
55
<PAGE>
Fixed Account
The Net Premiums that you allocate to the Fixed Account will earn interest. We
guarantee that this interest rate will never be less than an effective annual
rate of at least 3%. We may, but are not required to, credit interest in excess
of this rate. Different interest rates may apply to Net Premiums allocated, or
amounts transferred, to the Fixed Account on different dates. The current
interest rate of the Fixed Account at the time we issue your Policy is shown in
your Policy Schedule.
VALUATION OF YOUR INVESTMENT
Sub-Accounts
- --------------------------------------------------------------------------------
Accumulation Unit A unit of measure used to calculate a Policy
owner's share of a Sub-Account. Although it is not
the same as a mutual fund share, it is similar.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Accumulation Unit Value The dollar value of an Accumulation Unit in
a Sub-Account.
- --------------------------------------------------------------------------------
The value of your interest in a Sub-Account is measured in Accumulation Units.
An Accumulation Unit is an accounting unit of measure. It is similar to a share
of a mutual fund. The value of an Accumulation Unit varies from day to day
depending on the investment performance of the Fund in which the Sub-Account is
invested and the expenses of the Sub-Account.
The Accumulation Unit Value of each Sub-Account is calculated on each day that
the New York Stock Exchange is open for business (Valuation Date). The
Accumulation Unit Value of a Sub-Account on any Valuation Date is calculated by
dividing the value of the Sub-Account's net assets by the number of Accumulation
Units credited to the Sub-Account on the Valuation Date.
When you allocate Net Premiums or transfer amounts to a Sub-Account, your
Account Value is credited with Accumulation Units. Other transactions, such as
withdrawals and payments of the Monthly Deduction and Monthly Expense Charge,
will decrease the number of Accumulation Units.
The number of Accumulation Units added to or subtracted from your Account
Value is calculated by dividing the dollar amount of the transaction by the
Accumulation Unit Value for the Sub-Account at the close of trading on the
Valuation Date when we process the transaction. We use the following guidelines
to determine the Valuation Date when we process the transaction:
o If we receive your premium payment or transfer instructions in
good order on a Valuation Date before the close of regular trading
on the New York Stock Exchange (typically 4:00 p.m. Eastern Time),
we will process the transaction on that Valuation Date.
o If not, we will process the transaction on the next Valuation
Date.
<PAGE>
To calculate the Accumulation Unit Value of a Sub-Account on any Valuation Date,
we start with the Accumulation Unit Value from the preceding Valuation Date and
adjust it to reflect the following items:
o The investment performance of the Sub-Account, which is based on
the investment performance of the corresponding Fund
o Any dividend or distributions paid by the corresponding Fund
o Any charges or credits for taxes that we determined were the
result of the investment operations of the Sub-Account
o The mortality and expense risk charge
Supplement F to this Prospectus contains a description of the procedures we use
to calculate the Accumulation Unit Value of a Sub-Account.
Fixed Account
The value of the Fixed Account is calculated daily and reflects the following
transactions:
o Net Premiums allocated to the Fixed Account
o Withdrawals from the Fixed Account
o Transfers to and from the Fixed Account
o Interest credited to the Fixed Account
o Charges assessed against the Fixed Account, such as the Monthly
Deduction and Monthly Expense Charges and any surrender charges
Supplement F to this Prospectus contains a description of the procedures we use
to calculate the value in the Fixed Account.
PERFORMANCE INFORMATION
We may include performance information in advertisements, sales literature and
reports to Policy owners or prospective investors.
We may report performance information in any manner permitted under applicable
law. For example, we may report total returns and average annual total returns
for the Funds and the Sub-Accounts or present performance information as a
change in a hypothetical Policy owner's Account Value or Death Benefit. The
performance information may cover various periods of time, including periods
beginning with the start of operations of a Sub-Account or the Fund in which it
invests. Performance information may not reflect the deduction of all charges
applicable to a particular Policy. For example, performance information may not
reflect the deduction of the cost of insurance charge because of the individual
nature of this charge. If all charges applicable to a particular Policy were
included, performance would be reduced.
<PAGE>
You can request a personalized illustration that shows the performance of a
hypothetical Policy. The illustration will be based either on actual historical
Fund performance or on the hypothetical investment return that you request. The
Net Cash Surrender Value provided in the illustration will assume all Fund
charges and expenses, all Separate Account 1 charges and all Policy charges are
deducted. The Account Value provided in the illustration will assume all charges
except the surrender charge are deducted. Your Policy's actual investment
performance may not be the same as the performance of the hypothetical Policy
shown in the illustration. You should not consider any performance information
to be an estimate or guarantee of future performance.
We may also compare the performance of a Sub-Account to the performance of other
separate accounts or investments as listed in rankings prepared by independent
organizations that monitor the performance of separate accounts and other
investments. We may also include evaluations of the Sub-Account published by
nationally recognized ranking services or nationally recognized financial
publications.
<PAGE>
VOTING RIGHTS
Because each Sub-Account invests in a corresponding Fund, Columbus Life is
entitled to vote at any meeting of the Fund's shareholders. Columbus Life, on
behalf of Separate Account 1, votes the shares of a Fund that are held by a
Sub-Account according to the instructions of the holders of the Policies who
have invested in that Sub-Account.
If you have money in a Sub-Account on the record date for a meeting of the
shareholders of the corresponding Fund, we will ask you for voting instructions.
Your voting instructions will apply to a specific number of Fund shares. We will
calculate this number by determining the percentage of the Sub-Account that you
own and applying this percentage to the total number of Fund shares that the
Sub-Account owns.
We will mail materials to you at least 14 days before the shareholder meeting so
you can provide your voting instructions to us. If we do not receive voting
instructions from you, we will still vote the shares for which you are entitled
to provide instructions. We will vote these shares in the same proportion as the
voting instructions received by Policy holders who provide instructions. If
Columbus Life itself is entitled to vote at the shareholders meeting, it will
vote its shares in the same manner.
We may not ask the Policy holders for voting instructions if the applicable
rules and regulations change and permit us to vote the shares of the Fund. We
may also change the manner in which we calculate the number of shares for which
you can provide voting instructions if the applicable rules and regulations
change.
We may disregard the voting instructions of Policy holders under certain
circumstances and state insurance regulators may require us to disregard these
instructions under certain circumstances. If we disregard the voting
instructions we receive, we will include a summary of our actions in our next
report to you.
<PAGE>
COLUMBUS LIFE INSURANCE COMPANY AND SEPARATE ACCOUNT 1
Columbus Life Insurance Company
Columbus Life Insurance Company (Columbus Life) is a stock life insurance
company organized under the laws of the State of Ohio on September 8, 1986. It
is a wholly-owned subsidiary of The Western and Southern Life Insurance Company
(WSLIC), a mutual life insurance company organized under the laws of the State
of Ohio on February 23, 1888. Columbus Life issues insurance and annuity
contracts and is located at 400 East Fourth Street, Cincinnati, Ohio 45202.
Columbus Life is subject to supervision by the department of insurance of the
various states in which it is licensed to transact business.
Investments allocated to the Fixed Account are held in Columbus Life's general
account along with Columbus Life's other assets. The interests of the Fixed
Account have not been registered under the Securities Act of 1933 and Columbus
Life's general account has not been registered as an investment company under
the Investment Company Act of 1940. As a result, the staff of the SEC has not
reviewed the information in this Prospectus about the Fixed Account. Disclosures
regarding the Fixed Account may, however, be subject to certain general
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in a prospectus.
Because of state insurance law requirements, Columbus Life maintains reserves to
cover its obligations under the Policies. The assets in Separate Account 1
attributable to the Policies make up a part of these reserves. Although these
reserves support the Policies, Policy owners have no ownership interest in these
reserves and any excess reserves will be for the benefit of Columbus Life and
not the Policy owners. The general account of Columbus Life is available to
satisfy Columbus Life's obligations under the Policies.
<PAGE>
DIRECTORS OF COLUMBUS LIFE. Columbus Life is managed by its Board of Directors,
4 of whom are also officers of Columbus Life or WSLIC. Each Director's principal
business address is 400 East Fourth Street, Cincinnati, Ohio 45202, unless
otherwise noted. The following persons serve as Directors of Columbus Life:
NAME PRINCIPAL OCCUPATION (PAST 5 YEARS)
William J. Williams Chairman of the Board of Columbus Life
since 1989; Chairman of the Board of WSLIC
and Western-Southern Life Assurance Company
(WSLAC) since 1989; Chief Executive Officer
of WSLIC and WSLAC 1989-1994.
John F. Barrett Vice-Chairman of the Board of
Columbus Life since 1987; Chief Executive
Officer of WSLIC and WSLAC since 1994;
President of WSLIC and WSLAC since 1989;
Chief Operating Officer of WSLIC and WSLAC
1989-1994.
Lawrence L. Grypp President and Chief Executive Officer of
Columbus Life since 1999; President and
Chief Executive Officer of Summit Financial
Resources, Inc. 1998-1999; Executive
Vice President of Massachusetts Mutual Life
Insurance Company 1976-1996.
James N. Clark Executive Vice President and
Secretary of WSLIC and WSLAC since 1997;
Executive Vice President, Secretary and
Treasurer of WSLIC and WSLAC 1996-1997;
Executive Vice President and Treasurer of
WSLIC and WSLAC 1994-1996.
Robert C. Savage General Agent, Savage and Associates, 4427
Talmadge Road, Building 2, Toledo,
Ohio 43623.
Ralph E. Waldo Retired President and Chief Executive
Officer of Columbus Life. 3974 Patricia
Drive, Columbus, Ohio 43220.
<PAGE>
OFFICERS OF COLUMBUS LIFE (OTHER THAN DIRECTORS). The senior officers of
Columbus Life, other than the Directors named above, and the officers
responsible for the variable life operations are described below. Each officer's
principal business address is 400 East Fourth Street, Cincinnati, Ohio 45202,
unless otherwise noted.
NAME PRINCIPAL OCCUPATION (PAST 5 YEARS)
Dale P. Hennie Senior Vice President and Chief Information
Officer of Columbus Life, WSLIC and WSLAC
since 1999; Senior Vice President of
Insurance Operations of Columbus Life,
WSLIC and WSLAC 1997-1999; Vice President of
WSLIC and WSLAC 1990-1997.
Nora E. Moushey Senior Vice President and Chief
Actuary of Columbus Life, WSLIC and WSLAC
since 1998; Senior Vice President of
Products and Financial Management of
Columbus Life from 1993-1998.
James M. Teeters Senior Vice President of Insurance
Operations of Columbus Life, WSLIC and
WSLAC since 1999; Senior Vice President of
Administration of Columbus Life 1991-1999;
Senior Vice President of Administration of
WSLIC and WSLAC 1998-1999.
Robert L. Walker Senior Vice President and Chief Financial
Officer of Columbus Life, WSLIC and WSLAC
since 1998; Chief Financial Officer of
National Data Corporation 1997-1998; Senior
Vice President and Chief Financial Officer
of Providian Corporation 1993-1997.
Mark A. Wilkerson Senior Vice President and Chief Marketing
Officer of Columbus Life since 1990.
William F. Ledwin Vice President and Chief Investment Officer
of Columbus Life since 1987; Senior Vice
President and Chief Investment Officer of
WSLIC and WSLAC since 1989; President of
Fort Washington Investment Advisors, Inc.
since 1990.
Thomas D. Holdridge Vice President of Underwriting of Columbus
Life since 1980.
Donald J. Wuebbling Vice President and Secretary of Columbus
Life since 1987; Senior Vice President
and General Counsel of WSLIC and WSLAC since
1999; Vice President and General Counsel of
WSLIC and WSLAC 1988-1999.
Edward S. Heenan Vice President and Comptroller of Columbus
Life, WSLIC and WSLAC since 1987.
<PAGE>
James J. Vance Vice President and Treasurer of Columbus
Life, WSLIC and WSLAC since 1999;
Treasurer of Columbus Life, WSLIC and WSLAC
1997-1999; Assistant Treasurer of WSLIC and
WSLAC 1995-1997; Director of Financial
Research of WSLIC and WSLAC 1994-1995.
Charles W. Wood, Jr. Vice President of Sales and
Marketing of Columbus Life since 1999; Vice
President of Marketing Support of Columbus
Life 1998-1999; Regional Vice President of
Sales of Ameritas Life Insurance Company
1996-1998; Senior Vice President and Chief
Marketing Officer of Covenant Life Insurance
Company 1988-1995.
Donald W. Kaplan Vice President of Financial
Projections of Columbus Life since 1998;
Vice President of Financial Projections of
WSLIC and WSLAC since 1988.
Mario J. San Marco Vice President of Columbus Life since 1992;
Vice President of WSLIC and WSLAC
since 1988.
<PAGE>
The directors, officers and employees of Columbus Life and Touchstone Securities
are bonded in the amount of $10,000,000 by a Financial Institutions Blanket
Bond, for dishonest, fraudulent, or criminal acts, wherever committed, and
whether committed alone or in collusion with others.
Separate Account 1
Columbus Life established Columbus Life Separate Account 1 (Separate Account 1)
under Ohio law on September 10, 1998. Separate Account 1 is registered with the
SEC as a unit investment trust. We may operate Separate Account 1 as a
management investment company or any other form permitted by law. We may also
deregister Separate Account 1 if registration with the SEC is no longer
required.
<PAGE>
Separate Account 1 is currently divided into 18 Sub-Accounts. Separate Account 1
holds the investments allocated to the Sub-Accounts by the owners of the
Policies. It may also hold assets for the benefit of owners of certain other
variable universal life insurance policies that it issues. Separate Account 1
invests the assets of each Sub-Account in an underlying Fund. The investment
objective of a Sub-Account and the underlying Fund in which it invests are
identical.
We own Separate Account 1's assets but we separate Separate Account 1's assets
from our general account assets and the assets of our other separate accounts.
Liabilities from other businesses we conduct will not be charged to Separate
Account 1's assets. We hold Separate Account 1's assets exclusively for the
benefit of owners and beneficiaries of the Policies and any other variable
universal life policies supported by Separate Account 1. We are obligated to pay
all benefits provided under the Policies.
The income, capital gains and capital losses of each Sub-Account are credited to
or charged against the assets of that Sub-Account without regard to the income,
capital gains or capital losses of any other Sub-Account or Columbus Life.
SERVICE PROVIDERS
Distribution of the Policies
Touchstone Securities, Inc. is the sole underwriter of the Policy. Touchstone
Securities is a wholly-owned subsidiary of IFS Financial Services, a
wholly-owned subsidiary of WSLAC, a wholly-owned subsidiary of WSLIC. Touchstone
Securities is a broker-dealer registered under the Securities Exchange Act of
1934 and is a member of the National Association of Securities Dealers, Inc.
(NASD) and Securities Investor Protection Corporation (SIPC). The Policy will be
sold by agents who have entered into distribution agreements with Touchstone
Securities. The agents will be licensed insurance agents in those states where
the Policy may be lawfully sold. The agents will also be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of NASD.
Columbus Life pays Touchstone Securities, or agents of Touchstone Securities, a
commission of up to 105% of the target annual premium (annualized) in the first
year when the Policy is sold, plus up to 3% of all premiums in excess of the
target annual premium. Each year thereafter, Columbus Life pays a commission of
3% or less on all premiums paid on a Policy. Each year Columbus Life also pays a
service fee of 0.25% or less of the Account Value, less any Indebtedness.
Touchstone Securities is generally responsible for paying its agents and
representatives for distribution of the Policies.
<PAGE>
<TABLE>
<CAPTION>
Service Providers to the Funds
The key service providers for each family of Funds in which the Sub-Accounts
invest are indicated below:
- ----------------------------------------------------------------------------------------------------------------------
AIM variable insurance funds, inc. (AIM)
Advisor Custodian Underwriter/Distributor
------- --------- -----------------------
<S> <C> <C>
AIM Advisors, Inc. State Street Bank and Trust Company AIM Distributors, Inc.
11 Greenway Plaza, Suite 100 225 Franklin Street 11 Greenway Plaza, Suite 100
Houston, Texas 77046 Boston, Massachusetts 02110 Houston, Texas 77046
- ---------------------------------------- -------------------------------------- --------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
The Alger American Fund (Alger)
Advisor Custodian Underwriter/Distributor
Fred Alger Management, Inc. Custodial Trust Company Alger Inc.
75 Maiden Lane 101 Carnegie Center 30 Montgomery Street
New York, New York 10038 Princeton, New Jersey 08540 Jersey City, New Jersey 07302
- ---------------------------------------- -------------------------------------- --------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust (MFS)
Advisor Custodian Underwriter/Distributor
Massachusetts Financial Services State Street Bank and Trust Company MFS Fund Distributors, Inc.
Company 225 Franklin Street 500 Boyleston Street
500 Boyleston Street Boston, Massachusetts 02110 Boston, Massachusetts 02116
Boston, Massachusetts 02116
- ---------------------------------------- -------------------------------------- --------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
PIMCO Variable Insurance Trust (PIMCO)
Advisor Custodian Underwriter/Distributor
Pacific Investment Management Company Investors Fiduciary Trust Company PIMCO Funds Distributors, Inc.
840 Newport Center Drive 801 Pennsylvania 2187 Atlantic Street
Newport Beach, California 92660 Kansas City, Missouri 64105 Stamford, Connecticut 06902
- ---------------------------------------- -------------------------------------- --------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Touchstone Variable Series Trust (Touchstone)
Advisor Custodian Underwriter/Distributor
Touchstone Advisors, Inc. Investors Bank & Trust Company Touchstone Securities, Inc.
311 Pike Street 200 Clarendon Street 311 Pike Street
Cincinnati, Ohio 45202 Boston, Massachusetts 021
Cincinnati, Ohio 45202
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
TAX MATTERS
The following is a summary discussion of certain federal income tax matters that
apply to your Policy. The following discussion does not purport to be complete
or to cover all situations. The discussion is general in nature, and it should
not be considered tax advice. You should consult your own tax advisor for more
complete information.
The individual situation of each Policy owner or beneficiary will determine how
ownership or receipt of the Policy's proceeds will be treated for purposes of
federal estate tax, state inheritance tax and other taxes. Other than the very
general overview of the effect of federal estate taxes on the Policy that is
contained in the following discussion, the effect of federal estate tax, state
inheritance tax and other taxes is generally not discussed herein.
<PAGE>
The following discussion is also based on federal income tax law and
interpretations in effect as of the date of this Prospectus and is subject to
later changes in such tax law or interpretations.
Except as is otherwise expressly noted below, this discussion assumes that you
are the Policy owner and that you are a natural person who is a U.S. citizen
and resident. The tax effects on an owner who is not a natural person, U.S.
citizen or U.S. resident may be different than the effects discussed herein.
General
Your Policy will be treated as "life insurance" for federal income tax purposes
(a) if it meets the definition of life insurance under Section 7702 of the
Internal Revenue Code of 1986, as amended (the "Code"), and (b) for as long as
the investments made by the mutual funds available for investment under the
Policy satisfy certain investment diversification requirements under Section
817(h) of the Code. We believe that the Policy will meet these requirements.
Accordingly, provided that your Policy meets such requirements, the following
federal income tax consequences should apply:
o The death benefit received by the beneficiary under the Policy
will not be subject to federal income tax; and
o Increases in the Policy's cash value as a result of investment
experience will not be subject to federal income tax unless and
until there is a distribution from the Policy, such as a surrender
or a partial withdrawal.
Payment of Death Benefit
In general, as long as your Policy is considered "life insurance," the death
benefit payable under the Policy will not be included in the income of the
beneficiary receiving such benefit for federal income tax purposes.
However, if such death benefit is paid in the form of an Income Plan (over a
period of years) and not in a lump sum, then, in general, a portion of each
payment will be tax-free but the remaining portion of each payment will be
treated as interest on the death benefit and will be included in the
beneficiary's income for federal income tax purposes. The portion of each such
payment that will be treated as tax-free and the portion that will be treated as
interest are determined under the provisions of Section 101 of the Code and U.S.
Treasury Department regulations issued thereunder. The tax-free portion
generally will be determined by spreading on a pro rata basis the single sum
death benefit under the Policy over the anticipated number of payments under the
applicable Income Plan.
<PAGE>
PRE-DEATH DISTRIBUTIONS - TESTING FOR MODIFIED ENDOWMENT CONTRACT STATUS
The federal income tax consequences of a distribution from your Policy that does
not reflect the payment of a death benefit under the Policy can be affected by
whether the Policy is determined to be a "modified endowment contract." In all
cases, however, the character of the income that is described in this and the
following parts of this tax discussion as taxable to the recipient will be
ordinary income (as opposed to capital gain).
Your Policy will generally be considered under the Code to be a "modified
endowment contract" if, at any time during the first 7 Policy Years of the
Policy, you have paid a cumulative amount of premiums that exceeds the premiums
that would have been paid by that time under a fixed-benefit insurance policy
that provided a death benefit equal to the Policy's first-year death benefit and
that was designed (based on certain assumptions mandated under the Code) to
provide for paid-up future benefits after the payment of 7 level annual
premiums. This determination is called the "7-pay test."
Further, whenever there is a "material change" in your Policy, it will generally
be (a) treated as a new contract for purposes of determining whether the Policy
is a modified endowment contract and (b) thereby subjected to a new 7-pay test
over a new 7-year period. The new 7-pay test will be adjusted to take into
account, under a prescribed formula, the accumulated cash value of the Policy at
the time of the material change. Thus, a materially changed Policy will be
considered a modified endowment contract if it fails to satisfy the new 7-pay
test.
A material change in your Policy for these purposes could occur as a result of a
change in the Policy's death benefit option, the selection of additional rider
benefits under the Policy, an increase in the Policy's Specified Amount of
coverage, or certain other changes.
If your Policy's benefits are reduced during the first 7 Policy Years of the
Policy (or within 7 years after a material change in the Policy), the initial
7-pay test that applied to the Policy at the time of its issue (or, if
applicable, at the time of the material change in the Policy) will be
recalculated based on the reduced level of benefits and applied retroactively
for purposes of such 7-pay test. (Such a reduction in benefits could include,
for example, a decrease in the Policy's Specified Amount that you request or, in
some cases, a partial surrender or termination of additional benefits under a
rider to the Policy.) If the premiums previously paid are greater than the
recalculated 7-pay test limit, the Policy will become a modified endowment
contract.
If your Policy is received in exchange for a modified endowment contract, it
will also be considered a modified endowment contract.
Changes made in your Policy (for example, a decrease in the Policy's benefits or
a lapse or reinstatement of the Policy) may also impact the maximum amount of
premiums that can be paid under the Policy as well as the maximum amount of cash
value that may be maintained under the Policy.
TAXATION OF PRE-DEATH DISTRIBUTIONS IF YOUR POLICY IS NOT A MODIFIED
ENDOWMENT CONTRACT
This part of the tax discussion summarizes the federal income tax purposes of a
distribution to you from your Policy (that does not reflect the payment of a
death benefit under the Policy) when the Policy is not considered a modified
endowment contract.
LOANS. As long as your Policy remains in force during the Insured's lifetime
(and is not a modified endowment contract), no part of the proceeds of a loan
from the Policy will be subject to current federal income tax. Interest on the
loan generally will not be tax deductible.
If a loan is still outstanding when the Policy is surrendered or lapses,
however, the then outstanding loan amount will be included in your income for
federal income tax purposes at that time to the extent the cash value of the
Policy exceeds your "basis" in the Policy. Generally your "basis" in the Policy
will equal the premiums you have paid on the Policy less the amount of any
previous distributions from the Policy that were taxable.
PARTIAL WITHDRAWALS. After the first 15 Policy Years of your Policy, the
proceeds from a partial withdrawal will be subject to federal income tax to the
extent such proceeds exceed your "basis" in the Policy. Your "basis" in the
Policy generally will equal the premiums you have paid on the Policy, less the
amount of any previous distributions from the Policy that were not taxable.
During the first 15 Policy Years of your Policy, the proceeds from a partial
withdrawal or a reduction in insurance coverage generally will be subject to
federal income tax to the extent that the then cash surrender value under the
Policy exceeds your "basis" in the Policy, up to certain limits that are set
forth in Section 7702 of the Code.
These limits generally are based on the amount by which your premiums on the
Policy or the Policy's cash surrender value immediately before the withdrawal or
reduction in coverage exceeds the amount of premiums or cash surrender value
that was needed for the Policy to be considered a life insurance policy under
the Code immediately before the withdrawal or reduction in coverage. These
limits also depend in part on whether the withdrawal or reduction in coverage
occurs in the first 5 Policy Years of the Policy.
SURRENDER OR TERMINATION. Upon full surrender of your Policy, any excess in the
amount of the proceeds we pay (including for this purpose amounts we use to
discharge any Policy loan) over your "basis" in the Policy will be subject to
federal income tax. You will generally not be taxed on the portion of the
proceeds that does not exceed your "basis" in the Policy. Your "basis" in the
Policy generally will equal the premiums you have paid on the Policy less the
amount of any previous distributions from the Policy that were taxable.
In addition, if your Policy terminates while there is a Policy loan outstanding,
the cancellation of the loan and accrued loan interest will be treated as a
distribution and could be subject to tax under the above rules.
ASSIGNMENT. Finally, if you make an assignment of rights or benefits under your
Policy, you may be deemed to have received a distribution from the Policy, all
or part of which may be taxable.
<PAGE>
TAXATION OF PRE-DEATH DISTRIBUTIONS IF YOUR POLICY IS A MODIFIED ENDOWMENT
CONTRACT
This part of the tax discussion summarizes the federal income tax purposes of a
distribution to you from your Policy (that does not reflect the payment of a
death benefit under the Policy) when the Policy is considered a modified
endowment contract.
If your Policy is considered a modified endowment contract, any distribution
from the Policy during the Insured's lifetime will generally be taxed on an
"income-first" basis and hence will be included in your income for federal
income tax purposes to the extent the then cash surrender value of the Policy
exceeds your then "basis" in the Policy. For modified endowment contracts, your
"basis" in the Policy is similar to the basis described above that would apply
if the Policy were not a modified endowment contract, except that your "basis"
would be increased by the amount of any prior loan under the Policy that was
considered taxable income to you.
Distributions for this purpose generally include a loan received under the
Policy (including any increase in the loan amount to pay interest on an existing
loan or an assignment or a pledge to secure a loan) or a partial withdrawal from
the Policy. Thus, any such distributions will be considered taxable income to
you to the extent the cash surrender value exceeds your "basis" in the Policy.
For purposes of determining the taxable portion of any distribution, all
modified endowment contracts issued by the same insurer (or its affiliate) to
the same owner (excluding certain tax-qualified plans) during any calendar year
are aggregated and treated as if they were a single modified endowment contract.
Thus, if your Policy is considered a modified endowment contract and other
modified endowment contracts issued by us (or an affiliate of ours) were issued
to you in addition to the Policy during any calendar year, the Policy and such
other contracts are considered one contract in determining the tax on any
distribution under the Policy or one of such other contracts.
The U.S. Treasury Department has authority to prescribe additional rules to
prevent avoidance of "income-first" taxation on distributions from modified
endowment contracts.
Further, a 10% penalty tax will also generally apply under the federal income
tax provisions of the Code to the taxable portion of a distribution to you from
your Policy if it is a modified endowment contract. The penalty tax will not,
however, apply to a distribution that is made:
o To you after you have attained age 59 1/2
o In the case of your disability (as defined in the Code and
generally limited to a disability that is expected to result in
your death or be of indefinite duration and that prevents you from
working in any job) or
o Received as part of a series of substantially equal periodic
payments for your life (or life expectancy) or the joint lives (or
joint life expectances) of you and a beneficiary under the Policy.
SURRENDER OR TERMINATION. In addition, upon a full surrender of the Policy, any
excess of the proceeds we pay (including any amounts we use to discharge any
loan) over your "basis" in the Policy will be subject to federal income tax and,
unless an exception applies, the 10% penalty tax.
<PAGE>
If your Policy terminates after a Grace Period while there is a Policy loan
outstanding, the cancellation of the loan will be treated as a distribution (to
the extent not previously treated as a distribution) and could be subject to
federal income tax, including the 10% penalty tax, as described above.
APPLICABLE TIME PERIODS. Distributions that occur during a Policy Year in which
your Policy becomes a modified endowment contract, and during any subsequent
Policy Years, will be taxed as described in this part of the discussion as
distributions from a modified endowment contract. In addition, distributions
from your Policy within two years before it becomes a modified endowment
contract also will be subject to federal income tax in this manner. This means
that a distribution made from the Policy when it was not a modified endowment
contract could later become taxable as a distribution from a modified endowment
contract if the Policy, subsequently, becomes a modified endowment contract (by
reason of later failing the 7-pay test).
The U.S. Treasury Department has been authorized to prescribe rules that would
treat other distributions from the Policy made in anticipation of the Policy
becoming a modified endowment contract in a similar fashion.
POLICY LAPSES AND REINSTATEMENTS
The lapse of your Policy may have the tax consequences described above for
surrenders and terminations, even if you may be able to reinstate the Policy.
For federal income tax purposes, some reinstatements may be treated as the
purchase of a new insurance contract.
DIVERSIFICATION
As has been noted before, your Policy will be treated as "life insurance" for
federal income tax purposes only if, among other things, the investments made by
the mutual funds available for investment under the Policy satisfy certain
investment diversification requirements under Section 817(h) of the Code.
The U.S. Treasury Department has issued regulations that implement the
investment diversification requirements of Code Section 817(h). If we fail to
comply with these regulations, your Policy will be disqualified as a life
insurance policy under Section 7702 of the Code and you will be subject to
federal income tax on the income under the Policy for the period of the
disqualification and for subsequent periods. Separate Account 1, through the
Funds, therefore intends to comply with these requirements.
In connection with the issuance of then temporary diversification regulations,
the U.S. Treasury Department stated that it anticipated the issuance of
guidelines that could describe certain circumstances in which your ability as
the owner of your Policy to direct your investments under the Policy to
particular sub-accounts within Separate Account 1 would cause you, rather than
Columbus Life, to be treated as the owner of the assets of Separate Account 1.
If you were considered the owner of the assets of Separate Account 1, income and
gains from Separate Account 1 would be included in your income for federal
income tax purposes. Columbus Life thus reserves the right to amend the Policy
in any way necessary to avoid any such result.
<PAGE>
As of the date of this Prospectus, however, no such guidelines have been issued,
although the U.S. Treasury Department has informally indicated that any such
guidelines could limit the number of investment funds or the frequency of
transfers among such funds. If issued, these guidelines may be applied by us
retroactively.
ESTATE AND GENERATION SKIPPING TAXES
As noted before, this tax discussion generally addresses only federal income tax
matters. We do, however, want to note as a general matter that, if you are the
Insured under your Policy, the death benefit under the Policy will generally be
includable in your estate for purposes of federal estate tax. If you are not the
Insured, then, under certain conditions, only the replacement value, an amount
approximately equal to the cash surrender value of the Policy, will be
includable in your estate for purposes of federal estate tax.
Federal estate tax is integrated with federal gift tax under a unified rate
schedule. In general, under the law in effect as of the date of this Prospectus,
estates of less than $650,000 (with such amount increasing incrementally to $1
million by 2006) will not incur a federal estate tax liability. In addition, an
unlimited marital deduction may be available for federal estate tax purposes to
the extent your estate is to be distributed to your surviving spouse.
If you are not the Insured under the Policy, and you die before the Insured, the
value of your Policy, as determined under U.S. Treasury Department regulations,
is includable in your estate for federal estate tax purposes. Whether a federal
estate tax is payable depends on a variety of factors, including those listed in
the preceding paragraph.
As a general rule, if a "transfer" under the Policy is made to a person who is
two or more generations younger than you, a generation skipping transfer tax may
be payable at rates similar to the maximum estate tax rate in effect at the
time. The generation skipping transfer tax provisions generally apply to
"transfers" that would be subject to the gift and estate tax rules. Individuals
are generally allowed an aggregate generation skipping transfer tax exemption of
$1 million.
Because these rules are complex, you should consult with a qualified tax advisor
for specific information, especially when benefits under the Policy are passing
to younger generations.
The particular situation of the Policy's owner, Insured and/or beneficiary will
determine how ownership or receipt of the Policy's proceeds will be treated for
purposes of federal estate and generation skipping taxes, as well as state and
local estate, inheritance and other taxes.
<PAGE>
PENSION AND PROFIT-SHARING PLANS
If the Policy is purchased by a trust or other entity that forms part of a
pension or profit-sharing plan that is qualified as a tax-favored plan under
Section 401(a) of the Code for the benefit of a participant covered under the
plan, the federal income tax treatment of the Policy will be somewhat different
from that described in the foregoing parts of this tax discussion.
If the Policy is purchased as part of a pension or profit sharing plan for the
benefit of a plan participant, the reasonable net premium cost for the amount of
insurance under the Policy is generally required to be included annually in the
applicable plan participant's income for federal income tax purposes. This cost
is generally determined by tables issued by the Internal Revenue Service or, if
less, the insurance company's rates as to the cost of individual one-year term
insurance for standard risks. This cost (generally referred to as the "P.S.-58"
cost) is reported to the participant annually.
If the plan participant dies while covered by the plan and the Policy proceeds
are paid to the participant's beneficiary, then the excess of the Policy's death
benefit over the Policy's cash surrender value generally will not be subject to
federal income tax. However, the Policy's cash surrender value will generally
still be taxable in this situation to the extent it exceeds the participant's
cost basis in the Policy. The participant's cost basis will generally include
the costs of insurance previously reported as income to the participant.
Special rules may apply if the participant borrowed from the Policy or was
considered an owner-employee under the plan (such as the sole proprietor, a 10%
partner, or 5% Subchapter S corporation owner of the employer of the plan).
There are limits on the amounts of life insurance that may be purchased on
behalf of a participant in a pension or profit-sharing plan. Complex rules, in
addition to those discussed above, apply whenever life insurance is purchased by
a tax-qualified plan. You should consult with the plan administrator and a
qualified tax advisor in such situation.
OTHER EMPLOYEE BENEFIT PROGRAMS
Complex rules may also apply when the Policy is held by an employee or a trust,
or acquired by an employee, in connection with the provision of other employee
benefits. In particular, such a Policy owner must consider whether the Policy
was applied for by (or issued to) a person having an insurable interest under
applicable state law and with the insured person's consent. The lack of an
insurable interest or consent may, among other things, affect the qualification
of the Policy as life insurance for federal income tax purposes and the right of
the named beneficiary under the Policy to receive a death benefit.
ERISA
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 ("ERISA"). An employer or trust should consult a qualified
legal advisor as to the effect of ERISA in any case when the Policy is purchased
in connection with an employee benefit plan.
<PAGE>
WITHHOLDING
Payments received by you from your Policy (other than the payment of a tax-free
death benefit under the Policy) are generally subject to federal income tax
withholding to the extent it is reasonable to believe that they will be
includable in income for federal income tax purposes, except that you generally
are permitted to elect not to have federal income taxes withheld from such
payments if you notify us on a timely basis that you are making this election
(and meet certain reporting requirements as to such election).
If federal income tax withholding applies to the payment, the withholding is
generally taken at the same rate as is taken on wages; except that, if the
payments are not payable over a period of more than a year, the withholding is
generally taken at a 10% rate. In some cases, when generation skipping taxes may
apply, we may also be required to withhold for such taxes unless we receive
satisfactory written notification that no such taxes are due.
CHANGES IN TAX LAWS
Your Policy may be affected by changes that occur in the federal income tax laws
and by other tax laws, such as state or local income tax laws, federal estate
and gift tax laws and local estate and other similar laws (which other laws are
generally not discussed in this Prospectus). We have also not discussed the
effect of possible tax law changes on the Policy in this tax discussion. We
suggest that you consult a tax advisor if you have questions about the effects
of such other tax laws or of possible changes in the tax laws.
TAXATION OF COLUMBUS LIFE
Columbus Life is taxed as a life insurance company under federal income tax
laws. Columbus Life does not initially expect to incur any income tax on the
earnings or the realized capital gains attributable to Separate Account 1. If,
in the future, Columbus Life determines that Separate Account 1 may incur
federal income taxes, then it may assess a charge against the Sub-Accounts for
those taxes. Any charge will reduce your Policy's Account Value.
We may have to pay state, local or other taxes in addition to premium taxes. At
present, these taxes are not substantial. If they increase, charges may be made
for such taxes when they are attributable to Separate Account 1 or allocable to
your Policy.
Finally, certain Funds in which the Sub-Accounts are invested may elect to pass
through to Columbus Life taxes withheld by foreign taxing jurisdictions of
foreign source income. Such an election may result in additional taxable income
and income tax to Columbus Life, which could result in charges being made for
such taxes. The amount of the additional income tax, however, may be more than
offset by credits for the foreign taxes withheld that are also passed through.
These credits may provide a benefit to Columbus Life.
70
<PAGE>
OTHER GENERAL INFORMATION
LEGAL MATTERS
Frost & Jacobs LLP has advised Columbus Life on certain federal securities law
matters. All matters of Ohio law pertaining to the Policy, including the
validity of the Policy and Columbus Life's right to issue the Policy under Ohio
insurance law, have been passed upon by Donald J. Wuebbling, Esq., Senior Vice
President and General Counsel of WSLIC.
EXPERTS
The financial statements as of December 31, 1998 and 1997 and for each of the
three years in the period ended December 31, 1998 in this Registration Statement
have been so included in reliance upon the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
Actuarial matters in the Prospectus have been examined by David M. Burridge,
FSA, MAAA, as stated in his opinion filed as an exhibit to the registration
statement.
FINANCIAL STATEMENTS
The consolidated financial statements of Columbus Life included in this
Prospectus are relevant only for the purpose of showing the ability of Columbus
Life to meet its contractual obligations under the Policies. They do not show or
contain any information about the investment performance of Separate Account 1.
This Prospectus contains no financial statements for Separate Account 1, which
commenced operations as of the date of this Prospectus.
<PAGE>
SUPPLEMENT A - POLICY ILLUSTRATION
The following tables illustrate how the Death Benefits, Account Values and Net
Cash Surrender Values of a Policy may vary over an extended period of time at
certain ages, assuming hypothetical gross rates of investment return for the
investment options equivalent to constant gross annual rates of 0%, 5% and 10%.
The hypothetical rates of investment return are for purposes of illustration
only and should not be deemed a representation of past or future rates of
investment return. Actual rates of return for a particular Policy may be more or
less than the hypothetical investment rates of return and will depend on a
number of factors including the investment allocations made by a Policy owner.
Also, values would be different from those shown if the gross annual investment
returns averaged 0%, 5% and 10% over a period of years but fluctuated above and
below those averages for individual Policy Years.
The tables assume that the Sub-Accounts are subject to a daily charge for Fund
advisory fees and operating expenses equivalent to an annual rate of 0.86% of
the average daily net assets. This annual expense ratio is based on the average
of the expense ratios of each available Fund underlying the Sub-Accounts for the
last fiscal year (estimated for Funds beginning operations in 1999) and takes
into account current expense caps or expense reimbursement arrangements. The
fees and expenses of each underlying Fund vary, and the total fees and expenses
used in the above calculation ranged from an annual rate of 0.50% to an annual
rate of 1.25% of average daily net assets. For more information on the
investment option expenses, see the "Policy at a Glance" at the beginning of the
Prospectus.
The tables also assume that the Sub-Accounts are subject to a daily charge for
the Company's mortality and expense risks on a current basis at an annual rate
of 0.90% for the first 20 Policy Years and 0.35% thereafter. On a guaranteed
basis, the annual rate is 1.00% for all Policy Years.
The hypothetical gross annual rates of investment return of 0%, 5% and 10%, when
adjusted for the above daily charges, result in the following net effective
annual rates of return:
o -1.74%, 3.17% and 8.09%, respectively, during the first 20 Policy Years
and -1.20%, 3.74% and 8.68%, respectively, thereafter, with the
mortality and expense risk charge on a current basis.
o -1.84%, 3.07% and 7.98%, respectively, for all Policy Years with the
mortality and expense risk charge on a guaranteed basis.
The tables reflect deduction of all applicable charges described in the
Prospectus for the hypothetical Insured. The Net Cash Surrender Values
illustrated in the tables also reflect deduction of applicable surrender
charges. The current charges and the higher guaranteed maximum charges Columbus
Life may charge are reflected in separate tables on each of the following pages.
The amounts shown are as of the end of each Policy Year.
The hypothetical values shown in the tables do not reflect any charges for
federal income taxes against Separate Account 1 since Columbus Life is not
currently making such charges. However, such charges may be made in the future
and, in that event, the gross annual investment rate of return would have to
exceed 0%, 5% or 10% by an amount sufficient to cover tax charges in order to
produce the Death Benefits, Account Values and Net Cash Surrender Values
illustrated.
The tables illustrate the Policy values that would result based upon the
hypothetical investment rates of return if premiums are paid as indicated, if
all Net Premiums are allocated to the Sub-Accounts, if no Policy Loans have been
made and if death benefit Option 1 has been selected. The tables are also based
on the assumptions that the Policy owner has not requested an increase or
decrease in Specified Amount, and that no partial withdrawals or transfers have
been made.
For comparative purposes, the second column of each table on the Summary Pages
of the illustrations shows the amount to which the premiums would accumulate if
an amount equal to those premiums were invested to earn interest at 5%
compounded annually.
Upon request, Columbus Life will provide you with a comparable illustration
based upon the proposed Insured's age, sex and premium class, the Specified
Amount or premium requested, and the proposed frequency of premium payments.
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for John Doe $100,000.00 Specified Amount
Male Issue Age 35 Death Benefit Option: 1
- --------------------------------------------------------------------------------
Preferred-TNU $900.00 Annual Premium
- --------------------------------------------------------------------------------
Flexible Premium Variable Universal Life Insurance
The Policy is a flexible premium, variable universal life policy. The Policy is
called "flexible premium" because you can change the amount and frequency of
your premium payments, within certain limits. The Policy is called "variable"
life insurance because your Cash Surrender Value and your Death Benefit may vary
with the performance of the sub-accounts.
Underwriting Class: Male Preferred-TNU
The cost of insurance for this illustration is based on the assumption the
policy is issued with the underwriting class listed at the left. Actual cost of
insurance will depend on the outcome of the underwriting process, and may vary
from what is shown on the illustration.
Death Benefit Option
You may select from two options. Option 1 provides an initial Death Benefit
equal to the Specified Amount. Option 2 provides an initial Death Benefit equal
to the Specified Amount plus the Account Value.
Initial Specified Amount $100,000
The Specified Amount assumed at issue is shown on the left. The actual amount
payable at death will depend on the Death Benefit Option and may be decreased by
loans or withdrawals, or increased by additional insurance benefits. The
insurance contract will specify how to determine the benefit. The Death Benefits
are illustrated as of the end of each policy year.
Initial Planned Premium Outlay $900.00 Annual
The planned premiums, including lump-sum premiums are shown in the yearly detail
of this illustration (Mode A). Values would be different if premiums are paid
with a different frequency or in different amounts. This illustration assumes
that 100% of the premiums are allocated to the Variable Account.
Minimum Annual Premium for Lifetime Guarantee $1,254.30
By paying the Lifetime No-Lapse Guarantee premium, you are receiving a Benefit
that will keep the policy in force for the lifetime of the insured even if your
policy Net Cash Surrender Value is less than the next Monthly Deduction and
Monthly Expense Charge, and regardless of investment performance.
Minimum Annual Premium for Term Guarantee $324.96
By paying the Term No-Lapse Guarantee premium, you are receiving a Benefit that
will keep the policy in force for ten years even if your policy Net Cash
Surrender Value is less than the next Monthly Deduction and Monthly Expense
Charge, and regardless of investment performance. At least 1/12 of this minimum
premium must be paid in order for the policy to take effect.
Non-Guaranteed Elements of the Policy
The cost of Insurance and the policy charges are guaranteed to be no higher than
the maximums stated in the policy and prospectus. The current cost of insurance
and current policy charges are not guaranteed. The Account Value will depend on
the allocation to and the performance of the various sub-accounts as well as the
non-guaranteed elements of the policy. No minimum Account Value is guaranteed
for amounts allocated to the sub-accounts.
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Summary Page
John Doe Current Charges
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- -------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $900.00
<TABLE>
<CAPTION>
Summary Page
Assuming Current Charges
Assuming Hypothetical Gross Investment Return of:
0.00% 5.00% 10.00%
Net Cash Net Cash Net Cash
Premium Premiums at Account Value Surrender Value Account Surrender Account Surrender
--- ----- -----
Year Outlay 5% Value Value Value Value
---- ------ -- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 900 945 617 0 653 0 688 0
2 900 1,937 1,225 0 1,327 0 1,433 0
3 900 2,979 1,822 0 2,024 0 2,240 0
4 900 4,073 2,410 10 2,743 343 3,113 713
5 900 5,222 2,977 577 3,475 1,075 4,045 1,645
6 900 6,428 3,535 1,135 4,231 1,831 5,055 2,655
7 900 7,694 4,072 1,672 5,000 2,600 6,136 3,736
8 900 9,024 4,601 2,201 5,796 3,396 7,306 4,906
9 900 10,420 5,111 2,711 6,606 4,206 8,562 6,162
10 900 11,886 5,601 3,201 7,432 5,032 9,910 7,510
15 900 20,392 7,724 7,724 11,769 11,769 18,287 18,287
20 900 31,247 9,250 9,250 16,433 16,433 30,327 30,327
25 900 45,102 10,217 10,217 21,849 21,849 49,130 49,130
30 900 62,785 9,463 9,463 26,944 26,944 77,510 77,510
35 900 85,353 5,640 5,640 30,692 30,692 120,865 120,865
40 900 114,156 0## 0## 31,402 31,402 185,762 185,762
45 900 150,917 0## 0## 25,206 25,206 283,733 283,733
Age 70 900 85,353 5,640 5,640 30,692 30,692 120,865 120,865
</TABLE>
## Additional premium is required to keep the policy in force.
The current cost of insurance rates and charges are subject to change. Account
Values will vary from those illustrated if actual rates and charges differ from
those assumed.
The hypothetical gross rates of return are illustrative only and do not
represent past or future investment results. Actual investment results may be
more or less than those shown and will depend on investment allocations and the
investment experience of the sub-accounts. No representation is being made that
these hypothetical returns can be achieved over any time period. No minimum
account value is guaranteed for amounts allocated to the sub-accounts.
If actual variable account earnings over an extended period average out to one
of the hypothetical gross investment returns shown here, and if all other
assumptions continue unchanged, it does not mean the policy will perform exactly
as in these illustrations. This is because actual earnings will likely be
sometimes higher and sometimes lower than the average, which will not give the
same accumulated result as a constant rate every year.
This illustration is not valid unless preceded or accompanied by the current
prospectus for Columbus Life's Variable Universal Life product.
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Summary Page
John Doe Maximum Charges
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $900.00
<TABLE>
<CAPTION>
Summary Page
Assuming Maximum Charges
Assuming Hypothetical Gross Investment Return of:
0.00% 5.00% 10.00%
Net Cash Net Cash Net Cash
Premium Premiums at Account Value Surrender Value Account Surrender Account Surrender
--- ----- -----
Year Outlay 5% Value Value Value Value
---- ------ -- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 900 945 556 0 590 0 623 0
2 900 1,937 1,091 0 1,186 0 1,285 0
3 900 2,979 1,605 0 1,790 0 1,989 0
4 900 4,073 2,100 0 2,403 3 2,738 338
5 900 5,222 2,574 174 3,023 623 3,537 1,137
6 900 6,428 3,018 618 3,640 1,240 4,377 1,977
7 900 7,694 3,444 1,044 4,266 1,866 5,274 2,874
8 900 9,024 3,840 1,440 4,890 2,490 6,223 3,823
9 900 10,420 4,207 1,807 5,512 3,112 7,226 4,826
10 900 11,886 4,546 2,146 6,132 3,732 8,290 5,890
15 900 20,392 5,791 5,791 9,167 9,167 14,683 14,683
20 900 31,247 5,963 5,963 11,721 11,721 23,195 23,195
25 900 45,102 4,358 4,358 12,954 12,954 34,411 34,411
30 900 62,785 0## 0## 11,343 11,343 49,405 49,405
35 900 85,353 0## 0## 3,585 3,585 70,485 70,485
40 900 114,156 0## 0## 0## 0## 103,899 103,899
45 900 150,917 0## 0## 0## 0## 154,317 154,317
Age 70 900 85,353 0## 0## 3,585 3,585 70,485 70,485
</TABLE>
## Additional premium is required to keep the policy in force.
Maximum cost of insurance rates and charges have been used to calculate the
above values. These maximums are shown in the policy and prospectus.
The hypothetical gross rates of return are illustrative only and do not
represent past or future investment results. Actual investment results may be
more or less than those shown and will depend on investment allocations and the
investment experience of the sub-accounts. No representation is being made that
these hypothetical returns can be achieved over any time period. No minimum
account value is guaranteed for amounts allocated to the sub-accounts.
If actual variable account earnings over an extended period average out to one
of the hypothetical gross investment returns shown here, and if all other
assumptions continue unchanged, it does not mean the policy will perform exactly
as in these illustrations. This is because actual earnings will likely be
sometimes higher and sometimes lower than the average, which will not give the
same accumulated result as a constant rate every year.
This illustration is not valid unless preceded or accompanied by the current
prospectus for Columbus Life's Variable Universal Life product.
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $900.00
<TABLE>
<CAPTION>
Values Projected at 10%
----------------------------------------------------------------------------------------------------
8.09% Net 7.98% Net
----------------------------------------------------------------------------------------------------
Current Charges Maximum Charges
----------------------------------------------------------------------------------------------------
End Net Cash Net Cash
of Premium Account Value Surrender Death Benefit Account Value Surrender Value Death Benefit
Age Year Outlay Mode Value
-------------- ---------- -------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
36 1 900 A 688 0 100,000 623 0 100,000
37 2 900 A 1,433 0 100,000 1,285 0 100,000
38 3 900 A 2,240 0 100,000 1,989 0 100,000
39 4 900 A 3,113 713 100,000 2,738 338 100,000
40 5 900 A 4,045 1,645 100,000 3,537 1,137 100,000
41 6 900 A 5,055 2,655 100,000 4,377 1,977 100,000
42 7 900 A 6,136 3,736 100,000 5,274 2,874 100,000
43 8 900 A 7,306 4,906 100,000 6,223 3,823 100,000
44 9 900 A 8,562 6,162 100,000 7,226 4,826 100,000
45 10 900 A 9,910 7,510 100,000 8,290 5,890 100,000
------------
9,000
46 11 900 A 11,359 9,559 100,000 9,420 7,620 100,000
47 12 900 A 12,906 11,706 100,000 10,622 9,422 100,000
48 13 900 A 14,571 13,971 100,000 11,892 11,292 100,000
49 14 900 A 16,364 16,364 100,000 13,246 13,246 100,000
50 15 900 A 18,287 18,287 100,000 14,683 14,683 100,000
51 16 900 A 20,360 20,360 100,000 16,200 16,200 100,000
52 17 900 A 22,588 22,588 100,000 17,805 17,805 100,000
53 18 900 A 24,985 24,985 100,000 19,507 19,507 100,000
54 19 900 A 27,556 27,556 100,000 21,297 21,297 100,000
55 20 900 A 30,327 30,327 100,000 23,195 23,195 100,000
------------
18,000
56 21 900 A 33,512 33,512 100,000 25,193 25,193 100,000
57 22 900 A 36,963 36,963 100,000 27,305 27,305 100,000
58 23 900 A 40,701 40,701 100,000 29,543 29,543 100,000
59 24 900 A 44,747 44,747 100,000 31,906 31,906 100,000
60 25 900 A 49,130 49,130 100,000 34,411 34,411 100,000
</TABLE>
Net investment return percentages shown at the top of the page are calculated
as the hypothetical gross investment return less all asset-based charges shown
in the Prospectus. The amounts shown in the columns labeled under Account
Values, Net Cash Surrender Values and Death Benefits reflect these net
investment returns as well as other applicable types of insurance costs,
deductions and charges shown in the Prospectus. This illustration does not
project performance of any fund selected.
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $900.00
<TABLE>
<CAPTION>
Values Projected at 10%
----------------------------------------------------------------------------------------------------
8.09% Net 7.98% Net
----------------------------------------------------------------------------------------------------
Current Charges Maximum Charges
----------------------------------------------------------------------------------------------------
End Net Cash Net Cash
of Premium Account Value Surrender Death Benefit Account Value Surrender Value Death Benefit
Age Year Outlay Mode Value
-------------- ---------- -------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
61 26 900 A 53,888 53,888 100,000 37,061 37,061 100,000
62 27 900 A 59,057 59,057 100,000 39,877 39,877 100,000
63 28 900 A 64,682 64,682 100,000 42,860 42,860 100,000
64 29 900 A 70,813 70,813 100,000 46,030 46,030 100,000
65 30 900 A 77,510 77,510 100,000 49,405 49,405 100,000
------------
27,000
66 31 900 A 84,844 84,844 101,813 53,008 53,008 100,000
67 32 900 A 92,813 92,813 110,447 56,874 56,874 100,000
68 33 900 A 101,437 101,437 119,696 61,042 61,042 100,000
69 34 900 A 110,769 110,769 129,599 65,562 65,562 100,000
70 35 900 A 120,865 120,865 140,203 70,485 70,485 100,000
71 36 900 A 131,787 131,787 151,555 75,881 75,881 100,000
72 37 900 A 143,638 143,638 162,311 81,838 81,838 100,000
73 38 900 A 156,513 156,513 173,729 88,467 88,467 100,000
74 39 900 A 170,514 170,514 185,860 95,856 95,856 104,483
75 40 900 A 185,762 185,762 198,766 103,899 103,899 111,172
------------
36,000
76 41 900 A 202,397 202,397 212,516 112,644 112,644 118,276
77 42 900 A 220,403 220,403 231,423 122,019 122,019 128,120
78 43 900 A 239,887 239,887 251,881 132,062 132,062 138,665
79 44 900 A 260,958 260,958 274,005 142,815 142,815 149,956
80 45 900 A 283,733 283,733 297,920 154,317 154,317 162,033
81 46 900 A 308,339 308,339 323,756 166,609 166,609 174,940
82 47 900 A 334,906 334,906 351,651 179,727 179,727 188,713
83 48 900 A 363,573 363,573 381,751 193,705 193,705 203,390
84 49 900 A 394,482 394,482 414,206 208,573 208,573 219,002
85 50 900 A 427,781 427,781 449,170 224,366 224,366 235,584
------------
45,000
</TABLE>
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $900.00
<TABLE>
<CAPTION>
Values Projected at 10%
----------------------------------------------------------------------------------------------------
8.09% Net 7.98% Net
----------------------------------------------------------------------------------------------------
Current Charges Maximum Charges
----------------------------------------------------------------------------------------------------
End Net Cash Net Cash
of Premium Account Value Surrender Death Benefit Account Value Surrender Value Death Benefit
Age Year Outlay Mode Value
-------------- ---------- -------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
86 51 900 A 463,619 463,619 486,800 241,113 241,113 253,168
87 52 900 A 502,152 502,152 527,259 258,846 258,846 271,788
88 53 900 A 543,535 543,535 570,712 277,599 277,599 291,479
89 54 900 A 587,927 587,927 617,324 297,401 297,401 312,271
90 55 900 A 635,493 635,493 667,268 318,278 318,278 334,192
91 56 900 A 686,397 686,397 720,717 340,245 340,245 357,257
92 57 900 A 742,068 742,068 771,751 364,326 364,326 378,899
93 58 900 A 803,214 803,214 827,310 390,895 390,895 402,622
94 59 900 A 870,695 870,695 888,109 420,410 420,410 428,818
95 60 900 A 945,557 945,557 955,012 453,470 453,470 458,005
------------
54,000
96 61 900 A 1,028,480 1,028,480 1,028,480 490,454 490,454 490,454
97 62 900 A 1,118,602 1,118,602 1,118,602 530,389 530,389 530,389
98 63 900 A 1,216,546 1,216,546 1,216,546 573,511 573,511 573,511
99 64 900 A 1,322,991 1,322,991 1,322,991 620,074 620,074 620,074
100 65 900 A 1,438,676 1,438,676 1,438,676 670,353 670,353 670,353
------------
58,500
</TABLE>
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $900.00
<TABLE>
<CAPTION>
Values Projected at 5%
----------------------------------------------------------------------------------------------------
3.17% Net 3.07% Net
----------------------------------------------------------------------------------------------------
Current Charges Maximum Charges
----------------------------------------------------------------------------------------------------
End Net Cash Net Cash
of Premium Account Value Surrender Death Benefit Account Value Surrender Value Death Benefit
Age Year Outlay Mode Value
-------------- ---------- -------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
36 1 900 A 653 0 100,000 590 0 100,000
37 2 900 A 1,327 0 100,000 1,186 0 100,000
38 3 900 A 2,024 0 100,000 1,790 0 100,000
39 4 900 A 2,743 343 100,000 2,403 3 100,000
40 5 900 A 3,475 1,075 100,000 3,023 623 100,000
41 6 900 A 4,231 1,831 100,000 3,640 1,240 100,000
42 7 900 A 5,000 2,600 100,000 4,266 1,866 100,000
43 8 900 A 5,796 3,396 100,000 4,890 2,490 100,000
44 9 900 A 6,606 4,206 100,000 5,512 3,112 100,000
45 10 900 A 7,432 5,032 100,000 6,132 3,732 100,000
------------
9,000
46 11 900 A 8,274 6,474 100,000 6,750 4,950 100,000
47 12 900 A 9,123 7,923 100,000 7,367 6,167 100,000
48 13 900 A 9,990 9,390 100,000 7,972 7,372 100,000
49 14 900 A 10,875 10,875 100,000 8,576 8,576 100,000
50 15 900 A 11,769 11,769 100,000 9,167 9,167 100,000
51 16 900 A 12,683 12,683 100,000 9,736 9,736 100,000
52 17 900 A 13,608 13,608 100,000 10,281 10,281 100,000
53 18 900 A 14,544 14,544 100,000 10,803 10,803 100,000
54 19 900 A 15,482 15,482 100,000 11,280 11,280 100,000
55 20 900 A 16,433 16,433 100,000 11,721 11,721 100,000
------------
18,000
56 21 900 A 17,503 17,503 100,000 12,103 12,103 100,000
57 22 900 A 18,588 18,588 100,000 12,426 12,426 100,000
58 23 900 A 19,680 19,680 100,000 12,688 12,688 100,000
59 24 900 A 20,770 20,770 100,000 12,865 12,865 100,000
60 25 900 A 21,849 21,849 100,000 12,954 12,954 100,000
</TABLE>
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $900.00
<TABLE>
<CAPTION>
Values Projected at 5%
----------------------------------------------------------------------------------------------------
3.17% Net 3.07% Net
----------------------------------------------------------------------------------------------------
Current Charges Maximum Charges
----------------------------------------------------------------------------------------------------
End Net Cash Net Cash
of Premium Account Value Surrender Death Benefit Account Value Surrender Value Death Benefit
Age Year Outlay Mode Value
-------------- ---------- -------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
61 26 900 A 22,919 22,919 100,000 12,931 12,931 100,000
62 27 900 A 23,972 23,972 100,000 12,789 12,789 100,000
63 28 900 A 24,999 24,999 100,000 12,493 12,493 100,000
64 29 900 A 25,993 25,993 100,000 12,021 12,021 100,000
65 30 900 A 26,944 26,944 100,000 11,343 11,343 100,000
------------
27,000
66 31 900 A 27,845 27,845 100,000 10,423 10,423 100,000
67 32 900 A 28,677 28,677 100,000 9,233 9,233 100,000
68 33 900 A 29,440 29,440 100,000 7,729 7,729 100,000
69 34 900 A 30,116 30,116 100,000 5,872 5,872 100,000
70 35 900 A 30,692 30,692 100,000 3,585 3,585 100,000
71 36 900 A 31,151 31,151 100,000 786 786 100,000
72 37 900 A 31,468 31,468 100,000 0 0 100,000
73 38 900 A 31,637 31,637 100,000
74 39 900 A 31,625 31,625 100,000
75 40 900 A 31,402 31,402 100,000
------------
36,000
76 41 900 A 30,934 30,934 100,000
77 42 900 A 30,149 30,149 100,000
78 43 900 A 28,990 28,990 100,000
79 44 900 A 27,371 27,371 100,000
80 45 900 A 25,206 25,206 100,000
81 46 900 A 22,382 22,382 100,000
82 47 900 A 18,760 18,760 100,000
83 48 900 A 14,165 14,165 100,000
84 49 900 A 8,352 8,352 100,000
85 50 900 A 1,009 1,009 100,000
------------
45,000
86 51 900 A 0 0 0
------------
45,900
</TABLE>
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $900.00
<TABLE>
<CAPTION>
Values Projected at 0%
----------------------------------------------------------------------------------------------------
-1.74% Net -1.84% Net
----------------------------------------------------------------------------------------------------
Current Charges Maximum Charges
----------------------------------------------------------------------------------------------------
End Net Cash Net Cash
of Premium Account Value Surrender Death Benefit Account Value Surrender Value Death Benefit
Age Year Outlay Mode Value
-------------- ---------- -------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
36 1 900 A 617 0 100,000 556 0 100,000
37 2 900 A 1,225 0 100,000 1,091 0 100,000
38 3 900 A 1,822 0 100,000 1,605 0 100,000
39 4 900 A 2,410 10 100,000 2,100 0 100,000
40 5 900 A 2,977 577 100,000 2,574 174 100,000
41 6 900 A 3,535 1,135 100,000 3,018 618 100,000
42 7 900 A 4,072 1,672 100,000 3,444 1,044 100,000
43 8 900 A 4,601 2,201 100,000 3,840 1,440 100,000
44 9 900 A 5,111 2,711 100,000 4,207 1,807 100,000
45 10 900 A 5,601 3,201 100,000 4,546 2,146 100,000
------------
9,000
46 11 900 A 6,072 4,272 100,000 4,857 3,057 100,000
47 12 900 A 6,514 5,314 100,000 5,141 3,941 100,000
48 13 900 A 6,938 6,338 100,000 5,387 4,787 100,000
49 14 900 A 7,345 7,345 100,000 5,607 5,607 100,000
50 15 900 A 7,724 7,724 100,000 5,791 5,791 100,000
51 16 900 A 8,086 8,086 100,000 5,928 5,928 100,000
52 17 900 A 8,422 8,422 100,000 6,018 6,018 100,000
53 18 900 A 8,731 8,731 100,000 6,063 6,063 100,000
54 19 900 A 9,003 9,003 100,000 6,041 6,041 100,000
55 20 900 A 9,250 9,250 100,000 5,963 5,963 100,000
------------
18,000
56 21 900 A 9,533 9,533 100,000 5,808 5,808 100,000
57 22 900 A 9,781 9,781 100,000 5,577 5,577 100,000
58 23 900 A 9,984 9,984 100,000 5,269 5,269 100,000
59 24 900 A 10,133 10,133 100,000 4,863 4,863 100,000
60 25 900 A 10,217 10,217 100,000 4,358 4,358 100,000
</TABLE>
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $900.00
<TABLE>
<CAPTION>
Values Projected at 0%
----------------------------------------------------------------------------------------------------
-1.74% Net -1.84% Net
----------------------------------------------------------------------------------------------------
Current Charges Maximum Charges
----------------------------------------------------------------------------------------------------
End Net Cash Net Cash
of Premium Account Value Surrender Death Benefit Account Value Surrender Value Death Benefit
Age Year Outlay Mode Value
-------------- ----------- -------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
61 26 900 A 10,237 10,237 100,000 3,732 3,732 100,000
62 27 900 A 10,182 10,182 100,000 2,982 2,982 100,000
63 28 900 A 10,042 10,042 100,000 2,073 2,073 100,000
64 29 900 A 9,806 9,806 100,000 991 991 100,000
65 30 900 A 9,463 9,463 100,000 0 0 100,000
------------
27,000
66 31 900 A 9,001 9,001 100,000
67 32 900 A 8,399 8,399 100,000
68 33 900 A 7,653 7,653 100,000
69 34 900 A 6,738 6,738 100,000
70 35 900 A 5,640 5,640 100,000
71 36 900 A 4,329 4,329 100,000
72 37 900 A 2,776 2,776 100,000
73 38 900 A 970 970 100,000
74 39 900 A 0 0 100,000
------------
35,100
</TABLE>
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Premium Information
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $900.00
Premium Information
Term No Lapse $324.96 Guideline $1,393.67
Guarantee Level
Premium Premium
Lifetime No Lapse $1,254.30 Guideline $15,735.04
Guarantee Single
Premium Premium
Seven Pay Premium $3,813.35
If the policy is in force on the policy anniversary when the insured is age 100,
the Death Benefit will continue and the Death Benefit Option will be Option 2.
If the Death Benefit Option was previously Option 1, the Specified Amount will
not be automatically decreased by the Account Value unless the insured's issue
age was greater than 75. Any riders will terminate. The variable Account Value
and any loan Account Value will be transferred to the fixed account, which will
thereafter earn the then-current interest rate. The fixed account will be
reduced by the amount of any indebtedness and no further loans will be
permitted. No further premiums may be paid and no costs or charges will be
deducted. The policy will continue beyond the insured's age 100 in this manner
until the insured's death. However, the owner may discontinue this Extended
Maturity Benefit at any time by surrendering the policy.
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Important Notes
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $900.00
Important Notes
Current and maximum values assume that premiums are paid as indicated, that the
first payment is received by the policy issue date, and that each subsequent
periodic payment is received by the planned date.
The current per policy expense charge is $6.00 per month. The maximum per policy
expense charge is $7.00 per month. The current premium expense charge is 4.75%
for policy years 1-20 and 2.75% thereafter. The maximum premium expense charge
is 5.50%. The premium tax charge will vary by state. On a current basis it will
be equal to the state premium tax rate plus .55% for the federal DAC (Deferred
Acquisition Cost) tax. The maximum tax charge is guaranteed to be no greater
than 3.50%. The Account Values, Net Cash Surrender Values and Death Benefits
shown in this illustration reflect the deduction of these charges. The Net Cash
Surrender Values also reflect deductions of applicable surrender charges.
Current interest credited on the Fixed Account is 5%.
Guaranteed interest credited on the Fixed Account is 3%.
This illustration does include the Term No Lapse Guarantee. The Term No Lapse
Guarantee is available only if the required premium is paid. If the required
premium is not paid the benefit is terminated.
This illustration does not include the Lifetime No Lapse Guarantee. The Lifetime
No Lapse Guarantee is available only if the required premium is paid. If the
required premium is not paid the benefit is terminated.
If premiums are paid as illustrated this policy is not a modified endowment
contract.
This is an illustration and not a contract or offer of insurance. Although the
information in this illustration is based on certain tax and legal assumptions,
it is not intended to be tax or legal advice. Such advice should be obtained
from a professional tax or legal adviser.
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for John Doe $100,000.00 Specified Amount
Male Issue Age 55 Death Benefit Option: 1
- --------------------------------------------------------------------------------
Preferred-TNU $2,280.00 Annual Premium
- --------------------------------------------------------------------------------
Flexible Premium Variable Universal Life Insurance
The Policy is a flexible premium, variable universal life policy. The Policy is
called "flexible premium" because you can change the amount and frequency of
your premium payments, within certain limits. The Policy is called "variable"
life insurance because your Cash Surrender Value and your Death Benefit may vary
with the performance of the sub-accounts.
Underwriting Class: Male Preferred-TNU
The cost of insurance for this illustration is based on the assumption the
policy is issued with the underwriting class listed at the left. Actual cost of
insurance will depend on the outcome of the underwriting process, and may vary
from what is shown on the illustration.
Death Benefit Option
You may select from two options. Option 1 provides an initial Death Benefit
equal to the Specified Amount. Option 2 provides an initial Death Benefit equal
to the Specified Amount plus the Account Value.
Initial Specified Amount $100,000
The Specified Amount assumed at issue is shown on the left. The actual amount
payable at death will depend on the Death Benefit Option and may be decreased by
loans or withdrawals, or increased by additional insurance benefits. The
insurance contract will specify how to determine the benefit. The Death Benefits
are illustrated as of the end of each policy year.
Initial Planned Premium Outlay $2,280.00 Annual
The planned premiums, including lump-sum premiums are shown in the yearly detail
of this illustration (Mode A). Values would be different if premiums are paid
with a different frequency or in different amounts. This illustration assumes
that 100% of the premiums are allocated to the Variable Account.
Minimum Annual Premium for Lifetime Guarantee $3,168.07
By paying the Lifetime No-Lapse Guarantee premium, you are receiving a Benefit
that will keep the policy in force for the lifetime of the insured even if your
policy Net Cash Surrender Value is less than the next Monthly Deduction and
Monthly Expense Charge, and regardless of investment performance.
Minimum Annual Premium for Term Guarantee $1,414.44
By paying the Term No-Lapse Guarantee premium, you are receiving a Benefit that
will keep the policy in force for ten years even if your policy Net Cash
Surrender Value is less than the next Monthly Deduction and Monthly Expense
Charge, and regardless of investment performance. At least 1/12 of this minimum
premium must be paid in order for the policy to take effect.
Non-Guaranteed Elements of the Policy
The cost of Insurance and the policy charges are guaranteed to be no higher than
the maximums stated in the policy and prospectus. The current cost of insurance
and current policy charges are not guaranteed. The Account Value will depend on
the allocation to and the performance of the various sub-accounts as well as the
non-guaranteed elements of the policy. No minimum Account Value is guaranteed
for amounts allocated to the sub-accounts.
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Summary Page
John Doe Current Charges
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $2,280.00
<TABLE>
<CAPTION>
Summary Page
Assuming Current Charges
Assuming Hypothetical Gross Investment Return of:
0.00% 5.00% 10.00%
Net Cash Net Cash Net Cash
Premium Premiums at Account Value Surrender Value Account Surrender Account Surrender
Year Outlay 5% Value Value Value Value
---- ------ -- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,280 2,394 1,594 0 1,685 0 1,776 0
2 2,280 4,908 3,132 0 3,395 0 3,668 0
3 2,280 7,547 4,605 695 5,121 1,211 5,674 1,764
4 2,280 10,318 6,004 2,094 6,854 2,944 7,797 3,887
5 2,280 13,228 7,321 3,411 8,586 4,676 10,036 6,126
6 2,280 16,284 8,558 4,648 10,318 6,408 12,406 8,496
7 2,280 19,492 9,708 5,798 12,043 8,133 14,911 11,001
8 2,280 22,861 10,762 6,852 13,752 9,842 17,558 13,648
9 2,280 26,398 11,714 7,804 15,439 11,529 20,354 16,444
10 2,280 30,111 12,554 8,644 17,095 13,185 23,309 19,399
15 2,280 51,659 14,759 14,759 24,610 24,610 40,993 40,993
20 2,280 79,160 12,392 12,392 29,812 29,812 66,081 66,081
25 2,280 114,259 2,285 2,285 31,260 31,260 109,631 109,631
30 2,280 159,055 0## 0## 20,776 20,776 176,682 176,682
35 2,280 216,227 0## 0## 0## 0## 273,649 273,649
40 2,280 289,195 0## 0## 0## 0## 273,649 273,649
45 2,280 382,322 0## 0## 0## 0## 647,732 647,732
Age 70 2,280 51,659 14,759 14,759 24,610 24,610 40,993 40,993
</TABLE>
## Additional premium is required to keep the policy in force.
The current cost of insurance rates and charges are subject to change. Account
Values will vary from those illustrated if actual rates and charges differ from
those assumed.
The hypothetical gross rates of return are illustrative only and do not
represent past or future investment results. Actual investment results may be
more or less than those shown and will depend on investment allocations and the
investment experience of the sub-accounts. No representation is being made that
these hypothetical returns can be achieved over any time period. No minimum
account value is guaranteed for amounts allocated to the sub-accounts.
If actual variable account earnings over an extended period average out to one
of the hypothetical gross investment returns shown here, and if all other
assumptions continue unchanged, it does not mean the policy will perform exactly
as in these illustrations. This is because actual earnings will likely be
sometimes higher and sometimes lower than the average, which will not give the
same accumulated result as a constant rate every year.
This illustration is not valid unless preceded or accompanied by the current
prospectus for Columbus Life's Variable Universal Life product.
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Summary Page
John Doe Maximum Charges
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $2,280.00
<TABLE>
<CAPTION>
Summary Page
Assuming Maximum Charges
Assuming Hypothetical Gross Investment Return of:
0.00% 5.00% 10.00%
Net Cash Net Cash Net Cash
Premium Premiums at Account Value Surrender Value Account Surrender Account Surrender
--- ----- -----
Year Outlay 5% Value Value Value Value
---- ------ -- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,280 2,394 1,149 0 1,228 0 1,306 0
2 2,280 4,908 2,206 0 2,420 0 2,644 0
3 2,280 7,547 3,172 0 3,579 0 4,017 107
4 2,280 10,318 4,028 118 4,681 771 5,409 1,499
5 2,280 13,228 4,776 866 5,726 1,816 6,823 2,913
6 2,280 16,284 5,397 1,487 6,692 2,782 8,243 4,333
7 2,280 19,492 5,892 1,982 7,577 3,667 9,673 5,763
8 2,280 22,861 6,230 2,320 8,347 4,437 11,084 7,174
9 2,280 26,398 6,401 2,491 8,988 5,078 12,468 8,558
10 2,280 30,111 6,385 2,475 9,473 5,563 13,807 9,897
15 2,280 51,659 2,755 2,755 8,624 8,624 19,172 19,172
20 2,280 79,160 0## 0## 0## 0## 18,613 18,613
25 2,280 114,259 0## 0## 0## 0## 0## 0##
30 2,280 159,055 0## 0## 0## 0## 0## 0##
35 2,280 216,227 0## 0## 0## 0## 0## 0##
40 2,280 289,195 0## 0## 0## 0## 0## 0##
45 2,280 382,322 0## 0## 0## 0## 0## 0##
Age 70 2,280 51,659 2,755 2,755 8,624 8,624 19,172 19,172
</TABLE>
## Additional premium is required to keep the policy in force.
Maximum cost of insurance rates and charges have been used to calculate the
above values. These maximums are shown in the policy and prospectus.
The hypothetical gross rates of return are illustrative only and do not
represent past or future investment results. Actual investment results may be
more or less than those shown and will depend on investment allocations and the
investment experience of the sub-accounts. No representation is being made that
these hypothetical returns can be achieved over any time period. No minimum
account value is guaranteed for amounts allocated to the sub-accounts.
If actual variable account earnings over an extended period average out to one
of the hypothetical gross investment returns shown here, and if all other
assumptions continue unchanged, it does not mean the policy will perform exactly
as in these illustrations. This is because actual earnings will likely be
sometimes higher and sometimes lower than the average, which will not give the
same accumulated result as a constant rate every year.
This illustration is not valid unless preceded or accompanied by the current
prospectus for Columbus Life's Variable Universal Life product.
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $2,280.00
<TABLE>
<CAPTION>
Values Projected at 10%
----------------------------------------------------------------------------------------
8.09% Net 7.98% Net
----------------------------------------------------------------------------------------
Current Charges Maximum Charges
----------------------------------------------------------------------------------------
End Net Cash Net Cash
of Premium Account Value Surrender Death Benefit Account Value Surrender Value Death Benefit
Age Year Outlay Mode Value
-------------- ---------- -------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 1 2,280 A 1,776 0 100,000 1,306 0 100,000
57 2 2,280 A 3,668 0 100,000 2,644 0 100,000
58 3 2,280 A 5,674 1,764 100,000 4,017 107 100,000
59 4 2,280 A 7,797 3,887 100,000 5,409 1,499 100,000
60 5 2,280 A 10,036 6,126 100,000 6,823 2,913 100,000
61 6 2,280 A 12,406 8,496 100,000 8,243 4,333 100,000
62 7 2,280 A 14,911 11,001 100,000 9,673 5,763 100,000
63 8 2,280 A 17,558 13,648 100,000 11,084 7,174 100,000
64 9 2,280 A 20,354 16,444 100,000 12,468 8,558 100,000
65 10 2,280 A 23,309 19,399 100,000 13,807 9,897 100,000
------------
22,800
66 11 2,280 A 26,437 23,505 100,000 15,080 12,147 100,000
67 12 2,280 A 29,745 27,790 100,000 16,276 14,321 100,000
68 13 2,280 A 33,261 32,284 100,000 17,372 16,394 100,000
69 14 2,280 A 37,001 37,001 100,000 18,353 18,353 100,000
70 15 2,280 A 40,993 40,993 100,000 19,172 19,172 100,000
71 16 2,280 A 45,266 45,266 100,000 19,784 19,784 100,000
72 17 2,280 A 49,855 49,855 100,000 20,129 20,129 100,000
73 18 2,280 A 54,817 54,817 100,000 20,117 20,117 100,000
74 19 2,280 A 60,202 60,202 100,000 19,651 19,651 100,000
75 20 2,280 A 66,081 66,081 100,000 18,613 18,613 100,000
------------
45,600
76 21 2,280 A 72,997 72,997 100,000 16,865 16,865 100,000
77 22 2,280 A 80,689 80,689 100,000 14,234 14,234 100,000
78 23 2,280 A 89,318 89,318 100,000 10,518 10,518 100,000
79 24 2,280 A 99,047 99,047 104,000 5,431 5,431 100,000
80 25 2,280 A 109,631 109,631 115,112 0 0 0
</TABLE>
Net investment return percentages shown at the top of the page are
calculated as the hypothetical gross investment return less all asset-based
charges shown in the Prospectus. The amounts shown in the columns labeled under
Account Values, Net Cash Surrender Values and Death Benefits reflect these net
investment returns as well as other applicable types of insurance costs,
deductions and charges shown in the Prospects. This illustration does not
project performance of any fund selected.
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $2,280.00
<TABLE>
<CAPTION>
Values Projected at 10%
----------------------------------------------------------------------------------------
8.09% Net 7.98% Net
----------------------------------------------------------------------------------------
Current Charges Maximum Charges
----------------------------------------------------------------------------------------
End Net Cash Net Cash
of Premium Account Value Surrender Death Benefit Account Value Surrender Value Death Benefit
Age Year Outlay Mode Value
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
81 26 2,280 A 121,071 121,071 127,124
82 27 2,280 A 133,429 133,429 140,101
83 28 2,280 A 146,772 146,772 154,110
84 29 2,280 A 161,166 161,166 169,224
85 30 2,280 A 176,682 176,682 185,516
------------
68,400
86 31 2,280 A 193,390 193,390 203,060
87 32 2,280 A 211,366 211,366 221,934
88 33 2,280 A 230,683 230,683 242,217
89 34 2,280 A 251,418 251,418 263,989
90 35 2,280 A 273,649 273,649 287,331
91 36 2,280 A 297,455 297,455 312,328
92 37 2,280 A 323,466 323,466 336,405
93 38 2,280 A 352,006 352,006 362,566
94 39 2,280 A 383,467 383,467 391,136
95 40 2,280 A 418,327 418,327 422,510
------------
91,200
96 41 2,280 A 456,904 456,904 456,904
97 42 2,280 A 498,829 498,829 498,829
98 43 2,280 A 544,394 544,394 544,394
99 44 2,280 A 593,914 593,914 593,914
100 45 2,280 A 647,732 647,732 647,732
------------
102,600
</TABLE>
Net investment return percentages shown at the top of the page are
calculated as the hypothetical gross investment return less all asset-based
charges shown in the Prospectus. The amounts shown in the columns labeled under
Account Values, Net Cash Surrender Values and Death Benefits reflect these net
investment returns as well as other applicable types of insurance costs,
deductions and charges shown in the Prospects. This illustration does not
project performance of any fund selected.
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $2,280.00
<TABLE>
<CAPTION>
Values Projected at 5%
----------------------------------------------------------------------------------------
3.17% Net 3.07% Net
----------------------------------------------------------------------------------------
Current Charges Maximum Charges
----------------------------------------------------------------------------------------
End Net Cash Net Cash
of Premium Account Value Surrender Death Benefit Account Value Surrender Value Death Benefit
Age Year Outlay Mode Value
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 1 2,280 A 1,685 0 100,000 1,228 0 100,000
57 2 2,280 A 3,395 0 100,000 2,420 0 100,000
58 3 2,280 A 5,121 1,211 100,000 3,579 0 100,000
59 4 2,280 A 6,854 2,944 100,000 4,681 771 100,000
60 5 2,280 A 8,586 4,676 100,000 5,726 1,816 100,000
61 6 2,280 A 10,318 6,408 100,000 6,692 2,782 100,000
62 7 2,280 A 12,043 8,133 100,000 7,577 3,667 100,000
63 8 2,280 A 13,752 9,842 100,000 8,347 4,437 100,000
64 9 2,280 A 15,439 11,529 100,000 8,988 5,078 100,000
65 10 2,280 A 17,095 13,185 100,000 9,473 5,563 100,000
------------
22,800
66 11 2,280 A 18,715 15,782 100,000 9,776 6,844 100,000
67 12 2,280 A 20,280 18,325 100,000 9,876 7,921 100,000
68 13 2,280 A 21,793 20,816 100,000 9,741 8,763 100,000
69 14 2,280 A 23,239 23,239 100,000 9,344 9,344 100,000
70 15 2,280 A 24,610 24,610 100,000 8,624 8,624 100,000
71 16 2,280 A 25,888 25,888 100,000 7,520 7,520 100,000
72 17 2,280 A 27,058 27,058 100,000 5,951 5,951 100,000
73 18 2,280 A 28,119 28,119 100,000 3,801 3,801 100,000
74 19 2,280 A 29,044 29,044 100,000 941 941 100,000
75 20 2,280 A 29,812 29,812 100,000 0 0 0
------------
45,600
76 21 2,280 A 30,627 30,627 100,000
77 22 2,280 A 31,225 31,225 100,000
78 23 2,280 A 31,568 31,568 100,000
79 24 2,280 A 31,598 31,598 100,000
80 25 2,280 A 31,260 31,260 100,000
</TABLE>
Net investment return percentages shown at the top of the page are
calculated as the hypothetical gross investment return less all asset-based
charges shown in the Prospectus. The amounts shown in the columns labeled under
Account Values, Net Cash Surrender Values and Death Benefits reflect these net
investment returns as well as other applicable types of insurance costs,
deductions and charges shown in the Prospects. This illustration does not
project performance of any fund selected.
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $2,280.00
<TABLE>
<CAPTION>
Values Projected at 5%
---------------------------------------------------------------------------------------
3.17% Net 3.07% Net
---------------------------------------------------------------------------------------
Current Charges Maximum Charges
----------------------------------------------------------------------------------------
End Net Cash Net Cash
of Premium Account Value Surrender Death Benefit Account Value Surrender Value Death Benefit
Age Year Outlay Mode Value
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
81 26 2,280 A 30,483 30,483 100,000
82 27 2,280 A 29,178 29,178 100,000
83 28 2,280 A 27,236 27,236 100,000
84 29 2,280 A 24,502 24,502 100,000
85 30 2,280 A 20,776 20,776 100,000
------------
68,400
86 31 2,280 A 15,782 15,782 100,000
87 32 2,280 A 9,163 9,163 100,000
88 33 2,280 A 434 434 100,000
89 34 2,280 A 0 0 0
------------
77,520
</TABLE>
Net investment return percentages shown at the top of the page are
calculated as the hypothetical gross investment return less all asset-based
charges shown in the Prospectus. The amounts shown in the columns labeled under
Account Values, Net Cash Surrender Values and Death Benefits reflect these net
investment returns as well as other applicable types of insurance costs,
deductions and charges shown in the Prospects. This illustration does not
project performance of any fund selected.
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $2,280.00
<TABLE>
<CAPTION>
Values Projected at 0%
----------------------------------------------------------------------------------------
-1.74% Net -1.84% Net
----------------------------------------------------------------------------------------
Current Charges Maximum Charges
----------------------------------------------------------------------------------------
End Net Cash Net Cash
of Premium Account Value Surrender Death Benefit Account Value Surrender Value Death Benefit
Age Year Outlay Mode Value
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 1 2,280 A 1,594 0 100,000 1,149 0 100,000
57 2 2,280 A 3,132 0 100,000 2,206 0 100,000
58 3 2,280 A 4,605 695 100,000 3,172 0 100,000
59 4 2,280 A 6,004 2,094 100,000 4,028 118 100,000
60 5 2,280 A 7,321 3,411 100,000 4,776 866 100,000
61 6 2,280 A 8,558 4,648 100,000 5,397 1,487 100,000
62 7 2,280 A 9,708 5,798 100,000 5,892 1,982 100,000
63 8 2,280 A 10,762 6,852 100,000 6,230 2,320 100,000
64 9 2,280 A 11,714 7,804 100,000 6,401 2,491 100,000
65 10 2,280 A 12,554 8,644 100,000 6,385 2,475 100,000
------------
22,800
66 11 2,280 A 13,277 10,344 100,000 6,158 3,225 100,000
67 12 2,280 A 13,864 11,909 100,000 5,708 3,753 100,000
68 13 2,280 A 14,317 13,340 100,000 5,008 4,031 100,000
69 14 2,280 A 14,618 14,618 100,000 4,042 4,042 100,000
70 15 2,280 A 14,759 14,759 100,000 2,755 2,755 100,000
71 16 2,280 A 14,718 14,718 100,000 1,098 1,098 100,000
72 17 2,280 A 14,476 14,476 100,000 0 0 0
73 18 2,280 A 14,029 14,029 100,000
74 19 2,280 A 13,344 13,344 100,000
75 20 2,280 A 12,392 12,392 100,000
------------
45,600
76 21 2,280 A 11,261 11,261 100,000
77 22 2,280 A 9,752 9,752 100,000
78 23 2,280 A 7,809 7,809 100,000
79 24 2,280 A 5,346 5,346 100,000
80 25 2,280 A 2,285 2,285 100,000
81 26 2,280 A 0 0 0
------------
59,280
</TABLE>
Net investment return percentages shown at the top of the page are
calculated as the hypothetical gross investment return less all asset-based
charges shown in the Prospectus. The amounts shown in the columns labeled under
Account Values, Net Cash Surrender Values and Death Benefits reflect these net
investment returns as well as other applicable types of insurance costs,
deductions and charges shown in the Prospects. This illustration does not
project performance of any fund selected.
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Premium Information
John Doe
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $2,280.00
Premium Information
Term No Lapse $1,414.44 Guideline $3,520.08
Guarantee Level
Premium Premium
Lifetime No Lapse $3,168.07 Guideline $36,648.25
Guarantee Single
Premium Premium
Seven Pay Premium $7,440.98
If the policy is in force on the policy anniversary when the insured is age 100,
the Death Benefit will continue and the Death Benefit Option will be Option 2.
If the Death Benefit Option was previously Option 1, the Specified Amount will
not be automatically decreased by the Account Value unless the insured's issue
age was greater than 75. Any riders will terminate. The variable Account Value
and any loan Account Value will be transferred to the fixed account, which will
thereafter earn the then-current interest rate. The fixed account will be
reduced by the amount of any indebtedness and no further loans will be
permitted. No further premiums may be paid and no costs or charges will be
deducted. The policy will continue beyond the insured's age 100 in this manner
until the insured's death. However, the owner may discontinue this Extended
Maturity Benefit at any time by surrendering the policy.
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Important Notes
John Doe
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $2,280.00
Important Notes
Current and maximum values assume that premiums are paid as indicated, that the
first payment is received by the policy issue date, and that each subsequent
periodic payment is received by the planned date.
The current per policy expense charge is $6.00 per month. The maximum per policy
expense charge is $7.00 per month. The current premium expense charge is 4.75%
for policy years 1-20 and 2.75% thereafter. The maximum premium expense charge
is 5.50%. The premium tax charge will vary by state. On a current basis it will
be equal to the state premium tax rate plus .55% for the federal DAC (Deferred
Acquisition Cost) tax. The maximum tax charge is guaranteed to be no greater
than 3.50%.
The Account Values, Net Cash Surrender Values and Death Benefits shown in this
illustration reflect the deduction of these charges. The Net Cash Surrender
Values also reflect deductions of applicable surrender charges.
Current interest credited on the Fixed Account is 5%.
Guaranteed interest credited on the Fixed Account is 3%.
This illustration does include the Term No Lapse Guarantee. The Term No Lapse
Guarantee is available only if the required premium is paid. If the required
premium is not paid the benefit is terminated.
This illustration does not include the Lifetime No Lapse Guarantee. The Lifetime
No Lapse Guarantee is available only if the required premium is paid. If the
required premium is not paid the benefit is terminated.
If premiums are paid as illustrated this policy is not a modified endowment
contract.
This is an illustration and not a contract or offer of insurance. Although the
information in this illustration is based on certain tax and legal assumptions,
it is not intended to be tax or legal advice. Such advice should be obtained
from a professional tax or legal adviser.
<PAGE>
SUPPLEMENT B - TABLE OF APPLICABLE DEATH BENEFIT FACTORS
<TABLE>
<CAPTION>
Insured's Age Last Applicable Insured's Age Applicable Insured's Age Applicable
Policy Anniversary Death Benefit Last Policy Death Benefit Last Policy Death Benefit
Factor Anniversary Factor Anniversary Factor
<S> <C> <C> <C> <C> <C>
1 through 40 2.50 54 1.57 68 1.17
41 2.43 55 1.50 69 1.16
42 2.36 56 1.46 70 1.15
43 2.29 57 1.42 71 1.13
44 2.22 58 1.38 72 1.11
45 2.15 59 1.34 73 1.09
46 2.09 60 1.30 74 1.07
47 2.03 61 1.28 75 through 90 1.05
48 1.97 62 1.26 91 1.04
49 1.91 63 1.24 92 1.03
50 1.85 64 1.22 93 1.02
51 1.78 65 1.20 94 1.01
52 1.71 66 1.19 95 or higher 1.00
53 1.64 67 1.18
</TABLE>
Page B-1
<PAGE>
SUPPLEMENT C - TABLE OF COST OF INSURANCE CHARGES
The Guaranteed Maximum Monthly Cost of Insurance Charges per $1,000 of Specified
Amount for an Insured in the standard or preferred underwriting class are listed
in the table below (Based on 1980 CSO Mortality Table, Age Last Birthday). For
any insured in a special or substandard rate class, the rate above must be
multiplied by the appropriate rating factor, as shown in an amendment added to
the policy.
<TABLE>
<CAPTION>
---------------------------- --------------------------------------------------------
Juvenile Ages Adult Ages
--------------------------------------------------------
----------------------------
Male Male Female Female
Attained Attained Tobacco Tobacco Tobacco Tobacco
<S> <C> <C> <C> <C> <C> <C> <C>
Age Male Female Age Abstainer* User** Abstainer* User**
--- ---- ------ --- ---------- ------ ---------- ------
0 0.09 0.07 20 0.14 0.19 0.08 0.10
1 0.09 0.07 21 0.14 0.19 0.09 0.10
2 0.08 0.07 22 0.14 0.19 0.09 0.10
3 0.08 0.07 23 0.13 0.19 0.09 0.10
4 0.08 0.06 24 0.13 0.18 0.09 0.11
5 0.07 0.06 25 0.13 0.18 0.09 0.11
6 0.07 0.06 26 0.12 0.17 0.09 0.11
7 0.07 0.06 27 0.12 0.17 0.10 0.12
8 0.06 0.06 28 0.12 0.17 0.10 0.12
9 0.06 0.06 29 0.12 0.17 0.10 0.13
10 0.06 0.06 30 0.12 0.18 0.10 0.13
11 0.07 0.06 31 0.12 0.18 0.11 0.14
12 0.08 0.06 32 0.13 0.19 0.11 0.14
13 0.09 0.06 33 0.13 0.20 0.12 0.15
14 0.10 0.07 34 0.14 0.21 0.12 0.16
15 0.12 0.07 35 0.14 0.23 0.13 0.17
16 0.13 0.08 36 0.15 0.24 0.13 0.18
17 0.14 0.08 37 0.16 0.26 0.14 0.20
18 0.15 0.08 38 0.17 0.29 0.16 0.22
19 0.16 0.09 39 0.18 0.31 0.17 0.24
----------------------------
40 0.20 0.35 0.18 0.26
41 0.21 0.38 0.20 0.29
42 0.23 0.42 0.21 0.32
* Abstainer generally 43 0.25 0.46 0.23 0.34
means the Insured does not
use tobacco products.
44 0.27 0.50 0.24 0.37
45 0.29 0.55 0.26 0.40
46 0.31 0.60 0.28 0.43
47 0.34 0.65 0.29 0.46
** User generally means 48 0.36 0.71 0.31 0.49
the Insured uses tobacco
products.
49 0.39 0.77 0.34 0.53
50 0.43 0.84 0.36 0.57
51 0.47 0.92 0.39 0.61
52 0.51 1.00 0.42 0.65
53 0.57 1.11 0.46 0.71
54 0.62 1.22 0.49 0.76
55 0.69 1.33 0.53 0.81
56 0.76 1.46 0.57 0.87
57 0.83 1.59 0.61 0.92
58 0.92 1.73 0.65 0.97
59 1.01 1.88 0.69 1.02
60 1.12 2.04 0.74 1.09
61 1.23 2.23 0.80 1.16
62 1.37 2.45 0.88 1.27
63 1.52 2.68 0.97 1.39
64 1.69 2.95 1.08 1.53
65 1.88 3.22 1.20 1.68
66 2.08 3.52 1.32 1.83
67 2.30 3.82 1.44 1.97
68 2.53 4.14 1.57 2.12
69 2.80 4.49 1.71 2.28
70 3.10 4.88 1.88 2.47
71 3.44 5.31 2.08 2.71
72 3.84 5.81 2.33 3.01
73 4.29 6.37 2.64 3.36
74 4.79 6.98 2.98 3.77
75 5.33 7.64 3.38 4.21
--------------------------------------------------------
Page C-1
<PAGE>
--------------------------------------------------------
Adult Ages
--------------------------------------------------------
Male Male Female Female
Attained Tobacco Tobacco Tobacco Tobacco
Age Abstainer* User** Abstainer* User**
--- ---------- ------ ---------- ------
76 5.91 8.32 3.80 4.69
77 6.51 9.01 4.26 5.19
78 7.15 9.71 4.76 5.73
79 7.85 10.45 5.32 6.31
80 8.62 11.26 5.96 6.97
81 9.50 12.15 6.70 7.73
* Abstainer generally 82 10.50 13.16 7.56 8.60
means the Insured does not
use tobacco products.
83 11.63 14.26 8.55 9.61
84 12.86 15.43 9.65 10.73
85 14.18 16.62 10.86 11.93
86 15.57 17.80 12.17 13.21
** User generally means 87 17.00 19.04 13.59 14.57
the Insured uses tobacco
products.
88 18.49 20.35 15.13 16.01
89 20.04 21.67 16.79 17.53
90 21.69 23.03 18.61 19.26
91 23.49 24.47 20.64 21.16
92 25.50 26.17 22.97 23.32
93 27.96 28.41 25.80 25.94
94 31.38 31.56 29.59 29.59
95 36.80 36.80 35.37 35.37
96 46.59 46.59 45.53 45.53
97 67.04 67.04 66.32 66.32
98 120.67 120.67 120.23 120.23
99 120.67 120.67 120.23 120.23
--------------------------------------------------------
Page C-2
<PAGE>
Supplement D - Table of Surrender Charges
The Maximum Surrender Charges per $1,000 of decrease in Specified Amount (except
for decreases caused by a change of death benefit option) for Policy Years 1-10
are listed in the table below. Surrender charge decreases linearly to zero
between the end of year 10 and the end of year 14.
----------------------------- --------------------------------------------------------
Juvenile Ages Adult Ages
----------------------------- --------------------------------------------------------
-----------------------------
Issue Issue Male Male Female Female
Age Male Female Age Abstainer* User** Abstainer* User**
--- ---- ------ --- ---------- ------ ---------- ------
0 15.40 14.60 20 18.80 20.70 17.80 18.70
1 15.50 14.60 21 19.10 21.00 18.00 19.00
2 15.60 14.80 22 19.30 21.30 18.30 19.30
3 15.80 14.90 23 19.60 21.60 18.50 19.60
4 15.90 15.00 24 19.80 22.00 18.80 19.90
5 16.10 15.20 25 20.10 22.30 19.10 20.20
6 16.30 15.30 26 20.40 22.70 19.30 20.50
7 16.40 15.50 27 20.80 23.10 19.60 20.80
8 16.60 15.60 28 21.10 23.50 19.90 21.20
9 16.90 15.80 29 21.50 24.00 20.30 21.60
10 17.10 16.00 30 21.80 24.40 20.60 21.90
11 17.30 16.10 31 22.20 24.90 20.90 22.30
12 17.60 16.30 32 22.60 25.40 21.30 22.80
13 17.80 16.50 33 23.00 26.00 21.70 23.20
14 18.10 16.70 34 23.50 26.60 22.10 23.70
15 18.30 16.90 35 24.00 27.20 22.50 24.20
16 18.50 17.10 36 24.40 27.80 22.90 24.70
17 18.80 17.40 37 24.90 28.50 23.40 25.20
18 19.00 17.60 38 25.50 29.20 23.80 25.70
19 19.30 17.80 39 26.00 29.90 24.30 26.30
-----------------------------
<PAGE>
40 26.60 30.60 24.80 26.90
41 27.20 31.40 25.30 27.50
42 27.80 32.20 25.80 28.10
43 28.40 33.10 26.40 28.80
44 29.10 34.00 27.00 29.40
45 29.80 34.90 27.60 30.10
* Abstainer generally means 46 30.60 35.90 28.20 30.80
the Insured does not use
tobacco products.
47 31.30 36.90 28.80 31.60
48 32.10 38.00 29.50 32.30
49 33.00 39.10 30.20 33.10
50 33.90 40.30 30.90 33.90
** User generally means the 51 34.80 41.60 31.70 34.80
Insured uses tobacco
products.
52 35.80 42.90 32.40 35.70
53 36.80 44.30 33.20 36.50
54 37.90 44.90 34.10 37.50
55 39.10 44.60 34.90 38.40
56 40.30 44.20 35.80 39.40
57 41.60 43.90 36.80 40.50
58 42.90 43.60 37.80 41.60
59 43.50 43.30 38.90 42.80
60 43.00 42.90 40.00 44.00
61 42.60 42.60 41.20 44.00
62 42.10 42.30 42.50 43.50
63 41.60 42.00 42.80 42.90
64 41.20 41.60 42.20 42.30
65 40.80 41.30 41.60 41.80
66 40.30 41.10 41.00 41.20
67 40.00 40.90 40.40 40.70
68 39.60 40.70 39.80 40.20
69 39.30 40.50 39.30 39.70
70 38.90 40.40 38.70 39.20
71 38.60 40.30 38.10 38.70
72 38.30 40.20 37.60 38.30
73 38.00 40.00 37.10 37.80
74 37.70 39.90 36.50 37.40
75 37.40 39.90 36.00 37.00
76 37.10 39.80 35.60 36.60
77 36.90 39.80 35.10 36.20
78 36.80 39.70 34.70 35.90
79 36.60 39.60 34.30 35.60
80 36.50 39.50 34.00 35.20
81 36.30 39.30 33.50 34.80
82 35.90 38.90 33.00 34.30
83 35.30 38.10 32.30 33.50
84 34.40 36.90 31.40 32.50
85 32.90 35.10 30.00 31.00
--------------------------------------------------------
Page D-1
</TABLE>
<PAGE>
SUPPLEMENT E - CONTINUATION PROVISIONS
Continuation Under the Term No-Lapse Guarantee Provision
To determine if your adjusted total premium payments are sufficient to maintain
the Term No-Lapse Guarantee for continuation of your Policy when the Term
No-Lapse Guarantee applies, we use the following procedure:
o We determine your adjusted total premium payments (the total
amount of your premium payments less the amount of any withdrawals
and the amount of your Loan Account).
o We determine if you have made any changes in your Policy that
resulted in a change in the Monthly Deduction. In this discussion,
we call this type of change a policy change.
o We determine the total required amount for this guarantee
provision.
o If you have not made any policy changes, the total required
amount is 1/12th of the applicable minimum annual premium for
the Term No-Lapse Guarantee multiplied by the number of months
from the Policy Date to the next Monthly Anniversary Day. The
minimum annual premium for the Term No-Lapse Guarantee under
your Policy is shown in your Policy Schedule.
For example, if the minimum annual premium for the Term
No-Lapse Guarantee is $1,200, your Policy Date is June 15,
2000, the next Monthly Anniversary Day is March 15, 2001, and
you have not made any policy change, the required amount is
$900 ($100 ($1,200 divided by 12) x 9 (number of months in the
period)).
o If you have made a policy change, we calculate a required
amount for the period from the Policy Date to the date on
which the policy change was effective and a required amount
for the period from the date on which the policy change was
effective to the next Monthly Anniversary Day. Each
calculation is based on the minimum annual premium for the
Term No-Lapse Guarantee applicable for the period.
We then add the 2 required amounts to determine the total
required amount.
o If you have made more than one policy change, we calculate a
required amount for each period. We then add the required
amounts to determine the total required amount.
o We then compare your adjusted total premium payments to the
total required amount.
Page E-1
23
<PAGE>
o If your adjusted total premium payments are equal to or
greater than the total required amount, your Policy will
continue to be effective, your Term No-Lapse Guarantee will
remain in effect and your Policy will not lapse.
o If your adjusted total premium payments are less than the
total required amount, a Grace Period will start.
o We will send you notice if you are in jeopardy of losing your Term
No-Lapse Guarantee. If your Term No-Lapse Guarantee is lost, it
will not be reinstated.
Continuation Under the Lifetime No-Lapse Guarantee Provision
To determine if your adjusted total premium payments are sufficient for
continuation when the Lifetime No-Lapse Guarantee applies, we use the procedure
described above, but we base our calculation of the total required amount on the
minimum annual premium for the Lifetime No-Lapse Guarantee under your Policy as
shown on your Policy Schedule.
Page E-2
<PAGE>
SUPPLEMENT F - VALUATION PROCEDURES
Sub-Accounts Accumulation Unit Value
In this discussion, the term Valuation Period means the period of time
beginning at the close of trading on the NYSE on one Valuation Date, as defined
below, and ending at the close of trading on the NYSE on the next succeeding
Valuation Date. A Valuation Date is each day valuation of the Sub-Accounts is
required by law including every day that the NYSE is open.
The value of an Accumulation Unit at the close of any Valuation Period
is determined for each Sub-Account by multiplying the Accumulation Unit Value of
the Sub-Account at the close of the immediately preceding Valuation Period by
the "Net Investment Factor" (described below). Depending upon investment
performance of the underlying Fund in which the Sub-Account is invested, the
Accumulation Unit Value may increase or decrease.
The Net Investment Factor for each Sub-Account for any Valuation Period
is determined by dividing (a) by (b) and subtracting (c) from the result, where:
(a) equals: (1) the net asset value per share of the underlying
Fund at the end of the current Valuation Period, plus
(2) the per share amount of any dividend or capital
gain distribution made by the underlying Fund on
shares held in the Sub-Account if the "ex-dividend"
date occurs during the current Valuation Period, plus
or minus
(3) a per share charge or credit for any taxes
reserved, which are determined by Columbus Life to
have resulted from the investment operations of the
Sub-Account during the current Valuation Period;
(b) is the net asset value per share of the corresponding
underlying Fund determined at the end of the immediately
preceding Valuation Period; and
(c) is a factor representing the charges deducted from the
Sub-Account on a daily basis for the daily portion of the
annual mortality and expense risk charge.
Page F-1
<PAGE>
Fixed Account Value
The value of the Fixed Account is calculated on a daily basis by the
following formula:
NP + XFT + I - XFF - WD = value of the Fixed Account where
NP = the sum of all Net Premiums allocated to the
Fixed Account
XFT = any amount transferred to the Fixed Account from a
Sub-Account
I = interest credited by Columbus Life to the Fixed
Account
XFF = any amounts transferred from the Fixed Account to a
Sub-Account
WD = any amounts withdrawn for charges or deductions, or
in connection with any surrenders or partial
withdrawals
Page F-2
<PAGE>
COLUMBUS LIFE INSURANCE COMPANY FINANCIAL STATEMENTS
Columbus Life
Insurance Company
(A Wholly-Owned Subsidiary of The Western and Southern Life Insurance Company)
Report on Audits of Financial Statements - Statutory Basis as of December 31,
1998 and 1997 and for the Three Years Ended December 31, 1998
<PAGE>
Columbus Life Insurance Company
(a wholly-owned subsidiary of The Western and Southern Life Insurance Company)
Table of Contents
- --------------------------------------------------------------------------------
Pages
Report of Independent Accountants 1
Financial Statements:
Balance Sheets - Statutory Basis as of December 31, 1998 and 1997 2
Summaries of Operations - Statutory Basis for the years ended
December 31, 1998, 1997 and 1996 3
Statements of Changes in Shareholder's Equity - Statutory Basis
for the years ended December 31, 1998, 1997 and 1996 4
Statements of Cash Flows - Statutory Basis for the years ended
December 31, 1998, 1997 and 1996 5
Notes to Statutory Basis Financial Statements 6-16
<PAGE>
Report of Independent Accountants
To the Board of Directors
We have audited the accompanying balance sheets (statutory basis) of Columbus
Life Insurance Company ("the Company") (a wholly-owned subsidiary of The Western
and Southern Life Insurance Company) as of December 31, 1998 and 1997, and the
related summaries of operations (statutory basis) and statements of changes in
shareholder's equity (statutory basis) and cash flows (statutory basis) for the
three years ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1, these financial statements were prepared in conformity
with accounting practices prescribed or permitted by the Insurance Department of
the State of Ohio. The effects on the financial statements of the variances
between the statutory basis of accounting and generally accepted accounting
principles are determined to be material.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Columbus Life Insurance Company as of December 31, 1998 and 1997, or the
results of its operations or its cash flows for the three years ended December
31, 1998.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the admitted assets, liabilities, and surplus of Columbus
Life Insurance Company as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the three years ended December 31, 1998, on
the basis of accounting described in Note 1.
March 5, 1999
<PAGE>
Columbus Life Insurance Company
(a wholly-owned subsidiary of The Western and Southern Life Insurance Company)
Balance Sheets - Statutory Basis as of December 31, 1998 and 1997
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
---------- -----------
(in thousands)
Assets
Bonds $1,459,357 $ 1,401,436
Preferred and common stocks 240,218 195,723
Mortgage loans 148,623 159,861
Policy loans 77,236 75,268
Real estate:
Investment properties - 171
Properties acquired in satisfaction of debt 1,992 2,397
Cash and temporary investments 42,064 42,534
Other invested assets 11,194 4,380
---------- -----------
Total cash and invested assets 1,980,684 1,881,770
Premiums deferred and uncollected 7,343 7,636
Investment income due and accrued 23,284 23,048
Other assets 5,073 4,649
---------- -----------
Total assets $2,016,384 $ 1,917,103
---------- -----------
Liabilities
Policy reserves 1,574,309 $ 1,538,045
Policy claims in process of settlement 4,107 4,
4
Dividends payable to policyholders 14,578 15,204
Other liabilities 77,023 62,980
Interest maintenance reserve 21,705 17,769
Asset valuation reserve 61,165 51,992
---------- -----------
Total liabilities 1,752,887 1,690,154
Shareholder's Equity
Common stock, $1 par value,
authorized 10,000,000 shares, issued
and outstanding 10,000,000 shares 10,000 10,000
Paid-in-capital 41,600 41,600
Retained earnings 211,897 175,349
---------- -----------
Total shareholder's equity 263,497 226,949
---------- -----------
Total liabilities and shareholder's equity $2,016,384 $ 1,917,103
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
Columbus Life Insurance Company
(a wholly-owned subsidiary of The Western and Southern Life Insurance Company)
Summaries of Operations - Statutory Basis for the years ended
December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
(in thousands)
---------------------------------
Revenue:
Premiums $ 167,538 $ 159,235 $ 146,725
Net investment income 138,724 143,809 134,651
Considerations for supplementary
contracts and dividend
accumulations 6,250 6,425 6,178
Other 5,624 3,821 3,156
--------- --------- ---------
318,136 313,290 290,710
--------- --------- ---------
Policy benefits and expenses:
Death benefits 30,314 29,618 28,851
Annuity benefits 8,
5 8,352 7,058
Disability and accident and health benefits 2,875 2,501 2,839
Surrender benefits 121,444 107,856 103,848
Other benefits 10,716 11,913 10,022
Increase in policy reserve and other
policyholders' funds 36,588 43,817 37,204
Commissions on premiums 27,800 23,961 23,030
General expenses 36,583 35,
7 37,728
--------- --------- ---------
274,485 263,185 250,580
--------- --------- ---------
Gain from operations before dividends
to policyholders, federal
income taxes, and net realized capital gain 43,651 50,105 40,130
Dividends to policyholders 14,610 15,232 14,671
--------- --------- ---------
Gain from operations before federal
income taxes and net
realized capital gain 29,041 34,873 25,459
Federal income taxes 6,238 11,079 5,713
--------- --------- ---------
Net gain from operations before
net realized capital gain 22,803 23,794 19,746
Net realized capital gain, less federal
income tax of $5,345 in 1998 and $2,467
in 1997 and transfers to the Interest
Maintenance Reserve of $8,237 in 1998 and
$5,938 in 1997 11,114 4,492 15,358
--------- --------- ---------
Net income $ 33,917 $ 28,286 $ 35,104
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
Columbus Life Insurance Company
(a wholly-owned subsidiary of The Western and Southern Life Insurance Company)
Statements of Changes in Shareholder's Equity - Statutory Basis
for the years ended December 31, 1998, 1997 and 1996
1998 1997 1996
--------- --------- ---------
(in thousands)
---------------------------------
Shareholder's equity at beginning of year $ 226,949 $ 185,348 $ 167,130
Net income 33,917 28,286 35,104
Change in net unrealized gains 10,630 14,507 (13,922)
Increase in nonadmitted assets 1,457 372 685
Increase in asset valuation reserve (9,173) (1,312) (3,491)
Other (283) (252) (158)
--------- --------- ---------
Shareholder's equity at end of year $ 263,497 $ 226,949 $ 185,348
========= ========= =========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
Columbus Life Insurance Company
(a wholly-owned subsidiary of The Western and Southern Life Insurance Company)
Statements of Cash Flows - Statutory Basis for the years ended December 31,
1998, 1997 and 1996
1998 1997 1996
--------- --------- ---------
(in thousands)
---------------------------------
Net cash from operations:
Premiums and annuity considerations $ 179,372 $ 169,138 $ 156,428
Net investment income received 132,144 141,117 130,474
Other income received - 263 166
--------- --------- ---------
311,516 310,518 287,068
Surrender benefits paid (121,444) (107,856) (103,848)
Other benefits paid to policyholders (52,606) (50,456) (48,811)
Commissions, other expenses and taxes paid (59,937) (57,780) (54,117)
Dividends paid to policyholders (15,236) (14,673) (14,150)
Federal income taxes paid (8,020) (18,334) (13,572)
Net (increase) decrease in policy
loans and premium notes (1,968) (2,169) (1,149)
Other operating expenses paid (112) - (3,549)
--------- --------- ---------
Net cash from operations 52,193 59,250 47,872
Proceeds from investments sold,
matured or repaid:
Bond 709,881 674,578 709,018
Stocks 119,711 122,354 115,370
Mortgage loans 24,695 29,186 42,811
Real estate and other invested assets 4,684 1,195 22,057
--------- --------- ---------
Total investment proceeds 858,971 827,313 889,256
Other sources 4,197 1,145 4,398
--------- --------- ---------
Total cash provided 863,168 828,458 941,526
--------- --------- ---------
Cost of investments acquired:
Bonds 754,891 722,159 793,135
Stocks 140,492 132,550 113,514
Mortgage loans 13,127 13,900 13,711
Real estate and other invested assets 6,656 2,086 283
--------- --------- ---------
Total investments acquired 915,166 870,695 920,643
Other cash applied, net 665 734 7,180
--------- --------- ---------
Total cash applied 915,831 871,429 927,823
--------- --------- ---------
Net change in cash and temporary investments (470) 16,279 13,703
Cash and temporary investments:
Beginning of year 42,534 26,255 12,552
--------- --------- ---------
End of year $ 42,064 $ 42,534 $ 26,255
========= ========= =========
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
Columbus Life Insurance Company
(a wholly-owned subsidiary of
The Western and Southern Life Insurance Company)
Notes to Statutory Basis Financial Statements
- --------------------------------------------------------------------------------
1. Principal Accounting Policies:
a. Nature of Operations: Columbus Life Insurance Company (the Company), a stock
life insurance company, is a wholly-owned subsidiary of The Western and Southern
Life Insurance Company (Western and Southern), a mutual life insurance company.
The Company offers individual life, universal life and annuity contracts through
general and independent agents and affiliated broker-dealers. The Company is
licensed in 39 states and the District of Columbia. Approximately 61% of the
gross premiums and annuity considerations for the Company were derived from
Ohio, California, Michigan, Florida, Indiana and New Jersey.
b. Basis of Presentation: The Company is subject to regulation by the Department
of Insurance of the State of Ohio (the "Department") and other states in which
the Company operates. The Company files financial statements with these
departments using statutory accounting practices (SAP) prescribed or permitted
by the Department and used in the preparation of the accompanying
statutory-basis financial statements. Prescribed statutory accounting practices
include a variety of publications of the National Association of Insurance
Commissioners (NAIC), as well as state laws, regulations, and general
administrative rules. Permitted statutory accounting practices encompass all
accounting practices not so prescribed; such practices differ from
state-to-state, may differ from company-to-company within a state and may change
in the future. These practices differ in some respects from generally accepted
accounting principles. The more significant differences are:
o Certain assets are excluded from the statements of admitted assets,
liabilities and shareholder's equity as "nonadmitted assets" (principally
furniture and equipment) for statutory reporting purposes.
o Debt securities classified as available for sale are carried at amortized cost
instead of fair value.
o Deferred federal income taxes are not provided for statutory reporting
purposes.
o The Company's investment in subsidiaries is accounted for on the equity method
for statutory purposes, rather than being consolidated with the Company.
o The costs of acquiring new business, such as commissions, certain costs of
policy underwriting and issuance and certain variable agency expenses, have not
been deferred for statutory reporting purposes.
6
<PAGE>
Columbus Life Insurance Company
(a wholly-owned subsidiary of The Western and Southern Life Insurance Company)
Notes to Statutory Basis Financial Statements
- --------------------------------------------------------------------------------
The Company received written approval from the Department to record guaranty
fund assessments as billed and defer the amount on the balance sheet to the
extent that they are recoverable through premium tax credits. When the tax
credits are realized, the assessment is removed from the balance sheet as a
credit to premium tax expense. The Company also received approval to record all
taxes, including interest, assessments, settlements and corrections through the
Summary of Operations, rather than as a direct charge to shareholder's equity.
There is no prescribed accounting treatment for these transactions.
In March 1998, the NAIC finalized the Codification of Statutory Accounting
Principles guidance which will replace the current Accounting Practices and
Procedures manual as the NAIC's primary guidance on statutory accounting. The
Codification provides guidance for areas where statutory accounting has been
silent and changes current statutory accounting in some areas. The principal
changes expected to impact the Company is the recording of deferred taxes. The
Ohio Insurance Department has adopted the Codification, effective January 1,
2001. The Company has not estimated the potential effect of the Codification
guidance.
c. Revenues and Expenses: Annuity and universal life premiums are recognized as
revenue when received. Other life insurance premiums are recognized at the
beginning of each policy year. Accident and health insurance premiums are
recognized as revenue when due. Policy acquisition costs are expensed as
incurred.
d. Valuation of Investments:
o Debt securities and stock values are as prescribed by the NAIC; debt
securities at amortized cost or NAIC value, preferred stocks in good standing at
cost and all other stocks at market.
o Investments in subsidiaries are recorded under the equity method, adjusted to
use only those assets that would constitute admitted assets if owned directly by
an insurance company. The net income or loss of such subsidiaries is recorded
directly to retained earnings.
o Mortgage loans not in default are carried at outstanding indebtedness less
unamortized discount. Mortgage loans in default and property acquired in
satisfaction of debt are recorded at the lower of the related indebtedness or
fair market value.
7
<PAGE>
Columbus Life Insurance Company
(a wholly-owned subsidiary of The Western and Southern Life Insurance Company)
Notes to Statutory Basis Financial Statements
- --------------------------------------------------------------------------------
o Real estate is carried at the lower of depreciated cost or fair market value.
Depreciation is computed by the straight-line method over the estimated useful
life of the asset.
o Policy loan values are carried at outstanding indebtedness not in excess of
policy cash surrender value.
o Real estate joint ventures and partnerships are accounted for on the equity
basis, with the equity in earnings recorded through net investment income and
equity for general and limited partnership interests, respectively.
The asset valuation reserve serves to provide a reserve, recorded through
equity, against fluctuations in the market values of bonds, stocks, mortgage
loans, real estate and other invested assets. The interest maintenance reserve
defers the recognition of realized capital gains and losses resulting from
changes in interest rates on fixed income investments sold, and amortizes the
gains and losses into investment income over the remaining life of the
investments sold. The net gain deferred as a result of recording the interest
maintenance reserve was $8,237,000 and $5,938,000 and net of federal income
taxes of $4,436,000 and $3,197,000 in 1998 and 1997, respectively. Realized
gains and losses from sales of securities are determined on the basis of
specific identification and recognized on the trade date.
Realized gains and losses, adjusted for the interest maintenance reserve are
included in the determination of net income. Adjustments to fair market value
for permanent declines in value of mortgage loans, property acquired in
satisfaction of debt and real estate are treated as realized losses and are
included in net income. Adjustments for declines which are not permanent are
treated as unrealized losses.
8
<PAGE>
Columbus Life Insurance Company
(a wholly-owned subsidiary of The Western and Southern Life Insurance Company)
Notes to Statutory Basis Financial Statements
- --------------------------------------------------------------------------------
e. Policy Reserves: Policy reserves for life insurance, annuity contracts, and
supplemental benefits are developed by using accepted actuarial methods and are
computed principally on the Commissioner's Annuity Reserve Valuation Method. The
following mortality tables and interest rates are used:
Percentage of Reserves
1998 1997
Life insurance:
1941 Commissioners Standard Ordinary, 2-1/2% - 3% 3.7% 3.9%
1958 Commissioners Standard Ordinary, 2-1/2% - 4-1/2% 23.6 23.9
1980 Commissioners Standard Ordinary, 4% - 5% 33.7 29.2
Annuities:
Various, 2-1/2% - 7-1/2% 36.9 40.7
Supplemental benefits:
Various, 2-1/2% - 7-1/2% 1.1 1.2
Other, 2% - 5-1/2% 1.0 1.1
100.0% 100.0%
f. Dividends: Dividends to policyholders are determined annually by the Board of
Directors. The dividends to policyholders were determined using factors based on
approved dividend scales. Dividends to policyholders are reserved one year in
advance through charges to operations.
g. Cash and Temporary Investments: The Company considers short-term investments
with an initial maturity of three months or less to be temporary investments.
h. Federal Income Taxes: The Company's parent files a consolidated tax return
with its eligible subsidiaries, including the Company. The provision for federal
income taxes is allocated to the Company using a separate return method based
upon a written agreement. Under the agreement, the benefits from losses of
subsidiaries are not retained by the subsidiary companies but are allocated
among those companies in the consolidated group having taxable income.
i. Use of Estimates: The preparation of financial statements in conformity with
accounting practices prescribed or permitted by insurance regulatory authorities
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
9
<PAGE>
Columbus Life Insurance Company
(a wholly-owned subsidiary of The Western and Southern Life Insurance Company)
Notes to Statutory Basis Financial Statements
- --------------------------------------------------------------------------------
2. Debt and Equity Securities:
Fair values for debt securities are based on quoted market prices. The amortized
cost and estimated fair values of debt securities at December 31, 1998 and 1997
are as follows:
<TABLE>
<CAPTION>
1998
-------------------------------------------------
Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------------------- ----------------------
(in thousands)
-------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government corporations
and agencies $ 64,996 $ 1,273 $ 565 $ 65,704
Debt securities issued by states of
the U.S. and political subdivisions
of the states 6,004 1,012 - 7,016
Corporate securities 1,074,857 59,379 7,816 1,126,420
Mortgage-backed securities 313,250 8,836 260 321,826
Foreign government securities 250 - 7 243
---------- ------- ------ ----------
Total $1,459,357 $70,500 $8,648 $1,521,209
========== ======= ====== ==========
1997
-------------------------------------------------
Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------------------- ----------------------
(in thousands)
-------------------------------------------------
U.S. Treasury securities and obligations
of U.S. government corporations
and agencies $ 10,456 $ 460 $ - $ 10,916
Debt securities issued by states of
the U.S. and political subdivisions
of the states 30,900 2,786 - 33,686
Corporate securities 1,107,134 53,161 1,363 1,158,932
Mortgage-backed securities 252,696 7,183 831 259,048
Foreign government securities 250 - 9 241
---------- ------- ------ ----------
Total $1,401,436 $63,590 $2,203 $1,462,823
========== ======= ====== ==========
</TABLE>
10
<PAGE>
Columbus Life Insurance Company
(a wholly-owned subsidiary of The Western and Southern Life Insurance Company)
Notes to Statutory Basis Financial Statements
- --------------------------------------------------------------------------------
The amortized cost and estimated fair value of bonds at December 31, 1998, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
Amortized Estimated
Cost Fair Value
--------- ----------
(in thousands)
-------------------------
Due in one year or less $ 28,599 $ 28,916
Due after one year through five years 479,972 498,720
Due after five years through ten years 446,786 470,016
Due after ten years 190,750 201,731
---------- ----------
1,146,107 1,199,383
Mortgage-backed securities 313,250 321,826
Total $1,459,357 $1,521,209
Proceeds from sales of investments in bonds during 1998, 1997 and 1996 were
$709,881,000, $674,578,000 and $709,018,000, respectively. Gross gains of
$13,801,000, $10,711,000 and $12,768,000 and gross losses of $2,004,000,
$1,795,000 and $3,449,000 were realized on these sales in 1998, 1997 and 1996,
respectively.
Unrealized gains and losses on investments in common stocks and on investments
in subsidiaries are reported directly in equity and do not affect net income.
The gross unrealized gains and gross unrealized losses on, and the cost and fair
value of those investments and preferred stocks are as follows:
<TABLE>
<CAPTION>
1998
-------------------------------------------------
Unrealized Unrealized Fair
Cost Gains Losses Value
----------------------- ----------------------
(in thousands)
-------------------------------------------------
<S> <C> <C> <C> <C>
Preferred stocks in good standing $ 22,764 $ 929 $ 146 $ 23,547
Other preferred stocks 2,094 - 844 1,250
-------- ------- ------- --------
Total preferred stocks $ 24,858 $ 929 $ 990 $ 24,797
======== ======= ======= ========
Common stock $138,817 $41,775 $10,629 $169,963
Subsidiaries 37,573 21,240 12,572 46,241
-------- ------- ------- --------
Total common stock $176,390 $63,015 $23,201 $216,204
======== ======= ======= ========
</TABLE>
11
<PAGE>
Columbus Life Insurance Company
(a wholly-owned subsidiary of The Western and Southern Life Insurance Company)
Notes to Statutory Basis Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997
-------------------------------------------------
Unrealized Unrealized Fair
Cost Gains Losses Value
----------------------- ----------------------
(in thousands)
-------------------------------------------------
<S> <C> <C> <C> <C>
Preferred stocks in good standing $ 14,808 $ 873 $ 16 $ 15,665
Other preferred stocks 2,000 - 690 1,310
-------- ------- ------- --------
Total preferred stocks $ 16,808 $ 873 $ 706 $ 16,975
======== ======= ======= ========
Common stock $114,837 $22,991 $ 5,008 $136,820
Subsidiaries 33,037 21,043 11,295 42,785
-------- ------- ------- --------
Total common stock $147,874 $44,034 $16,303 $179,605
======== ======= ======= ========
</TABLE>
Proceeds from sales of investments in equity securities during 1998, 1997 and
1996 were $119,711,000, $122,354,000 and $115,370,000, respectively. Gross gains
of $22,175,000, $19,599,000 and $22,663,000 and gross losses of $6,390,000,
$13,127,000 and $2,464,000 were realized on these sales in 1998, 1997 and 1996,
respectively. Net investment income consisted of the following for the years
ended December 31,:
1998 1997 1996
-------- -------- --------
Debt securities $111,621 $108,148 $103,347
Equity securities 5,370 13,717 6,164
Mortgage loans 13,814 14,733 17,650
Rental income from real estate 229 500 1,427
Policy loans 4,811 4,647 4,504
Other invested assets 1,242 905 1,874
Short-term investments 2,597 3,225 2,442
-------- -------- --------
Gross investment income 139,684 145,875 137,408
Investment expense (960) (2,066) (2,757)
-------- -------- --------
Net investment income $138,724 $143,809 $134,651
======== ======== ========
12
<PAGE>
Columbus Life Insurance Company
(a wholly-owned subsidiary of The Western and Southern Life Insurance Company)
Notes to Statutory Basis Financial Statements
- --------------------------------------------------------------------------------
3. Fair Value of Financial Instruments:
The following sets forth the fair values of the Company's financial instruments.
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
----------------------- ----------------------
(in thousands) (in thousands)
-------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Debt securities $1,459,357 $1,521,209 $1,401,436 $1,462,823
Preferred and common stock 193,977 194,760 152,938 153,795
Mortgage loans, net 148,623 158,136 159,861 168,818
Cash and temporary investments 42,064 42,064 42,534 42,534
---------- ---------- ---------- ----------
Total assets $1,844,021 $1,916,169 $1,756,769 $1,827,970
========== ========== ========== ==========
Liabilities
Investment-type contract reserves 1,172,653 1,111,851 1,151,598 1,071,801
---------- ---------- ---------- ----------
Total liabilities $1,172,653 $1,111,851 $1,151,598 $1,071,801
========== ========== ========== ==========
</TABLE>
Fair values for debt, equity and short-term investment securities are based on
quoted market prices.
The fair values of mortgage loans, consisting principally of commercial real
estate loans, are estimated using discounted cash flow analyses, using interest
rates currently being offered for similar loans collateralized by properties
with similar investment risk. The fair values for mortgage loans in default are
established at the lower of the fair market value of the related underlying
collateral or carrying value of the loan.
The Company believes it is not practicable to estimate the fair value of policy
loans. These assets, totaling $77,236,000 at December 31, 1998, are carried at
their aggregate unpaid principal balances. Estimation of the fair value is not
practicable as the loans have no stated maturity and are an integral part of the
related insurance contracts.
Certain reserves for investment-type insurance contracts do not include
mortality or morbidity risk. Fair values for insurance reserves are not required
to be disclosed. However, the estimated fair values of all insurance reserves
and investment contracts are taken into consideration in the Company's overall
management of interest rate risk.
13
<PAGE>
Columbus Life Insurance Company
(a wholly-owned subsidiary of The Western and Southern Life Insurance Company)
Notes to Statutory Basis Financial Statements
- --------------------------------------------------------------------------------
The Company believes that all individual annuity contracts which are in the cash
value fund accumulation phase prior to annuitization represent investment-type
insurance contracts. The fair values for these contracts have been estimated as
the carrying values in the balance sheet less any applicable surrender charges.
It also believes the single premium immediate annuities without life
contingencies represent investment contracts. The fair value of these annuities
is estimated by recalculating the reserve at a reinvestment interest rate
determined from Asset/Liability matching.
Interest changes may have temporary effects on the sale and profitability of
annuity products offered by the Company. Although the rates offered by the
Company are adjustable in the long-term, in the short-term they may be subject
to contractual and competitive restrictions which may prevent timely adjustment.
The Company's Management constantly monitors interest rates with respect to a
spectrum of durations and sells annuities that permit flexible responses to
interest rate changes as part of the Company's management of interest spreads.
However, adverse changes in investment yields on invested assets will affect the
earnings on those products with a guaranteed return.
4. Related Party Transactions:
The Company is a party to service agreement with Western and Southern for the
performance of certain legal services, investment advisory and data processing
functions for the Company. The Company paid $8,537,000, $7,175,000 and
$5,760,000 in 1998, 1997 and 1996, respectively, for these services.
The Company has entered into an agreement with Western and Southern where the
Company reinsured the liabilities of, and began servicing and administering the
former business of Columbus Mutual Life Insurance Company (Columbus Mutual), a
former affiliate of Western and Southern which merged with Western and Southern.
The agreement is anticipated to last until all obligations for policies issued
by Columbus Mutual are settled. Reserves reflected on the Company's balance
sheets for policies and contracts included under the Agreement are:
December 31,
------------
1998 1997
--------- ---------
(in thousands)
---------------------
Life and annuity reserves $ 903,045 $ 938,017
Accident and health reserves 13,507 -
14
<PAGE>
Columbus Life Insurance Company
(a wholly-owned subsidiary of The Western and Southern Life Insurance Company)
Notes to Statutory Basis Financial Statements
- --------------------------------------------------------------------------------
5. Federal Income Taxes:
Following is a reconciliation between the amount of tax computed at the federal
statutory rate of 35% and the federal income tax provision (exclusive of taxes
related to capital gains or losses) reflected in the summaries of operations:
1998 1997 1996
--------- --------- ---------
(in thousands)
---------------------------------
Income tax computed at statutory rate $ 10,164 $ 12,206 $ 8,910
Increase (decrease) in taxes
resulting from:
Adjustments to statutory reserves
for tax purposes 1,835 1,989 2,306
Deferred acquisition costs recorded
for tax purposes 1,495 1,719 1,727
Amortization of IMR (1,505) (1,284) (1,001)
EDP conversion cost expense - - 56
Bond discount accrual (1,011) (726) (760)
Charitable contribution - - (1,733)
Dividend received deduction - (3,500) (1,225)
Changes in prior period estimates (7,815) 729 (3,129)
Other 3,075 (54) 559
--------- --------- ---------
Federal income taxes $ 6,238 $ 11,079 $ 5,713
========= ========= =========
6. Dividend Restrictions:
Ohio insurance law limits the amount of dividends that can be paid to a parent
in a holding company structure, without prior approval of the regulators, to the
greater of ten percent of statutory surplus or the prior year statutory net gain
from operations. As of December 31, 1998, the Company has approximately
$33,917,000 available for payment of dividends to Western and Southern without
further approval of the regulators. No dividends were paid to Western and
Southern in 1998, 1997 and 1996.
7. Contingencies:
The Company is currently a defendant in various lawsuits which allege improper
sales practices by the Company. Recently a nationwide class was certified in one
of these cases. The terms of the class are still uncertain; however, the Company
intends to vigorously appeal the certification. At this point in time,
management is unable to estimate the potential outcome of the lawsuits.
15
<PAGE>
Columbus Life Insurance Company
(a wholly-owned subsidiary of The Western and Southern Life Insurance Company)
Notes to Statutory Basis Financial Statements
- --------------------------------------------------------------------------------
8. Regulatory Restrictions:
The Company is required by statutory regulations to meet minimum risked-based
capital standards. Risk-based capital is a method of measuring the minimum
amount of capital appropriate for an insurance company to support its overall
business operations in consideration of its size and risk profile. At December
31, 1998 and 1997, the Company exceeded the minimum risk-based capital standards
required.
State regulatory authorities have powers relating to granting and revoking
licenses to transact business, the licensing of agents, the regulation of
premium rates and trade practices, the form and content of insurance policies,
the content of advertising material, financial statements and the nature of
permitted practices.
18
<PAGE>
GLOSSARY
Account Value The sum of the value of your investments in the
Sub-Accounts, the value of your investments in the
Fixed Account and the value of your Loan Account.
Accumulation Unit A unit of measure used to calculate a Policyholder's
share of a Sub-Account.
Accumulation Unit Value The dollar value of an Accumulation Unit in a
Sub-Account.
Attained Age We determine the Attained Age of the Insured at
various times for various reasons.
o At the time we issue your Policy, the Insured's
Attained Age is the Insured's age on the
Policy Date.
o After we issue your Policy, the Insured's
Attained Age generally is the Insured's age on
the last Policy Anniversary on or before
the Monthly Anniversary Date.
o If you increase the Specified Amount after
we issue your Policy, the Insured's Attained
Age, for purposes of determining cost of
insurance charges applicable to the
increase, is the Insured's age on the
last anniversary of the increase on or before
that Monthly Anniversary Day.
Beneficiary The person or persons you have
named to receive the Death
Proceeds when the Insured dies.
Cash Surrender Value The Account Value minus any surrender charge.
Columbus Life, we, us Columbus Life Insurance Company.
and our
Contingent Beneficiary The person or persons you have named to receive
the Death Proceeds when no Beneficiaries remain
alive and the Insured dies.
Death Benefit The amount we pay to the Beneficiary under the
Policy when the Insured dies.
Death Proceeds Death Benefit plus any insurance on the
Insured's life that was provided by riders to
your Policy.
Fixed Account An investment option that provides a fixed rate
of interest.
Fund A Fund is a series of a registered management
investment company. Each Sub-Account invests in
a Fund that has the same investment
objective as the Sub-Account.
Indebtedness The sum of the value of your Loan
Account plus accrued and unpaid
interest on the loan.
<PAGE>
Insured The person on whose life we
provide insurance coverage under
your Policy.
Loan Account The portion of your Account Value that is
collateral for your loans.
Minimum Issue Limit The minimum amount of insurance you must
purchase and maintain. If the Insured is in
a standard premium class, the Minimum Issue
Limit is $25,000. If the Insured
is in a preferred premium class,
the Minimum Issue Limit is $100,000.
Monthly Anniversary Day The date each month on which we deduct the
Monthly Deduction and Monthly Expense Charge.
This is generally the same date each month as
the Policy Date, so long as that date is a day
on which processing occurs.
Monthly Deduction The Monthly Deduction includes the amount
deducted for the cost of insurance charge plus
the cost of any additional benefits provided
under your Policy by rider.
Monthly Expense Charge The Monthly Expense Charge covers the cost of
administering your Policy.
Net Cash Surrender Value Your Account Value minus any surrender charge
and any Indebtedness.
Net Premiums The amount of premium payment you paid less
the premium expense charge and less the tax
charges.
Payee The person who actually receives
the payment of proceeds from us
under one of the Income Plans.
Depending on the circumstances,
the Payee might mean you, the
Beneficiary, the Contingent
Beneficiary, your estate or
another designated person.
Policy The Columbus Life Flexible
Premium Variable Universal Life
Policy, including the application
and any amendments, any
supplemental application, riders
or endorsements.
Policy Anniversary The same date each year as the Policy Date.
Policy Date The date from which Policy months, years and
anniversaries are measured.
<PAGE>
Policy Schedule The schedule that begins on page 3 of your
Policy. It contains specific information about
your Policy such as the Specified Amount, your
planned premium, the death benefit option you
selected, required payments for guaranteed
continuation of your Policy and the maximum
amounts of various charges.
Policy Year A year that starts on the your Policy Date or
an anniversary of your Policy Date.
Separate Account 1 A separate account of Columbus Life Insurance
Company that supports your Policy.
Specified Amount The amount of insurance coverage provided by
the Policy.
Sub-Accounts A division of Separate Account 1. Each
Sub-Account invests in a Fund, which has the
same investment objective as the Sub-Account.
Surrender Charge If the Specified Amount of your Policy
decreases, you will pay a surrender charge under
certain circumstances.
<PAGE>
BACK COVER
This booklet contains the Columbus Life Flexible Premium Variable Universal Life
Insurance Prospectus and the current prospectuses of AIM Variable Insurance
Funds, Inc., The Alger American Fund, MFS Variable Insurance Trust, PIMCO
Variable Insurance Trust and Touchstone Variable Series Trust. You should rely
only on the information contained in the Policy (including any attached riders
or endorsements), these prospectuses or our approved sales literature.
No one is authorized to give any information or make any representation other
than those contained in the Policy (including any attached riders or
endorsements), these prospectus or our approved sales literature.
<PAGE>
PART II
INFORMATION NOT REQUIRED TO BE FILED IN A PROSPECTUS
Undertaking to File Reports
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, 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.
Information and Undertaking Pursuant to Rule 484(b)(1) under the Securities Act
of 1933
The Code of Regulations of Columbus Life Insurance Company provides in Article
VI that:
ARTICLE VI
Indemnification and Insurance
Section 1. Indemnification. To the fullest extent not prohibited by
applicable law, the corporation shall indemnify each director, officer
and employee against any and all costs and expenses (including attorney
fees, judgments, fines, penalties, amounts paid in settlement, and
other disbursements) actually and reasonably incurred by or imposed
upon such director, officer or employee in connection with any action,
suit, investigation or proceeding (or any claim or other matter
therein), whether civil, criminal, administrative or otherwise in
nature, including any settlements thereof or any appeals therein, with
respect to which such director, officer or employee is named or
otherwise becomes or is threatened to be made a party by reason of
being or at any time having been a director, officer or employee of the
corporation, or, at the direction or request of the corporation, a
director, trustee, officer, administrator, manager, employee, adviser
or other agent of or fiduciary for any other corporation, partnership,
trust, venture or other entity or enterprise including any employee
benefit plan; provided, however, that no person shall be indemnified to
the extent, if any, ,that the directors, acting at a meeting at which a
quorum of directors who are not parties to or threatened with any such
action, suit, investigation or proceeding, determine that such
indemnification is contrary to applicable law.
Any director who is a party to or threatened with any such action,
suit, investigation or proceeding shall not be qualified to vote; and
if for this reason a quorum of directors, who are not disqualified from
voting by reason of being parties to or threatened with such action ,
suit, investigation or proceeding, cannot be obtained, such
determination shall be made by three attorneys at law, who have not
theretofore represented the corporation in any matter and who shall be
selected by all of the officers and directors of the corporation who
are not parties to or threatened with any such action, suit,
investigation or proceeding. If there
II-1
<PAGE>
are no officers or directors who are qualified to make such selection,
the selection shall be made by a Judge of the Court of Common Pleas of
Hamilton County, Ohio. Such indemnification shall not be deemed
exclusive of any other right to which such director, officer or
employee may be entitled under the Articles of Incorporation, this
Code of Regulations, any agreement, any insurance purchased by the
corporation, vote of shareholders or otherwise.
Section 2. Insurance. The Board of Directors of the corporation may
secure and maintain such policies of insurance as it may consider
appropriate to insure any person who is serving or has served as a
director, officer or employee of the corporation, or who is serving or
has served at the request of the corporation as a director, trustee,
officer, manager, employee, adviser or other agent of or fiduciary for
any other corporation, partnership, trust, venture, or other entity or
enterprise including any employee benefit plan against any liability
asserted against and incurred by such person.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Representation Regarding the Reasonableness of Aggregate Fees and Charges
Deducted under Policies Pursuant to Section 26(e)(2)(A) of the Investment
Company Act of 1940
Pursuant to Section 26(e) of the Investment Company Act of 1940, as amended,
Columbus Life Insurance Company represents that, with respect to the Policies
registered with the Securities and Exchange Commission by this Registration
Statement, as it may be amended, and offered by the Prospectus included in the
Registration Statement, all fees and charges imposed for any purpose and in any
manner and deducted under the Policies, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by Columbus Life Insurance Company.
II-2
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet
Reconciliation and tie between the Items in Form N-8B-2 and the
Prospectus
The Prospectus consisting of 129 pages
The undertaking to file reports
Other undertakings and representations
The signatures
Written consents filed herewith
The following exhibits:
1. Exhibits required by Article IX, paragraph A, of Form N-8B-2:
(1) Resolution of Board of Directors of the Columbus Life
Insurance Company dated September 10, 1998 authorizing the
establishment of the Separate Account previously filed on
May 14, 1999 as Exhibit 1.(1) to the Registration Statement
on Form S-6, File No. 333-78489 is incorporated by reference
(2) Not applicable
(3) (a) Form of Distributor Agreement between the Columbus Life
Insurance Company, on behalf of Separate Account 1, and
Touchstone Securities, Inc. filed herewith
(b) Specimen of typical agreement(s) between Touchstone
Securities, Inc. and dealers, managers, sales
supervisors and salesmen
(c) Not applicable
(4) Not applicable
(5) (a) Form of Columbus Life Flexible Premium Variable
Universal Life Insurance Policy filed herewith
(b) Form of Disability Credit Rider filed herewith
(c) Form of Children's Term Rider filed herewith
II-3
<PAGE>
(d) Form of Accidental Death Rider filed herewith
(e) Form of Accelerated Death Benefit Rider filed herewith
(f) Form of Insured Insurability Rider filed herewith
(g) Form of Other Insured Term Rider filed herewith
(6) (a) (i) Certificate of Incorporation of the Columbus Life
Insurance Company filed herewith
(ii) Certificate of Amendment of Articles of
Incorporation of Columbus Life Insurance Company
filed herewith
(b) Code of Regulations of the Columbus Life Insurance
Company filed herewith
(7) Not applicable
(8) (a) Participation Agreement by and among AIM Variable
Insurance Funds, Inc., Columbus Life Insurance
Company, on behalf of itself and its separate
accounts, and Touchstone Securities, Inc. filed
herewith
(b) Agreement with respect to Trademarks and Fund Names
between AIM Management Group Inc. and Columbus Life
Insurance Company filed herewith
(c) Administrative Services Agreement between Columbus
Life Insurance Company and AIM Advisors, Inc. filed
herewith
(d) Participation Agreement by and among The Alger
American Fund, Columbus Life Insurance Company on its
own behalf and on behalf of its Separate Account 1
and Fred Alger & Company filed herewith
(e) Service Agreement between Fred Alger Management, Inc.
and Columbus Life Insurance Company filed herewith
(f) Participation Agreement among MFS Variable Insurance
Trust, Columbus Life Insurance Company and
Massachusetts Financial Services Company filed
herewith
(g) Participation Agreement among Columbus Life Insurance
Company, PIMCO Variable Insurance Trust, and PIMCO
Funds Distributors LLC filed herewith
(h) Services Agreement between Pacific Investment
Management Company and Columbus Life Insurance
Company filed herewith
II-4
<PAGE>
(i) Form of Fund Participation Agreement between Columbus
Life Insurance Company and Touchstone Variable Series
Trust filed herewith
(9) Not applicable
(10) (a) Form of Columbus Life Insurance Company Application
for Life Insurance filed herewith
(b) Form of Columbus Life Insurance Company Supplement to
Application for Life Insurance to be Completed When
Applying for Flexible Premium Variable Universal Life
filed herewith
(11) Description of Issuance, Transfer and Redemption
Procedures and Method of Conversion to Fixed Benefit
Policies for Columbus Life Flexible Premium Variable
Universal Life Insurance Policies Offered by Columbus
Life Insurance Company Separate Account 1 of Columbus
Life Insurance Company filed herewith
2. Opinion and Consent of Counsel filed herewith
3. None
4. Not Applicable
5. Not required
99.(1) Actuarial Opinion and Consent filed herewith
99.(2) Consent of PricewaterhouseCoopers LLP filed herewith
99.(3) Powers of Attorney previously filed on May 14, 1999 as Exhibit
99.(3) to the Registration Statement on Form S-6, File No.
333-78489 is incorporated by reference
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Columbus Life Insurance Company Separate Account 1, has duly caused
this Pre-Effective Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned thereunto duly authorized in the City of
Cincinnati and State of Ohio, on the 2 day of August, 1999.
COLUMBUS LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 1
By: COLUMBUS LIFE INSURANCE COMPANY
By: /s/ Lawrence L. Grypp
Lawrence L. Grypp
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
Principal Executive Officer:
/s/ Lawrence L. Grypp
Lawrence L. Grypp
President and Chief Executive Officer
August 2, 1999
Principal Accounting and Financial Officer:
/s/ Robert L. Walker
Robert L. Walker
Chief Financial Officer
August 2, 1999
Directors:
William J. Williams*
John H. Barrett*
Paul H. Amato*
James N. Clark*
Robert C. Savage*
Ralph E. Waldo*
*By: /s/ Robert L. Walker
Robert L. Walker
as attorney in fact for each Director
August 2, 1999
II-6
<TABLE>
EXHIBIT INDEX
<CAPTION>
<S> <C> <C>
EXHIBIT NO. DESCRIPTION PAGE
1.(3)(a) Form of Distributor Agreement between the Columbus Life Insurance Company, on behalf
of Separate Account 1, and Touchstone Securities, Inc.
1.(3)(b) Specimen of typical agreement(s) between Touchstone Securities, Inc. and dealers,
managers, sales supervisors and salesmen
1.(5)(a) Form of Columbus Life Flexible Premium Variable Universal Life Insurance Policy
1.(5)(b) Form of Disability Credit Rider
1.(5)(c) Form of Children's Term Rider
1.(5)(d) Form of Accidental Death Rider
1.(5)(e) Form of Accelerated Death Benefit Rider
1.(5)(f) Form of Insured Insurability Rider
1.(5)(g) Form of Other Insured Term Rider
1.(6)(a)(i) Certificate of Incorporation of the Columbus Life Insurance Company
1.(6)(a)(ii) Certificate of Amendment of Articles of Incorporation of Columbus Life Insurance
Company
1.(6)(b) Code of Regulations of the Columbus Life Insurance Company filed herewith
1.(8)(a) Participation Agreement by and among AIM Variable
Insurance Funds, Inc., Columbus Life Insurance Company, on
behalf of itself and its separate accounts, and Touchstone
Securities, Inc.
1.(8)(b) Agreement with respect to Trademarks and Fund Names between AIM Management Group
Inc. and Columbus Life Insurance Company
1.(8)(c) Administrative Services Agreement between Columbus Life Insurance Company and AIM
Advisors, Inc.
1.(8)(d) Participation Agreement by and among The Alger American
Fund, Columbus Life Insurance Company on its own behalf
and on behalf of its Separate Account 1 and Fred Alger &
Company
1.(8)(e) Service Agreement between Fred Alger Management, Inc. and Columbus Life Insurance
Company
1.(8)(f) Participation Agreement among MFS Variable Insurance Trust, Columbus Life Insurance
Company and Massachusetts Financial Services Company
1.(8)(g) Participation Agreement among Columbus Life Insurance Company, PIMCO Variable
Insurance Trust, and PIMCO Funds Distributors LLC
1.(8)(h) Services Agreement between Pacific Investment Management Company and Columbus Life
Insurance Company
1.(8)(i) Form of Fund Participation Agreement between Columbus Life Insurance Company and
Touchstone Variable Series Trust
1.(10)(a) Form of Columbus Life Insurance Company Application for Life Insurance
1.(10)(b) Form of Columbus Life Insurance Company Supplement to Application for Life
Insurance to be Completed When Applying for Flexible Premium Variable Universal Life
1.(11) Description of Issuance, Transfer and Redemption Procedures and Method of Conversion
to Fixed Benefit Policies for Columbus Life Flexible Premium Variable Universal Life
Insurance Policies Offered by Columbus Life Insurance Company Separate Account 1 of
Columbus Life Insurance Company
2 Opinion and Consent of Counsel
99.(1) Actuarial Opinion and Consent
99.(2) Consent of PricewaterhouseCoopers LLP
</TABLE>
DISTRIBUTOR AGREEMENT
(Columbus Life Flexible Premium Variable Universal Life Insurance Contracts)
This Agreement is made as of the 15th day of July, 1999 by and between
Columbus Life Insurance Company, an insurance company organized and existing
under the laws of the State of Ohio (the "Company") and Touchstone Securities,
Inc., a Nebraska corporation (the "Distributor") and its undersigned affiliated
insurance agencies (the "Agencies").
WHEREAS, the Company and its Separate Account 1 (the "Separate
Account"), which is a separate investment account registered as a unit
investment trust under the Investment Company Act of 1940 (the "1940 Act"),
propose to offer for sale certain flexible premium variable universal life
insurance contracts, together with certificates under group contracts and any
riders (hereafter, the "Contracts"), interests under which may be deemed to be
securities under the Securities Act of 1933 (the "1933 Act") and the laws of
some states; and
WHEREAS, the Separate Account and various divisions thereof (the
"Sub-Accounts") will invest in various underlying funds (each a "Fund" and
collectively the "Funds"), each of which will be an open-end diversified
management investment company or a series thereof; and
WHEREAS, the Distributor is registered as a broker-dealer with the
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934 (the "1934 Act") and is a member of the National Association of
Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Agencies are affiliated with the Distributor by common
ownership or contract and are duly licensed insurance agencies under the
applicable insurance laws of one or more of those states in which the Contracts
will be distributed pursuant to this Agreement; and
WHEREAS, certain personnel of the Company or its affiliates may engage,
or may be deemed to be engaged, directly or indirectly, in offering, selling,
advertising or marketing Contracts and confirming transactions as required Rule
10b-10 under the 1934 Act; in the maintenance of records required by Rules 17a-3
and 17a-4 under the 1934 Act or other SEC or NASD rules applicable to registered
broker-dealers; and in the payment of commissions with respect to Contracts; and
WHEREAS, all Company personnel engaged in the activities described in
the foregoing paragraph (and those registered representatives of the Distributor
who shall supervise securities activities related to the Contracts that are
conducted on the premises of financial institutions), as well as all other
persons who Section 3(a)(18) of the 1934 Act defines as associated persons of
the Distributor, will be referred to herein as "Associated Persons," (it being
understood that such term, as used in this Agreement, does not include persons
associated with other broker-dealer firms that are engaged by the Distributor to
offer and sell Contracts);
NOW, THEREFORE, in consideration of the covenants and mutual promises
herein contained, the Distributor and the Company agree as follows:
1
<PAGE>
1. APPOINTMENT OF DISTRIBUTOR. The Distributor will act as the
exclusive general distributor of the Contracts during the term of this Agreement
in each state or other jurisdiction where the Contracts may legally be sold. The
Distributor shall at all times function as, and be deemed to be, an independent
contractor and will be under no obligation to effectuate any particular amount
of sales of Contracts or to promote or make sales, except to the extent the
Distributor deems advisable. Anything in this Agreement to the contrary
notwithstanding, the Company retains the ultimate right to control the sale of
the Contracts, including the right to suspend sales in any jurisdiction or
jurisdictions, to appoint and discharge agents of the Company, or to refuse to
sell a Contract to any applicant for any reason whatsoever.
2. APPOINTMENT OF DEALERS. The Distributor will use its best efforts to
find purchasers for the Contracts and to promote the distribution of the
Contracts. The Distributor may enter into agreements, in form and substance
satisfactory to the Company, with dealers and other persons selected by the
Distributor ("Selected Dealers"), providing for the sale of Contracts by and
through such Selected Dealers. The Selected Dealers shall not have any authority
to act as agent for the Company, but shall act only as dealers for their own
accounts or as agents for their customers.
3. DISTRIBUTION RESPONSIBILITIES OF THE DISTRIBUTOR. The Distributor
will assume full responsibility for securities law compliance by the Associated
Persons with respect to the offering of the Contracts, including, as applicable,
compliance with the NASD Rules of Fair Practice and Federal and state securities
laws and regulations. The Distributor, directly or through the Company as its
agent, will (a) make timely filings as required by law with the SEC, NASD, and
any other securities regulatory authorities of any sales literature or materials
relating to the Separate Account or the Sub-Accounts, (b) make available to the
Company copies of any agreements or plans intended for use in connection with
the sale of the Contracts in sufficient numbers and in adequate time for
clearance by the appropriate regulatory authorities before they are used, and
(c) train the Associated Persons, use its best efforts to prepare them to
complete satisfactorily any and all applicable NASD and state securities
examinations, register the Associated Persons as its registered representatives
or principals to the extent legally required before they engage in securities
activities, and diligently supervise and control them in the performance of such
activities. The parties will use their best efforts to obtain any required
clearances by regulatory agencies as expeditiously as reasonably possible and
will not use any materials, plan or agreement in any jurisdiction unless all
filings have been made and approvals obtained that are necessary to make said
use proper and legal therein. The Company will be responsible for filing the
Contracts with and obtaining all necessary approvals thereof from state
insurance regulatory authorities.
4. ADMINISTRATIVE FUNCTIONS AND SERVICES. Completed applications for
the Contracts shall be transmitted directly to the Company or its designated
agent for acceptance or rejection in accordance with rules and procedures
established by the Company. Initial and subsequent premium payments under the
Contracts shall be made payable to the Company and shall be delivered to the
Company or its designated agent; any such payments that are received in error by
the Distributor shall be forwarded by the Distributor to the Company or its
designated agent promptly after such receipt. All other administrative functions
and services in connection with the Contracts shall be performed by the Company.
2
<PAGE>
5. APPOINTMENT OF AGENTS; COMPLIANCE WITH STATE INSURANCE LAWS. The
Company shall undertake to appoint as life insurance agents of the Company the
Distributor's qualified principals and representatives (including Associated
Persons where applicable) and, as appropriate upon the request of the
Distributor, those of the Selected Dealers. The Distributor, either itself or
through an affiliated insurance agency, shall comply with all state insurance
licensing requirements applicable to the Distributor in performing this
Agreement, and shall be responsible for ensuring that Associated Persons will
engage in the offer and sale of Contracts only if properly qualified under the
insurance laws of all relevant jurisdictions. Although the Distributor may
assist the Selected Dealers or their representatives or principals in qualifying
under relevant insurance laws to sell Contracts, and will assist the Company in
monitoring such qualification on a periodic basis, the responsibility for
ensuring that all such requirements have been met is that of such Selected
Dealers and not the Distributor. Each of the Agencies joins in the execution
this Agreement for the purpose of acknowledging its obligations to comply with
all state insurance licensing requirements of those states in which such Agency
is licensed that are applicable to the Contracts and the performance of this
Agreement on Distributor's behalf.
6. SUITABILITY. The Distributor will take reasonable steps to ensure
that the 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 the applicant.
7. SALES PRACTICES. The Distributor will use its best efforts to assure
that no person uses any sales aids, promotional material, or sales literature
with respect to Contracts that have not been specifically approved in advance by
the Distributor and the Company. The Company will be responsible for filing such
items, as necessary, with any insurance regulatory authorities and, where
necessary, obtaining approvals of said authorities. Distributor will use its
best efforts to assure that no person, in connection with the offer or sale of
the Contracts, makes any representations regarding the Contracts, the
Sub-Accounts, the Company, shares of the Funds, the Funds, or the Distributor,
which are not either then authorized by the Company and the Distributor or
contained in a then-effective Registration Statement relating to the Separate
Accounts and the offering of the Contracts (the "Registration Statement").
8. COSTS AND EXPENSES. Except as set forth below or otherwise
specifically set forth herein, or except as may otherwise be agreed between the
parties from time to time, each party to this Agreement shall bear all costs and
expenses of providing the services and performing the functions that it
undertakes to provide or perform hereunder.
(a) As between the Company and the Distributor, the Company will
bear and/or reimburse the Distributor for the cost of all direct
services and expenses (but not any part of the Distributor's general
overhead) and all fees, including registration and filing fees,
required or incurred in connection with (i) registering and qualifying
the Separate Account and the Contracts with Federal and state
regulatory authorities, (ii) preparing, typesetting, printing, filing
and distributing registration statements, prospectuses and statements
of additional information (including amendments to any of the
foregoing) pertaining to the Separate Account and the Contracts
(except the cost thereof relating to those prospectuses and statements
of additional information distributed to prospective investors, which
will be borne by the Distributor), (iii) preparing, typesetting,
printing, filing and distributing
3
<PAGE>
Contract forms, (iv) preparing, typesetting, printing, filing and
distributing to Contract owners confirmations, periodic statements of
account, and periodic reports of the Separate Account and the various
Sub-Accounts to Contract owners, (v) audit and accounting expenses
pertaining to the Company and audit and financial statement
preparation expenses pertaining to the Separate Account and the
Sub-Accounts, (vi) preparation of and filing Forms N-SAR for the
Separate Account, (vii) preparation of and filing required insurance
regulatory reports for the Separate Account and the Company, (viii)
general advice, including the fees and expenses of legal counsel,
concerning the Separate Account and the Contracts, and (ix)
registering and qualifying those Associated Persons who are employees
of the Company or its affiliates with state insurance regulatory
authorities (including the training of Associated Persons for this
purpose).
(b) As between the Company and the Distributor, the Distributor
will bear and/or reimburse the Company for the cost of all direct
services and expenses (but not any part of the Company's general
overhead) and all fees, including registration and filing fees,
required or incurred in connection with (i) registering and qualifying
the Associated Persons with Federal and state securities regulatory
authorities, including the NASD (including the training of Associated
Persons for this purpose), (ii) preparing, typesetting, filing with
insurance and securities regulatory authorities, printing and
disseminating sales literature (including prospectuses and statements
of additional information distributed to prospective investors) and
advertising in connection with the Contracts or in connection with the
shares of the Funds purchased by the Separate Account through its
Sub-Accounts, and (iii) costs of computer processing that may be
necessary for the Distributor to perform its responsibilities
hereunder.
(c) In connection with the sale of the Contracts, Distributor
will pay all amounts (including sales commissions and overrides at
rates established by Distributor) becoming payable to the Selected
Dealers or their sales representatives, to the Associated Persons or
to any other broker-dealers who have entered into sales agreements
with the Distributor, provided that appropriate records of all
commission payments shall be maintained by the Company or its agent.
The agreements with the Selected Dealers and any such agreement with
another broker-dealer shall be subject to the Company's approval as to
form and substance.
9. RECORDS AND CONFIRMATIONS. The Distributor, directly or through the
Company as its agent, will (i) maintain and preserve in accordance with Rules
17a-3 and 17a-4 under the 1934 Act all books and records required to be
maintained in connection with the offer and sale of the Contracts being
distributed pursuant to this Agreement, which books and records shall remain the
property of the Distributor and shall be subject to inspection by the SEC in
accordance with Section 17(a) of the 1934 Act and (ii) upon or prior to the
completion of each Contract transaction for which a confirmation is legally
required, send a written confirmation for each such transaction reflecting the
facts of the transaction. All records maintained hereunder by the Company as the
Distributor's agent will be promptly surrendered by the Company at the request
of the Distributor and will be available at any time during business hours to
properly-constituted governmental authorities and furnished to them in true,
correct and current hard copy form, should the same be required by said
authorities.
4
<PAGE>
The Company or the Distributor (but at the Company's expense), will
maintain and preserve all records in connection with the Contracts and the
Separate Account in accordance with Rules 31a-1 and 31a-2 under the 1940 Act. To
the extent maintained and preserved by the Distributor, such records shall be
the property of the Company and shall be returned to the Company upon request.
10. SECURITIES LAW REGISTRATION. The Distributor will execute such
papers and do such acts and things as shall from time to time be reasonably
requested by the Company for the purpose of (i) maintaining the registration of
the Contracts under the 1933 Act and the registration of the Separate Account
under the 1940 Act and (ii) qualifying and maintaining the qualification of the
Contracts for sale under the applicable laws of any state.
Each party hereto shall advise the other promptly of (i) any action of
the SEC or any authorities of any state or territory, of which it has knowledge,
affecting the registration or qualification of the Separate Account or of the
Contracts or the right to offer the Contracts for sale or (ii) the happening of
any event which makes untrue any statement, or which requires the making of any
change in, any registration statement or any current prospectus or statement of
additional information, in order to make the statements therein not materially
misleading.
11. COMPENSATION. As compensation to the Distributor for assuming the
expenses and performing the distribution services to be assumed and performed by
it pursuant to this Agreement, the Distributor will receive from the Company
such amounts and at such times as are set forth in Schedule A to this Agreement
(as the same may from time to time be amended by agreement between the parties
hereto). To the extent that applicable state insurance laws require that
compensation due on account of the sale of Contracts be paid only to duly
licensed insurance agents, the Distributor agrees that any such compensation
received from the Company by the Distributor will be processed by the
Distributor on behalf of its affiliated insurance agency. In this event, such
compensation will be reported by the Distributor for purposes of satisfying
securities regulatory requirements and by its affiliated insurance agency for
purposes of satisfying state insurance regulatory requirements.
The Company will receive all amounts charged as "surrender charges" in
connection with the Contracts, and all other amounts assessed as Contract
charges.
12. COOPERATION. The Distributor and the Company agree to cooperate
with each other fully in any insurance regulatory examination, investigation, or
proceeding or any judicial proceeding arising in connection with the Contracts.
The Distributor and the Company further agree to cooperate fully with each other
in any securities regulatory examination, investigation or proceeding or any
judicial proceeding with respect to the Company, the Distributor, their
respective affiliates, agents or representatives (including all Associated
Persons), and the Selected Dealers, to the extent that such examination,
investigation or proceeding is in connection with Contracts distributed under
this Agreement. The Distributor shall furnish applicable Federal and state
regulatory authorities with any information or reports in connection with its
services under this Agreement which such authorities may request in order to
ascertain whether the Company's operations are being conducted in a manner
consistent with any applicable law or regulations.
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<PAGE>
13. INDEMNIFICATION.
(a) The Distributor shall indemnify and hold harmless the
Separate Account, the Company and each of its directors and officers,
and each person who controls the Company against any loss, liability,
claim, damage, or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damage
or expense and reasonable counsel fees incurred in connection
therewith) (i) arising by reason of any person's acquiring any
Contract or interest thereunder, which may be based upon the ground
that any Registration Statement related to the Contracts or the
Separate Account or the prospectus or statement of additional
information contained therein, as from time to time amended or
supplemented, or any annual or interim reports of the Company or the
Separate Account to Contract owners, include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not
misleading, but only to the extent that such statement or omission was
made in reliance upon, and in conformity with, information furnished
to the Company in writing in connection therewith by or on behalf of
the Distributor or (ii) otherwise arising out of the Distributor's
negligence, bad faith, willful misfeasance or reckless disregard of
its responsibilities hereunder.
(b) The Company shall indemnify and hold harmless the
Distributor, its agents and employees, and each person, if any, who
controls the Distributor against any loss, liability, claim, damage,
or expense described in subparagraph (a), above, except as to
statements (or omissions) made (or not made) in reliance upon, and
conformity with, information furnished to the Company in writing by or
on behalf of the Distributor for use in connection with (i) the
Registration Statement related to the Contracts or the Separate
Account or the prospectus or statement of additional information
contained therein, as the same may be from time to time amended and
supplemented, or (ii) any annual or interim reports to Contract
owners; provided, however, that in no case is the indemnity of the
Company in favor of the Distributor and any such controlling persons
to be deemed to protect the Distributor or any such controlling
persons against any liability to the Company or its Contract owners to
which the Distributor or any such controlling person would otherwise
be subject by reason or willful misfeasance, bad faith or negligence
in the performance of their duties or by reason of reckless disregard
of their obligations and duties under this agreement.
(c) No person from whom indemnity may be sought under this
Section 13 ("Indemnitor") shall be liable to indemnify or hold
harmless any person ("Indemnitee") pursuant to this Section 13, unless
the Indemnitee shall have notified the Indemnitor in writing of the
nature of the claim as to which indemnity is being sought hereunder
within a reasonable time after the Indemnitee shall have been served
with a summons or other first legal process giving notice thereof (or
shall have received notice of such service on any designated agent),
which notice to the Indemnitor shall give information as to the nature
of the claim for which indemnity is sought hereunder. The failure of
the Indemnitee to notify the Indemnitor of any such claim shall not
relieve it from any liability which it may have to the Indemnitee
otherwise than on account of its indemnity agreement contained in this
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<PAGE>
Section 13. The Indemnitor will be entitled to participate at its
own expense in the defense, or, if it so elects, to assume the defense
of any suit brought to enforce any such claim, but if the Indemnitor
elects to assume the defense, such defense shall be conducted by
counsel chosen by it that is reasonably satisfactory to the
Indemnitee. If the Indemnitor elects to assume the defense of any such
suit and retain such counsel in accordance herewith, the Indemnitee
shall bear the fees and expenses of any additional counsel retained by
it. If the Indemnitor does not elect to assume the defense of any such
suit, it will reimburse the Indemnitee for the reasonable fees and
expenses of any counsel retained by the Indemnitee that is reasonably
satisfactory to the Indemnitor.
14. MISCELLANEOUS.
(a) This Agreement shall become effective as of July 15, 1999 and
shall continue in full force and effect until terminated. It may be
terminated at any time without penalty on six months' prior written
notice by either party to the other.
(b) This Agreement may be amended only by the written agreement
of the parties hereto.
(c) The Distributor will not assign or delegate its
responsibilities under this Agreement, except with the consent of the
Company.
(d) This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
(e) The Distributor shall keep confidential any information
obtained pursuant to this Agreement and shall disclose such
information only if the Company has authorized such disclosure, or if
such disclosure is expressly required by Federal or state authorities
having jurisdiction.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COLUMBUS LIFE INSURANCE COMPANY TOUCHSTONE SECURITIES, INC.
By: _________________________________ By: __________________________________
Name: _________________________________ Name: ________________________________
Title: ________________________________ Title: _______________________________
And, its affiliated insurance agencies:
IFS INSURANCE AGENCY, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
IFS AGENCY SERVICES, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
IFS AGENCY, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
666765.01
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<PAGE>
SCHEDULE A
COMMISSION SCHEDULE
COLUMBUS LIFE INSURANCE COMPANY SEPARATE ACCOUNT 1
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
9
FORM OF GENERAL AGENCY AGREEMENT
THIS GENERAL AGENCY AGREEMENT ("Agreement") is made and entered into by and
between TOUCHSTONE SECURITIES, INC., a Nebraska corporation, and its undersigned
affiliated insurance agency (herein jointly and severally referred to as
"Touchstone"); the undersigned Broker-Dealer (herein separately referred to as
"Broker-Dealer"); and the undersigned Life Agency (herein separately referred to
as "Life Agency"). Broker-Dealer and Life Agency are herein jointly and
severally referred to as "General Agent."
THIS AGREEMENT sets forth the terms and conditions under which the parties
agree that Touchstone, having been authorized under a separate Distributor
Agreement with Columbus Life Insurance Company ("Company") to obtain and appoint
agents of Company, shall appoint General Agent as a general agent of Company to
solicit for and sell certain variable contracts (the "Contracts") which are
described on the Commission Schedule attached hereto, as the same may be amended
from time to time pursuant to this Agreement.
THE TERM of this Agreement shall commence on the date this Agreement, having
been signed by General Agent, is accepted and executed by Touchstone at its home
office, and shall continue in force until terminated as herein provided.
THIS AGREEMENT includes the attached Terms and Conditions, the attached
Commission Schedule (as amended from time to time), and all other schedules,
exhibits or addenda referencing this Agreement and now or hereafter appended
hereto by Touchstone, all of which are incorporated herein by reference. The
parties agree that this Agreement constitutes the complete and exclusive
statement of the terms and conditions between the parties covering the
performance hereof and cannot be amended, altered or modified except in the
manner provided for in the Terms and Conditions.
All terms and conditions of this Agreement are hereby agreed to by:
<TABLE>
<CAPTION>
GENERAL AGENT: TOUCHSTONE:
Broker-Dealer
<S> <C>
____________________________________________ Touchstone Securities, Inc.
By:_________________________________________ By:_________________________________________
Name and Title:_____________________________ Name and Title:_____________________________
By:_________________________________________ By:_________________________________________
Name and Title:_____________________________ Name and Title:_____________________________
And Life Agency: And, its affiliated insurance agency:
____________________________________________
By:_________________________________________ By:_________________________________________
Name and Title:_____________________________ Name and Title:_____________________________
By:_________________________________________ By:_________________________________________
Name and Title:_____________________________ Name and Title:_____________________________
Date:_______________________________________ Date Accepted:______________________________
FORM 7128-9801
</TABLE>
<PAGE>
1
<TABLE>
<CAPTION>
<S> <C> <C> <C>
General Agent Summary
__________________________________________________________________________________________________________
General Agent Name Tax ID Number
__________________________________________________________________________________________________________
General Agent Corporate Address
Number and Street:________________________________________________________________________________________
__________________________________________________________________________________________________________
City:__________________________________State:_____________Zip:________________Telephone:()________________
FAX:()____________________
Individual responsible for insurance and annuity sales (Product Manager)
Name:___________________________________________________________Telephone:()______________________________
Administrative key contact
Name:___________________________________________________________Telephone:()______________________________
Licensing contact &phone
Name:___________________________________________________________Telephone:()______________________________
Commission Checks to be mailed to:
Name:___________________________________________________Address:__________________________________________
City:__________________________________State:_____________Zip:________________Telephone:()________________
Number of Agents Number of branch offices
__________________________________________________________________________________________________________
Send Agent copies of confirms and statements to:
[ ] Individual Agent at branch location
(If selected,branch/agent list must be returned with this document.)
[ ] Corporate address as follows:
Street:_____________________________________________
City:_______________________________________________
State:_________________Zip:_________________________
PLEASE RETURN A COPY OF THE FIRM 'S CRD STATUS REPORT WITH THIS DOCUMENT AND
APPLICABLE STATE INSURANCE LICENSES
Send Customer Contracts to:
[ ] Agent
[ ] Customer
Please return to:
Touchstone Securities,Inc.P.O.Box 1275 Cincinnati,Ohio 45201-1275
FORM 7128-9801
2
</TABLE>
<PAGE>
TERMS AND CONDITIONS OF
GENERAL AGENCY AGREEMENT
1. APPOINTMENT. General Agent is hereby appointed, through its
licensed and appointed individual agents, to solicit and procure
applications for the sale of Contracts on behalf of Company in
those states where General Agent is duly licensed to do so
and in those states where Company is authorized to sell such
Contracts. General Agent shall have no exclusive territory for
the sale of the Contracts. Touchstone shall inform General Agent
of those jurisdictions in which the Contracts may be lawfully
sold. Broker-Dealer warrants and represents that, at all times
while this Agreement is in force, it is and will remain registered
as a broker-dealer with the Securities and Exchange Commission
(the "SEC") and a member of the National Association of Securities
Dealers, Inc. (the "NASD"). Life Agency warrants and represents
that, at all times while this Agreement is in force, it is and
will remain licensed as a life insurance agency under the
insurance laws of the various states in which it operates and
Contracts are sold under authority of this Agreement.
2. AUTHORITY TO SOLICIT AND SELL. General Agent shall have the
authority, pursuant to the rules and regulations of Company and
Touchstone, to solicit sales of the Contracts, obtain completed
applications therefor and accept premiums paid thereon. All
applications for the Contracts shall be on forms duly authorized
by Company in accordance with the insurance laws and regulations
of the various states in which such Contracts are sold. All such
applications and the full amount, without setoff, demand or
deduction, of all premiums shall be promptly remitted to Company
in accordance with the rules and regulations of Touchstone and
Company applicable to such transactions.
No solicitation for a Contract shall be made by any person
associated with General Agent unless and until such person has
been duly appointed as an agent of Company in accordance with
applicable insurance laws and regulations. General Agent is not
authorized to solicit for the sale of the Contracts in any
jurisdiction where such product is not duly authorized to be sold.
3. AUTHORITY TO RECOMMEND APPOINTMENT OF AGENTS. General Agent is
authorized to recommend to Touchstone those persons associated
with General Agent who are to be appointed as agents of Company
and who are to be authorized to solicit for the sale of the
Contracts in accordance herewith. General Agent agrees to fulfill
all requirements set forth in the General Letter of Recommendation
attached as Schedule A hereto in conjunction with its submission
of licensing and appointment papers for all proposed agents.
Company shall have absolute discretion to accept or reject such
recommendation for the appointment of any such person as an agent
for the sale of the Contracts. Company shall also have the
absolute right to terminate any such person as an agent of
Company. Before any such person approved for appointment as an
5
<PAGE>
agent is permitted to sell the Contracts, such agent, Broker-
Dealer and Life Agency shall have entered into a written agreement
pursuant to which: (i) the agent is appointed as an agent of Life
Agency and a registered representative of Broker-Dealer; (ii) said
agent agrees that his or her selling activities relating to the
Contracts shall be under the supervision and the control of
General Agent; and (iii) that said agent's right to continue to
sell such Contracts is subject to his or her continued compliance
with such agreement and any procedures, rules or regulations
implemented by General Agent.
4. RESPONSIBILITIES OF AGENT. In addition to the responsibilities set
forth in Paragraphs 2 and 3 above, General Agent shall:
(a) make reasonable efforts to maintain the Contracts in force
and provide reasonable assistance to owners of the
Contracts,
(b) be governed strictly by all rules and instructions of
Company and Touchstone and observe and comply with all
applicable insurance laws and regulations,
(c) train and supervise its agents to insure that purchase of
a Contract is not recommended to an applicant in the
absence of reasonable grounds to believe that the purchase
of the Contract is suitable for that applicant. While not
limited to the following, a determination of suitability
shall be based on information furnished to an agent after
reasonable inquiry of such applicant concerning the
applicant's insurance and investment objectives, other
security holdings, financial situation and needs, and the
likelihood that the applicant will continue to make any
premium payments contemplated by the Contracts and will
keep the Contract in force for a sufficient period of time
so that Company's acquisition costs are amortized over a
reasonable period of time,
(d) insure that any offer of a Contract made by a sales agent
of General Agent will be made only by means of a currently
effective prospectus,
(e) keep such records in such form as may be reasonably
required by Company and Touchstone and/or as required
under applicable laws and regulations. Such records and
forms and all supplies furnished to the General Agent by
Company shall remain the property of Company and shall be
subject to examination and/or possession at any time by
Company or its authorized representatives,
(f) pay expenses incurred in the performance of this
Agreement,
(g) deliver Contracts immediately, and
(h) promptly notify Touchstone and Company in writing of any
customer complaint or notice of regulatory investigation
related to the Contracts, Broker-Dealer, Life Agency, or
any activities contemplated by this Agreement, of which
General Agent becomes aware.
6
<PAGE>
5. LIMITATIONS OF AUTHORITY. The authority granted to General Agent
does not permit it or any of its sales agents to:
(a) make, alter or discharge any contract to which Company or
Touchstone is a party,
(b) waive or modify any terms, rates, conditions or
limitations of any Contract,
(c) adjust or settle any claim unless specifically directed by
Company or to admit liability on any claim unless
authorized to do so in writing by Company,
(d) enter into any legal proceedings pertaining to Company's
or Touchstone's business without prior written consent.
Company or Touchstone shall not be responsible for any
expenses incurred as a result of these proceedings.
(e) exercise any authority on behalf of Touchstone or Company
other than as authorized by this Agreement,
(f) attempt to bind Touchstone or Company by any promise or
agreement,
(g) incur any debt, expense, or liability in Company's or
Touchstone's name or account without prior written
consent,
(h) pay or allow or offer to pay or allow as an inducement to
any person to purchase, any rebate of premium or
consideration or any inducement not specified in the
Contract,
(i) allow a writing agent to sign an application for a
Contract, as the writing agent, unless such application
was personally taken by such agent in the presence of the
applicant, or
(j) engage in any activity prohibited by federal or state laws
regulating financial institutions.
6. TRAINING, COMPLIANCE AND LICENSING. General Agent shall be
responsible for the training and supervision of all persons
appointed as agents hereunder. General Agent and all persons
associated with General Agent shall, in the solicitation and sale
of the Contracts, comply with all written procedures, rules and
regulations of Touchstone or Company applicable thereto. General
Agent and all persons associated with General Agent shall use only
those sales, advertising and promotional materials which have been
approved in writing by Touchstone.
7
<PAGE>
General Agent shall have the responsibility for compliance with
all laws, rules and regulations applicable to the solicitation and
sale of the Contracts by General Agent and by all persons
associated with General Agent.
General Agent, its affiliates, its officers, directors, employees,
and sales personnel, shall obtain and maintain all licenses,
registrations, and appointments required by any law, regulations,
or other requirement of the SEC, the NASD, or of any jurisdiction
where the Contracts are to be sold. General Agent shall
immediately notify Touchstone if any sales persons associated with
it cease to be registered representatives of Broker-Dealer or if
General Agent is disqualified for continued membership with the
NASD or registration with the SEC.
7. COMPENSATION. General Agent shall receive commissions on premiums
on Contracts issued as a result of applications obtained by it and
accepted by Company. Commissions payable hereunder are specified
in the Commission Schedule which is attached hereto and
incorporated herein by reference. Such Commission Schedule may be
amended or modified at any time by Touchstone with prior written
notice. Any such amendment or modification shall apply only to
applications for Contracts which are obtained by General Agent
after the date of such modification or amendment. All compensation
due to General Agent and its sales persons under this Agreement
shall be paid to Broker-Dealer on behalf of General Agent
(assuming Broker-Dealer and Life Agency are separate persons), or
as otherwise required by law. As between Broker-Dealer and Life
Agency, Life Agency hereby appoints Broker-Dealer as its agent on
its behalf to receive and process commission payments that are
required by applicable law to be paid to Life Agency.
Notwithstanding the foregoing, Broker-Dealer agrees to account for
all commissions paid under this Agreement from the sale of
Contracts in accordance with the applicable reporting requirements
of the SEC and the NASD.
If Company, for any reason, refunds any premium or part of a
premium on any Contract, any commissions paid the General Agent on
such premiums that are to be refunded under the Schedule of
Commissions shall at Touchstone's option be immediately repaid to
Touchstone or, at the option of Touchstone, be deducted from any
compensation payable to the General Agent.
General Agent covenants that all necessary contractual
arrangements shall be in place to allow Touchstone to pay General
Agent for business produced by sales persons associated with
General Agent in the jurisdictions in which they hold licenses.
General Agent agrees to pay all compensation, if any, due to any
person, including sales persons associated with the General Agent,
with respect to business produced pursuant to this Agreement.
8
<PAGE>
The payment of compensation shall always be subject to the General
Agent and/or its sales persons being properly licensed in the
designated territory.
8. FIDELITY BOND AND OTHER LIABILITY COVERAGE. General Agent
represents that all directors, officers, agents, employees and
associated persons who are licensed pursuant to this Agreement as
Company Agents for state insurance law purposes or who have access
to funds of Company, including but not limited to, funds submitted
with applications for the Contracts are and shall be covered by a
blanket fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond
shall be maintained by General Agent at its expense. Such bond
shall be, at a minimum, of the form, type and amount required
under NASD rules, endorsed (if necessary) to extend coverage to
transactions relating to the Contracts. Touchstone may require
evidence satisfactory to it, that such coverage is in force and
General Agent shall give prompt written notice to Touchstone of
any notice of cancellation of the bond or change of coverage.
General Agent hereby assigns any proceeds received from a fidelity
bonding company, error and omissions or other liability coverage,
to Touchstone or Company as their interest may appear, to the
extent of their loss due to activities covered by the bond, policy
or other liability coverage. If there is any deficiency amount,
whether due to a deductible or otherwise, General Agent shall
promptly pay such amounts on demand. This paragraph shall not be
construed to limit the indemnification provided in Section 9
hereof.
9. INDEMNIFICATION. General Agent shall indemnify and hold Touchstone
and Company harmless from any liability arising from any act or
omission of General Agent or of any officer, director, employee of
General Agent or of sales persons associated with General Agent.
General Agent shall indemnify and hold Touchstone and Company
harmless from any claim by a sales person associated with General
Agent for compensation due or to become due on account of such
person's sale of Contracts. General Agent expressly authorizes
Touchstone to charge against all compensation due or to become due
to General Agent under this Agreement any monies paid or
liabilities incurred by Touchstone or Company under this Section
9.
Touchstone shall indemnify and hold General Agent harmless from
any liability resulting from damages sustained by a Contract owner
caused by acts or omissions of Touchstone; except to the extent
General Agent's acts or omissions caused such liability.
Indemnification by Touchstone is subject to the conditions that
General Agent promptly notify Touchstone of any claim or suit made
against General Agent, and that General Agent allow Touchstone to
make such investigation, settlement, or defense thereof as
Touchstone deems prudent.
9
<PAGE>
10. ENTIRE AGREEMENT. This Agreement is the complete and exclusive
statement of the agreement between the parties as to the subject
matter hereof which supersedes all proposals or agreements, oral
or written, and all other communications or letters of intent
between the parties related to the subject matter of this
Agreement.
11. MODIFICATION OF AGREEMENT. This Agreement can only be modified by
a written agreement duly signed by the persons authorized to sign
agreements on behalf of the parties. Variance from the terms or
conditions of this Agreement or any order or other written
notification will be of no effect.
12. SEPARABILITY OF PROVISIONS. If any provision or provisions of this
Agreement shall be held to be invalid, illegal, or unenforceable,
the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or be impaired
thereby.
13. ASSIGNMENT. This Agreement and the rights, duties, and obligations
of the parties hereto shall not be assignable by either party
hereto without the prior written consent of the other, and any
purported assignment shall be void.
14. WAIVER. No waiver by either party of any default by the other in
the performance of any promise, term, or condition of this
Agreement shall be construed to be a waiver by such party of any
other or subsequent default in performance of the same or any
other covenant, promise, term, or condition hereof. No prior
transactions or dealings between the parties shall be deemed to
establish any custom or usage waiving or modifying any provision
hereof.
15. NOTIFICATION OF CLAIMS, DEMANDS, OR ACTIONS. Each party hereto
shall promptly notify the other in writing of any claims, demands,
or actions having any bearing on this Agreement.
. PERFORMANCE IN ACCORDANCE WITH LAW. Each party agrees to perform
its obligations hereunder in accordance with all applicable laws,
rules, and regulations now or hereafter in effect. Notwithstanding
the imposition of liabilities and obligations on the Broker-Dealer
and Life Agency acting together as General Agent under this
Agreement (if Broker-Dealer and Life Agency are separate persons),
nothing herein contained shall be construed to relieve
Broker-Dealer of any of its responsibilities or obligations to
comply with all applicable federal and state securities laws and
regulations in its performance of this Agreement; nor shall
anything herein contained be construed to relieve Life Agency of
its responsibilities or obligations to comply with all applicable
state insurance laws and regulations in its performance of
this Agreement.
17. BINDING AGREEMENT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, their successors, and
permitted assigns.
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<PAGE>
18. ACTS BEYOND THE CONTROL OF THE PARTIES. No liability shall result
to either party, nor shall either party be deemed to be in default
hereunder, as a result of delay in its performance or from its
non-performance hereunder caused by circumstances beyond its
control, including but not limited to: act of God, act of war,
riot, epidemic, fire, flood, or other disaster, or act of
government. Nevertheless, the party shall be required to be
diligent in attempting to remove such cause or causes.
19. RELATIONSHIP OF THE PARTIES. Each of the parties will act as an
independent contractor under the terms of this Agreement and
neither is now, or in the future, an agent, or a legal
representative of the other for any purposes. Neither party has
any right or authority to supervise or control the activities of
the other party's employees in connection with the performance of
this Agreement or to assign or create any application of any kind,
express, or implied, on behalf of the other party or to bind it in
any way, to accept any service of process upon it or to receive
any notice of any nature whatsoever on its behalf.
20. TERMINATION. This Agreement shall automatically terminate upon
breach by any party of any terms and conditions hereof, or upon
the dissolution, bankruptcy, or insolvency of any party. This
Agreement may be terminated without cause by any party at any time
upon 30 days prior written notice. Termination shall not affect
General Agent's right to any compensation earned on premiums
received and accepted by Company prior to the effective date of
such termination, nor shall termination affect the obligations set
forth in Paragraph 9.
21. GOVERNING LAW; CONSTRUCTION. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of Ohio.
Whenever the context requires, all words used in the singular
shall be deemed to include the plural and vice versa, and each
gender shall include any other gender.
22. CAPTIONS. Captions contained in this Agreement are for reference
purposes only and do not constitute part of this Agreement.
23. NOTICE. All notices which are required to be given or submitted
pursuant to his Agreement shall be in writing and shall be deemed
given when deposited with the United States Postal Service,
postage prepaid, registered or certified mail, return-receipt
requested, to the last address of record of the party being
notified which is maintained by the other party in the ordinary
course of business.
11
<PAGE>
SCHEDULE A
TO TERMS AND CONDITIONS OF GENERAL
AGENCY AGREEMENT
General Letter of Recommendation: General Agent hereby certifies to Touchstone
and Company that all of the following requirements will be fulfilled in
conjunction with the submission of licensing/appointment papers for all
applicants as agents ("applicant") submitted by General Agent. General Agent
will, upon request, forward proof of compliance with same to Touchstone and
Company in a timely manner.
1. We have made a thorough and diligent inquiry and investigation
relative to each applicant's identity, residence and business
reputation and declare that each applicant is personally known to
us, has been examined by us, is known to be of good moral
character, has a good business reputation, is reliable, is
financially responsible and is worthy of a license. Each
individual is trustworthy, competent, and qualified to act as an
agent for Company, and to hold himself out in good faith to the
general public. We vouch for each applicant.
2. We have on file a B-300, B-301 or U-4 form which was completed by
each applicant. We have fulfilled all the necessary investigative
requirements for the registration of each applicant as a
registered representative through our NASD member firm, and each
applicant is presently registered as an NASD registered
representative.
The above information in our files indicates no fact or condition
which would disqualify the applicant from receiving a license, and
all the findings of all investigative information is favorable.
3. We certify that all educational requirements have been met for the
specific state in which each applicant is requesting a license,
and that all such persons have fulfilled the appropriate
examination, education and training requirements.
4. If the applicant is required to submit his or her picture,
signature, and securities registration in the state in which he or
she is applying for a license, we certify that those items
forwarded to Touchstone and Company are those of the applicant and
the securities registration is a true copy of the original.
5. We hereby warrant that the applicant is not applying for a license
with Company in order to place insurance chiefly or solely on his
or her life or property, lives or property of his or her
relatives, or property or liability of his or her associates.
6. We certify that each applicant will receive close and adequate
supervision, and that we will make inspection when needed of any
or all risks written by these applicants, to the end that the
insurance interest of the public will be properly protected.
12
<PAGE>
7. We will not permit any applicant to transact insurance business as
an agent until duly licensed therefor. No applicants have been
furnished supplies, nor have any applicants been permitted to
write, solicit business or act as an agent in any capacity, and
they will not be so permitted until the certificate of authority
or license applied for is received.
8. We certify that Life Agency, Broker-Dealer and applicant shall
have entered into a written agreement pursuant to which: (i)
applicant is appointed an agent of Life Agency and a registered
representative of Broker-Dealer, (ii) applicant agrees that his or
her selling activities relating to all Contracts shall be under
the supervision and control of General Agent; and (iii) that
applicant's right to continue to sell such Contracts is subject to
his or her continued compliance with such agreement and any
procedures, rules or regulations implemented by General Agent.
13
<PAGE>
TOUCHSTONE PERSONALIZED ASSET
ALLOCATION AGREEMENT
The purpose of this Agreement is to set forth certain arrangements between the
General Agent ("General Agent") signing below and Touchstone Securities, Inc.
("Underwriter"), which relate to the use of ProRep(TM) Software in the purchase
and redemption of units of the Contracts by clients of the General Agent
("Clients").
1. Intended use of ProRep(TM) Software. From time to time the
Underwriter may supply ProRep(TM) Software, brochures and other
materials, including model portfolio mixes and investor
questionnaires, to General Agent to assist General Agent in
formulating an asset allocation program for Clients. Such
materials are designed to be used and evaluated by the General
Agent, as an investment professional, in light of each Client's
individual circumstances, and are not to be relied upon as
investment advice of the Underwriter.
2. Purchase and Redemption of Units. Any purchase or redemption of
Contract units pursuant to the use of ProRep(TM) Software or the
Touchstone Personalized Asset Allocation program shall be
conducted in compliance with the terms and conditions of the
prospectuses for the Contracts then in effect. Any such purchase
or redemption shall be made solely upon the instructions of the
General Agent or the Client. Neither the Company nor the
Underwriter have any investment authority over any Client's
account.
3. Representations and Warranties by the General Agent. The General
Agent hereby represents and warrants that: (a) it is a registered
broker dealer under the Securities Exchange Act of 1934 and is
registered in any state in which it is required to be so
registered, and that it shall comply with all applicable federal
and state laws in conducting its activities, including rules,
regulations and interpretations by governmental and regulatory
bodies and self-regulatory organizations having jurisdiction; and
(b) it is a registered investment advisor under the Investment
Advisers Act of 1940 and is registered in any state in which it
is required to be so registered, and that it shall comply with
all applicable federal and state laws in conducting its
activities, including rules, regulations and interpretations by
governmental and regulatory bodies and self-regulatory
organizations having jurisdiction.
4. Promotional Materials. The General Agent shall provide the
Underwriter with a copy of any agreements or materials referring
to the Contracts and prepared by the General Agent. All
promotional materials making reference to the Contracts are
subject to approval by the Company or Underwriter before
distribution. Notwithstanding the foregoing, neither the Company
nor the Underwriter are responsible for the content of any
materials prepared by any General Agent.
14
<PAGE>
5. Indemnification. The General Agent shall indemnify and hold
harmless the Company, Underwriter and Transfer Agent against any
loss, cost or expense (including legal fees) arising out of the
purchase or redemption of Contract units for Client Accounts or
the transfer or disbursement of Client assets in accordance with
the instructions of the General Agent.
The parties hereto have entered into this Agreement on
Date ___________________, 19______
GENERAL AGENT:
_______________________________ (Name of Broker/Dealer)
_______________________________ (Name of Registered Investment
Advisor, if applicable)
_______________________________ By (Signature)
_______________________________ (Print Name and Title)
TOUCHSTONE SECURITIES, INC.
______________________________ By (Signature)
15
<PAGE>
LIFE INSURANCE POLICY
COVERAGE PROVIDED BY THIS POLICY. We agree to pay the Death Benefit to the
Beneficiary when We receive proof of the death of the Insured while this policy
is in effect, subject to the terms of this policy. The Death Benefit is
explained in the Death Benefit Provisions section.
The amount or the duration of the Death Benefit may be fixed or may increase or
decrease depending upon the investment results of the Sub-Accounts You select,
and upon the Death Benefit Option selected. The Account Value may increase or
decrease without limit depending upon the investment results of the Sub-Accounts
You select. There is no minimum guaranteed Account Value for amounts You
allocate to the Sub-Accounts.
Premiums are payable on this policy until the day before the policy anniversary
on which the Insured is age 100. If the policy is still in effect at that time,
the insurance coverage provided by this policy will continue until the death of
the Insured, as explained in the Extended Maturity Benefit Provisions section,
with no further premium payments.
TEN-DAY RIGHT TO EXAMINE THE POLICY (FREE LOOK PERIOD). Please read Your policy
carefully. If You are not satisfied with it, You may return it to Us within 10
days after You receive it. Mail or deliver the policy to Us at Our Home Office
(P.O. Box 5737, Cincinnati, Ohio 45201-5737) or to the agent through whom You
purchased it. The policy will be deemed void as though it had never been applied
for. We will refund to You an amount equal to the sum of (1) the difference
between any premiums You have paid, including fees and charges, and the amounts
allocated to the Variable Account, (2) the Variable Account Value on the date
Your cancellation request is received by Us or the agent through whom You
purchased this policy, and (3) any fees or charges imposed on amounts allocated
to the Variable Account.
This policy is a legal contract between You, as Owner,
and Columbus Life Insurance Company.
Signed for Columbus Life Insurance Company at Cincinnati, Ohio.
PLEASE READ YOUR POLICY CAREFULLY
Flexible Premium Variable Universal Life Policy
Flexible Premiums Payable During Life of Insured to Age 100
Death Benefit Payable at Death of Insured
Period of Coverage Not Guaranteed
Non-Participating
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
POLICY SCHEDULE 3 POLICY VALUES 16
DEFINITIONS 4 Account Value
THIS POLICY IS A CONTRACT 7 Cash Surrender Value 16
OWNERSHIP PROVISIONS 7 Net Cash Surrender Value 16
Owner, Contingent Owner Withdrawal or Partial Surrender 16
and Joint Owner 7 LOAN PROVISIONS 17
BENEFICIARY PROVISIONS 8 Right to Borrow and
Primary Beneficiary and Maximum Loan 17
Contingent Beneficiary 8 Loan Account 17
DEATH BENEFIT PROVISIONS 8 Loan Interest 17
Death Benefit 8 Policy Termination 17
Death Benefit Options 8 Repaying Loans 17
Specified Amount and Death POLICY COSTS AND CHARGES 18
Benefit Option Changes 9 Premium Expense Charges 18
PREMIUM PAYMENT PROVISIONS 10 Tax Charges 18
Payment of Premiums 10 Cost of Insurance Charges 18
Planned Premiums 10 Monthly Deduction and
Grace Period and Termination Monthly Expense Charge 18
of Coverage 11 Mortality and Expense
REINSTATEMENT 11 Risk Charge 18
GUARANTEES OF CONTINUED COVERAGE 11 Surrender Charges 19
Minimum Annual Premiums 11 PAYMENT OF PROCEEDS 19
Minimum Annual Premiums 11 Policy Proceeds 19
Term No-Lapse Guarantee 11 How We Pay 19
Lifetime No-Lapse Guarantee 12 How to Claim Death Proceeds 19
EXTENDED MATURITY BENEFIT PROVISIONS 12 Calculation of Death Proceeds 20
VARIABLE ACCOUNT PROVISIONS 13 CHOOSING AN INCOME PLAN 20
Separate Account 13 The Income Plans 20
Sub-Accounts 13 GENERAL PROVISIONS 23
Variable Account 13 Annual Report 23
Valuation Date and Projection of Benefits
Valuation Period 13 and Values 23
Accumulation Unit 13 Ownership and Insulation
Net Investment Factor 13 of Assets 23
Crediting and Deduction of Reliance 23
Accumulation Units 14 Limits on Our Contesting
Addition, Deletion or This Policy 23
Substitution of Investments 14 Conversion to a Fixed Policy 23
FIXED ACCOUNT PROVISIONS 14 Suicide 24
Fixed Account 14 Error in Age or Sex 24
Fixed Account Value 15 Claims of Creditors 24
Interest Rate 15 Assignment 24
ALLOCATION OF PREMIUMS 15 Required Note on
DOLLAR COST AVERAGING 15 Our Computations 24
TRANSFER PROVISIONS 15 Authority to Make
Transfers 15 Agreements 24
Limitation on Transfers Conformity with Laws 25
from the Fixed Account 16 Taxes 25
Termination 25
Notices 25
Nonparticipating 25
</TABLE>
<PAGE>
DEFINITIONS
YOU AND YOUR. In this policy, You and Your refer to the Owner of the policy. In
the application, You and Your refer to the proposed Insured.
WE, OUR AND US. Columbus Life Insurance Company.
ACCOUNT VALUE. The sum of Your interest in the Fixed Account, the Variable
Account and the Loan Account. The Account Value section explains how to
calculate the Account Value.
ACCUMULATION UNIT. An accounting unit of measure that We use to calculate the
Variable Account Value.
AMOUNT AT RISK. The amount by which the Death Benefit plus any Indebtedness
exceeds the Account Value.
ATTAINED AGE. The Age of the Insured on the last anniversary of the Policy Date
or of the date of any increase.
BENEFICIARY OR PRIMARY BENEFICIARY. The person or persons You have named to
receive the Death Benefit when the Insured dies.
CASH SURRENDER VALUE. The Account Value, less any applicable Surrender Charges.
CONTINGENT BENEFICIARY. The person or persons You have named to receive the
Death Benefit if none of the Primary Beneficiaries is living when the Insured
dies.
CONTINGENT OWNER. The person You have named to be the Owner of this policy if
You die before the Insured.
CONTINGENT PAYEE. The person who will receive any amount still due under an
Income Plan when the Payee dies.
COST OF INSURANCE CHARGES. The amount deducted each Monthly Anniversary Day for
insurance coverage under this policy, as described in the Cost of Insurance
Charges section.
FIXED ACCOUNT. An option under this policy which allows You to allocate Your Net
Premiums to Our general account, or to transfer amounts from the Variable
Account to Our general account, in order to earn interest at an effective annual
rate guaranteed to be not less than 3.00%.
GUARANTEED MINIMUM CONTINUATION PERIOD. The period shown on the Policy Schedule
during which We guarantee that this policy will not terminate or begin the Grace
Period, provided certain conditions are met, as described in the Guarantees of
Continued Coverage section.
INDEBTEDNESS. Any policy loan plus any accrued loan interest.
INSURED. The person named on the application on whose life this policy provides
insurance coverage.
LIFETIME NO-LAPSE GUARANTEE. Our guarantee that this policy will never terminate
or begin the Grace Period, provided certain conditions are met, as described in
the Guarantees of Continued Coverage section.
LOAN ACCOUNT. The portion of the Account Value which is collateral for loan
amounts and any interest due which remains unpaid.
MONTHLY ANNIVERSARY DAY. The date each month on which We deduct the Monthly
Deduction and the Monthly Expense Charges. This is generally the same date each
month as the Policy Date, so long as that date falls on a Valuation Date.
MONTHLY DEDUCTION. The amount deducted each Monthly Anniversary Day for the Cost
of Insurance Charges plus the cost of any additional benefits provided under
this policy by rider.
MONTHLY EXPENSE CHARGE. The amount deducted each Monthly Anniversary Day to
cover Our expenses of administering this policy. The maximum Monthly Expense
Charge is shown on the Policy Schedule.
<PAGE>
MORTALITY AND EXPENSE RISK CHARGE. The amount deducted to compensate Us for
assuming the mortality and expense risk of this policy. The maximum Mortality
and Expense Risk Charge is shown on the Policy Schedule.
NET CASH SURRENDER VALUE. The Account Value, less any applicable Surrender
Charge, less any Indebtedness.
NET INVESTMENT FACTOR. A factor which reflects the investment gain or loss of a
Sub-Account from one Valuation Period to the next.
NET PREMIUM. The amount of premium paid less the Premium Expense Charge and the
Tax Charge.
OWNER OR JOINT OWNER. The person or persons who have all rights under this
policy. If there are Joint Owners, both must consent in writing to the exercise
of any right under this policy.
PLANNED PREMIUM. The amount and frequency of the premium You have indicated You
plan to pay, as shown on the Policy Schedule.
POLICY DATE. The date from which policy months, years and anniversaries are
measured.
POLICY SCHEDULE. The schedule on page 3 of this policy, or the most recent
amended Policy Schedule We have sent You to replace it.
PORTFOLIO. A separate investment fund in which a Sub-Account of the Separate
Account invests.
PREMIUM EXPENSE CHARGE. The percentage deducted from each premium payment before
it is allocated, for Our distribution expenses. The maximum Premium Expense
Charge is shown on the Policy Schedule.
SEPARATE ACCOUNT. Columbus Life Insurance Company Separate Account 1.
SPECIFIED AMOUNT. The amount of insurance coverage You have selected, as shown
on the Policy Schedule.
SUB-ACCOUNT. A sub-division of the Separate Account. Each Sub-Account invests in
a different Portfolio. The Sub-Accounts are shown on the Policy Schedule.
SURRENDER CHARGES. An amount which will be deducted from the Account Value if
this policy, or any part of it, is surrendered or withdrawn, or if the Specified
Amount is decreased. A Surrender Charge would also be deducted on any date when
the Grace Period ends without sufficient premium being paid to keep the policy
in force.
TAX CHARGE. The percentage deducted from each premium payment before it is
allocated to cover state premium taxes, if any, and premium-based federal taxes.
The maximum Tax Charge is shown on the Policy Schedule.
TERM NO-LAPSE GUARANTEE. Our guarantee that this policy will not terminate or
begin the Grace Period during the Guaranteed Minimum Continuation Period shown
on the Policy Schedule, provided certain conditions are met, as described in the
Guarantees of Continued Coverage section.
VALUATION DATE. Any date on which We are open for business and the New York
Stock Exchange is open for trading.
VALUATION PERIOD. A period beginning with the close of business on the New York
Stock Exchange on one Valuation Date and ending at the close of business on the
New York Stock Exchange on the next Valuation Date.
VARIABLE ACCOUNT. An option under this policy which allows You to allocate Your
Net Premiums to one or more Sub-Accounts of the Separate Account, or to transfer
amounts from the Fixed Account to one or more Sub-Accounts of the Separate
Account.
VARIABLE ACCOUNT VALUE. The current value of all Your Accumulation Units in the
Sub-Accounts to which You have allocated Net Premiums, or to which You have
transferred amounts from the Fixed Account.
<PAGE>
THIS POLICY IS A CONTRACT
This policy is a contract between You and Us to insure the life of the Insured.
We provide insurance coverage and other benefits described in this policy. Our
decision to do this is based on the completed application and payment by You of
premiums.
Whenever We refer to the policy, We mean the entire contract. The entire
contract consists of:
the basic policy;
the attached application;
any attached supplemental applications; and
any attached riders or endorsements.
Riders and endorsements add provisions or change the terms of the basic policy.
OWNERSHIP PROVISIONS
OWNER, CONTINGENT OWNER AND JOINT OWNER
You have all rights in this policy, subject to any assignment and to the rights
of any irrevocable Beneficiary You have named. During the life of the Insured,
You may exercise the following rights, subject to the terms of this policy:
(1) the right to change the Specified Amount;
(2) the right to change the amount or frequency of Planned Premium;
(3) the right to change the Death Benefit Option;
(4) the right to assign the policy;
(5) the right to change the Owner or Beneficiary;
(6) the right to surrender this policy;
(7) the right to take loans;
(8) the right to take partial withdrawals;
(9) the right to make transfers;
(10) the right to change Net Premium allocations; and
(11) any other rights under this policy.
If You are not the Insured, You may name a Contingent Owner. If You die before
the Insured, ownership would then pass to the Contingent Owner. If there is no
Contingent Owner, Your estate would become the Owner.
This policy may be owned by two persons as Joint Owners. In that case, both
Joint Owners must consent in writing to the exercise of any rights under the
policy. You must also have the consent of any irrevocable Beneficiary to
exercise Your rights under this policy. You do not need the consent of a
Contingent Owner or a revocable Beneficiary to exercise any of Your rights.
You may change the Owner, or change or revoke any Contingent Owner designation,
at any time by written notice to Us. The change will take effect on the date You
signed the notice, but We will not be liable for any actions We take before We
receive the notice at Our Home Office. A change of Owner automatically revokes
any Contingent Owner designation. A change of Owner, or a change or revocation
of a Contingent Owner designation, does not automatically change or revoke a
prior Beneficiary designation.
BENEFICIARY PROVISIONS
PRIMARY BENEFICIARY AND CONTINGENT BENEFICIARY
The Beneficiary will receive the Death Benefit upon the Insured's death. Unless
You change them later, the Primary and Contingent Beneficiaries are the persons
named in the application. If no Primary Beneficiary is still living when the
Insured dies, We will pay the Death Benefit to any Contingent Beneficiary who is
still living. If there is no surviving Primary or Contingent Beneficiary, We
will pay You. If You were the Insured, We will pay Your estate. The interest of
any Beneficiary is subject to the rights of any assignee reflected on Our
records.
Two or more persons may be named as Primary Beneficiaries or Contingent
Beneficiaries. We will pay equal shares when there is more than one Beneficiary
of the same class, unless You specify otherwise on the Beneficiary designation.
<PAGE>
No revocable Beneficiary has rights under this policy until the Insured dies. An
irrevocable Beneficiary cannot be changed without his or her consent.
You may change the Beneficiary at any time before the death of the Insured by
sending written notice to Us. The change will be effective as of the date You
signed the notice, but We will not be liable for any payments We make or other
actions We take before the notice is received at Our Home Office.
Unless You have instructed otherwise, if the Beneficiary is the spouse of the
Insured, both die and We cannot tell who died first, We will pay the Death
Benefit as if the Beneficiary had survived the Insured.
DEATH BENEFIT PROVISIONS
DEATH BENEFIT
We will pay the Death Benefit proceeds as described in the Payment of Proceeds
section when We receive proof that the Insured died while this policy was in
force, and any other proof that We may require in order to investigate the
claim. The Beneficiary should contact Us at the Home Office or contact one of
Our agents for instructions on how to file a claim.
DEATH BENEFIT OPTIONS
The Death Benefit will be one of the following two Options, as selected by You
on the application, or as subsequently changed by You.
OPTION 1
The Death Benefit is the greater of the following, less any Indebtedness as of
the Insured's date of death: (1) the Specified Amount; or (2) the Account Value
times the applicable factor from the table below.
OPTION 2
The Death Benefit is the greater of the following, less any Indebtedness as of
the Insured's date of death: (1) the Account Value plus the Specified Amount; or
(2) the Account Value times the applicable factor from the table below.
<TABLE>
<CAPTION>
Insured's Age Applicable Insured's Age Applicable
Last Policy Anniversary Factor Last Policy Anniversary Factor
<S> <C> <C> <C>
40 and under 2.50 61 1.28
41 2.43 62 1.26
42 2.36 63 1.24
43 2.29 64 1.22
44 2.22 65 1.20
45 2.15 66 1.19
46 2.09 67 1.18
47 2.03 68 1.17
48 1.97 69 1.16
49 1.91 70 1.15
50 1.85 71 1.13
51 1.78 72 1.11
52 1.71 73 1.09
53 1.64 74 1.07
54 1.57 75 through 90 1.05
55 1.50 91 1.04
56 1.46 92 1.03
57 1.42 93 1.02
58 1.38 94 1.01
59 1.34 95 or higher 1.00
60 1.30
</TABLE>
SPECIFIED AMOUNT AND DEATH BENEFIT OPTION CHANGES
You may request a change in the Specified Amount or Death Benefit Option at any
time after the first policy year by sending notice to Us in writing at Our Home
Office. Following Our approval of any such change, We will send You
<PAGE>
an amended Policy Schedule. The amended Policy Schedule will show the new
Minimum Annual Premium for the Term No-Lapse Guarantee and the new Minimum
Annual Premium for the Lifetime No-Lapse Guarantee. It will also show the new
maximum Surrender Charges applicable to Your policy.
INCREASING THE SPECIFIED AMOUNT - If Your Attained Age is 75 or less, You may
apply for any increase in the Specified Amount on a supplemental application.
The requested increase is subject to evidence of insurability satisfactory to
Us. The minimum increase is $25,000. Any increase We approve will be effective
on the next Monthly Anniversary Day coinciding with or next following such
approval, as shown on an amended Policy Schedule, subject to deduction of the
first month's Cost of Insurance Charges for the increase from the Net Cash
Surrender Value of this policy. Because the new Maximum Surrender Charges will
increase, thereby reducing Your Net Cash Surrender Value, and because the Cost
of Insurance Charges will be higher, the amount of premium You must pay to keep
Your policy from terminating will increase.
DECREASING THE SPECIFIED AMOUNT - Any decrease in the Specified Amount which You
request will become effective on the first Monthly Anniversary Day after We
receive Your request. The minimum decrease is $25,000. The new Specified Amount
must not be less than the minimum issue limit shown on the Policy Schedule at
issue. We may limit the amount of the decrease to preserve the tax status of
this policy as life insurance. If You decrease Your Specified Amount during the
fourteen year period following the Policy Date or the date of any increase in
the Specified Amount, a Surrender Charge will be deducted from Your Account
Value as described in the Surrender Charges section.
Any decrease You request will occur in the following order: first against the
most recent increase in Specified Amount, if any; then in order against the next
most recent increases; then finally against the initial Specified Amount.
CHANGING THE DEATH BENEFIT OPTION - You may request a change in the Death
Benefit Option. Except as described below, this will require a change in the
Specified Amount, which may in turn change the Death Benefit. If You request a
change from Option 1 to Option 2, the new Specified Amount will be the previous
Specified Amount reduced by the Account Value at the time of the change. If You
request a change from Option 2 to Option 1, the new Specified Amount will be the
previous Specified Amount plus the Account Value at the time of the change. You
may not make a change in the Death Benefit Option which would reduce the
Specified Amount below the minimum issue limit shown on the Policy Schedule.
You can make an election to keep the Specified Amount the same. However, if the
change is from Option 1 to Option 2, Your election must be accompanied by
evidence satisfactory to Us that the Insured is still insurable.
PREMIUM PAYMENT PROVISIONS
PAYMENT OF PREMIUMS
Premium payments under this policy are payable during the lifetime of the
Insured until the day before the policy anniversary on which the Insured is age
100. Any premium You pay generally must be at least $50. If You pay by
pre-authorizing Us to make automatic deductions from Your bank account, however,
We will accept smaller premium payments. We reserve the right not to accept any
premium payment which would, in Our opinion, cause this policy to fail to
qualify as life insurance under federal tax laws.
In order for this policy to take effect, the first premium paid must equal at
least 1/12th of the Minimum Annual Premium for the Term No-Lapse Guarantee, as
shown on the Policy Schedule. Premiums after the first are payable at Our Home
Office.
PLANNED PREMIUMS
The amount and frequency of Your Planned Premiums are shown on the Policy
Schedule, but You are not required to make premium payments according to a set
schedule. You may skip a Planned Premium payment, and You may change the
frequency and the amount of the Planned Premium shown.
Even if premium payments are not continued, insurance coverage under this policy
and any benefits provided by rider will be continued until the value is
insufficient as described below in the Grace Period section. No rider will be
continued beyond the termination date provided in the rider.
The amount and frequency of Your premium payments will affect Your policy values
and the length of time for which You have insurance coverage. Depending on the
investment performance of the Sub-Accounts You select, the
<PAGE>
Planned Premium may not be enough to keep the policy in force. You may need to
change Your Planned Premium or make additional premium payments to keep Your
policy from terminating.
GRACE PERIOD AND TERMINATION OF COVERAGE
Except as described below in the Guarantees of Continued Coverage section, on
any Monthly Anniversary Day when the Net Cash Surrender Value is less than the
sum of the Monthly Expense Charge and Monthly Deduction for the following month,
We will allow a Grace Period. We will mail You, and anyone shown on Our records
as holding this policy as collateral, a notice indicating the minimum premium
You must pay in order to keep the policy in effect. You will have 61 days from
the date We mail You this notice to pay enough premium. If You do not pay the
needed premium within the 61 day Grace Period, all coverage provided by this
policy will terminate without value at the end of the 61 day period. If the
Insured dies during the Grace Period, the proceeds paid will be reduced by the
amount of any unpaid charges, not to exceed three times the sum of the Monthly
Deduction and the Monthly Expense Charge.. We will not terminate this policy
until at least 61 days after We mail You and anyone shown on Our records as
holding this policy as collateral, notice at the last addresses shown on Our
records.
REINSTATEMENT
If the Grace Period expires and Your policy terminates because You have not paid
the needed premium, You may reinstate the policy within five years after the
expiration of the Grace Period if the Insured is still living. The reinstatement
is subject to evidence of insurability satisfactory to Us. In addition, You must
pay an amount of premium which will result in a Net Cash Surrender Value
sufficient to pay all back costs and charges which would have been subtracted
from the Account Value if there had been sufficient value on each Monthly
Anniversary Day from the date of termination to the date of reinstatement, plus
an amount sufficient to cover the Monthly Deductions and Monthly Expense Charges
for the next three months. You must also repay or reinstate any Indebtedness at
the time of the termination. The Guarantees of Continued Coverage may not be
reinstated.
GUARANTEES OF CONTINUED COVERAGE
MINIMUM ANNUAL PREMIUMS
At issue, the Minimum Annual Premium for the Term No-Lapse Guarantee and the
Minimum Annual Premium for the Lifetime No-Lapse Guarantee are as shown on the
Policy Schedule. If You make any changes in Your policy which result in a change
in the Monthly Deduction (as used in this section, a "Policy Change"), We will
send You an amended Policy Schedule showing the new Minimum Annual Premium for
the Term No-Lapse Guarantee and the Minimum Annual Premium for the Lifetime
No-Lapse Guarantee.
TERM NO-LAPSE GUARANTEE
During the Guaranteed Minimum Continuation Period shown on the Policy Schedule,
We guarantee that this policy will not terminate or begin the Grace Period if,
at all times since the Policy Date, the sum of the premiums paid, less any
withdrawals, less the amount of any Indebtedness, is equal to or greater than
the following:
(1) If You have made no Policy Changes, 1/12th of the Minimum Annual
Premium for the Term No-Lapse Guarantee, as shown on the Policy
Schedule at issue, times the number of months from the Policy Date to
the next Monthly Anniversary Day.
(2) If You have made Policy Changes, 1/12th of the Minimum Annual
Premium for the Term No-Lapse Guarantee at issue times the number of
months from the Policy Date to the first such change, plus 1/12th of
the Minimum Annual Premium for the Term No-Lapse Guarantee following
each such change times the number of months from that change to the
next change, or, with respect to the most recent such change, the
number of months from that change to the next Monthly Anniversary Day.
On any Monthly Anniversary Day when the sum of the premiums paid, less any
withdrawals, less the amount of any Indebtedness is less than the amount
required to meet the conditions of the Term No-Lapse Guarantee described above,
We will allow a Grace Period. We will mail You, and anyone shown on Our records
as holding this policy as collateral, a notice indicating the minimum premium
You must pay in order to keep the Term No-Lapse Guarantee in effect. You will
have 61 days from the date We mail You this notice to pay enough premium. If You
do not pay the needed premium within the 61 day Grace Period, the Term No-Lapse
Guarantee will terminate at the end of the 61 day period. In addition, You will
no longer be eligible for the Lifetime No-Lapse Guarantee.
LIFETIME NO-LAPSE GUARANTEE
If You meet the conditions of the Term No-Lapse Guarantee throughout the entire
Guaranteed Minimum Continuation Period shown on the Policy Schedule, You will be
eligible for the Lifetime No-Lapse Guarantee. We
<PAGE>
guarantee that this policy will never terminate or begin the Grace Period if, at
all times beginning with the expiration of the Guaranteed Minimum Continuation
Period, the sum of the premiums paid, less any withdrawals, less the amount of
any Indebtedness, is equal to or greater than the following:
(1) If You have made no Policy Changes, 1/12th of the Minimum Annual
Premium for the Lifetime No-Lapse Guarantee, as shown on the Policy
Schedule at issue, times the number of months from the Policy Date to
the next Monthly Anniversary Day.
(2) If You have made Policy Changes, 1/12th of the Minimum Annual
Premium for the Lifetime No-Lapse Guarantee at issue times the number
of months from the Policy Date to the first such change, plus 1/12th of
the Minimum Annual Premium for the Lifetime No-Lapse Guarantee
following each such change times the number of months from that change
to the next change, or, with respect to the most recent such change,
the number of months from that change to the next Monthly Anniversary
Day.
On any Monthly Anniversary Day following the expiration of the Guaranteed
Minimum Continuation Period when the sum of the premiums paid, less any
withdrawals, less the amount of any Indebtedness, is less than the amount
required to meet the conditions of the Lifetime No-Lapse Guarantee described
above, We will allow a Grace Period. We will mail You, and anyone shown on Our
records as holding this policy as collateral, a notice indicating the minimum
premium You must pay in order to keep the Lifetime No-Lapse Guarantee in effect.
You will have 61 days from the date We mail You this notice to pay enough
premium. If You do not pay the needed premium within the 61 day Grace Period,
the Lifetime No-Lapse Guarantee will terminate at the end of the 61 day period.
EXTENDED MATURITY BENEFIT PROVISIONS
Premium payments under this policy are payable during the lifetime of the
Insured until the day before the policy anniversary on which the Insured is age
100. The current value of all Your Accumulation Units in any Sub-Accounts, and
the current value of the Loan Account plus interest due and unpaid, will be
permanently transferred into the Fixed Account. The Fixed Account Value will be
decreased by the amount of any outstanding Indebtedness, and no further loans
will be permitted. At all times thereafter, no further premiums may be paid, no
charges will be deducted, and the Death Benefit Option will be Option 2. If Your
Death Benefit Option was previously Option 1, We will not automatically decrease
the Specified Amount by the Account Value unless You were greater than age 75 on
the Policy Date. The policy will continue in effect until the Insured's death,
or until it is surrendered for its Net Cash Surrender Value.
VARIABLE ACCOUNT PROVISIONS
SEPARATE ACCOUNT
The Separate Account is established under the laws of the State of Ohio. It is a
unit investment trust registered with the Securities and Exchange Commission
under the Investment Company Act of 1940. The assets in the Separate Account are
kept separate from Our general assets and assets of any other separate accounts
We may have. The assets of the Separate Account shall be available to cover the
liabilities of Our general account only to the extent that the assets of the
Separate Account exceed the liabilities arising under the variable life
insurance policies supported by the Separate Account. The investment policy of
the Separate Account shall not be changed without the approval of the insurance
commissioner of the State of Ohio. The approval process is on file with the
insurance commissioner.
SUB-ACCOUNTS
The Separate Account is divided into Sub-Accounts, each of which invests all its
assets in a corresponding Portfolio.
VARIABLE ACCOUNT
The Variable Account of this policy is an option which allows You to allocate
Your Net Premiums to one or more Sub-Accounts of the Separate Account. The
Variable Account Value is equal to the current value of all Your Accumulation
Units in the Sub-Accounts to which You have allocated Net Premiums.
VALUATION DATE AND VALUATION PERIOD
A Valuation Date is any date on which We are open for business and the New York
Stock Exchange is open for business. The assets of each Sub-Account will be
valued on each Valuation Date. A Valuation Period is a period beginning with the
close of business on the New York Stock Exchange on one Valuation Date and
ending at the close of business on the New York Stock Exchange on the next
Valuation Date.
<PAGE>
ACCUMULATION UNIT
The value of an Accumulation Unit for each Sub-Account was arbitrarily set at
$10 when funds were first credited to the Sub-Account. The Accumulation Unit
Value for any subsequent Valuation Period is determined by multiplying the
Accumulation Unit value for the immediately preceding Valuation Period by the
Net Investment Factor. The Accumulation Unit value will fluctuate from day to
day depending on the investment performance of the Portfolio in which the
Sub-Account is invested.
NET INVESTMENT FACTOR
The Net Investment Factor reflects the investment performance of a Sub-Account
from one Valuation Period to the next. The Net Investment Factor for each
Sub-Account, for any Valuation Period, is determined by dividing (1) by (2) and
subtracting (3) from the result, where:
(1) equals:
(a) the net asset value per share of the corresponding Portfolio
at the end of the current Valuation Period, plus
(b) the per share amount of any dividend or capital gain
distribution made by the Portfolio on shares held in the
Sub-Account if the "ex-dividend" date occurs during the
current Valuation Period, plus or minus
(c) a per Accumulation Unit charge or credit for any taxes
incurred by or reserved for in the Sub-Account, which is
determined by Us to have resulted from the investment
operations of the Sub-Account during the current Valuation
Period;
(2) equals:
(a) the net asset value per share of the corresponding Portfolio
at the end of the immediately preceding Valuation Period,
plus or minus
(b) the per Accumulation Unit charge or credit for any taxes
reserved for the immediately preceding Valuation Period; and
(3) is a factor representing the charges deducted from the
Sub-Account on a daily basis for the Mortality and Expense Risk
Charge.
CREDITING AND DEDUCTION OF ACCUMULATION UNITS
We will credit Net Premiums You have allocated to the Variable Account in the
form of Accumulation Units.
In the case of the initial premium, Accumulation Units will be credited as of
the later of these dates:
(1) the Policy Date; or
(2) the Valuation Date We receive the premium in Our Home Office.
For subsequent premiums, We will credit Accumulation Units as of the Valuation
Date We receive the premium in Our Home Office.
The number of Accumulation Units to be credited to this policy in each
Sub-Account will generally be determined by dividing the Net Premium allocated
to each Sub-Account by the Accumulation Unit Value for that Sub-Account as of
the end of the Valuation Period during which the premium is received.
Accumulation Units are credited when amounts are transferred into a Sub-Account.
Accumulation Units are deducted when amounts are transferred out of a
Sub-Account, when amounts (including any fees or charges) are partially
surrendered, and when the Monthly Deduction and the Monthly Expense Charge are
assessed.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
We reserve the right to make additional Sub-Accounts available. These
Sub-Accounts will invest in investment portfolios that We believe are suitable
for the Separate Account. We also reserve the right to eliminate existing
Sub-Accounts, or to combine two or more Sub-Accounts.
We reserve the right to substitute a new investment portfolio or similar
investment option for the Portfolio in which a Sub-Account invests. This may
happen if the shares of the Portfolio are no longer available, or as a result of
unsatisfactory investment performance, a change in laws or regulations, a change
in a Portfolio's investment objectives or restrictions, or for some other
reason. We will not substitute any shares attributable to Your interest in a
Sub-Account without obtaining the prior approval of the Securities and Exchange
Commission, to the extent required by the Investment Company Act of 1940, and
any other required approvals.
<PAGE>
If We make a substitution or change, We may, by rider or endorsement, make any
changes in this policy which may be necessary or appropriate to reflect the
substitution or change.
We reserve the right to operate the Separate Account as a management investment
company under the Investment Company Act of 1940, or in any other form permitted
by law. We reserve the right to deregister the Separate Account under the 1940
Act in the event such registration is no longer required.
FIXED ACCOUNT PROVISIONS
FIXED ACCOUNT
The Fixed Account is an option under this policy which allows You to allocate
Your Net Premiums to Our general account.
FIXED ACCOUNT VALUE
At any time, the Fixed Account Value of Your policy equals:
(1) the sum of all Net Premiums allocated to the Fixed Account; plus
(2) all amounts transferred from the Variable Account or the Loan
Account; plus
(3) interest credited to the Fixed Account; minus
(4) all amounts transferred from the Fixed Account to the Variable
Account; minus
(5) all amounts withdrawn from the Fixed Account for charges,
deductions or partial surrenders.
INTEREST RATE
The amounts You allocate to the Fixed Account will earn interest. We guarantee
that this interest rate will never be less than an effective annual rate of 3%.
We may, but are not required to, credit interest in excess of this rate. The
current interest rate applicable to the Fixed Account at the time of issue is
shown on the Policy Schedule.
ALLOCATION OF PREMIUMS
You may elect to have Net Premiums allocated to the Fixed Account and/or to one
or more Sub-Accounts of the Variable Account. Each allocation must be in whole
percentages. The sum of the allocation percentages must equal 100%. The
allocation You selected for the initial Net Premium is shown on the Policy
Schedule. Additional Net Premiums will be allocated in the same manner as Your
initial Net Premium, unless You request a change in Your allocation.
DOLLAR COST AVERAGING
You may request in writing at any time that We automatically transfer specified
dollar amounts, earnings or specified percentages from the Fixed Account or from
the Touchstone Standby Income Sub-Account to other Sub-Accounts You select. You
may elect to have these transfers done on a monthly or quarterly basis. We will
process the transfers on the appropriate Monthly Anniversary Days. You must
select this automatic transfer, referred to as "Dollar Cost Averaging," for a
period of at least 12 months. The minimum Dollar Cost Averaging transfer is
$100. You must allocate whole percentages of the total amount transferred to
each Sub-Account You select.
Dollar Cost Averaging will terminate when any of the following occurs: (1) the
number of designated transfers has been completed; (2) the value in the Fixed
Account or the Touchstone Standby Income Sub-Account is insufficient to complete
the next scheduled transfer; (3) You request termination in writing; or (4) this
policy terminates. We reserve the right to charge a fee for this service. We
also reserve the right to stop offering this service. If We decide to stop
offering this service after Your policy is issued, We will give You 30 days
written notice. This would not affect any Dollar Cost Averaging programs already
in effect.
TRANSFER PROVISIONS
TRANSFERS
You may transfer amounts among the Fixed Account and the Sub-Accounts of the
Variable Account. The minimum transfer amount is $250. Each allocation to a
Sub-Account must be in whole percentages.
Transfers may be made among the Sub-Accounts at any time. There is no charge for
the first twelve transfers among the Sub-Accounts in any policy year. A single
transfer involving multiple Sub-Accounts is considered one transfer for purposes
of these limits. Each transfer after the twelfth will be subject to a transfer
fee of $10.
<PAGE>
Transfers from the Fixed Account to one or more Sub-Accounts, or from one or
more Sub-Accounts to the Fixed Account may be made only once each policy year.
There is no charge for these transfers. There is no limitation on the maximum
amount which may be transferred from the Sub-Accounts to the Fixed Account.
LIMITATION ON TRANSFERS FROM THE FIXED ACCOUNT
Transfers from the Fixed Account are limited to a maximum of 25% of the Fixed
Account Value during each of the first four policy years. After the fourth
policy year, the entire Fixed Account can be transferred at any time.
POLICY VALUES
ACCOUNT VALUE
The Account Value of this policy is the sum of Your interest in the Variable
Account, the Fixed Account and the Loan Account. The Account Value on each
Valuation Date after the Policy Date will be:
1. the Account Value on the prior Valuation Date, less any partial
surrender or withdrawal (including withdrawal fees or Surrender
Charges) paid since that date; plus
2. interest on amounts allocated to the Fixed Account and the Loan
Account; plus or minus
3. the positive or negative investment experience on amounts
allocated to the Variable Account, reflected in the change in
value of the Accumulation Units; plus
4. any Net Premium for the policy received since the prior Valuation
Date; less
5. any Monthly Deduction and Monthly Expense Charge due, if the
Valuation Date is a Monthly Anniversary Day; less
6. any transfer charges assessed.
The Account Value on the Policy Date, or if later, the date We receive the
initial premium, is the initial Net Premium received for this policy less the
Monthly Expense Charges and the Monthly Deduction made as of the Policy Date or
as of such later date.
CASH SURRENDER VALUE
The Cash Surrender Value of this policy is the Account Value, less any
applicable Surrender Charge, as described in the Surrender Charges section.
NET CASH SURRENDER VALUE
The Net Cash Surrender Value of this policy is the Cash Surrender Value less the
amount of any Indebtedness. You may surrender this policy for the Net Cash
Surrender Value by written notice to Us. We will pay proceeds as described in
the Payment of Proceeds section.
WITHDRAWAL OR PARTIAL SURRENDER
You may withdraw part of this policy for cash after the first policy year by
written notice to Us. We will pay withdrawals as described in the Payment of
Proceeds section. The minimum amount which can be withdrawn is $500. No
withdrawal can be made which would reduce the Net Cash Surrender Value to less
than $250. The fee for each withdrawal after the first in any policy year is
$50. No withdrawal can be made which would reduce the Specified Amount to less
than the minimum issue limit shown on the Policy Schedule.
The amount withdrawn (including any applicable withdrawal fees and Surrender
Charges) will be deducted from the Account Value. The deduction will be made
from the Sub-Accounts and the Fixed Account in proportion to the amounts in each
account. This will reduce the Death Benefit.
The Specified Amount will be reduced to the extent necessary such that (1) does
not exceed (2) where:
(1) is the Death Benefit less the Account Value immediately after the
partial surrender, and (
2) is the Death Benefit less the Account Value immediately before
the partial surrender.
LOAN PROVISIONS
RIGHT TO BORROW AND MAXIMUM LOAN
You may borrow from this policy in any amount not in excess of 90% of the Cash
Surrender Value less the amount of any outstanding Indebtedness on the date the
loan is made and less an amount equal to the Monthly Deductions and Monthly
Expense Charges for the next two months. This policy will be the only security
We require for the loan, as described in the Loan Account section. We will pay
loan proceeds as described in the Payment of Proceeds section.
<PAGE>
LOAN ACCOUNT
When We issue You a loan, an amount equal to the loan is transferred from the
Sub-Accounts and the Fixed Account into a Loan Account as collateral for the
loan. The transfer is made in proportion to the values in each account. The Loan
Account will earn interest. The earned interest will be transferred on each
Monthly Anniversary Day from the Loan Account to the Sub-Accounts and the Fixed
Account in proportion to the current premium allocation instructions from You.
The minimum interest rate We will credit to the Loan Account is shown on the
Policy Schedule. We may, but are not required to, credit interest in excess of
this rate. Any loan, whether or not repaid, will have a permanent effect on the
Death Benefit and policy values because the investment results of the
Sub-Accounts and the current interest rates of the Fixed Account will not apply
to amounts in the Loan Account.
LOAN INTEREST
The maximum interest rate We charge on loans is shown on the Policy Schedule.
Loan Interest is due on each Policy Anniversary and on the date the loan is
repaid in full. The amount of any Loan Interest charged on the loan which is not
paid when due will be treated as an additional loan, and will be transferred
from the Sub-Accounts and the Fixed Account into the Loan Account in proportion
to the values in each account.
POLICY TERMINATION
If the Indebtedness exceeds the Cash Surrender Value less the Monthly Deduction
and the Monthly Expense Charge for the current month on any Monthly Anniversary
Day, We will terminate this policy. We will not do this, however, until 31 days
after We mail notice to You indicating the minimum amount You must pay in order
to keep this policy in effect. We will notify You, and anyone shown on Our
records as holding this policy as collateral, at the last addresses shown on Our
records.
REPAYING LOANS
Loans can be repaid in whole or in part at any time during the lifetime of the
Insured. Any Indebtedness not repaid will reduce the amounts payable upon
surrender of the policy or at the death of the Insured.
All payments We receive from You will be credited to Your policy as premium
unless You give Us written notice that the payment is for loan repayment. Loan
repayments will first reduce the outstanding balance of Your loan, and then
accrued but unpaid interest on the loan. The amount of any loan repayment will
be transferred from the Loan Account to the Sub-Accounts and the Fixed Account
in proportion to the current premium allocations from You.
POLICY COSTS AND CHARGES
PREMIUM EXPENSE CHARGES
As compensation for Our distribution expenses, a Premium Expense Charge is
deducted from all premiums received. This charge is deducted before premiums are
credited to the Fixed Account or the Sub-Accounts. The maximum Premium Expense
Charge percentage is shown on the Policy Schedule.
TAX CHARGES
To cover state premium taxes and federal taxes associated with distribution of
this policy, We will deduct a Tax Charge from all premiums received before they
are credited to the Fixed Account or the Sub-Accounts. The percentage deducted
will vary by state to reflect each state's actual percentage of premium tax
charged, if any. The maximum Tax Charge percentage is shown on the Policy
Schedule.
COST OF INSURANCE CHARGES
The maximum monthly Cost of Insurance Charges are shown on the Policy Schedule.
Cost of Insurance Charges apply to all Insureds of the same Attained Age, sex
and risk classification whose policies have been in effect the same length of
time. At Our option, We may charge less than the maximums shown. The actual
charges will be determined by Us from time to time. Any change in the monthly
Cost of Insurance Charges will be on a non-discriminatory basis toward any one
Insured. The maximum monthly Cost of Insurance Charges at the Insured's Attained
Age are determined as follows:
(1) Divide the Death Benefit plus any Indebtedness at the beginning
of the policy month by 1 plus the guaranteed monthly interest
rate applicable to the Fixed Account.
(2) Subtract the Account Value at the beginning of the policy month.
(3) Add the cost of additional benefits provided by rider.
<PAGE>
(4) Add the Monthly Expense Charge.
(5) Divide the resulting number by 1000 to determine the number of
thousands of dollars of insurance coverage.
(6) Multiply by the Cost of Insurance Charge shown on the Policy
Schedule.
MONTHLY DEDUCTION AND MONTHLY EXPENSE CHARGE
Each Monthly Deduction on the Monthly Anniversary Day consists of the Cost of
Insurance Charge plus the cost of any additional benefits provided by rider. The
maximum Monthly Expense Charge is shown on the Policy Schedule. We take the
Monthly Deduction and the Monthly Expense Charge from the Fixed Account and the
Sub-Accounts in proportion to the values in each account on the Monthly
Anniversary Day. You may, however, elect to have the Monthly Deduction and the
Monthly Expense Charge taken from the Fixed Account or from any one Sub-Account
You choose. If the Monthly Deduction and the Monthly Expense Charge exceed the
value of the selected account on any Monthly Anniversary Day, the remainder will
be taken pro rata from the other accounts. You must notify us in writing of this
election.
MORTALITY AND EXPENSE RISK CHARGE
As compensation for Our assumption of mortality and expense risks, We deduct
from the Accumulation Unit Values on a pro rata basis a daily charge. The
maximum Mortality and Expense Risk Charge, expressed as an effective annual
rate, is shown on the Policy Schedule.
SURRENDER CHARGES
During the fourteen year period following the Policy Date or the date of any
increase in Specified Amount, a Surrender Charge will be deducted from Your
Account Value if any of the following occurs:
(1) You surrender Your policy;
(2) a Grace Period ends without sufficient premium being received by
Us to keep the policy in effect;
(3) You request a decrease in the Specified Amount; or
(4) You request a partial surrender which results in a reduction in
the Specified Amount, as described in the Withdrawal or Partial
Surrender section.
If the Surrender Charge results from either (1) or (2), the amount deducted will
be the Maximum Surrender Charge shown on the Policy Schedule.
If the Surrender Charge results from either (3) or (4), the amount deducted will
generally be less than the Maximum Surrender Charge shown on the Policy
Schedule. The amount will be calculated based on the total reduction in
Specified Amount. Because the most recent increase in Specified Amount is
reduced first, the Surrender Charge associated with that increase will be
deducted first. The Surrender Charge will be deducted from the Sub-Accounts and
the Fixed Account in proportion to the amounts in each account.
PAYMENT OF PROCEEDS POLICY PROCEEDS
The proceeds of this policy may be either Death Proceeds, payable to the
Beneficiary upon the death of the Insured, or Net Cash Surrender Value proceeds,
payable to You if this policy is canceled for its Net Cash Surrender Value
during the lifetime of the Insured.
HOW WE PAY
Proceeds may be paid in a lump sum or under one or more Income Plans. The Income
Plans are described in the Income Plans section.
We may defer the payment of any proceeds or transfer for a period of up to six
months from the date of Our receipt of the notice giving rise to such payment,
if such payment or transfer is based on the Fixed Account. We will not defer any
amounts needed to pay premiums for other policies in force with Us. Proceeds
under the policy that are attributable to the Variable Account are generally
payable within seven days after We receive notice and any additional
requirements are met. We may defer payments or transfers out of the Variable
Account if:
(1) the New York Stock Exchange is closed on other than customary
weekend holiday closings; or
(2) trading on the New York Stock Exchange is restricted as
determined by the SEC; or
(3) an emergency exists, as determined by the SEC, as a result of
which disposal or valuation of assets is not reasonably
practicable; or
(4) the SEC by order permits deferral for the protection of Owners.
<PAGE>
We will pay interest from the date of death or other date proceeds are due to
the date of payment. The rate of interest will not be less than that required by
law.
HOW TO CLAIM DEATH PROCEEDS
We must receive proof of the Insured's death before We will pay Death Proceeds.
The Beneficiary should contact Our Home Office or Our nearest agent for
instructions.
CALCULATION OF DEATH PROCEEDS
Death Proceeds include the Death Benefit plus any insurance on the Insured's
life provided by riders.
CHOOSING AN INCOME PLAN
You may choose an Income Plan for Net Cash Surrender Value proceeds, or for
Death Proceeds. If You do not choose an Income Plan before the Insured dies, the
Beneficiary can choose one. For each plan We may issue a separate written
agreement putting the plan into effect. The smallest amount which may be applied
under an income plan is $2,000. Each payment must be at least $100. We may make
less frequent payments if payments to be made would be less than $100.
The Beneficiary may be the Payee for payments under the selected Income Plan, or
may name a different Payee to receive the payments under Income Plans. The
Beneficiary may also name a Contingent Payee to receive any amount still due
when the Payee dies.
THE INCOME PLANS
In addition to the following options, other Income Plans may be available.
OPTION 1 - Payments for a Fixed Period
Equal monthly payments will be made for a stated number of years, which You
select from the Fixed Period Minimum Income Table. The monthly payments will not
be less than those shown in the table.
OPTION 1
FIXED PERIOD MINIMUM INCOME TABLE*
Monthly Payments for each $1,000 applied
Number Monthly Number Monthly Number Monthly
of Install- of Install- of Install-
Years ments Years ments Years ments
1 $84.47 11 $8.86 21 $5.32
2 42.86 12 8.24 22 5.15
3 28.99 13 7.71 23 4.99
4 22.06 14 7.26 24 4.84
5 17.91 15 6.87 25 4.71
6 15.14 16 6.53 26 4.59
7 13.16 17 6.23 27 4.47
8 11.68 18 5.96 28 4.37
9 10.53 19 5.73 29 4.27
10 9.61 20 5.51 30 4.18
*Values are based on interest at
an effective annual rate of 3%.
OPTION 2 - Payments for Life - Guaranteed Period
Equal monthly payments will be made for the guaranteed period chosen and
thereafter during the life of a designated person. The amount of each monthly
payment depends on that person's age and sex on the date of first payment and on
any guaranteed period chosen. See the One Life Minimum Income Table, below. We
may require proof to Our satisfaction of such age. We may require like proof
that such person is alive on the date any payment is due. The guaranteed period
may be 10 or 20 years.
<PAGE>
OPTIONS 2 AND 4
ONE LIFE MINIMUM INCOME TABLE*
Monthly Payments for each $1,000 applied
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Age of Life Life Life Age of Life Life Life
Payee No Years 10 Years 20 Years Payee No Years 10 Years 20 Years
Last Certain Certain Certain Last Certain Certain Certain
Birth- Birth-
day Male Female Male Female Male Female day Male Female Male Female Male Female
15 and
under $2.82 $2.76 $2.81 $2.76 $2.81 $2.75 50 $3.91 $3.66 $3.88 $3.64 $3.80 $3.60
16 2.83 2.77 2.83 2.77 2.82 2.76 51 3.98 3.71 3.94 3.70 3.85 3.65
17 2.84 2.78 2.84 2.78 2.83 2.78 52 4.05 3.77 4.01 3.75 3.91 3.70
18 2.86 2.79 2.85 2.79 2.85 2.79 53 4.12 3.83 4.08 3.82 3.96 3.75
19 2.87 2.80 2.87 2.80 2.86 2.80 54 4.20 3.90 4.16 3.88 4.02 3.81
20 2.89 2.82 2.88 2.81 2.88 2.81 55 4.28 3.97 4.23 3.95 4.09 3.87
21 2.90 2.83 2.90 2.83 2.89 2.82 56 4.37 4.04 4.32 4.02 4.15 3.93
22 2.92 2.84 2.91 2.84 2.91 2.84 57 4.47 4.12 4.41 4.09 4.21 3.99
23 2.93 2.86 2.93 2.86 2.93 2.85 58 4.57 4.21 4.50 4.17 4.28 4.05
24 2.95 2.87 2.95 2.87 2.94 2.87 59 4.67 4.30 4.60 4.25 4.35 4.12
25 2.97 2.89 2.97 2.89 2.96 2.88 60 4.79 4.39 4.70 4.34 4.42 4.19
26 2.99 2.90 2.99 2.90 2.98 2.90 61 4.91 4.49 4.81 4.44 4.49 4.26
27 3.01 2.92 3.01 2.92 3.00 2.92 62 5.04 4.60 4.92 4.54 4.56 4.33
28 3.03 2.94 3.03 2.94 3.02 2.93 63 5.18 4.71 5.04 4.64 4.63 4.41
29 3.05 2.96 3.05 2.96 3.04 2.95 64 5.33 4.84 5.17 4.75 4.70 4.49
30 3.08 2.98 3.07 2.97 3.07 2.97 65 5.49 4.97 5.30 4.87 4.76 4.56
31 3.10 3.00 3.10 3.00 3.09 2.99 66 5.66 5.11 5.44 5.00 4.83 4.64
32 3.13 3.02 3.12 3.02 3.11 3.01 67 5.85 5.26 5.59 5.13 4.90 4.72
33 3.15 3.04 3.15 3.04 3.14 3.03 68 6.04 5.43 5.74 5.27 4.96 4.79
34 3.18 3.06 3.18 3.06 3.17 3.06 69 6.25 5.60 5.89 5.42 5.03 4.87
35 3.21 3.09 3.21 3.09 3.20 3.08 70 6.48 5.80 6.06 5.58 5.08 4.94
36 3.25 3.12 3.24 3.11 3.22 3.10 71 6.71 6.00 6.22 5.75 5.14 5.01
37 3.28 3.14 3.27 3.14 3.26 3.13 72 6.97 6.23 6.39 5.92 5.19 5.08
38 3.32 3.17 3.31 3.17 3.29 3.16 73 7.24 6.47 6.57 6.10 5.24 5.14
39 3.35 3.20 3.35 3.20 3.32 3.19 74 7.53 6.73 6.75 6.29 5.28 5.20
40 3.39 3.23 3.38 3.23 3.36 3.22 75 7.84 7.02 6.93 6.49 5.32 5.25
41 3.43 3.27 3.42 3.26 3.39 3.25 76 8.18 7.33 7.12 6.69 5.35 5.29
42 3.48 3.30 3.47 3.30 3.43 3.28 77 8.53 7.66 7.30 6.90 5.38 5.34
43 3.52 3.34 3.51 3.33 3.47 3.31 78 8.92 8.02 7.48 7.11 5.41 5.37
44 3.57 3.38 3.56 3.37 3.51 3.35 79 9.33 8.42 7.67 7.32 5.43 5.40
45 3.62 3.42 3.60 3.41 3.56 3.39 80 9.77 8.85 7.85 7.53 5.45 5.43
46 3.67 3.46 3.65 3.45 3.60 3.43 81 10.24 9.31 8.02 7.73 5.47 5.45
47 3.73 3.51 3.71 3.50 3.65 3.47 82 10.75 9.82 8.19 7.93 5.48 5.47
48 3.78 3.55 3.76 3.54 3.70 3.51 83 11.29 10.37 8.35 8.13 5.49 5.48
49 3.84 3.60 3.82 3.59 3.75 3.55 84 11.87 10.96 8.50 8.31 5.50 5.49
85 and over 12.49 11.61 8.64 8.48 5.50 5.50
</TABLE>
*Values are based on the "Annuity 2000 Table," with Projection Scale G, adjusted
for age last birthday, with interest at an effective annual rate of 3%.
<PAGE>
OPTION 3 - Payments of a Fixed Amount
Equal monthly payments of a fixed amount will be made until the value applied
under this option, with interest credited at an effective annual rate of 3% on
the unused balance, is exhausted. The amount chosen must be at least $5 per
month for each $1,000 of proceeds placed under this option. The last payment
will be for the balance only. Payments may not be for more than 30 years.
OPTION 4 - Life Annuity - No Guaranteed Period
Equal monthly payments will be made during the life of a designated person. The
amount of each monthly payment depends on that person's sex and age on the date
of the first payment. See the One Life Minimum Income Table, above. We may
require proof to Our satisfaction of such age. We may require like proof that
such person is alive on the date any payment is due. There is no guaranteed
period. This means that when the designated person dies, no further payments
will be made, even if only one payment has been made.
OPTION 5 - Joint and Survivor
Equal monthly payments will be made during the lifetimes of two designated
persons. Upon the death of either, payments will continue unchanged throughout
the lifetime of the survivor, or they may be reduced to a pre-selected
percentage (75%, 66 2/3%, or 50%) of the original payment. Payments will cease
upon the death of the survivor. There is no guaranteed period. This means that
when the survivor dies, no further payments will be made, even if only one
payment has been made. The amount of each monthly payment depends on the ages
and sexes of both persons on the date of first payment, and the pre-selected
percentage for continuing payments. See the sample monthly payments in the Joint
and Survivor Minimum Income Table, below. We may require proof to Our
satisfaction of their ages. We may require proof that any designated person is
alive on the date any payment based upon the life of such person is due.
OPTION 5
JOINT AND SURVIVOR
MINIMUM INCOME TABLE*
Sample Monthly Payments for each $1,000 applied
Male Female Joint & Joint & Joint & Joint &
Age Age 100% 75% 66 2/3% 50%
Survivor Survivor Survivor Survivor
60 60 3.93 4.23 4.34 4.58
60 65 4.14 4.48 4.61 4.880
60 70 4.34 4.75 4.90 5.24
65 60 4.07 4.44 4.58 4.88
65 65 4.36 4.75 4.90 5.22
65 70 4.66 5.10 5.27 5.64
70 60 4.18 4.65 4.83 5.23
70 65 4.56 5.03 5.22 5.62
70 70 4.97 5.48 5.68 6.12
*Values are based on the "Annuity 2000 Table," with Projection Scale G, adjusted
for age last birthday, with interest at an effective annual rate of 3%.
GENERAL PROVISIONS
ANNUAL REPORT
At least once a year We will send You an annual report showing the current
Account Value, Surrender Charge, Cash Surrender Value, Indebtedness, Net Cash
Surrender Value, amount of interest credited to amounts in the Fixed Account and
Loan Account, change in value of amounts in the Variable Account, premiums paid,
loan activity, partial withdrawals, Monthly Expense Charges and Cost of
Insurance charges since the date of the last report. Any other information
required by applicable law will also be included in the annual report.
<PAGE>
PROJECTION OF BENEFITS AND VALUES
You may request other information about this policy, including a hypothetical
illustration of policy benefits and values. We may make a reasonable charge to
provide this information.
OWNERSHIP AND INSULATION OF ASSETS
We shall have exclusive and absolute ownership and control of the assets of the
Separate Account. The assets of the Separate Account which are equal to reserves
and other liabilities are not chargeable with liabilities arising out of any
other business We may conduct.
RELIANCE
We have issued this policy in reliance on the answers You have provided to Us in
the application and in any supplemental applications. These answers are
considered representations, and not warranties. We have assumed that all these
answers are true and complete. If they are not, We may have the right to void
the policy as if it had not been issued, as explained in the Limits on Our
Contesting This Policy section. If that occurred, We would send back all the
premiums You had paid.
LIMITS ON OUR CONTESTING THIS POLICY
No statement will be used in contesting a claim unless it is in an application
or supplemental application and a copy of such application is attached to this
policy.
We will not contest this policy to the extent of the initial Specified Amount
after it has been in effect during the Insured's lifetime for two years from the
Policy Date. We will not contest the validity of any increase in Specified
Amount after such increase has been in effect during the Insured's lifetime for
two years. Unless otherwise provided in the rider, We will not contest any rider
attached to this policy after the rider has been in effect during the Insured's
lifetime for two years from the effective date of the rider.
We will not contest this policy with respect to statements made in an
application for reinstatement after the policy has been in effect during the
Insured's lifetime for two years from the effective date of the reinstatement.
CONVERSION TO A FIXED POLICY
You may elect to convert this policy to a fixed policy at any time:
(1) within 24 months of the Policy Date; or
(2) within 60 days of the later of notification of a change in the
investment policy of the Separate Account, or the effective date
of such change.
This election will be executed by transferring all Variable Account values into
the Fixed Account without charge. After the date of this election, Net Premiums
may not be allocated, and transfers may not be made, to the Variable Account.
The other terms and charges of this policy continue to apply.
SUICIDE
We will pay only a limited benefit if the Insured commits suicide while sane or
insane, within two years from the Policy Date. If the policy is in effect, We
will return the premiums You paid, less: (1) the amount of any Indebtedness; (2)
any withdrawal amount; and (3) all monthly costs of insurance on all persons
other than the Insured ever covered by rider. If the amount of the Net Cash
Surrender Value is larger, We will pay it instead.
We will not pay with respect to any increases in the Specified Amount if the
Insured commits suicide while sane or insane, within two years from the
effective date of any such increase. If the policy is in effect and the Insured
commits suicide more than two years after the Policy Date and within two years
after the date of an increase in Specified Amount, We will return the monthly
costs of insurance charged for such increase.
This provision also applies to any rider attached to this policy. The two year
period will be measured from the rider's date of issue. If this policy is
reinstated, this provision will run anew from the reinstatement date. Any
premium refund will be limited to those paid on or after the effective date of
the reinstatement.
ERROR IN AGE OR SEX
If the Insured's age or sex as stated in the application is wrong, it could mean
the Monthly Deductions are wrong. The same is true for the age or sex of any
other person insured by this policy or its riders. We will adjust the amount
payable to the amount that the monthly Cost of Insurance for the month of death
would have purchased at the correct age and sex.
<PAGE>
CLAIMS OF CREDITORS
The proceeds of this policy will be paid free from the claims of creditors to
the extent allowed by law.
ASSIGNMENT
You may assign this policy by giving Us notice of the assignment. We will not be
responsible for the validity of an assignment. We will not be liable for any
payments We make or actions We take before We receive notice of an assignment.
REQUIRED NOTE ON OUR COMPUTATIONS
Calculations are based on the Mortality Tables shown on the Policy Schedule. We
have filed a detailed statement of Our computations with the applicable State
Insurance Department. The values under this policy are not less than those
required by the law of the applicable state. Any benefit provided by an attached
rider will not increase these values unless stated in the rider.
The method used in calculating policy values will be based on actuarial
procedures that recognize the variable nature of this policy.
AUTHORITY TO MAKE AGREEMENTS
All agreements made by Us must be in writing and signed by Our president, a vice
president, Our secretary or an assistant secretary. No other person, including
an insurance agent, can change any of this policy's terms, extend the time for
paying premiums, or make any other agreement which would be binding on Us.
CONFORMITY WITH LAWS
We reserve the right to make any changes necessary to comply with any federal or
state statute, rule or regulation. We do not need Your consent to make such
changes.
TAXES
We reserve the right to deduct any taxes levied by any government entity which,
at Our sole discretion, are determined to have resulted from the establishment
or maintenance or operation of the Separate Account, or from the investment
performance of the Separate Account.
TERMINATION
This policy will terminate and all insurance coverage under the policy will
stop: (1) as of the end of the Valuation Period during which We receive notice
from You requesting that this policy be surrendered; (2) as of the date the
Insured dies (although some riders may provide benefits for other covered
persons beyond the Insured's death); (3) as of the date the Grace Period
expires; or (4) as of the date 31 days after We mail You notice that the amount
of the Indebtedness exceeds the Cash Surrender Value less the Monthly Deduction
and the Monthly Expense Charge.
NOTICES
Whenever written notice is required, send it to Our Home Office. The address of
Our Home Office is shown on the front of this policy. Please include the policy
number in Your correspondence.
NONPARTICIPATING
This policy and any riders attached to it are issued at a nonparticipating rate
and shall not share in Our surplus earnings.
DISABILITY CREDIT RIDER
An Additional Benefit of this Policy Issued By
Columbus Life Insurance Company
Conditions For Applying Credit
We will apply and credit the Credit Amount to the premiums payable under the
policy, to the extent stated, while the Insured continues to be totally disabled
if:
Amount to Premiums
(1) The Insured has been totally disabled without interruption for at
least six months;
(2) The disability started before the policy anniversary on which the
Insured is age 60;
(3) The disability started while the basic policy and this rider were
in force; and
(4) All other terms of this rider are met.
Credit Amount
The Credit Amount is the annual dollar amount selected by you and shown on the
Policy Schedule of the policy that will be applied to the payment of premiums
under the policy as provided in this rider. The monthly Credit Amount is equal
to 1/12 of the Credit Amount. The Credit Amount selected by you may not be less
than the Minimum Annual Premium for the Term No-Lapse Guarantee, nor greater
than the Minimum Annual Premium for the Lifetime No-Lapse Guarantee, shown on
the Policy Schedule. The Credit Amount at all times must be within these minimum
and maximum limits. If these Minimum Annual Premium amounts change under the
policy and the Credit Amount is no longer within these limits, then the Credit
Amount must be changed to an amount that is within the minimum and maximum
limits. If you do not select a Credit Amount within the limits, the Credit
Amount will be increased to the minimum limit or decreased to the maximum limit,
as appropriate. The charges under this rider will also change accordingly.
Evidence of insurability may be required for issuance of this rider and for any
subsequent change in the Credit Amount.
Applying the Credit Amount
You should keep your policy in force until we approve your claim.
Any Credit Amount applied and credited will be considered a premium payment
received under the policy.
Upon our approval of your claim and while this rider continues in force, we will
apply the monthly Credit Amount each month to premiums payable under the policy
starting with the month following the month in which the disability starts. The
last month for which we will credit the monthly Credit Amount will be the one in
which the disability stops. Each monthly Credit Amount will be applied and
credited on the Monthly Anniversary Day. However, any monthly Credit Amounts
that accrue from the month following the month in which the disability starts
until the date we approve your claim will be applied and credited on the date we
approve your claim.
The Credit Amount selected by you may or may not be sufficient to keep the
policy in force. If it is not sufficient and if a No Lapse Guarantee is not in
effect, the policy will enter a Grace Period and you will be notified in
accordance with the Grace Period and Termination of Coverage section of the
policy.
Definition Of Totally Disabled
"Totally disabled" means that because of bodily injury or disease the Insured
cannot engage in any job which he or she has the schooling, training or
experience to do. If the Insured is under 16 years of age, "any job" includes
going to school.
We will consider the Insured totally disabled if he or she has suffered any of
these losses: loss of sight of both eyes or use of both hands, both feet, or one
hand and one foot. The loss must be total with no chance for recovery.
Disabilities Not Covered
This rider will not cover a disability that starts before the Insured's fifth
birthday or that results from:
<PAGE>
(1) An injury that is self-inflicted on purpose;
(2) Declared or undeclared war, or any cause or act of war, whether the
Insured is a member of any armed force or a civilian; or
(3) Bodily injury that is sustained or disease that first manifests
itself while this rider is not in force.
Notice And Proof Of Claim
Written notice and proof of the Insured's disability must be received a tour
Home Office while the Insured is alive and totally disabled. A delay will be
excused if the notice and proof are given as soon as reasonably possible. We may
require the Insured to be examined by physicians we name as part of the proof.
We will not apply and credit the monthly Credit Amount for any month that is
more than 12 months before we receive the notice and proof.
We may require proof that the Insured continues to be totally disabled including
examinations by physicians we name. After we have credited the monthly Credit
Amount for 24 months, we will not need this proof more often than once every 12
months. If proof is not furnished within two months after we ask for it, we will
not credit any more monthly Credit Amounts to your premium payments.
When Effective
This rider will not take effect unless the policy is in force. Once the rider
takes effect it will be in force until it ends.
If (1) the rider is added after the policy is in force, or (2) the Credit Amount
shown on the Policy Schedule is changed for any reason, then (3) the rider or
change will not take effect until the Monthly Anniversary Day coinciding with or
next following our date of approval. If the rider is added after the policy is
in force, such Monthly Anniversary Day will be the rider date shown on the
Policy Schedule.
Cost of Insurance
The monthly cost of insurance for this rider is shown on the Policy Schedule and
will be deducted as part of each Monthly Deduction. See the Monthly Deduction
and Monthly Expense Charge section of the policy.
Incorrect Age
The age of the Insured shown on the Policy Schedule should be correct. If the
age shown is not correct, it could mean the monthly cost of insurance deductions
for this rider are wrong. If so, we will adjust the Account Value. We will make
a charge or credit for the difference between the monthly costs of insurance
that should have been charged and those that were charged.
Policy Terms, Values
This rider is attached to and made a part of the policy. The terms and
definitions of the basic policy apply to the rider except to the extent they are
in conflict with its terms. This rider has no values.
When Rider Ends
This rider will end when the first of the following events occurs:
(1) If you send us your written request;
(2) The policy ends; or
(3) The day before the policy anniversary on which the Insured is age
60 except that if the Insured is then disabled, the rider will end on
the earlier of when disability ends or the day before the policy
anniversary on which the Insured is age 100.
<PAGE>
CHILDREN'S TERM RIDER
An Additional Benefit of this Policy Issued By
Columbus Life Insurance Company
Children's Term Rider Benefit
The effective date of this rider, the Children's Term Benefit Amount for each
Insured Child and the monthly cost of this rider are as shown on the Policy
Schedule of the policy.
We will pay the Children's Term Benefit Amount upon receipt at our Home Office
of due proof of death of any Insured Child subject to the terms and conditions
of the policy and this rider. The death must occur after such child is 15 days
old and before the earliest date (the "Expiration Date") of:
(1) the day before the policy anniversary on which the Insured under
the policy is or would have been age 65;
(2) the Insured Child's 23rd birthday; and
(3) any term conversion pertaining to such Insured Child under
Conversion Privilege, below.
Owner and Beneficiary
Unless otherwise provided by written notice to us:
(1) The Insured shall be the owner of this rider and the beneficiary of
any insurance payable during the Insured's lifetime;
(2) Upon the Insured's death, the Insured's spouse, if living, shall be
the owner and beneficiary of this rider; and
(3) Otherwise, or after the death of the Insured's spouse, the
surviving Insured Children, jointly, shall be the owners and
beneficiaries of this rider.
Insured Child
"Insured Child" means any child, stepchild, or legally adopted child of the
Insured at least 15 days old who was named in the application for this rider and
was less than 18 years of age on the date of such application.
Insured Child also means any child at least 15 days old, who after the date of
the application for this rider, was born of any legal marriage of the Insured or
was legally adopted by the Insured when less than 18 years old.
Fully Paid-Up Term Insurance After Insured's Death
Upon the Insured's death, except as the result of suicide while sane or insane
occurring within two years from the effective date of this rider, the insurance
on the Insured Children, including any such child born after the date of the
Insured's death, will become fully paid-up nonparticipating term insurance, and
will continue in effect for each such Insured Child until the Expiration Date
specified in this rider for such Insured Child.
Such paid-up term insurance may be surrendered for cash by the owner at any
time. The cash value is the net single premium for such insurance on the lives
of all persons covered, computed at their then attained age. Within 31 days
after any policy anniversary the cash value will not be less than on such
anniversary. We will furnish such values on request.
Conversion Privilege
The term insurance on any Insured Child may be converted at the attained age,
without evidence of insurability, subject to the following conditions:
(1) The term conversion privilege may be exercised after the Insured
Child is age 18 and prior to the Expiration Date of the insurance on
such Insured Child. If the Expiration Date occurs on the day before the
policy anniversary on which the Insured is or would have been age 65,
the conversion privilege may be exercised at that time for any Insured
Child underage 18.
<PAGE>
(2) The new policy may be on any whole life plan on the life of the
Insured Child which is regularly issued by us on the conversion date.
(3) The amount of the new policy may not be less than the minimum
required by us for the plan selected nor greater than 5 times the
amount of the insurance in effect on such Insured Child on the
conversion date. At least one plan will always be available to which
conversion will be permitted.
(4) The premium for the new policy shall be at the rate used by us for
standard risks on the policy date of the new policy.
(5) Additional benefit riders shall be included in the policy only upon
evidence of insurability satisfactory to us.
(6) The Incontestable and Suicide provision periods specified in the
new policy will run from the effective date of this rider except for
benefits obtained under provision (5), above.
(7) Conversion will be made during the lifetime of the Insured Child
upon receipt by us at our Home Office of the owner's written
application accompanied by the policy and the payment required to
effect such conversion. The Insured Child's term insurance under this
rider will expire then.
Cost of Rider
The monthly cost of insurance for this rider is shown on the Policy Schedule and
will be deducted as part of each Monthly Deduction. See the Monthly Deduction
and Monthly Expense Charge section of the policy.
Income Plans
All income plans of the policy are applicable to the Children's Term Benefit
Amount under this rider.
Suicide
If the Insured shall commit suicide while sane or insane within 2 years from the
effective date of this rider, the term insurance provided under this rider on
any Insured Child may be converted within 60 days after the date of such death
in accordance with and subject to the provisions set forth in this rider under
Conversion Privilege.
Limits on Our Contesting This Rider
This rider shall be incontestable as to the insurance provided on the life of
any person covered under this rider after this rider has been in effect for 2
years from its effective date.
Termination
This rider will terminate upon the first to occur of the following events:
(1) By written request of the owner of this rider on any monthly
anniversary date of this rider;
(2) Upon termination of the policy while the Insured is still alive; or
(3) On the day before the policy anniversary on which the Insured is or
would have been age 65.
Policy Terms
This rider is attached to and made a part of the policy. The terms and
definitions of the basic policy apply to this rider except to the extent they
are in conflict with its terms.
<PAGE>
ACCIDENTAL DEATH RIDER
An Additional Benefit of this Policy Issued By
Columbus Life Insurance Company
Conditions for Payment of Accidental Death Benefit
We will pay the Accidental Death Benefit to the beneficiary when we receive
proof at our Home Office that:
(1) The Insured died as a direct result, independent of all other
causes, of accidental bodily injury;
(2) The injury happened on or after the Insured's first birthday and
while the basic policy and this rider were in force;
(3) Death occurred no more than 90 days after the injury and while the
basic policy and this rider were in force; and
(4) All other terms of this rider are met.
Accidental Death Benefit Amount The amount of the Accidental Death Benefit is
shown on the Policy Schedule of the policy. It will be added to the Death
Benefit and paid in the same way.
Increased Benefit
We will double the Accidental Death Benefit if the injury occurred while the
Insured was riding as a fare-paying passenger within a public conveyance or as
an authorized passenger within a school bus. "Public conveyance" means an
aircraft, train, streetcar or motor vehicle while being operated by a licensed
common carrier or taxicab company for passenger service. "School bus" means a
motor vehicle while being operated by an accredited school for the
transportation of students on an officially authorized trip.
Intoxicated Driver Loss Benefit
If the Insured's death is the direct result of accidental bodily injury caused
by an intoxicated driver's operation of a vehicle, an additional benefit is
provided. This benefit is equal to the Accidental Death Benefit shown on the
Policy Schedule. The term "intoxicated" means under the influence of alcohol or
having a prohibited concentration of alcohol in the blood, breath, urine or
other bodily substance, as determined by the law of the jurisdiction in which
the accident occurred. The claimant must furnish proof that the driver was
intoxicated according to the law of such jurisdiction. This additional death
benefit will not be paid if the Insured was riding in the same vehicle as the
intoxicated driver who caused the Insured's death. The additional benefit
provided here under will not be paid unless the Insured also qualifies for the
Accidental Death Benefit provided under this rider.
When Benefit Will Not Be Paid
We will not pay any amount under this rider if the Insured's injury or death
results, directly or indirectly, from any of the following risks:
(1) Suicide while sane or insane;
(2) Mental or physical infirmity or disease, or treatment for the
infirmity or disease;
(3) Infection, except one caused by an accidental cut or wound;
(4) Commission of an assault or felony or an attempt to commit an
assault or felony;
(5) Declared or undeclared war, or any cause or act of war, whether the
Insured is a member of any armed force or a civilian;
(6) Travel in an aircraft or descent from it:
(a) if the Insured has any duties on board,
(b) if the Insured expects to descend while it is in flight, or
(c) if the aircraft is being operated for any training purpose;
(7) Taking or using any hallucinogen, narcotic or drug except on the
advice of a licensed physician;
(8) Taking, inhaling or absorbing any poison, gas or fumes except while
the Insured is on his or her job; or
(9) Participation in any activity or event, including the operation of
a vehicle, while intoxicated. "Intoxicated" means under the influence
of alcohol or having a prohibited concentration of alcohol in the
blood, breath, urine or other bodily substance, as determined by the
law of the jurisdiction in which the accident occurred.
<PAGE>
When Effective
This rider will not take effect until it is received while the Insured is alive
and in good health. It will not take effect unless the policy is in force. Once
the rider takes effect it will be in force until it ends.
If the rider is added after the policy is in force, or if the Accidental Death
Benefit amount is changed, the rider or change will not take effect until the
Monthly Anniversary Day coinciding with or next following our date of approval.
You must pay any charges required by us. If the rider is added after the policy
is in force, such Monthly Anniversary Day will be the rider date shown on the
Policy Schedule.
Cost of Insurance
The monthly cost of insurance for this rider is shown on the Policy Schedule and
will be deducted as part of the Monthly Deduction. See the Monthly Deduction and
Monthly Expense Charge section of the policy.
Incorrect Age
The age of the Insured shown on the Policy Schedule should be correct. If the
age shown is not correct, it could mean the monthly cost of insurance deductions
for this rider are wrong. If so, we will adjust the Account Value. We will make
a charge or credit for the difference between the monthly costs of insurance
that should have been charged and those that were charged.
Termination
This rider shall terminate upon the first to occur of the following events:
(1) If you send us your written request;
(2) Upon termination of the policy; or
(3) On the day before the policy anniversary on which the Insured is
age 70.
Policy Terms, Values
This rider is attached to and made a part of the policy. The terms and
definitions of the basic policy apply to this rider except to the extent they
are in conflict with its terms. This rider has no values.
<PAGE>
ACCELERATED DEATH BENEFIT RIDER
An Additional Benefit of this Policy Issued By
Columbus Life Insurance Company
Accelerated Death Benefit
You may elect to receive an advance on the Death Benefit under the policy, when
the Insured has been diagnosed as having a fatal illness.
The cumulative maximum advance will be equal to the lesser of (i) $250,000 or
(ii) that amount equal to 60% of the difference between (a) and (b) on the date
of the first advance, where:
"(a)" is equal to the total Death Benefit under the policy, as defined
in the policy; and
"(b)" is that amount equal to the cumulative total policy loan amount
you could borrow under the policy pursuant to the Loan Provisions
section of the policy, less the current Indebtedness.
The minimum advance is $5,000. You may request more than one advance subject to
the minimum and cumulative maximum amounts. Advances may be made as frequently
as monthly but all advances must be within 12 months of the first advance. The
Death Benefit used in this calculation must be incontestable. The advance will
be paid in a lump sum to you or to any other payee you so designate.
The accelerated death benefit under this rider will be made available to you on
a voluntary basis only. Therefore:
1. If you are required by law to elect this benefit to meet the claims
of creditors, whether in bankruptcy or otherwise, you are not eligible
for this benefit.
2. If you are required by a government agency to elect this benefit in
order to apply for, obtain, or keep a government benefit or
entitlement, you are not eligible for this benefit.
Tax Consequences
It is possible that part, or all, of an advance may be considered taxable by the
Internal Revenue Service. You should consult your attorney, accountant or other
tax adviser before requesting an advance under this rider.
Conditions for Making Advance
The payment of any advance under this rider is conditioned upon and subject to
our receipt of all of the following:
1. your written election of this advance;
2. the written consent of any irrevocable Beneficiary and any assignee;
3. your written designation of us as an assignee for a portion of the
Death Benefit proceeds equal to the amount of such advance, including
interest;
4. medical evidence acceptable to us from a licensed physician other
than the Insured or a member of his/her immediate family that:
(a) the Insured has been diagnosed as having a fatal illness; and
(b) such fatal illness was first diagnosed while the Insured was
covered by the policy; and
(c) such fatal illness is expected to result in death within one
year of the date such evidence is provided.
We may require a second opinion and examination of the Insured at our expense by
a physician designated by us. We also reserve the right to assess an
administrative charge of not more than $150.00 to process a claim under this
rider.
<PAGE>
Terms of Advance
Advances made under this rider will be in the form of a special loan secured by
a first lien on the Death Benefit payable under the policy. Upon the death of
the Insured, the Death Benefit will be reduced by the amount of this special
loan, including interest. We will administer this loan separate and apart from
any loan you make under the policy pursuant to the Loan Provisions section of
the policy.
The loan interest rate will be 8% (7.4% in advance) per year. Interest is due
and payable in advance to the next policy anniversary. If interest is not paid
when due, it will be added to the amount of the loan.
This loan may be increased by us if necessary to keep the policy in effect. If a
premium remains unpaid at the end of the Grace Period, we will increase such
loan by the amount of the premium and interest at 8% to the next policy
anniversary even if such increase causes the loan to exceed the cumulative
maximum advance available under this rider.
Other Provisions
Unless otherwise provided in your written election for an advance, the payee may
not commute, anticipate, assign, alienate or otherwise encumber any payment
under this rider.
This rider is attached to and made a part of the policy. The terms and
definitions of the basic policy apply to this rider except to the extent they
are in conflict with its terms. There is no cost for this rider.
<PAGE>
INSURED INSURABILITY RIDER
An Additional Benefit of this Policy Issued By
Columbus Life Insurance Company
Insured Insurability Option
The effective date of this rider, Insured Insurability Option Amount for each
option, monthly cost for this rider, and age to which payable are as shown on
the Policy Schedule of the policy.
We will provide an option to purchase additional insurance on the life of the
Insured in an amount equal to the Insured Insurability Option Amount, without
evidence of insurability, on each of the option dates specified below, subject
to the terms and conditions of this rider.
Schedule of Option Dates
A regular option date will occur on the policy anniversary on which the
Insured's age, last birthday, is: 25, 28, 31, 34, 37, and 40.
An alternate option date will occur on the 90th day after any of the following
events:
(1) The Insured's marriage;
(2) The birth of each living child born of the Insured's marriage, or
(3) The legal adoption of each child adopted by the Insured.
In the event of multiple births or adoptions, the number of options available on
the alternate option date so established shall be equal to the number of
children so born or adopted.
The exercise of an alternate option shall nullify the next regular option not
previously so nullified. Such nullification shall not affect the alternate
options which may become available on any subsequent alternate option dates.
The failure to exercise an option, whether regular or alternate, shall not
affect the options available on any subsequent option dates.
Automatic Insurance Protection
If the death of the Insured occurs during the 90 days prior to either a regular
or alternate option date, we will pay to the Beneficiary, without further
premium, the additional amount of insurance represented by one option.
Conditions for Exercise of Option
Each exercise of this option will be subject to the following conditions:
(1) A written application for the increase in the Specified Amount must
be made on or before the date as of which this option is exercised.
(2) If you are not the Insured, the written consent of the Insured must
be obtained.
(3) If this option is exercised as of an alternate option date, proof
of the event which gave rise to such date must be submitted.
If you are not the Insured and do not exercise an option, the Insured may
exercise it with your written consent.
The increase in the Specified Amount which results from the exercise of this
option will be subject to any limitations of risk which are in the policy. The
rate class will be the same as used in the basic policy. The effective date of
the increase will be the date as of which the option is exercised and all
conditions for exercise of the option have been satisfied. The new Specified
Amount of the policy may not be greater than the Insured Insurability Option
Amount plus the old Specified Amount.
<PAGE>
If the policy includes a Disability Credit Rider, then, upon an increase in the
Specified Amount under this rider, the Credit Amount under the Disability Credit
Rider may have to be changed in accordance with and subject to the terms,
conditions and requirements of the Disability Credit Rider. A change in the
Credit Amount under the Disability Credit Rider may require evidence of
insurability.
Cost of Rider
The monthly charge for this rider is shown on the Policy Schedule and will be
deducted as part of the Monthly Deduction. See the Monthly Deduction and Monthly
Expense Charge section of the policy.
Limits on Our Contesting This Rider
We will not contest this rider or the validity of an increase in Specified
Amount under an option after this rider has been in effect during the lifetime
of the Insured for two years after its effective date.
Incorrect Age
The age of the Insured shown on the Policy Schedule should be correct. If the
age shown is not correct, it could mean the monthly cost of insurance deductions
for this rider are wrong. If so, we will adjust the Account Value. We will make
a charge or credit for the difference between the monthly costs of insurance
that should have been charged and those that were charged.
Termination
This rider shall terminate upon the first to occur of the following events:
(1) If you send us your written request;
(2) Upon termination of the policy; or
(3) On the policy anniversary on which the Insured is age 40.
Policy Terms
This rider is attached to and made a part of the policy. The terms and
definitions of the basic policy apply to this rider except to the extent they
are in conflict with its terms.
<PAGE>
OTHER INSURED TERM RIDER
An Additional Benefit of this Policy Issued By
Columbus Life Insurance Company
Other Insured
"Other Insured" shall mean and separately refer to each person designated in an
application for coverage under this rider whom we have approved. A separate
application and proof of insurability is required for each person named as an
Other Insured, whether such application is made at the time this rider is first
issued or any time subsequent thereto.
Additional Benefit For Other Insured
This rider provides adjustable insurance on the life of each Other Insured
covered under this rider in the amount of the Other Insured Benefit Amount
specified for such Other Insured. The name and issue age of each Other Insured,
the effective date of coverage for each Other Insured, and the amount of the
Other Insured Benefit Amount for each such Other Insured are shown in the Policy
Schedule of the policy.
We will pay the Other Insured Benefit Amount specified for the Other Insured
upon receipt at our Home Office of due proof of death of such Other Insured
occurring while coverage on that person was in force under this rider, subject
to the terms and conditions of the policy and this rider. The Other Insured
Benefit Amount will be paid to the designated beneficiary of such coverage.
Owner and Beneficiary
You, the policy Owner, are also the owner of this rider. The Insured shall be
the primary beneficiary of the coverage provided for all Other Insureds under
this rider. The estate of each Other Insured shall be the contingent beneficiary
of the specific coverage provided under this rider on the life of such Other
Insured. At any time, you may designate someone else by special written request
as the primary or contingent beneficiary for any coverage provided under this
rider.
If the Insured dies while this rider is in effect, each Other Insured for whom
coverage was in force under this rider at the time of the Insured's death shall
have the right, for a period of 60 days following the death of the Insured, (i)
to change the beneficiary of the coverage provided under this rider on the life
of such Other Insured and (ii) to convert the coverage to a new policy in
accordance with the terms of this rider. See Conversion Privilege and
Termination of This Rider, below.
Increasing or Decreasing the Other Insured Benefit Amount
At any time after the first year of coverage for an Other Insured, you can
request an increase or decrease in the Other Insured Benefit Amount specified
for such Other Insured. The request must be in writing. Following any increase
or decrease in the Other Insured Benefit Amount for an Other Insured, the Other
Insured Benefit Amount for such Other Insured cannot be less than $10,000 nor
greater than the Specified Amount for the Insured under the basic policy.
A supplemental application must be submitted for any increase. We also require
satisfactory proof that the Other Insured is insurable. Any increase will go
into effect on the Monthly Anniversary Day coinciding with or next following our
date of approval.
Any decrease will go into effect on the Monthly Anniversary Day on or following
the date we process the request. Any decreases will be applied against any
increases previously made, in the reverse order in which they were made.
<PAGE>
Conversion Privilege
The coverage provided under this rider for any Other Insured may be converted
without evidence of insurability at the attained age of such Other Insured to a
new separate policy, subject to the following conditions:
(a) The conversion privilege with respect to each Other Insured will
continue until the policy anniversary on which such Other Insured is
age 85, at which time the Conversion Privilege will expire with respect
to such Other Insured.
(b) The new policy on the life of the Other Insured may be on any life
plan (other than term insurance) regularly issued by us at the attained
age on the conversion date.
(c) The amount of the new policy may not be less than our minimum for
the plan selected nor greater than the Other Insured Benefit Amount in
effect for such Other Insured at the conversion date. At least one plan
will always be available to which conversion will be permitted.
(d) The premium for the new policy will be at the rate used by us on
the policy date of the new policy for the mortality classification of
such Other Insured under this rider. If such mortality classification
is no longer available, we will use the mortality classification that
most closely matches such mortality classification of the Other Insured
under this rider.
(e) The Incontestable and Suicide provision periods specified in the
new policy will run from the effective date of coverage for such Other
Insured under this rider.
(f) Conversion will be made when we receive written application and the
payment required to make the conversion.
Cost of Insurance
The maximum monthly cost of insurance rates per $1000 of coverage are shown for
each Other Insured in the Policy Schedule. These rates are based on the 1980
Commissioners' Standard Ordinary Mortality Table for the rate class of the Other
Insured, age last birthday. The actual rates, which may be lower, will be
determined by us from time to time.
The monthly cost of insurance is determined for each Other Insured by
multiplying the cost of insurance rate for such Other Insured times such Other
Insured's Benefit Amount, and dividing by 1000. If such Other Insured's Benefit
Amount has been increased, this calculation is done separately for the original
amount and the increased amounts. The monthly cost of insurance for each Other
Insured is included in the Monthly Deduction for the policy. See the Monthly
Deduction and Monthly Expense Charge section of the policy.
Income Plans
All income plans of the policy are applicable to the Other Insured Benefit
Amount under this rider.
Expiration Date of Coverage on Other Insured
The coverage provided under this rider on the life of an Other Insured shall
expire on the day before the policy anniversary on which the Other Insured is
age 95 or, if earlier, on the date that the coverage under this rider for such
Other Insured is converted to a new policy under Conversion Privilege, above
(the "Coverage Expiration Date").
Coverage on any Other Insured may also be terminated upon your written request.
In this event, the Coverage Expiration Date for such Other Insured will be the
Monthly Anniversary Day coinciding with or next following the date we process
your request.
Termination of This Rider
This rider and coverage for all Other Insureds under this rider will terminate
on the first to occur of the following events:
(a) If you send us your written request;
(b) On the last Coverage Expiration Date to occur;
(c) Subject to the provisions set forth below, on the policy
anniversary on which the Insured is age 100 or, if earlier, on the
death of the Insured; or
(d) Upon termination of the policy.
If this rider terminates pursuant to clause (c) and the Conversion Privilege has
not otherwise expired for the Other Insured, we will allow each Other Insured
for whom coverage is in force under this rider, during the 60-day period
following the event described in clause (c), above, to convert the coverage
provided under this rider on the life of such Other Insured to a new policy
pursuant and subject to the terms and conditions set forth under Conversion
Privilege, above. The converted policy will become effective upon termination of
the coverage under this rider. If any Other Insured for whom coverage was in
force under this rider at the time of the event described in clause (c), above,
dies during the 60-day period following such event, we will pay the Other
Insured Benefit Amount for such Other Insured to the designated beneficiary of
such coverage.
<PAGE>
Reinstatement
If the policy lapses and is then reinstated, this rider may also be reinstated.
We will reinstate this rider if we receive:
(a) evidence of insurability satisfactory to us for each Other Insured
being reinstated; and
(b) payment of an amount of premium sufficient to pay (i) all back
rider costs for the Other Insured(s) being reinstated from the date of
termination to the date of reinstatement and (ii) the rider costs for
the Other Insured(s) being reinstated for the next three policy months.
The rider will be reinstated as of the policy's reinstatement date.
Limits on Our Contesting This Rider
The coverage for an Other Insured under this rider shall be incontestable after
it has been in effect during the lifetime of such Other Insured for two years
from the effective date of such coverage. However, with regard to statements
made concerning any reinstatement, the coverage for an Other Insured under this
rider shall be incontestable after it has been in effect for two years during
the lifetime of such Other Insured, as determined from its date of
reinstatement. Any increase in the Other Insured Benefit Amount for an Other
Insured effective after the original effective date of coverage shall be
incontestable only after such increase has been in effect for two years during
the lifetime of such Other Insured following the effective date of such
increase.
Suicide
If any Other Insured, whether sane or insane, commits suicide within two years
of the effective date of coverage on such Other Insured under this rider, we
will pay only a limited benefit. If the rider is in effect then, we will pay the
beneficiary an amount equal to the cost of insurance for coverage of such Other
Insured under this rider which was deducted from the policy's Account Value.
For any increase in this rider's Other Insured Benefit Amount for an Other
Insured, a limited benefit equal to the cost of insurance which was deducted for
the increase will be paid if such Other Insured commits suicide within two years
of such increase.
Policy Terms
This rider is attached to and made a part of the policy. The terms and
definitions of the basic policy apply to this rider except to the extent they
are in conflict with its terms.
ARTICLES OF INCORPORATION
OF
COLUMBUS LIFE INSURANCE COMPANY
The undersigned, desiring to form a corporation for profit under
Sections 3907.01 et seq. of the Revised Code of Ohio, do hereby certify:
FIRST: The name of the corporation is Columbus Life Insurance Company.
SECOND: The place in Ohio where the principal office of the corporation
is located is the City of Columbus, Franklin County.
THIRD: The kind of business to be undertaken by, and the purpose of,
the corporation are to make insurance upon the lives of individuals, and every
type of insurance appertaining thereto or connected therewith, on the stock
plan, to grant, purchase, and dispose of annuities, and to make insurance
against accidents to persons, sickness, or temporary or permanent physical
disability. The corporation shall have the power and authority to exercise any
and all rights, powers and privileges, and shall be subject to all duties and
obligations, now or hereafter granted to or imposed upon domestic legal reserve
life insurance companies by the laws of the State of Ohio and shall have the
power and authority to engage in any act or activity which is not unlawful for
domestic legal reserve life insurance companies under the laws of the State of
Ohio.
FOURTH: (A) The corporate powers of the corporation shall be exercised
by its board of directors, except where the laws of the State of Ohio or the
articles or the regulations of the corporation require that certain corporate
power be exercised by action of its stockholders, in which cases such corporate
power shall be exercised by its stockholders.
<PAGE>
(B) The number of directors of the corporation, which shall not be less
than five (5) nor more than twenty-one (21), may be fixed or changed from time
to time by a resolution adopted by the affirmative vote, whether cast in person
or by proxy, of the holders of shares of the corporation entitling them to
exercise not less than a majority of the voting power of the corporation, but no
reduction in the number of directors shall of itself have the effect of
shortening the term of any incumbent director; and until changed by action of
the stockholders as aforesaid, the number of directors of the corporation shall
be fifteen (15).
(C) The initial directors shall be elected at the first meeting of
stockholders. Thereafter, directors shall be elected at the annual meeting of
the stockholders of the corporation or at a special meeting called for that
purpose. Each director shall hold office until the next annual meeting of
stockholders of the corporation and until his successor is duly elected and
shall qualify or until his earlier resignation, removal from office, or death.
The election of directors shall be by ballot whenever requested by the presiding
officer of the meeting or by the holders of shares of the corporation entitling
them to exercise not less than a majority of the voting power of the
corporation, but unless such request is made the election shall be by voice
vote.
(D) Directors need not be stockholders of the corporation. A majority
of the directors shall be citizens of the State of Ohio.
(E) A director may be removed from office, with or without cause, only
by the vote of the holders of not less than a majority of the voting power of
the corporation. In case one or more vacancies in the board of directors shall
exist, the remaining directors, through less than a majority of the whole
authorized number of directors, may, by the vote of a majority of their number,
fill any vacancy in the board of directors for the unexpired term.
<PAGE>
FIFTH: The officers of the corporation may be elected by the directors
at any meeting of the directors to serve at the pleasure of the directors and
upon such other terms and conditions of employment as the directors may
determine. The officers of the corporation shall be a president, a secretary,
and a treasurer. The directors may elect one or more vice-presidents and such
other officers and assistant officers as the directors may from time to time
determine. A majority of the officers of the corporation shall be citizens of
the State of Ohio. Any two or more offices may be held by the same person.
SIXTH: (A) The paid-in capital of the corporation shall be not less
than $1,000,000, the contributed surplus of the corporation shall be not less
than $1,000,000, and the aggregate capital and surplus of the corporation shall
be not less than $2,500,000. The authorized number of shares of the corporation
shall be 10,000,000, all of which shall be common shares, each with a par value
of $1.00 per share.
(B) No stockholder of the corporation shall have, as a matter of right,
the preemptive right to purchase or subscribe for shares of any class, now or
hereafter authorized, or to purchase or subscribe for securities or other
obligations convertible into or exchangeable for such shares or which by
warrants or otherwise entitle the holders thereof to subscribe for or purchase
any such shares.
SEVENTH: The directors of the corporation shall have the power to cause
the corporation from time to time and at any time to purchase, hold, sell,
transfer or otherwise deal with (A) shares of any class or series issued by it,
(B) any security or other obligation of the corporation which may confer upon
the holder thereof the right to convert the same into shares of any class or
series authorized by the articles of the corporation, and
<PAGE>
(C) any security or other obligation which may confer upon the holder thereof
the right to purchase shares of any class or series authorized by the articles
of the corporation. The corporation shall have the right to repurchase, if and
when any shareholder desires to sell, or on the happening of any event is
required to sell, shares of any class or series issued by the corporation. The
authority granted in this Article Seventh of these articles shall not limit the
plenary authority of the directors to purchase, hold, sell, transfer, or
otherwise deal with shares of any class or series, securities, or other
obligations issued by the corporation or authorized by its articles.
IN WITNESS WHEREOF, the undersigned have hereunto set their respective
hands as incorporators of Columbus Life Insurance Company on the dates so
indicated.
/s/ Ralph E. Waldo
------------------------- ------------------------
Ralph E. Waldo
/s/ Eugene W. Bates
------------------------- ------------------------
Eugene W. Bates
/s/ James N. Clark
------------------------- ------------------------
James N. Clark
/s/ William J. Reidenbach
------------------------- ------------------------
William J. Reidenbach
/s/ Wendall Sullivan
------------------------- ------------------------
Wendall Sullivan
/s/ James W. Carpenter
------------------------- ------------------------
James W. Carpenter
/s/ Ralph F. Ellis
------------------------- ------------------------
Ralph F. Ellis
/s/ Robert F. Morand
------------------------- ------------------------
Robert F. Morand
/s/ David J. Menke
------------------------- ------------------------
David J. Menke
/s/ William F. Meyer
------------------------- ------------------------
William F. Meyer
<PAGE>
/s/ John H. Santen
------------------------- ------------------------
John H. Santen
/s/ Donald J. Wuebbling
------------------------- ------------------------
Donald J. Wuebbling
/s/ Hans M. Zimmer
------------------------- ------------------------
Hans M. Zimmer
I hereby certify that the foregoing Articles of Incorporation of
Columbus Life Insurance Company are in accordance with the Constitution and laws
of the State of Ohio and of the United States and that the same are hereby
approved as of this 3rd day of September, 1986.
ANTHONY J. CELEBREZZE, JR.
Attorney General of Ohio
By: ______________________
NAME: PETER D. PATITSAS
Assistant Attorney General
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
COLUMBUS LIFE INSURANCE COMPANY
PAUL H. AMATO and DONALD J. WUEBBLING, being respectively President and
Secretary of the Columbus Life Insurance Company, do hereby certify that on
March 27, 1996 the sole shareholder of said corporation by unanimous written
consent adopted the following resolution amending the Articles of Incorporation
of the corporation:
RESOLVED, that Article SECOND of the Articles of Incorporation of the
Company be and hereby is amended to read as follows:
SECOND: The place in Ohio where the principal office of the corporation
is located is the City of Cincinnati, Hamilton County.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the corporate
seal this 27th day of March, 1996.
/s/ Paul H. Amato
--------------------------------
Paul H. Amato, President
/s/ Donald J. Wuebbling
--------------------------------
Donald J. Wuebbling, Secretary
April 9, 1996
I, James W. Carpenter, Assistant Secretary of Columbus Life Insurance
Company, hereby certify that this is a true and correct copy of the Certificate
of Amendment dated March 27, 1996.
/s/ James W. Carpenter
--------------------------------
CODE OF REGULATIONS
OF
COLUMBUS LIFE INSURANCE COMPANY
ARTICLE I
Meetings of Shareholders
Section 1. Annual Meetings. The annual meeting of shareholders, for the
election of directors, for the consideration of any reports and for the
transaction of such other business as may properly come before the meeting,
shall be held on the fourth Monday in January of each year or on such other date
in the period January 1 through March 31 each year as may be designated by the
Board of Directors.
Section 2. Special Meetings. Special meetings of the shareholders may
be called by the Chief Executive Officer, by the Secretary, by a majority of the
members of the Board of Directors acting with or without a meeting, or by the
holders of at least twenty-five percent of the shares then outstanding and
entitled to vote at the shareholders' meeting. Upon delivery of the request in
writing to the Chief Executive Officer or the Secretary, the one to whom the
request is delivered shall give notice to shareholders of the meeting in
accordance with the Code of Regulations. If the request is refused, or is not
given with 15 days after the delivery or mailing of the request, the persons
making the request may call a meeting of the shareholders by giving such notice.
Section 3. Place of Meetings. All meetings of shareholders shall be
held at the principal office of the corporation unless another place is
designated by a vote of the majority of the Directors. Meetings may be held at
any place within or without the State of Ohio.
Section 4. Notice of Meetings. A written or printed notice of every
meeting of shareholders, whether annual or special, stating the time, place and
the purpose or purposes for which the meeting is called, shall be given by the
Chief Executive Officer or the Secretary by personal delivery or by mail not
more than sixty nor less than seven days before such meeting to each shareholder
of record entitled to notice thereof. If mailed, such notice shall be addressed
to the shareholder at his address as it appears upon the records of the
corporation. If a meeting is adjourned to another time or place, no further
notice as to such adjourned meeting need be given if the time and place of a
transfer of shares after notice has been given and prior to the holding of the
meeting, it shall not be necessary to serve notice on the transferee. Nothing
hearin (sic) contained shall prevent the setting of a record date in the manner
provided by law for the determination of the shareholders who are entitled to
receive notice of or to vote at any meeting of shareholders or for any purpose
permitted by law.
Section 5. Waiver of Notice. Notice of the time, place and purpose or
purposes of any meeting of shareholders may be waived in writing, either before
or after the holding of such meeting, by any shareholder, which writing shall be
filed with or entered upon the records of such meeting. The attendance of any
shareholder, in person or by proxy, at any such meeting without protesting the
lack of proper notice prior to or at the commencement of such meeting shall be
deemed to be a waiver by such shareholder of notice of such meeting.
<PAGE>
Section 6. Action Without Meeting. Any action which may be authorized
or taken at a meeting of shareholders, may be authorized or taken without a
meeting if authorized in a writing signed by all the shareholders who would be
entitled to notice of a meeting of shareholders held for such purpose.
Section 7. Quorum. At any meeting of shareholders, the holders of a
majority in amount of the shares of the corporation then outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum for such meeting, but no action required by law, the
Articles of Incorporation or this Code of Regulations to be authorized or taken
by the holders of a designated proportion of the shares of any particular class,
or of each class, may be authorized or taken by a lesser proportion. The holders
of a majority of the voting shares represented at a meeting may adjourn such
meeting from time to time, and at such adjourned meeting any business may be
transacted as if the meeting had been held as originally called.
Section 8. Order of Business. The order of business at any meeting of
shareholders shall be determined by the presiding officer unless otherwise
determined by a vote of a majority in interest of the shareholders present and
entitled to a vote at such meeting.
Section 9. Shareholders Entitled to Vote. Every shareholder of record
shall be entitled at each meeting of shareholders to one vote for each share
standing in his or her name on the books of the corporation.
A corporation owning shares in this corporation may vote the same by
its Chief Executive Officer, its Secretary or its Treasurer, and any such
officer shall conclusively be deemed to have authority to vote such shares and
to execute any proxies and written waivers and consents in relation thereto,
unless, before a vote is taken or a consent or waiver is acted upon, it shall be
made to appear by a certified copy of the regulations, by-laws or resolution of
the Board of Directors of the corporation owning such shares that such authority
does not exist or is vested in some other officer or person.
Section 10. Votes Necessary. At all elections of the directors the
candidates receiving the greatest number of votes shall be elected. All other
questions shall be determined by a majority vote of the shares entitled to vote
and represented at the meeting in person or by proxy, unless for any particular
purpose the vote of a greater proportion of the shares, or of any particular
class of shares, or of each class, is otherwise required by law, the Articles of
Incorporation or this Code of Regulations.
Section 11. Proxies. At meetings of the shareholders any shareholder of
record entitled to vote thereat may be represented any may vote by a proxy or
proxies appointed by an instrument in writing, but such instrument shall be
filed with the secretary of the meeting before the person holding such proxy
shall be allowed to vote thereunder. No proxy shall be valid after the
expiration of eleven months after the date of its execution, unless the
shareholder executing it shall have specified therein the length of time it is
to continue in force.
<PAGE>
ARTICLE II
Board of Directors
Section 1. Powers, Qualification, Number, Term. All the capacity of the
corporation shall be vested in and all its power and authority, except as
otherwise provided by law, shall be exercised by, and its business and affairs
shall be conducted and its property managed under the direction of the Board of
Directors of not less then (sic) five (5) nor more than twenty-one (21) persons
as the shareholders shall by resolution determine at each annual meeting or at a
special meeting called for the purpose of electing directors.
A majority of the Board shall be citizens of the State of Ohio.
Section 2. Vacancies. In case of any vacancy among the directors, the
remaining directors, though less than a quorum, by an affirmative vote of the
majority thereof, may elect a director to fill such vacancy, and such newly
elected director shall hold office until the next annual meeting or a special
meeting of shareholders called for the purpose of electing directors and until
his successor shall be elected and qualified.
Section 3. By-laws. The Board of Directors may adopt and amend from
time to time by-laws to govern its own proceedings consistent with the Articles
of Incorporation, the Code of Regulations and Ohio law.
Section 4. Quorum and Manner of Acting. A majority of all the directors
then in office shall be present in person at any meeting of directors in order
to constitute a quorum for the transaction of business at such meeting, but in
the absence of a quorum a majority of those present may adjourn a meeting from
time to time. Any business may be transacted at an adjourned meeting as if the
meeting had been held as originally called. Except as otherwise provided by law,
the Articles of Incorporation or this Code of Regulation, the act of the
majority of the directors present at any meeting of directors at which a quorum
is present shall be the act of the Board of Directors. Any action which may be
taken by the directors at a meeting may be taken without a meeting if authorized
by a writing signed by all directors.
Section 5. Removal of Directors. Any director may be removed, with or
without cause, at any time by the affirmative vote of a majority of the
shareholders entitled to vote at a special meeting of shareholders called for
that purpose. If any director is removed, the vacancy may be filled by the
shareholders at the same meeting.
Section 6. Meetings. After each annual election of directors the newly
elected directors shall meet as soon as practicable for the purpose of
organization, the election and appointment of officers and the transaction of
other business. The directors shall hold such other meetings from time to time
as they may deem necessary, and such meetings as may from time to time be called
by the Chief Executive Officer, Secretary or any two directors. Meetings shall
be held at the principal office of the corporation, or at such other place
within or without the State of Ohio as the Chief Executive Officer or a majority
of the directors may determine.
<PAGE>
Section 7. Notice of Meetings. The Chief Executive Officer or the
Secretary shall cause telegraphic or written notice of the time and place of all
meetings of the directors, regular and special, to be duly served upon or sent
to each director not less then (sic) three days nor more than twenty days before
the meeting, except that a regular meeting of the directors may be held without
notice immediately after the annual meeting of shareholders, at the same place
as such annual meeting was held, for the purpose of electing or appointing
officers for the ensuing year and for the transaction of such other business as
may properly come before such meeting. No notice of adjourned meetings need be
given. Notice of the time and place of any meeting of the directors may be
waived in writing, either before or after the holding of such meeting, by any
director, which writing shall be filed with or entered upon the records of such
meeting. The attendance of any director at any such meeting without protesting
the lack of proper notice prior to or at the commencement of the meeting shall
be deemed to be a waiver by him of notice of such meeting.
Section 8. Compensation. Directors shall be entitled to receive as
compensation for services and expenses, such amount as the Board of Directors
may determine.
ARTICLE III
Committees
Section 1. Creation. The Board of Directors may create an Executive
Committee and any other committee of directors consisting of not less than three
(3) directors, and may delegate to each such committee any of the authority of
directors other than the filling of vacancies on the Board of Directors or in
any committee of directors. Each such committee shall serve at the pleasure of
the Board of Directors, shall act only in the intervals between meetings of the
directors and shall be subject to the control and direction of the directors.
The directors may appoint one or more directors as alternate members of any
committee. An alternate member may take the place of any absent member at any
meeting of such committee.
Section 2. Authority and Manner of Acting. Any such committee may act
by majority of its members at a meeting or by a writing signed by all of its
members. Any act or authorization of an act or transaction of business by any
such committee within the authority delegated to it shall be as effective for
all purposes as the act or authorization of the directors.
ARTICLE IV
Officers
Section 1. Officers. The officers of the corporation shall be a Chief
Executive Officer, President, one or more Vice Presidents, a Treasurer and a
Secretary and such other officers or assistant officers as the Board of
Directors may from time to time elect or appoint. The Chief Executive Officer
shall be a member of the Board of Directors. In addition, the Board of Directors
may elect a Chairman and a Vice Chairman from among themselves. More than one
office may be held by the same person. A majority of the officers must be
citizens of the State of Ohio.
<PAGE>
Section 2. Tenure of Office. Officers shall hold their respective
offices for one year or until their successors are elected or appointed and
qualified. Any officer may be removed or suspended at any time without cause and
without notice by an affirmative vote of the whole Board.
Section 3. Duties of Officers.
(a) Chairman of the Board: The Chairman of the Board of Directors shall preside
at all meetings of the Board and perform such other duties as may be delegated
to him from time to time by the Board.
(b) Vice Chairman of the Board: The Vice Chairman of the Board shall preside at
all meetings of the Board when the Chairman is absent and perform such other
duties as may be delegated to him from time to time by the Board.
(c) Chief Executive Officer: The Chief Executive Officer shall be the chief
executive officer of the corporation. He shall have general supervision and
control of the business of the corporation. All other officers shall act under
his direction and he may assign or distribute duties or authority among officers
and employees. The Chief Executive Officer may designate the officer who shall
act in his place in his absence.
(d) President: The President shall be the chief operating officer of the
corporation. He shall have general and active management of the business of the
corporation as determined by the Chief Executive Officer.
(e) Vice Presidents: The Vice Presidents, under the direction of the Chief
Executive Officer, shall assist in the management of the corporation and perform
such duties as may be assigned to them.
(f) Secretary: The Secretary shall keep the minutes of the meetings of the Board
and of policyholders and record them min a book kept for that purpose. He shall
perform such other duties as may be assigned to him.
(g) Treasurer: The Treasurer shall perform the usual duties of such office and
such other duties as may be assigned to him.
(h) All other officers and assistant officers shall perform such duties as may
from time to time be delegated to them.
<PAGE>
ARTICLE V
Shares
Section 1. Certificates. Certificates evidencing the ownership of
shares of the corporation shall be issued to those entitled to them. Each
certificate for shares shall bear a distinguishing number, the signatures of the
Chief Executive Officer, the President or a Vice President and of the Secretary
or an Assistant Secretary, and such recitals as may be required by law. The
certificates for shares shall be of such tenor and design as the Board of
Directors may from time to time adopt. A record shall be kept by the Secretary
of the name of each person owning the shares represented by each certificate,
the number of shares represented thereby, the date thereof and, in case of
cancellation, the date of cancellation.
Section 2. Transfers. Shares may be transferred on the proper books of
the corporation by the registered holders thereof, or by their attorneys or
their legal representatives, by surrender of the certificates therefor for
cancellation and a written assignment of the shares evidenced thereby. The Board
of Directors may appoint one or more transfer agents and one or more registrars
for the shares of the corporation.
Section 3. Lost Certificates. The Board of Directors may order a new
certificate or certificates of shares to be executed and delivered in place of
any certificate or certificates alleged to have been lost, stolen or destroyed,
but, in every case, the owner of the lost, stolen or destroyed certificate or
certificates shall first cause to be given to the corporation a bond, with
surety or sureties satisfactory to the corporation, in such sum as the Board of
Directors may, in its discretion, deem sufficient as indemnity against any loss
or liability that the corporation may incur by reason of the issuance of such
new certificates; but the Board of Directors, may in its discretion, refuse to
issue such new certificates, save upon the order of some court and one having
jurisdiction in such matters, pursuant to the statute made and provided.
Section 4. Record Date. The Board of Directors may fix a date, not more
than 60 days nor less than ten days preceding the date of any meeting of
shareholders or the date for payment of any dividend, or the date for allotment
of rights, or the date when any change or conversion or exchange of shares shall
go into effect, as a record date for the determination of the shareholders
entitled to notice of, and to vote at, any such meeting, or entitled to receive
payment of any such dividend or to any such allotment or rights, or to exercise
the rights in respect to any such change, conversion or exchange. Only such
shareholders of record on the date so fixed shall be entitled to receive notice
of, and to vote at such meeting, or to receive such rights, as the case may be,
notwithstanding any transfer of any share on the books of the corporation after
such record date. If the Board of Directors does not fix a date, the record date
shall be the date next proceeding the 15th day prior to the date of such
meeting, payment, or other event, or if such date is a legal holiday the last
business day next preceding such date.
<PAGE>
ARTICLE VI
Indemnification and Insurance
Section 1. Indemnification. To the fullest extent not prohibited by
applicable law, the corporation shall indemnify each director, officer and
employee against any and all costs and expenses (including attorney fees,
judgments, fines, penalties, amounts paid in settlement, and other
disbursements) actually and reasonably incurred by or imposed upon such
director, officer or employee in connection with any action, suit, investigation
or proceeding (or any claim or other matter therein), whether civil, criminal,
administrative or otherwise in nature, including any settlements thereof or any
appeals therein, with respect to which such director, officer or employee is
named or otherwise becomes or is threatened to be made a party by reason of
being or at any time having been a director, officer or employee of the
corporation, or, at the direction or request of the corporation, a director,
trustee, officer, administrator, manager, employee, adviser or other agent of or
fiduciary for any other corporation, partnership, trust, venture or other entity
or enterprise including any employee benefit plan; provided, however, that no
person shall be indemnified to the extent, if any, ,that the directors, acting
at a meeting at which a quorum of directors who are not parties to or threatened
with any such action, suit, investigation or proceeding, determine that such
indemnification is contrary to applicable law.
Any director who is a party to or threatened with any such action,
suit, investigation or proceeding shall not be qualified to vote; and if for
this reason a quorum of directors, who are not disqualified from voting by
reason of being parties to or threatened with such action , suit, investigation
or proceeding, cannot be obtained, such determination shall be made by three
attorneys at law, who have not theretofore represented the corporation in any
matter and who shall be selected by all of the officers and directors of the
corporation who are not parties to or threatened with any such action, suit,
investigation or proceeding. If there are no officers or directors who are
qualified to make such selection, the selection shall be made by a Judge of the
Court of Common Pleas of Hamilton County, Ohio. Such indemnification shall not
be deemed exclusive of any other right to which such director, officer or
employee may be entitled under the Articles of Incorporation, this Code of
Regulations, any agreement, any insurance purchased by the corporation, vote of
shareholders or otherwise.
Section 2. Insurance. The Board of Directors of the corporation may
secure and maintain such policies of insurance as it may consider appropriate to
insure any person who is serving or has served as a director, officer or
employee of the corporation, or who is serving or has served at the request of
the corporation as a director, trustee, officer, manager, employee, adviser or
other agent of or fiduciary for any other corporation, partnership, trust,
venture, or other entity or enterprise including any employee benefit plan
against any liability asserted against and incurred by such person.
<PAGE>
ARTICLE VII
Seal
The seal of the corporation shall be circular, about two inches in
diameter, with the name of the corporation engraved around the margin and the
word "SEAL" engraved across the center.
ARTICLE VIII
Amendments
Section 1. Meeting of Shareholders. This Code of Regulations may be
changed, added to or repealed by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting power of the corporation at
any annual meeting of the shareholders or at any special meeting of the
shareholders called for that purpose, provided that at any special meeting the
intention to consider such amendments must be stated in the notices or waivers
of notice for such special meeting.
Section 2. Amendment Without Meeting. This Code of Regulations may be
amended without a meeting of shareholders by the written consent of the holders
of record of shares entitling them to exercise a majority of the voting power of
the corporation.
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
COLUMBUS LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
TOUCHSTONE SECURITIES, INC.
<PAGE>
TABLE OF CONTENTS
DESCRIPTION PAGE
Section 1. Available Funds....................................................2
1.1 Availability.................................................2
1.2 Addition, Deletion or Modification of Funds..................2
1.3 No Sales to the General Public...............................2
Section 2. Processing Transactions............................................2
2.1 Timely Pricing and Orders....................................2
2.2 Timely Payments..............................................3
2.3 Applicable Price.............................................3
2.4 Dividends and Distributions..................................4
2.5 Book Entry...................................................4
Section 3. Costs and Expenses.................................................4
3.1 General......................................................4
3.2 Parties To Cooperate.........................................4
Section 4. Legal Compliance...................................................4
4.1 Tax Laws.....................................................4
4.2 Insurance and Certain Other Laws.............................7
4.3 Securities Laws..............................................7
4.4 Notice of Certain Proceedings and Other Circumstances........8
4.5 LIFE COMPANY To Provide Documents; Information About AVIF....9
4.6 AVIF To Provide Documents; Information About LIFE COMPANY...10
Section 5. Mixed and Shared Funding..........................................11
5.1 General.....................................................11
5.2 Disinterested Directors.....................................11
5.3 Monitoring for Material Irreconcilable Conflicts............12
5.4 Conflict Remedies...........................................12
5.5 Notice to LIFE COMPANY......................................14
5.6 Information Requested by Board of Directors.................14
5.7 Compliance with SEC Rules...................................14
5.8 Other Requirements..........................................14
Section 6. Termination........................................................14
6.1 Events of Termination.......................................14
6.2 Notice Requirement for Termination..........................15
6.3 Funds To Remain Available...................................16
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<PAGE>
DESCRIPTION PAGE
6.4 Survival of Warranties and Indemnifications.................16
6.5 Continuance of Agreement for Certain Purposes...............16
Section 7. Parties To Cooperate Respecting Termination.......................16
Section 8. Assignment.........................................................17
Section 9. Notices............................................................17
Section 10. Voting Procedures.................................................18
Section 11. Foreign Tax Credits...............................................18
Section 12. Indemnification...................................................18
12.1 Of AVIF by LIFE COMPANY and UNDERWRITER.....................18
12.3 Effect of Notice............................................23
12.4 Successors..................................................23
Section 13. Applicable Law....................................................23
Section 14. Execution in Counterparts.........................................23
Section 15. Severability......................................................23
Section 16. Rights Cumulative.................................................24
Section 17. Headings..........................................................24
Section 18. Confidentiality...................................................24
Section 19. Trademarks and Fund Names.........................................25
Section 20. Parties to Cooperate..............................................25
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<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 1ST day of MAY , 1999
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"), Columbus Life Insurance Company, an Ohio life insurance
company ("LIFE COMPANY"), on behalf of itself and each of its segregated asset
accounts listed in Schedule A hereto, as the parties hereto may amend from time
to time (each, an "Account," and collectively, the "Accounts"); and Touchstone
Securities, Inc., an affiliate of LIFE COMPANY and the principal underwriter of
the Contracts ("UNDERWRITER") (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of fifteen separate series ("Series"),
shares ("Shares") of each of which are registered under the Securities Act of
1933, as amended (the "1933 Act") and are currently sold to one or more separate
accounts of life insurance companies to fund benefits under variable annuity
contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A
hereto as the Parties hereto may amend from time to time (each a "Fund";
reference herein to "AVIF" includes reference to each Fund, to the extent the
context requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set forth on
Schedule A hereto, as the Parties hereto may amend from time to time, which
Contracts (hereinafter collectively, the "Contracts"), if required by applicable
law, will be registered under the 1933 Act; and
WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts,
each of which may be divided into two or more subaccounts ("Subaccounts";
reference herein to an "Account" includes reference to each Subaccount thereof
to the extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts, each
of which is registered as a unit investment trust investment company under the
1940 Act (or exempt therefrom), and the security interests deemed to be issued
by the Accounts under the Contracts will be registered as securities under the
1933 Act (or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Contracts; and
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WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under
the Securities Exchange Act of 1934 ("1934 Act") and a member in good standing
of the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to LIFE COMPANY for
purchase and redemption at net asset value and with no sales charges, subject to
the terms and conditions of this Agreement. The Board of Directors of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Directors acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that no Shares of any Fund have been or
will be sold to the general public.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to provide
LIFE COMPANY with the net asset value per Share for each Fund by 6:00 p.m.
Central Time on each Business Day. As used herein, "Business Day" shall mean any
day on which (i) the New York Stock Exchange is open for regular trading, (ii)
AVIF calculates the Fund's net asset value, and (iii) LIFE COMPANY is open for
business.
(b) LIFE COMPANY will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. LIFE COMPANY will perform such Account processing the same Business Day,
and will place corresponding orders to
2
<PAGE>
purchase or redeem Shares with AVIF by 9:00 a.m. Central Time the following
Business Day; PROVIDED, however, that AVIF shall provide additional time to LIFE
COMPANY in the event that AVIF is unable to meet the 6:00 p.m. time stated in
paragraph (a) immediately above. Such additional time shall be equal to the
additional time that AVIF takes to make the net asset values available to LIFE
COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY and
of redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase and
redemption orders with respect to each Fund and shall transmit one net payment
per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), LIFE COMPANY shall be entitled
to an adjustment to the number of Shares purchased or redeemed to reflect the
correct net asset value per Share. Any material error in the calculation or
reporting of net asset value per Share, dividend or capital gain information
shall be reported promptly upon discovery to LIFE COMPANY.
2.2 TIMELY PAYMENTS.
LIFE COMPANY will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by LIFE COMPANY by 1:00 p.m. Central Time
on the same day as the Order is placed, to the extent practicable, but in any
event within five (5) calendar days after the date the order is placed in order
to enable LIFE COMPANY to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be required
by law.
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that LIFE COMPANY receives
prior to the close of regular trading on the New York Stock Exchange on a
Business Day will be executed at the net asset values of the appropriate Funds
next computed after receipt by AVIF or its designated agent of the orders. For
purposes of this Section 2.3(a), LIFE COMPANY shall be the designated agent of
AVIF for receipt of orders relating to Contract transactions on each Business
Day and receipt by such designated agent shall constitute receipt by AVIF;
PROVIDED that AVIF receives notice of such orders by 9:00 a.m. Central Time on
the next following Business Day or such later time as computed in accordance
with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by LIFE COMPANY will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
3
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2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to LIFE COMPANY of any income
dividends or capital gain distributions payable on the Shares of any Fund. LIFE
COMPANY hereby elects to reinvest all dividends and capital gains distributions
in additional Shares of the corresponding Fund at the ex-dividend date net asset
values until LIFE COMPANY otherwise notifies AVIF in writing, it being agreed by
the Parties that the ex-dividend date and the payment date with respect to any
dividend or distribution will be the same Business Day. LIFE COMPANY reserves
the right to revoke this election and to receive all such income dividends and
capital gain distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will
be recorded in an appropriate title for LIFE COMPANY, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided in Schedule B, attached
hereto and made a part hereof, each Party will bear, or arrange for others to
bear, all expenses incident to its performance under this Agreement.
3.2 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of AVIF and the Accounts.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) AVIF represents and warrants that each Fund is currently qualified
as a regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and represents that it will use
its best efforts to qualify and to maintain qualification of each Fund as a RIC.
AVIF will notify LIFE COMPANY immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so qualify
in the future.
(b) AVIF represents that it will use its best efforts to comply and to
maintain each Fund's compliance with the diversification requirements set forth
in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under
the Code. AVIF will notify LIFE COMPANY immediately upon having a reasonable
4
<PAGE>
basis for believing that a Fund has ceased to so comply or that a Fund might not
so comply in the future. In the event of a breach of this Section 4.1(b) by
AVIF, it will take all reasonable steps to adequately diversify the Fund so as
to achieve compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.
(c) LIFE COMPANY agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of LIFE
COMPANY or, to LIFE COMPANY's knowledge, of any Contract owners, annuitants,
insureds or participants (as appropriate) under the Contracts (collectively
"Participants"), that any Fund has failed to comply with the diversification
requirements of Section 817(h) of the Code or LIFE COMPANY otherwise becomes
aware of any facts that could give rise to any claim against AVIF or its
affiliates as a result of such a failure or alleged failure:
(i) LIFE COMPANY shall promptly notify AVIF of such
assertion or potential claim (subject to the
Confidentiality provisions of Section 18 as to any
Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to
minimize any liability that may arise as a result of
such failure or alleged failure;
(iii) LIFE COMPANY shall use its best efforts to minimize
any liability of AVIF or its affiliates resulting
from such failure, including, without limitation,
demonstrating, pursuant to Treasury Regulations
Section 1.817-5(a)(2), to the Commissioner of the IRS
that such failure was inadvertent;
(iv) LIFE COMPANY shall permit AVIF, its affiliates and
their legal and accounting advisors to participate in
any conferences, settlement discussions or other
administrative or judicial proceeding or contests
(including judicial appeals thereof) with the IRS,
any Participant or any other claimant regarding any
claims that could give rise to liability to AVIF or
its affiliates as a result of such a failure or
alleged failure; PROVIDED, however, that LIFE COMPANY
will retain control of the conduct of such
conferences, discussions, proceedings, contests or
appeals;
(v) any written materials to be submitted by LIFE
COMPANY to the IRS, any Participant or any other
claimant in connection with any of the foregoing
proceedings or contests (including, without
limitation, any such materials to be submitted to the
IRS pursuant to Treasury Regulations Section
1.817-5(a)(2)), (a) shall be provided by LIFE COMPANY
to AVIF (together with any supporting information or
analysis); subject to the confidentiality provisions
of Section 18, at least ten (10) business days or
such shorter period to which the Parties hereto agree
prior to the day on which such proposed materials are
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<PAGE>
to be submitted, and (b) shall not be submitted by
LIFE COMPANY to any such person without the express
written consent of AVIF which shall not be
unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and
their accounting and legal advisors with such
cooperation as AVIF shall reasonably request
(including, without limitation, by permitting AVIF
and its accounting and legal advisors to review the
relevant books and records of LIFE COMPANY) in order
to facilitate review by AVIF or its advisors of any
written submissions provided to it pursuant to the
preceding clause or its assessment of the validity or
amount of any claim against its arising from such a
failure or alleged failure;
(vii) LIFE COMPANY shall not with respect to any claim of
the IRS or any Participant that would give rise to a
claim against AVIF or its affiliates (a) compromise
or settle any claim, (b) accept any adjustment on
audit, or (c) forego any allowable administrative or
judicial appeals, without the express written consent
of AVIF or its affiliates, which shall not be
unreasonably withheld, PROVIDED that LIFE COMPANY
shall not be required, after exhausting all
administrative penalties, to appeal any adverse
judicial decision unless AVIF or its affiliates shall
have provided an opinion of independent counsel to
the effect that a reasonable basis exists for taking
such appeal; and PROVIDED FURTHER that the costs of
any such appeal shall be borne equally by the Parties
hereto; and
(viii) AVIF and its affiliates shall have no liability as a
result of such failure or alleged failure if LIFE
COMPANY fails to comply with any of the foregoing
clauses (i) through (vii), and such failure could be
shown to have materially contributed to the
liability.
Should AVIF or any of its affiliates refuse to give its written consent to any
compromise or settlement of any claim or liability hereunder, LIFE COMPANY may,
in its discretion, authorize AVIF or its affiliates to act in the name of LIFE
COMPANY in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; PROVIDED, that in no event shall LIFE COMPANY have any liability
resulting from AVIFs refusal to accept the proposed settlement or compromise
with respect to any failure caused by AVIF. As used in this Agreement, the term
"affiliates" shall have the same meaning as "affiliated person" as defined in
Section 2(a)(3) of the 1940 Act.
(d) LIFE COMPANY represents and warrants that the Contracts currently
are and will be treated as annuity contracts or life insurance contracts under
applicable provisions of the Code and that it will use its best efforts to
maintain such treatment; LIFE COMPANY will notify AVIF immediately upon having a
reasonable basis for believing that any of the Contracts have ceased to be so
treated or that they might not be so treated in the future.
6
<PAGE>
(e) LIFE COMPANY represents and warrants that each Account is a
"segregated asset account" and that interests in each 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. LIFE COMPANY will use its best efforts to continue to
meet such definitional requirements, and it will notify AVIF 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.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by LIFE COMPANY, including, the furnishing of information not otherwise
available to LIFE COMPANY which is required by state insurance law to enable
LIFE COMPANY to obtain the authority needed to issue the Contracts in any
applicable state.
(b) LIFE COMPANY represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws of
the State of Ohio and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under Section 3907.15 of the Ohio
Insurance Law and the regulations thereunder, and (iii) the Contracts comply in
all material respects with all other applicable federal and state laws and
regulations.
(c) AVIF represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
(a) LIFE COMPANY represents and warrants that (i) interests in each
Account pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act, (ii) the Contracts will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and Ohio
law, (iii) each Account is and will remain registered under the 1940 Act, to the
extent required by the 1940 Act, (iv) each Account does and will comply in all
material respects with the requirements of the 1940 Act and the rules
thereunder, to the extent required, (v) each Account's 1933 Act registration
statement relating to the Contracts, together with any amendments thereto, will
at all times comply in all material respects with the requirements of the 1933
Act and the rules thereunder, (vi) LIFE COMPANY will amend the registration
statement for its Contracts under the 1933 Act and for its Accounts under the
1940 Act from time to time as required in order to effect the continuous
offering of its Contracts or as may otherwise be required by applicable law, and
(vii) each Account Prospectus will at all times comply in all material respects
with the requirements of the 1933 Act and the rules thereunder.
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(b) AVIF represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required by the
1933 Act and duly authorized for issuance and sold in compliance with Maryland
law, (ii) AVIF is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) AVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares, (iv) AVIF
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (v) AVIF's 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (vi)
AVIF's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale
in accordance with the laws of any state or other jurisdiction if and to the
extent reasonably deemed advisable by AVIF.
(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserve; the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule
l2b-1 to finance distribution expenses.
(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required currently by
Rule 17g-(l) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF will immediately notify LIFE COMPANY of (i) the issuance by
any court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to AVIF's registration statement under the 1933 Act
or AVIF Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or AVIF Prospectus that may affect the offering of Shares
of AVIF, (iii) the initiation of any proceedings for that purpose or for any
other purpose relating to the registration or offering of AVIF's Shares, or (iv)
any other action or circumstances that may prevent the lawful offer or sale of
Shares of any Fund in any state or jurisdiction, including, without limitation,
any circumstances in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law, or (b) such law precludes the use of such Shares as an underlying
investment medium of the Contracts issued or to be issued by LIFE COMPANY. AVIF
will make every reasonable effort to prevent the issuance, with respect to any
Fund, of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
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(b) LIFE COMPANY will immediately notify AVIF of (i) the issuance by
any court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to each Account's registration statement under the
1933 Act relating to the Contracts or each Account Prospectus, (ii) any request
by the SEC for any amendment to such registration statement or Account
Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation
of any proceedings for that purpose or for any other purpose relating to the
registration or offering of each Account's interests pursuant to the Contracts,
or (iv) any other action or circumstances that may prevent the lawful offer or
sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. LIFE COMPANY will make every reasonable effort to prevent the
issuance of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
4.5 LIFE COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF.
(a) LIFE COMPANY will provide to AVIF or its designated agent at least
one (1) complete copy of all SEC registration statements, Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) LIFE COMPANY will provide to AVIF or its designated agent at least
one (1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named, at least five (5)
Business Days prior to its use or such shorter period as the Parties hereto may,
from time to time, agree upon. No such material shall be used if AVIF or its
designated agent objects to such use within five (5) Business Days after receipt
of such material or such shorter period as the Parties hereto may, from time to
time, agree upon. AVIF hereby designates AIM as the entity to receive such sales
literature, until such time as AVIF appoints another designated agent by giving
notice to LIFE COMPANY in the manner required by Section 9 hereof.
(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
AVIF or its affiliates in connection with the sale of the Contracts other than
(i) the information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
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(d) LIFE COMPANY shall adopt and implement procedures reasonably
designed to ensure that information concerning AVIF and its affiliates that is
intended for use only by brokers or agents selling the Contracts (I.E.,
information that is not intended for distribution to Participants) ("broker only
materials") is so used, and neither AVIF nor any of its affiliates shall be
liable for any losses, damages or expenses relating to the improper use of such
broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature
or other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT LIFE COMPANY.
(a) AVIF will provide to LIFE COMPANY at least one (1) complete copy of
all SEC registration statements, AVIF Prospectuses, reports, any preliminary and
final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to AVIF or the
Shares of a Fund, contemporaneously with the filing of such document with the
SEC or other regulatory authorities.
(b) AVIF will provide to LIFE COMPANY a camera ready copy of all AVIF
prospectuses and printed copies, in an amount specified by LIFE COMPANY, of AVIF
statements of additional information, proxy materials, periodic reports to
shareholders and other materials required by law to be sent to Participants who
have allocated any Contract value to a Fund. AVIF will provide such copies to
LIFE COMPANY in a timely manner so as to enable LIFE COMPANY, as the case may
be, to print and distribute such materials within the time required by law to be
furnished to Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at least
one (1) complete copy of each piece of sales literature or other promotional
material in which LIFE COMPANY, or any of its respective affiliates is named, or
that refers to the Contracts, at least five (5) Business Days prior to its use
or such shorter period as the Parties hereto may, from time to time, agree upon.
No such material shall be used if LIFE COMPANY or its designated agent objects
to such use within five (5) Business Days after receipt of such material or such
shorter period as the Parties hereto may, from time to time, agree upon. LIFE
COMPANY shall receive all such sales literature until such time as it appoints a
designated agent by giving notice to AVIF in the manner required by Section 9
hereof.
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(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning LIFE COMPANY,
each Account, or the Contracts other than (i) the information or representations
contained in the registration statement, including each Account Prospectus
contained therein, relating to the Contracts, as such registration statement and
Account Prospectus may be amended from time to time; or (ii) in published
reports for the Account or the Contracts that are in the public domain and
approved by LIFE COMPANY for distribution; or (iii) in sales literature or other
promotional material approved by LIFE COMPANY or its affiliates, except with the
express written permission of LIFE COMPANY.
(e) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning LIFE
COMPANY, and its respective affiliates that is intended for use only by brokers
or agents selling the Contracts (i.e., information that is not intended for
distribution to Participants) ("broker only materials") is so used, and neither
LIFE COMPANY, nor any of its respective affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The SEC has granted an order to AVIF exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with LIFE
COMPANY, and trustees of qualified pension and retirement plans (collectively,
"Mixed and Shared Funding"). The Parties recognize that the SEC has imposed
terms and conditions for such orders that are substantially identical to many of
the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply
pursuant to such an exemptive order granted to AVIF. AVIF hereby notifies LIFE
COMPANY that, in the event that AVIF implements Mixed and Shared Funding, it may
be appropriate to include in the prospectus pursuant to which a Contract is
offered disclosure regarding the potential risks of Mixed and Shared Funding.
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5.2 DISINTERESTED DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board;(b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board of Directors will monitor for the existence
of any material irreconcilable conflict between the interests of the
Participants in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). LIFE COMPANY agrees to inform the Board of Directors of AVIF of the
existence of or any potential for any such material irreconcilable conflict of
which it is aware. The concept of a "material irreconcilable conflict" is not
defined by the 1940 Act or the rules thereunder, but the Parties recognize that
such a conflict may arise for a variety of reasons, including, without
limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax or
securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive
orders of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist
the Board of Directors in carrying out its responsibilities by providing the
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Board of Directors with all information reasonably necessary for the Board of
Directors to consider any issue raised, including information as to a decision
by LIFE COMPANY to disregard voting instructions of Participants. LIFE COMPANY's
responsibilities in connection with the foregoing shall be carried out with a
view only to the interests of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members
of the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, LIFE COMPANY will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of
the Accounts from AVIF or any Fund and reinvesting
such assets in a different investment medium,
including another Fund of AVIF, or submitting the
question whether such segregation should be
implemented to a vote of all affected Participants
and, as appropriate, segregating the assets of any
particular group (E.G., annuity Participants, life
insurance Participants or all Participants) that
votes in favor of such segregation, or offering to
the affected Participants the option of making such a
change; and
(ii) establishing a new registered investment company of
the type defined as a "management company" in Section
4(3) of the 1940 Act or a new separate account that
is operated as a management company.
(b) If the material irreconcilable conflict arises because of LIFE
COMPANY's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote, LIFE
COMPANY may be required, at AVIFs election, to withdraw each Account's
investment in AVIF or any Fund. No charge or penalty will be imposed as a result
of such withdrawal. Any such withdrawal must take place within six (6) months
after AVIF gives notice to LIFE COMPANY that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by LIFE COMPANY for the purchase and redemption of Shares of
AVIF.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to LIFE COMPANY conflicts with
the majority of other state regulators, then LIFE COMPANY will withdraw each
Account's investment in AVIF within six (6) months after AVIFs Board of
Directors informs LIFE COMPANY that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal AVIF shall
continue to accept and implement orders by LIFE COMPANY for the purchase and
redemption of Shares of AVIF. No charge or penalty will be imposed as a result
of such withdrawal.
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(d) LIFE COMPANY agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried out at its
expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts. LIFE
COMPANY will not be required by the terms hereof to establish a new funding
medium for any Contracts if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.
5.5 NOTICE TO LIFE COMPANY.
AVIF will promptly make known in writing to LIFE COMPANY the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least
annually submit to the Board of Directors of AVIF such reports, materials or
data as the Board of Directors may reasonably request so that the Board of
Directors may fully carry out the obligations imposed Upon it by the provisions
hereof or any exemptive order granted by the SEC to permit Mixed and Shared
Funding, and said reports, materials and data will be submitted at any
reasonable time deemed appropriate by the Board of Directors. All reports
received by the Board of Directors of potential or existing conflicts, and all
Board of Directors actions with regard to determining the existence of a
conflict, notifying Participating Insurance Companies and Participating Plans of
a conflict, and determining whether any proposed action adequately remedies a
conflict, will be properly recorded in the minutes of the Board of Directors or
other appropriate records, and such minutes or other records will be made
available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which AVIF is serving as an investment medium
for variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to Mixed and Shared Funding, AVIF agrees that it will comply with the
terms and conditions thereof and that the terms of this Section 5 shall be
deemed modified if and only to the extent required in order also to comply with
the terms and conditions of such exemptive relief that is afforded by any of
said rules that are applicable.
5.8 OTHER REQUIREMENTS.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
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SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a
Fund:
(a) at the option of any party, with or without cause with respect to
the Fund, upon six (6) months advance written notice to the other parties, or,
if later, upon receipt of any required exemptive relief from the SEC, unless
otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings
against LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding LIFE COMPANY's obligations
under this Agreement or related to the sale of the Contracts, the operation of
each Account, or the purchase of Shares, if, in each case, AVIF reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on the Fund with respect to which the Agreement is to be terminated; or
(c) at the option of LIFE COMPANY upon institution of formal
proceedings against AVIF, its principal underwriter, or its investment adviser
by the NASD, the SEC, or any state insurance regulator or any other regulatory
body regarding AVIFs obligations under this Agreement or related to the
operation or management of AVIF or the purchase of AVIF Shares, if, in each
case, LIFE COMPANY reasonably determines that such proceedings, or the facts on
which such proceedings would be based, have a material likelihood of imposing
material adverse consequences on LIFE COMPANY, or the Subaccount corresponding
to the Fund with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares
are not registered and, in all material respects, issued and sold in accordance
with any applicable federal or state law, or (ii) such law precludes the use of
such Shares as an underlying investment medium of the Contracts issued or to be
issued by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's investment in
the Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY if the Fund ceases to qualify as a
RIC under Subchapter M of the Code or under successor or similar provisions, or
if LIFE COMPANY reasonably believes that the Fund may fail to so qualify; or
(g) at the option of LIFE COMPANY if the Fund fails to comply with
Section 817(h) of the Code or with successor or similar provisions, or if LIFE
COMPANY reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by LIFE COMPANY cease
to qualify as annuity contracts or life insurance contracts under the Code
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(other than by reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or if interests in an Account under the Contracts are
not registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, AVIF will, at the
option of LIFE COMPANY, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 6.3 will not apply to
any terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of
this Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund
pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i)
hereof, this Agreement shall nevertheless continue in effect as to any Shares of
that Fund that are outstanding as of the date of such termination (the "Initial
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Termination Date"). This continuation shall extend to the earlier of the date as
of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that LIFE COMPANY may, by written notice shorten said six (6) month period in
the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.l(g), 6.1(h) or
6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the
written consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted will be given by means
mutually acceptable to the Parties concerned. Each other notice or communication
required or permitted by this Agreement will be given to the following persons
at the following addresses and facsimile numbers, or such other persons,
addresses or facsimile numbers as the Party receiving such notices or
communications may subsequently direct in writing:
AIM VARIABLE INSURANCE FUNDS, INC.
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
COLUMBUS LIFE INSURANCE COMPANY
400 East Fourth Street
Cincinnati, Ohio 45202
Facsimile: 513-361-6757
Attn: Mark Wilkerson
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TOUCHSTONE SECURITIES, INC.
311 Pike Street
Cincinnati, Ohio 45202
Facsimile: 513-361-7982
Attn: Jill T. McGruder
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3
hereof, LIFE COMPANY will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. LIFE COMPANY will vote
Shares in accordance with timely instructions received from Participants. LIFE
COMPANY will vote Shares that are (a) not attributable to Participants to whom
pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants. Neither
LIFE COMPANY nor any of its affiliates will in any way recommend action in
connection with or oppose or interfere with the solicitation of proxies for the
Shares held for such Participants. LIFE COMPANY reserves the right to vote
shares held in any Account in its own right, to the extent permitted by law.
LIFE COMPANY shall be responsible for assuring that each of its Accounts holding
Shares calculates voting privileges in a manner consistent with that of other
Participating Insurance Companies or in the manner required by the Mixed and
Shared Funding exemptive order obtained by AVIF. AVIF will notify LIFE COMPANY
of any changes of interpretations or amendments to Mixed and Shared Funding
exemptive order it has obtained. AVIF will comply with all provisions of the
1940 Act requiring voting by shareholders, and in particular, AVIF either will
provide for annual meetings (except insofar as the SEC may interpret Section 16
of the 1940 Act not to require such meetings) or will comply with Section 16(c)
of the 1940 Act (although AVIF 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, AVIF will act in accordance with the SEC's interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the SEC may promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with LIFE COMPANY concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF BY LIFE COMPANY AND UNDERWRITER.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, LIFE COMPANY and UNDERWRITER agree to indemnify and hold harmless AVIF,
its affiliates, and each person, if any, who controls AVIF, or its affiliates
within the meaning of Section 15 of the 1933 Act and each of their respective
18
<PAGE>
directors and officers, (collectively, the "Indemnified Parties" for purposes of
this Section 12.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of LIFE COMPANY
and UNDERWRITER) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise;
PROVIDED, the Account owns shares of the Fund and insofar as such losses,
claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act registration
statement, any Account Prospectus, the Contracts, or
sales literature or advertising for the Contracts (or
any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading; PROVIDED, that
this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to LIFE COMPANY or UNDERWRITER by or on
behalf of AVIF for use in any Account's 1933 Act
registration statement, any Account Prospectus, the
Contracts, or sales literature or advertising or
otherwise for use in connection with the sale of
Contracts or Shares (or any amendment or supplement
to any of the foregoing); or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in AVIFs 1933 Act
registration statement, AVIF Prospectus, sales
literature or advertising of AVIF, or any amendment
or supplement to any of the foregoing, not supplied
for use therein by or on behalf of LIFE COMPANY,
UNDERWRITER or their respective affiliates and on
which such persons have reasonably relied) or the
negligent, illegal or fraudulent conduct of LIFE
COMPANY, UNDERWRITER or their respective affiliates
or persons under their control (including, without
limitation, their employees and "persons associated
with a member," as that term is defined in paragraph
(q) of Article I of the NASD's By-Laws), in
connection with the sale or distribution of the
Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in AVIF's 1933 Act registration statement,
AVIF Prospectus, sales literature or advertising of
AVIF, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading if such a statement or omission was
made in reliance upon and in conformity with
information furnished to AVIF, or its affiliates by
or on behalf of LIFE COMPANY, UNDERWRITER or their
19
<PAGE>
respective affiliates for use in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales
literature or advertising of AVIF, or any amendment
or supplement to any of the foregoing; or
(iv) arise as a result of any failure by LIFE COMPANY or
UNDERWRITER to perform the obligations, provide the
services and furnish the materials required of them
under the terms of this Agreement, or any material
breach of any representation and/or warranty made by
LIFE COMPANY or UNDERWRITER in this Agreement or
arise out of or result from any other material breach
of this Agreement by LIFE COMPANY or UNDERWRITER; or
(v) arise as a result of failure by the Contracts issued
by LIFE COMPANY to qualify as annuity contracts or
life insurance contracts under the Code, otherwise
than by reason of any Fund's failure to comply with
Subchapter M or Section 817(h) of the Code.
(b) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any losses, claims, damages, liabilities or actions
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
AVIF.
(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless AVIF
shall have notified LIFE COMPANY and UNDERWRITER in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the action shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify LIFE COMPANY and UNDERWRITER of any
such action shall not relieve LIFE COMPANY and UNDERWRITER from any liability
which they may have to the Indemnified Party against whom such action is brought
otherwise than on account of this Section 12.1. Except as otherwise provided
herein, in case any such action is brought against an Indemnified Party, LIFE
COMPANY and UNDERWRITER shall be entitled to participate, at their own expense,
in the defense of such action and also shall be entitled to assume the defense
thereof, with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from LIFE
COMPANY or UNDERWRITER to such Indemnified Party of LIFE COMPANY's or
UNDERWRITER's election to assume the defense thereof, the Indemnified Party will
cooperate fully with LIFE COMPANY and UNDERWRITER and shall bear the fees and
expenses of any additional counsel retained by it, and neither LIFE COMPANY nor
UNDERWRITER will be liable to such Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
20
<PAGE>
12.2 OF LIFE COMPANY AND UNDERWRITER BY AVIF.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF agrees to indemnify and hold harmless LIFE COMPANY,
UNDERWRITER, their respective affiliates, and each person, if any, who controls
LIFE COMPANY, UNDERWRITER or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective directors and officers,
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of AVIF) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law, or otherwise; PROVIDED, the Account owns shares of the Fund and insofar as
such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in AVIFs 1933 Act registration statement,
AVIF Prospectus or sales literature or advertising of
AVIF (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading; PROVIDED, that this agreement to
indemnify shall not apply as to any Indemnified Party
if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to AVIF or
its affiliates by or on behalf of LIFE COMPANY,
UNDERWRITER or their respective affiliates for use in
AVIFs 1933 Act registration statement, AVIF
Prospectus, or in sales literature or advertising or
otherwise for use in connection with the sale of
Contracts or Shares (or any amendment or supplement
to any of the foregoing); or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in any Account's 1933 Act
registration statement, any Account Prospectus, sales
literature or advertising for the Contracts, or any
amendment or supplement to any of the foregoing, not
supplied for use therein by or on behalf of AVIF, or
its affiliates and on which such persons have
reasonably relied) or the negligent, illegal or
fraudulent conduct of AVIF, or its affiliates or
persons under its control (including, without
limitation, their employees and "persons associated
with a member" as that term is defined in Section (q)
of Article I of the NASD By-Laws), in connection with
the sale or distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature
or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing, or
the omission or alleged omission to state therein a
21
<PAGE>
material fact required to be stated therein or
necessary to make the statements therein not
misleading, if such statement or omission was made in
reliance upon and in conformity with information
furnished to LIFE COMPANY, UNDERWRITER or their
respective affiliates by or on behalf of AVIF or AIM
for use in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature
or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF to perform
the obligations, provide the services and furnish the
materials required of it under the terms of this
Agreement, or any material breach of any
representation and/or warranty made by AVIF in this
Agreement or arise out of or result from any other
material breach of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e) hereof, AVIF agrees to indemnify and hold harmless the Indemnified
Parties from and against any and all losses, claims, damages, liabilities
(including amounts paid in settlement thereof with, the written consent of AVIF)
or actions in respect thereof (including, to the extent reasonable, legal and
other expenses) to which the Indemnified Parties may become subject directly or
indirectly under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or actions directly or indirectly result
from or arise out of the failure of any Fund to operate as a regulated
investment company in compliance with (i) Subchapter M of the Code and
regulations thereunder, or (ii) Section 817(h) of the Code and regulations
thereunder, including, without limitation, any income taxes and related
penalties, rescission charges, liability under state law to Participants
asserting liability against LIFE COMPANY pursuant to the Contracts, the costs of
any ruling and closing agreement or other settlement with the IRS, and the cost
of any substitution by LIFE COMPANY of Shares of another investment company or
portfolio for those of any adversely affected Fund as a funding medium for each
Account that LIFE COMPANY reasonably deems necessary or appropriate as a result
of the noncompliance.
(c) AVIF shall be liable under this Section 12.2 with respect to any
losses, claims, damages, liabilities or actions to which an Indemnified Party
would otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance by that Indemnified Party of its duties or by
reason of such Indemnified Party's reckless disregard of its obligations and
duties (i) under this Agreement, or (ii) to LIFE COMPANY, UNDERWRITER, each
Account or Participants.
(d) AVIF shall be liable under this Section 12.2 with respect to any
action against an Indemnified Party unless the Indemnified Party shall have
notified AVIF in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the action 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 AVIF of any such action shall not relieve AVIF from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this Section 12.2. Except as otherwise provided
herein, in case any such action is brought against an Indemnified Party, AVIF
will be entitled to participate, at its own expense, in the defense of such
22
<PAGE>
action and also shall be entitled to assume the defense thereof (which shall
include, without limitation, the conduct of any ruling request and closing
agreement or other settlement proceeding with the IRS), with counsel approved by
the Indemnified Party named in the action, which approval shall not be
unreasonably withheld. After notice from AVIF to such Indemnified Party of
AVIF's or AIM's election to assume the defense thereof, the Indemnified Party
will cooperate fully with AVIF and shall bear the fees and expenses of any
additional counsel retained by it, and AVIF will not be liable to such
Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection with
the defense thereof, other than reasonable costs of investigation.
(e) In no event shall AVIF be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, LIFE COMPANY, UNDERWRITER or any other Participating
Insurance Company or any Participant, with respect to any losses, claims,
damages, liabilities or expenses that arise out of or result from (i) a breach
of any representation, warranty, and/or covenant made by LIFE COMPANY or
UNDERWRITER hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by LIFE COMPANY or any Participating Insurance
Company to maintain its segregated asset account (which invests in any Fund) as
a legally and validly established segregated asset account under applicable
state law and as a duly registered unit investment trust under the provisions of
the 1940 Act (unless exempt therefrom); or (iii) the failure by LIFE COMPANY or
any Participating Insurance Company to maintain its variable annuity or life
insurance contracts (with respect to which any Fund serves as an underlying
funding vehicle) as annuity contracts or life insurance contracts under
applicable provisions of the Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Sections 12.1(c) or 12.2(d) above of participation in or control
of any action by the indemnifying Party will in no event be deemed to be an
admission by the indemnifying Party of liability, culpability or responsibility,
and the indemnifying Party will remain free to contest liability with respect to
the claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of
the indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
23
<PAGE>
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
SECTION 18. CONFIDENTIALITY
AVIF acknowledges that the identities of the customers of LIFE COMPANY
or any of its affiliates (collectively, the "LIFE COMPANY Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
LIFE COMPANY Protected Parties or any of their employees or agents in connection
with LIFE COMPANY's performance of its duties under this Agreement are the
valuable property of the LIFE COMPANY Protected Parties. AVIF agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the LIFE COMPANY Protected Parties' customers, or any other
information or property of the LIFE COMPANY Protected Parties, other than such
information as may be independently developed or compiled by AVIF from
information supplied to it by the LIFE COMPANY Protected Parties' customers who
also maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with LIFE COMPANY's prior written
consent; or (b) as required by law or judicial process. LIFE COMPANY
acknowledges that the identities of the customers of AVIF or any of its
affiliates (collectively, the "AVIF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the AVIF Protected
Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. LIFE COMPANY agrees that if it comes into possession of
any list or compilation of the identities of or other information about the AVIF
Protected Parties' customers or any other information or property of the AVIF
Protected Parties, other than such information as may be independently developed
or compiled by LIFE COMPANY from information supplied to it by the AVIF
24
<PAGE>
Protected Parties' customers who also maintain accounts directly with LIFE
COMPANY, LIFE COMPANY will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with AVIF's prior written consent; or (b) as required by
law or judicial process. Each party acknowledges that any breach of the
agreements in this Section 18 would result in immediate and irreparable harm to
the other parties for which there would be no adequate remedy at law and agree
that in the event of such a breach, the other parties will be entitled to
equitable relief by way of temporary and permanent injunctions, as well as such
other relief as any court of competent jurisdiction deems appropriate.
SECTION 19, TRADEMARKS AND FUND NAMES
(a) Except as may otherwise be provided in a License Agreement among A
I M Management Group, Inc., LIFE COMPANY and UNDERWRITER, neither LIFE COMPANY
nor UNDERWRITER or any of their respective affiliates, shall use any trademark,
trade name, service mark or logo of AVIF, AIM or any of their respective
affiliates, or any variation of any such trademark, trade name, service mark or
logo, without AVIF's or AIM's prior written consent, the granting of which shall
be at AVIF's or AIM's sole option.
(b) Except as otherwise expressly provided in this Agreement, neither
AVIF, its investment adviser, its principal underwriter, or any affiliates
thereof shall use any trademark, trade name, service mark or logo of LIFE
COMPANY, UNDERWRITER or any of their affiliates, or any variation of any such
trademark, trade name, service mark or logo, without LIFE COMPANY's or
UNDERWRITER's prior written consent, the granting of which shall be at LIFE
COMPANY's or UNDERWRITER's sole option.
SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including, without limitation, the
SEC, the NASD and state insurance regulators) and will permit each other and
such authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers signing below.
<TABLE>
<CAPTION>
......... AIM VARIABLE INSURANCE FUNDS, INC.
<S> <C>
Attest: /S/ NANCY L. MARTIN By: /S/ ROBERT H. GRAHAM
------------------------------------- -----------------------------------------------------------
Name: Nancy L. Martin...... Name: Robert H. Graham
Title Assistant Secretary Title: President
25
<PAGE>
......... COLUMBUS LIFE INSURANCE COMPANY,
......... On behalf of itself and its separate accounts
Attest: /S/ CHARLES W. WOOD, JR. By: /S/ MARK WILKERSON
Name: CHARLES W. WOOD, JR Name: MARK WILKERSON
Title: VICE PRESIDENT.... Title: SENIOR VICE PRESIDENT
----------------------------------- -----------------------------------------------------
......... TOUCHSTONE SECURITIES, INC.
......... On behalf of itself and its separate accounts
Attest: /S/ DAVID E. DENNISON By: /S/ JILL T. MCGRUDER
Name: DAVID DENNISON.... Name: JILL T. MCGRUDER
--------------------------- --------------------------------------------
Title: VICE PRESIDENT.... Title: PRESIDENT
----------------------------------- -----------------------------------------------------
</TABLE>
26
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Government Securities Fund
AIM V.I. Growth Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
o Columbus Life Insurance Company Separate Account 1
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
o Columbus Life Variable Universal Life
27
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE B
EXPENSE ALLOCATIONS
<S> <C>
- ------------------------------------------------------------ ---------------------------------------------------------
LIFE COMPANY AVIF / AIM
- ------------------------------------------------------------ ---------------------------------------------------------
preparing and filing the Account's registration statement preparing and filing the Fund's registration statement
- ------------------------------------------------------------ ---------------------------------------------------------
text composition for Account prospectuses and supplements text composition for Fund prospectuses and supplements
- ------------------------------------------------------------ ---------------------------------------------------------
text alterations of prospectuses (Account) and supplements text alterations of prospectuses (Fund) and supplements
(Account) (Fund)
- ------------------------------------------------------------ ---------------------------------------------------------
printing Account and Fund prospectuses and supplements a camera ready Fund prospectus
- ------------------------------------------------------------ ---------------------------------------------------------
text composition and printing Account SAIs text composition and printing Fund SAIs
- ------------------------------------------------------------ ---------------------------------------------------------
mailing and distributing Account SAIs to policy owners mailing and distributing Fund SAls to policy
owners upon request by policy owners upon request by policy owners
- ------------------------------------------------------------ ---------------------------------------------------------
mailing and distributing prospectuses (Account and Fund) and
supplements (Account and Fund) to policy owners of record a
required by Federal Securities Laws and to prospective
purchasers
- ------------------------------------------------------------ ---------------------------------------------------------
text composition (Account), printing, mailing, and text composition of annual and semi-annual reports
distributing annual and semi-annual reports for Account (Fund)
(Fund and Account as, applicable)
- ------------------------------------------------------------ ---------------------------------------------------------
text composition, printing, mailing, distributing, and text composition, printing, mailing, distributing
and tabulation of proxy statements and voting instruction tabulation of proxy statements and voting instruction
solicitation materials to policy owners with respect to solicitation materials to policy owners with respect to
proxies related to the Account proxies related to the Fund
- ------------------------------------------------------------ ---------------------------------------------------------
preparation, printing and distributing sales material and
advertising relating to the Funds, insofar as such
materials relate to the Contracts and filing such materials
with and obtaining approval from, the SEC, the NASD, any
state insurance regulatory authority, and any other
appropriate regulatory authority, to the extent required
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
28
AGREEMENT WITH RESPECT TO
TRADEMARKS AND FUND NAMES
(a) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of
AIM Variable Insurance Funds, Inc. ("AVIF') and A I M Distributors, Inc.
("AIM"), owns all right, title and interest in and to the name, trademark and
service mark "AIM" and such other trade names, trademarks and service marks as
may be set forth on Schedule A (the "AIM licensed marks" or the "licensor's
licensed marks"), as amended from time to time by written notice from AIM to
Columbus Life Insurance Company ("Life Company") and is authorized to use and to
license other persons to use such marks. Life Company and its affiliates are
hereby granted a non-exclusive license to use the AIM licensed marks in
connection with Life Company's performance of the services contemplated under
the Participation Agreement among AVIF, AIM, Life Company and Touchstone
Securities, Inc. (the "Participation Agreement") subject to the terms and
conditions set forth in this Agreement.
(b) The grant of license to Life Company and its affiliates ( the
"licensee") shall terminate automatically upon termination of the Participation
Agreement pursuant to Section 6.1 thereof. Upon automatic termination, the
licensee shall cease to use the licensor's licensed marks, except that Life
Company shall have the right to continue to service any outstanding Contracts
bearing any of the AIM licensed marks. Upon AIM's elective termination of this
license, Life Company and its affiliates shall immediately cease to issue any
new annuity or life insurance contracts bearing any of the AIM licensed marks
and shall likewise cease any activity which suggests that it has any right under
any of the AIM licensed marks or that it has any association with AIM, except
that Life Company shall have the right to continue to service outstanding
Contracts bearing any of the AIM licensed marks.
(c) The licensee shall obtain the prior written approval of the
licensor or AVIF for the public release by such licensee of any materials
bearing the licensor's licensed marks. Such approvals shall not be unreasonably
withheld.
(d) During the term of this grant of license, a licensor may request
that a licensee submit samples of any materials bearing any of the licensor's
licensed marks which were previously approved by the licensor but, due to
changed circumstances, the licensor may wish to reconsider. If, on
reconsideration, or on initial review, respectively, any such samples fail to
meet with the written approval of the licensor, then the licensee shall
immediately cease distributing such disapproved materials. The licensor's
approval shall not be unreasonably withheld, and the licensor, when requesting
reconsideration of a prior approval, shall assume the reasonable expenses of
withdrawing and replacing such disapproved materials. The licensee shall obtain
the prior written approval of the licensor for the use of any new materials
developed to replace the disapproved materials, in the manner set forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates that, to
the best of the knowledge of the licensee, the licensor's licensed marks are
valid and enforceable trademarks and/or service marks and that such licensee
does not own the licensor's licensed marks and claims no rights therein other
than as a licensee under this Agreement; (ii) agrees never to contend otherwise
in legal proceedings or in other circumstances; and (iii) acknowledges and
agrees that the use of the licensor's licensed marks pursuant to this grant of
license shall inure to the benefit of the licensor.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers signing below.
<TABLE>
<CAPTION>
A I M MANAGEMENT GROUP INC.
<S> <C>
Attest: /S/ NANCY L. MARTIN By: /S/ ROBERT H. GRAHAM
----------------------------------- --------------------------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /S/ NANCY L. MARTIN By: /S/ ROBERT H. GRAHAM
----------------------------------- --------------------------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
COLUMBUS LIFE INSURANCE COMPANY
Attest: /S/ CHARLES W. WOOD, JR. By: /S/ MARK WILKERSON
Name: Charles W. Wood, Jr. Name: Mark Wilkerson
Title: Vice President Title: Senior Vice President
TOUCHSTONE SECURITIES, INC.
Attest: /S/ DAVID E. DENNISON By: /S/ JILL MCGRUDER
Name: DAVID DENNISON Name: JILL T. MCGRUDER
Title: VICE PRESIDENT Title: PRESIDENT
</TABLE>
<PAGE>
SCHEDULE A
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Government Securities Fund
AIM V.I. Growth Fund
o AIM and Design
[SAMPLE DESIGN HERE]
ADMINISTRATIVE SERVICES AGREEMENT
Columbus Life Insurance Company ("INSURER") and A I M ADVISORS, INC.
("AIM") (collectively, the "Parties") mutually agree to the arrangements set
forth in this Administrative Services Agreement (the "Agreement") dated as of
MAY 1, 1999.
WHEREAS, AIM is the investment adviser to AIM Variable Insurance Funds,
Inc. (the "Fund"); and
WHEREAS, AIM has entered into an amended Master Administrative Services
Agreement, dated May 1, 1998, with the Fund ("Master Agreement") pursuant to
which it has agreed to provide, or arrange to provide, certain administrative
services, including such services as may be requested by the Fund's Board of
Directors from time to time; and
WHEREAS, INSURER issues variable life insurance policies and/or
variable annuity contracts (collectively, the "Contracts"); and
WHEREAS, INSURER has entered into a participation agreement, dated MAY
1, 1999 ("Participation Agreement") with the Fund, pursuant to which the Fund
has agreed to make shares of certain of its portfolios ("Portfolios") available
for purchase by one or more of INSURER's separate accounts or divisions thereof
(each, a "Separate Account"), in connection with the allocation by Contract
owners of purchase payments to corresponding investment options offered under
the Contracts; and
WHEREAS, INSURER and AIM expect that the Fund, and its Portfolios, can
derive substantial savings in administrative expenses by virtue of having one or
more Separate Accounts of INSURER each as a single shareholder of record of
Portfolio shares, rather than having numerous public shareholders of such
shares; and
WHEREAS, INSURER and AIM expect that the Fund, and its Portfolios, can
derive such substantial savings because INSURER performs the administrative
services listed on Schedule A hereto for the Fund in connection with the
Contracts issued by INSURER; and
WHEREAS, INSURER has no contractual or other legal obligation to
perform such administrative services, other than pursuant to this Agreement and
the Participation Agreement; and
WHEREAS, INSURER desires to be compensated for providing such
administrative services; and
WHEREAS, AIM desires that the Fund benefit from the lower
administrative expenses resulting from the administrative services performed by
INSURER; and
WHEREAS, AIM desires to retain the administrative services of INSURER
and to compensate INSURER for providing such administrative services;
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NOW, THEREFORE, the Parties agree as follows:
SECTION 1. ADMINISTRATIVE SERVICES; PAYMENTS THEREFOR.
(a) INSURER shall provide the administrative services set out in
Schedule A hereto and made a part hereof, as the same may be amended from time
to time. For such services, AIM agrees to pay to INSURER a quarterly fee
("Quarterly Fee") equal to a percentage of the average daily net assets of the
Fund attributable to the Contracts issued by INSURER ("INSURER Fund Assets") at
the following annual rates:
ANNUAL RATE TOTAL AVERAGE QUARTERLY NET ASSETS FOR ALL PORTFOLIOS
0.00% Less than $10 million
0.15% $10 million but less than $200 million
0.20% $200 million or more
(b) AIM shall calculate the Quarterly Fee at the end of each calendar
quarter and will make such payment to INSURER, without demand or notice by
INSURER, within 30 days thereafter, in a manner mutually agreed upon by the
Parties from time to time.
(c) From time to time, the Parties shall review the Quarterly Fee to
determine whether it exceeds or is reasonably expected to exceed the incurred
and anticipated costs, over time, of INSURER. The Parties agree to negotiate in
good faith a reduction to the Quarterly Fee as necessary to eliminate any such
excess or as necessary to reflect a reduction in the fee paid by the Fund to AIM
pursuant to the Master Agreement.
SECTION 2. NATURE OF PAYMENTS.
The Parties to this Agreement recognize and agree that AIM's payments
hereunder are for administrative services only and do not constitute payment in
any manner for investment advisory services or for costs of distribution of
Contracts or of Portfolio shares, and are not otherwise related to investment
advisory or distribution services or expenses. INSURER represents and warrants
that the fees to be paid by AIM for services to be rendered by INSURER pursuant
to the terms of this Agreement are to compensate the INSURER for providing
administrative services to the Fund, and are not designed to reimburse or
compensate INSURER for providing administrative services with respect to the
Contracts or any Separate Account.
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SECTION 3. TERM AND TERMINATION.
Any Party may terminate this Agreement, without penalty, on 60 days
written notice to the other Party. Unless so terminated, this Agreement shall
continue in effect for so long as AIM or its successor(s) in interest, or any
affiliate thereof, continues to perform in a similar capacity for the Fund, and
for so long as INSURER provides the services contemplated hereunder with respect
to Contracts under which values or monies are allocated to a Portfolio.
SECTION 4. AMENDMENT.
This Agreement may be amended upon mutual agreement of the
Parties in writing.
SECTION 5. NOTICES.
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
COLUMBUS LIFE INSURANCE COMPANY
400 East Fourth Street
Cincinnati, Ohio 45202
Facsimile: 513-361-6757
Attention: Mark Wilkerson
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attention: Nancy L. Martin, Esquire
SECTION 6. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Parties and their transferees, successors and assigns. The benefits of and the
right to enforce this Agreement shall accrue to the Parties and their
transferees, successors and assigns.
(b) ASSIGNMENT. Neither this Agreement nor any of the rights,
obligations or liabilities of any Party hereto shall be assigned without the
written consent of the other Party.
(c) INTENDED BENEFICIARIES. Nothing in this Agreement shall be
construed to give any person or entity other than the Parties, as well as the
Fund, any legal or equitable claim, right or remedy. Rather, this Agreement is
intended to be for the sole and exclusive benefit of the Parties, as well as the
Fund.
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(d) COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which shall together constitute
one and the same instrument.
(e) APPLICABLE LAW. This Agreement shall be interpreted, construed, and
enforced in accordance with the laws of the State of Delaware without reference
to the conflict of law principles thereof.
(f) SEVERABILITY. If any portion of this Agreement shall be found to be
invalid or unenforceable by a court or tribunal or regulatory agency of
competent jurisdiction, the remainder shall not be affected thereby, but shall
have the same force and effect as if the invalid or unenforceable portion had
not been inserted.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date of first above written.
COLUMBUS LIFE INSURANCE COMPANY
By: /S/ MARK WILKERSON
Title: SENIOR VICE PRESIDENT
A I M ADVISORS, INC.
By: /S/ ROBERT GRAHAM
Title: PRESIDENT
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SCHEDULE A
ADMINISTRATIVE SERVICES FOR
AIM VARIABLE INSURANCE FUNDS, INC.
INSURER shall provide certain administrative services respecting the
operations of the Fund, as set forth below. This Schedule, which may be amended
from time to time as mutually agreed upon by INSURER and AIM, constitutes an
integral part of the Agreement to which it is attached. Capitalized terms used
herein shall, unless otherwise noted, have the same meaning as the defined terms
in the Agreement to which this Schedule relates.
A. RECORDS OF PORTFOLIO SHARE TRANSACTIONS; MISCELLANEOUS RECORDS
1. INSURER shall maintain master accounts with the Fund, on behalf of
each Portfolio, which accounts shall bear the name of INSURER as the record
owner of Portfolio shares on behalf of each Separate Account investing in the
Portfolio.
2. INSURER shall maintain a daily journal setting out the number of
shares of each Portfolio purchased, redeemed or exchanged by Contract owners
each day, as well as the net purchase or redemption orders for Portfolio shares
submitted each day, to assist AIM, the Fund and/or the Fund's transfer agent in
tracking and recording Portfolio share transactions, and to facilitate the
computation of each Portfolio's net asset value per share. INSURER shall
promptly provide AIM, the Fund, and the Fund's transfer agent with a copy of
such journal entries or information appearing thereon in such format as may be
reasonably requested from time to time. INSURER shall provide such other
assistance to AIM, the Fund, and the Fund's transfer agent as may be necessary
to cause various Portfolio share transactions effected by Contract owners to be
properly reflected on the books and records of the Fund.
3. In addition to the foregoing records, and without limitation,
INSURER shall maintain and preserve all records as required by law to be
maintained and preserved in connection with providing administrative services
hereunder.
B. ORDER PLACEMENT AND PAYMENT
1. INSURER shall determine the net amount to be transmitted to the
Separate Accounts as a result of redemptions of each Portfolio's shares based on
Contract owner redemption requests and shall disburse or credit to the Separate
Accounts all proceeds of redemptions of Portfolio shares. INSURER shall notify
the Fund of the cash required to meet redemption payments.
2. INSURER shall determine the net amount to be transmitted to the Fund
as a result of purchases of Portfolio shares based on Contract owner purchase
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payments and transfers allocated to the Separate Accounts investing in each
Portfolio. INSURER shall transmit net purchase payments to the Fund's custodian.
C. ACCOUNTING SERVICES
INSURER shall perform miscellaneous accounting services as may be
reasonably requested from time to time by AIM, which services shall relate to
the business contemplated by the Participation Agreement between INSURER and the
Fund, as amended from time to time. Such services shall include, without
limitation, periodic reconciliation and balancing of INSURER's books and records
with those of the Fund with respect to such matters as cash accounts, Portfolio
share purchase and redemption orders placed with the Fund, dividend and
distribution payments by the Fund, and such other accounting matters that may
arise from time to time in connection with the operations of the Fund as related
to the business contemplated by the Participation Agreement.
D. REPORTS
INSURER acknowledges that AIM may, from time to time, be called upon by
the Fund's Board of Directors ("Board"), to provide various types of information
pertaining to the operations of the Fund and related matters, and that AIM also
may, from time to time, decide to provide such information to the Board in its
own discretion. Accordingly, INSURER agrees to provide AIM with such assistance
as AIM may reasonably request so that AIM can report such information to the
Fund's Board in a timely manner. INSURER acknowledges that such information and
assistance shall be in addition to the information and assistance required of
INSURER pursuant to the Fund's mixed and shared funding SEC exemptive order,
described in the Participation Agreement.
INSURER further agrees to provide AIM with such assistance as AIM may
reasonably request with respect to the preparation and submission of reports and
other documents pertaining to the Fund to appropriate regulatory bodies and
third party reporting services.
E. FUND-RELATED CONTRACT OWNER SERVICES
INSURER agrees to print and distribute, in a timely manner,
prospectuses, statements of additional information, supplements thereto,
periodic reports, proxy materials and any other materials of the Fund required
by law or otherwise to be given to its shareholders, including, without
limitation, Contract owners investing in Portfolio shares. INSURER further
agrees to provide telephonic support for Contract owners, including, without
limitation, advice with respect to inquiries about the Fund and each Portfolio
thereof (not including information about performance or related to sales),
communicating with Contract owners about Fund (and Separate Account)
performance, and assisting with proxy solicitations, specifically with respect
to soliciting voting instructions from Contract owners.
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F. MISCELLANEOUS SERVICES
INSURER shall provide such other administrative support to the Fund as
mutually agreed between INSURER and AIM or the Fund from time to time. INSURER
shall, from time to time, relieve the Fund of other usual or incidental
administration services of the type ordinarily borne by mutual funds that offer
shares to individual members of the general public.
7
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 11th day of April, 1999, by and among The
Alger American Fund (the "Trust"), an open-end management investment company
organized as a Massachusetts business trust, Columbus Life Insurance Company, on
its own behalf, and on behalf of its Separate Account 1, a life insurance
company organized as a corporation under the laws of the State of Ohio, (the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth in Schedule A, as may be amended from time to time (the
"Accounts"), and Fred Alger & Company, Incorporated, a Delaware corporation, the
Trust's distributor (the "Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, the Trust and the Distributor desire that Trust shares be used
as an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, shares of beneficial interest in the Trust are divided into
the following series which are available for purchase by the Company for the
Accounts: Alger American Small Capitalization Portfolio, Alger American Growth
Portfolio, Alger American Income and Growth Portfolio, Alger American Balanced
Portfolio, Alger American MidCap Growth Portfolio, and Alger American Leveraged
AllCap Portfolio;
WHEREAS, the Trust has received an order from the Commission, dated
February 17, 1989 (File No. 812-7076), granting Participating Insurance
Companies and their separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Portfolios of the Trust to be sold to and held by variable annuity and variable
life insurance separate accounts of both affiliated and unaffiliated life
insurance companies (the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies and variable annuity contracts to be
issued by the Company under which the Portfolios are to be made available as
investment vehicles (the "Contracts");
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from registration
under the 1940 Act is available and the Trust has been so advised;
<PAGE>
WHEREAS, the Company desires to use shares of the Portfolios
indicated on Schedule A as investment vehicles for the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
1.1. For purposes of this Article I, the Company shall be the Trust's agent
for the receipt from each account of purchase orders and requests for
redemption pursuant to the Contracts relating to each Portfolio,
provided that the Company notifies the Trust of such purchase orders
and requests for redemption ordinarily by 9:30 a.m. Eastern time ( but
on occasion may notify the Trust by 10:00 a.m. Eastern time) on the
next following Business Day, as defined in Section 1.3.
1.2. The Trust shall make shares of the Portfolios available to the Accounts
at the net asset value next computed after receipt of a purchase order
by the Trust (or its agent), as established in accordance with the
provisions of the then current prospectus of the Trust describing
Portfolio purchase procedures. The Company will transmit orders from
time to time to the Trust for the purchase and redemption of shares of
the Portfolios. The Trustees of the Trust (the "Trustees") may refuse
to sell shares of any Portfolio to any person, or suspend or terminate
the offering of shares of any Portfolio if such action is required by
law or by regulatory authorities having jurisdiction or if, in the sole
discretion of the Trustees acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, such
action is deemed in the best interests of the shareholders of such
Portfolio.
1.3. The Company shall pay for the purchase of shares of a Portfolio on
behalf of an Account with federal funds to be transmitted by wire to
the Trust, with the reasonable expectation of receipt by the Trust by
2:00 p.m. Eastern time on the next Business Day after the Trust (or its
agent) receives the purchase order. Upon receipt by the Trust of the
federal funds so wired, such funds shall cease to be the responsibility
of the Company and shall become the responsibility of the Trust for
this purpose. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Trust calculates
its net asset value pursuant to the rules of the Commission.
1.4. The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at
the net asset value next computed after receipt by the Trust (or its
agent) of the request for redemption, as established in accordance with
the provisions of the then current prospectus of the Trust describing
Portfolio redemption procedures. The Trust shall make payment for such
shares in the manner established from time to time by the Trust.
Proceeds of redemption with respect to a Portfolio will normally be
paid to the Company for an Account in federal funds transmitted by wire
to the Company by order of the Trust with the reasonable expectation of
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<PAGE>
receipt by the Company by 2:00 p.m. Eastern time on the next Business
Day after the receipt by the Trust (or its agent) of the request for
redemption. Such payment may be delayed if, for example, the
Portfolio's cash position so requires or if extraordinary market
conditions exist, but in no event shall payment be delayed for a
greater period than is permitted by the 1940 Act. The Trust reserves
the right to suspend the right of redemption, consistent with Section
22(e) of the 1940 Act and any rules thereunder.
1.5. Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of
the Trust's Portfolios under Section 1.4 on any Business Day may be
netted against one another for the purpose of determining the amount of
any wire transfer.
1.6. Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or the
Accounts. Portfolio Shares purchased from the Trust will be recorded in
the appropriate title for each Account or the appropriate subaccount of
each Account.
1.7. The Trust shall furnish, on or before the ex-dividend date, notice to
the Company of any income dividends or capital gain distributions
payable on the shares of any Portfolio of the Trust. The Company hereby
elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional
shares of that Portfolio. The Trust shall notify the Company of the
number of shares so issued as payment of such dividends and
distributions.
1.8. The Trust shall calculate the net asset value of each Portfolio on each
Business Day, as defined in Section 1.3. The Trust shall make the net
asset value per share for each Portfolio available to the Company or
its designated agent on a daily basis as soon as reasonably practical
after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available to the
Company by 6:30 p.m. Eastern time each Business Day.
1.9. The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their segregated asset accounts,
to the Fund Sponsor or its affiliates and to such other entities as may
be permitted by Section 817(h) of the Code, the regulations hereunder,
or judicial or administrative interpretations thereof. No shares of any
Portfolio will be sold directly to the general public. The Company
agrees that it will use Trust sharesonly for the purposes of funding
the Contracts through the Accounts listed in Schedule A, as amended
from time to time.
1.10. The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding materially to those contained in
Section 2.9 and Article IV of this Agreement.
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ARTICLE II.
OBLIGATIONS OF THE PARTIES
2.1. The Trust shall prepare and be responsible for filing with the
Commission and any state regulators requiring such filing all
shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and
statements of additional information of the Trust. The Trust shall bear
the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this
Section 2.1 and all taxes to which an issuer is subject on the issuance
and transfer of its shares.
2.2. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Trust to the Contract owners as required to be
distributed to such Contract owners under applicable federal or state
law.
2.3. The Trust shall provide such documentation (including a final copy of
the Trust's prospectus as set in type or in camera-ready copy) and
other assistance as is reasonably necessary in order for the Company to
print together in one document the current prospectus for the Contracts
issued by the Company and the current prospectus for the Trust. The
Trust shall bear the expense of printing copies of its current
prospectus that will be distributed to existing Contract owners, and
the Company shall bear the expense of printing copies of the Trust's
prospectus that are used in connection with offering the Contracts
issued by the Company.
2.4. The Trust and the Distributor shall provide (1) at the Trust's expense,
one copy of the Trust's current Statement of Additional Information
("SAI") to the Company and to any Contract owner who requests such SAI,
(2) at the Company's expense, such additional copies of the Trust's
current SAI as the Company shall reasonably request and that the
Company shall require in accordance with applicable law in connection
with offering the Contracts issued by the Company.
2.5. The Trust, at its expense, shall provide the Company with copies of
its proxy material, periodic reports to shareholders and other
communications to shareholders in such quantity as the Company shall
reasonably require for purposes of distributing to Contract owners. The
Trust, at the Company's expense, shall provide the Company with copies
of its period reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably request
for use in connection with offering the Contracts issued by the
Company. If requested by the Company in lieu thereof, the Trust shall
provide such documentation (including a final copy of the Trust's proxy
materials, periodic reports to shareholders and other communications to
shareholders, as set in type or in camera-ready copy) and other
assistance as reasonably necessary in order for the Company to print
such shareholder communications for distribution to Contract owners.
2.6. The Company agrees and acknowledges that the Distributor is the sole
owner of the name and mark "Alger" and that all use of any designation
comprised in whole or part of such name or mark under this Agreement
shall inure to the benefit of the Distributor. Except as provided in
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Section 2.5, the Company shall not use any such name or mark on its own
behalf or on behalf of the Accounts or Contracts in any registration
statement, advertisement, sales literature or other materials relating
to the Accounts or Contracts without the prior written consent of the
Distributor. Upon termination of this Agreement for any reason, the
Company shall cease all use of any such name or mark as soon as
reasonably practicable.
2.7. The Company shall furnish, or cause to be furnished, to the Trust or
its designee a copy of each Contract prospectus and/or statement of
additional information describing the Contracts, each report to
Contract owners, proxy statement, application for exemption or request
for no-action letter in which the Trust or the Distributor is named
contemporaneously with the filing of such document with the Commission.
The Company shall furnish, or shall cause to be furnished, to the Trust
or its designee each piece of sales literature or other promotional
material in which the Trust or the Distributor is named, at least five
Business Days prior to its use. No such material shall be used if the
Trust or its designee reasonably objects to such use within three
Business Days after receipt of such material.
2.8. The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust or the
Distributor in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from
the registration statement or prospectus for the Trust shares (as such
registration statement and prospectus may be amended or supplemented
from time to time), annual and semi-annual reports of the Trust,
Trust-sponsored proxy statements, or in sales literature or other
promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the prior
written permission of the Trust, the Distributor or their respective
designees. The Trust and the Distributor agree to respond to any
request for approval on a prompt and timely basis. The Company shall
adopt and implement procedures reasonably designed to ensure that
"broker only" materials including information therein about the Trust
or the Distributor are not distributed to existing or prospective
Contract owners.
2.9. The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and
the Distributor, in such form as the Company may reasonably require, as
the Company shall reasonably request in connection with the preparation
of registration statements, prospectuses and annual and semi-annual
reports pertaining to the Contracts.
2.10. The Trust and the Distributor shall not give, and agree that no
affiliate of either of them shall give, any information or make any
representations or statements on behalf of the Company or concerning
the Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the
registration statement or prospectus for the Contracts (as such
registration statement and prospectus may be amended or supplemented
from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional materials,
except as required by legal process or regulatory authorities or with
the prior written permission of the Company. The Company agrees to
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respond to any request for approval on a prompt and timely basis,
2.11. So long as, and to the extent that, the Commission interprets the
1940 Act to require pass-through voting privileges for Contract owners,
the Company will provide pass-through voting privileges to Contract
owners whose cash values are invested, through the registered Accounts,
in shares of one or more Portfolios of the Trust. The Trust shall
require all Participating Insurance Companies to calculate voting
privileges in the same manner and the Company shall be responsible for
assuring that the Accounts calculate voting privileges in the manner
established by the Trust. With respect to each registered Account, the
Company will vote shares of each Portfolio of the Trust held by a
registered Account and for which no timely voting instructions from
Contract owners are received in the same proportion as those shares for
which voting instructions are received. The Company and its agents will
in no way recommend or oppose or interfere with the solicitation of
proxies for Portfolio shares held to fund the Contacts without the
prior written consent of the Trust, which consent may be withheld in
the Trust's sole discretion. The Company reserves the right, to the
extent permitted by law, to vote shares held in any Account in its sole
discretion.
2.12. The Company and the Trust will each provide to the other information
about the results of any regulatory examination relating to the
Contracts or the Trust, including relevant portions of any "deficiency
letter" and any response thereto.
2.13. No compensation shall be paid by the Trust to the Company, or by the
Company to the Trust, under this Agreement (except for specified
expense reimbursements). However, nothing herein shall prevent the
parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust, the
Accounts or both.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of Ohio
and that it has legally and validly established each Account as a
segregated asset account under such law as of the date set forth in
Schedule A, and that TOUCHSTONE SECURITIES INCORPORATED, the principal
underwriter for the Contracts, is registered as a broker-dealer under
the Securities Exchange Act of 1934 and is a member in good standing of
the National Association of Securities Dealers, Inc.
3.2. The Company represents and warrants that it has registered or, prior to
any issuance or sale of the Contracts, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act
and cause each Account to remain so registered to serve as a segregated
asset account for the Contracts, unless an exemption from registration
is available.
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3.3. The Company represents and warrants that the Contracts will be
registered under the 1933 Act unless an exemption from registration is
available prior to any issuance or sale of the Contracts; the Contracts
will be issued and sold in compliance in all material respects with all
applicable federal and state laws; and the sale of the Contracts shall
comply in all material respects with state insurance law suitability
requirements.
3.4. The Trust represents and warrants that it is duly organized and validly
existing under the laws of the Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act and
the rules and regulations thereunder.
3.5. The Trust and the Distributor represent and warrant that the Portfolio
shares offered and sold pursuant to this Agreement will be registered
under the 1933 Act and sold in accordance with all applicable federal
and state laws, and the Trust shall be registered under the 1940 Act
prior to and at the time of any issuance or sale of such shares. The
Trust shall amend its registration statement under the 1933 Act and the
1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Trust shall register and qualify
its shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Trust.
3.6. The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements for
variable annuity, endowment or life insurance contracts set forth in
Section 817(h) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the rules and regulations thereunder, including without
limitation Treasury Regulation 1.817-5, and will notify the Company
immediately upon having a reasonable basis for believing any Portfolio
has ceased to comply or might not so comply and will immediately take
all reasonable steps to adequately diversify the Portfolio to achieve
compliance within the grace period afforded by Regulation 1.817-5.
3.7. The Trust represents and warrants that it is currently qualified as a
"regulated investment company" under Subchapter M of the Code, that it
will make every effort to maintain such qualification and will notify
the Company immediately upon having a reasonable basis for believing it
has ceased to so qualify or might not so qualify in the future.
3.8. The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of
a Portfolio shall at all times be covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount not less
than the minimum coverage required by Rule 17g-1 or other applicable
regulations under the 1940 Act. Such bond shall include coverage for
larceny and embezzlement and be issued by a reputable bonding company.
3.9. The Distributor represents that it is duly organized and validly
existing under the laws of the State of Delaware and that it is
registered, and will remain registered, during the term of this
Agreement, as a broker-dealer under the Securities Exchange Act of 1934
and is a member in good standing of the National Association of
Securities Dealers, Inc.
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ARTICLE IV.
POTENTIAL CONFLICTS
4.1. The parties acknowledge that a Portfolio's shares may be made available
for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any
material irreconcilable conflict between the interests of the contract
owners of all Participating Insurance Companies. A material
irreconcilable conflict may arise for a variety of reasons, including:
(a) an action by any state insurance regulatory authority; (b) a change
in applicable federal or state insurance, tax or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in
voting instructions given by variable annuity contract and variable
life insurance contract owners; or (f) a decision by an insurer to
disregard the voting instructions of contract owners. The Trust shall
promptly inform the Company of any determination by the Trustees that a
material irreconcilable conflict exists and of the implications
thereof.
4.2. The Company agrees to report promptly any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist
the Trustees in carrying out their responsibilities under the Shared
Funding Exemptive Order by providing the Trustees with all information
reasonably necessary for and requested by the Trustees to consider any
issues raised including, but not limited to, information as to a
decision by the Company to disregard Contract owner voting
instructions. All communications from the Company to the Trustees may
be made in care of the Trust.
4.3. If it is determined by a majority of the Trustees, or a majority of the
disinterested Trustees, that a material irreconcilable conflict exists
that affects the interests of contract owners, the Company shall, in
cooperation with other Participating Insurance Companies whose contract
owners are also affected, at its own expense and to the extent
reasonably practicable (as determined by the Trustees) take whatever
steps are necessary to remedy or eliminate the material irreconcilable
conflict, which steps could include: (a) withdrawing the assets
allocable to some or all of the Accounts from the Trust or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Trust, or
submitting the question of whether or not such segregation should be
implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e.,
annuity contract owners, life insurance contract owners, or variable
contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected
Contract owners the option of making such a change; and (b)
establishing a new registered management investment company or managed
separate account.
4.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority
vote, the Company may be required, at the Trust's election, to withdraw
8
<PAGE>
the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account; provided, however that such
withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives
written notice that this provision is being implemented. Until the end
of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of
shares of the Trust.
4.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw
the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account within six (6) months after the
Trustees inform the Company in writing that the Trust has determined
that such decision has created a material irreconcilable conflict;
provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees.
Until the end of such six (6) month period, the Trust shall continue to
accept and implement orders by the Company for the purchase and
redemption of shares of the Trust.
4.6. For purposes of Section 4.3 through 4.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed
action adequately remedies any material irreconcilable conflict, but in
no event will the Trust be required to establish a new funding medium
for any Contract. The Company shall not be required to establish a new
funding medium for the Contracts if an offer to do so has been declined
by vote of a majority of Contract owners materially adversely affected
by the material irreconcilable conflict. In the event that the Trustees
determine that any proposed action does not adequately remedy any
material irreconcilable conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within
six (6) months after the Trustees inform the Company in writing of the
foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested Trustees.
4.7. The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so
that the Trustees may fully carry out the duties imposed upon them by
the Shared Funding Exemptive Order, and said reports, materials and
data shall be submitted more frequently if reasonably deemed
appropriate by the Trustees.
4.8. If and to the extent that Rule 6e-3(T) is amended, or Rule 6e-3 is
adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared
Funding Exemptive Order, then the Trust and/or the Participating
9
<PAGE>
Insurance Companies, as appropriate, shall take such steps as may be
necessary to comply with Rule 6e-3(T), as amended, or Rule 6e-3, as
adopted, to the extent such rules are applicable.
ARTICLE V.
INDEMNIFICATION
5.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Distributor, the Trust and each of its Trustees,
officers, employees and agents and each person, if any, who controls
the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section
5.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal
counsel fees incurred in connection therewith) (collectively,
"Losses"), to which the Indemnified Parties may become subject under
any statute or regulation, or at common law or otherwise, insofar as
such Losses are related to the sale or acquisition of the Contracts or
Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in
the Contracts themselves or in sales literature generated or
approved by the Company on behalf of the Contracts or Accounts
(or any amendment or supplement to any of the foregoing)
(collectively, "Company Documents" for the purposes of this
Article V), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this indemnity shall not
apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in
reliance upon and was accurately derived from written
information furnished to the Company by or on behalf of the
Trust for use in Company Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived from Trust Documents as defined in Section
5.2(a)) or wrongful conduct of the Company or persons under
its control, with respect to the sale or acquisition of the
Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such statement or omission was made in
reliance upon and accurately derived from written information
furnished to the Trust by or on behalf of the Company; or
10
<PAGE>
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under
the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(f) arise out of or result from the provision by the Company to
the Trust of insufficient or incorrect information regarding
the purchase or sale of shares of any Portfolio, or the
failure of the Company to provide such information on a timely
basis.
5.2. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor agrees to indemnify
and hold harmless the Company, its affiliates and each of their
directors, officers, employees, and agents and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for the purposes of this
Section 5.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Distributor, which consent shall not be unreasonably withheld) or
expenses (including the reasonable costs of investigating or defending
any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively,
"Losses"), to which the Indemnified Parties may become subject under
any statute or regulation, or at common law or otherwise, insofar as
such Losses are related to the sale or acquisition of the Contracts or
Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement or prospectus for the Trust (or any
amendment or supplement thereto) (collectively, "Trust
Documents" for the purposes of this Article V), or arise out
of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and
was accurately derived from written information furnished to
the Distributor or the Trust by or on behalf of the Company
for use in Trust Documents or otherwise for use in connection
with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived form Company Documents) or wrongful conduct
of the Distributor or persons under its control, with respect
to the sale or acquisition of the Contracts or Portfolio
shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading if such statement
11
<PAGE>
or omission was made in reliance upon and accurately derived
from written information furnished to the Company by or on
behalf of the Trust; or
(d) arise out of or result from any failure by the Distributor or
the Trust to provide the services or furnish the materials
required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or the
Trust in this Agreement or arise out of or result from any
other material breach of this Agreement by the Distributor or
the Trust.
5.3. None of the Company, the Trust or the Distributor shall be liable
under the indemnification provisions of Sections 5.1 or 5.2, as
applicable, with respect to any Losses incurred or assessed against an
Indemnified Party that arise from such Indemnified Party's willful
misfeasance, bad faith or negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement.
5.4. None of the Company, the Trust or the Distributor shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable,
with respect to any claim made against an Indemnified party unless such
Indemnified Party shall have notified the other party in writing within
a reasonable time after the summons, or other first written
notification, giving information of the nature of the claim shall have
been served upon or otherwise received by such Indemnified Party (or
after such Indemnified Party shall have received notice of service upon
or other notification to any designated agent), but failure to notify
the party against whom indemnification is sought of any such claim
shall not relieve that party from any liability which it may have to
the Indemnified Party in the absence of Sections 5.1 and 5.2.
5.5. In case any such action is brought against an Indemnified Party, the
indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also
shall be entitled to assume the defense thereof, with counsel
reasonably satisfactory to the party named in the action. After notice
from the indemnifying party to the Indemnified Party of an election to
assume such defense, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the indemnifying
party will not be liable to the Indemnified Party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
ARTICLE VI.
TERMINATION
6.1. This Agreement shall terminate:
12
<PAGE>
(a) at the option of any party upon 60 days advance written notice
to the other par-ties, unless a shorter time is agreed to by
the parties;
(b) at the option of the Trust or the Distributor if the Contracts
issued by the Company cease to qualify as annuity contracts or
life insurance contracts, as applicable, under the Code or if
the Contracts are not registered, issued or sold in accordance
with applicable state and/or federal law; or
(c) at the option of any party upon a determination by a majority
of the Trustees of the Trust, or a majority of its
disinterested Trustees, that a material irreconcilable
conflict exists; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust or the Distributor by the NASD,
the SEC, or any state securities or insurance department or
any other regulatory body regarding the Trust's or the
Distributor's duties under this Agreement or related to the
sale of Trust shares or the operation of the Trust; or
(e) at the option of the Company if the Trust or a Portfolio fails
to meet the diversification requirements specified in Section
3.6 hereof, or
(f) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Variable
Contracts issued by the Company, as determined by the Company,
and upon prompt notice by the Company to the other parties; or
(g) at the option of the Company in the event any of the shares of
the Portfolio are not registered, issued or sold in accordance
with applicable state and/or federal law, or such law
precludes the use of such shares as the underlying investment
media of the Variable Contracts issued or to be issued by the
Company; or
(h) at the option of the Company, if the Portfolio fails to
qualify as a Regulated Investment Company under Subchapter M
of the Code; or
(i) at the option of the Distributor if it shall determine in its
sole judgment exercised in good faith, that the Company and/or
its affiliated companies has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject
of material adverse publicity.
(j) at the option of the Company if it shall determine in its sole
judgment exercised in good faith, that the Distributor and/or
its affiliated companies has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject
of material adverse publicity.
13
<PAGE>
6.2. Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional shares
of any Portfolio and redeem shares of any Portfolio pursuant to the
terms and conditions of this Agreement for all Contracts in effect on
the effective date of termination of this Agreement.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.9 shall
survive the termination of this Agreement as long as shares of the
Trust are held on behalf of Contract owners in accordance with Section
6.2.
ARTICLE VII.
NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust or its Distributor:
Fred Alger Management, Inc.
30 Montgomery Street
Jersey City, NJ 07302
Attn:
Duch
Executive Vice President
If to the Company:
Columbus Life Insurance Company
400 East Fourth Street
Cincinnati, OH 45201
Attn: Mark A. Wilkerson
Senior Vice President
ARTICLE VIII.
MISCELLANEOUS
8.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
14
<PAGE>
8.2. This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
8.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York. It
shall also be subject to the provisions of the federal securities laws
and the rules and regulations thereunder and to any orders of the
Commission granting exemptive relief therefrom and the conditions of
such orders. Copies of any such orders shall be promptly forwarded by
the Trust to the Company.
8.5. All liabilities of the Trust arising, directly or indirectly, under
this Agreement, of any and every nature whatsoever, shall be satisfied
solely out of the assets of the Trust and no Trustee, officer, agent or
holder of shares of beneficial interest of the Trust shall be
personally liable for any such liabilities.
8.6. Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Commission,
the National Association of Securities Dealers, Inc. and state
insurance regulators) and shall permit such authorities reasonable
access to its books and records in connection with any investigation or
inquiry relating to this Agreement or the transactions contemplated
hereby.
8.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
8.8. This Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the
other party.
8.10. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by both parties.
8.11. Each party hereto shall, except as required by law or otherwise
permitted by this Agreement, 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
shall not disclose such confidential information without the written
consent of the affected party unless such information has become
publicly available.
15
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
FRED ALGER & COMPANY, INCORPORATED
By: /S/ GREGORY S. DUCH
------------------------------------------
Name: GREGORY S. DUCH
Title: EXECUTIVE VICE PRESIDENT
THE ALGER AMERICAN FUND
By: /S/ GREGORY S. DUCH
------------------------------------------
Name: GREGORY S. DUCH
Title: TREASURER
COLUMBUS LIFE INSURANCE COMPANY
By: /S/ MARK A. WILKERSON
------------------------------------------
Name:
Title:
<PAGE>
SCHEDULE A
THE TRUST:
The Alger American Fund:
Alger American Growth Portfolio
Alger American Small Capitalization Portfolio
THE ACCOUNT(S):
Columbus Life Insurance Company Separate Account I
17
SERVICE AGREEMENT
AGREEMENT dated as of April 11, 1999, between Fred Alger Management,
Inc. ("Alger"), a New York Corporation with its principal offices at 1 World
Trade Center, Suite 9333, New York, NY 10048, as Investment Adviser for The
Alger American Fund (the "Fund"), and Columbus Life Insurance Company, on its
own behalf, and on behalf of its Separate Account 1 (the "Company"), an Ohio
corporation having its principal office and place of business at 400 East Fourth
Street, Cincinnati, OH 45201.
In consideration of the promises and mutual covenants set forth in this
Agreement, the Parties agree as follows:
1. SERVICES PROVIDED
The Company agrees to provide services to the Fund including the
following:
a) responding to inquiries from the Company Contract owners using
one or more Portfolios of the Fund as an investment vehicle
regarding the services performed by the Company as they relate
to the Fund;
b) providing information to Alger and to Contract owners with
respect to shares attributable to Contract owner accounts;
c) printing and mailing of shareholder communications from the
Fund consistent with the Participation Agreement dated April
11, 1999 (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution
and tax notices) as may be required;
d) communication directly with Contract owners concerning the
Fund's operations;
e) providing such other similar services as Alger may reasonably
request pursuant to the extent permitted or required under
applicable statutes, rules, and regulations.
2. EXPENSE ALLOCATION
Subject to Paragraph 3 hereof, the Company or its affiliates shall
initially bear the costs of the following:
a) printing and distributing the Fund's prospectus, statement of
additional information and any amendments or supplements
thereto, periodic reports to shareholders, Fund proxy material
and other shareholder communications (collectively, the "Fund
Materials") to be distributed to prospective Contract owners;
<PAGE>
b) printing and distributing all sales literature or promotional
material developed by the Company or its affiliates and
relating to the contracts;
c) servicing Contract owners who have allocated Contract value to
a Portfolio, which servicing shall include, but is not limited
to, the items listed in Paragraph 1 of this Agreement.
3. PAYMENT OF EXPENSES
a) Alger will pay the Company a quarterly fee equal to a
percentage of the average daily net assets of the Portfolios
attributable to Contracts, at the annual rate set forth in the
following schedule ("Portfolio Servicing Fee"), in connection
with the expenses incurred by the Company under Paragraph 2
hereof: 0.25% of all assets invested in any Portfolio of the
Fund.
b) From time to time, the Parties hereto shall review the
Portfolio Servicing Fee to determine whether it reasonably
approximates the incurred and anticipated costs, over time of
the Company in connection with its duties hereunder. The
Parties agree to negotiate in good faith any change to the
Portfolio Servicing Fee proposed by a Party in good faith.
4. TERM OF AGREEMENT
This Agreement shall continue in effect for so long as Alger or its
successor(s) in interest, or any affiliate thereof, continues to
perform in a similar capacity for the Fund, and for so long as any
Contract value or any monies attributable to the Company is allocated
to a Portfolio, provided, however, that either party may Terminate this
Agreement upon a material breach of this Agreement by the other party
that remains uncured for 60 days after written notice by the
terminating party. However, Portfolio Servicing Fees shall in no event
be paid to the Company more than one year after the termination of this
Agreement.
5. INDEMNIFICATION
a) The Company agrees to indemnify and hold harmless Alger and
its officers, directors, and affiliates from any and all loss,
liability and expense resulting from the gross negligence or
willful wrongful act of the Company under this Agreement,
except to the extent such loss, liability or expense is the
result of the willful misfeasance, bad faith or gross
2
<PAGE>
negligence of Alger in the performance of its duties, or by
reason of the reckless disregard of its obligations and duties
under this Agreement.
b) Alger agrees to indemnify and hold harmless the Company and
its officers, directors and affiliates from any and all loss,
liability and expense resulting from the gross negligence or
willful wrongful act of Alger under this Agreement, except to
the extent such loss, liability or expense is the result of
the willful misfeasance, bad faith or gross negligence of the
Company in the performance of its duties, or by reason of the
reckless disregard of its obligations and duties under this
Agreement.
6. NOTICE
Notices and communications required or permitted hereby will be given
to the following persons at the following addresses and facsimile
numbers, or such other persons, addresses or facsimile numbers as the
Party receiving such notices or communications may subsequently direct
in writing:
Fred Alger Management, Inc.
1 World Trade Center
Suite 9333
New York, NY 10048
Attn: Gregory S. Duch
Fax: (201) 451-8768
Columbus Life Insurance Company
400 East Fourth Street
Cincinnati, OH 45201
Attn: Mark A. Wilkerson
Fax: (513) 361-6939
7. APPLICABLE LAW
Except insofar as the Investment Company Act of 1940 or other federal
laws and regulations may be controlling, this Agreement will be
construed and the provisions hereof interpreted under and in accordance
with New York law, without regard for that state's principles of
conflict of laws.
8. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement
will not be affected thereby.
9. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, that the Parties are entitled to
under federal and state laws.
3
<PAGE>
10. ASSIGNMENT
Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written consent of the other
party thereto.
11. AMENDMENT
This Agreement may be amended or modified in whole or in part only by a
written agreement executed by both parties.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized officers signing below.
FRED ALGER MANAGEMENT, INC.
By: /S/ GREGORY S. DUCH
--------------------------
Gregory S. Duch
Executive Vice President
COLUMBUS LIFE INSURANCE COMPANY
By: /S/ MARK A. WILKERSON
--------------------------
Mark A. Wilkerson
Senior Vice President
4
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
COLUMBUS LIFE INSURANCE COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this 12th day of April 1999, by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), COLUMBUS LIFE INSURANCE COMPANY, an Ohio corporation (the "Company")
on its own behalf and on behalf of each of the segregated asset accounts of the
Company set forth in Schedule A hereto, as may be amended from time to time (the
"Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or
variable life insurance contracts (individually, the "Policy" or, collectively,
the "Policies") which, if required by applicable law, will be registered under
the 1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company, to set aside and invest assets attributable to the aforesaid variable
annuity and/or variable life insurance contracts that are allocated to the
Accounts (the Policies and the Accounts covered by this Agreement, and each
corresponding Portfolio covered by this Agreement in which the Accounts invest,
is specified in Schedule A attached hereto as may be modified from time to
time);
WHEREAS, the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered
as a broker-dealer with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934, as
<PAGE>
amended (hereinafter the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD");
WHEREAS, Touchstone Securities, Inc., the underwriter for the
individual variable annuity and the variable life policies, is registered as a
broker-dealer with the SEC under the 1934 Act and is a member in good standing
of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust,
MFS, and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that
Business Day, as defined below) and which are available for purchase by
such Accounts, executing such orders on a daily basis at the net asset
value next computed after receipt by the Trust or its designee of the
order for the Shares. For purposes of this Section 1.1, the Company
shall be the designee of the Trust for receipt of such orders from
Policy owners and receipt by such designee shall constitute receipt by
the Trust; provided that the Trust receives notice of such orders by
9:30 a.m. New York time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange, Inc. (the
"NYSE") is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and
the Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall calculate such
net asset value on each day which the NYSE is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Board") may refuse to sell any Shares to the Company and the Accounts,
or suspend or terminate the offering of the Shares if such action is
required by law or by regulatory authorities having jurisdiction or is,
in the sole discretion of the Board acting in good faith and in light
of its fiduciary duties under federal and any applicable state laws,
necessary in the best interest of the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements
with the Trust and MFS (the "Participating Insurance Companies") and
their separate accounts, qualified pension and retirement plans and MFS
or its affiliates. The Trust and MFS will not sell Trust shares to any
insurance company or separate account unless an agreement containing
provisions substantially the same as Articles III and VII of this
Agreement is in effect to govern such sales. The Company will not
resell the Shares except to the Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed
by Policy owners on that Business Day), executing such requests on a
daily basis at the net asset value next computed after receipt by the
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Trust or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Trust for
receipt of requests for redemption from Policy owners and receipt by
such designee shall constitute receipt by the Trust; provided that the
Trust receives notice of such request for redemption by 9:30 a.m. New
York time on the next following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted
with respect to any Portfolio. However, with respect to payment of the
purchase price by the Company and of redemption proceeds by the Trust,
the Company and the Trust shall net purchase and redemption orders with
respect to each Portfolio and shall transmit one net payment for all of
the Portfolios in accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the
Shares by 2:00 p.m. New York time on the next Business Day after an
order to purchase the Shares is made in accordance with the provisions
of Section 1.1. hereof. In the event of net redemptions, the Trust
shall pay the redemption proceeds by 2:00 p.m. New York time on the
next Business Day after an order to redeem the shares is made in
accordance with the provisions of Section 1.4. hereof. All such
payments shall be in federal funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts.
The Shares ordered from the Trust will be recorded in an appropriate
title for the Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby
elects to receive all such dividends and distributions as are payable
on a Portfolio's Shares in additional Shares of that Portfolio. The
Trust shall notify the Company of the number of Shares so issued as
payment of such dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per
share for each Portfolio available to the Company on each Business Day
as soon as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value
per share available by 6:30 p.m. New York time. In the event that the
Trust is unable to meet the 6:30 p.m. time stated herein, it shall
provide additional time for the Company to place orders for the
purchase and redemption of Shares. Such additional time shall be equal
to the additional time which the Trust takes to make the net asset
value available to the Company. If the Trust provides materially
incorrect share net asset value information, the Trust shall make an
adjustment to the number of shares purchased or redeemed for the
Accounts to reflect the correct net asset value per share. Any material
error in the calculation or reporting of net asset value per share,
dividend or capital gains information shall be reported promptly upon
discovery to the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will
be registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold,
and distributed in compliance in all material respects with all
applicable state and federal laws, including without limitation the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the 1940 Act. The Company further represents and warrants
that it is an insurance company duly organized and in good standing
under applicable law and that it
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has legally and validly established the Account as a segregated asset
account under applicable law and has registered or, prior to any
issuance or sale of the Policies, will register the Accounts as unit
investment trusts in accordance with the provisions of the 1940 Act
(unless exempt therefrom) to serve as segregated investment accounts
for the Policies, and that it will maintain such registration for so
long as any Policies are outstanding. The Company shall amend the
registration statements under the 1933 Act for the Policies and the
registration statements under the 1940 Act for the Accounts from time
to time as required in order to effect the continuous offering of the
Policies or as may otherwise be required by applicable law. The
Company shall register and qualify the Policies for sales in
accordance with the securities laws of the various states only if and
to the extent deemed necessary by the Company.
2.2. The Company represents and warrants that the Policies are
currently and at the time of issuance will be treated as life
insurance, endowment or annuity contract under applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), that it
will maintain such treatment and that it will notify the Trust or MFS
immediately upon having a reasonable bas's for believing that the
Policies have ceased to be so treated or that they might not be so
treated in the future.
2.3. The Company represents and warrants that Touchstone Securities,
Inc. ("Touchstone"), the underwriter for the individual variable
annuity and the variable life policies, is a member in good standing of
the NASD and is a registered broker-dealer with the SEC. The Company
represents and warrants that the Company and Touchstone will sell and
distribute such policies in accordance in all material respects with
all applicable state and federal securities laws, including without
limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of The
Commonwealth of Massachusetts and all applicable federal and state
securities laws and that the Trust is and shall remain registered under
the 1940 Act. The Trust shall amend the registration statement for its
Shares under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares. The
Trust shall register and qualify the Shares for sale in accordance with
the laws of the various states only if and to the extent deemed
necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in
good standing of the NASD and is registered as a broker-dealer with the
SEC. The Trust and MFS represent that the Trust and the Underwriter
will sell and distribute the Shares in accordance in all material
respects with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940
Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act and
any applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it
shall perform its obligations for the Trust in compliance all material
respects with any applicable federal securities laws and with the
securities laws of The Commonwealth of Massachusetts. MFS represents
and warrants that it is not subject to state securities laws other than
the securities laws of The Commonwealth of Massachusetts and that it is
exempt from registration as an investment adviser under the securities
laws of The Commonwealth of Massachusetts.
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2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably
request so that it may carry out fully the obligations imposed upon it
by the conditions contained in the exemptive application pursuant to
which the SEC has granted exemptive relief to permit mixed and shared
funding (the "Mixed and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the
Shares as the Company may reasonably request for distribution to
existing Policy owners whose Policies are funded by such Shares. The
Trust or its designee shall provide the Company, at the Company's
expense, with as many copies of the current prospectus for the Shares
as the Company may reasonably request for distribution to prospective
purchasers of Policies. If requested by the Company in lieu thereof,
the Trust or its designee shall provide such documentation (including a
"camera ready" copy of the new prospectus as set in type or, at the
request of the Company, as a diskette in the form sent to the financial
printer) and other assistance as is reasonably necessary in order for
the parties hereto once each year (or more frequently if the prospectus
for the Shares is supplemented or amended) to have the prospectus for
the Policies and the prospectus for the Shares printed together in one
document; the expenses of such printing to be apportioned between (a)
the Company and (b) the Trust or its designee in proportion to the
number of pages of the Policy and Shares' prospectuses, taking account
of other relevant factors affecting the expense of printing, such as
covers, columns, graphs and charts; the Trust or its designee to bear
the cost of printing the Shares' prospectus portion of such document
for distribution to owners of existing Policies funded by the Shares
and the Company to bear the expenses of printing the portion of such
document relating to the Accounts; provided, however, that the Company
shall bear all printing expenses of such combined documents where used
for distribution to prospective purchasers or to owners of existing
Policies not funded by the Shares. In the event that the Company
requests that the Trust or its designee provides the Trust's prospectus
in a "camera ready" or diskette format, the Trust shall be responsible
for providing the prospectus in the format in which it or MFS is
accustomed to formatting prospectuses and shall bear the expense of
providing the prospectus in such format (e.g., typesetting expenses),
and the Company shall bear the expense of adjusting or changing the
format to conform with any of its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or
its designee. The Trust or its designee, at its expense, shall print
and provide such statement of additional information to the Company (or
a master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust
or its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser
who requests such statement or to an owner of a Policy not funded by
the Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's
proxy materials, reports to Shareholders and other communications to
Shareholders in such quantity as the Company shall reasonably require
for distribution to Policy owners.
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3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3
above, or of Article V below, the Company shall pay the expense of
printing or providing documents to the extent such cost is considered a
distribution expense. Distribution expenses would include by way of
illustration, but are not limited to, the printing of the Shares'
prospectus or prospectuses for distribution to prospective purchasers
or to owners of existing Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate
to include in the prospectus pursuant to which a Policy is offered
disclosure regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions
received from Policy owners; and
(c) vote the Shares for which no instructions have been
received in the same proportion as the Shares of such
Portfolio for which instructions have been received
from Policy owners;
so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass through voting privileges for variable
contract owners. The Company will in no way recommend action in
connection with or oppose or interfere with the solicitation of proxies
for the Shares held for such Policy owners. The Company reserves the
right to vote shares held in any segregated asset account in its own
right, to the extent permitted by law. Participating Insurance
Companies shall be responsible for assuring that each of their separate
accounts holding Shares calculates voting privileges in the manner
required by the Mixed and Shared Funding Exemptive Order. The Trust and
MFS will notify the Company of any changes of interpretations or
amendments to the Mixed and Shared Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other
promotional material in which the Trust, MFS, any other investment
adviser to the Trust, or any affiliate of MFS are named, at least three
(3) Business Days prior to its use. No such material shall be used if
the Trust, MFS, or their respective designees reasonably objects to
such use within three (3) Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning
the Trust or any other such entity in connection with the sale of the
Policies other than the information or representations contained in the
registration statement, prospectus or statement of additional
information for the Shares, as such registration statement, prospectus
and statement of additional information may be amended or supplemented
from time to time, or in reports or proxy statements for the Trust, or
in sales literature or other promotional material approved by the
Trust, MFS or their respective designees, except with the permission of
the Trust, MFS or their respective designees. The Trust, MFS or their
respective designees each agrees to respond to any request for approval
on a prompt and timely basis. The Company shall adopt and implement
procedures reasonably designed to ensure that information concerning
the Trust, MFS or any
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of their affiliates which is intended for use only by brokers or
agents selling the Policies (i.e., information that is not intended
for distribution to Policy owners or prospective Policy owners) so
used, and neither the Trust, MFS nor any of their affiliates shall be
liable for any losses, damages or expenses relating to the improper
use of such broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or
the Accounts is named, at least three (3) Business Days prior to its
use. No such material shall be used if the Company or its designee
reasonably objects to such use within three (3) Business Days after
receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf
of the Company or concerning the Company, the Accounts, or the Policies
in connection with the sale of the Policies other than the information
or representations contained in a registration statement, prospectus,
or statement of additional information for the Policies, as such
registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
reports for the Accounts, or in sales literature or other promotional
material approved by the Company or its designee, except with the
permission of the Company. The Company or its designee agrees to
respond to any request for approval on a prompt and timely basis. The
parties hereto agree that this Section 4.4. is neither intended to
designate nor otherwise imply that MFS is an underwriter or distributor
of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company
or the Trust, as appropriate) will each provide to the other at least
one complete copy of all registration statements, prospectuses,
statements of additional information, reports, proxy statements, sales
literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any
of the above, that relate to the Policies, or to the Trust or its
Shares, prior to or contemporaneously with the filing of such document
with the SEC or other regulatory authorities. The Company and the Trust
shall also each promptly inform the other of the results of any
examination by the SEC (or other regulatory authorities) that relates
to the Policies, the Trust or its Shares, and the party that was the
subject of the examination shall provide the other party with a copy of
relevant portions of any "deficiency letter" or other correspondence or
written report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as
is reasonably practicable of any proxy solicitation for any Portfolio,
and of any material change in the Trust's registration statement,
particularly any change resulting in change to the registration
statement or prospectus or statement of additional information for any
Account. The Trust and MFS will cooperate with the Company so as to
enable the Company to solicit proxies from Policy owners or to make
changes to its prospectus, statement of additional information or
registration statement, in an orderly manner. The Trust and MFS will
make reasonable efforts to attempt to have changes affecting Policy
prospectuses become effective simultaneously with the annual updates
for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited
to advertisements (such as material published, or designed for use in,
a newspaper, magazine, or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards,
motion pictures, or other public media), and sales literature (such as
brochures, circulars, reprints or excerpts or any other advertisement,
sales literature, or published articles), distributed or made generally
available to customers or the
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public, educational or training materials or communications
distributed or made generally available to some or all agents or
employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, and the Company shall pay no fee or other
compensation to the Trust, except that if the Trust or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act
to finance distribution and Shareholder servicing expenses, then,
subject to obtaining any required exemptive orders or regulatory
approvals, the Trust may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Trust
in writing. Each party, however, shall, in accordance with the
allocation of expenses specified in Articles III and V hereof,
reimburse other parties for expenses initially paid by one party but
allocated to another party. In addition, nothing herein shall prevent
the parties hereto from otherwise agreeing to perform, and arranging
for appropriate compensation for, other services relating to the Trust
and/or to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable
federal and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration
fees; preparation and filing of the Trust's proxy materials and reports
to Shareholders; setting in type and printing its prospectus and
statement of additional information (to the extent provided by and as
determined in accordance with Article III above); setting in type and
printing the proxy materials and reports to Shareholders (to the extent
provided by and as determined in accordance with Article III above);
the preparation of all statements and notices required of the Trust by
any federal or state law with respect to its Shares; all taxes on the
issuance or transfer of the Shares; and the costs of distributing the
Trust's prospectuses and proxy materials to owners of Policies funded
by the Shares and any expenses permitted to be paid or assumed by the
Trust pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act.
The Trust shall not bear any expenses of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies
and of distributing the Trust's Shareholder reports to Policy owners.
The Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal
securities and state insurance laws; the cost of preparing, printing
and distributing the Policy prospectus and statement of additional
information; and the cost of preparing, printing and distributing
annual individual account statements for Policy owners as required by
state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817 (h) (1)
of the Code and Treas. Reg. 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance
contracts, as they may be amended from time to time (and any revenue
rulings, revenue procedures, notices, and other published announcements
of the Internal Revenue Service interpreting these sections), as if
those requirements applied directly to each such Portfolio.
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6-2. The Trust and MFS represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the
Code and that they will maintain such qualification (under Subchapter M
or any successor or similar provision).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for
the existence of any material irreconcilable conflict between the
interests of the variable annuity contract owners and the variable life
insurance policy owners of the Company and/or affiliated companies
("contract owners") investing in the Trust. The Board shall have the
sole authority to determine if a material irreconcilable conflict
exists, and such determination shall be binding on the Company only if
approved in the form of a resolution by a majority of the Board, or a
majority of the disinterested trustees of the Board. The Board will
give prompt notice of any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set
forth in the Trust's exemptive application pursuant to which the SEC
has granted the Mixed and Shared Funding Exemptive Order by providing
the Board, as it may reasonably request, with all information necessary
for the Board to consider any issues raised and agrees that it will be
responsible for promptly reporting any potential or existing conflicts
of which it is aware to the Board including, but not limited to, an
obligation by the Company to inform the Board whenever contract owner
voting instructions are disregarded. The Company also agrees that, if a
material irreconcilable conflict arises, it will at its own cost remedy
such conflict up to and including (a) withdrawing the assets allocable
to some or all of the Accounts from the Trust or any Portfolio and
reinvesting such assets in a different investment medium, including
(but not limited to) another Portfolio of the Trust, or submitting to a
vote of all affected contract owners whether to withdraw assets from
the Trust or any Portfolio and reinvesting such assets in a different
investment medium and, as appropriate, segregating the assets
attributable to any appropriate group of contract owners that votes in
favor of such segregation, or offering to any of the affected contract
owners the option of segregating the assets attributable to their
contracts or policies, and (b) establishing a new registered management
investment company and segregating the assets underlying the Policies,
unless a majority of Policy owners materially adversely affected by the
conflict have voted to decline the offer to establish a new registered
management investment company.
7.3. A majority of the disinterested trustees of the Board shall
determine whether any proposed action by the Company adequately
remedies any material irreconcilable conflict. In the event that the
Board determines that any proposed action does not adequately remedy
any material irreconcilable conflict, the Company will withdraw from
investment in the Trust each of the Accounts designated by the
disinterested trustees and terminate this Agreement within six (6)
months after the Board informs the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination
shall be limited to the extent required to remedy any such material
irreconcilable conflict as determined by a majority of the
disinterested trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to
mixed or 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 Trust and/or the Participating Insurance
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Companies, as appropriate, shall take such steps as may be necessary
to comply with Rule 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as
adopted, to the extent such rules are applicable; and (b) Sections
3.5, 3.6, 7.1, 7.2, 7.3 and 7.4 of this Agreement shall continue in
effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended
or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. Indemnification by the Company
The Company agrees to indemnify and hold harmless the Trust,
MFS, any affiliates of MFS, and each of their respective
directors/trustees, officers and each person, if any, who controls the
Trust or MFS within the meaning of Section 15 of the 1933 Act, and any
agents or employees of the foregoing (each an "Indemnified Party," or
collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company) or expenses (including reasonable counsel fees) to which any
Indemnified Party may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Shares or the Policies
and:
(a) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the
Policies or contained in the Policies or sales
literature or other promotional material for the
Policies (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading provided that this agreement to indemnify
--------
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reasonable reliance upon and in
conformity with information furnished to the Company
or its designee by or on behalf of the Trust or MFS
for use in the registration statement, prospectus or
statement of additional information for the Policies
or in the Policies or sales literature or other
promotional material (or any amendment or supplement)
or otherwise for use in connection with the sale of
the Policies or Shares; or
(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, statement of additional
information or sales literature or other promotional
material of the Trust not supplied by the Company or
its designee, or persons under its control and on
which the Company has reasonably relied) or wrongful
conduct of the Company or persons under its control,
with respect to the sale or distribution of the
Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
registration statement, prospectus, statement of
additional information, or sales literature or other
promotional literature of the Trust, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
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the statement or statements therein not misleading,
if such statement or omission was made in reliance
upon information furnished to the Trust by or on
behalf of the Company; or
(d) arise out of or result from any material breach of
any representation and/or warranty made by the
Company in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Company; or
(e) arise as a result of any failure by the Company to
provide the services and furnish the materials under
the terms of this Agreement;
as limited by and in accordance with the provisions of this
Article VIII.
8.2. Indemification by the Trust
The Trust agrees to indemnify and hold harmless the Company,
its affiliates and each of their directors and officers and each
person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act, and any agents or employees of the foregoing (each
an "Indemnified Party," or collectively, the "Indemnified Parties" for
purposes of this Section 8.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the
written consent of the Trust) or expenses (including reasonable counsel
fees) to which any Indemnified Party may become subject under any
statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Shares or the
Policies and:
(a) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement, prospectus,
statement of additional information or sales
literature or other promotional material of the Trust
(or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statement therein not
misleading, provided that this agreement to indemnify
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shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reasonable reliance upon and in
conformity with information furnished to the Trust,
MFS, the Underwriter or their respective designees by
or on behalf of the Company for use in the
registration statement, prospectus or statement of
additional information for the Trust or in sales
literature or other promotional material for the
Trust (or any amendment or supplement) or otherwise
for use in connection with the sale of the Policies
or Shares: or
(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, statement of additional
information or sales literature or other promotional
material for the Policies not supplied by the Trust,
MFS, the Underwriter or any of their respective
designees or persons under their respective control
and on which any such entity has reasonably relied)
or wrongful conduct of the Trust or persons under its
control, with respect to the sale or distribution of
the Policies or Shares; or
11
<PAGE>
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
registration statement, prospectus, statement of
additional information, or sales literature or other
promotional literature of the Accounts or relating to
the Policies, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein
or necessary to make the statement or statements
therein not misleading, if such statement or omission
was made in reliance upon information furnished to
the Company by or on behalf of the Trust, MFS or the
Underwriter; or
(d) arise out of or result from any material breach of
any representation and/or warranty made by the Trust
in this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to
comply with the diversification requirements
specified in Article VI of this Agreement) or arise
out of or result from any other material breach of
this Agreement by the Trust-, or
(e) arise out of or result from the materially incorrect
or untimely calculation or reporting of the daily net
asset value per share or dividend or capital gain
distribution rate; or
(f) arise as a result of any failure by the Trust to
provide the services and furnish the materials under
the terms of the Agreement;
as limited by and in accordance with the provisions of this
Article VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating
Insurance Company or any Policy holder, with respect to any losses,
claims, damages, liabilities or expenses that arise out of or result
from (1) a breach of any representation, warranty, and/or covenant made
by the Company hereunder or by any Participating Insurance Company
under an agreement containing substantially similar representations,
warranties and covenants; (ii) the failure by the Company or any
Participating Insurance Company to maintain its segregated asset
account (which invests in any Portfolio) as a legally and validly
established segregated asset account under applicable state law and as
a duly registered unit investment trust under the provisions of the
1940 Act (unless exempt therefrom); or (ill) the failure by the Company
or any Participating Insurance Company to maintain its variable annuity
and/or variable life insurance contracts (with respect to which any
Portfolio serves as an underlying funding vehicle) as life insurance,
endowment or annuity contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to
any losses, claims, damages, liabilities or expenses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, willful misconduct, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations
and duties under this Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of notice of commencement of any action, such Indemnified Party
will, if a claim in respect thereof is to be made against the
indemnifying party under this section, notify the indemnifying party of
the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any Indemnified Party otherwise than under this section.
12
<PAGE>
In case any such action is brought against any Indemnified Party, and
it notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, assume the defense thereof, with counsel
satisfactory to such Indemnified Party. After notice from the
indemnifying party of its intention to assume the defense of an action,
the Indemnified Party shall bear the expenses of any additional counsel
obtained by it, and the indemnifying party shall not be liable to such
Indemnified Party under this section for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of
its respective officers, directors, trustees, employees or 1933 Act
control persons in connection with the Agreement, the issuance or sale
of the Policies, the operation of the Accounts, or the sale or
acquisition of Shares.
8.7. A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this
Article VIII. The indemnification provisions contained in this Article
VIII shall survive any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall
promptly notify the other parties to this Agreement, in writing, of the
institution of any formal proceedings brought against such party or its
designees by the NASD, the SEC, or any insurance department or any other
regulatory body regarding such party's duties under this Agreement or related to
the sale of the Policies, the operation of the Accounts, or the purchase of the
Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts, or one, some,
or all Portfolios:
(a) at the option of any party upon six (6) months'
advance written notice to the other parties; or
(b) at the option of the Company to the extent that the
Shares of Portfolios are not reasonably available to
meet the requirements of the Policies or are not
"appropriate funding vehicles" for the Policies, as
reasonably determined by the Company. Without
limiting the generality of the foregoing, the Shares
of a
13
<PAGE>
Portfolio would not be "appropriate funding vehicles"
if, for example, such Shares did not meet the
diversification or other requirements referred to
in Article VI hereof, or if the Company would be
permitted to disregard Policy owner voting
instructions pursuant to Rule 6e-2 or 6e-3(T) under
the 1940 Act. Prompt notice of the election to
terminate for such cause and an explanation of such
cause shall be furnished to the Trust by the Company;
or
(c) at the option of the Trust or MFS upon institution of
formal proceedings against the Company by the NASD,
the SEC, or any insurance department or any other
regulatory body regarding the Company's duties under
this Agreement or related to the sale of the
Policies, the operation of the Accounts, or the
purchase of the Shares; or
(d) at the option of the Company upon institution of
formal proceedings against the Trust or MFS by the
NASD, the SEC, or any state securities or insurance
department or any other regulatory body regarding the
Trust's or MFS' duties under this Agreement or
related to the sale of the Shares; or
(e) at the option of the Company, the Trust or MFS upon
receipt of any necessary regulatory approvals and/or
the vote of the Policy owners having an interest in
the Accounts (or any subaccounts) to substitute the
shares of another investment company for the
corresponding Portfolio Shares in accordance with the
terms of the Policies for which those Portfolio
Shares had been selected to serve as the underlying
investment media. The Company will give thirty (30)
days' prior written notice to the Trust of the Date
of any proposed vote or other action taken to replace
the Shares; or
(f) termination by either the Trust or MFS by written
notice to the Company, if either one or both of the
Trust or MFS respectively, shall determine, in their
sole judgment exercised in good faith, that the
Company has suffered a material adverse change in its
business, operations, financial condition, or
prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(g) termination by the Company by written notice to the
Trust and MFS, if the Company shall determine, in its
sole judgment exercised in good faith, that the Trust
or MFS has suffered a material adverse change in this
business, operations, financial condition or
prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(h) at the option of any party to this Agreement, upon
another party's material breach of any provision of
this Agreement; or
(i) upon assignment of this Agreement, unless made with
the written consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies
and, if applicable, the Accounts as to which the Agreement is to be
terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised
for cause or for no cause.
14
<PAGE>
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations,
the Company shall not redeem the Shares attributable to the Policies
(as opposed to the Shares attributable to the Company's assets held in
the Accounts), and the Company shall not prevent Policy owners from
allocating payments to a Portfolio that was otherwise available under
the Policies, until thirty (30) days after the Company shall have
notified the Trust of its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and
MFS shall, at the option of the Company, continue to make available
additional shares of the Portfolios pursuant to the terms and
conditions of this Agreement, for all Policies in effect on the
effective date of termination of this Agreement (the "Existing
Policies"), except as otherwise provided under Article VII of this
Agreement. Specifically, without limitation, the owners of the Existing
Policies shall be permitted to transfer or reallocate investment under
the Policies, redeem investments in any Portfolio and/or invest in the
Trust upon the making of additional purchase payments under the
Existing Policies.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail, overnight courier or facsimile to the other party at the address
of such party set forth below or at such other address as such party may from
time to time specify in writing to the other party,
If to the Trust:
MFS Variable Insurance Trust
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary
If to the Company:
Columbus Life Insurance Company
400 East 4th Street
Cincinnati, Ohio 45202
Facsimile No.: (513) 361-6757
Attn: Mark Wilkerson
If to MFS:
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, General Counsel
15
<PAGE>
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement or as otherwise required by
applicable law or regulation, shall not disclose, disseminate or
utilize such names and addresses and other confidential information
without the express written consent of the affected party until such
time as it may come into the public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument
are not binding upon any of the Trust's trustees, officers, employees,
agents or shareholders individually, but are binding solely upon the
assets and property of the Trust in accordance with its proportionate
interest hereunder. The Company further acknowledges that the assets
and liabilities of each Portfolio are separate and distinct and that
the obligations of or arising out of this instrument are binding solely
upon the assets or property of the Portfolio on whose behalf the Trust
has executed this instrument. The Company also agrees that the
obligations of each Portfolio hereunder shall be several and not joint,
in accordance with its proportionate interest hereunder, and the
Company agrees not to proceed against any Portfolio for the obligations
of another Portfolio.
16
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
COLUMBUS LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/ Mark Wilkerson
Title: Senior Vice President
MFS VARIABLE INSURANCE TRUST,
on behalf of the Portfolios
By its authorized officer and not individually,
By: /s/ James R. Bordewick, Jr.
James R. Bordewick, Jr.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES
COMPANY
By its authorized officer,
By: /s/ Jeffrey L. Shames
James L. Shames
Chairman and Chief Executive Officer
671555.01
<PAGE>
As of April 12, 1999
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<CAPTION>
<S> <C> <C>
- ---------------------------------------- ------------------------------------ ----------------------------------------
Name of Separate Policies Funded Portfolios
Account and Date By Separate Account Applicable to Policies
Established by Board of Directors
- ---------------------------------------- ------------------------------------ ----------------------------------------
- ---------------------------------------- ------------------------------------ ----------------------------------------
Columbus Life Insurance Company Columbus Life Variable MFS Emerging Growth Series
Separate Account 1 Universal Life MFS Growth with Income Series
- ---------------------------------------- ------------------------------------ ----------------------------------------
</TABLE>
PARTICIPATION AGREEMENT
Among
COLUMBUS LIFE INSURANCE COMPANY,
PIMCO VARIABLE INSURANCE TRUST,
and
PIMCO FUNDS DISTRIBUTORS LLC
THIS AGREEMENT, dated as of the 30th day of April 1999 by and among
Columbus Life Insurance Company, (the "Company"), an Ohio life insurance
company, on its own behalf and on behalf of each segregated asset account of the
Company set forth on Schedule A hereto as may be amended from time to time (each
account hereinafter referred to as the "Account"), PIMCO Variable Insurance
Trust (the "Fund"), a Delaware business trust, and PIMCO Funds Distributors LLC
(the "Underwriter"), a Delaware limited liability company.
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 and variable annuity
contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter ("Participating Insurance Companies");
WHEREAS, the shares of beneficial interest of the Fund are divided into
several series of shares, each designated a "Portfolio" and representing the
interest in a particular managed portfolio of securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (the "SEC") 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, (the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, if and to the extent necessary to permit shares of
the Fund to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
(the "Mixed and Shared Funding Exemptive Order");
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, Pacific Investment Management Company (the "Adviser"), which
serves as investment adviser to the Fund, is duly registered as an investment
adviser under the federal Investment Advisers Act of 1940, as amended;
WHEREAS, the Company has issued or will Issue certain variable life
insurance and/or variable annuity contracts supported wholly or partially by the
Account (the "Contracts"), and said Contracts are listed in Schedule A hereto,
as it may be amended from time to time by mutual written agreement;
WHEREAS, the Account is duly established and maintained as a segregated
asset account, duly established by the Company, on the date shown for such
Account on Schedule A hereto, to set aside and invest assets attributable to the
aforesaid Contracts;
WHEREAS, the Underwriter, which serves as distributor to the Fund, is
registered as a broker dealer with the SEC 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, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Fund has granted to the Underwriter exclusive
authority to distribute the Fund's shares, and has agreed to instruct, and has
so instructed, the Underwriter to make available to the Company for purchase on
behalf of the Account Fund shares of those Designated Portfolios selected by the
Underwriter. Pursuant to such authority and instructions, and subject to Article
X hereof, the Underwriter agrees to make available to the Company for purchase
on behalf of the Account, shares of those Designated Portfolios listed on
Schedule A to this Agreement, such purchases to be effected at net asset value
in accordance with Section 1.3 of this Agreement. Notwithstanding the foregoing,
(i) Fund series (other than those listed on Schedule A) in existence now or that
may be established in the future will be made available to the Company only as
the Underwriter may so provide, and (ii) the Board of Trustees of the Fund (the
"Board") may suspend or terminate the offering of Fund shares of any Designated
Portfolio or class thereof, if such action is required by law or by regulatory
authorities having jurisdiction or if, 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, suspension or termination is necessary in the best
interests of the shareholders of such Designated Portfolio.
1.2. The Fund shall redeem, at the Company's request, any full
or fractional Designated Portfolio shares held by the Company on behalf of the
Account, such redemptions to be effected at net asset value in accordance with
Section 1.3 of this Agreement. Notwithstanding the foregoing, (i) the Company
shall not redeem Fund shares attributable to Contract owners except in the
circumstances permitted in Section 10.3 of this Agreement, and (ii) the Fund may
delay redemption of Fund shares of any Designated Portfolio to the extent
permitted by the 1940 Act, and any rules, regulations or orders thereunder.
1.3. Purchase and Redemption Procedures
(a) The Fund hereby appoints the Company as an agent
of the Fund for the limited purpose of receiving purchase and redemption
requests on behalf of the Account (but not with respect to any Fund shares that
may be held in the general account of the Company) for shares of those
Designated Portfolios made available hereunder, based on allocations of amounts
to the Account or subaccounts thereof under the Contracts and other transactions
relating to the Contracts or the Account. Receipt of any such request (or
relevant transactional information therefor) on any day the New York Stock
Exchange is open for trading and on which the Fund calculates its net asset
value pursuant to the
2
<PAGE>
rules of the SEC (a "Business Day") by the Company as such limited
agent of the Fund prior to the time that the Fund ordinarily calculates its net
asset value as described from time to time in the Fund Prospectus (which as of
the date of execution of this Agreement is 4:00 p.m. Eastern Time) shall
constitute receipt by the Fund on that same Business Day, provided that the Fund
receives notice of such request by 9:30 a.m. Eastern Time on the next following
Business Day.
(b) The Company shall pay for shares of each
Designated Portfolio on the same day that it notifies the Fund of a purchase
request for such shares. Payment for Designated Portfolio shares shall be made
in federal funds transmitted to the Fund by wire to be received by the Fund by
4:00 p.m. Eastern Time on the day the Fund is notified of the purchase request
for Designated Portfolio shares (unless the Fund determines and so advises the
Company that sufficient proceeds are available from redemption of shares of
other Designated Portfolios effected pursuant to redemption requests tendered by
the Company on behalf of the Account). If federal funds are not received on
time, such funds will be invested, and Designated Portfolio shares purchased
thereby will be issued, as soon as practicable and the Company shall promptly,
upon the Fund's request, reimbursethe Fund for any charges, costs, fees,
interest or other expenses incurred by the Fund in connection with any advances
to, or borrowing or overdrafts by, the Fund, or any similar expenses incurred by
the Fund, as a result of portfolio transactions effected by the Fund based upon
such purchase request. Upon receipt of federal funds so wired, such funds shall
cease to be the responsibility of the Company and shall become the
responsibility of the Fund.
(c) Payment for Designated Portfolio shares redeemed
by the Account or the Company shall be made in federal funds transmitted by wire
to the Company or any other designated person on the next Business Day after the
Fund is properly notified of the redemption order of such shares (unless
redemption proceeds are to be applied to the purchase of shares of other
Designated Portfolios in accordance with Section 1.3(b) of this Agreement),
except that the Fund reserves the right to redeem Designated Portfolio shares
in assets other than cash and to delay payment of redemption proceeds to the
extent permitted under Section 22(e) of the 1940 Act and any Rules thereunder,
and in accordance with the procedures and policies of the Fund as described in
the then current prospectus. The Fund shall not bear any responsibility
whatsoever for the proper disbursement or crediting of redemption proceeds by
the Company; the Company alone shall be responsible for such action.
(d) Any purchase or redemption request for Designated
Portfolio shares held or to be held in the Company's general account shall be
effected at the net asset value per share next determined after the Fund's
receipt of such request, provided that, in the case of a purchase request,
payment for Fund shares so requested is received by the Fund in federal funds
prior to close of business for determination of such value, as defined from time
to time in the Fund Prospectus.
1.4. The Fund shall use its best efforts to make the net asset
value per share for each Designated Portfolio available to the Company by 6:30
p.m. Eastern Time each Business Day, and in any event, as soon as reasonably
practicable after the net asset value per share for such Designated Portfolio is
calculated, and shall calculate such net asset value in accordance with the
Fund's Prospectus. Neither the Fund, any Designated Portfolio, the Underwriter,
nor any of their affiliates shall be liable for any information provided to the
Company pursuant to this Agreement which information is based on incorrect
information supplied by the Company or any other Participating Insurance Company
to the Fund or the Underwriter.
1.5. The Fund shall furnish notice (by wire or telephone
followed by written confirmation) to the Company as soon as reasonably
practicable of any income dividends or capital gain distributions payable on any
Designated Portfolio shares. The Company, on its behalf and on behalf of the
Account, hereby elects to receive all such dividends and distributions as are
payable on any Designated Portfolio shares in the form of additional shares of
that Designated Portfolio. The Company
3
<PAGE>
reserves the right, on its behalf and on behalf of the Account, to revoke this
election and to receive all such dividends and capital gain distributions in
cash. The Fund shall notify the Company promptly of the number of Designated
Portfolio shares so issued as payment of such dividends and distributions.
1.6. Issuance and transfer of Fund shares shall be by book
entry only. Stock certificates will not be issued to the Company or the Account.
Purchase and redemption orders for Fund shares shall be recorded in an
appropriate ledger for the Account or the appropriate subaccount of the Account.
1.7. (a) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; the Fund's shares may be sold
to other insurance companies (subject to Section 1.8 hereof) and the cash value
of the Contracts may be invested in other investment companies, provided,
however, that until this Agreement is terminated pursuant to Article X, the
Company shall promote the Designated Portfolios on the same basis as other
funding vehicles available under the Contracts. Funding vehicles other than
those listed on Schedule A to this Agreement may be available for the investment
of the cash value of the Contracts, provided, however, (i) any such vehicle or
series thereof, has investment objectives or policies that are substantially
different from the investment objectives and policies of the Designated
Portfolios available hereunder; (ii) the Company gives the Fund and the
Underwriter 45 days written notice of its intention to make such other
investment vehicle available as a funding vehicle for the Contracts; and (iii)
unless such other investment company was available as a Funding vehicle for the
Contracts prior to the date of this Agreement and the Company has so informed
the Fund and the Underwriter prior to their signing this Agreement, the Fund or
Underwriter consents in writing to the use of such other vehicle, such consent
not to be unreasonably withheld.
(b) The Company shall not, without prior notice to
the Underwriter (unless otherwise required by applicable law), take any action
to operate the Account as a management investment company under the 1940 Act.
(c) The Company shall not, without prior notice to
the Underwriter (unless otherwise required by
applicable law), induce Contract owners to change or modify the Fund or change
the Fund's distributor or investment adviser.
(d) The Company shall not, without prior notice to
the Fund, induce Contract owners to vote on any matter
submitted for consideration by the shareholders of the Fund in a manner other
than as recommended by the Board of Trustees of the Fund.
1.8. The Underwriter and the Fund shall sell Fund shares only
to Participating Insurance Companies and their separate accounts and to persons
or plans ("Qualified Persons") that communicate to the Underwriter and the Fund
that they qualify to purchase shares of the Fund under Section 817(h) of the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
thereunder without impairing the ability of the Account to consider the
portfolio investments of the Fund as constituting investments of the Account for
the purpose of satisfying the diversification requirements of Section 817(h).
The Underwriter and the Fund shall not sell Fund shares to any insurance company
or separate account unless an agreement complying with Article VI of this
Agreement is in effect to govern such sales, to the extent required. The Company
hereby represents and warrants that it and the Account are Qualified Persons.
The Fund reserves the right to cease offering shares of any Designated Portfolio
in the discretion of the Fund.
ARTICLE II. Representations and Warranties
4
<PAGE>
2.1. The Company represents and warrants that the Contracts
(a) are, or prior to issuance will be, registered under the 1933 Act, or (b) are
not registered because they are properly exempt from registration under the 1933
Act or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act. The Company further represents and warrants
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal securities and state securities and
insurance laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law, that it has legally and validly established
the Account prior to any issuance or sale thereof as a segregated asset account
under Ohio insurance laws, and that it (a) has registered or, prior to any
issuance or sale of the Contracts, will register the Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts, or alternatively (b) has not
registered the Account in proper reliance upon an exclusion from registration
under the 1940 Act. The Company shall register and qualify the Contracts or
interests therein as securities in accordance with the laws of the various
states only if and to the extent deemed advisable by the Company.
2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with applicable state and federal
securities laws and that the Fund is and shall remain registered under the 1940
Act. The Fund shall amend the registration statement for its shares under the
1933 Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Fund or the Underwriter.
2.3. The Fund may make payments to finance distribution
expenses pursuant to Rule 12b-1 under the 1940 Act. Prior to financing
distribution expenses pursuant to Rule l2b- 1, the Fund will have the Board, a
majority of whom are not interested persons of the Fund, formulate and approve a
plan pursuant to Rule I 2b- I under the 1940 Act to finance distribution
expenses.
2.4. The Fund makes no representations as to whether any
aspect of its operations, including, but not limited to, investment policies,
fees and expenses, complies with the insurance and other applicable laws of the
various states.
2.5. The Fund represents that it is lawfully organized and
validly existing under the laws of the State of Delaware and that it does and
will comply in all material respects with the 1940 Act.
2.6. The Underwriter represents and warrants that it is a
member in good standing of the NASD and is registered as a broker-dealer with
the SEC. The Underwriter further represents that it will sell and distribute the
Fund shares in accordance with any applicable state and federal securities laws.
2.7. The Fund and the Underwriter represent and warrant that
all of their trustees/directors, 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 a blanket fidelity
bond or similar coverage for the benefit of the Fund in an amount not less than
the minimum coverage as required currently by Rule l7g-1 of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.8. The Company represents and warrants that all of its
directors, officers, employees, and other individuals/entities employed or
controlled by the Company dealing with the money and/or securities of the
Account are covered by a blanket fidelity bond or similar coverage for the
benefit
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of the Account, in an amount not less than $5 million. The aforesaid bond
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company. The Company agrees to hold for the benefit of the Fund and to
pay to the Fund any amounts lost from larceny, embezzlement or other events
covered by the aforesaid bond to the extent such amounts properly belong to the
Fund pursuant to the terms of this Agreement. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company with as many
copies of the Fund's current prospectus (describing only the Designated
Portfolios listed on Schedule A) or, to the extent permitted, the Fund's
profiles as the Company may reasonably request. The Company shall bear the
expense of printing copies of the current prospectus and profiles for the
Contracts that will be distributed to existing Contract owners, and the Company
shall bear the expense of printing copies of the Fund's prospectus and profiles
that are used in connection with offering the Contracts issued by the Company.
If requested by the Company in lieu thereof, the Fund shall provide such
documentation (including a final copy of the new prospectus on diskette at the
Fund's expense) and other assistance as is reasonably necessary in order for the
Company once each year (or more frequently if the prospectus for the Fund is
amended) to have the prospectus for the Contracts and the Fund's prospectus or
profile printed together in one document (such printing to be at the Company's
expense).
3.2. The Fund's prospectus shall state that the current
Statement of Additional Information ("SAI") for the Fund is available, and the
Underwriter (or the Fund), at its expense, shall provide a reasonable number of
copies of such SAI free of charge to the Company for itself and for any owner of
a Contract who requests such SAI.
3.3. The Fund shall provide the Company with information
regarding the Fund's expenses, which information may include a table of fees and
related narrative disclosure for use in any prospectus or other descriptive
document relating to a Contract. The Company agrees that it will use such
information in the form provided. The Company shall provide prior written notice
of any proposed modification of such information, which notice will describe in
detail the manner in which the Company proposes to modify the information, and
agrees that it may not modify such information in any way without the prior
consent of the Fund.
3.4. The Fund, at its expense, shall provide the Company with
copies of its proxy material, reports to shareholders, and other communications
to shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.5. The Company shall:
(i) solicit voting instructions from Contract
owners;
(ii) vote the Fund shares in accordance with
instructions received from Contract owners: and
(iii)vote Fund shares for which no instructions
have been received in the same proportion as
Fund shares of such portfolio for which
instructions have been received,
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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 or to the
extent otherwise required by law. The Company will vote Fund shares held in any
segregated asset account in the same proportion as Fund shares of such portfolio
for which voting instructions have been received from Contract owners, to the
extent permitted by law.
3.6. Participating Insurance Companies shall be responsible
for assuring that each of their separate accounts participating in a Designated
Portfolio calculates voting privileges as required by the Shared Funding
Exemptive Order and consistent with any reasonable standards that the Fund may
adopt and provide in writing.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee, each piece of sales literature or other
promotional material that the Company develops and in which the Fund (or a
Designated Portfolio thereof) or the Adviser or the Underwriter is named. No
such material shall be used until approved by the Fund or its designee, and the
Fund will use its best efforts for it or its designee to review such sales
literature or promotional material within ten Business Days after receipt of
such material. The Fund or its designee reserves the right to reasonably object
to the continued use of any such sales literature or other promotional material
in which the Fund (or a Designated Portfolio thereof) or the Adviser or the
Underwriter is named, and no such material shall be used if the Fund or its
designee so object.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund or
the Adviser or the Underwriter in connection with the sale of the Contracts
other than the information or representations contained in the registration
statement or prospectus or SAI for the Fund shares, as such registration
statement and prospectus or SAI may be amended or supplemented from time to
time, or in reports or proxy statements for the Fund, or in sales literature or
other promotional material approved by the Fund or its designee or by the
Underwriter, except with the permission of the Fund or the Underwriter or the
designee of either.
4.3. The Fund and the Underwriter, or their designee, shall
furnish, or cause to be furnished, to the Company, each piece of sales
literature or other promotional material that it develops and in which the
Company, and/or its Account, is named. No such material shall be used until
approved by the Company, and the Company will use its best efforts to review
such sales literature or promotional material within ten Business Days after
receipt of such material. The Company reserves the right to reasonably object to
the continued use of any such sales literature or other promotional material in
which the Company and/or its Account is named, and no such material shall be
used if the Company so objects.
4.4. The Fund and the Underwriter shall not give any
information or make any representations on behalf of the Company or concerning
the Company, the Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus (which shall
include an offering memorandum, if any, if the Contracts issued by the Company
or interests therein are not registered under the 1933 Act), or SAI for the
Contracts, as such registration statement, prospectus, or SAI may be amended or
supplemented from time to time, or in published reports for the Account which
are in the public domain or approved by the Company for distribution to Contract
owners, or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one
complete copy of all registration statements, prospectuses, SAls, reports, proxy
statements, sales literature and other
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promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Fund or its
shares, promptly after the filing of such document(s) with the SEC or other
regulatory authorities.
4.6. The Company will provide to the Fund at least one
complete copy of all registration statements, prospectuses (which shall include
an offering memorandum, if any, if the Contracts issued by the Company or
interests therein are not registered under the 1933 Act), SAls, 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,
promptly after the filing of such document(s) with the SEC or other regulatory
authorities. The Company shall provide to the Fund and the Underwriter any
complaints received from the Contract owners pertaining to the Fund or the
Designated Portfolio.
4.7. The Fund will provide the Company with as much notice as
is reasonably practicable of any proxy solicitation for any Designated
Portfolio, and of any material change in the Fund's registration statement,
particularly any change resulting in a change to the registration statement or
prospectus for any Account. The Fund will work with the Company so as to enable
the Company to solicit proxies from Contract owners, or to make changes to its
prospectus or registration statement, in an orderly manner. The Fund will make
reasonable efforts to attempt to have changes affecting Contract prospectuses
become effective simultaneously with the annual updates for such prospectuses.
4.8. For purposes of this Article IV, the phrase "sales
literature and other promotional materials" includes, but is not limited to, any
of the following that refer to the Fund or any affiliate of the Fund:
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public media),
sales literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Fund.
ARTICLE V. Fees and Expenses
5.1. The Fund and the Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule l2b-1 to finance
distribution expenses, then the Fund or Underwriter may make payments to the
Company or to the underwriter for the Contracts if and in amounts agreed to by
the Underwriter in writing, and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter, or other
resources available to the Underwriter. Currently, no such payments are
contemplated.
5.2. All expenses incident to performance by the Fund under
this Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that
8
<PAGE>
constitutes an annual report), the preparation of all statements and notices
required by any federal or state law, and all taxes on the issuance or transfer
of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the
Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification and Qualification
6.1. The Fund will invest its assets in such a manner as to
ensure that the Contracts will be treated as annuity or life insurance
contracts, whichever is appropriate, under the Code and the regulations issued
thereunder (or any successor provisions). Without limiting the scope of the
foregoing, each Designated Portfolio has complied and will continue to comply
with Section 817(h) of the Code and Treasury Regulation ss.1.817-5, 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.
In the event of a breach of this Article VI by the Fund, it will take all
reasonable steps (a) to notify the Company of such breach and (b) to adequately
diversify the Fund so as to achieve compliance within the grace period afforded
by Regulation 1.817-5.
6.2. The Fund represents that it is or will be qualified as a
Regulated Investment Company under Subchapter M of the Code, and that It will
make every effort to maintain such qualification (under Subchapter M or any
successor or similar provisions) and that it will notify the Company immediately
upon having a reasonable basis for believing that it has ceased to so qualify or
that it might not so qualify in the future.
6.3. The Company represents that the Contracts are currently,
and at the time of issuance shall be, treated as life insurance or annuity
insurance contracts, under applicable provisions of the Code, and that it will
make every effort to maintain such treatment, and that it will notify the Fund
and the Underwriter immediately upon having a reasonable basis for believing the
Contracts have ceased to be so treated or that they might not be so treated in
the future. The Company agrees that any prospectus offering a contract that is a
"modified endowment contract" as that term is defined in Section 7702A of the
Code (or any successor or similar provision), shall identify such contract as a
modified endowment contract.
ARTICLE VII. Potential Conflicts
The following provisions shall apply only upon issuance of the Mixed and Shared
Funding Order and the sale of shares of the Fund to variable life insurance
separate accounts, and then only to the extent required under the 1940 Act.
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the Contract owners of
all separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board
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<PAGE>
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing
conflicts of which it is aware to the Board. The Company will assist the Board
in carrying out its responsibilities under the Mixed and Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Company to inform the Board whenever Contract
owner voting instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a
majority of its disinterested members, that a material irreconcilable conflict
exists, the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority of
the disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the Account's
investment in the Fund and terminate this Agreement with respect to each
Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the end of the foregoing six month period, the Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Section 7.3 through 7.6 of this
Agreement, a majority of the disinterested members of the Board shall determine
whether any proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Fund be required to establish a new funding
medium for the Contracts. The Company shall not be required by Section 7.3 to
establish a new funding medium for the Contract if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict. In the event that the Board determines
that any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; provided,
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<PAGE>
however, that such withdrawal and termination shall be limited to the extent
required by any such material irreconcilable conflict as determined by a
majority of the disinterested members of the Board.
7.7. If and to the extent the Mixed and Shared Funding
Exemption Order or any amendment thereto contains terms and conditions different
from Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement, then
the Fund and/or the Participating Insurance Companies, as appropriate, shall
take such steps as may be necessary to comply with the Mixed and Shared Funding
Exemptive Order, and Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this
Agreement shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in the Mixed and Shared
Funding Exemptive Order or any amendment thereto. If and to the extent that Rule
6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive
relief from any provision of the 1940 Act or the rules promulgated thereunder
with respect to mixed or shared funding (as defined in the Mixed and Shared
Funding Exemptive Order) on terms and conditions materially different from those
contained in the Mixed and Shared Funding Exemptive Order, then (a) the Fund
and/or the Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary to comply with Rules 6e2 and 6e-3(T), as amended, and
Rule 6e-3, as adopted, to the extent Such rules are applicable; and (b) Sections
3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect
only to the extent that terms and conditions substantially identical to such
Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification by the Company
8.1(a). The Company agrees to indemnify and hold
harmless the Fund and the Underwriter and each of its trustees/directors and
officers, and each person, if any, who controls the Fund or Underwriter within
the meaning of Section 15 of the 1933 Act or who is under common control with
the Underwriter (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements:
(i) arise out of or are based upon any
untrue statement or alleged untrue statements of any
material fact contained the registration statement,
prospectus (which shall include a written description
of a Contract that is not registered under the 1933
Act), or SAI for the Contracts or contained in the
Contracts or sales literature for the Contracts (or
any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, provided that
this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund
for use in the registration statement, prospectus or
SAI for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of
statements or representations (other than statements
or representations contained in the registration
statement,
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<PAGE>
prospectus, SAI, or sales literature of the Fund not
supplied by the Company or persons under its control)
or wrongful conduct of the Company or its agents or
persons under the Company's authorization or 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 of the Fund or any amendment thereof
or supplement thereto or the omission or alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading if such a statement or
omission was made in reliance upon information
furnished to the Fund by or on behalf of the Company;
or
(iv) arise as a result of any material
failure by the Company to provide the services and
furnish the materials under the terms of this
Agreement (including a failure, whether unintentional
or in good faith or otherwise, to comply with the
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 Company in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Company; or
(vi)as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of its obligations or
duties under this Agreement.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the Company
in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify the
Company of any such claim shall not relieve the Company from any liability
which it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against an Indemnified Party, the Company shall be entitled to
participate, at its own expense, in the defense of such action. The Company also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Company to such party of
the Company's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Company will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
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8.1(d). The Indemnified Parties will promptly notify
the Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or the
operation of the Fund.
8.2. Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold
harmless the Company, its affiliates and each of their directors and officers
and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Underwriter) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements:
(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 of the Fund
(or any amendment or Supplement to any of the
foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity
with information furnished to the Underwriter or Fund
by or on behalf of the Company for use in the
registration statement, prospectus or SAI for the
Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with
the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of
statements or representations (other than statements
or representations contained in the registration
statement, prospectus, SAI or sales literature for
the Contracts not supplied by the Underwriter or
persons under its control) or wrongful conduct of the
Fund or Underwriter or persons under their control,
with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or
alleged untrue statement of a material fact contained
in a registration statement, prospectus, SAI or sales
literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statement or statements therein not misleading,
if such statement or omission was made in reliance
upon information furnished to the Company by or on
behalf of the Fund or the Underwriter, or
(iv) arise as a result of any failure by the
Fund or the Underwriter to provide the services and
furnish the materials under the terms of this
Agreement (including a failure of the Fund, 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
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<PAGE>
(v) arise out of or result from any material
breach of any representation and/or warranty made by
the Underwriter in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under
this indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance or such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under
this indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Underwriter in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure
to notify the Underwriter of any such claim shall not relieve the Underwriter
from any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Party, the
Underwriter will be entitled to participate, at its own expense, in the defense
thereof. The Underwriter also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After notice from
the Underwriter to such party of the Underwriter's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Underwriter will not be liable to
such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
The Company agrees promptly to notify the Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of the Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold
harmless the Company, its affiliates, and each of their directors and officers
and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Section 8.3) against any and all losses, claims, expenses, damages,
liabilities (including amounts paid in settlement with the written consent of
the Fund) or litigation (including legal and other expenses) to which the
Indemnified Parties may be required to pay or may 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:
(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
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(ii) arise out of or result from any material breach
of any representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise
be Subject by reason of such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, the Fund, the Underwriter or the
Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this
indemnification provision with respect to any claim made against all 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 failure to notify the Underwriter of any such
claim shall not relieve the Underwriter from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Party, the Underwriter will be entitled to participate,
at its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Underwriter will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs
of investigation.
8.3(d). The Company and the Underwriter agree
promptly to notify the Fund of the commencement of any litigation or proceeding
against it 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.
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
California.
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, any Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith. If, in the future, the Mixed and Shared Funding Exemptive Order
should no longer be necessary under applicable law, then Article VII shall no
longer apply.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect
until the first to occur of:
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(a) termination by any party, for any reason with respect
to some or all Designated Portfolios, by three (3)
months advance written notice delivered to the other
parties; or
(b) termination by the Company by written notice to the
Fund and the Underwriter based upon the Company's
determination that shares of the Fund are not
reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to the
Fund and the Underwriter in the event any of the
Designated Portfolio's shares are not registered,
issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of
such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
(d) termination by the Fund or Underwriter in the event
that formal administrative proceedings are instituted
against the Company by the NASD, the SEC, the
Insurance Commissioner or like official of any state
or any other regulatory body regarding the Company's
duties under this Agreement or related to the sale of
the Contracts, the operation of any Account, or the
purchase of the Fund's shares; provided, however,
that the Fund or Underwriter determines in its sole
judgment exercised in good faith, that any such
administrative proceedings will have a material
adverse effect upon the ability of the Company to
perform its obligations under this Agreement; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the
Fund or Underwriter by the NASD, the SEC, or any
state securities or insurance department or any other
regulatory body; provided, however, that the Company
determines in its sole judgment exercised in good
faith, that any such administrative proceedings will
have a material adverse effect upon the ability of
the Fund or Underwriter to perform its obligations
under this Agreement; or
(f) termination by the Company by written notice to the
Fund and the Underwriter with respect to any
Designated Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company
under Subchapter M or fails to comply with the
Section 817(h) diversification requirements specified
in Article VI hereof, or if the Company reasonably
believes that such Portfolio may fall to so qualify
or comply; or
(g) termination by the Fund or Underwriter by written
notice to the Company in the event that the Contracts
fail to meet the qualifications specified in Article
VI hereof, or
(h) termination by either the Fund or the Underwriter by
written notice to the Company, if either one or both
of the Fund or the Underwriter respectively, shall
determine, in their sole judgment exercised in good
faith, that the Company has suffered a material
adverse change in its business, operations, financial
condition, or prospects since the date of this
Agreement or is the subject of material adverse
publicity; or
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(i) termination by the Company by written notice to the
Fund and the Underwriter, if the Company shall
determine, in its sole judgment exercised in good
faith, that the Fund, Adviser, or the Underwriter has
suffered a material adverse change in its business,
operations, financial condition or prospects since
the date of this Agreement or is the subject of
material adverse publicity; or
(j) termination by the Fund or the Underwriter by written
notice to the Company, if the Company gives the Fund
and the Underwriter the written notice specified in
Section 1.7(a)(ii) hereof and at the time such notice
was given there was no notice of termination
outstanding under any other provision of this
Agreement; provided, however, any termination under
this Section 10.1(j) shall be effective forty-five
days after the notice specified in Section 1.7(a)(ii)
was given; or
(k) termination by the Company upon any substitution of
the shares of another investment company or series
thereof for shares of a Designated Portfolio of the
Fund in accordance with the terms of the Contracts,
provided that the Company has given at least 45 days
prior written notice to the Fund and Underwriter of
the date of substitution; or
(1) termination by any party in the event that the Fund's
Board of Trustees determines that a material
irreconcilable conflict exists as provided in Article
VII.
10.2. Notwithstanding any termination of this Agreement, the
Fund and the Underwriter shall, at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and conditions of
this Agreement, for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts"), unless the
Underwriter requests that the Company seek an order pursuant to Section 26(b) of
the 1940 Act to permit the substitution of other securities for the shares of
the Designated Portfolios. The Underwriter agrees to split the cost of seeking
such an order, and the Company agrees that it shall reasonably cooperate with
the Underwriter and seek such an order upon request. Specifically, the owners of
the Existing Contracts may be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts (subject to any such
election by the Underwriter). The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement. The parties
further agree that this Section 10.2 shall not apply to any terminations under
Section 10.1(g) of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to
the Contracts (as opposed to Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract owner
initiated or approved transactions, (ii) as required by state and/or federal
laws or regulations or Judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), (iii) upon 45 days
prior written notice to the Fund and Underwriter, as permitted by an order of
the SEC pursuant to Section 26(b) of the 1940 Act, but only if a substitution of
other securities for the shares of the Designated Portfolios is consistent with
the terms of the Contracts, or (iv) as permitted under the terms of the
Contract. Upon request, the Company will promptly furnish to the Fund and the
Underwriter reasonable assurance that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contacts, the Company shall not prevent
Contract owners from allocating payments to a Portfolio that was otherwise
available under the Contracts without first giving the Fund or the Underwriter
45 days notice of its intention to do so.
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<PAGE>
10.4. Notwithstanding any termination of this Agreement, each
party's obligation under Article VIII to indemnify the other parties shall
survive.
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: PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
If to the Company: Columbus Life Insurance Company
400 East Fourth Street
Cincinnati, OH 45202
If to Underwriter: PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look solely to
the property of the Fund, and in the case of a series company, the respective
Designated Portfolios listed on Schedule A hereto as though each such Designated
Portfolio had separately contracted with the Company and the Underwriter for the
enforcement of any claims against the Fund. The parties agree that neither the
Board, officers, agents or shareholders of the Fund assume any personal
liability or responsibility for obligations entered into by or on behalf of the
Fund.
12.2. Subject to the requirements of legal process and
regulatory authority, each party hereto shall treat as confidential the names
and addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information without the express
written consent of the affected party until such time as such information has
come into the public domain.
12.3. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or
more Counterparts, each of which taken together shall constitute one and the
same instrument.
12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
SEC, the NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with
18
<PAGE>
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby. Notwithstanding the generality of the foregoing, each party
hereto further agrees to furnish the Ohio Insurance Commissioner with any
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 the Company are being conducted in a manner consistent
with the Ohio variable annuity laws and regulations and any other applicable law
or regulations.
12.7. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies,
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written consent of
all parties hereto.
12.9. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under
statutory accounting principles) and annual report
(prepared under generally accepted accounting
principles) filed with any state or federal
regulatory body or otherwise made available to the
public, as soon as practicable and in any event
within 90 days after the end of each fiscal year; and
(b) any registration statement (without exhibits) and
financial reports of the Company filed with the
Securities and Exchange Commission or any state
insurance regulatory, as soon as practicable after
the filing thereof.
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.
COMPANY:
COLUMBUS LIFE INSURANCE COMPANY
By its authorized officer
By: /s/ Mark Wilkerson
Name: Mark Wilkerson
Title: Senior Vice President
Date: April 30, 1999
PIMCO VARIABLE INSURANCE TRUST
By its authorized officer
By: /s/ Brent R. Harris
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<PAGE>
Name: Brent R. Harris
Title: Chairman
Date: April 30, 1999
PIMCO FUNDS DISTRIBUTORS LLC
By its authorized officer
By: /s/ Newton B. Schott, Jr.
Name: Newton B. Schott, Jr.
Title: Executive Vice President
Date: April 30, 1999
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<PAGE>
Schedule A
PIMCO Variable Insurance Trust Portfolios:
PIMCO Long-Term U.S. Government Portfolio
Segregated Asset Accounts:
Columbus Life Insurance Company Separate Account I
Dated April 30, 1999.
SERVICES AGREEMENT
The terms and conditions of this Services Agreement between Pacific
Investment Management Company ("PIMCO") and Columbus Life Insurance Company (the
"Company") are effective as of April 30, 1999.
WHEREAS, the Company, PIMCO Funds Distributors LLC and PIMCO Variable
Insurance Trust (the "Trust") have entered into a Fund Participation Agreement
dated April 30, 1999, as may be amended from time to time (the "Participation
Agreement"), pursuant to which the Company, on behalf of certain of its separate
accounts (the "Separate Accounts"), purchases shares ("Shares") of certain
Portfolios of the Trust ("Portfolios") to serve as an investment vehicle under
certain variable annuity and/or variable life insurance contracts ("Variable
Contracts") offered by the Company, which Portfolios may be one of several
investment options available under the Variable Contracts; and
WHEREAS, PIMCO recognizes that it will derive substantial savings in
administrative expenses by virtue of having a sole shareholder rather than
multiple shareholders in connection with each Separate Account's investments in
the Portfolios, and that in the course of soliciting applications for Variable
Contracts issued by the Company and in servicing owners of such Variable
Contracts, the Company will provide information about the Trust and its
Portfolios from time to time, answer questions concerning the Trust and its
Portfolios, including questions respecting Variable Contract owners' interests
in one or more Portfolios, and provide services respecting investments in the
Portfolios; and
WHEREAS, PIMCO wishes to compensate the Company for the efforts of the
Company in providing written and oral information and services regarding the
Trust to Variable Contract owners; and
WHEREAS, the following represents the collective intention and
understanding of the service fee agreement between PIMCO and the Company.
NOW, THEREFORE, in consideration of their mutual promises, the Company
and PIMCO agree as follows:
1. Services. The Company and/or its affiliates agree to provide
services ("Services") to owners of Variable Contracts including, but not limited
to: teleservicing support in connection with the Portfolios; delivery of current
Trust prospectuses, reports, notices, proxies and proxy statements and other
informational materials; facilitation of the tabulation of Variable Contract
owners' votes in the event of a Trust shareholder vote; maintenance of Variable
Contract records reflecting Shares purchased and redeemed and Share balances,
and the conveyance of that information to the Trust or PIMCO as may be
reasonably requested; provision of support services, including providing
information about the Trust and its Portfolios and answering questions
concerning the Trust and its Portfolios, including questions respecting Variable
Contract owners' interests in one or more Portfolios; provision and
administration of Variable Contract features for the benefit of Variable
Contract owners in connection with the Portfolios,
<PAGE>
which may include fund transfers, dollar cost averaging, asset allocation,
portfolio rebalancing, earnings sweep, and pre-authorized deposits and
withdrawals; and provision of other services as may be agreed upon from time
to time.
2. Compensation. In consideration of the Services, PIMCO agrees to pay
to the Company a service fee at an annual rate equal to twenty-five (25) basis
points (0.25%) of the average daily value of the Shares held in the Separate
Accounts. Such payments will be made monthly in arrears. For purposes of
computing the payment to the Company under this paragraph 2, the average daily
value of Shares held in the Separate Accounts over a monthly period shall be
computed by totaling such Separate Accounts' aggregate investment (Share net
asset value multiplied by total number of Shares held by such Separate Accounts)
on each business day during the calendar month, and dividing by the total number
of business days during such month. The payment to the Company under this
paragraph 2 shall be calculated by PIMCO at the end of each calendar month and
will be paid to the Company within 30 days thereafter. Payment will be
accompanied by a statement showing the calculation of the monthly amounts
payable by PIMCO and such other supporting data as may be reasonably requested
by the Company.
3. Term. This Services Agreement shall remain in full force and effect
for an initial term of one year, and shall automatically renew for successive
one year periods. This Services Agreement may be terminated by either party
hereto upon 30 days written notice to the other. This Services Agreement shall
terminate automatically upon the redemption of all Shares held in the Separate
Accounts, upon termination of the Participation Agreement, upon a material,
unremedied breach of the Participation Agreement, as to a Portfolio upon
termination of the investment advisory agreement between the Trust, on behalf of
such Portfolio, and PIMCO, or upon assignment of the Participation Agreement by
either the Company or PIMCO. Notwithstanding the termination of this Services
Agreement, PIMCO will continue to pay the service fees in accordance with
paragraph 2 so long as net assets of the Separate Accounts remain in a
Portfolio, provided such continued payment is permitted in accordance with
applicable law and regulation.
4. Amendment. This Services Agreement may be amended only upon mutual
agreement of the parties hereto in writing.
5. Effect on Other Terms, Obligations and Covenants. Nothing herein
shall amend, modify or supersede any contractual terms, obligations or covenants
among or between any of the Company, PIMCO or the Trust previously or currently
in effect, including those contractual terms, obligations or covenants contained
in the Participation Agreement.
2
<PAGE>
In witness whereof, the parties have caused their duly authorized
officers to execute this Services Agreement.
PACIFIC INVESTMENT MANAGEMENT COMPANY
/s/ Brent R. Harris
By: Brent R. Harris
Title: Managing Director
Date: April 30, 1999
COLUMBUS LIFE INSURANCE COMPANY
/s/ Mark Wilkerson
By: Mark Wilkerson
Title: Senior Vice President
Date: April 30, 1999
FUND PARTICIPATION AGREEMENT
This Fund Participation Agreement (the "Agreement"), dated as of the
15th of July, 1999, is made by and among Columbus Life Insurance Company
("Columbus Life"), on its own behalf and on behalf of Columbus Life Insurance
Company Separate Account 1 (the "Separate Account") and the various sub-accounts
of the Separate Account as set forth in Exhibit A attached hereto (each a
"Sub-Account"), and Touchstone Variable Series Trust (formerly, the Select
Advisors Variable Insurance Trust), a Massachusetts business trust (the
"Trust"), and each separate series of the Trust, as set forth on Exhibit B-2
attached hereto (each a "Fund" or together the "Funds"), all of which Funds
serve as underlying investment media for the Sub-Accounts.
The parties hereby agree as follows:
1. Representations and Agreements of the Parties.
1.1 The Trust makes the following representations and covenants:
(a) The Trust has been established and is validly existing and in
good standing as a business trust under the laws of the
Commonwealth of Massachusetts and consists of separate series
described in the most recent Post-Effective Amendment to its
Registration Statement on Form N-1A (the "Trust Registration
Statement").
(b) The Trust is a no-load diversified, open-end, management
investment company and is duly registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The offering
of the securities of the Trust has been duly registered under
the Securities Act of 1933, as amended (the "1933 Act").
(c) The Trust has supplied the information regarding the Trust and
each of the Funds to Columbus Life for inclusion in the Pre-
and Post-Effective Amendments to the Registration Statement on
Form S-6 (the "Columbus Life Registration Statement") for the
Contracts (as defined in Section 1.2) to be issued by the
Separate Account. The information does not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading.
(d) The Trust Registration Statement does not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or a material fact that is
necessary in order to make the statements therein not
misleading. This representation does not extend to statements
or omissions made in reliance upon and in conformity with
written information furnished by Columbus Life for inclusion
in the Trust Registration Statement.
(e) The Trust and each Fund will comply with and qualify under the
requirements applicable to regulated investment companies
under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and the Trust will notify
1
<PAGE>
Columbus Life immediately upon having a reasonable basis for
believing that the Trust or any Fund has ceased to comply
with these requirements.
(f) Each Fund will comply with the diversification requirements
set forth in Section 5(b)(1) of the 1940 Act and Section
817(h) of the Code and Section 1.817-5(b) of the regulations
under the Code, and the Trust will cause each Fund to comply
with these diversification requirements. The Trust will notify
Columbus Life immediately upon having a reasonable basis for
believing that any Fund has ceased to meet these requirements
or might not meet these requirements in the future.
(g) Except for shares or interests sold for organizational
purposes prior to the effective date of its initial
Registration Statement, the Trust will not sell shares of or
interests in the Funds to purchasers other than the Separate
Account or one or more other separate accounts established by
Columbus Life or other life insurance companies.
1.2 Columbus Life represents and covenants as follows:
(a) It is an insurance company duly organized and in good standing
under applicable law and has legally and validly established
the Separate Account as a separate account under Ohio law, and
has registered the Separate Account as a unit investment trust
under the 1940 Act to serve as an investment vehicle for
flexible premium variable universal life insurance contracts
to be offered by the Separate Account (the "Contracts").
(b) The Contracts provide for the allocation of net amounts
received by Columbus Life to the Separate Account and to the
Sub-Accounts. Selection of a particular Sub-Account is made by
the Contract owner, who may change such selection from time to
time in accordance with the terms of the applicable Contract.
(c) The offering of the Contracts has been registered under the
1933 Act.
(d) Each Sub-Account is a "segregated asset account" for purposes
of diversification testing. Interests in each Sub-Account are
offered exclusively through the purchase of a "variable
contract," within the meaning of such term under Section
817(d) of the Code. Columbus Life will exercise its best
efforts to continue to meet such definitional requirements,
and will notify the Trust immediately upon having a reasonable
basis for believing that a Sub-Account has ceased to meet
these requirements or might not meet these requirements in the
future.
(e) The information regarding Columbus Life and the Separate
Account that Columbus Life and the Separate Account have
supplied to the Trust for inclusion in the Trust Registration
Statement does not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading.
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<PAGE>
1.3 The representations and covenants contained in Sections 1.1 and 1.2
are continuing representations and covenants of each party making them and must
be satisfied throughout the term of this Agreement. The Trust will provide
Columbus Life, within ten (10) business days (y) after the end of each year, a
letter from the appropriate officer of the Trust certifying to the continued
accuracy of the representations contained in Section 1.1, above, and (z) after
the end of each calendar quarter, a detailed listing of the individual
securities and other assets, if any, held by each Fund as of the end of such
calendar quarter. Columbus Life will provide the Trust, within ten (10) business
days after the end of each year, a letter from the appropriate officer of
Columbus Life certifying to the continued accuracy of the representations
contained in Section 1.2 above.
2. Marketing. Columbus Life through its Distributor, Touchstone
Securities, Inc. (the "Distributor"), will make all reasonable efforts to market
the Contracts. In marketing the contracts, Columbus Life and the Distributor
will comply with all applicable state or federal securities and insurance laws.
3. Valuation and Order.
3.1 The Trust will cause Investors Bank and Trust Company, the
administrative services and fund accounting agent for the Trust ("IBT"), or any
other person acting in a similar role, to provide to Columbus Life, promptly
following the close of trading (the "Close") on each Business Day (as defined in
3.4, below), (x) the net asset value per share for each Fund as of the Close on
that Business Day, (y) the per share amount of any dividend or capital gain
distribution made by a Fund in respect of the shares held by the related
Sub-Account, if the "ex-dividend" date for such dividend or distribution has
occurred since the Close of the preceding Business Day, and (z) based on these
net asset values and dividends and distributions, the Accumulation Unit Value
(as such term is defined in the Columbus Life Registration Statement) to be used
in determining values in each Sub-Account.
3.2 Columbus Life shall be the designee of the Trust for receipt of
orders from the Separate Account. Accordingly, receipt of an order for the
purchase or the redemption of shares of the Trust by Columbus Life shall, for
purposes of the calculations described in Section 3.1, above, constitute receipt
of an order by the Trust, provided that the Trust receives notice of the order
by 11:00 A.M. on the following Business Day. Orders received by Columbus Life
will be sent directly to the Trust or its specified agent, and payment for
purchases, net of redemptions, will be wired to a custodial account designated
by the Trust. If redemptions for the Trusts for any period exceed purchases, the
Trust will wire the excess amount to an account designated by Columbus Life. The
Trust will execute all orders from Columbus Life (whether net purchases or net
redemptions) at the net asset value per share, as determined as of the Close on
the preceding Business Day, i.e., the Business Day on which the orders were duly
received by Columbus Life from owners of the Contracts in accordance with the
Columbus Life Registration Statement. Promptly after executing the orders, the
Trust will provide to Columbus Life a written confirmation, which shall include
(x) the number of shares of the Trust in each Fund at the Close of the preceding
Business Day, (y) a detailed account, by dollars and by shares, of the purchases
and redemptions for the Trust (and the net result of the purchases and
redemptions) by each
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<PAGE>
Sub-Account since the Close of the preceding Business Day, and (z) the number of
shares of each Fund of the Trust held by each Fund's corresponding Sub-Account
after all such orders have been executed. Notwithstanding the above, the Trust
shall not be held responsible for providing Columbus Life with values, or with
investment results, on any day that is not a Business Day, when an emergency
exists making the valuation of a Fund's portfolio securities not reasonably
practicable, or during any period when the Securities and Exchange Commission
("SEC") has by order permitted the suspension of pricing of shares for the
protection of shareholders.
3.3 "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and each other day, if any, on which the Trust is
required to calculate the net asset value of a Fund, as set forth in the Trust's
Registration Statement.
4.1 Expenses. All expenses related to (y) the establishment and
operation of the Trust, including all costs of registration and other compliance
under state and federal laws and (z) the performance by the Trust of its
obligations under this Agreement, shall be paid by the Trust.
4.2 Documents and Information. The Trust will provide to Columbus Life,
for use by the Separate Account and the Sub-Accounts, a reasonable quantity of
(w) all prospectuses of the Trust or any Fund required for delivery to existing
Contract owners and all related statements of additional information, (x) all
proxy material required for meetings of shareholders of the Trust or any Fund
thereof, (y) all periodic reports to shareholders of the Trust required to be
delivered to the Contract owners and (z) any other material reasonably required
to be distributed to the owners of the Contracts.
5. Sales Representations. Columbus Life and its agents shall not make
any representations concerning the Funds other than those contained in (y) the
then current prospectuses and related statements of additional information of
the Separate Account for the Contracts issued by the Separate Account and (z)
any current printed sales literature of the Separate Account related to the
Contracts that is delivered to the Trust and as to which the Trust has not
objected by notice to Columbus Life given in accordance with Section 12.
6. Administrative Services to Contract Owners. Administrative services
to Contract owners shall be the responsibility of Columbus Life and shall not be
the responsibility of the Trust. The Trust recognizes that Columbus Life,
through the Separate Account and the Sub-Accounts, will be the sole shareholder
of the Trust and the Funds for the benefit of owners of the Contracts.
7. Disclosures.
(a) The Trust will provide Columbus Life, after the end of each
fiscal year, with such investment advisory data and other
expense data of each Fund for the fiscal year, and with such
other information as may be necessary, to enable Columbus Life
to fulfill, on a timely basis, its prospectus disclosure
obligations under state and/or federal securities laws and its
obligations under variable life insurance requirements.
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<PAGE>
(b) The Trust will provide Columbus Life, as soon as reasonably
practical after the end of each fiscal year, with all
information regarding the Funds required by Columbus Life to
meet the requirements imposed on it and/or the Separate
Account and the Sub-Accounts pursuant to Rule 30d-2 under the
1940 Act.
(c) The Trust will promptly disclose in writing to Columbus Life
any information regarding the Trust or any Fund that is
reasonably required by Columbus Life in order to cause the
information regarding the Trust and the Funds included in the
prospectuses, statements of additional information and other
disclosure documents then being used by Columbus Life in
connection with its offering of the Contracts to conform to
the representations and covenants made in Section 1.1.
8. Voting. So long as, and to the extent that, the SEC continues to
interpret the 1940 Act to require (and so long as any state insurance department
or agency having jurisdiction requires) pass-through voting privileges for
variable contract owners, the Trust will provide Columbus Life, on a timely
basis and at no cost to Columbus Life, with sufficient copies of all proxy
material for distribution to the Contract owners. Columbus Life will distribute
all the material and will vote shares in the Fund in accordance with
instructions received from the Contract owners. Columbus Life shall vote those
shares for which no instructions have been received in the same proportion as
the portion for which instructions have been received from Contract owners.
Columbus Life will not recommend or oppose action in connection with any such
vote or interfere with any such solicitation of proxies.
9. Insurance. The Trust shall maintain, without cost or expense to
Columbus Life, (y) fidelity bond coverage in an amount not less than the minimum
coverage required by Rule 17g-1 under the 1940 Act, and (z) errors and omissions
coverage in an amount and with companies reasonably acceptable to Columbus Life.
The Trust and each Fund shall be named insureds under each such coverage. At the
request of Columbus Life, which may be made not more frequently than twice in
any calendar year, the Trust will supply, or cause the company issuing such
policies to supply, evidence in writing, satisfactory to Columbus Life, that the
bonds and other insurance policies called for by this paragraph are then in
force with such companies and in such amounts as either comply with Rule 17g-1
or have been approved by Columbus Life.
10. Termination. This Agreement shall terminate as to the sale and
issuance of new Contracts:
(a) at the option of any party, upon not less than 60 days advance
written notice to the other parties;
(b) at the option of the Trust, with respect to any one or more of
the Funds, if the Trust determines and demonstrates to the
reasonable satisfaction of Columbus Life that liquidation of
the Fund or Funds is in the best interests of each Fund and
its beneficial owners; provided that any such Fund shall be
continued in operation for a sufficient period of time after
the determination to permit the substitution of
5
<PAGE>
the shares of another investment company for the shares of the
Fund, pursuant to SEC regulation;
(c) at the option of Columbus Life, immediately upon delivery of
written notice to the Trust, if (x) interests in any Fund of
the Trust are not available for any reason to meet the
requirements of the Contracts, as determined by Columbus Life,
provided that the termination shall be effective only as to
those Funds that are not reasonably available, or (y) any one
or more of the representations set forth in Section 1.1 are,
individually or in the aggregate, materially untrue, or if the
Trust breaches any one or more of the terms of this Agreement
and such breaches are, individually or in the aggregate,
material, or (z) any combination of untrue representations and
breaches of agreement terms are, individually or in the
aggregate, material;
(d) at the option of the Trust, immediately upon delivery of
written notice to Columbus Life, upon institution of formal
proceedings against the Separate Account or Columbus Life by
the National Association of Securities Dealers ("NASD"), the
SEC or any other regulatory body;
(e) at the option of Columbus Life, immediately upon delivery of
written notice to the Trust, upon institution of formal
proceedings against the Trust by the NASD, the SEC or any
other regulatory body;
(f) with respect to any Fund, if either the requisite vote of the
Contract owners having an interest in the Fund is obtained
for, or the SEC gives requisite approval to, the substitution
of the shares or interests of another investment company for
the shares of the Fund as investments for any one or more of
the Sub-Accounts; provided that Columbus Life gives the Trust
not less than 60 days prior written notice of either (y) any
such proposed vote of Contract owners or (z) any proposed
application for an order of substitution from the SEC; or
(g) if interests in the Funds are not issued or sold in
conformance with federal law or such law precludes the use of
shares in the Funds as an underlying investment media for the
Sub-Accounts or, indirectly, for the Contracts issued or to be
issued by Columbus Life. Prompt notice shall be given by any
party to the other such parties in the event the conditions of
this subparagraph (g) occur.
11. Termination Does Not Relieve Certain Obligations. Termination as
the result of any cause listed in Section 10, except as and in respect of any
Fund or Funds as to which this Agreement was terminated in accordance with
Section 10(b), shall not affect the obligation of the Trust to provide shares of
the Funds for investment by the Sub-Accounts (and all related information
required by Columbus Life, the Separate Account and the Sub-Accounts to meet the
requirements of the 1940 Act and the Code as to such investment) in connection
with the Contracts then in force for which the shares of the Funds are serving
as underlying investment media, unless the further sale of the shares is
proscribed by law, by the SEC or by any other regulatory body.
6
<PAGE>
12. Notices. Any notice, claim, request or demand required by this
Agreement shall be in writing and shall be deemed to have been duly given on the
day delivered or transmitted by fax or on the third business day after mailing
(first class, postage prepaid) to the addresses or fax numbers set forth below:
(a) If to Columbus Life (for itself or on behalf of the Separate
Account or any Sub-Account):
Columbus Life Insurance Company
400 East Fourth Street
Cincinnati, Ohio 45202
Fax: (513) 629-__________
Attn: ___________________________
with a copy to:
Donald J. Wuebbling
Vice President & General Counsel
Western-Southern Life Assurance Company
400 Broadway
Cincinnati, Ohio 45202
Fax: (513) 629-1044
(b) If to the Trust (for itself or on behalf of any of its Funds):
Touchstone Variable Series Trust
311 Broadway Street
Cincinnati, Ohio 45202
Fax: (513) 361-7982
Attn: Jill T. McGruder
with a copy to:
Karen M. McLaughlin
Frost & Jacobs LLP
2500 PNC Center
Cincinnati, Ohio 45202
Fax: (513) 651-6981
13. No Waiver. The forbearance or neglect of any party to insist upon
strict compliance by any other party, with any of the provisions of this
Agreement, whether continuing or not, or to declare a termination against the
other parties, shall not be construed as a waiver or any of the rights or
privileges of any party hereunder. No waiver of any right or privilege of any
party arising from any default or failure of performance by any party shall
affect the rights or privileges of the other parties in the event of a further
default or failure of performance.
7
<PAGE>
14. Assignment. No party to this Agreement may assign this Agreement or
any interest in the Agreement, by operation of law or otherwise, without the
prior written consent of all other parties to this Agreement.
15. Governing Law. This Agreement shall be construed and the provisions
of this Agreement interpreted under and in accordance with the laws of Ohio.
This Agreement shall be subject to the provisions of the federal securities
statutes, rules and regulations, including such exemptions from those statutes,
rules and regulations as the SEC may grant, and the terms of this Agreement
shall be interpreted and construed in accordance therewith.
16. Trust Liability. All persons dealing with the Trust must look
solely to the property of the Trust for the enforcement of any claims against
the Trust. None of the Trustees, officers, agents or shareholders of the Trust
shall be personally liable for obligations entered into on behalf of the Trust.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
15th day of July, 1999.
COLUMBUS LIFE INSURANCE COMPANY
By: __________________________________
[name and title]
TOUCHSTONE VARIABLE SERIES TRUST
By: __________________________________
Jill T. McGruder, President
8
<PAGE>
EXHIBIT A
Small Cap Value Sub-Account
Emerging Growth Sub-Account
International Equity Sub-Account
Income Opportunity Sub-Account
High Yield Sub-Account
Value Plus Sub-Account
Growth & Income Sub-Account
Enhanced 30 Sub-Account
Balanced Sub-Account
Bond Sub-Account
Standby Income Sub-Account
9
<PAGE>
EXHIBIT B
Touchstone Small Cap Value Fund
Touchstone Emerging Growth Fund
Touchstone International Equity Fund
Touchstone Income Opportunity Fund
Touchstone High Yield Fund
Touchstone Value Plus Fund
Touchstone Growth & Income Fund
Touchstone Enhanced 30 Fund
Touchstone Balanced Fund
Touchstone Bond Fund
Touchstone Standby Income Fund
10
Table of Contents
Application....................................................1-2
Agent's Report.................................................3-4
Pre-Authorized Transfer..........................................5
Privacy Notice.................................................6-7
Temporary Insurance Agreement..................................8-9
Reminders
a) Minor to be insured? Include minor's SS #, page 1. Also, if minor is
less than 15 years of age, a parent, conservator, or guardian must
sign on page 2. Any proposed insured age 15 or older must sign on page
2.
b) Owner other than proposed insured? Remember the owner's SS or tax I.D.
# and date of birth on page 1, section F. The owner must also sign on
page 2.
c) Universal Life policy? Complete the Death Benefit Option on page 1.
d) Variable Universal Life? Make certain to complete the supplement CL
45.240.
e) Policy to cover more than one person? Answer Tobacco Use question for
Proposed Insured and Other Insured's, page 2. (Show Details to "Yes"
answers.)
f) Replacing a policy? Be sure to write the address of the company whose
policy is being replaced, along with the policy plan and number, page
2.
g) Remember to list all insurance in force, including any being replaced.
If none, state "none," page 2.
h) Is a PHI or commercial inspection required? Remember to arrange a
convenient time for our interviewer to call, page 3.
i) Always give the applicant the Privacy Notice.
j) Money taken with application? Complete the top copy of the TIA (Home
Office Copy) and give the applicant the Applicant's Copy. If either
health question is answered "yes," do not collect money. Never collect
money without a TIA.
k) If an NAIC illustration is required in your state, please include the
signed illustration or the signed form which states that "no
illustration was used."
Checks must be made payable to Columbus Life.
<PAGE>
CL 45.238 (4/99)
[LOGO APPEARS HERE]
Application for Life Insurance USE BLACK INK
- --------------------------------------------------------------------------------
A. Proposed Insured (Print first name, middle initial and last name)
__ Female Birth Date _____
Name ______________________________ __ Male Age ______
SS# or Tax ID # ___________________ Birth Place ______________ Ht __ Wt __
Occupation ____________________________________________________________________
- --------------------------------------------------------------------------------
B. Other Insured (Print first name, middle initial and last name)
Relationship to Insured ________________________
__ Female Birth Date _____
Name ______________________________ __ Male Age ______
SS# or Tax ID # ___________________ Birth Place ______________ Ht __ Wt __
Occupation ____________________________________________________________________
- --------------------------------------------------------------------------------
C. Children (for Children's Rider)
No. of Units_______ if V.L., Benefit Amt. __________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name Sex Age State of Birth Birth Date Height Weight
- ---- --- --- -------------- ---------- ------ ------
- ------------------------------------------------------------------- ----- ------ --------------- --------------- --------- ---------
- ------------------------------------------------------------------- ----- ------ --------------- --------------- --------- ---------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
D. Coverage Applied For: ___ Unisex Option
If applying for Variable Life, please complete Supplement to Application.
Plan of Insurance _____________________________________________
(Use Plan name in Marketing Manual)
_____________________________________________
(Amount - Do Not Include SCR)
If UL, Death Benefit Option: ___ #1 ___ #2
- --------------------------------------------------------------------------------
E. Supplemental Benefits and Riders
___ Waiver of Ins. Cost ___ W.P. (If VUL, Credit Amt.________________ )
___ SCR (Not included in D above)________________________
___ Term Rider $_________ ___ Proposed Insured ___ Other
___ OIR Term $___________________________________________
Renewal Period Yrs.: __ 1 __ 5 __ 10 __ 20
___ PULR ___ SPLR (Premium Amount) $___________________
___ Conversion Period: __ Nonconvertible __ 5 yr. __ To age 70
___ Insured Insurability $_______________________________
___ ADB #1 ___ ADB #2 $ Other ________________________
- --------------------------------------------------------------------------------
___ Dividend Option, if participating: ___ Paid in Cash
___ Buy Paid-Up Additions
___ Reduce Premiums
___ One-Year Term Additions, balance to:
___ Accumulate at Interest
Automatic Premium Loan Provision
(Whole Life only) __ Yes __ No
- --------------------------------------------------------------------------------
F. Owner of Policy (Print first name, middle Initial and last name) -
Proposed Insured shall be owner unless otherwise shown
Name __________________________________________________________
Birth Date ______________________ SS#/Tax ID # _______________
Relationship to Insured ________________________________________
- --------------------------------------------------------------------------------
G. Beneficiaries (Print first name, middle initial and last name)
Primary ______________________ Relationship to Insured ________________________
Contingent ______________________ Relationship to Insured _____________________
- --------------------------------------------------------------------------------
H. Replacement:
Will the insurance or annuity applied for, if issued, replace an existing policy
in this or another company?....... __ Yes __ No
If "yes," is this replacement a:
(1) Section 1035 tax-deferred exchange?...... __ Yes __ No
(2) tax-qualified exchange of pension benefits?...... __ Yes __ No
If "yes," list the company name, policy number, and type of policy(ies) being
replaced.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
I. Insurance in force and/or applied for: (if NONE, state so)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Proposed & Other Insureds (specify) Company Amt Accidental Death Amt Yr Issued
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
J. Background on Proposed and Other Insured and Children listed in A, B,
and C:
Driver's license number(s) and state _____________________________________
<TABLE>
<CAPTION>
<S> <C> <C>
1. In the past five years, had driver's license suspended or revoked or had two or more moving violations?..........__ Yes __ No
2. Have you ever consulted a physician or medical practitioner for, or been treated for: high blood pressure,
cancer, tumors, diabetes, ulcers, or heart, lung, or liver disorder, mental or nervous disorder, or back
or spine disorder?...............................................................................................__ Yes __ No
3. Have you been treated for AIDS, ARC (AIDS-Related Complex) or any other immune deficiency disorder?..............__ Yes __ No
4. Have you used sedatives, stimulants, hallucinogenic or narcotic drugs other than those prescribed
by a physician or medical practitioner, or been treated for drug or alcohol use? ................................__ Yes __ No
5. Ever been declined, postponed, rated or modified for insurance or reinstatement?.................................__ Yes __ No
6. Within the past 12 months have you or any proposed insured smoked a cigarette or used any tobacco products? .....__ Yes __ No
7. In the past three years, have you or any proposed insured participated in the following: parachuting,
scuba diving, motor racing or aviation other than regular commercial airline flights? If "Yes," complete
a Supplemental Questionnaire.....................................................................................__ Yes __ No
8. Has any member of your immediate family (parents, brothers or sisters) had heart disease, diabetes,
or cancer prior to age 60?.......................................................................................__ Yes __ No
</TABLE>
Personal Physician Name/Address: ______________________________________________
Details to "Yes" answers and/or Special Instructions (For "Yes" answers, please
list question #, name, date, physician, hospital, address, and phone.)
- --------------------------------------------------------------------------------
DECLARATION: I understand and agree to the following:
A) the representations recorded in this application are true and complete to
the best of my knowledge and belief, and constitute the primary basis for
the issuance of any insurance hereunder;
B) only an authorized underwriter of the Company at its Home Office has the
authority to determine insurability;
C) no agent is authorized to make or alter contracts, to extend the time for
payment of premiums, or to waive any of the Company's rights or
requirements;
D) if the Company accepts 1/12 of the minimum annual premium and a Temporary
Insurance Agreement is duly executed, the Company is liable under this
application to the extent provided in the Temporary Insurance Agreement.
Otherwise, the Company shall incur no liability under this application
unless a policy issued on this application has been received by the Owner,
the first premium has been paid and any limitation or modification of
insurance applied for has been agreed to in writing by the Owner, all while
the health of the person(s) now proposed for coverage and any other
conditions remain as described in the application.
E) if the Company amends this application by endorsement, acceptance of any
policy issued shall constitute a ratification of change or correction only
to clarify the intent of the policy and/or coverage as applied for on the
application without reduction in benefit.
AUTHORIZATION TO OBTAIN INFORMATION: I authorize any physician or other medical
practitioner, hospital, clinic, other medical care institution, other companies
or institutions, my employer, consumer reporting agency or the Medical
Information Bureau, Inc., to give Columbus Life Insurance Company, or its
reinsurers, information about me or my health for underwriting purposes. Except
for the Medical Information Bureau reports, information may, in some cases, be
obtained by an authorized representative of Columbus Life. This information may
include an investigative consumer report, details of other insurance coverage,
employment, or medical care including diagnosis, advice and treatment of any
physical and mental condition regarding me or any of my minor children to be
insured. I further consent to the release of any drug or alcohol related
information which may be protected by federal regulations.
USE AND DISCLOSURE: I understand that Columbus Life will use this information to
determine eligibility for insurance and/or benefits. Also, Columbus Life or its
reinsurers may release this information to the Medical Information Bureau, inc.
reinsurance companies and/or to other insurance companies to which I may apply
for insurance and/or benefits. This Authorization is valid for two and one-half
years form the date shown below unless a shorter period is legally required. I
understand that I have the right to receive a copy of this Authorization upon
request. A photocopy of this Authorization will be as valid as the original. My
signature below also acknowledges my receipt of the privacy notice found on
pages 6 and 7 explaining the Medical Information Bureau, Inc. and investigative
consumer reports. Under penalties of perjury, I certify that (1) the number
shown on this form is my correct Taxpayer Identification Number, and (2) I am
not currently subject to backup withholding as a result of Internal Revenue
Service notification. The Internal Revenue Service does not require your consent
to any provision of this document other than the certifications required to
avoid backup withholding.
WARNING: Any person who, with intent to defraud, or knowing that he is
facilitating a fraud against Columbus Life Insurance Company, submits an
application or files a claim containing a false or deceptive statement is guilty
of insurance fraud.
Signed at _____________________________________ Date __________________________
(City and State)
___________________________________________________________
Signature of Proposed Insured (if age 15 or older)
___________________________________________________________
Signature of Applicant/Owner if other than Proposed Insured
___________________________________________________________
Signature of Proposed Other Insured
___________________________________________________________
Agent's Name (Please Print)
______________________________________________ ___________________________
Agent's Signature License No.
- --------------------------------------------------------------------------------
<PAGE>
AGENT'S REPORT
COLUMBUS LIFE INSURANCE COMPANY APPLICATION FOR INSURANCE - Page 3
- --------------------------------------------------------------------------------
1. Purpose of Insurance Applied For:
___ Personal and Family Protection ___ 1035 Exchange
___ Keyman Insurance ___ Defined Benefit
___ Buy - Sell ___ Money Purchase
___ Split Dollar ___ Profit Sharing
___ IRA/IRA Rollover-transfers ___ 403(b) - 501(c) Plan
___ If IRA, specify tax year Specify Company (Equifax, Choice Point,
Holmes/Infolink, EMSI.)
___ Other (specify)
2. A. Is a Current Examination being made? ___ Yes ___ No
(If yes, give type of exam below.)
___ Paramed Exam ___ Blood Profile
___ M.D. Exam ___ EKG
___ HOS ___ XRAY
___ Other (Specify)
B. Was Inspection Report Ordered? ___ Yes ___ No
Specify Company (Equifax, Choice Point, Holmes/Infolink, EMSI.)
- --------------------------------------------------------------------------------
3. PHI/Inspection Information (Always Complete)
Residence Address of Proposed Insured: (Please Print)
No. & Street _________________________________________
How Long? ____________Yrs. State of Residence __________
City & State _________________________________________
State where Employed ___________
Billing Name and Address: (If Not Same As Residence Address Above) -
(Please Print)
_________________________________ _______ _________________________
First Name M.I. Last Name
________________________________________________________________________________
Street Address or P.O. Box Number
______________________________ _______ _________________
City State Zip Code
Telephone Numbers
Home: (Area) _____________ No. _____________________
Extension No. _____________ During Day __ Yes __ No
Business: (Area) _____________ No. _____________________
Extension No. _____________ During Day __ Yes __ No
Is proposed insured or spouse generally at home during day? __ Yes __ No
Most convenient time and place for interview call? _____________________________
- --------------------------------------------------------------------------------
4. Premium Amount and Mode of Premium Payment
Modal
Premium
Amount Mode
Life $ _______________ _______________
Annuity $ _______________ _______________
Total $ _______________ _______________
Total Amount Paid at time of Application $ _______________
5. Future Premiums - after first has been paid:
___ None - Single Premium Only
___ Direct bill
___ Annually ___ Semiannually ___ Quarterly
___ Pre-Authorized Transfer
___ New Plan ___ Existing Plan
Month and Day of first withdrawal ____________________________
___ Account Bill
___ New Plan (Will be assigned by H.O.)
___ Existing Plan No.
Payable: ___ Monthly ___ Annually
___ Semiannually ___ Quarterly
___ Government Allotment (See Marketing Manual Rules.)
___ New Plan ___ Existing Plan No.
- ------------------------------------------------------------------
6. Credit Application To: (Please Print) % of App. Code No
General
Agent _______________________________ _________ ___________
Agent _______________________________ _________ ___________
Agent _______________________________ _________ ___________
Writing Agent's Phone No. ( )
---------------------
Writing Agent's Fax No. ( )
---------------------
- --------------------------------------------------------------------------------
PLEASE COMPLETE REVERSE SIDE - AGENT'S MARKETING REPORT
<PAGE>
AGENT'S MARKETING REPORT
<PAGE>
Marketing Information
Insured
----------------------------------
Education
----------------------------------
___ Graduate School
___ College
___ High School
___ Other
----------------------------------
Occupation
----------------------------------
___ Professional/Executive
___ Technical/Administrative
___ Sales/Service Manager
___ Clerical/White Collar
___ Craftsman/Blue Collar/Agricultural
___ Student
___ Homemaker
___ Retired
___ Other ______________________
----------------------------------
Income
----------------------------------
___ Under $25,000
___ 25,000 - 49,999
___ 50,000 - 74,999
___ 75,000 - 99,999
___ 100,000 plus
Spouse
- ----------------------------------
Education
- ----------------------------------
___ Graduate School
___ College
___ High School
___ Other
- ----------------------------------
Occupation
- ----------------------------------
___ Professional/Executive
___ Technical/Administrative
___ Sales/Service Manager
___ Clerical/White Collar
___ Craftsman/Blue Collar/Agricultural
___ Student
___ Homemaker
___ Retired
___ Other ______________________
- ----------------------------------
Income
- ----------------------------------
___ Under $25,000
___ 25,000 - 49,999
___ 50,000 - 74,999
___ 75,000 - 99,999
___ 100,000 plus
Family
- ----------------------------
Household
- ----------------------------
___ Married
___ Single
___ Divorced
___ Widowed
___ Separated
- ----------------------------
Children
- ----------------------------
___ Pre-School
___ School Age
___ College
___ Working
- ----------------------------
Coverages
- ----------------------------
___ Life
___ Ind. ___ Work ___ Both
___ Health
___ Ind. ___ Work ___ Both
___ Disability
___ Ind. ___ Work ___ Both
___ Long Term Care
___ Ind. ___ Work ___ Both
- ----------------------------
Investments
- ----------------------------
___ Stocks
___ Bonds
___ Mutual Funds
___ Real Estate
___ Other ________________
Sale Profile
- ----------------------------
Source of Lead
- ----------------------------
___ Present Client
___ Referral
___ Cold Call
___ Direct Mail
___ Seminar
- ----------------------------
Sales Presentation
- ----------------------------
___ Illustration
___ Fact Finder
___ Needs Analysis
___ Estate Plan
___ Financial Plan
___ Business Plan
___ Business Benefits
___ Retirement
___ Asset Transfer
___ Education
___ Mortgage
___ Other ________________
- ----------------------------
Next Contact: Year
- ----------------------------
___ 1 ___ 2 ___ 3
- ----------------------------
For
- ----------------------------
___ Review ___ Referral
___ Additional Coverage
___ Spouse Coverage
<PAGE>
COLUMBUS LIFE INSURANCE COMPANY APPLICATION FOR INSURANCE - Page 5
Preauthorized Transfer
For your convenience, and with your authorization, Columbus Life can
electronically transfer funds from your checking account once a month to pay
premiums on your policy. If you would like this service, please complete the
attached authorization and submit it with a check from your bank to pay the
initial premium on your policy. If you have already paid the initial premium,
please send a voided check with this authorization.
We will need your bank's name and complete address (it is very important that
you give us the bank's street and street number in addition to the city, state,
and zip code).
The premium payor(s) must sign the authorization, taking care to do so very
legibly. Joint checking accounts require both parties' signatures.
We can arrange to electronically transfer funds any day of the month except the
29th, 30th, or 31st.
If your bank is not equipped for this electronic funds transfer, the transfer
will be done manually as a pre-authorized check.
Authorization For Preauthorized Transfer By
Columbus Life Insurance Company, 400 East 4th St., Cincinnati, Ohio 45201-3302
TO (BANK NAME) ______________________________________________________________
BANK ADDRESS (NO. AND STREET) _______________________________________________
(CITY, STATE, ZIP) __________________________________________________________
As a convenience to me, I hereby request and authorize you to electronically
transfer funds to the Columbus Life Insurance Company, Cincinnati, Ohio, or pay
and charge to my account checks drawn on my account by and payable to the order
of the Columbus Life Insurance Company, Cincinnati, Ohio, provided there are
sufficient collected funds in said account to pay the same upon presentation. I
agree that your rights in respect to each such electronic transfer or check
shall be the same as if it were a check drawn on you and signed personally by
me. This authority is to remain in effect until revoked by me in writing, and
until you actually receive such notice I agree that you shall be fully protected
in honoring any such electronic transfer or check. I further agree that if any
such transfer or check be dishonored, whether with or without cause and whether
intentionally or inadvertently, you shall be under no liability whatsoever even
though such dishonor results in the forfeiture of insurance.
ACCOUNT NUMBER ___________________ TODAY'S DATE _______________________
_____________________________________ _______________________________________
PRINT NAME OF PREMIUM PAYOR PRINT NAME OF JOINT ACCOUNT HOLDER
_____________________________________ _______________________________________
BANK SIGNATURE OF PREMIUM PAYOR BANK SIGNATURE OF JOINT ACCOUNT HOLDER
_____________________________________
COLUMBUS LIFE POLICY NO.
To: The Bank (Paper Drafts Only)
In consideration of your participation in the plan the Columbus Life Insurance
Company has put into effect, by which payments are collected by checks drawn by
and payable to the Company, the Company agrees:
1. To indemnify you and hold you harmless from any loss you may suffer as
a consequence of your actions resulting from or in connection with the
execution and issuance of any pre-authorized check, whether or not
genuine, purporting to be executed by this Company and received by you
in the regular course of business for the purpose of payment of
insurance premiums, including any cost or expenses reasonably incurred
in connection therewith.
2. In the event that any such check shall be dishonored whether with or
without cause, and whether intentionally or inadvertently, to
indemnify you for any loss even though dishonor results in a
forfeiture of the insurance.
3. To defend at our own cost and expense any action which might be
brought by any depositor or any other persons because of your actions
taken pursuant to said authorization and direction, or in any manner
arising by reason of your participation in the foregoing plan of
premium collection.
Donald J. Wuebbling
[SIGNATURE HERE]
Secretary
Columbus Life Insurance Company
<PAGE>
IMPORTANT: THIS NOTICE MUST BE GIVEN TO THE PROPOSED INSURED WHENEVER AN
APPLICATION FOR INSURANCE IS COMPLETED.
Your Privacy is Important to us!
Welcome
Welcome to Columbus
Life Insurance
We've prepared this notice to help answer questions you may have about your
insurance application. The following describes how we collect, evaluate, and
safeguard information about you as one of our applicants for insurance.
Collection of Information
The application you completed supplies us with the basic facts (such as
amount of insurance, age, health history, etc.) necessary to calculate the
cost of your insurance policy. Frequently, we also turn to other sources to
confirm or add to information you have provided. For example, we may, at our
expense:
- ask you to have a medical examination or laboratory test.
- request medical records from your doctor, clinic, or hospital.
- obtain information from other insurance companies to which you have
applied for insurance or have previously made a claim for benefits.
- evaluate reports from the Medical Information Bureau and/or a consumer
reporting agency. You can find further information about these
organizations on the back of this notice.
- contact you by telephone for a brief Personal History Interview at
your convenience. This procedure is also described later in this
notice.
Safeguarding Your Privacy
We treat all information about you confidentially. Ordinarily, it will be
provided to third parties only if you authorize us in writing to do so. In
rare instances, we may be required to provide information without your
consent. We may send information to state insurance departments at their
request as part of their regulatory duties, or to law enforcement facilities
in response to a summons or subpoena. Columbus Life Insurance Company, or its
reinsurers, may also release information in its file to other life insurance
companies to whom you may apply for life or health insurance, or to whom a
claim for benefits may be submitted. Furthermore, we may gather information
from you which is used for statistical purposes, marketing research, or
medical research, which will not identify you individually. On your written
request, we will send you a summary or copy of the relevant information
obtained in connection with your application. Please include in your letter
your complete name, address, date of birth, and all policy numbers under
which you are insured. Or, if you wish, you may visit our Home Office in
Cincinnati to see and copy your records in person -- to maintain security of
the information, we will ask you for proper identification before showing you
the records. Confidential or detailed medical information will be disclosed
only through the physician of your choice, with whom you may discuss it.
Also, on your request, a copy of any consumer report we obtain on you will be
provided to you by the responsible agent. Finally, we will not give you
information we might collect in expectation of or in connection with any
claim, civil or criminal proceeding. For example, we will not disclose
information relating to suspected fraud or material misrepresentation.
If We Rate Your Policy
We attempt to offer all applicants insurance exactly as they have applied
for, and are able to do so in most instances. However, if we are unable to
provide the coverage you applied for, we will notify you of our decision in
writing. We will also provide you with specific reasons for our action should
you send us a written request to do so.
<PAGE>
How You May Correct Our Information
If you believe any information in our file is not correct or complete, you
may ask us to review it. If we agree with you, we will make any necessary
corrections and inform anyone who may have received such information in the
past two years. If we do not agree with you, you may file a statement of
dispute with us. That statement will be sent to anyone receiving such
information in the past two years and included in any future disclosure of
the disputed information.
The Medical Information Bureau, Inc. (MIB)
The MIB is a nonprofit organization of life insurance companies which
operates as an information exchange for its members. We may make reports to
the MIB regarding factors affecting your insurability. Underwriting
decisions, however, are not reported to the MIB. If you apply to another
Bureau member company for life or health insurance or submit a claim for
benefits, the MIB will, upon request, provide that company with information
in its file. If you request, the MIB will arrange for disclosure of any
information it has in your file.
If you believe the information in the MIB's file is not correct, you may
contact the MIB and seek a correction in accordance with procedures outlined
in the Federal Fair Credit Reporting Act. The address of the MIB's
information office is:
MIB, Inc.
P.O. Box 105, Essex Station
Boston, MA 02112
(617) 426-3660
Consumer Reports
We may ask an independent agency to prepare an investigative consumer report
to help us determine your eligibility for the insurance you have requested.
This report may include information on your character, general reputation,
and personal characteristics, such as health, finances, and occupation. The
consumer reporting agency may obtain information from public records and
through interviews with members of your family, business associates,
financial institutions, neighbors, and other acquaintances. If you request a
personal interview, the agency will make a reasonable attempt to talk to you
and include that information in its report.
This information is for insurance purposes only. We will not reveal it to
anyone without your authorization. However, the consumer reporting agency may
retain and release information to others under certain circumstances. If you
ask and give proper identification, the agency will provide you with a copy
of the report and explain their retention and release practices.
Personal History Interview Information
Although we may obtain an investigative consumer report from an independent
agency, we at Columbus Life have developed a simple method of securing all or
most of such information through our own "Personal History Interview." In
conducting such an interview, a specially trained Columbus Life Home Office
interviewer would telephone you to verify a variety of information or to ask
additional questions vital to the underwriting of the insurance for which you
have applied.
[GRAPHIC HERE]
Any More Questions?
If you would like to know more about our information practices, our sales
representative will be happy to assist you, or you may contact us at our Home
Office:
The Columbus Life
Insurance Company
400 East 4th Street
Cincinnati, OH 45201-3302
<PAGE>
TEMPORARY INSURANCE COLUMBUS LIFE INSURANCE COMPANY
AGREEMENT 400 East 4th Street
Cincinnati, OH 45201-3302
The life insurance policy you have applied for will not become effective unless
and until a policy is delivered to you and you accept it. However, if you have
paid our agent at least one-twelfth of the annual premium for the policy you
applied for, we will provide temporary insurance on the lives of the proposed
insureds listed below. The amount, duration and conditions of this temporary
insurance are described below.
Amount of Coverage - $500,000 Maximum for All Applications or Agreements
If money has been accepted by the Company as advance payment with an application
for Life Insurance and any Person proposed for coverage listed below dies while
this temporary insurance is in effect, the Company will pay to the designated
beneficiary the lesser of (a) the amount of all death benefits applied for in
the Application, including any accidental or supplemental death benefits, if
applicable, or (b) $500,000. This total benefit limit applies to all insurance
applied for under this and any other current applications to the Company and any
other Temporary Insurance Agreements.
Insurability Preserved If Change In Health While Covered
If any person listed below suffers a change in health after the effective date
of this Agreement, but before coverage terminates as set forth below, the
Company will offer the insurance applied for on such person at the appropriate
rate on the basis of such person's insurability as of the effective date if such
person is living after the termination date.
Date Coverage Begins
Temporary Life Insurance under this Agreement will begin on the date of this
Agreement, but only if Part I of the Application listed below has been completed
on the same date or prior to the date of this Agreement.
Date Coverage Terminates - 90-Day Maximum Temporary
Life Insurance under this Agreement will terminate automatically on the earliest
of
a. 90 days from the date of this Agreement, or
b. the date that insurance takes effect under the policy applied for, or
c. the date a policy, other than as applied for, is offered to the
Applicant, or
d. the date the Company mails notice of termination of coverage to the
premium notice address designated in Part 1 of the Application. The
Company may terminate coverage at any time.
Special Limitations
o This Agreement does not provide benefits for disability.
o Fraud or material misrepresentations in the Application or in the
answers to the Health questions of this Agreement will invalidate this
Agreement and the Company's only liability is for refund of any
payment made.
o No one is authorized to accept money on Persons proposed for coverage
under 15 days of age or over age 70 (last birthday) on the date of
this Agreement, nor will any coverage take effect.
o If any Person proposed for coverage dies by suicide, the Company's
liability under this Agreement is limited to a refund of the payment
made. (In Missouri, the Company must prove intent at the time of
application.)
o There is no coverage under this Agreement if the check or draft
submitted as payment is not honored by the bank.
o The minimum advance payment acceptable for this Agreement is 1/12 the
minimum annual premium for the insurance applied for in the
Application.
o No one is authorized to waive or modify any of the provisions of this
Agreement.
ALL CHECKS MUST BE MADE PAYABLE TO THE COLUMBUS LIFE. DO NOT MAKE CHECK PAYABLE
TO THE AGENT OR LEAVE THE PAYEE BLANK.
Names of Persons Proposed for Coverage _______________________________________
______________________________________________________ Payment Amount __________
HEALTH QUESTIONS - Has any Person listed above:
a. within the past 6 months, been admitted to a hospital or
other medical facility, or been advised to be admitted?.. __ YES __ NO
b. within the past 3 years, been treated for chest pain, heart
disease or disorder, cancer, drug or alcohol use, or any
disorder of the liver, or had such treatment recommended by
a physician or other medical practitioner?............... __ YES __ NO
If either of these questions is answered "YES" or left blank, no representative
of the Columbus Life Insurance Company is authorized to accept money, and NO
COVERAGE will take effect under this agreement.
This Agreement provides a Limited Amount of Life Insurance protection, for a
Limited Period of time, subject to the terms of this Agreement. I have received
a copy of, and have read is the above Terms and Conditions of this Temporary
Insurance Agreement and declare that the answers are true to the best of my
knowledge and belief. I Understand and Agree to all the Terms and Conditions of
this Agreement.
________________________________________________ Date _________________
Signature of Agent
________________________________________________
Signature of Applicant
________________________________________________
Signature(s) of Proposed Insured(s)
APPLICANT COPY
[LOGO APPEARS HERE]
Supplement
to Application
- --------------------------------------------------------------------------------
To be completed when applying for Flexible Premium Variable Universal Life.
- --------------------------------------------------------- ----------------------
I. NET PREMIUM ALLOCATION
Allocations must be in whole percentages. There is no limit on the number of
allocations, but the total net allocations must equal 100%. These percentages
will apply in future years, but may be changed at any time by the policy owner.
Your net premium will be allocated as described in the policy to the
Sub-Accounts you select.
Allocate my purchase payment(s) among the following investment options (MUST BE
COMPLETED):
AIM ALGER
_____ % V. I. Growth _____ % American Small Capitalization
_____ % V. I. Government Securities _____ % American Growth
MFS PIMCO
_____ % VIT Emerging Growth _____ % Long Term U.S. Government Bond
_____ % VIT Growth With Income
TOUCHSTONE
_____ % Small Cap Value _____ % Income _____ % Growth & Income
Opportunity
_____ % Emerging _____ % High Yield _____ % Enhanced 30
Growth
_____ % International _____ % Value Plus _____ % Balanced
Equity
_____ % Bond _____ % Standby Income
COLUMBUS LIFE Fixed Account _____ %
- --------------------------------------------------------------------------------
II. DOLLAR COST AVERAGING
Please transfer $ _____________ ($100 minimum) from the (check one):
___ Touchstone ___ Fixed
Standby Income Account
Frequency: ___ Monthly ___ Quarterly ___ Until Source Fund is Depleted
AIM ALGER
_____ % V. I. Growth _____ % American Small Capitalization
_____ % V. I. Government Securities _____ % American Growth
MFS PIMCO
_____ % VIT Emerging Growth _____ % Long Term U.S. Government Bond
_____ % VIT Growth With Income
TOUCHSTONE
_____ % Small Cap Value _____ % Income _____ % Growth & Income
Opportunity
_____ % Emerging _____ % High Yield _____ % Enhanced 30
Growth
_____ % International _____ % Value Plus _____ % Balanced
Equity
_____ % Bond _____ % Standby Income
- --------------------------------------------------------------------------------
III. AUTOMATIC REBALANCING
Do you wish to employ the automatic rebalancing feature? __ No __ Yes
Frequency: ___ Quarterly ___ Semi-Annually ___ Annually
Note: If frequency is not selected, quarterly rebalancing will apply.
Automatic Rebalancing is not available if Dollar Cost Averaging is
from Touchstone Standby Income.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------- ----------------------
IV. SUITABILITY - Investment Objectives and Risk Tolerance apply to Policy
Owner
In order to determine if this policy meets your investment objectives and
continuing financial needs, please complete the following:
1. Investment Objectives. Please check at least one. Multiple
objectives may be selected; however, if more than one, please
rank in order of importance to you.
_____ Long Term Gain _____
_____ Safety of Principal _____
_____ Short Term Gain _____
_____ Tax Advantage _____
_____ Income _____
_____ Death Benefit _____
2. Risk Tolerance:
Please rank from 1 to 4 the level(s) of risk most acceptable to
you. A rank of "1" is most acceptable. A rank of "4" is least
acceptable. Your portfolio selections should be consistent with
the risk tolerance levels you rank below.
_____ Low/Conservative
_____ Moderate
_____ High/Aggressive
_____ Speculative
________________________________________________ _______________________
Supervisory Principal's Signature Date
- --------------------------------------------------------------------------------
V. STATEMENT OF UNDERSTANDING
I agree and understand that the amount and duration of the death benefit
may vary with investment experience. Regardless of the investment
experience the death benefit will never be less than the Specified Amount,
reduced by any indebtedness, as long as the policy is in force. The
account value may increase or decrease on any day depending on the
investment return for the policy. No minimum account value is guaranteed.
On request, Columbus Life will furnish illustrations of benefits,
including the death benefit.
Signed at _____________________ Date________________________
__________________________________________________
Signature of Proposed Insured (if age 15 or older)
__________________________________________________
Signature of Agent/Registered Representative
__________________________________________________
Signature of Policy Owner if not Proposed Insured
- --------------------------------------------------------- ----------------------
VI. TELEPHONE ACCESS AUTHORIZATION (MUST BE COMPLETED)
Unless waived, the Policy Owner and Representative will have automatic
telephone access authorization.
____ I elect NOT to have telephone access authorization.
____ I elect NOT to have my Registered Representative have telephone
access authorization.
I hereby authorize and direct Columbus Life to make allowable transfers of
funds or reallocation of net premiums among available Sub-Accounts or to
complete other financial transactions as may be allowed by Columbus Life
at the time of request, based upon instructions received by telephone,
from (a) myself, as Policy Owner, (b) my Registered Representative, and/or
(c) the person(s) named below. Columbus Life will not be liable for
following instructions communicated by telephone that it reasonably
believes to be genuine. Columbus Life will employ reasonable procedures,
including requiring the policy number to be stated, tape recording all
instructions, and mailing written confirmations. If Columbus Life does not
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, Columbus Life may be liable for any losses due to
unauthorized or fraudulent instructions.
Name per (c) above: _______________________________ SS# ________________
Address __________________________________________________________________
o All telephone conversations will be recorded.
o This authorization will continue in force until the earlier of
Columbus Life's receipt of the revocation of this authorization
by phone or in writing or Columbus Life's discontinuance of this
privilege.
_______________________________________________ _________________________
Signature of Policy Owner Date
- --------------------------------------------------------------------------------
Description of Issuance, Transfer and Redemption Procedures
and Method of Conversion to Fixed Benefit Policies
for Columbus Life Flexible Premium Variable Universal Life Policies
Offered by Columbus Life Insurance Company Separate Account 1
of Columbus Life Insurance Company
This document sets forth, as required by Rule 6e-3(T)(b)(12)(iii), the
administrative procedures that will be followed by Columbus Life Insurance
Company ("Columbus Life") in connection with the issuance of the Columbus Life
Flexible Premium Variable Universal Life Insurance Policy (the "Policy"), the
transfer of assets held thereunder and the redemption by policyholders of their
interests in the Policies. This document also describes the method that Columbus
Life will use when a Policy is exchanged for a fixed benefit insurance policy.
Capitalized terms used herein have the same definition as in the Prospectus for
the Policy that is included in the current registration statement on Form S-6
for the Policy as filed with the Securities and Exchange Commission.
Columbus Life Insurance Company Separate Account 1 ("Separate Account 1") is
registered under the Investment Company Act of 1940 (the "1940 Act") as a unit
investment trust. Separate Account 1 has been designated to receive and invest
premium payments from owners of the Policies. Separate Account 1 has 18
Sub-Accounts. Each Sub-Account invests in shares of a corresponding Fund of the
AIM Variable Insurance Funds, Inc., The Alger American Fund, MFS Variable
Insurance Trust, PIMCO Variable Insurance Trust or Touchstone Variable Series
Trust, each of which is registered under the 1940 Act. The investment experience
of a Sub-Account depends upon the market performance of the corresponding Fund
in which it invests.
I. Issuance Procedures - Purchase and Related Transactions
Set forth below is a summary of the principal Policy provisions and
administrative procedures which might be deemed to constitute, either directly
or indirectly, a "purchase" transaction. The summary shows that, because of the
insurance nature of the Policies, the procedures involved necessarily differ in
certain significant respects from the purchase procedures for mutual funds and
annuity contracts. The chief differences revolve around the cost of insurance
charges and the insurance underwriting process. While certain Policy provisions,
such as reinstatement and repayment of Indebtedness, do not result in the
issuance or purchase of a Policy, they do require a Policy owner to make certain
payments and involve a transfer of assets supporting Policy reserves into
Separate Account 1.
A. Premium Payments
The Policy is a flexible premium policy. The Policy is called "flexible premium"
because the Policy owner can change the amount and frequency of premium
payments, within certain limits. The Policy owner not required to make premium
payments in set amounts or on a set schedule. While this flexibility may be
attractive, the Policy owner is responsible for making sufficient premium
payments to ensure that the Policy continues.
- Page 1 -
<PAGE>
When a Policy is purchased, the applicant sets the amount and frequency of
planned payments. This is the Planned Premium. Making Planned Premium payments
does not guarantee that a Policy will continue. Because the Net Cash Surrender
Value of a Policy is affected by other factors, such as the investment return,
the charges related to the Policy, and the amount of loans and withdrawals the
Policy owner has made, the Planned Premium payments may not be enough to keep
the Policy in force. The Policy owner may need to increase the Planned Premium
or make additional premium payments to keep the Policy in force.
Other than the initial premium payment, Columbus Life does not require any
additional premium payments. A failure to make an additional premium payment
will not of itself cause a Policy to lapse. While Columbus Life expects that
most Policy owners will choose to pay Planned Premium payments, the Policy
provides that additional premium payments may be made if (a) the Insured is then
living and less than 100 years of age, (b) the premium payment is at lest $50
and (c) the additional premium payment does not cause total premiums to exceed
the maximum premium limitation for the Policy set by federal tax laws. If made
through a pre-authorized, automatic plan, Columbus Life will accept additional
premium payments of less than $50. Columbus Life reserves the right to limit the
number and amount of any premium payments made in addition to the Planned
Premium payment.
B. Application and Initial Premium Processing
The Policies will be offered and sold pursuant to established underwriting
standards in accordance with state insurance laws. State insurance laws prohibit
unfair discrimination, but recognize that premiums and charges much be based
upon factors such as age, gender, health, tobacco use and occupation.
Upon receipt of a completed application and all other required forms, Columbus
Life will follow certain insurance underwriting (i.e., evaluation of risks)
procedures designated to determine whether the applicant is insurable. This
process may involve such verification procedures as medical examinations and may
require that further information be provided by the proposed Insured before a
determination can be made. A Policy will not be issued until this underwriting
procedure has been completed.
Any premium payment received by Columbus Life from the applicant before the
underwriting process is completed will be held in escrow. After completing the
underwriting process, Columbus Life will notify the applicant of its decision
regarding the application. If the application is approved, the insurance
coverage provided by the Policy will begin on the effective date of the Policy.
The effective date of the Policy will be the later of
o The date Columbus Life completes the underwriting process and approves
the application; or
o The date Columbus Life receives the required minimum initial premium
payment. (The minimum initial premium payment must be equal to or in
excess of 1/12th of the Minimum Annual Premium for the Term No-Lapse
Guarantee.)
- Page 2 -
<PAGE>
Columbus Life will allocate the initial Net Premiums to the selected investment
options on the effective date of the Policy. Columbus Life will send a
confirmation statement indicating that the initial Net Premiums have been
allocated and the Policy is effective.
If a premium payment has been made and Columbus Life rejects the application,
Columbus Life will refund the applicant all premium payments made.
C. 10 Day Review Period
A Policy owner has 10 days to review the Policy after it is received. This
10-day review period is called the free look period. The state where the Policy
owner lives may require a longer free look period.
If the Policy owner is not satisfied with the Policy, the Policy can be
cancelled during the free look period. To cancel the Policy, it must be returned
either to Columbus Life or to the insurance agent who sold the Policy within 10
days after it is received. If the Policy is cancelled during the free look
period, Columbus Life will refund
o The amount of Net Premiums allocated to the Fixed Account, plus
o The value of the investments in the Sub-Accounts attributed to the
Policy as calculated on the date notice of cancellation is received
by Columbus Life or the insurance agent, plus
o Any charges.
However, some state laws may require Columbus Life to refund the total premium
payments made by the Policy owner.
D. Allocation of Net Premiums
The Policy owner may allocate your Net Premiums among 19 investment options: 18
Sub-Accounts of Separate Account 1 and the Fixed Account. Each Sub-Account
invests exclusively in a corresponding Fund of AIM Variable Insurance Funds,
Inc. (AIM), The Alger American Fund (Alger), MFS Variable Insurance Trust (MFS),
PIMCO Variable Insurance Trust (PIMCO) or Touchstone Variable Series Trust
(Touchstone). The Sub-Accounts provide an opportunity for a higher rate of
return than the Fixed Account but also expose you to a higher risk of losing
your money. The Fixed Account provides a guaranteed minimum rate of return.
The following guidelines apply to the allocation of Net Premiums:
o At least 1% of Net Premiums must be allocated to each investment option
chosen.
o Whole percentages must be used. For example, 33% or 34% is a permitted
allocation to an investment option; 33 1/3% is not.
o The allocation percentages must total 100%.
- Page 3 -
<PAGE>
When Net Premiums are allocated or amounts are transferred to a Sub-Account, the
Account Value is credited with Accumulation Units. Other transactions, such as
withdrawals and payments of the Monthly Deduction and Monthly Expense Charge,
will decrease the number of Accumulation Units. The number of Accumulation Units
added to or subtracted from the Account Value is calculated by dividing the
dollar amount of the transaction by the Accumulation Unit Value for the
Sub-Account at the close of trading on the Valuation Date when the transaction
is processed. Columbus Life uses the following guidelines to determine the
Valuation Date when the transaction is processed:
o If Columbus Life receives your premium payment or transfer
instructions in good order on a Valuation Date before the close of
regular trading on the New York Stock Exchange (typically 4:00 p.m.
Eastern Time), Columbus Life will process the transaction on that
Valuation Date.
o If not, Columbus Life will process the transaction on the next
Valuation Date.
E. Reinstatement
For a period of 5 years after termination, a Policy owner can request that
Columbus Life reinstate the Policy. We will reinstate your Policy if:
o The Insured is living.
o Columbus Life receives satisfactory evidence of insurability.
o The Policy owner makes a premium payment that increases the Net Cash
Surrender Value to an amount equal to or greater than:
o All costs and charges that Columbus Life would have deducted from
the date of termination to the date of reinstatement and
o The Monthly Deductions and Monthly Expense Charges for the 3 months
following the date of reinstatement.
o The Policy owner repays or reinstates any Indebtedness that was
outstanding on the date of termination.
Columbus Life will not reinstate a Policy if it has been surrendered for its Net
Cash Surrender Value.
F. Repayment of Indebtedness
Columbus Life charges interest on the amounts borrowed at the current rate shown
in the owner's Policy Schedule. Interest is due on each Policy Anniversary. If
interest is not paid when it is due, Columbus Life will treat it as an
additional loan and transfer amounts due on a pro-rata basis from each
investment options to the Loan Account.
A Loan can be repaid in full or in part at any time while the Insured is living.
When you make a payment towards the principal amount of your loan, Columbus Life
transfers the amount of the loan payment from the Loan Account back to the
investment options on a pro-rata basis according to allocation instructions of
the Policy owner at that time.
If the loan is not repaid before the Insured dies, the Indebtedness will be
deducted when determining the Death Benefit to be paid by Columbus Life. If the
loan is not repaid before the Policy is surrendered or the Policy lapses at the
end of a Grace Period, the Indebtedness will reduce the Net Cash Surrender Value
proceeds.
- Page 4 -
<PAGE>
G. Increases in Specified Amount
After one year, the Policy owner may change the Specified Amount by sending a
written request to Columbus Life. The Specified Amount of the Policy may be
increased without changing the death benefit option. The Specified Amount must
be increased by at least $25,000.
The Policy owner must apply for any increase in the Specified Amount on a
supplemental application. Before the increase is effective, Columbus Life will
require satisfactory proof of insurability. Any approved increase will be
effective as of the date shown on the amended Policy Schedule.
H. Other
1. Misstatement of Age or Sex
If the age or gender of the Insured is misstated in the application or
supplemental application, Columbus Life will change any benefits under the
Policy to those benefits that the cost of insurance charge for the month of
death would have provided if the correct age and gender had been stated. If
Columbus Life does not discover the misstatement until after the payment of the
Policy proceeds under one of the Income Plans has started, Columbus Life will
deduct any overpayments, plus compound interest, from subsequent payments and
will pay any underpayments, plus compound interest, in a lump sum.
2. Incontestability
Except for cases involving termination of the Policy or fraud, Columbus Life
will not contest:
o The Policy after the Policy has been in effect for 2 years during
the Insured's lifetime
o Any increase in Specified Amount after the increase has been in
effect for 2 years during the Insured's lifetime
o Any rider attached to the Policy after the rider has been in effect
for 2 years
During these 2-year periods, Columbus Life may contest the validity of your
Policy, any increase in Specified Amount or the validity of any riders based on
material misstatements made in the application or any supplemental application.
No statement will be used in contesting a claim unless it is in an application
or supplemental application and a copy of the application is attached to the
Policy.
If the Policy is reinstated after termination, the 2-year period of
contestability begins on the reinstatement date. If the Policy has been in
effect for 2 years, it will be contestable only as to statements made in the
reinstatement application. If the Policy has been in force for less than 2
years, it will be contestable as to statements made in the reinstatement
application as well as the initial application and supplemental applications.
- Page 5 -
<PAGE>
If the Policy terminates and is later reinstated, Columbus Life will measure the
2-year time period from the effective date of reinstatement. Any premium payment
refund will be limited to premiums paid on or after the effective date of
reinstatement.
3. Suicide
The Policy does not cover suicide by the Insured, whether sane or insane, during
the 2-year period beginning with the Policy Date. If the Policy is in effect and
the Insured commits suicide during this 2-year period, Columbus Life will pay
you the greater of the following amounts:
o The premium payments, less any Indebtedness, less any previous
withdrawals, and less all monthly costs of insurance on all
persons other than the Insured ever covered by rider
o The Net Cash Surrender Value
Columbus Life will not pay any Death Benefit in these circumstances.
With respect to any increase in Specified Amount, Columbus Life will not pay
death benefits if the Insured, whether sane or insane, commits suicide within 2
years from the effective date of the increase. If the Policy has been in effect
for more than 2 years after the Policy Date but less than 2 years from an
increase in Specified Amount, Columbus Life will return the monthly costs of
insurance charged for the increase and pay death benefits based on the previous
Specified Amount (on which the 2-year suicide exclusion has expired).
This provision also applies to any rider attached to the Policy. The 2-year
period begins on the rider's date of issue.
If the Policy terminates and is later reinstated, Columbus Life will measure the
2-year time period from the effective date of reinstatement. Any premium payment
refund will be limited to premiums paid on or after the effective date of
reinstatement.
II. Transfer Procedure
A. Regular Transfers
After your free look period, amounts may be transferred among the Sub-Accounts
up to 12 times per year without a charge. We will charge you $10 for each
additional transfer you make among the Sub-Accounts in a Policy Year. You are
also permitted to make 1 transfer to the Fixed Account or 1 transfer from the
Fixed Account per Policy Year without charge. In the first 4 Policy Years, you
cannot transfer more than 25% of your money from the Fixed Account in a Policy
Year.
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<PAGE>
The following guidelines apply to transfers other than dollar cost averaging
transfers:
o Each transfer must be at least $250 or the total value of a
Sub-Account, if less than $250.
o The allocation to each investment option must be at least 1% of the
total transfer amount.
Transfer are made by written request to Columbus Life, by telephone if the
Policy owner has completed a Telephone Authorization Form or by an authorized
third-party.
B. Dollar Cost Averaging Program
The Dollar Cost Averaging Program allows the Policy owner to transfer amounts at
regular intervals from the Touchstone Standby Income Sub-Account or the Fixed
Account to the other Sub-Accounts. The Policy owner can transfer (a) a specific
dollar amount, (b) a specific percentage of your money in the Touchstone Standby
Income Sub-Account or the Fixed Account or (c) earnings in the Touchstone
Standby Income Sub-Account or the Fixed Account. The Policy owners selects the
number and frequency of the transfers in the Dollar Cost Averaging Program.
Columbus Life will transfer the money on Monthly Anniversary Day, except when
the date would fall on the 29th, 30th or 31st of any month. If this exception
applies, any transfers in the Dollar Cost Averaging Program will be made on the
28th of the month.
The following guidelines apply to dollar cost averaging transfers:
o Dollar cost averaging transfers must continue for at least 12 months.
o Each transfer must be at least $100.
o The allocation to each Sub-Account must be at least 1% of the transfer
amount.
Dollar cost averaging transfers will stop if (a) the requested number of
transfers is completed, (b) after using the program for 12 months, upon request,
(c) there is not enough money in to complete the transfer (d) or the Dollar Cost
Averaging Program is discontinued by Columbus Life. If the program is
discontinued, the Policy owner will be allowed to complete the number of
transfers previously requested.
III. Redemption Procedures - Surrenders and Related Transactions
A. Surrender for Cash
The Policy owner can cancel the Policy at any time. When the Policy is
cancelled, Columbus Life pays the owner the Net Cash Surrender Value. This
payment terminates the Policy and Columbus Life's obligations under the Policy.
The Net Cash Surrender Value will equal the Account Value, less any Indebtedness
and any applicable surrender charge. Because investment performance, Monthly
Deductions and Monthly Expense Charges affect the Account Value, loan activity
affects Indebtedness and surrender charges may apply, the Net Cash Surrender
Value may be less than the total of the premium payments.
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<PAGE>
B. Partial Withdrawals
1. Voluntary Withdrawal
After the Policy has been owned for 1 year, the Policy owner may withdraw money
from the Policy by sending written instructions to Columbus Life.
The following guidelines apply to partial withdrawals:
o Each withdrawal must be at least $500.
o No partial withdrawal may be made that would reduce the Net Cash
Surrender Value below $250.
o Columbus Life will generally assess a surrender charge for each partial
withdrawal.
o There is no withdrawal fee for the first partial withdrawal in that
Policy Year. A withdrawal fee of $50 per withdrawal will be charged for
each additional withdrawal in that Policy Year.
o If death benefit Option 1 is selected, each partial withdrawal will
generally reduce the Specified Amount by the amount withdrawn plus any
withdrawal fees and surrender charges.
o The amount of the partial withdrawal may be limited because the
Specified Amount cannot be reduced to less than the Minimum Issue
Limit by a partial withdrawal.
When the partial withdrawal is processed, Columbus Life will deduct the amount
withdrawn plus any withdrawal fees and surrender charges from the Account Value.
Columbus Life withdraws money from each of the investment options on a pro-rata
basis.
Columbus Life will generally send payments within 7 days of the date that the
request is processed. Columbus Life may delay calculating the amount of the
payment from a Sub-Account or sending a payment from a Sub-Account for any of
the following reasons:
o A premium payment made by check has not cleared the banking system.
o The New York Stock Exchange is closed on a day that it normally would
be open.
o Trading on the New York Stock Exchange is restricted.
o Because of an emergency, it is not reasonably practicable for the
Sub-Accounts to sell securities or to fairly determine the value of
their investments.
o The Securities and Exchange Commission permits us to postpone payments
from the Sub-Accounts for the Policy owner's protection.
As required by most states, Columbus Life reserves the right to delay payments
from the Fixed Account for up to 6 months. Columbus Life will notify the Policy
owner if there will be a delay.
2. Decreases in Specified Amount
Columbus Life will generally be charged a surrender charge any time the Policy
owner decreases the Specified Amount. However, even though it may cause a
decrease in the Specified Amount, Columbus Life will not charge a surrender
charge solely for changing the death benefit option from Option 1 to Option 2.
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The amount of the surrender charge will depend on the amount of the decrease in
Specified Amount, the number of years since the issuance of the Policy, whether
or not the Specified Amount has previously changed and when previous changes in
the Specified Amount occurred. If there is a surrender charge, the applicable
surrender charge will be deducted from the Account Value on the effective date
of the decrease.
C. Loans and Indebtedness
The Policy owner can borrow money against the Policy while the Insured is
living. The maximum loan is an amount equal to 90% of the Cash Surrender Value
less any outstanding Indebtedness and less the amount of the next 2 Monthly
Deductions and Monthly Expense Charges.
When a loan is made, Columbus Life transfers an equal amount into the Loan
Account and the money in the Loan Account is the collateral for the loan. The
money is transferred to the Loan Account from each of the investment options on
a pro-rata basis.
Interest at the rate listed in the Policy Schedule is charged on amounts in the
Loan Account and is payable on each Policy Anniversary. If the interest is not
paid when due, Columbus Life will treat the interest payment as an additional
loan and transfer the amount due to the Loan Account from each of the investment
options on a pro-rata basis.
Columbus Life will pay interest on amounts in the Loan Account. The minimum
interest rate is 3.00% annually. Each month Columbus Life will transfer the
interest earned on the Loan Account back to the investment options on a pro-rata
basis according to the then current allocation instructions.
A loan can be repaid in full or in part at any time while the Insured is living.
When a payment is made towards the principal amount of the loan, Columbus Life
transfers the amount of the loan repayment from the Loan Account back to the
investment options on a pro-rata basis according to the then current allocation
instructions.
If the loan is not repaid before the Insured dies, Columbus Life will deduct the
Indebtedness when determining your Death Proceeds. If the loan is not repaid
before the Policy is surrendered or lapses at the end of a Grace Period,
Columbus Life will deduct the Indebtedness to determine the Net Cash Surrender
Value proceeds.
Finally, if the Indebtedness exceeds the Cash Surrender Value less the Monthly
Deduction and Monthly Expense Charge for the current month, Columbus Life can
terminate the Policy. Columbus Life will mail a notice to the Policy holder at
least 31 days before terminating the Policy. This notice will tell the Policy
holder the minimum amount of the loan that must be repaid to keep the Policy in
effect. Columbus Life will mail the notice to address of the Policy holder as
shown on its records. If its records indicate that someone holds the Policy as
collateral, Columbus Life will also mail a copy of the notice to that person's
address as shown on its records.
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D. Death Benefits and Death Proceeds
As long as the Policy remains in force, Columbus Life will pay Death Proceeds to
the named Beneficiary (or other appropriate Payee) in accordance with the Income
Plan selected by the Policy owner or, if the Policy owner has not selected an
Income Plan, by the Payee. Generally, Columbus Life will begin making payments
under the Income Plan selected within 7 days after receiving satisfactory proof
of the Insured's death, but payments may be delayed under certain circumstances
as described earlier. In particular, during the first two Policy Years and in
other instances where Columbus Life may have a basis for contesting a claim,
there may be a delay beyond the 7-day period. Regardless, Columbus Life pays
interest on the Death Proceeds from the time of the Insured's death until the
date of the lump-sum payment or the date payment begins under one of the Income
Plans.
Columbus Life pays the named Beneficiary the Death Proceeds. The Death Proceeds
equals the Death Benefit plus any additional insurance on the life of the
Insured provided by riders. However, if the Insured dies during a Grace Period,
Columbus Life will reduce the Death Proceeds by any unpaid charges, but not by
more than 3 times the sum of the Monthly Deduction and the Monthly Expense
Charge.
The Death Benefit is the amount payable to the Beneficiary when the Insured
dies. A choice of 2 death benefit options is available under the Policy: Option
1 and Option 2. The Death Benefit under Option 1 equals the greater of the
following amounts:
o The Specified Amount, less any Indebtedness
o The Account Value multiplied by the Applicable Death Benefit Factor,
less any Indebtedness
The Death Benefit under Option 2 equals the greater of the following amounts:
o The Specified Amount plus the Account Value, less any Indebtedness
o The Account Value multiplied by the Applicable Death Benefit Factor,
less any Indebtedness
Columbus Life calculates the Death Benefits as of the date of the Insured's
death.
E. Termination
Columbus Life will terminate the Policy and all insurance coverage under the
Policy will stop in the following instances:
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o As of the date on which Columbus Life receives notice requesting that
the Policy be cancelled
o As of the date the Insured dies (although some riders may provide
benefits for other covered persons beyond the Insured's death)
o As of the date a Grace Period related to the continuation of the Policy
expires
o As of 31 days after Columbus Life mails a notice that the Indebtedness
exceeds the Cash Surrender Value less the Monthly Deduction and the
Monthly Expense Charge for the current month unless the Policy owner
makes the necessary premium payment to continue the Policy
F. Lapse
If a Grace Period related to the continuation of the Policy ends, the Policy
owner has not paid the minimum additional premium needed to continue the Policy
and neither No-Lapse Guarantee applies, the Policy will lapse. Columbus Life
will not pay the Policy owner any money if the Policy lapses because the Net
Cash Surrender Value of the Policy will have been reduced to zero.
IV. Exchange Procedures
A Policy may be exchanged for a fixed policy at any time:
o Within 24 months of the Policy Date or
o Within 60 days of the later of
o notification of a change in the investment policy of Separate
Account 1, or
o the effective date of the change
If the Policy is exchanged, Columbus Life will transfer the entire value of the
Policy owner's investment in the Sub-Accounts to the Fixed Account. There is no
charge for this transfer. After the date your Policy is exchanged, Net Premiums
may not be allocated, and transfers may not be made, to any of the Sub-Accounts.
All other terms and charges of your Policy will continue to apply.
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FOUNDED IN 1888
OFFICE OF
SENIOR VICE PRESIDENT
August 2, 1999
Mr. Lawrence L. Grypp, President
Columbus Life Insurance Company
400 East Fourth Street
Cincinnati, Ohio 45202
Dear Mr. Grypp:
This opinion is furnished in connection with the filing, by Columbus Life
Insurance Company (the "Company") and its Columbus Life Insurance Company
Separate Account 1 ("Separate Account"), of a Registration Statement on Form S-6
under the Securities Act of 1933 for its flexible premium variable universal
life insurance policies ("Policies").
I have examined such documents and such law as I considered necessary and
appropriate, and on the basis of such examinations, it is my opinion that:
1. The Company is duly organized and validly existing under the laws of the
State of Ohio, and has the authority to issue the Policies in all jurisdictions
where it has the authority to do a variable life insurance business, and where
the Policies have been approved by the appropriate regulatory authorities
2. The Separate Account is a duly established and validly existing insurance
corporation separate account of The Company under the laws of the State of Ohio.
3. The portion of the assets to be held in the Separate Account equal to the
reserves and other liabilities under the Policies is not chargeable with
liabilities arising out of any other business the Company may conduct.
4. The offer and sale of the Policies have been duly authorized by the Company
and the Policies, when issued as contemplated by the said Form S-6 Registration
Statement (as it may from time to time be amended), will constitute legal,
validly issued and binding obligations of the Company in accordance with their
terms.
I hereby consent to the filing of this opinion as an exhibit to the said
Registration Statement on Form S-6.
Sincerely,
/s/ Donald J. Wuebbling
Senior Vice President and General Counsel
FOUNDED IN 1888
August 3, 1999
Mr. Lawrence L. Grypp, President
Columbus Life Insurance Company
400 East Fourth Street
Cincinnati, Ohio 45202
Dear Mr. Grypp:
This opinion is furnished in connection with the filing, by Columbus Life
Insurance Company and its Columbus Life Insurance Company Separate Account 1, of
Pre-Effective Amendment No. 1 to its Registration Statement on Form S-6 under
the Securities Act of 1933 for its flexible premium variable universal life
insurance policies ("Policies"). The prospectus included in the registration
statement describes the Policies. I am familiar with and have provided actuarial
advice concerning the preparation of the Registration Statement, including
exhibits.
In my professional opinion, the illustration of death benefits, account values
and cash surrender values included in Supplement A to the prospectus contained
in the Registration Statement are based on the assumptions stated in the
illustrations, and are consistent with the provisions of the Policies. The issue
age 35 male preferred tobacco non-user illustration is representative of the
rate structure of the Policy for younger ages, while the issue age 55 male
preferred tobacco non-user illustration is representative of the rate structure
for older ages. The rate structure underlying the age 35 sample has not been
designed so as to make its relationship between premiums and benefits appear
more favorable to prospective young purchasers with this sex and class than for
any other sex or underwriting class. The rate structure underlying the age 55
sample has not been designed so as to make its relationship between premiums and
benefits appear more favorable to prospective older purchasers with this sex and
class than for any other sex or underwriting class.
I am also of the opinion that the aggregate fees and charges under the Policies
are reasonable in relation to the services rendered, the expenses expected to be
incurred and the risks assumed by the Company.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement, and to the use of my name under the caption "Experts" in the
prospectus contained in the Registration Statement.
Sincerely,
/s/ David M. Burridge, FSA, MAAA
Senior Actuary, Life Products
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-6 of our
report dated March 5, 1999 relating to the financial statements of The Columbus
Life Insurance Company, which appears in such Registration Statement. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Cincinnati, Ohio
August 12, 1999
