As Filed with the Securities and Exchange Commission on December 23, 1999
Registration No. 333- ______
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
LIFE INVESTORS VARIABLE LIFE ACCOUNT A
--------------------------------------
(EXACT NAME OF TRUST)
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
-------------------------------------------
(NAME OF DEPOSITOR)
4333 EDGEWOOD ROAD NE
CEDAR RAPIDS, IOWA 52499
------------------------------------------------------------
(COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
(NAME AND COMPLETE ADDRESS
OF AGENT FOR SERVICE) COPY TO:
John D. Cleavenger, Esq. Stephen E. Roth, Esq.
PFL Life Insurance Company Sutherland Asbill & Brennan LLP
4333 Edgewood Road NE 1275 Pennsylvania Avenue, N.W.
Cedar Rapids, Iowa 52499 Washington, DC 20004-2415
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this Registration Statement
SECURITIES BEING OFFERED: Flexible Premium Variable Life Insurance Policy
The Registrant hereby amends this Registration Statement on such dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment that specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PART I
<PAGE>
------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Issued by PROSPECTUS
JANUARY __, 2000
LIFE INVESTORS VARIABLE LIFE ACCOUNT A
LIFE INVESTORS INSURANCE COMPANY
OF AMERICA
4333 EDGEWOOD ROAD NE
CEDAR RAPIDS, IOWA 52499
(319) 398-8511
-------------------------------------------------
Life Investors Insurance Company of America (the "Company") is offering the
flexible premium variable life insurance policy ("Policy") described in this
prospectus. The Policy is designed as a long-term investment that attempts to
provide significant life insurance benefits for the Insured. This prospectus
provides information that a prospective owner should know before investing in
the Policy. You should consider the Policy in conjunction with other insurance
you own.
You can allocate your Policy's values to:
o Life Investors Variable Life Account A (the "Separate Account"), which
invests in the portfolios listed on this page; or
o a Fixed Account, which credits a specified rate of interest.
A prospectus for each of the portfolios available through the Separate Account
must accompany this prospectus. Please read these documents before investing and
save them for future reference.
PLEASE NOTE THAT THE POLICIES AND THE PORTFOLIOS:
o ARE NOT GUARANTEED TO ACHIEVE THEIR GOALS;
o ARE NOT FEDERALLY INSURED;
o ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY; AND
o ARE SUBJECT TO RISKS, INCLUDING LOSS OF THE AMOUNT INVESTED.
The following portfolios are available:
/diamond/ JANUS ASPEN SERIES
Janus Aspen Growth Portfolio
Janus Aspen Worldwide Growth Portfolio
Janus Aspen Balanced Portfolio
Janus Aspen Capital Appreciation Portfolio
Janus Aspen Aggressive Growth Portfolio
/diamond/ AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Government Securities Fund
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
/diamond/ OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Main Street Growth & Income Fund/VA
Oppenheimer Multiple Strategies Fund/VA
Oppenheimer Bond Fund/VA
Oppenheimer Strategic Bond Fund/VA
Oppenheimer High Income Fund/VA
/diamond/ FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS
Fidelity VIP II Index 500 Portfolio
Fidelity VIP Money Market Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP II Contrafund(R) Portfolio
Fidelity VIP III Growth & Income Portfolio
================================================================================
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THIS POLICY OR DETERMINED THAT THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
================================================================================
<PAGE>
TABLE OF CONTENTS
================================================================================
GLOSSARY....................................................................1
POLICY SUMMARY..............................................................3
RISK SUMMARY................................................................8
THE COMPANY AND THE FIXED ACCOUNT..........................................10
LIFE INVESTORS INSURANCE COMPANY OF AMERICA...........................10
THE FIXED ACCOUNT.....................................................10
THE SEPARATE ACCOUNT AND THE PORTFOLIOS....................................10
THE SEPARATE ACCOUNT..................................................10
THE PORTFOLIOS........................................................12
VOTING PORTFOLIO SHARES...............................................15
THE POLICY.................................................................15
PURCHASING A POLICY...................................................15
WHEN INSURANCE COVERAGE TAKES EFFECT..................................16
CANCELING A POLICY (FREE-LOOK RIGHT)..................................17
OWNERSHIP RIGHTS......................................................17
SELECTING AND CHANGING THE BENEFICIARY............................18
CHANGING THE OWNER................................................18
ASSIGNING THE POLICY..............................................18
PREMIUMS...................................................................19
PREMIUM FLEXIBILITY...................................................19
ALLOCATING PREMIUMS...................................................20
POLICY VALUES..............................................................21
POLICY VALUE..........................................................21
CASH SURRENDER VALUE..................................................21
SUBACCOUNT VALUE......................................................21
UNIT VALUE............................................................22
FIXED ACCOUNT VALUE...................................................22
CHARGES AND DEDUCTIONS.....................................................22
EXPENSE CHARGE........................................................23
MONTHLY DEDUCTION.....................................................23
COST OF INSURANCE.................................................24
MONTHLY ADMINISTRATIVE CHARGE.....................................24
CHARGES FOR RIDERS................................................24
CHARGES FOR A SUBSTANDARD PREMIUM CLASS RATING....................24
MORTALITY AND EXPENSE RISK CHARGE.....................................24
SURRENDER AND WITHDRAWAL CHARGES......................................25
TRANSFER CHARGE.......................................................26
PORTFOLIO EXPENSES....................................................27
DEATH BENEFIT..............................................................27
DEATH BENEFIT PROCEEDS................................................27
DEATH BENEFIT OPTIONS.................................................27
CHANGING DEATH BENEFIT OPTIONS........................................29
EFFECTS OF WITHDRAWALS ON THE DEATH BENEFIT...........................29
CHANGING THE SPECIFIED AMOUNT.........................................29
i
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================================================================================
PAYMENT OPTIONS.......................................................30
SURRENDERS AND PARTIAL WITHDRAWALS.........................................31
SURRENDERS............................................................31
WITHDRAWALS...........................................................31
TRANSFERS..................................................................32
EXCHANGE PRIVILEGE....................................................33
DOLLAR COST AVERAGING.................................................33
ASSET REBALANCING PROGRAM.............................................34
LOANS......................................................................35
LOAN CONDITIONS.......................................................35
EFFECT OF POLICY LOANS................................................36
POLICY LAPSE AND REINSTATEMENT.............................................36
LAPSE.................................................................36
REINSTATEMENT.........................................................37
FEDERAL TAX CONSIDERATIONS.................................................37
OTHER POLICY INFORMATION...................................................40
OUR RIGHT TO CONTEST THE POLICY.......................................40
SUICIDE EXCLUSION.....................................................40
MISSTATEMENT OF AGE OR SEX............................................41
MODIFYING THE POLICY..................................................41
PAYMENTS WE MAKE......................................................41
REPORTS TO OWNERS.....................................................42
RECORDS...............................................................42
POLICY TERMINATION....................................................42
SUPPLEMENTAL BENEFITS AND RIDERS......................................42
PERFORMANCE DATA...........................................................44
ADDITIONAL INFORMATION.....................................................56
SALE OF THE POLICIES..................................................56
LEGAL MATTERS.........................................................56
LEGAL PROCEEDINGS.....................................................56
YEAR 2000 MATTERS.....................................................56
FINANCIAL STATEMENTS..................................................57
ADDITIONAL INFORMATION ABOUT THE COMPANY..............................57
LIFE INVESTORS'EXECUTIVE OFFICERS AND DIRECTORS.......................57
ILLUSTRATIONS..............................................................58
ii
<PAGE>
GLOSSARY
================================================================================
AGE
The Insured's age on the Insured's last birthday.
BENEFICIARY
The person(s) you select to receive the death benefit from this Policy.
CASH SURRENDER VALUE
The amount we pay when you surrender your Policy. It is equal to: (1) the Policy
Value as of the date of surrender; MINUS (2) any surrender charge; MINUS (3) any
Indebtedness.
COMPANY (WE, US, OUR, LIFE INVESTORS, HOME OFFICE)
Life Investors Insurance Company of America, 4333 Edgewood Road NE, Cedar
Rapids, Iowa 52499, telephone: 319-398-8511.
CUMULATIVE MINIMUM MONTHLY PREMIUM
The sum of all Minimum Monthly Premiums beginning on the Policy Date.
DEATH BENEFIT PROCEEDS
The amount we pay to the beneficiary when we receive due proof of the Insured's
death. We deduct any Indebtedness or unpaid Monthly Deductions before making any
payment.
FIXED ACCOUNT
Part of our general account. Amounts allocated to the Fixed Account earn at
least 3% annual interest (4% for Policies issued in Florida).
FREE LOOK PERIOD
The period shown on your Policy's cover page during which you may examine and
return the Policy and receive a refund. The length of the free look period
varies by state.
GRACE PERIOD
A 61-day period after which a Policy will lapse if you do not make a sufficient
payment.
INDEBTEDNESS
The total amount of all outstanding Policy loans, including both principal and
interest due.
INSURED
The person whose life is Insured by this Policy.
INVESTMENT START DATE
The later of the Policy Date or the date when we receive the first premium at
our Home Office.
LAPSE
A Policy that terminates without value after a grace period. You may reinstate a
lapsed Policy.
MATURITY DATE
The first Policy anniversary after the Insured's 100th birthday. You may elect
to continue the Policy beyond Insured's age 100 under the extended Maturity Date
option.
MINIMUM MONTHLY PREMIUM
This is the amount necessary to guarantee coverage for a No-Lapse Period. It is
shown on your Policy's specification page.
MONTHLY DATE
This is the same day as the Policy Date in each successive month. If there is no
day in a calendar month that coincides with the Policy Date, or if that day
falls on a day that is not a Valuation Date, then the Monthly Date is the next
Valuation Date. On each Monthly Date, we determine Policy charges and deduct
them from the Policy Value.
MONTHLY DEDUCTION
This is the monthly amount we deduct from the Policy Value. The Monthly
Deduction includes the cost of insurance charge, the administrative charge, a
charge for any riders, and any charges for a substandard premium class rating.
NO-LAPSE PERIOD
A period you choose on the Policy application (20 Policy Years, 30 Policy Years,
or to Insured's age 100) during which the Policy will not enter a grace period
if if on a Monthly Date the sum of premiums paid, less any withdrawals and
Indebtedness, equals or exceeds the Cumulative Minimum Monthly Premium.
1
<PAGE>
OWNER (YOU, YOUR)
The person entitled to exercise all rights as Owner under the Policy.
POLICY DATE
The Policy Date is the date when coverage becomes effective. The Policy date is
the latest of: (a) the date of the application; (b) the date all required
medical examinations or diagnostic tests are completed; (c) the date of issue
requested in the application unless underwriting is not yet completed; or (d)
the date of underwriting approval. The Policy Date is shown on the Policy's
specifications page, and we use it to measure Policy months, years, and
anniversaries. We begin to deduct the Monthly Deductions on the Policy Date.
POLICY VALUE
The sum of your Policy's value in the Subaccounts and the Fixed Account
(including amounts held in the Fixed Account to secure any loans).
PREMIUMS
All payments you make under the Policy other than repayments of Indebtedness.
PREMIUM SUSPENSE ACCOUNT
A temporary holding account where we place all premiums we receive prior to the
Investment Start Date. The Premium Suspense Account does not credit any interest
or investment return.
SEPARATE ACCOUNT
Life Investors Variable Life Account A. It is a separate investment account that
is divided into Subaccounts, each of which invests in a corresponding portfolio.
SEPARATE ACCOUNT VALUE
The total value of your Policy allocated to the Subaccounts of the Separate
Account.
SPECIFIED AMOUNT
The dollar amount of insurance selected by the Owner. The Specified Amount may
be increased or decreased after issue. The Specified Amount is a factor in
determining the Policy's death benefit and surrender charge.
SUBACCOUNT
A subdivision of Life Investors Variable Life Account A. We invest each
Subaccount's assets exclusively in shares of one investment portfolio.
SURRENDER
To cancel the Policy by signed request from the Owner.
VALUATION DATE
Each day that both the New York Stock Exchange and the Company are open for
business, except for any days when a Subaccount's corresponding investment
portfolio does not value its shares. As of the date of this prospectus: the
Company is open whenever the New York Stock Exchange is open; and there is no
day when both the New York Stock Exchange and the Company are open for business
but an investment portfolio does not value its shares.
VALUATION PERIOD
The period beginning at the close of business of the New York Stock Exchange on
one Valuation Date and continuing to the close of business on the next Valuation
Date.
WRITTEN NOTICE
The Written Notice you must sign and send us to request or exercise your rights
as Owner under the Policy. To be complete, each Written Notice must: (1) be in a
form we accept, (2) contain the information and documentation that we determine
in our sole discretion is necessary for us to take the action you request or for
you to exercise the right specified, and (3) be received at our Home Office.
YOU (YOUR, OWNER)
The person entitled to exercise all rights as Owner under the Policy.
2
<PAGE>
POLICY SUMMARY
================================================================================
This summary describes the Policy's important features and corresponds to
prospectus sections that discuss the topics in more detail. The Glossary defines
certain words and phrases used in this prospectus.
PREMIUMS
o You can select a premium payment plan (monthly, quarterly, semi-annually,
or annually) but you are not required to pay premiums according to the
plan. The initial premium is due on or before the Policy Date. Thereafter,
you may make subsequent premium payments, in any frequency or amount, at
any time before the Maturity Date. We will not accept any premiums after
the Maturity Date.
o In your application, you must select one of three No-Lapse Periods we
offer: 20 Policy Years; 30 Policy Years; or to Insured's age 100. We will
establish a Minimum Monthly Premium amount for your Policy based on the
Insured's age, sex, premium class, Specified Amount, riders, and the
selected No-Lapse Period. The Minimum Monthly Premium under your Policy is
the amount necessary to guarantee insurance coverage for the No-Lapse
Period you select. Longer No-Lapse Periods require higher Minimum Monthly
Premiums. You can change your Policy's No-Lapse Period at any time, but,
you must pay any additional premiums required.
o We will notify you if your Policy enters a 61-day grace period. Your
Policy will lapse if you do not make a sufficient payment before the end
of the grace period.
If your Policy is in the No-Lapse Period you have selected, then the
Policy will enter a 61-day grace period only if on a Monthly Date the Cash
Surrender Value is not enough to pay the next Monthly Deduction due, AND
the sum of premiums paid minus withdrawals and Indebtedness is less than
the Cumulative Minimum Monthly Premium.
If your Policy is not in the No-Lapse Period you have selected, then your
Policy will enter a 61-day grace period only if the Cash Surrender Value
on any Monthly Date is not enough to pay the next Monthly Deduction due.
o When you receive your Policy, the 10-day FREE LOOK PERIOD begins (the free
look period may be longer in some states). You may return the Policy
during the free look period and receive a refund of all payments you made
(less any withdrawals and Indebtedness).
o We multiply each premium you pay by the expense charge, deduct that
charge, and credit the resulting amount (the net premium) to the Policy
Value.
INVESTMENT OPTIONS
FIXED ACCOUNT:
o You may place money in the Fixed Account where it earns at least 3% annual
interest (4% for Policies issued in Florida). We may declare higher rates
of interest, but are not obligated to do so.
3
<PAGE>
SEPARATE ACCOUNT:
o You may direct the money in your Policy to any of the Subaccounts of the
Separate Account. WE DO NOT GUARANTEE ANY MONEY YOU PLACE IN THE
SUBACCOUNTS. THE VALUE OF EACH SUBACCOUNT WILL INCREASE OR DECREASE,
DEPENDING ON THE INVESTMENT PERFORMANCE OF THE CORRESPONDING PORTFOLIO.
YOU COULD LOSE SOME OR ALL OF YOUR MONEY.
o Each Subaccount invests exclusively in one of the following investment
portfolios:
<TABLE>
<S> <C>
/diamond/ JANUS ASPEN SERIES /diamond/ OPPENHEIMER VARIABLE ACCOUNT FUNDS
Janus Aspen Growth Portfolio Oppenheimer Main Street Growth & Income Fund/VA
Janus Aspen Worldwide Growth Portfolio Oppenheimer Multiple Strategies Fund/VA
Janus Aspen Balanced Portfolio Oppenheimer Bond Fund/VA
Janus Aspen Capital Appreciation Oppenheimer Strategic Bond Fund/VA
Portfolio Oppenheimer High Income Fund/VA
Janus Aspen Aggressive Growth
Portfolio
/diamond/ AIM VARIABLE INSURANCE FUNDS, INC. /diamond/ FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS
AIM V.I. Capital Appreciation Fund Fidelity VIP II Index 500 Portfolio
AIM V.I. Government Securities Fund Fidelity VIP Money Market Portfolio
AIM V.I. Growth Fund Fidelity VIP Growth Portfolio
AIM V.I. International Equity Fund Fidelity VIP II Contrafund(R) Portfolio
AIM V.I. Value Fund Fidelity VIP III Growth & Income Portfolio
</TABLE>
See "The Company and the Fixed Account," and "The Separate Account and the
Portfolios."
POLICY VALUE
o Policy Value is the sum of your amounts in the Subaccounts and the Fixed
Account. Policy Value is the starting point for calculating important
values under the Policy, such as the Cash Surrender Value and the death
benefit.
o Policy Value varies from day to day, depending on the investment experience
of the Subaccounts you choose, interest we credit to the Fixed Account,
charges we deduct, and any other transactions (E.G., transfers,
withdrawals, and loans). WE DO NOT GUARANTEE A MINIMUM POLICY VALUE.
o Prior to the Investment Start Date, we allocate the net premiums to the
Premium Suspense Account. On the first Valuation Date on or following the
Investment Start Date, we will transfer the amounts in the Premium Suspense
Account to the Subaccounts and the Fixed Account according to your
allocation percentages.
4
<PAGE>
CHARGES AND DEDUCTIONS
$ EXPENSE CHARGE: We multiply each premium by an expense charge, deduct that
charge, and credit the remaining amount (the net premium) to your Policy
Value according to your allocation instructions. The expense charge varies
by Policy Year as follows:
Premiums paid DURING the first 10 Policy Years: expense charge = 5%
Premiums paid AFTER the first 10 Policy Years: expense charge =
currently 2.5% (maximum 5%).
$ MONTHLY DEDUCTION. On the Policy Date and on each Monthly Date thereafter,
we deduct:
-> a cost of insurance charge for the Policy
-> a $10 monthly administrative charge
-> charges for any riders
-> any charges for a substandard premium class rating
$ SURRENDER AND WITHDRAWAL CHARGES:
-> Surrender: During the first 19 Policy Years, we deduct a surrender
charge that varies based on your age, sex, premium class, and initial
Specified Amount. A separate surrender charge applies for 19 years after
any Specified Amount increase. See "Charges and Deductions -- Surrender
and Withdrawal Charges" for a table showing surrender charges for sample
Insureds and premium classes.
-> Withdrawals: For each withdrawal, we deduct (from the remaining Policy
Value) a fee equal to the lesser of $25 or 2% of the amount withdrawn.
$ MORTALITY AND EXPENSE RISK CHARGE: We deduct a daily charge equal to 0.75%
(at an annual rate) of the average net assets of the Separate Account.
$ TRANSFER CHARGE: We assess a $25 fee for the 13th and each additional
transfer among the Subaccounts or the Fixed Account in a Policy Year.
$ PORTFOLIO EXPENSES: The portfolios deduct investment advisory fees and
other expenses from the amounts the Subaccounts invest in the portfolios.
These fees and expenses (shown in the following table) vary by portfolio
and currently range from 0.28% to 0.92% per year of the average portfolio
assets.
5
<PAGE>
The following table shows the fees and expenses charged by the portfolios. The
purpose of the table is to assist you in understanding the various costs and
expenses that you will bear directly and indirectly. The table reflects charges
and expenses of the portfolios for the fiscal year ended December 31, 1998.
Expenses of the portfolios may be higher or lower in the future. Please refer to
the portfolios' prospectuses for more information.
ANNUAL PORTFOLIO OPERATING EXPENSES (As a percentage of average portfolio assets
AFTER fee waivers and expense reimbursements)
<TABLE>
<CAPTION>
TOTAL
PORTFOLIO MANAGEMENT OTHER ANNUAL
- --------- FEES EXPENSES EXPENSES
---------- -------- --------
<S> <C> <C> <C>
Janus Aspen Growth Portfolio (1) 0.65% 0.03% 0.68%
Janus Aspen Worldwide Growth Portfolio (1) 0.65% 0.07% 0.72%
Janus Aspen Balanced Portfolio 0.72% 0.02% 0.74%
Janus Aspen Capital Appreciation Portfolio (1) 0.70% 0.22% 0.92%
Janus Aspen Aggressive Growth Portfolio 0.72% 0.03% 0.75%
AIM V.I. Capital Appreciation Fund 0.62% 0.05% 0.67%
AIM V.I. Government Securities Fund 0.50% 0.26% 0.76%
AIM V.I. Growth Fund 0.64% 0.08% 0.72%
AIM V.I. International Equity Fund 0.75% 0.16% 0.91%
AIM V.I. Value Fund 0.61% 0.05% 0.66%
Oppenheimer Main Street Growth & Income Fund/VA 0.74% 0.05% 0.79%
Oppenheimer Multiple Strategies Fund/VA 0.72% 0.04% 0.76%
Oppenheimer Bond Fund/VA 0.72% 0.02% 0.74%
Oppenheimer Strategic Bond Fund/VA 0.74% 0.06% 0.80%
Oppenheimer High Income Fund/VA 0.74% 0.04% 0.78%
Fidelity VIP II Index 500 Portfolio (2)(Initial Class) 0.24% 0.04% 0.28%
Fidelity VIP Money Market Portfolio (Initial or Service Class) 0.20% 0.10% 0.30%
Fidelity VIP Growth Portfolio (3)(Initial or Service Class) 0.59% 0.16% 0.75%
Fidelity VIP II Contrafund(R) Portfolio (3)(Initial or Service Class) 0.59% 0.16% 0.75%
Fidelity VIP III Growth & Income Portfolio (3)(Initial or Service Class) 0.49% 0.21% 0.70%
</TABLE>
(1) Fee reductions by the investment adviser reduce the Management Fee.
Without such reductions, the Management Fee would have been the
following: 0.72% for Growth; 0.67% for Worldwide Growth; and 0.75% for
Capital Appreciation. The investment adviser has agreed to continue the
waivers and fee reductions until at least the next annual renewal of the
advisory agreement.
(2) The investment adviser has voluntarily agreed to reimburse the portfolio
to the extent that total operating expenses exceed 0.28% of its average
net assets during this period. Without this reimbursement, the total
annual expenses would have been 0.35%.
(3) The investment adviser or the portfolio has entered into varying
arrangements with third parties whereby credits realized as a result of
uninvested cash balances were used to reduce these expenses. Without
these reductions, total annual expenses would have been the following:
0.80% for Growth; 0.80% for Contrafund(R); and 0.71% for Growth &
Income.
6
<PAGE>
SURRENDERS AND WITHDRAWALS
o SURRENDER: At any time while the Policy is in force, you may make a written
request to surrender your Policy and receive the Cash Surrender Value
(I.E., the Policy Value minus any surrender charge, and minus any
Indebtedness).
o WITHDRAWALS: After the 1st Policy Year, you may make a written request to
withdraw part of the Policy Value, subject to the following rules.
Withdrawals may have tax consequences.
/checkmark/ You may make one withdrawal in a Policy Year.
/checkmark/ You must request at least $500;
/checkmark/ If you request a withdrawal that will leave a Cash Surrender
Value of less than $500, we will treat it as a surrender
request; and
/checkmark/ For each withdrawal, we deduct a fee equal to the lesser of $25
or 2% of the amount withdrawn.
DEATH BENEFITS
o You must choose between two death benefit options under the Policy. After
the first Policy Year, you may change death benefit options once each
12-month period. We calculate the amount under each death option as of the
Insured's date of death. See "Death Benefit Options."
>> LEVEL DEATH BENEFIT is equal to the greater of:
/diamond/ the Specified Amount (which is the amount of insurance the
owner selects); OR
/diamond/ the Policy Value multiplied by the applicable Death Benefit
Ratio.
>> INCREASING DEATH BENEFIT is equal to the greater of:
/diamond/ the Specified Amount PLUS the Policy Value; OR
/diamond/ the Policy Value multiplied by the applicable Death Benefit
Ratio.
TRANSFERS
o You may make an unlimited number of transfers among the Subaccounts and the
Fixed Account.
o The minimum amount you may transfer from a Subaccount or the Fixed Account
is the lesser of $100, or the total value in the Subaccount or Fixed
Account.
o We charge $25 per transfer for the 13th and each additional transfer during
a Policy Year.
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<PAGE>
LOANS
o You may take a loan (minimum $250) from your Policy at any time. The
maximum loan amount you may take is 90% (100% in certain states) of the
Cash Surrender Value, minus 6 months of Monthly Deductions. Loans may have
tax consequences.
o As collateral for the loan, we transfer an amount equal to the loan plus
interest in advance until the next Policy Anniversary from the Separate
Account and Fixed Account to the loan reserve (part of our Fixed Account).
We credit interest on amounts in the loan reserve and we guarantee that the
annual rate will not be lower than 3% (4% in Florida).
o We charge you a maximum annual interest rate of 5.66% in advance on your
loan. Interest is due and payable at the beginning of each Policy Year.
Unpaid interest becomes part of the outstanding loan and accrues interest
if it is not paid before the beginning of the next Policy Year.
o After the 10th Policy Year, we consider certain portions of the loan amount
to be preferred loans. The sum of preferred loans cannot exceed 25% of the
Policy Value. We charge an annual interest rate of 3.85% in advance on
preferred loan amounts.
o You may repay all or part of your Indebtedness at any time. Loan repayments
must be at least $25, and must be clearly marked as "loan repayments" or we
will credit them as premiums.
o We deduct any unpaid Indebtedness from the proceeds payable on the
Insured's death.
RISK SUMMARY
================================================================================
The following are some of the risks associated with the Policy.
INVESTMENT If you invest your Policy Value in one or more
RISK Subaccounts, then you will be subject to the risk that
investment performance will be unfavorable and that the
Policy Value will decrease. You COULD lose everything
you invest. If you allocate net premiums to the Fixed
Account, then we credit your Policy Value (in the Fixed
Account) with a declared rate of interest, but you
assume the risk that the rate may decrease, although it
will never be lower than a guaranteed minimum annual
effective rate of 3%.
- --------------------------------------------------------------------------------
RISK OF If your Policy fails to meet certain conditions, we will
LAPSE notify you that the Policy has entered a 61-day grace
period and will lapse unless you make a sufficient
payment during the grace period. You may reinstate a
lapsed Policy.
If your Policy is in the selected No-Lapse Period, then
the Policy will enter a grace period only if on a
Monthly Date the Cash Surrender Value is not enough to
pay the next Monthly Deduction due, AND the sum of
premiums paid minus withdrawals and Indebtedness is less
than the Cumulative Minimum Monthly Premium.
If your Policy is not in the selected No-Lapse Period,
then your Policy will enter a grace period only if the
Cash Surrender Value on a Monthly Date is not enough to
pay the next Monthly Deduction due.
- --------------------------------------------------------------------------------
8
<PAGE>
Your Policy also may lapse (whether or not you are in
the selected No-lapse Period) if your Indebtedness
reduces the Cash Surrender Value to zero.
- --------------------------------------------------------------------------------
TAX RISKS We anticipate that the Policy will generally be deemed a
life insurance contract under Federal tax law, so that
the death benefit paid to the beneficiary will not be
subject to Federal income tax. However, there is more
uncertainty with respect to Policies issued on a
substandard premium class basis and Policies with a
Level One-Year Term Insurance Rider attached. Depending
on the total amount of premiums you pay, the Policy may
be treated as a modified endowment contract ("MEC")
under Federal tax laws. If a Policy is treated as a
MEC, then surrenders, partial withdrawals, and loans
under a Policy will be taxable as ordinary income to the
extent there are earnings in the Policy. In addition, a
10% penalty tax may be imposed on surrenders, partial
withdrawals, and loans taken before you reach age
59 1/2. You should consult a qualified tax advisor for
assistance in all Policy-related tax matters.
- --------------------------------------------------------------------------------
SURRENDER The surrender charge under this Policy applies for
RISKS 19 Policy Years after the Policy Date. An additional
surrender charge will be applicable for 19 years from
the date of any increase in the Specified Amount. It is
possible that you will receive no Cash Surrender Value
if you surrender your Policy in the first few Policy
Years. You should purchase this Policy only if you have
the financial ability to keep it in force for a
substantial period of time.
Even if you do not ask to surrender your Policy,
surrender charges MAY play a role in determining whether
your Policy will lapse, because surrender charges affect
the Cash Surrender Value which is a measure we use to
determine whether your Policy will enter a grace period
(and possibly lapse). See "Risk of Lapse," above.
- --------------------------------------------------------------------------------
LOAN RISK A Policy loan, whether or not repaid, will affect
Policy Value over time because we subtract the amount of
the loan from the Subaccounts and Fixed Account as
collateral, and the loan collateral does not participate
in the investment results of the Subaccounts or receive
any higher current interest rate credited to the Fixed
Account.
We reduce the amount we pay on the Insured's death by
the amount of any Indebtedness. Your Policy may lapse if
your Indebtedness reduces the Cash Surrender Value to
zero.
- --------------------------------------------------------------------------------
9
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THE COMPANY AND THE FIXED ACCOUNT
================================================================================
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
Life Investors Insurance Company of America is the insurance company issuing the
Policy. Life Investors was incorporated under Iowa law on September 26, 1930,
and is a wholly owned indirect subsidiary of AEGON USA, Inc. Life Investors
established the Separate Account to support the investment options under this
Policy and under other variable life insurance policies we may issue. Our
general account supports the Fixed Account options under the Policy.
IMSA. Life Investors is a member of the Insurance Marketplace Standards
Association ("IMSA"). IMSA members subscribe to a set of ethical standards
involving the sales and service of individually sold life insurance and
annuities. As a member of IMSA, Life Investors may use the IMSA logo and
language in advertisements.
THE FIXED ACCOUNT
The Fixed Account is part of our general account. We own the assets in the
general account and we use these assets to support our insurance and annuity
obligations other than those funded by our separate investment accounts. Subject
to applicable law, the Company has sole discretion over investment of the Fixed
Account's assets. The Company bears the full investment risk for all amounts
allocated or transferred to the Fixed Account. We guarantee that the amounts
allocated to the Fixed Account will be credited interest daily at a net
effective annual interest rate of at least 3% (4% for Policies issued in
Florida). We will determine any interest rate credited in excess of the
guaranteed rate at our sole discretion.
WE HAVE NOT REGISTERED THE FIXED ACCOUNT WITH THE SECURITIES AND EXCHANGE
COMMISSION AND THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
REVIEWED THE DISCLOSURE IN THIS PROSPECTUS RELATING TO THE FIXED ACCOUNT.
THE SEPARATE ACCOUNT AND THE PORTFOLIOS
================================================================================
THE SEPARATE ACCOUNT
We established Life Investors Variable Life Account A as a separate investment
account under Iowa law on July 1, 1999. We own the assets in the Separate
Account and we are obligated to pay all benefits under the Policies. We may use
the Separate Account to support other variable life insurance policies we issue.
The Separate Account is registered with the Securities and Exchange Commission
as an unit investment
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<PAGE>
trust under the Investment Company Act of 1940 and qualifies as a "separate
account" within the meaning of the Federal securities laws.
We have divided the Separate Account into Subaccounts, each of which invests in
shares of one portfolio among the following mutual funds:
o Janus Aspen Series (managed by Janus Capital Corporation)
o AIM Variable Insurance Funds, Inc. (managed by A I M Advisors, Inc.)
o Oppenheimer Variable Account Funds (managed by OppenheimerFunds, Inc.)
o Fidelity Variable Insurance Products Funds (managed by Fidelity
Management & Research Company)
The Subaccounts buy and sell portfolio shares at net asset value. Any dividends
and distributions from a portfolio are reinvested at net asset value in shares
of that portfolio.
Income, gains, and losses credited to, or charged against, a Subaccount of the
Separate Account reflect the Subaccount's own investment experience and not the
investment experience of our other assets. We may not use the Separate Account's
assets to pay any of our liabilities other than those arising from the Policies.
If the Separate Account's assets exceed the required reserves and other
liabilities, we may transfer the excess to our general account.
The Separate Account may include other Subaccounts that are not available under
the Policies and are not discussed in this prospectus. Where permitted by
applicable law, we reserve the right to:
1. Create new separate accounts;
2. Combine the Separate Account with other separate accounts;
3. Remove, combine or add Subaccounts and make the new Subaccounts
available to you at our discretion;
4. Make new portfolios available under the Separate Account or remove
existing portfolios;
5. Substitute new portfolios for any existing portfolios if shares of
a portfolio are no longer available for investment or if we
determine that investment in a portfolio is no longer appropriate
in light of the Separate Account's purposes;
6. Deregister the Separate Account under the Investment Company Act of
1940 if such registration is no longer required;
7. Operate the Separate Account as a management investment company
under the Investment Company Act of 1940, or as any other form
permitted by law;
8. Manage the Separate Account under the direction of a committee at
any time;
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<PAGE>
9. Fund additional classes of variable life insurance contracts
through the Separate Account; and
10. Make any changes required by the Investment Company Act of 1940 or
any other law.
We will not make any such changes without receiving any necessary approval of
the Securities and Exchange Commission and applicable state insurance
departments. We will notify you of any changes.
THE PORTFOLIOS
The Separate Account invests in shares of certain portfolios. Each portfolio is
part of a mutual fund that is registered with the Securities and Exchange
Commission as an open-end management investment Company. Such registration does
not involve supervision of the management or investment practices or policies of
the portfolios by the Securities and Exchange Commission.
Each portfolio's assets are held separate from the assets of the other
portfolios, and each portfolio has investment objectives and policies that are
different from those of the other portfolios. Thus, each portfolio operates as a
separate investment fund, and the income or losses of one portfolio generally
have no effect on the investment performance of any other portfolio. Pending any
prior approval by a state insurance regulatory authority, certain Subaccounts
and corresponding portfolios may not be available to residents of some states.
The following table summarizes each portfolio's investment objective(s) and
policies. THERE IS NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL ACHIEVE ITS
STATED OBJECTIVE(S). You can find more detailed information about the
portfolios, including a description of risks, in the prospectuses for the
portfolios. You should read these prospectuses carefully.
PORTFOLIO INVESTMENT OBJECTIVE
--------- --------------------
JANUS ASPEN GROWTH o Seeks long-term growth of capital in a manner
consistent with the preservation of capital.
Invests primarily in common stocks of issuers
of any size.
JANUS ASPEN o Seeks long-term growth of capital in a manner
WORLDWIDE GROWTH consistent with the preservation of capital.
Invests primarily in common stocks of foreign
and domestic issuers of any size.
JANUS ASPEN BALANCED o Seeks long-term capital growth, consistent with
preservation of capital and balanced by current
income.
JANUS ASPEN CAPITAL o Seeks long-term growth of capital. Invests in
APPRECIATION common stocks of issuers of any size.
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<PAGE>
PORTFOLIO INVESTMENT OBJECTIVE
--------- --------------------
JANUS ASPEN o Seeks long-term growth of capital. Normally
AGGRESSIVE GROWTH invests at least 50% of its equity assets in
securities issued by medium-sized companies.
AIM V.I. CAPITAL o Seeks to provide growth of capital through
APPRECIATION investment in common stocks, with emphasis on
medium-and small-sized growth companies.
AIM V.I. GOVERNMENT o Seeks to achieve a high level of current income
SECURITIES consistent with reasonable concern for safety
of principal by investing in debt securities
issued, guaranteed or otherwise backed by the
United States Government.
AIM V.I. GROWTH o Seeks to provide growth of capital primarily by
investing in seasoned and better capitalized
companies considered to have strong earnings
momentum.
AIM V.I. INTERNATIONAL o Seeks to provide long-term growth of capital by
EQUITY investing in a diversified portfolio of
international equity securities whose issuers
are considered to have strong earnings
momentum.
AIM V.I. VALUE o Seeks to achieve long-term growth of capital by
investing primarily in equity securities judged
by the fund's investment adviser to be
undervalued relative to the investment
adviser's appraisal of the current or projected
earnings of the companies issuing the
securities, or relative to current market
values or assets owned by the companies issuing
the securities, or relative to the equity
market generally. Income is a secondary
objective.
OPPENHEIMER MAIN o Seeks a high total return (which includes
STREET GROWTH & growth in the value of its shares as well as
INCOME/VA current income) from equity and debt
securities.
OPPENHEIMER MULTIPLE o Seeks a high total investment return, which
STRATEGIES/VA includes current income and capital
appreciation in the value of its shares.
OPPENHEIMER o Seeks a high level of current income as its
BOND/VA primary objective. As a secondary objective,
seeks capital appreciation when consistent with
its primary objective.
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<PAGE>
PORTFOLIO INVESTMENT OBJECTIVE
--------- --------------------
OPPENHEIMER STRATEGIC o Seeks a high level of current income
BOND/VA principally derived from interest on debt
securities and seeks to enhance such income by
writing covered call options on debt
securities.
OPPENHEIMER HIGH o Seeks a high level of current income from
INCOME/VA investment in high-yield, fixed-income
securities. Investments include unrated
securities or high-risk securities in the lower
rating categories, commonly known as "junk
bonds," which are subject to a greater risk of
loss of principal and nonpayment of interest
than higher-rated securities.
FIDELITY INDEX 500 o Seeks to provide investment results that
correspond to the total return of a broad range
of common stocks publicly traded in the United
States, as represented by the Standard &
Poor's(R) Composite Index of 500 Stocks.
FIDELITY MONEY MARKET o Seeks to earn a high level of current income
while maintaining a stable $1.00 share price by
investing in high-quality, short-term
securities.
FIDELITY GROWTH o Seeks capital appreciation by investing
primarily in common stocks.
FIDELITY CONTRAFUND(R) o Seeks capital appreciation by investing in
securities of companies whose value the adviser
believes is not fully recognized by the public.
FIDELITY GROWTH & o Seeks high total return through a combination
INCOME of current income and capital appreciation.
In addition to the Separate Account, the portfolios may sell shares to other
separate investment accounts established by other insurance companies to support
variable annuity contracts and variable life insurance policies or qualified
retirement plans. It is possible that, in the future, it may become
disadvantageous for variable life insurance separate accounts and variable
annuity separate accounts to invest in the portfolios simultaneously. Although
neither the Company nor the portfolios currently foresee any such disadvantages,
either to variable life insurance policy owners or to variable annuity contract
owners, each portfolio's Board of Directors (Trustees) will monitor events in
order to identify any material conflicts between the interests of such variable
life insurance policy owners and variable annuity contract owners, and will
determine what action, if any, it should take. Such action could include the
sale of portfolio shares by one or more of the separate accounts, which could
have adverse consequences. Material conflicts could result from, for example,
(1) changes in state insurance laws, (2) changes in Federal income tax laws, or
(3) differences in voting instructions between those given by variable life
insurance policy owners and those given by variable annuity contract owners.
If a portfolio's Board of Directors (Trustees) were to conclude that separate
portfolios should be established for variable life insurance and variable
annuity separate accounts, we will bear the attendant
14
<PAGE>
expenses, but variable life insurance policy owners and variable annuity
contract owners would no longer have the economies of scale resulting from a
larger combined portfolio.
THESE PORTFOLIOS ARE NOT AVAILABLE FOR PURCHASE DIRECTLY BY THE GENERAL PUBLIC,
AND ARE NOT THE SAME AS OTHER MUTUAL FUND PORTFOLIOS WITH VERY SIMILAR OR NEARLY
IDENTICAL NAMES THAT ARE SOLD DIRECTLY TO THE PUBLIC. However, the investment
objectives and policies of certain portfolios available under the Policy are
very similar to the investment objectives and policies of other portfolios that
are or may be managed by the same investment adviser or manager. Nevertheless,
the investment performance and results of the portfolios available under the
Policy may be lower or higher than the investment results of such other
(publicly available) portfolios. THERE CAN BE NO ASSURANCE, AND WE MAKE NO
REPRESENTATION, THAT THE INVESTMENT RESULTS OF ANY OF THE PORTFOLIOS AVAILABLE
UNDER THE POLICY WILL BE COMPARABLE TO THE INVESTMENT RESULTS OF ANY OTHER
PORTFOLIO, EVEN IF THE OTHER PORTFOLIO HAS THE SAME INVESTMENT ADVISER OR
MANAGER, THE SAME INVESTMENT OBJECTIVES AND POLICIES, AND A VERY SIMILAR NAME.
PLEASE READ THE PORTFOLIO PROSPECTUSES TO OBTAIN MORE COMPLETE INFORMATION
REGARDING THE PORTFOLIOS. KEEP THESE PROSPECTUSES FOR FUTURE REFERENCE.
VOTING PORTFOLIO SHARES
Even though we are the legal owner of the portfolio shares held in the
Subaccounts, and have the right to vote on all matters submitted to shareholders
of the portfolios, we will vote our shares only as Owners instruct, so long as
such action is required by law.
Before a vote of a portfolio's shareholders occurs, you will receive voting
materials. We will ask you to instruct us on how to vote and to return your
proxy to us in a timely manner. You will have the right to instruct us on the
number of portfolio shares that corresponds to the amount of Policy Value you
have in that portfolio (as of a date set by the portfolio).
If we do not receive voting instructions on time from some Owners, we will vote
those shares in the same proportion as the timely voting instructions we
receive. Should Federal securities laws, regulations and interpretations change,
we may elect to vote portfolio shares in our own right. If required by state
insurance officials, or if permitted under Federal regulation, we may disregard
certain Owner voting instructions. If we ever disregard voting instructions, we
will send you a summary in the next annual report to Owners advising you of the
action and the reasons we took such action.
THE POLICY
================================================================================
PURCHASING A POLICY
To purchase a Policy, you must submit a completed application and an initial
premium to us at our Home Office. You may also send the application and initial
premium to us through any licensed life insurance agent who is also a registered
representative of a broker-dealer having a selling agreement with AFSG
Securities Corporation, the principal underwriter for the Policy.
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<PAGE>
We determine the minimum Specified Amount benefit for a Policy based on the
Insured's age when we issue the Policy. The minimum Specified Amount is $100,000
for issue ages 0-49, and $50,000 for issue ages 50-85.
Generally, the Policy is available for Insureds between issue ages 0-85 for
preferred risk classes, and between issue ages 18-85 for tobacco risk classes.
Starting at Specified Amounts of $250,000, we add a better risk class
(super-preferred) for non-tobacco users only. Super-preferred rates are
available for issue ages 18-75. We can provide you with details as to these
underwriting standards when you apply for a Policy. We reserve the right to
modify our underwriting requirements at any time. We must receive evidence of
insurability that satisfies our underwriting standards before we will issue a
Policy. We reserve the right to reject an application for any reason permitted
by law.
WHEN INSURANCE COVERAGE TAKES EFFECT
Full insurance coverage under the Policy will take effect only if the proposed
Insured is alive and in the same condition of health as described in the
application when we deliver the Policy to you, and if the initial premium is
paid.
CONDITIONAL INSURANCE COVERAGE. Before full insurance coverage takes effect, you
may receive conditional insurance converge subject to certain requirements. This
coverage shall not exceed (1) the amount of insurance applied for; or (2)
$500,000, whichever is smaller, less all other sums we pay upon the death of a
proposed Insured under any other pending application or policy. If a proposed
Insured is less than 15 days old or more than 60 years old, no insurance shall
take effect until the Policy is delivered. If we do not approve your
application, we will make a full refund of the initial premium paid with the
application.
If all of the following conditions of coverage have been met, then conditional
insurance coverage will go into effect on the Policy Date subject to the
liability limits shown above and subject to the conditions of the Policy as
applied for. The conditions of such coverage are that:
1. the full first premium on the premium mode selected for the Policy
benefits applied for, including any additional premium required for
restrictions or benefits, is paid when the application is signed; and
2. each proposed Insured has completed any required medical examinations,
diagnostic tests, and interviews, or has supplied us with any additional
information we require; and
3. each proposed Insured is, on the Policy Date, insurable and acceptable
to us under our rules, limits and underwriting standards for the plan
and for the amount applied for without modification and at the rate of
premium paid.
If insurance does not take effect under these conditions, then no insurance
shall take effect unless a Policy is delivered to and accepted by the applicant,
and the full first premium is paid before any change in the insurability of any
proposed Insured since the date of application.
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<PAGE>
Conditional life insurance coverage is void if the application contains any
material misrepresentation. Benefits will also be denied if any proposed Insured
commits suicide.
Conditional life insurance coverage terminates automatically, and without
notice, on the earliest of:
o the date we notify you that the application is declined and we
return the initial premium; or
o the date we determine the Insured has satisfied our underwriting
requirements; or
o 10 days following any counteroffer we make to offer insurance to any
proposed Insured under a different policy, or at an increased
premium, or under a different underwriting class; or
o 60 days from the beginning of conditional insurance coverage.
FULL INSURANCE COVERAGE. Once we determine that the Insured meets our
underwriting requirements, full insurance coverage begins, we issue the Policy,
and we begin to deduct monthly charges from your Policy Value. This date is the
Policy Date. Prior to the Investment Start Date (the later of the Policy Date
and the date we receive the first premium), we will place your premium (less
charges) in the Premium Suspense Account. On the first Valuation Date on or
following the Investment Start Date, we will transfer the amount in the Premium
Suspense Account to the Subaccounts and/or the Fixed Account as you directed on
your application. See "Allocating Premiums."
CANCELING A POLICY (FREE-LOOK RIGHT)
You may cancel a Policy during the free-look period by returning it to the
Company, or to the agent who sold it. The free-look period generally expires 10
days after you receive the Policy, but this period will be longer if required by
state law. If you decide to cancel the Policy during the free-look period, we
will treat the Policy as if we never issued it. Within seven calendar days after
we receive the returned Policy, we will refund all payments you made under the
Policy (less any withdrawals and Indebtedness).
OWNERSHIP RIGHTS
The Policy belongs to the Owner named in the application. The Owner may exercise
all of the rights and options described in the Policy. The Owner is the Insured
unless the application specifies a different person as the Insured. If the Owner
dies before the Insured and no contingent Owner is named, then Ownership of the
Policy will pass to the Owner's estate. The Owner may exercise certain rights
described below.
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<PAGE>
SELECTING AND o You designate the beneficiary (the person to receive
CHANGING THE the death benefit when the Insured dies) in the
BENEFICIARY application.
o If you designate more than one beneficiary, then each
beneficiary shares equally in any death benefit
unless the beneficiary designation states otherwise.
o If the beneficiary dies before the Insured, then any
contingent beneficiary becomes the beneficiary.
o If both the beneficiary and contingent beneficiary
die before the Insured, then we will pay the death
benefit to the Owner or the Owner's estate once
the Insured dies.
o You can change the beneficiary by providing us with a
written request while the Insured is living.
o The change in beneficiary is effective as of the date
you sign the written request.
o We are not liable for any actions we take before we
received the written request.
CHANGING THE o You may change the Owner by providing a written
OWNER request to us at any time while the Insured is alive.
o The change takes effect on the date you sign the
written request.
o We are not liable for any actions we take before we
received the written request.
o Changing the Owner does not automatically change the
beneficiary and does not change the Insured.
o Changing the Owner may have tax consequences. You
should consult a tax advisor before changing the
Owner.
ASSIGNING THE o You may assign Policy rights while the Insured is
POLICY alive by submitting a written request to our Home
Office.
o The Owner retains any Ownership rights that are not
assigned.
o Assignee may not change the Owner or the beneficiary,
and may not elect or change an optional method of
payment. We will pay any amount payable to the
assignee in a lump sum.
o Claims under any assignment are subject to proof of
interest and the extent of the assignment.
o We are not:
-> bound by any assignment unless we receive a
Written Notice of the assignment;
-> responsible for the validity of any assignment; or
-> liable for any payment we make before we received
Written Notice of the assignment.
o Assigning the Policy may have tax consequences. See
"Tax Treatment of Policy Benefits."
--------------------------------------------------------
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<PAGE>
PREMIUMS
================================================================================
PREMIUM FLEXIBILITY
When you apply for a Policy, you may indicate your intention to pay premiums on
a monthly, quarterly, semi-annual, or annual basis (planned premiums). However,
you do not have to pay premiums according to any schedule. You have flexibility
to determine the frequency and the amount of the premiums you pay. You must send
all premium payments to our Home Office. You may not pay any premiums after the
Policy's Maturity Date. You may not pay premiums less than $25.
We have the right to limit or refund any premium if (1) the premium would
disqualify the Policy as a life insurance contract under the Internal Revenue
Code; or (2) the amount you pay is less than $25; or (3) payment of a greater
amount would increase the death benefit by application of the death benefit
ratio (unless you provide us with satisfactory evidence of insurability).
You can stop paying premiums at any time and your Policy will continue in force
until the earlier of the Maturity Date, or the date when either (1) the Insured
dies, or (2) the grace period ends without a sufficient payment (see "Lapse,"
below), or (3) we receive your Written Notice requesting a surrender of the
Policy.
MINIMUM MONTHLY PREMIUM. On your application, you must select one of the three
No-Lapse Periods we offer under the Policy: 20 Policy Years; 30 Policy Years; or
to Insured's age 100. Certain states may require No-Lapse Periods that differ
from those we offer. Your Policy's specification page will show a Minimum
Monthly Premium amount for your Policy, which is based on the Insured's age,
sex, premium class, Specified Amount, riders, and the selected No-Lapse Period.
The Minimum Monthly Premium is the amount necessary to guarantee insurance
coverage for the No-lapse Period. (For two Policies covering Insureds with the
same age, sex, premium class, Specified Amount and riders, the Minimum Monthly
Premium is higher for the Policy with the longer No-Lapse Period.) You can
change the No-Lapse Period for your Policy at any time, but you must make a lump
sum payment of any additional premiums we require. Thereafter, you must pay the
premiums required for the newly-selected No-Lapse Period. Beginning on the
Policy Date until the end of the No-Lapse Period, your Policy will not enter a
grace period if on each Monthly Date during the No-Lapse Period, your Cash
Surrender Value is enough to pay the next Monthly Deduction due, AND the sum of
premiums paid less any withdrawals and Indebtedness, equals or exceeds the
Cumulative Minimum Monthly Premium. See "Policy Lapse and Reinstatement." During
the No-Lapse Period, we allow you to make premium payments necessary to cover
any deficiency in the Cumulative Minimum Monthly Premium.
The Minimum Monthly Premium will increase if you increase the Specified Amount
or add supplemental benefits to your Policy. The Minimum Monthly Premium will
decrease for any supplemental benefit you decrease or discontinue. The Minimum
Monthly Premium will not decrease if you decrease the Specified Amount. See
"Changing the Specified Amount."
LAPSE. Under certain conditions, your Policy will enter into a 61-day grace
period and possibly lapse:
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<PAGE>
o If your Policy is in the No-Lapse Period, then the Policy will enter a
grace period if on any Monthly Date the Cash Surrender Value is not
enough to pay the next Monthly Deduction due, AND the sum of premiums
paid minus withdrawals and Indebtedness is less than the Cumulative
Minimum Monthly Premium.
o If your Policy is not in the No-Lapse Period, then your Policy will
enter a 61-day grace period if the Cash Surrender Value on any Monthly
Date is not enough to pay the next Monthly Deduction due.
We will notify you when your Policy is in a grace period. If you do not make a
sufficient payment before the end of the grace period, then your Policy will
lapse. You may reinstate a lapsed Policy if you meet certain requirements. See
"Policy Lapse and Reinstatement."
TAX-FREE EXCHANGES (1035 EXCHANGES). We may accept as part of your initial
premium, money from another life insurance contract that qualified for a
tax-free exchange under Section 1035 of the Internal Revenue Code, contingent
upon receipt of the cash from that contract. If you contemplate such an
exchange, you should consult a tax advisor to discuss the potential tax effects
of such a transaction.
ALLOCATING PREMIUMS
When you apply for a Policy, you must instruct us to allocate your net premium
to one or more Subaccounts of the Separate Account and to the Fixed Account
according to the following rules:
o You must allocate at least 5% of each net premium to any Subaccount
or the Fixed Account you select.
o Allocation percentages must be in whole numbers and the sum of the
percentages must equal 100%.
o No more than 10 accounts (Subaccounts and Fixed Account) may be
concurrently active (have net premiums allocated to it).
o Up to 4 times each Policy Year, you can change the allocation
instructions for additional net premiums without charge by providing
us with written notification (or any other notification we deem
satisfactory). Any change in allocation instructions will be
effective on the date we record the change.
Investment returns from amounts allocated to the Subaccounts will vary with the
investment experience of these Subaccounts and will be reduced by Policy
charges. YOU BEAR THE ENTIRE INVESTMENT RISK FOR AMOUNTS YOU ALLOCATE TO THE
SUBACCOUNTS.
Prior to the Investment Start Date, we will place your premium (less charges) in
the Premium Suspense Account. We do not credit any interest or investment
returns to amounts in the Premium Suspense Account. On the first Valuation Date
on or following the Investment Start Date, we will transfer the amount in the
Premium Suspense Account to the Subaccounts and/or the Fixed Account in
accordance with the allocation percentages provided in your application. Amounts
allocated from the Premium Suspense Account will be invested at the unit value
next determined on the first Valuation Date on or
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<PAGE>
following the Investment Start Date. We invest all net premiums paid thereafter
at the unit value next determined after we receive the premium at our Home
Office.
POLICY VALUES
================================================================================
POLICY VALUE o serves as the starting point for calculating values under a
Policy;
o equals the sum of all values in the Fixed Account and in
each Subaccount;
o is determined on the Policy Date and on each Valuation
Date; and
o has no guaranteed minimum amount and may be more or less
than premiums paid.
CASH SURRENDER VALUE
The Cash Surrender Value is the amount we pay to you when you surrender your
Policy. We determine the Cash Surrender Value at the end of the Valuation Period
when we receive your written surrender request.
CASH SURRENDER VALUE ON ANY o the Policy Value as of such date; MINUS
VALUATION DATE EQUALS: o any surrender charge as of such date; MINUS
o any outstanding Indebtedness.
SUBACCOUNT VALUE
Each Subaccount's value is the Policy Value in that Subaccount. At the end of
any Valuation Period, the Subaccount's value is equal to the number of units
that the Policy has in the Subaccount, multiplied by the unit value of that
Subaccount.
THE NUMBER OF o the initial units purchased at the unit value on the
UNITS IN ANY Investment Start Date; PLUS
SUBACCOUNT ON o units purchased with additional net premiums; PLUS
ANY VALUATION o units purchased via transfers from another Subaccount, the
DATE EQUALS: Fixed Account, or the loan reserve; MINUS
o units redeemed to pay for Monthly Deductions; MINUS
o units redeemed to pay for partial withdrawals; MINUS
o units redeemed as part of a transfer to another Subaccount,
the Fixed Account, or the loan reserve.
Every time you allocate or transfer money to or from a Subaccount, we convert
that dollar amount into units. We determine the number of units we credit to, or
subtract from, your Policy by dividing
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<PAGE>
the dollar amount of the transaction by the unit value for that Subaccount at
the end of the Valuation Period.
We determine a unit value for each Subaccount to reflect how investment results
affect the Policy values. Unit values will vary among Subaccounts. The unit
value of each Subaccount was originally established at $10 per unit. The unit
value may increase or decrease from one Valuation Period to the next.
THE UNIT VALUE OF o the total value of the assets held in the
ANY SUBACCOUNT Subaccount, determined by the multiplying the number
AT THE ENDOF A of shares of designated portfolio the Subaccount
VALUATION PERIOD owns by the portfolio's net asset value per share;
IS CALCULATED AS: MINUS
o a deduction for the mortality and expense risk
charge; MINUS
o the accrued amount of reserve for any taxes or other
economic burden resulting from applying tax laws
that we determine to be properly attributable to the
Subaccount;
AND THE RESULT DIVIDED BY
o the number of outstanding units in the Subaccount.
FIXED ACCOUNT VALUE
On the Investment Start Date, the Fixed Account value is equal to the net
premiums allocated to the Fixed Account, less the portion of the first Monthly
Deduction taken from the Fixed Account.
THE FIXED ACCOUNT o the net premium(s) allocated to the Fixed
VALUE AT THE END OF Account; PLUS
ANY VALUATION o any amounts transferred to the Fixed Account
PERIOD IS EQUAL TO: (including amounts transferred from the loan
reserve); PLUS
o interest credited to the Fixed Account; MINUS
o amounts charged to pay for Monthly Deductions;
MINUS
o amounts withdrawn from the Fixed Account; MINUS
o amounts transferred from the Fixed Account to a
Subaccount or to the loan reserve.
CHARGES AND DEDUCTIONS
================================================================================
We make certain charges and deductions under the Policy. These charges and
deductions compensate us for: (1) services and benefits we provide; (2) costs
and expenses we incur; and (3) risks we assume.
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SERVICES AND o the death benefit, cash and loan benefits under the
BENEFITS WE Policy
PROVIDE: o investment options, including premium allocations
o administration of elective options
o the distribution of reports to Owners
COSTS AND o costs associated with processing and underwriting
EXPENSES WE applications, issuing and administering the Policy
INCUR: (including any riders)
o overhead and other expenses for providing services and
benefits
o sales and marketing expenses
o other costs of doing business, such as collecting
premiums, maintaining records, processing claims,
effecting transactions, and paying Federal, state and
local premium and other taxes and fees
RISKS WE ASSUME: o that the cost of insurance charges we may deduct are
insufficient to meet our actual claims because Insureds
die sooner than we estimate
o that the costs of providing the services and benefits
under the Policies exceed the charges we deduct
EXPENSE CHARGE
We deduct an expense charge from each premium payment to compensate us for
distribution expenses and state and local premium taxes. We credit the remaining
amount (the net premium) to your Policy Value according to your allocation
instructions. The expense charge currently varies by Policy Year and is
guaranteed not to exceed 5% of each premium in any Policy Year:
Premiums paid DURING first 10 Policy Years: expense charge = 5%
Premiums paid AFTER first 10 Policy Years: expense charge = 2.5%
While we may change the expense charge, we guarantee that the expense charge
will not exceed 5% of premiums paid in any Policy Year.
MONTHLY DEDUCTION
We deduct a Monthly Deduction from the Policy Value on the Policy Date and on
each Monthly Date. We will make deductions from each Subaccount and the Fixed
Account on a pro rata basis (I.E., in the same proportion that the value in each
Subaccount and the Fixed Account bears to the total Policy Value on the Monthly
Date). Because portions of the Monthly Deduction (such as the cost of insurance)
can vary from month-to-month, the Monthly Deduction will also vary.
The Monthly Deduction has four components:
-> a cost of insurance charge for the Policy;
-> a $10 monthly administrative charge;
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<PAGE>
-> charges for any riders; and
-> any charges for a substandard premium class rating.
COST OF INSURANCE. We assess a monthly cost of insurance charge to compensate us
for underwriting the death benefit. The charge depends on a number of variables
(age, sex, premium class, and Specified Amount) that would cause it to vary from
Policy to Policy and from Monthly Date to Monthly Date.
We calculate the cost of insurance charge separately for the initial Specified
Amount and for any increase in Specified Amount. If we approve an increase in
your Policy's Specified Amount, then a different premium class (and a different
cost of insurance charge) may apply to the increase, based on the Insured's
circumstances at the time of the increase.
COST OF The COST OF INSURANCE CHARGE is equal to:
INSURANCE
CHARGE -> the monthly cost of insurance rate; MULTIPLIED BY
-> the net amount at risk for your Policy on the
Monthly Date.
The NET AMOUNT AT RISK is equal to:
-> the death benefit at the beginning of the month;
DIVIDED BY
-> 1.0024663 (1.0032737 for Policies issued in Florida)
which is a "risk rate divisor" (a factor that reduces
the net amount at risk, for purposes of computing the
cost of insurance, by taking into account assumed
monthly earnings at an annual rate of 3.0% (4.0% for
Policies issued in Florida)); MINUS
-> the Policy Value at the beginning of the month.
We base the cost of insurance rates on the Insured's age, sex, premium class and
Specified Amount. The actual monthly cost of insurance rates are based on our
expectations as to future mortality experience. The rates will never be greater
than the guaranteed amount stated in your Policy. These guaranteed rates are
based on the 1980 Commissioner's Standard Ordinary (C.S.O.) Mortality Tables and
the Insured's age and premium class. For standard premium classes, these
guaranteed rates will never be greater than the rates in the 1980 C.S.O. tables.
MONTHLY ADMINISTRATIVE CHARGE. Each month we deduct a $10 monthly administrative
charge to compensate us for expenses such as record keeping, processing death
benefit claims and Policy changes, and overhead costs. This charge will not
exceed $10 per month.
CHARGES FOR RIDERS. The Monthly Deduction includes charges for any supplemental
insurance benefits you add to your Policy by rider. See "Supplemental Benefits
and Riders."
CHARGES FOR A SUBSTANDARD PREMIUM CLASS RATING. The Monthly Deduction includes a
charge we apply if our underwriting places the Insured in a substandard premium
class rating.
MORTALITY AND EXPENSE RISK CHARGE
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We deduct a daily charge from each Subaccount (not the Fixed Account) to
compensate us for certain mortality and expense risks we assume. The mortality
risk is that an Insured will live for a shorter time than we project. The
expense risk is that the expenses that we incur will exceed the administrative
charge limits we set in the Policy. This charge is equal to:
o the assets in each Subaccount, MULTIPLIED BY
o 0.00002047, which is the daily portion of the annual mortality
and expense risk charge rate of 0.75% during all Policy Years.
If this charge does not cover our actual costs, we absorb the loss. Conversely,
if the charge more than covers actual costs, the excess is added to our surplus.
We expect to profit from this charge and may use such profits for any lawful
purpose including covering distribution expenses.
SURRENDER AND WITHDRAWAL CHARGES
SURRENDER CHARGE. If you fully surrender your Policy during the first 19 Policy
Years, we deduct a surrender charge from your Policy Value and pay the remaining
amount (less any outstanding Indebtedness) to you. The payment you receive is
called the Cash Surrender Value. The surrender charge varies based on your age,
sex, premium class, and initial Specified Amount. The highest surrender charge
on any Policy occurs in the first Policy Year or the first year following an
increase in the Specified Amount. An increase in the Specified Amount will
increase the surrender charge, but a decrease in the Specified Amount will not
result in a decrease in the surrender charge. The maximum surrender charge for
any Insured is $58 per $1,000 of Specified Amount.
The table below provides the maximum applicable surrender charges for the
initial Specified Amount for selected sample Insureds. Your Policy's
specifications page indicates the surrender charges applicable to your Policy. A
separate surrender charge that lasts for 19 years applies to each Specified
Amount increase. No surrender charges apply to withdrawals or Specified Amount
decreases.
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SURRENDER CHARGE PER $1,000 OF SPECIFIED AMOUNT; INSURED AGE 35
MALE MALE FEMALE FEMALE
POLICY YEAR NON-TOBACCO TOBACCO NON-TOBACCO TOBACCO
- ----------- ----------- ------- ----------- -------
1 $24.00 $28.00 $22.00 $24.00
2 $22.80 $26.60 $20.90 $22.80
3 $21.60 $25.20 $19.80 $21.60
4 $20.40 $23.80 $18.70 $20.40
5 $19.20 $22.40 $17.60 $19.20
6 $18.00 $21.00 $16.50 $18.00
7 $16.80 $19.60 $15.40 $16.80
8 $15.60 $18.20 $14.30 $15.60
9 $14.40 $16.80 $13.20 $14.40
10 $13.20 $15.40 $12.10 $13.20
11 $12.00 $14.00 $11.00 $12.00
12 $10.80 $12.60 $9.90 $10.80
13 $9.60 $11.20 $8.80 $9.60
14 $8.40 $9.80 $7.70 $8.40
15 $7.20 $8.40 $6.60 $7.20
16 $6.00 $7.00 $5.50 $6.00
17 $4.80 $5.60 $4.40 $4.80
18 $3.60 $4.20 $3.30 $3.60
19 $2.40 $2.80 $2.20 $2.40
20 $0.00 $0.00 $0.00 $0.00
THE SURRENDER CHARGE MAY BE SIGNIFICANT. YOU SHOULD CAREFULLY CALCULATE THIS
CHARGE BEFORE YOU REQUEST A SURRENDER. Under some circumstances the level of
surrender charges might result in no Cash Surrender Value available.
WITHDRAWAL CHARGE. After the first Policy Year, you may request a partial
withdrawal from your Policy Value. For each withdrawal, we will deduct from your
Policy Value a fee equal to the lesser of $25 or 2% of the amount withdrawn.
TRANSFER CHARGE
o We currently allow you to make 12 transfers each Policy Year free of
charge.
o We charge $25 for the 13th and each additional transfer among the
Subaccounts and Fixed Account during a Policy Year. We will not
increase this charge.
o For purposes of assessing the transfer charge, each written or
telephone request is considered to be one transfer, regardless of
the number of Subaccounts (or Fixed Account) affected by the
transfer.
o We deduct the transfer charge from the amount being transferred.
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<PAGE>
o Transfers we effect to reallocate amounts on the Investment Start
Date, and transfers due to dollar cost averaging, asset rebalancing,
or loans, do NOT count as transfers for the purpose of assessing
this charge.
PORTFOLIO EXPENSES
The value of the net assets of each Subaccount reflects the investment advisory
fees and other expenses incurred by the corresponding portfolio in which the
Subaccount invests. For further information, see the portfolios' prospectuses
and Annual Portfolio Operating Expenses table included in the summary of this
prospectus.
DEATH BENEFIT
================================================================================
DEATH BENEFIT PROCEEDS
As long as the Policy is in force, we will pay the death benefit proceeds to the
primary beneficiary or a contingent beneficiary once we receive satisfactory
proof of the Insured's death. We may require you to return the Policy. If the
beneficiary dies before the Insured and there is no contingent beneficiary, we
will pay the death benefit proceeds to the Owner or the Owner's estate. We will
pay the death benefit proceeds in a lump sum or under a payment option. See
"Payment Options."
DEATH BENEFIT o the death benefit (described below); PLUS
PROCEEDS EQUAL: o any additional insurance provided by rider; MINUS
o any past due Monthly Deductions; MINUS
o any outstanding Indebtedness on the date of death.
If all or part of the death benefit proceeds are paid in one sum, we will pay
interest on this sum as required by applicable state law from the date we
receive due proof of the Insured's death to the date we make payment.
An increase in the Specified Amount will increase the death benefit and a
decrease in the Specified Amount will decrease the death benefit.
We may further adjust the amount of the death benefit proceeds under certain
circumstances. See "Our Right to Contest the Policy," and "Misstatement of Age
or Sex."
DEATH BENEFIT OPTIONS
The Policy provides two death benefit options: Increasing Option (varying death
benefit), and Level Option (level death benefit). We calculate the amount
available under each death benefit option as of the
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<PAGE>
date of the Insured's death. After the first Policy Year, you may change death
benefit options once each 12-month period.
The death benefit under o the Specified Amount PLUS the Policy Value on
the INCREASING OPTION the Insured's date of death; OR
is the greater of: o the Policy Value on the Insured's date of death
multiplied by the applicable death benefit
ratio.
Under the Increasing Option, the death benefit always varies as the Policy Value
varies.
The death benefit under o the Specified Amount on the Insured's date of
the LEVEL OPTION is the death; OR
greater of: o the Policy Value on the Insured's date of death
multiplied by the applicable death benefit
ratio.
Under the Level Option, your death benefit does not change unless the death
benefit ratio multiplied by the Policy Value is greater than the Specified
Amount. Then the death benefit will vary as the Policy Value varies. The death
benefit will also vary if you change the Specified Amount or Death Benefit
Option.
The DEATH BENEFIT RATIO is a ratio set forth in the Federal tax code based on
the Insured's age at the beginning of each Policy Year. The following table
indicates the applicable death benefit ratio for different ages:
AGE DEATH BENEFIT RATIO
------------------------------------------------------------
40 and under 2.50
41 to 45 2.50 minus 0.07 for each age over age 40
46 to 50 2.15 minus 0.06 for each age over age 45
51 to 55 1.85 minus 0.07 for each age over age 50
56 to 60 1.50 minus 0.04 for each age over age 55
61 to 65 1.30 minus 0.02 for each age over age 60
66 to 70 1.20 minus 0.01 for each age over age 65
71 to 74 1.15 minus 0.02 for each age over age 70
75 to 90 1.05
91 to 94 1.05 minus 0.01 for each age over age 90
95 and above 1.00
If the Federal tax code requires us to determine the death benefit by reference
to these death benefit ratios, the Policy is described as "in the corridor." An
increase in the Policy Value will increase our risk, and we will increase the
cost of insurance we deduct from the Policy Value.
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<PAGE>
CHANGING DEATH BENEFIT OPTIONS
After the first Policy Year, you may change death benefit options once each
12-month period. Changing the death benefit option may have tax consequences.
You should consult a tax advisor before changing death benefit options. Please
note the following when changing death benefit options:
o You must make your request in writing.
o The effective date of the change will be the Monthly Date on or
following the date when we approve your request for a change.
o We will send you a Policy endorsement with the change to attach to your
Policy.
If you change FROM INCREASING OPTION TO LEVEL OPTION:
/check mark/ We may require that you provide satisfactory
evidence of insurability.
/check mark/ The Specified Amount will change. The new Level
Option Specified Amount will equal the Increasing
Option Specified Amount plus the Policy Value on
the effective date of the change.
If you change FROM LEVEL OPTION TO INCREASING OPTION:
>> We may require that you provide satisfactory evidence
of insurability.
>> The Specified Amount will change. The new Increasing
Option Specified Amount will equal the Level Option
Specified Amount less the Policy Value immediately before
the change, but the new Specified Amount may not be less
than the minimum Specified Amount shown on your Policy's
specifications page.
EFFECTS OF WITHDRAWALS ON THE DEATH BENEFIT
If the Level Option is in effect, a withdrawal will reduce the Specified Amount
by the amount of the withdrawal (not including the withdrawal fee), and will
reduce the Policy Value by the amount of the withdrawal (including the
withdrawal fee). The reduction in Specified Amount will be subject to the terms
of the Changing the Specified Amount section below.
If the Increasing Option is in effect, a withdrawal will not affect the
Specified Amount.
CHANGING THE SPECIFIED AMOUNT
You select the Specified Amount when you apply for the Policy. After the first
Policy Year, you may change the Specified Amount once each 12-month period
subject to the conditions described below. We will not permit any change that
would result in your Policy being disqualified as a life insurance contract
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<PAGE>
under Section 7702 of the Internal Revenue Code. However, changing the Specified
Amount may have tax consequences and you should consult a tax advisor before
doing so.
INCREASING THE SPECIFIED AMOUNT
o You may increase the Specified Amount by submitting a
written request and providing evidence of
insurability satisfactory to us. The increase will be
effective on the next Monthly Date after we approve
the increase request.
o The minimum increase is $10,000.
o Increasing the Specified Amount will increase your
Minimum Monthly Premium and cause the No-Lapse Period
to begin again.
o Increasing the Specified Amount will result in an
additional surrender charge that lasts for 19 years.
o A different cost of insurance charge may apply to the
increase in Specified Amount, based on the Insured's
circumstances at the time of the increase.
DECREASING THE SPECIFIED AMOUNT
o You must submit a written request to decrease the
Specified Amount, but you may not decrease the
Specified Amount below the minimum amount shown on
your Policy specifications page.
o Any decrease will be effective on the next Monthly
Date after we process your written request.
o For purposes of determining the cost of insurance
charge, any decrease will first be used to reduce the
most recent increase, then the next most recent
increases in succession, and then the initial
Specified Amount.
o A decrease in Specified Amount may require that a
portion of Policy Value be distributed as a
withdrawal in order to maintain Federal tax
compliance.
o Decreasing the Specified Amount will not affect the
Minimum Monthly Premium or the surrender charges.
PAYMENT OPTIONS
There are several ways of receiving proceeds under the death benefit and
surrender provisions of the Policy, other than in a lump sum. None of these
options vary with the investment performance of a Separate Account. More
detailed information concerning these settlement options is available on request
to our Home Office.
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<PAGE>
SURRENDERS AND PARTIAL WITHDRAWALS
================================================================================
o You may make a written request to surrender your Policy for its Cash
Surrender Value as calculated at the end of the Valuation Date when we
receive your request. A surrender may have tax consequences. See "Tax
Treatment of Policy Benefits."
o The Insured must be alive and the Policy must be in force when you
make your written request. A surrender is effective as of the date
when we receive your written request. We may require that you return
the Policy.
o If you surrender your Policy during the first 19 Policy Years (or
during the first 19 years after an increase in the Specified Amount),
you will incur a surrender charge that varies based on the Insured's
age, sex, premium class and Specified Amount. See "Charges and
Deductions -- Surrender and Withdrawal Charges."
o Once you surrender your Policy, all coverage and other benefits under
it cease and cannot be reinstated.
o We will pay you the Cash Surrender Value in a lump sum within seven
days unless you request other arrangements.
WITHDRAWALS
After the 1st Policy Year, you may request to withdraw a portion of your Policy
Value subject to certain conditions.
-> You may make only one withdrawal per Policy Year.
-> You must: (1) make your request in writing, and (2) request at least
$500.
-> If you request a withdrawal that would leave a Cash Surrender Value of
less than $500, then we will treat it as a request to surrender your
Policy.
-> For each withdrawal, we deduct (from the remaining Policy Value) a fee
equal to the lesser of $25 or 2% of the amount withdrawn. See "Charges
and Deductions -- Surrender and Withdrawal Charges."
-> You can specify the Subaccount(s) and Fixed Account from which to make
the withdrawal; otherwise we will deduct the amount (including any
fee) from the Subaccounts and the Fixed Account on a pro-rata basis
(that is, according to the percentage of Policy Value contained in
each Subaccount and the Fixed Account).
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<PAGE>
-> We will process the withdrawal at the unit values next determined
after we receive your request.
-> We generally will pay a withdrawal request within seven days after the
Valuation Date when we receive the request.
-> Withdrawals may have tax consequences. See "Tax Treatment of Policy
Benefits."
TRANSFERS
================================================================================
You may make transfers from the Subaccounts or from the Fixed Account. We
determine the amount you have available for transfers at the end of the
Valuation Period when we receive your transfer request. The following features
apply to transfers under the Policy:
o You may make an unlimited number of transfers in a Policy Year.
o You may request transfers in writing (in a form we accept), or by
telephone.
o You must transfer at least $100, or, if less, the total value in the
Subaccount or Fixed Account.
o We deduct a $25 charge from the amount transferred for the 13th and
each additional transfer in a Policy Year. Transfers we effect from
the Premium Suspense Account, and transfers resulting from loans,
dollar cost averaging, asset rebalancing, and the exchange privilege
are NOT treated as transfers for purposes of the transfer charge.
o We consider each written or telephone request to be a single transfer,
regardless of the number of Subaccounts (or Fixed Account) involved.
o We process transfers based on unit values determined at the end of the
Valuation Date when we receive your transfer request.
Your Policy, as applied for and issued, will automatically receive telephone
transfer privileges unless you provide other instructions. The telephone
transfer privileges allow you to give authority to the registered representative
or agent of record for your Policy to make telephone transfers and to change the
allocation of future payments among the Subaccounts and the Fixed Account on
your behalf according to your instructions. To make a telephone transfer, you
may call 1-800-625-4213.
Please note the following regarding telephone transfers:
-> We are not liable for any loss, damage, cost or expense from complying
with telephone instructions we reasonably believe to be authentic. You
bear the risk of any such loss.
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<PAGE>
-> We will employ reasonable procedures to confirm that telephone
instructions are genuine.
-> Such procedures may include requiring forms of personal identification
prior to acting upon telephone instructions, providing written
confirmation of transactions to you, and/or tape recording telephone
instructions received from you.
-> If we do not employ reasonable confirmation procedures, we may be
liable for losses due to unauthorized or fraudulent instructions.
The corresponding portfolio of any Subaccount determines its net asset value per
share once daily, as of the close of the regular business session of the New
York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern time), which coincides
with the end of each Valuation Period. Therefore, we will process any transfer
request we receive after the close of the regular business session of the NYSE,
using the net asset value for each share of the applicable portfolio determined
as of the close of the next regular business session of the NYSE.
EXCHANGE PRIVILEGE
At any one time, you may exercise the Exchange Privilege under your Policy which
results in the transfer of the entire amount in the Separate Account to the
Fixed Account, and the allocation of all future net premiums to the Fixed
Account. This serves as an exchange of the Policy for the equivalent of a
flexible premium fixed benefit life insurance policy. We will not assess any
transfer or other charges in connection with the Exchange Privilege.
DOLLAR COST AVERAGING
You may elect to participate in a dollar cost averaging program. Dollar cost
averaging is an investment strategy designed to reduce the investment risks
associated with market fluctuations. The strategy spreads the allocation of your
premium into the Subaccounts or Fixed Account over a period of time. This allows
you to potentially reduce the risk of investing most of your premium into the
Subaccounts at a time when prices are high. We do not assure the success of this
strategy and the success depends on market trends. You should carefully consider
your financial ability to continue the program over a long enough period of time
to purchase units when their value is low as well as when it is high.
To participate in dollar cost averaging, you must place at least $5,000 in a
"source account" (either the Fixed Account, AIM V.I. Government Securities Fund
Subaccount, Oppenheimer Bond Fund/VA Subaccount, or the Fidelity VIP Money
Market Portfolio Subaccount). There can be only one source account. Each month,
we will automatically transfer equal amounts (minimum $100) from the source
account to your designated "target accounts." You may have multiple target
accounts.
There is no charge for dollar cost averaging. A transfer under this program is
NOT considered a transfer for purposes of assessing the transfer fee.
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<PAGE>
DOLLAR COST AVERAGIN -> we receive your written request to cancel your
WILL END IF: participation;
-> the value in the source account is exhausted;
-> you elect to participate in the asset rebalancing
program.
We may modify, suspend, or discontinue the dollar cost averaging program at any
time.
ASSET REBALANCING PROGRAM
We also offer an asset rebalancing program under which we will automatically
transfer amounts semi-annually to maintain a particular percentage allocation
among the Subaccounts. Policy Value allocated to each Subaccount will grow or
decline in value at different rates. The asset rebalancing program automatically
reallocates the Policy Value in the Subaccounts at the end of each semi-annual
period to match your Policy's currently effective premium allocation schedule.
The asset rebalancing program will transfer Policy Value from those Subaccounts
that have increased in value to those Subaccounts that have declined in value
(or not increased as much). Over time, this method of investing may help you buy
low and sell high. The asset rebalancing program does not guarantee gains, nor
does it assure that any Subaccount will not have losses. Policy Value in the
Fixed Account is not available for this program.
TO PARTICIPATE IN THE -> you must complete an asset rebalancing request
ASSET REBALANCING form and submit it to us before the Maturity
PROGRAM: Date
-> you must have a minimum Policy Value of $5,000.
If you elect asset rebalancing, it will occur on each semi-annual anniversary of
the Policy Date. You may modify your allocations up to 4 times in a Policy Year.
Once we receive the asset rebalancing request form, we will effect the initial
rebalancing semi-annually, in accordance with the Policy's current premium
allocation schedule. We will credit the amounts transferred at the unit value
next determined on the dates the transfers are made. If a day on which
rebalancing would ordinarily occur falls on a day on which the NYSE is closed,
rebalancing will occur on the next day the NYSE is open. There is no charge for
the asset rebalancing program. Any reallocation which occurs under the asset
rebalancing program will NOT be counted towards the 12 free transfers allowed
during each Policy Year. You can begin or end this program only once each Policy
Year.
ASSET REBALANCING -> you elect to participate in the dollar cost
WILL END IF: averaging program;
-> we receive your request to discontinue
participation; OR
-> you make a transfer to or from any Subaccount
other than under a scheduled rebalancing (not
including transfers in connection with loans).
We may modify, suspend, or discontinue the asset rebalancing program at any
time.
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<PAGE>
LOANS
================================================================================
While the Policy is in force, you may borrow money from us using the Policy as
the only collateral for the loan. A loan that is taken from, or secured by, a
Policy may have tax consequences.
LOAN CONDITIONS:
o The MINIMUM LOAN you may take is $250.
o The MAXIMUM LOAN you may take is 90% (100% in certain states) of the
Cash Surrender Value, minus 6 months of Monthly Deductions.
o To secure the loan, we transfer an amount equal to the loan (plus loan
interest in advance) from the Separate Account and Fixed Account to
the loan reserve, which is a part of the Fixed Account. Unless you
specify otherwise, we will transfer the loan from the Subaccounts and
the Fixed Account on a pro-rata basis.
o Amounts in the loan reserve earn interest at an annual rate guaranteed
not to be lower than 3.0% (4.0% for Policies issued in Florida). We
may credit the loan reserve with an interest rate different than the
rate credited to net premiums allocated to the Fixed Account.
o We normally pay the amount of the loan within seven days after we
receive a proper loan request. We may postpone payment of loans under
certain conditions. See "Payments We Make."
o We charge you a maximum interest rate of 5.66% per year on your loan.
Interest is due and payable at the beginning of each Policy Year.
Unpaid interest becomes part of the outstanding loan and accrues
interest if it is not paid before the beginning of the next Policy
Year.
o After the 10th Policy Year, we consider certain portions of the loan
amount to be preferred loans. The sum of preferred loans cannot exceed
25% of the Policy Value. We charge a maximum annual interest rate of
3.85% in advance on preferred loan amounts.
o We cannot change the interest rate on a loan once you take the loan.
o You may repay all or part of your Indebtedness at any time. Loan
repayments must be at least $25, and must be clearly marked as "loan
repayments" or they will be credited as premiums if they meet minimum
premium requirements.
o Upon each loan repayment, we will transfer an amount equal to the loan
repayment from the loan reserve to the Fixed and/or Separate Account
according to your current premium allocation schedule.
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<PAGE>
o We deduct any Indebtedness from the Policy Value upon surrender, and
from the death benefit proceeds payable on the Insured's death.
o If your Indebtedness equals or exceeds the Policy Value less any
applicable surrender charge (thereby reducing the Cash Surrender Value
to zero), then your Policy will enter a grace period. See "Policy
Lapse and Reinstatement."
EFFECT OF POLICY LOANS
A loan affects the Policy, because the death benefit proceeds and Cash Surrender
Value include reductions for the amount of any Indebtedness. Repaying a loan
causes the death benefit and Cash Surrender Value to increase by the amount of
the repayment. As long as a loan is outstanding, we hold an amount equal to the
loan in the loan reserve. This amount is not affected by the Subaccounts'
investment performance and may not be credited with the interest rates accruing
on the Fixed Account. Amounts transferred from the Separate Account to the loan
reserve will affect the Policy Value, even if the loan is repaid, because we
credit such amounts with an interest rate we declare rather than a rate of
return reflecting the investment results of the Separate Account.
There are risks involved in taking a loan, including the potential for a Policy
to lapse if projected earnings, taking into account outstanding loans, are not
achieved. If the Policy is a "modified endowment contract" (see "Federal Tax
Considerations"), then a loan will be treated as a withdrawal for Federal income
tax purposes. A loan may also have possible adverse tax consequences that could
occur if a Policy lapses with loans outstanding.
We will notify you (and any assignee of record) if the sum of your Indebtedness
is more than the Policy Value less any applicable surrender charge. If you do
not submit a sufficient payment within 61 days from the date of the notice, your
Policy may lapse. See "Policy Lapse and Reinstatement."
POLICY LAPSE AND REINSTATEMENT
================================================================================
LAPSE
Under certain conditions, your Policy may enter a 61-day grace period, and
possibly lapse (terminate without value):
o If your Policy is in the No-Lapse Period you have selected, then the
Policy will enter a grace period only if on a Monthly Date the Cash
Surrender Value is not enough to pay the next Monthly Deduction due, AND
the sum of premiums paid minus withdrawals and Indebtedness is less than
the Cumulative Minimum Monthly Premium.
o If your Policy is not in the No-Lapse Period you have selected, then
your Policy will enter a grace period if the Cash Surrender Value on any
Monthly Date is not enough to pay the next Monthly Deduction due.
36
<PAGE>
If you have taken a loan, then your Policy also will enter a grace period (and
possibly lapse) whenever your Indebtedness reduces the Cash Surrender Value to
zero.
If your Policy enters into a grace period, we will mail a notice to your last
known address and to any assignee of record. The 61-day grace period begins on
the date of the notice. The notice will specify the minimum payment required and
the final date by which we must receive the payment to keep the Policy from
lapsing. If we do not receive the specified minimum payment by the end of the
grace period, all coverage under the Policy will terminate and you will receive
no benefits.
REINSTATEMENT
Unless you have surrendered your Policy for its Cash Surrender Value, you may
reinstate a lapsed Policy at any time within 5 years after the end of the grace
period (and prior to the Maturity Date) by submitting all of the following items
to us at our Home Office:
1. a Written Notice requesting reinstatement;
2. the Insured's written consent to reinstatement;
3. evidence of insurability we deem satisfactory;
4. payment or reinstatement of any Indebtedness; and
5. payment of enough premium to keep the Policy in force for at
least 3 months.
The effective date of reinstatement will be the first Monthly Date on or next
following the date we approve your application for reinstatement. We reserve the
right to decline a reinstatement request.
FEDERAL TAX CONSIDERATIONS
================================================================================
The following summarizes some of the basic Federal income tax considerations
associated with a Policy and does not purport to be complete or to cover all
situations. THIS DISCUSSION IS NOT INTENDED AS TAX ADVICE. Please consult
counsel or other qualified tax advisors for more complete information. We base
this discussion on our understanding of the present Federal income tax laws as
they are currently interpreted by the Internal Revenue Service (the "IRS").
Federal income tax laws and the current interpretations by the IRS may change.
TAX STATUS OF THE POLICY. A Policy must satisfy certain requirements set forth
in the Internal Revenue Code ("Code") in order to qualify as a life insurance
contract for Federal income tax purposes and to receive the tax treatment
normally accorded life insurance contracts. The manner in which these
requirements are to be applied to certain innovative features of the Policy are
not directly addressed by the Code, and/or there is limited guidance as to how
these requirements are to be applied. Nevertheless, we believe that a Policy
should generally satisfy the applicable Code requirements. Because of the
absence of pertinent interpretations of the Code requirements, there is,
however, some uncertainty about the application of such requirements to the
Policy. There is more uncertainty with respect to Policies issued on a
substandard premium class basis and Policies with a Level One-Year Term
Insurance Rider attached.
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<PAGE>
If it is subsequently determined that a Policy does not satisfy the applicable
requirements, we may take appropriate steps to bring the Policy into compliance
with such requirements and we reserve the right to restrict Policy transactions
in order to do so.
In certain circumstances, Owners of variable life insurance contracts have been
considered for Federal income tax purposes to be the Owners of the assets of the
Separate Account supporting their contracts due to their ability to exercise
investment control over those assets. Where this is the case, the contract
Owners have been currently taxed on income and gains attributable to the
Separate Account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility to allocate premiums and
Policy Values, have not been explicitly addressed in published rulings. While we
believe that the Policy does not give you investment control over Separate
Account assets, we reserve the right to modify the Policy as necessary to
prevent you from being treated as the Owner of the Separate Account assets
supporting the Policy.
In addition, the Code requires that the investments of the Separate Account be
"adequately diversified" in order to treat the Policy as a life insurance
contract for Federal income tax purposes. We intend that the Separate Account,
through the Portfolios, will satisfy these diversification requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. We believe that the death benefit under a Policy should be
excludible from the beneficiary's gross income. Federal, state and local
transfer, and other tax consequences of Ownership or receipt of Policy proceeds
depend on your circumstances and the beneficiary's circumstances. You should
consult a tax advisor on these consequences.
Generally, you will not be deemed to be in constructive receipt of the Policy
Value until there is a distribution. In addition, if you elect the Terminal
Illness Accelerated Death Benefit, the tax consequences associated with
continuing the Policy after a distribution is made are unclear. Please consult a
tax advisor on these consequences. When distributions from a Policy occur, or
when loans are taken out from or secured by a Policy (E.G., by assignment), then
the tax consequences depend on whether the Policy is classified as a "Modified
Endowment Contract." Moreover, if a loan from a Policy that is not a MEC is
outstanding when the Policy is canceled or lapses, the amount of the outstanding
Indebtedness will be added to the amount distributed and will be taxed
accordingly.
MODIFIED ENDOWMENT CONTRACTS. Under the Code, certain life insurance contracts
are classified as "Modified Endowment Contracts" ("MECs") and receive less
favorable tax treatment than other life insurance contracts. The rules are too
complex to be summarized here, but generally depend on the amount of premiums
paid during the first seven Policy years. Certain changes in a Policy after
it is issued could also cause it to be classified as a MEC. Due to the Policy's
flexibility, each Policy's circumstances will determine whether the Policy is
classified as a MEC. If you do not want your Policy to be classified as a MEC,
you should consult a tax advisor to determine the circumstances, if any, under
which your Policy would or would not be classified as a MEC.
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<PAGE>
DISTRIBUTIONS FROM MODIFIED ENDOWMENT CONTRACTS. Policies classified as MECs are
subject to the following tax rules:
o All distributions other than death benefits from a MEC, including
distributions upon surrender and withdrawals, will be treated as
ordinary income subject to tax up to an amount equal to the excess (if
any) of the unloaned Policy Value immediately before the distribution
plus prior distributions over the Owner's total investment in the
Policy at that time. They will be treated as tax-free recovery of the
Owner's investment in the Policy only after all such excess has been
distributed. "Total investment in the Policy" means the aggregate
amount of any premiums or other considerations paid for a Policy, plus
any previously taxed distributions.
o Loans taken from such a Policy (or secured by such a Policy, E.G., by
assignment) are treated as distributions and taxed accordingly.
o A 10% additional income tax penalty is imposed on the amount included
in income except where the distribution or loan is made when you have
attained age 59 1/2 or are disabled, or where the distribution is part
of a series of substantially equal periodic payments for your life (or
life expectancy) or the joint lives (or joint life expectancies) of
you the beneficiary.
o If a Policy becomes a MEC, distributions that occur during the
Policy year will be taxed as distributions from a MEC. In addition,
distributions from a contract within two years before it becomes a MEC
will be taxed in this manner. This means that a distribution from a
Policy that is not a MEC at the time when the distribution is made
could later become taxable as a distribution from a MEC.
DISTRIBUTIONS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS.
Distributions from a Policy that is not a MEC are generally treated first as a
recovery of your investment in the Policy, and as taxable income after the
recovery of all investment in the Policy. However, certain distributions which
must be made in order to enable the Policy to continue to qualify as a life
insurance contract for Federal income tax purposes if Policy benefits are
reduced during the first 15 Policy Years may be treated in whole or in part as
ordinary income subject to tax.
Loans from or secured by a Policy that is not a MEC are generally not treated as
distributions. However, there is some uncertainty as to the tax treatment of a
Preferred Loan under a Policy that is not a MEC and you should consult a tax
advisor on this point.
Finally, neither distributions from nor loans from (or secured by) a Policy that
is not a MEC are subject to the 10% additional tax.
DEDUCTIBILITY OF POLICY LOAN INTEREST. In general, interest you pay on a loan
from a Policy will not be deductible. Before taking out a Policy loan, you
should consult a tax advisor as to the tax consequences.
MULTIPLE POLICIES. All MECs that we issue (or that our affiliates issue) to the
same Owner during any calendar year are treated as one MEC for purposes of
determining the amount includible in the Owner's income when a taxable
distribution occurs.
39
<PAGE>
BUSINESS USES OF THE POLICY. The Policy may be used in various arrangements,
including nonqualified deferred compensation or salary continuance plans, split
dollar insurance plans, executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans and business uses of the Policy may
vary depending on the particular facts and circumstances of each individual
arrangement and business uses of the Policy. Therefore, if you are contemplating
using the Policy in any arrangement the value of which depends in part on its
tax consequences, you should be sure to consult a tax advisor as to tax
attributes of the arrangement.
POSSIBLE TAX LAW CHANGES. While the likelihood of legislative or other changes
is uncertain, there is always a possibility that the tax treatment of the Policy
could change by legislation or otherwise. It is even possible that any
legislative change could be retroactive (effective prior to the date of the
change). Consult a tax advisor with respect to legislative developments and
their effect on the Policy.
POSSIBLE CHARGES FOR OUR TAXES. At the present time, we make no charge for any
Federal, state or local taxes (other than the charge for state premium taxes)
that may be attributable to the subaccounts or to the Policy. We reserve the
right to impose charges for any future taxes or economic burden we may incur.
OTHER POLICY INFORMATION
================================================================================
OUR RIGHT TO CONTEST THE POLICY
In issuing this Policy, we rely on all statements made by or for you and/or the
Insured in the application or in a supplemental application. Therefore, if you
make any material misrepresentation of a fact in the application (or any
supplemental application), then we may contest the Policy's validity or may
resist a claim under the Policy.
In the absence of fraud or non-payment of a Monthly Deduction, we cannot bring
any legal action to contest the validity of the Policy after the Policy has been
in force during the Insured's lifetime for two years after:
(a) the Policy Date;
(b) the effective date of any increase in the Specified Amount (and
then only for the increased amount); or
(c) the effective date of any reinstatement.
SUICIDE EXCLUSION
If the Insured commits suicide, while sane or insane, within two years of the
Policy Date, the Policy will terminate and our liability is limited to an amount
equal to the premiums paid, less any Indebtedness, and less any withdrawals
previously paid.
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<PAGE>
If the Insured commits suicide, while sane or insane, within two years from the
effective date of any increase in the Specified Amount, the Policy will
terminate and our liability for the amount of increase will be limited to the
cost of insurance for the increase.
Certain states may require suicide exclusion provisions that differ from those
stated here.
MISSTATEMENT OF AGE OR SEX
If the Insured's age or sex was stated incorrectly in the application, we will
adjust the death benefit proceeds to the amount that would have been payable at
the correct age and sex based on the most recent deduction for cost of
insurance.
MODIFYING THE POLICY
Any modification or waiver of our rights or requirements under this Policy must
be in writing and signed by our president, a vice president, our secretary, or
one of our officers. No agent may bind us by making any promise not contained in
this Policy.
Upon notice to you, we may modify the Policy:
-> to conform the Policy, our operations, or the Separate Account's
operations to the requirements of any law (or regulation issued by a
government agency) to which the Policy, our Company or the Separate
Account is subject; or
-> to assure continued qualification of the Policy as a life insurance
contract under the Federal tax laws; or
-> to reflect a change in the Separate Account's operation.
If we modify the Policy, we will make appropriate endorsements to the Policy. If
any provision of the Policy conflicts with the laws of a jurisdiction that
govern the Policy, we reserve the right to amend the provision to conform with
such laws.
PAYMENTS WE MAKE
We usually pay the amounts of any surrender, withdrawal, death benefit, or
settlement options within seven business days after we receive all applicable
Written Notices and/or due proofs of death. However, we can postpone such
payments if:
o the NYSE is closed, other than customary weekend and holiday closing,
or trading on the NYSE is restricted as determined by the Securities
and Exchange Commission (SEC); OR
o the SEC permits, by an order or less formal interpretation (E.G.,
no-action letter), the postponement of any payment for the protection
of Owners; OR
41
<PAGE>
o the SEC determines that an emergency exists that would make the
disposal of securities held in the Separate Account or the
determination of their value is not reasonably practicable.
We have the right to defer payment of amounts from the Fixed Account for up to 6
months.
If you have submitted a recent check or draft, we have the right to defer
payment of surrenders, withdrawals, death benefit proceeds, or payments under a
payment option until such check or draft has been honored.
REPORTS TO OWNERS
At least once each year, or more often as required by law, we will mail to
Owners at their last known address a report showing the following information as
of the end of the report period:
/check mark/ the current Policy Value
/check mark/ the current Cash Surrender Value
/check mark/ the current death benefit
/check mark/ any activity since the last report (E.G., premiums paid,
withdrawals, deductions, loans or loan repayments, and
other transactions)
/check mark/ any other information required by law
RECORDS
We will maintain all records relating to the Separate Account and the Fixed
Account at our Home Office.
POLICY TERMINATION
Your Policy will terminate on the earliest of:
o the Maturity Date;
o the end of the grace period without a sufficient payment;
o the date the Insured dies; or
o the date you surrender the Policy.
SUPPLEMENTAL BENEFITS AND RIDERS
The following supplemental benefits and riders are available under the Policy.
We deduct any monthly charges for these benefits and riders from Policy Value as
part of the Monthly Deduction. The benefits and riders available (which are
summarized below) provide fixed benefits that do not vary with the investment
experience of the Separate Account. For each Policy, we automatically provide
the
42
<PAGE>
supplemental benefits listed below. You may elect to add one or more of the
riders listed below at any time, subject to certain limitations. We may require
underwriting for certain riders. Your agent can help you determine whether
certain of the riders are suitable for you. Please contact us for further
details on these supplemental benefits and riders.
SUPPLEMENTAL BENEFITS
EXTENDED MATURITY DATE: Extends the Maturity Date past the original
Maturity Date. You must make a written request for this benefit (and we
must receive it) within 30 days prior to the original Maturity Date.
The tax consequences of keeping the Policy in force beyond the
Insured's 100th birthday are uncertain and you should consult a tax
advisor before doing so.
TERMINAL ILLNESS ACCELERATED BENEFIT: You may elect to receive a
portion of the death benefit proceeds in a "single sum benefit" if the
Insured has incurred a terminal condition while the Policy is in force.
Payment of any amounts under this benefit will result in reductions in
your Policy Value, Specified Amount, and certain Policy benefits. The
tax consequences of electing to receive a terminal illness accelerated
benefit are uncertain and you should consult a tax advisor before
making this election.
RIDERS
o WAIVER OF PREMIUM BENEFIT: Waives the initial planned premium if
the Insured becomes totally and permanently disabled for at least
six consecutive months prior to the Policy anniversary following
the Insured's 60th birthday.
o WAIVER OF MONTHLY DEDUCTION: Waives the Monthly Deduction if the
Insured becomes totally and permanently disabled for at least six
consecutive months prior to the Policy anniversary following the
Insured's 60th birthday.
o LEVEL ONE-YEAR TERM INSURANCE: Provides one-year renewable term
insurance on the Insured.
o ADDITIONAL INSURED'S LEVEL ONE-YEAR TERM INSURANCE: Provides
one-year renewable term insurance on an additional Insured.
o ACCIDENTAL DEATH BENEFIT: Provides for payment of an additional
benefit if the Insured dies due to and within 90 days of an
accidental injury that occurred on or before the Policy anniversary
when the Insured is age 65.
o GUARANTEED INSURABILITY BENEFIT: Provides options to purchase
additional insurance without evidence of insurability.
o INCOME REPLACEMENT BENEFIT: Provides a monthly benefit to the
beneficiary for a period of 20 years upon the Insured's death. In
addition, a lump sum benefit of 100 times the monthly benefit is
paid 20 years after the Insured's death.
o MONTHLY BENEFIT: Provides a monthly benefit to the beneficiary upon
the Insured's death.
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<PAGE>
o DISABILITY INCOME/WAIVER OF PREMIUM BENEFIT: Provides a disability
income benefit and waiver of premium benefit in the event of the
Insured's total and permanent disability for at least six
consecutive months prior to the Policy anniversary following the
Insured's 60th birthday.
o CHILDREN'S BENEFIT: Provides level term insurance on each of the
Insured's dependent children, until their 25th birthday.
PERFORMANCE DATA
================================================================================
In order to demonstrate how the actual investment experience of the portfolios
could have affected the death benefit, Policy Value and Cash Surrender Value of
the Policy, we may provide hypothetical illustrations using the actual
investment experience of each portfolio since its inception. THESE HYPOTHETICAL
ILLUSTRATIONS ARE DESIGNED TO SHOW THE PERFORMANCE THAT COULD HAVE RESULTED IF
THE POLICY HAD BEEN IN EXISTENCE DURING THE PERIOD ILLUSTRATED AND ARE NOT
INDICATIVE OF FUTURE PERFORMANCE.
The values we illustrate for death benefit, Policy Value and Cash Surrender
Value take into account all applicable charges and deductions from the Policy
(current and guaranteed), the Separate Account and the portfolios. We have not
deducted premium taxes or charges for any riders. These charges would lower the
performance figures significantly if reflected.
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<PAGE>
The following example shows how the hypothetical net return of the Janus Aspen
Growth Portfolio would have affected benefits for a Policy dated January 1,
1994. This example assumes that the Net Premiums and related Policy Values were
in the Sub-account for the entire period and that the values were determined on
the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
JANUS ASPEN GROWTH PORTFOLIO
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
----------------------- -----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 $655 $653 $0 $0
1996* $1,706 $1,702 $0 $0
1997* $2,747 $2,739 $227 $219
1998* $4,095 $4,085 $1,715 $1,705
1999* $6,338 $6,322 $4,098 $4,082
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
previous Policy Years.
The following example shows how the hypothetical net return of the Janus Aspen
Worldwide Growth Portfolio would have affected benefits for a Policy dated
January 1, 1994. This example assumes that the Net Premiums and related Policy
Values were in the Sub-account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 $645 $643 $0 $0
1996* $1,653 $1,648 $0 $0
1997* $2,943 $2,935 $423 $415
1998* $4,312 $4,302 $1,932 $1,922
1999* $6,289 $6,274 $4,049 $4,034
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
previous Policy Years.
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<PAGE>
The following example shows how the hypothetical net return of the Janus Aspen
Balanced Portfolio would have affected benefits for a Policy dated January 1,
1994. This example assumes that the Net Premiums and related Policy Values were
in the Sub-account for the entire period and that the values were determined on
the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
JANUS ASPEN BALANCED PORTFOLIO
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ---------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 $640 $638 $0 $0
1996* $1,608 $1,603 $0 $0
1997* $2,577 $2,569 $57 $49
1998* $3,865 $3,856 $1,485 $1,476
1999* $5,963 $5,948 $3,723 $3,708
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
previous Policy Years.
shows how the hypothetical net return of the Janus Aspen
Capital Appreciation Portfolio would have affected benefits for a Policy dated
January 1, 1998. This example assumes that the Net Premiums and related Policy
Values were in the Sub-account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
JANUS ASPEN CAPITAL APPRECIATION PORTFOLIO
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1999 $1,113 $1,110 $0 $0
</TABLE>
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<PAGE>
The following example shows how the hypothetical net return of the Janus Aspen
Aggressive Growth Portfolio would have affected benefits for a Policy dated
January 1, 1994. This example assumes that the Net Premiums and related Policy
Values were in the Sub-account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 $766 $764 $0 $0
1996* $1,808 $1,803 $0 $0
1997* $2,594 $2,587 $74 $67
1998* $3,568 $3,560 $1,188 $1,180
1999* $5,565 $5,551 $3,325 $3,311
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
previous Policy Years.
The following example shows how the hypothetical net return of the AIM V.I.
Value Fund would have affected benefits for a Policy dated January 1, 1994. This
example assumes that the Net Premiums and related Policy Values were in the
Sub-account for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
AIM V.I. VALUE FUND
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 $666 $664 $0 $0
1996* $1,810 $1,805 $0 $0
1997* $2,780 $2,772 $260 $252
1998* $4,169 $4,159 $1,789 $1,779
1999* $6,277 $6,262 $4,037 $4,022
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
previous Policy Years.
47
<PAGE>
The following example shows how the hypothetical net return of the AIM V.I.
Capital Appreciation Fund would have affected benefits for a Policy dated
January 1, 1994. This example assumes that the Net Premiums and related Policy
Values were in the Sub-account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
AIM V.I. CAPITAL APPRECIATION FUND
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 $653 $651 $0 $0
1996* $1,785 $1,780 $0 $0
1997* $2,817 $2,809 $297 $289
1998* $3,849 $3,840 $1,469 $1,460
1999* $5,251 $5,238 $3,011 $2,998
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
previous Policy Years.
The following example shows how the hypothetical net return of the AIM V.I.
Growth Fund would have affected benefits for a Policy dated January 1, 1994.
This example assumes that the Net Premiums and related Policy Values were in the
Sub-account for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
AIM V.I. GROWTH FUND
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 $613 $611 $0 $0
1996* $1,717 $1,712 $0 $0
1997* $2,751 $2,743 $231 $223
1998* $4,245 $4,235 $1,865 $1,855
1999* $6,463 $6,447 $4,223 $4,207
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
previous Policy Years.
48
<PAGE>
shows how the hypothetical net return of the AIM V.I.
International Equity Fund would have affected benefits for a Policy dated
January 1, 1994. This example assumes that the Net Premiums and related Policy
Values were in the Sub-account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
AIM V.I. INTERNATIONAL EQUITY FUND
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- -----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 $620 $618 $0 $0
1996* $1,476 $1,471 $0 $0
1997* $2,511 $2,504 $0 $0
1998* $3,287 $3,279 $907 $899
1999* $4,430 $4,418 $2,190 $2,178
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
previous Policy Years.
The following example shows how the hypothetical net return of the AIM V.I.
Government Securities Fund would have affected benefits for a Policy dated
January 1, 1994. This example assumes that the Net Premiums and related Policy
Values were in the Sub-account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
AIM V.I. GOVERNMENT SECURITIES FUND
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 $603 $601 $0 $0
1996* $1,432 $1,427 $0 $0
1997* $2,065 $2,058 $0 $0
1998* $2,846 $2,839 $466 $459
1999* $3,643 $3,633 $1,403 $1,393
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
previous Policy Years.
49
<PAGE>
The following example shows how the hypothetical net return of the Oppenheimer
Main Street Growth & Income Fund/VA would have affected benefits for a Policy
dated January 1, 1996. This example assumes that the Net Premiums and related
Policy Values were in the Sub-account for the entire period and that the values
were determined on the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1996 $899 $897 $0 $0
1998* $2,062 $2,057 $0 $0
1999* $2,776 $2,768 $256 $248
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
previous Policy Years.
The following example shows how the hypothetical net return of the Oppenheimer
Multiple Strategies Fund/VA would have affected benefits for a Policy dated
January 1, 1989. This example assumes that the Net Premiums and related Policy
Values were in the Sub-account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
OPPENHEIMER MULTIPLE STRATEGIES FUND/VA
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1990 $761 $759 $0 $0
1991* $1,342 $1,337 $0 $0
1992* $2,296 $2,289 $0 $0
1993* $3,121 $3,114 $741 $734
1994* $4,256 $4,246 $2,016 $2,006
1995* $4,782 $4,625 $2,682 $2,525
1996* $6,567 $6,203 $4,607 $4,243
1997* $8,260 $7,662 $6,440 $5,842
1998* $10,323 $9,440 $8,643 $7,760
1999* $11,530 $10,404 $9,990 $8,864
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
previous Policy Years.
50
<PAGE>
The following example shows how the hypothetical net return of the Oppenheimer
Bond Fund/VA would have affected benefits for a Policy dated January 1, 1989.
This example assumes that the Net Premiums and related Policy Values were in the
Sub-account for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
OPPENHEIMER BOND FUND/VA
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1990 $741 $739 $0 $0
1991* $1,473 $1,469 $0 $0
1992* $2,454 $2,447 $0 $0
1993* $3,212 $3,204 $832 $824
1994* $4,246 $4,235 $2,006 $1,995
1995* $4,772 $4,616 $2,672 $2,516
1996* $6,313 $5,958 $4,353 $3,998
1997* $7,210 $6,670 $5,390 $4,850
1998* $8,464 $7,695 $6,784 $6,015
1999* $9,567 $8,557 $8,027 $7,017
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
previous Policy Years.
The following example shows how the hypothetical net return of the Oppenheimer
Strategic Bond Fund/VA would have affected benefits for a Policy dated January
1, 1994. This example assumes that the Net Premiums and related Policy Values
were in the Sub-account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
OPPENHEIMER STRATEGIC BOND FUND/VA
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 $602 $600 $0 $0
1996* $1,428 $1,424 $0 $0
1997* $2,278 $2,271 $0 $0
1998* $3,092 $3,085 $712 $705
1999* $3,721 $3,712 $1,481 $1,472
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
previous Policy Years.
51
<PAGE>
The following example shows how the hypothetical net return of the Oppenheimer
High Income Fund/VA would have affected benefits for a Policy dated January 1,
1989. This example assumes that the Net Premiums and related Policy Values were
in the Sub-account for the entire period and that the values were determined on
the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
OPPENHEIMER HIGH INCOME FUND/VA
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1990 $672 $670 $0 $0
1991* $1,351 $1,347 $0 $0
1992* $2,660 $2,652 $140 $132
1993* $3,822 $3,813 $1,442 $1,433
1994* $5,542 $5,528 $3,302 $3,288
1995* $5,959 $5,802 $3,859 $3,702
1996* $7,922 $7,562 $5,962 $5,602
1997* $9,796 $9,207 $7,976 $7,387
1998* $11,590 $10,754 $9,910 $9,074
1999* $12,096 $11,081 $10,556 $9,541
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
previous Policy Years.
shows how the hypothetical net return of the Fidelity VIP
II Index 500 Portfolio would have affected benefits for a Policy dated January
1, 1993. This example assumes that the Net Premiums and related Policy Values
were in the Sub-account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
FIDELITY VIP II INDEX 500 PORTFOLIO
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1994 $712 $710 $0 $0
1995* $1,338 $1,334 $0 $0
1996* $2,713 $2,705 $193 $185
1997* $4,051 $4,042 $1,671 $1,662
1998* $6,143 $6,127 $3,903 $3,887
1999* $8,722 $8,538 $6,622 $6,438
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
previous Policy Years.
52
<PAGE>
The following example shows how the hypothetical net return of the Fidelity VIP
Money Market Portfolio would have affected benefits for a Policy dated January
1, 1989. This example assumes that the Net Premiums and related Policy Values
were in the Sub-account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
FIDELITY VIP MONEY MARKET PORTFOLIO
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1990 $707 $705 $0 $0
1991* $1,438 $1,434 $0 $0
1992* $2,156 $2,149 $0 $0
1993* $2,820 $2,813 $440 $433
1994* $3,454 $3,445 $1,214 $1,205
1995* $4,263 $4,101 $2,163 $2,001
1996* $5,157 $4,823 $3,197 $2,863
1997* $6,040 $5,516 $4,220 $3,696
1998* $6,936 $6,205 $5,256 $4,525
1999* $7,838 $6,877 $6,298 $5,337
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
previous Policy Years.
The following example shows how the hypothetical net return of the Fidelity VIP
Growth Portfolio would have affected benefits for a Policy dated January 1,
1998. This example assumes that the Net Premiums and related Policy Values were
in the Sub-account for the entire period and that the values were determined on
the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
FIDELITY VIP GROWTH PORTFOLIO
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1999 $956 $954 $0 $0
</TABLE>
53
<PAGE>
The following example shows how the hypothetical net return of the Fidelity VIP
II Contrafund Portfolio would have affected benefits for a Policy dated January
1, 1998. This example assumes that the Net Premiums and related Policy Values
were in the Sub-account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
FIDELITY VIP II CONTRAFUND PORTFOLIO
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1999 $878 $876 $0 $0
</TABLE>
The following example shows how the hypothetical net return of the Fidelity VIP
III Growth & Income Portfolio would have affected benefits for a Policy dated
January 1, 1998. This example assumes that the Net Premiums and related Policy
Values were in the Sub-account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
<TABLE>
<CAPTION>
FIDELITY VIP III GROWTH & INCOME PORTFOLIO
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
POLICY VALUE CASH SURRENDER VALUE
--------------------- ----------------------
POLICY ANNIVERSARY ON JANUARY 1 OF CURRENT GUARANTEED CURRENT GUARANTEED
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1999 $873 $870 $0 $0
</TABLE>
54
<PAGE>
ADDITIONAL INFORMATION
================================================================================
SALE OF THE POLICIES
The Policy will be sold by individuals who are licensed as our life insurance
agents and who are also registered representatives of broker-dealers having
written sales agreements for the Policy with AFSG Securities Corporation
("AFSG"), the principal underwriter of the Policy. AFSG is located at 4425 North
River Blvd., NE, Cedar Rapids, IA 52402, is registered with the SEC under the
Securities Exchange Act of 1934 as a broker-dealer, and is a member of the
National Association of Securities Dealers, Inc. The maximum sales commission
payable to our agents or other registered representatives may vary with the
sales agreement, but it is not expected to be greater than: 90% of all premiums
paid during the first Policy Year, and 2.50% of all premiums paid during Policy
Years 2 through 10. We will pay an additional sales commission of up to 0.25% of
the unloaned Policy Value on the sixth Policy anniversary and each anniversary
thereafter where the Policy Value (minus amounts attributable to loans) equals
at least $5,000. In addition, certain production, persistency and managerial
bonuses may be paid.
LEGAL MATTERS
Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on
certain legal matters relating to the Policy under the Federal securities laws.
John D. Cleavenger, Esq., Vice President and General Counsel (Individual
Division) of the Company, has passed upon all matters of Iowa law pertaining to
the Policy.
LEGAL PROCEEDINGS
Like other life insurance companies, we are involved in lawsuits. In some class
action and other lawsuits involving other insurers, substantial damages have
been sought and/or material settlement payments have been made. We believe that
there are no pending or threatened lawsuits that will adversely impact us or the
Separate Account.
YEAR 2000 MATTERS
We have in place a Year 2000 Project Plan (the "Plan") to review and analyze
existing hardware and software systems, as well as voice and data communications
systems, to determine if they are Year 2000 compliant. As of the date of this
prospectus, all of our mission-critical systems are Year 2000 compliant and
ready. The Plan is continuing as scheduled, as we continue with the validation
of our mission-critical and non-mission-critical systems, including revalidation
testing in 1999. In addition, Life Investors has undertaken aggressive
initiatives to test all systems that interface with any third parties and other
business partners. All of these steps are aimed at allowing current operations
to remain unaffected by the Year 2000 date change.
55
<PAGE>
As of the date of this prospectus, we have identified and made available what we
believe are the appropriate resources of hardware, people, and dollars,
including the engagement of outside third parties, to ensure that the Plan will
be completed.
Our actions under the Plan are intended to significantly reduce Life Investors'
risk of a material business interruption based on the Year 2000 issues.
Resolving the Year 2000 computer problem is complex and multifaceted. We cannot
know conclusively whether a response plan is successful until the Year 2000
arrives (or an earlier date if the systems or equipment address Year 2000 data
prior to the Year 2000). In spite of its efforts or results, Life Investors'
ability to function unaffected to and through the Year 2000 may be adversely
affected by actions, or failure to act, of third parties beyond our knowledge or
control. See the portfolios' prospectuses for information on their preparation
for Year 2000.
This statement is a Year 2000 Readiness Disclosure pursuant to Section 3(9) of
the Year 2000 Information and Readiness Disclosure Act, 15 U.S.C. Section 1
(1998).
FINANCIAL STATEMENTS
This prospectus does not include financial statements of the Separate Account
because, as of the date of this prospectus, the Separate Account had not yet
commenced operations, had no assets, and had incurred no liabilities. The
Company's financial statements appear at the end of this prospectus. The
statutory-basis balance sheets of Life Investors Insurance Company of America as
of December 31, 1998 and 1997, and the related statutory-basis statements of
operations, changes in capital and surplus, and cash flows for each of the years
then ended, have been audited by Ernst & Young LLP, independent accountants,
whose reports thereon are set forth elsewhere herein. Such financial statements
and schedules are included in this prospectus in reliance upon such reports
given upon the authority of Ernst & Young LLP as experts in accounting and
auditing. You should distinguish the Company's financial statements from the
Separate Account's financial statements and you should consider our financial
statements only as bearing upon our ability to meet our obligations under the
Policies.
ADDITIONAL INFORMATION ABOUT THE COMPANY
Life Investors is a stock life insurance Company that is a wholly owned indirect
subsidiary of AEGON USA, Inc. AEGON USA, Inc. is a wholly owned indirect
subsidiary of AEGON NV, a Netherlands corporation that is a publicly traded
international insurance group. Life Investors' Home Office is located at 4333
Edgewood Road NE, Cedar Rapids, Iowa 52499.
Life Investors was incorporated in 1961 under Iowa law and is subject to
regulation by the Iowa Commissioner of Insurance. Life Investors is engaged in
the business of issuing life insurance policies and annuity contracts, and is
licensed to do business in the District of Columbia, Guam and all states except
New York. Life Investors submits annual statements on its operations and
finances to insurance officials in all states and jurisdictions in which it does
business. Life Investors has filed the Policy described in this prospectus with
insurance officials in those jurisdictions in which the Policy is sold.
Life Investors intends to reinsure a portion of the risks assumed under the
Policies.
LIFE INVESTORS' EXECUTIVE OFFICERS AND DIRECTORS
Life Investors is governed by a board of directors. The following tables set
forth the name, address and principal occupation during the past five years of
each of Life Investors' executive officers and directors. Each person is located
at Life Investors Insurance Company of America, 4333 Edgewood Road, NE, Cedar
Rapids, IA 52499, except Mr. Dykhouse who is located at 1020 West Fourth Street,
Little Rock, AR 72201.
56
<PAGE>
<TABLE>
<CAPTION>
BOARD OF DIRECTORS AND SENIOR OFFICERS
-------------------------------------------------------------------------------------------------------------------
NAME POSITION WITH LIFE INVESTORS PRINCIPAL OCCUPATION DURING PAST 5 YEARS
------------------------- ------------------------------ ----------------------------------------------------------
<S> <C> <C>
Rex B. Eno Director, Chairman of the Director, Chairman of the Board, and President
Board, and President
------------------------- ------------------------------ ----------------------------------------------------------
Patrick S. Baird Director, Senior Vice Executive Vice President (1995-present), Chief Operating
President, and Chief Officer (1996-present), Chief Financial Officer
Operating Officer (1992-1995), Vice President and Chief Tax Officer
(1984-1995) of AEGON USA.
------------------------- ------------------------------ ----------------------------------------------------------
Douglas C. Kolsrud Director, Senior Vice Director, Senior Vice President, Chief Investment
President, Chief Investment Officer and Corporate Actuary
Officer and Corporate Actuary
------------------------- ------------------------------ ----------------------------------------------------------
Craig D. Vermie Director, Vice President, Secretary (1997-present), General Counsel
Secretary and General Counsel (1996-present), Vice President (1995-president),
Assistant General Counsel, Associate General Counsel,
Corporate Counsel (respectively) (1986-1995)
------------------------- ------------------------------ ----------------------------------------------------------
Robert J. Kontz Vice President and Corporate Vice President and Corporate Controller
Controller
------------------------- ------------------------------ ----------------------------------------------------------
Brenda K. Clancy Vice President, Treasurer Vice President, Treasurer and Chief Financial Officer
and Chief Financial Officer
------------------------- ------------------------------ ----------------------------------------------------------
Jack R. Dykhouse Director, Executive Vice Executive Vice President (1990-present)
President
------------------------- ------------------------------ ----------------------------------------------------------
William L. Busler Director, Executive Vice President, Annuity Division, AEGON, USA, Inc.
President (1980-present)
------------------------- ------------------------------ ----------------------------------------------------------
</TABLE>
Life Investors holds the Separate Account's assets physically segregated and
apart from the general account. Life Investors maintains records of all
purchases and sale of portfolio shares by each of the Subaccounts. A blanket
bond in the amount of $10 million (subject to a $1 million deductible), covering
directors, officers and all employees of AEGON USA, Inc. and its affiliates has
been issued to Life Investors and its affiliates.
ILLUSTRATIONS
================================================================================
The following illustrations show how certain values under a sample Policy would
change with different rates of fictional investment performance over an extended
period of time. In particular, the illustrations show how the death benefit,
Policy Value, and Cash Surrender Value under a Policy covering a male or female
Insured of age 35 on the Policy Date in a tobacco or non-tobacco class, would
change over time if the planned premiums were paid and the return on the assets
in the Subaccounts were a uniform gross annual rate (before any expenses) of 0%,
6% or 12%. The tables also show how the Policy would operate
57
<PAGE>
if premiums accumulated at 5% interest. The tables illustrate Policy values that
would result based on assumptions that you pay the premiums indicated, you do
not increase your Specified Amount, and you do not make any withdrawals or
Policy loans. The values under the Policy will be different from those shown
even if the returns averaged 0%, 6% or 12%, but fluctuated over and under those
averages throughout the years shown.
THE HYPOTHETICAL INVESTMENT RETURNS ARE PROVIDED ONLY TO ILLUSTRATE THE
MECHANICS OF A HYPOTHETICAL POLICY AND DO NOT REPRESENT PAST OR FUTURE
INVESTMENT RATES OF RETURN. Actual rates of return for a particular Policy may
be more or less than the hypothetical investment rates of return. The actual
return on your Policy Value will depend on factors such as the amounts you
allocate to particular portfolios, the amounts deducted for the Policy's monthly
charges, the portfolios' expense ratios, and your Policy loan and withdrawal
history.
The illustrations assume that the assets in the portfolios are subject to an
annual expense ratio of 0.71% of the average daily net assets. This annual
expense ratio is based on the average of the expense ratios of each of the
portfolios for the last fiscal year and takes into account current expense
reimbursement arrangements. For information on portfolio expenses, see the
Annual Portfolio Operating Expenses table in the "Policy Summary -- Charges and
Deductions" section of this prospectus, and see the portfolios' prospectuses.
Separate illustrations on each of the following pages reflect our current
expense charge and cost of insurance charge and the higher guaranteed maximum
expense charge and cost of insurance charge that we have the contractual right
to charge. The illustrations assume no charges for Federal or state taxes or
charges for supplemental benefits.
After deducting portfolio expenses and mortality and expense risk charges, the
illustrated gross annual investment rates of return of 0%, 6% and 12% would
correspond to approximate net annual rates for the Separate Account of -1.45%,
4.51% and 10.46%, respectively.
The illustrations are based on our sex distinct rates for tobacco and
non-tobacco users. Upon request, we will furnish a comparable illustration based
upon the proposed Insured's individual circumstances. Such illustrations may
assume different hypothetical rates of return than those shown in the following
illustrations.
58
<PAGE>
<TABLE>
<CAPTION>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
MALE ISSUE AGE 35
Specified Amount $100,000 Tobacco Class
Annual Premium $1,080 Level Death Benefit
Using Current Cost Assumptions
DEATH BENEFIT
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS AND
POLICY ACCUMULATED NET ANNUAL INVESTMENT RETURN OF
Year at 5% 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.45% (Net) 4.51% (Net) 10.46% (Net)
<S> <C> <C> <C> <C>
1 $1,134 $100,000 $100,000 $100,000
2 $2,325 $100,000 $100,000 $100,000
3 $3,575 $100,000 $100,000 $100,000
4 $4,888 $100,000 $100,000 $100,000
5 $6,266 $100,000 $100,000 $100,000
6 $7,713 $100,000 $100,000 $100,000
7 $9,233 $100,000 $100,000 $100,000
8 $10,829 $100,000 $100,000 $100,000
9 $12,504 $100,000 $100,000 $100,000
10 $14,263 $100,000 $100,000 $100,000
15 $24,470 $100,000 $100,000 $100,000
20 $37,497 $100,000 $100,000 $100,000
30 (AGE 65) $75,342 $100,000 $100,000 $147,195
40 (AGE 75) $136,987 $100,000* $100,000 $354,281
50 (AGE 85) $237,401 $100,000* $100,000 $930,254
60 (AGE 95) $400,964 $100,000* $100,000* $2,319,901
</TABLE>
<TABLE>
<CAPTION>
END OF POLICY VALUE CASH SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND ASSUMING HYPOTHETICAL GROSS AND
YEAR NET ANNUAL INVESTMENT RETURN OF NET ANNUAL INVESTMENT RETURN OF
0.00% (Gross) 6.00% (Gross) 12.00% (Gross) 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.45% (Net) 4.51% (Net) 10.46% (Net) -1.45% (Net) 4.51% (Net) 10.46% (Net)
<S> <C> <C> <C> <C> <C> <C>
1 $627 $676 $725 $0 $0 $0
2 $1,227 $1,364 $1,507 $0 $0 $0
3 $1,796 $2,060 $2,348 $0 $0 $0
4 $2,330 $2,760 $3,249 $0 $380 $869
5 $2,829 $3,465 $4,217 $589 $1,225 $1,977
6 $3,434 $4,319 $5,408 $1,334 $2,219 $3,308
7 $4,006 $5,186 $6,699 $2,046 $3,226 $4,739
8 $4,540 $6,064 $8,098 $2,720 $4,244 $6,278
9 $5,030 $6,946 $9,609 $3,350 $5,266 $7,929
10 $5,480 $7,835 $11,249 $3,940 $6,295 $9,709
15 $7,630 $12,997 $22,623 $6,790 $12,157 $21,783
20 $8,716 $18,547 $40,752 $8,716 $18,547 $40,752
30 (AGE 65) $6,346 $30,457 $120,652 $6,346 $30,457 $120,652
40 (AGE 75) $0* $37,713 $331,104 $0* $37,713 $331,104
50 (AGE 85) $0* $20,128 $885,956 $0* $20,128 $885,956
60 (AGE 95) $0* $0* $2,296,932 $0* $0* $2,296,932
</TABLE>
*Even though the Cash Surrender Value and Policy Value are 0, the Policy would
not Lapse if the premiums paid, less withdrawals and any indebtedness, equalled
or exceeded the cumulative minimum monthly premiums.
The hypothetical rates of return shown above are illustrative only and should
not be deemed a representation of past or future investment rates of return.
Actual rates of return may be more or less than those shown and will depend on a
number of factors, including the investment allocations made by an Owner and the
actual investment experience of the Portfolios. The Policy Value, Cash Surrender
Value, and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged 0.00%, 6.00%, and 12.00% over a period of years,
but also flucutated above or below those averages for individual Policy Years.
No representations can be made that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
59
<PAGE>
<TABLE>
<CAPTION>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
MALE ISSUE AGE 35
Specified Amount $100,000 Tobacco Class
Annual Premium $1,080 Level Death Benefit
Using Guaranteed Cost Assumptions
DEATH BENEFIT
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS AND
POLICY ACCUMULATED NET ANNUAL INVESTMENT RETURN OF
YEAR AT 5% 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.45% (Net) 4.51% (Net) 10.46% (Net)
<S> <C> <C> <C> <C>
1 $1,134 $100,000 $100,000 $100,000
2 $2,325 $100,000 $100,000 $100,000
3 $3,575 $100,000 $100,000 $100,000
4 $4,888 $100,000 $100,000 $100,000
5 $6,266 $100,000 $100,000 $100,000
6 $7,713 $100,000 $100,000 $100,000
7 $9,233 $100,000 $100,000 $100,000
8 $10,829 $100,000 $100,000 $100,000
9 $12,504 $100,000 $100,000 $100,000
10 $14,263 $100,000 $100,000 $100,000
15 $24,470 $100,000 $100,000 $100,000
20 $37,497 $100,000 $100,000 $100,000
30 (AGE 65) $75,342 $100,000* $100,000 $100,127
40 (AGE 75) $136,987 $100,000* $100,000* $237,194
50 (AGE 85) $237,401 $100,000* $100,000* $610,110
60 (AGE 95) $400,964 $100,000* $100,000* $1,475,849
</TABLE>
<TABLE>
<CAPTION>
END OF POLICY VALUE CASH SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND ASSUMING HYPOTHETICAL GROSS AND
YEAR NET ANNUAL INVESTMENT RETURN OF NET ANNUAL INVESTMENT RETURN OF
0.00% (Gross) 6.00% (Gross) 12.00% (Gross) 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.45% (Net) 4.51% (Net) 10.46% (Net) -1.45% (Net) 4.51% (Net) 10.46% (Net)
<S> <C> <C> <C> <C> <C> <C>
1 $625 $674 $723 $0 $0 $0
2 $1,223 $1,360 $1,502 $0 $0 $0
3 $1,790 $2,054 $2,341 $0 $0 $0
4 $2,324 $2,754 $3,241 $0 $374 $861
5 $2,821 $3,456 $4,206 $581 $1,216 $1,966
6 $3,277 $4,156 $5,240 $1,177 $2,056 $3,140
7 $3,690 $4,852 $6,347 $1,730 $2,892 $4,387
8 $4,058 $5,541 $7,532 $2,238 $3,721 $5,712
9 $4,377 $6,218 $8,801 $2,697 $4,538 $7,121
10 $4,642 $6,879 $10,161 $3,102 $5,339 $8,621
15 $5,094 $9,825 $18,657 $4,254 $8,985 $17,817
20 $3,525 $11,494 $31,094 $3,525 $11,494 $31,094
30 (AGE 65) $0* $3,045 $82,072 $0* $3,045 $82,072
40 (AGE 75) $0* $0* $221,677 $0* $0* $221,677
50 (AGE 85) $0* $0* $581,057 $0* $0* $581,057
60 (AGE 95) $0* $0* $1,461,236 $0* $0* $1,461,236
</TABLE>
*Even though the Cash Surrender Value and Policy Value are 0, the Policy would
not Lapse IF the premiums paid, less withdrawals and any indebtedness, equalled
or exceeded the Cumulative Minimum Monthly Premium.
The hypothetical rates of return shown above are illustrative only and should
not be deemed a representation of past or future investment rates of return.
Actual rates of return may be more or less than those shown and will depend on a
number of factors, including the investment allocations made by an Owner and the
actual investment experience of the Portfolios. The Policy Value, Cash Surrender
Value, and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged 0.00%, 6.00%, and 12.00% over a period of years,
but also flucutated above or below those averages for individual Policy Years.
No representations can be made that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
60
<PAGE>
<TABLE>
<CAPTION>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
MALE ISSUE AGE 35
Specified Amount $100,000 Preferred Class
Annual Premium $1,080 Level Death Benefit
Using Current Cost Assumptions
DEATH BENEFIT
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS AND
POLICY ACCUMULATED NET ANNUAL INVESTMENT RETURN OF
YEAR AT 5% 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.45% (Net) 4.51% (Net) 10.46% (Net)
<S> <C> <C> <C> <C>
1 $1,134 $100,000 $100,000 $100,000
2 $2,325 $100,000 $100,000 $100,000
3 $3,575 $100,000 $100,000 $100,000
4 $4,888 $100,000 $100,000 $100,000
5 $6,266 $100,000 $100,000 $100,000
6 $7,713 $100,000 $100,000 $100,000
7 $9,233 $100,000 $100,000 $100,000
8 $10,829 $100,000 $100,000 $100,000
9 $12,504 $100,000 $100,000 $100,000
10 $14,263 $100,000 $100,000 $100,000
15 $24,470 $100,000 $100,000 $100,000
20 $37,497 $100,000 $100,000 $100,000
30 (AGE 65) $75,342 $100,000 $100,000 $182,533
40 (AGE 75) $136,987 $100,000 $100,000 $442,127
50 (AGE 85) $237,401 $100,000* $126,625 $1,171,023
60 (AGE 95) $400,964 $100,000* $196,423 $2,985,961
</TABLE>
<TABLE>
<CAPTION>
END OF POLICY VALUE CASH SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND ASSUMING HYPOTHETICAL GROSS AND
YEAR NET ANNUAL INVESTMENT RETURN OF NET ANNUAL INVESTMENT RETURN OF
0.00% (Gross) 6.00% (Gross) 12.00% (Gross) 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.45% (Net) 4.51% (Net) 10.46% (Net) -1.45% (Net) 4.51% (Net) 10.46% (Net)
<S> <C> <C> <C> <C> <C> <C>
1 $722 $774 $826 $0 $0 $0
2 $1,427 $1,576 $1,731 $0 $0 $0
3 $2,111 $2,403 $2,720 $0 $243 $560
4 $2,774 $3,256 $3,802 $734 $1,216 $1,762
5 $3,415 $4,136 $4,985 $1,495 $2,216 $3,065
6 $4,151 $5,163 $6,402 $2,351 $3,363 $4,602
7 $4,866 $6,226 $7,958 $3,186 $4,546 $6,278
8 $5,558 $7,324 $9,664 $3,998 $5,764 $8,104
9 $6,225 $8,457 $11,535 $4,785 $7,017 $10,095
10 $6,868 $9,628 $13,590 $5,548 $8,308 $12,270
15 $9,836 $16,248 $27,576 $9,116 $15,528 $26,856
20 $12,137 $24,083 $50,378 $12,137 $24,083 $50,378
30 (AGE 65) $13,754 $44,097 $149,617 $13,754 $44,097 $149,617
40 (AGE 75) $7,538 $72,898 $413,203 $7,538 $72,898 $413,203
50 (AGE 85) $0* $120,595 $1,115,260 $0* $120,595 $1,115,260
60 (AGE 95) $0* $194,479 $2,956,397 $0* $194,479 $2,956,397
</TABLE>
*Even though the Cash Surrender Value and Policy Value are 0, the Policy would
not Lapse IF the premiums paid, less withdrawals and any Indebtedness, equalled
or exceeded the Cumulative Minimum Monthly Premiums.
The hypothetical rates of return shown above are illustrative only and should
not be deemed a representation of past or future investment rates of return.
Actual rates of return may be more or less than those shown and will depend on a
number of factors, including the investment allocations made by an Owner and the
actual investment experience of the Portfolios. The Policy Value, Cash Surrender
Value, and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged 0.00%, 6.00%, and 12.00% over a period of years,
but also flucutated above or below those averages for individual Policy Years.
No representations can be made that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
61
<PAGE>
<TABLE>
<CAPTION>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
MALE ISSUE AGE 35
Specified Amount $100,000 Preferred Class
Annual Premium $1,080 Level Death Benefit
Using Guaranteed Cost Assumptions
DEATH BENEFIT
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS AND
POLICY ACCUMULATED NET ANNUAL INVESTMENT RETURN OF
YEAR AT 5% 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.45% (Net) 4.51% (Net) 10.46% (Net)
<S> <C> <C> <C> <C>
1 $1,134 $100,000 $100,000 $100,000
2 $2,325 $100,000 $100,000 $100,000
3 $3,575 $100,000 $100,000 $100,000
4 $4,888 $100,000 $100,000 $100,000
5 $6,266 $100,000 $100,000 $100,000
6 $7,713 $100,000 $100,000 $100,000
7 $9,233 $100,000 $100,000 $100,000
8 $10,829 $100,000 $100,000 $100,000
9 $12,504 $100,000 $100,000 $100,000
10 $14,263 $100,000 $100,000 $100,000
15 $24,470 $100,000 $100,000 $100,000
20 $37,497 $100,000 $100,000 $100,000
30 (AGE 65) $75,342 $100,000 $100,000 $159,892
40 (AGE 75) $136,987 $100,000* $100,000 $378,744
50 (AGE 85) $237,401 $100,000* $100,000* $976,667
60 (AGE 95) $400,964 $100,000* $100,000* $2,366,588
</TABLE>
<TABLE>
<CAPTION>
END OF POLICY VALUE CASH SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND ASSUMING HYPOTHETICAL GROSS AND
YEAR NET ANNUAL INVESTMENT RETURN OF NET ANNUAL INVESTMENT RETURN OF
0.00% (Gross) 6.00% (Gross) 12.00% (Gross) 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.45% (Net) 4.51% (Net) 10.46% (Net) -1.45% (Net) 4.51% (Net) 10.46% (Net)
<S> <C> <C> <C> <C> <C> <C>
1 $722 $774 $826 $0 $0 $0
2 $1,427 $1,576 $1,731 $0 $0 $0
3 $2,110 $2,403 $2,720 $0 $243 $560
4 $2,773 $3,256 $3,801 $733 $1,216 $1,761
5 $3,414 $4,136 $4,984 $1,494 $2,216 $3,064
6 $4,031 $5,041 $6,277 $2,231 $3,241 $4,477
7 $4,624 $5,971 $7,691 $2,944 $4,291 $6,011
8 $5,192 $6,928 $9,239 $3,632 $5,368 $7,679
9 $5,733 $7,911 $10,933 $4,293 $6,471 $9,493
10 $6,247 $8,921 $12,789 $4,927 $7,601 $11,469
15 $8,342 $14,336 $25,132 $7,622 $13,616 $24,412
20 $9,378 $20,236 $44,947 $9,378 $20,236 $44,947
30 (AGE 65) $5,069 $31,412 $131,059 $5,069 $31,412 $131,059
40 (AGE 75) $0* $31,361 $353,967 $0* $31,361 $353,967
50 (AGE 85) $0* $0* $930,160 $0* $0* $930,160
60 (AGE 95) $0* $0* $2,343,156 $0* $0* $2,343,156
</TABLE>
*Even though the Cash Surrender Value and Policy Value are 0, the Policy would
not Lapse IF the premiums paid, less withdrawals and any indebtedness, equalled
or exceeded the cumulative minimum monthly premiums.
The hypothetical rates of return shown above are illustrative only and should
not be deemed a representation of past or future investment rates of return.
Actual rates of return may be more or less than those shown and will depend on a
number of factors, including the investment allocations made by an Owner and the
actual investment experience of the Portfolios. The Policy Value, Cash Surrender
Value, and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged 0.00%, 6.00%, and 12.00% over a period of years,
but also flucutated above or below those averages for individual Policy Years.
No representations can be made that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
62
<PAGE>
<TABLE>
<CAPTION>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
FEMALE ISSUE AGE 35
Specified Amount $100,000 Tobacco Class
Annual Premium $1,080 Level Death Benefit
Using Current Cost Assumptions
DEATH BENEFIT
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS AND
POLICY ACCUMULATED NET ANNUAL INVESTMENT RETURN OF
YEAR AT 5% 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.45% (Net) 4.51% (Net) 10.46% (Net)
<S> <C> <C> <C> <C>
1 $1,134 $100,000 $100,000 $100,000
2 $2,325 $100,000 $100,000 $100,000
3 $3,575 $100,000 $100,000 $100,000
4 $4,888 $100,000 $100,000 $100,000
5 $6,266 $100,000 $100,000 $100,000
6 $7,713 $100,000 $100,000 $100,000
7 $9,233 $100,000 $100,000 $100,000
8 $10,829 $100,000 $100,000 $100,000
9 $12,504 $100,000 $100,000 $100,000
10 $14,263 $100,000 $100,000 $100,000
15 $24,470 $100,000 $100,000 $100,000
20 $37,497 $100,000 $100,000 $100,000
30 (AGE 65) $75,342 $100,000 $100,000 $170,503
40 (AGE 75) $136,987 $100,000 $100,000 $413,479
50 (AGE 85) $237,401 $100,000* $108,118 $1,094,144
60 (AGE 95) $400,964 $100,000* $167,908 $2,764,668
</TABLE>
<TABLE>
<CAPTION>
END OF POLICY VALUE CASH SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND ASSUMING HYPOTHETICAL GROSS AND
YEAR NET ANNUAL INVESTMENT RETURN OF NET ANNUAL INVESTMENT RETURN OF
0.00% (Gross) 6.00% (Gross) 12.00% (Gross) 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.45% (Net) 4.51% (Net) 10.46% (Net) -1.45% (Net) 4.51% (Net) 10.46% (Net)
<S> <C> <C> <C> <C> <C> <C>
1 $696 $747 $798 $0 $0 $0
2 $1,366 $1,511 $1,663 $0 $0 $0
3 $2,008 $2,291 $2,599 $0 $131 $439
4 $2,621 $3,087 $3,614 $581 $1,047 $1,574
5 $3,202 $3,895 $4,712 $1,282 $1,975 $2,792
6 $3,890 $4,858 $6,047 $2,090 $3,058 $4,247
7 $4,546 $5,843 $7,500 $2,866 $4,163 $5,820
8 $5,172 $6,852 $9,086 $3,612 $5,292 $7,526
9 $5,769 $7,888 $10,820 $4,329 $6,448 $9,380
10 $6,339 $8,952 $12,720 $5,019 $7,632 $11,400
15 $9,012 $15,033 $25,737 $8,292 $14,313 $25,017
20 $11,151 $22,324 $47,097 $11,151 $22,324 $47,097
30 (AGE 65) $11,250 $39,573 $139,756 $11,250 $39,573 $139,756
40 (AGE 75) $4,288 $63,844 $386,429 $4,288 $63,844 $386,429
50 (AGE 85) $0* $102,969 $1,042,042 $0* $102,969 $1,042,042
60 (AGE 95) $0* $166,245 $2,737,295 $0* $166,245 $2,737,295
</TABLE>
*Even though the Cash Surrender Value and Policy Value are 0, the Policy would
not Lapse IF the premiums paid, less withdrawals and any indebtedness, equalled
or exceeded the cumulative minimum monthly premiums.
The hypothetical rates of return shown above are illustrative only and should
not be deemed a representation of past or future investment rates of return.
Actual rates of return may be more or less than those shown and will depend on a
number of factors, including the investment allocations made by an Owner and the
actual investment experience of the Portfolios. The Policy Value, Cash Surrender
Value, and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged 0.00%, 6.00%, and 12.00% over a period of years,
but also flucutated above or below those averages for individual Policy Years.
No representations can be made that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
63
<PAGE>
<TABLE>
<CAPTION>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
FEMALE ISSUE AGE 35
Specified Amount $100,000 Tobacco Class
Annual Premium $1,080 Level Death Benefit
Using Guaranteed Cost Assumptions
DEATH BENEFIT
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS AND
POLICY ACCUMULATED NET ANNUAL INVESTMENT RETURN OF
YEAR AT 5% 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.45% (Net) 4.51% (Net) 10.46% (Net)
<S> <C> <C> <C> <C>
1 $1,134 $100,000 $100,000 $100,000
2 $2,325 $100,000 $100,000 $100,000
3 $3,575 $100,000 $100,000 $100,000
4 $4,888 $100,000 $100,000 $100,000
5 $6,266 $100,000 $100,000 $100,000
6 $7,713 $100,000 $100,000 $100,000
7 $9,233 $100,000 $100,000 $100,000
8 $10,829 $100,000 $100,000 $100,000
9 $12,504 $100,000 $100,000 $100,000
10 $14,263 $100,000 $100,000 $100,000
15 $24,470 $100,000 $100,000 $100,000
20 $37,497 $100,000 $100,000 $100,000
30 (AGE 65) $75,342 $100,000 $100,000 $141,870
40 (AGE 75) $136,987 $100,000* $100,000 $340,749
50 (AGE 85) $237,401 $100,000* $100,000* $887,600
60 (AGE 95) $400,964 $100,000* $100,000* $2,170,224
</TABLE>
<TABLE>
<CAPTION>
END OF POLICY VALUE CASH SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND ASSUMING HYPOTHETICAL GROSS AND
YEAR NET ANNUAL INVESTMENT RETURN OF NET ANNUAL INVESTMENT RETURN OF
0.00% (Gross) 6.00% (Gross) 12.00% (Gross) 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.45% (Net) 4.51% (Net) 10.46% (Net) -1.45% (Net) 4.51% (Net) 10.46% (Net)
<S> <C> <C> <C> <C> <C> <C>
1 $695 $746 $797 $0 $0 $0
2 $1,364 $1,510 $1,661 $0 $0 $0
3 $2,006 $2,290 $2,598 $0 $130 $438
4 $2,619 $3,084 $3,611 $579 $1,044 $1,571
5 $3,199 $3,892 $4,709 $1,279 $1,972 $2,789
6 $3,745 $4,710 $5,895 $1,945 $2,910 $4,095
7 $4,254 $5,536 $7,177 $2,574 $3,856 $5,497
8 $4,727 $6,371 $8,568 $3,167 $4,811 $7,008
9 $5,166 $7,218 $10,080 $3,726 $5,778 $8,640
10 $5,569 $8,076 $11,727 $4,249 $6,756 $10,407
15 $7,038 $12,529 $22,560 $6,318 $11,809 $21,840
20 $7,383 $17,114 $39,822 $7,383 $17,114 $39,822
30 (AGE 65) $3,227 $25,762 $116,287 $3,227 $25,762 $116,287
40 (AGE 75) $0* $25,598 $318,457 $0* $25,598 $318,457
50 (AGE 85) $0* $0* $845,333 $0* $0* $845,333
60 (AGE 95) $0* $0* $2,148,737 $0* $0* $2,148,737
</TABLE>
*Even though the Cash Surrender Value and Policy Value are 0, the Po
not Lapse IF the premiums paid, less withdrawals and any indebtedness, equalled
or exceeded the cumulative minimum monthly premiums.
The hypothetical rates of return shown above are illustrative only and should
not be deemed a representation of past or future investment rates of return.
Actual rates of return may be more or less than those shown and will depend on a
number of factors, including the investment allocations made by an Owner and the
actual investment experience of the Portfolios. The Policy Value, Cash Surrender
Value, and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged 0.00%, 6.00%, and 12.00% over a period of years,
but also flucutated above or below those averages for individual Policy Years.
No representations can be made that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
64
<PAGE>
<TABLE>
<CAPTION>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
FEMALE ISSUE AGE 35
Specified Amount $100,000 Preferred Class
Annual Premium $1,080 Level Death Benefit
Using Current Cost Assumptions
DEATH BENEFIT
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS AND
POLICY ACCUMULATED NET ANNUAL INVESTMENT RETURN OF
YEAR AT 5% 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.45% (Net) 4.51% (Net) 10.46% (Net)
<S> <C> <C> <C> <C>
1 $1,134 $100,000 $100,000 $100,000
2 $2,325 $100,000 $100,000 $100,000
3 $3,575 $100,000 $100,000 $100,000
4 $4,888 $100,000 $100,000 $100,000
5 $6,266 $100,000 $100,000 $100,000
6 $7,713 $100,000 $100,000 $100,000
7 $9,233 $100,000 $100,000 $100,000
8 $10,829 $100,000 $100,000 $100,000
9 $12,504 $100,000 $100,000 $100,000
10 $14,263 $100,000 $100,000 $100,000
15 $24,470 $100,000 $100,000 $100,000
20 $37,497 $100,000 $100,000 $100,000
30 (AGE 65) $75,342 $100,000 $100,000 $191,632
40 (AGE 75) $136,987 $100,000 $100,000 $466,867
50 (AGE 85) $237,401 $100,000 $145,133 $1,243,001
60 (AGE 95) $400,964 $100,000* $224,579 $3,185,840
</TABLE>
<TABLE>
<CAPTION>
END OF POLICY VALUE CASH SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND ASSUMING HYPOTHETICAL GROSS AND
YEAR NET ANNUAL INVESTMENT RETURN OF NET ANNUAL INVESTMENT RETURN OF
0.00% (Gross) 6.00% (Gross) 12.00% (Gross) 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.45% (Net) 4.51% (Net) 10.46% (Net) -1.45% (Net) 4.51% (Net) 10.46% (Net)
<S> <C> <C> <C> <C> <C> <C>
1 $757 $810 $863 $0 $0 $0
2 $1,494 $1,647 $1,807 $0 $0 $0
3 $2,212 $2,513 $2,841 $232 $533 $861
4 $2,911 $3,410 $3,975 $1,041 $1,540 $2,105
5 $3,591 $4,339 $5,219 $1,831 $2,579 $3,459
6 $4,351 $5,402 $6,688 $2,701 $3,752 $5,038
7 $5,088 $6,501 $8,299 $3,548 $4,961 $6,759
8 $5,804 $7,640 $10,070 $4,374 $6,210 $8,640
9 $6,500 $8,820 $12,017 $5,180 $7,500 $10,697
10 $7,176 $10,045 $14,160 $5,966 $8,835 $12,950
15 $10,382 $17,049 $28,808 $9,722 $16,389 $28,148
20 $13,043 $25,499 $52,790 $13,043 $25,499 $52,790
30 (AGE 65) $16,060 $47,877 $157,075 $16,060 $47,877 $157,075
40 (AGE 75) $15,245 $82,420 $436,324 $15,245 $82,420 $436,324
50 (AGE 85) $1,890 $138,222 $1,183,811 $1,890 $138,222 $1,183,811
60 (AGE 95) $0* $222,355 $3,154,297 $0* $222,355 $3,154,297
</TABLE>
*Even though the Cash Surrender Value and Policy Value are 0, the Policy would
not Lapse IF the premiums paid, less withdrawals and any indebtedness, equalled
or exceeded the cumulative minimum monthly premiums.
The hypothetical rates of return shown above are illustrative only and should
not be deemed a representation of past or future investment rates of return.
Actual rates of return may be more or less than those shown and will depend on a
number of factors, including the investment allocations made by an Owner and the
actual investment experience of the Portfolios. The Policy Value, Cash Surrender
Value, and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged 0.00%, 6.00%, and 12.00% over a period of years,
but also flucutated above or below those averages for individual Policy Years.
No representations can be made that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
65
<PAGE>
<TABLE>
<CAPTION>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
FEMALE ISSUE AGE 35
Specified Amount $100,000 Preferred Class
Annual Premium $1,080 Level Death Benefit
Using Guaranteed Cost Assumptions
DEATH BENEFIT
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS AND
POLICY ACCUMULATED NET ANNUAL INVESTMENT RETURN OF
YEAR AT 5% 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.45% (Net) 4.51% (Net) 10.46% (Net)
<S> <C> <C> <C> <C>
1 $1,134 $100,000 $100,000 $100,000
2 $2,325 $100,000 $100,000 $100,000
3 $3,575 $100,000 $100,000 $100,000
4 $4,888 $100,000 $100,000 $100,000
5 $6,266 $100,000 $100,000 $100,000
6 $7,713 $100,000 $100,000 $100,000
7 $9,233 $100,000 $100,000 $100,000
8 $10,829 $100,000 $100,000 $100,000
9 $12,504 $100,000 $100,000 $100,000
10 $14,263 $100,000 $100,000 $100,000
15 $24,470 $100,000 $100,000 $100,000
20 $37,497 $100,000 $100,000 $100,000
30 (AGE 65) $75,342 $100,000 $100,000 $168,884
40 (AGE 75) $136,987 $100,000* $100,000 $406,187
50 (AGE 85) $237,401 $100,000* $100,000 $1,060,232
60 (AGE 95) $400,964 $100,000* $100,000 $2,596,489
</TABLE>
<TABLE>
<CAPTION>
END OF POLICY VALUE CASH SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND ASSUMING HYPOTHETICAL GROSS AND
YEAR NET ANNUAL INVESTMENT RETURN OF NET ANNUAL INVESTMENT RETURN OF
0.00% (Gross) 6.00% (Gross) 12.00% (Gross) 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.45% (Net) 4.51% (Net) 10.46% (Net) -1.45% (Net) 4.51% (Net) 10.46% (Net)
<S> <C> <C> <C> <C> <C> <C>
1 $744 $797 $849 $0 $0 $0
2 $1,469 $1,620 $1,778 $0 $0 $0
3 $2,172 $2,470 $2,794 $192 $490 $814
4 $2,854 $3,347 $3,904 $984 $1,477 $2,034
5 $3,514 $4,252 $5,119 $1,754 $2,492 $3,359
6 $4,150 $5,183 $6,447 $2,500 $3,533 $4,797
7 $4,761 $6,140 $7,900 $3,221 $4,600 $6,360
8 $5,348 $7,127 $9,491 $3,918 $5,697 $8,061
9 $5,911 $8,143 $11,237 $4,591 $6,823 $9,917
10 $6,451 $9,191 $13,153 $5,241 $7,981 $11,943
15 $8,763 $14,928 $26,003 $8,103 $14,268 $25,343
20 $10,279 $21,510 $46,883 $10,279 $21,510 $46,883
30 (AGE 65) $9,768 $37,436 $138,429 $9,768 $37,436 $138,429
40 (AGE 75) $0* $55,515 $379,614 $0* $55,515 $379,614
50 (AGE 85) $0* $68,243 $1,009,745 $0* $68,243 $1,009,745
60 (AGE 95) $0* $11,987 $2,570,781 $0* $11,987 $2,570,781
</TABLE>
*Even though the Cash Surrender Value and Policy Value are 0, the Policy would
not Lapse IF the premiums paid, less withdrawals and any indebtedness, equalled
or exceeded the cumulative minimum monthly premiums.
The hypothetical rates of return shown above are illustrative only and should
not be deemed a representation of past or future investment rates of return.
Actual rates of return may be more or less than those shown and will depend on a
number of factors, including the investment allocations made by an Owner and the
actual investment experience of the Portfolios. The Policy Value, Cash Surrender
Value, and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged 0.00%, 6.00%, and 12.00% over a period of years,
but also flucutated above or below those averages for individual Policy Years.
No representations can be made that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
66
<PAGE>
FINANCIAL STATEMENTS-STATUTORY BASIS
LIFE INVESTORS COMPANY OF AMERICA
NINE MONTHS ENDED SEPTEMBER 30, 1999
<PAGE>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
BALANCE SHEET - STATUTORY BASIS
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS) (UNAUDITED)
ADMITTED ASSETS
Cash and invested assets:
Cash and short-term investments $ 67,762
Bonds 5,364,963
Preferred stock 13,577
Common stock, at market 222,550
Mortgage loans on real estate 1,379,627
Home office properties, at cost less accumulated
Depreciation 18,933
Real estate acquired in satisfaction of debt,
At cost less accumulated depreciation 7,853
Investment real estate 50,568
Policy loans 39,076
Other invested assets 175,541
----------
Total cash and invested assets 7,340,450
Premiums deferred and uncollected 9,385
Accrued investment income 78,625
Cash surrender value of life insurance policies 94,184
Receivable from affiliate 54,095
Federal income tax recoverable 6,175
Other assets 19,617
----------
Total admitted assets $7,602,531
==========
2
<PAGE>
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Aggregate reserves for policies and contracts:
Life $1,696,780
Annuity 4,338,333
Accident and health 298,520
Policy and contract claim reserves:
Life 22,632
Accident and health 69,676
Other policyholders' funds 97,173
Remittances and items not allocated 65,409
Asset valuation reserve 111,502
Interest maintenance reserve 32,227
Payable for securities 213,095
Other liabilities 98,280
----------
Total liabilities 7,043,627
Capital and surplus:
Common stock, $2.48 par value, 1,164 shares
authorized, 1,008 issued and outstanding 2,500
Paid-in surplus 266,236
Unassigned surplus 290,168
----------
Total capital and surplus 558,904
----------
Total liabilities and capital and surplus $7,602,531
==========
3
<PAGE>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
STATEMENT OF OPERATIONS - STATUTORY BASIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS) (UNAUDITED)
Revenues:
Premiums and other considerations, net of reinsurance:
Life $ 261,982
Annuity 193,944
Accident and health 214,275
Net investment income 368,283
Amortization of interest maintenance reserve 4,567
Commissions and expense allowances on
reinsurance ceded 34,764
Other income 18,243
-----------
1,096,058
Benefits and expenses:
Benefits paid or provided for:
Life and accident and health benefits 66,792
Surrender benefits 358,193
Other benefits 223,688
Increase (decrease) in aggregate reserves for
policies and contracts:
Life 175,820
Annuity (29,102)
Accident and health 25,055
Other 1,756
-----------
822,202
Insurance expenses:
Commissions 95,781
General insurance expenses 82,121
Taxes, licenses and fees 15,041
Other 1,047
-----------
193,990
-----------
1,016,192
-----------
Gain from operations before federal income
tax expense and net realized capital gains on
investments 79,866
Federal income tax expense 18,583
-----------
Gain from operations before net realized
capital gains on investments 61,283
Net realized capital gains on investments
(net of related federal income tax expense and
amounts transferred to interest maintenance
reserve) 12,669
-----------
Net income $ 73,952
===========
4
<PAGE>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
STATEMENT OF CHANGES IN CAPITAL AND SURPLUS -
STATUTORY BASIS
(IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
CAPITAL
COMMON PAID-IN UNASSIGNED AND
STOCK SURPLUS SURPLUS SURPLUS
-----------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1999 $ 2,500 $ 266,236 $ 256,372 $ 525,108
Net income 0 0 73,952 73,952
Change in net unrealized gains 0 0 (12,132) (12,132)
Change in non-admitted assets 0 0 1,134 1,134
Change in asset valuation reserve 0 0 5,126 5,126
Dividend to stockholder 0 0 (35,000) (35,000)
Change in liability for reinsurance in
unauthorized companies 0 0 (2,166) (2,166)
Tax benefit on stock options exercised 1,856 1,856
Other adjustments 0 0 1,026 1,026
----------------------------------------------------
Balance at September 30, 1999 $ 2,500 $ 266,236 $ 290,168 $ 558,904
====================================================
</TABLE>
5
<PAGE>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
STATEMENT OF CASH FLOW - STATUTORY BASIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS) (UNAUDITED)
OPERATING ACTIVITIES
Premiums and other considerations, net of reinsurance $ 726,436
Net investment income 367,880
Life and accident and health claims (207,205)
Surrender benefits to policyholders and other fund withdrawals (358,196)
Other benefits to policyholders (89,716)
Commissions, other expenses and other taxes (199,592)
Dividends to stockholder (35,000)
Federal income taxes, excluding tax on capital gains (9,010)
Other, net (124,793)
-----------
Net cash provided by operating activities 70,804
INVESTING ACTIVITIES
Proceeds from investments sold, matured or repaid:
Bonds and preferred stocks 2,795,867
Common stocks 128,438
Mortgage loans on real estate 122,904
Other 4,114
-----------
3,051,323
Cost of investments acquired:
Bonds and preferred stocks 2,888,159
Common stocks 69,575
Mortgage loans 286,139
Other 21,161
-----------
3,265,034
-----------
Net cash used in investing activities (213,711)
-----------
FINANCING ACTIVITIES
Borrowed money (1,700)
-----------
Net cash used in financing activities (1,700)
Decrease in cash and short-term investments (144,607)
Cash and short-term investments at beginning of year 212,369
===========
Cash and short-term investments at end of year $ 67,762
===========
6
<PAGE>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS) (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited statutory basis financial statements have been
prepared in accordance with statutory accounting principles for interim
financial information and the instructions to Article 10 of Regulation S-X.
Accordingly, they do not include all the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine month period ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999. For further information, refer to the accompanying statutory
basis financial statements and notes thereto for the year ended December 31,
1998.
7
<PAGE>
FINANCIAL STATEMENTS-STATUTORY BASIS
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
YEARS ENDED DECEMBER 31, 1998 AND 1997
WITH REPORTS OF INDEPENDENT AUDITORS
<PAGE>
Life Investors Insurance Company of America
Financial Statements - Statutory Basis
and Other Financial Information
Years ended December 31, 1998 and 1997
CONTENTS
Report of Independent Auditors.................................................1
Audited Financial Statements
Balance Sheets - Statutory Basis...............................................2
Statements of Operations - Statutory Basis.....................................4
Statements of Changes in Capital and Surplus - Statutory Basis.................5
Statements of Cash Flows - Statutory Basis.....................................6
Notes to Financial Statements - Statutory Basis................................7
Statutory - Basis Financial Statement Schedules
Summary of Investments - Other Than Investments in Related Parties............28
Supplementary Insurance Information ..........................................29
Reinsurance...................................................................31
<PAGE>
[ERNST & YOUNG LETTERHEAD]
Report of Independent Auditors
The Board of Directors
Life Investors Insurance Company of America
We have audited the accompanying statutory-basis balance sheets of Life
Investors Insurance Company of America as of December 31, 1998 and 1997, and the
related statutory-basis statements of operations, changes in capital and surplus
and cash flows for the years then ended. Our audits also included the
accompanying statutory-basis financial statement schedules required by Article 7
of Regulation S-X. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with the accounting practices prescribed or
permitted by the Insurance Division, Department of Commerce, of the State of
Iowa, which practices differ from generally accepted accounting principles. The
variances between such practices and generally accepted accounting principles
also are described in Note 1. The effects on the financial statements of these
variances are not reasonably determinable but are presumed to be material.
In our opinion, because of the effects of the matters described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Life Investors Insurance Company of America at December 31, 1998 and 1997, or
the results of its operations or its cash flows for each of the years then
ended.
1
<PAGE>
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Life Investors
Insurance Company of America at December 31, 1998 and 1997, and the results of
its operations and its cash flows for the years then ended in conformity with
accounting practices prescribed or permitted by the Insurance Division,
Department of Commerce, of the State of Iowa. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
statutory-basis financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
February 19, 1999
2
<PAGE>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
BALANCE SHEETS - STATUTORY BASIS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
---------- ----------
<S> <C> <C>
ADMITTED ASSETS
Cash and invested assets:
Cash and short-term investments $ 212,369 $ 41,335
Bonds 5,295,324 5,205,338
Stocks:
Preferred 11,359 5,000
Common (cost: 1998 - $96,301; 1997 - $97,625) 130,938 122,821
Affiliated entities (cost: 1998 - $155,130; 1997 -
$ 155,821)
142,579 210,354
Mortgage loans on real estate 1,214,797 1,085,179
Real estate, at cost less accumulated depreciation
(1998 - $25,113; 1997 - $22,921):
Home office properties 17,987 18,276
Properties acquired in satisfaction of debt 6,819 7,171
Investment properties 53,813 55,352
Policy loans 38,737 36,390
Other invested assets 58,391 19,486
---------- ----------
Total cash and invested assets 7,183,113 6,806,702
Premiums deferred and uncollected 11,762 13,189
Accrued investment income 72,327 73,847
Short-term notes receivable from affiliate -- 8,500
Cash surrender value of life insurance policies 90,893 --
Receivable from affiliates -- 3,719
Federal income tax recoverable 13,892 --
Other assets 20,883 19,617
---------- ----------
Total admitted assets $7,392,870 $6,925,574
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
---------- ----------
<S> <C> <C>
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Aggregate reserves for policies and contracts:
Life $1,520,961 $1,193,313
Annuity 4,367,435 4,361,539
Accident and health 273,465 245,032
Policy and contract claim reserves:
Life 21,651 23,755
Accident and health 76,259 69,584
Other policyholders' funds 95,931 97,855
Remittances and items not allocated 65,227 138,953
Asset valuation reserve 116,628 86,251
Interest maintenance reserve 39,101 23,439
Short-term notes payable to affiliates 1,700 --
Federal income tax payable -- 6,876
Payable for securities 168,927 --
Payable to affiliates 31,358 --
Other liabilities 89,119 62,038
---------- ----------
Total liabilities 6,867,762 6,308,635
Commitments and contingencies
Capital and surplus:
Common stock, $2.48 par value, 1,164,000 shares authorized,
1,008,000 issued and outstanding 2,500 2,500
Paid-in surplus 266,236 266,236
Unassigned surplus 256,372 348,203
---------- ----------
Total capital and surplus 525,108 616,939
---------- ----------
Total liabilities and capital and surplus $7,392,870 $6,925,574
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
Life Investors Insurance Company of America
Statements of Operations - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997
----------- ----------
<S> <C> <C>
REVENUES
Premiums and other considerations, net of reinsurance:
Life $ 455,526 $ 334,461
Annuity 322,560 586,846
Accident and health 271,620 240,264
Net investment income 551,506 457,441
Amortization of interest maintenance reserve 5,679 2,562
Commissions and expense allowances on reinsurance ceded 36,474 45,064
Other 4,561 753
----------- -----------
1,647,926 1,667,391
BENEFITS AND EXPENSES
Benefits paid or provided for:
Life benefits 84,739 80,082
Surrender benefits 492,363 450,499
Accident and health benefits 176,278 154,201
Other benefits 103,705 84,221
Increase in aggregate reserves for policies and contracts:
Life 327,648 211,185
Annuity 5,896 307,079
Accident and health 28,433 13,845
Other 3,236 6,032
----------- -----------
1,222,298 1,307,144
Insurance expenses:
Commissions 122,520 119,163
General insurance expenses 104,290 81,687
Taxes, licenses and fees 25,081 18,535
Other (462) 3,287
----------- -----------
251,429 222,672
Total benefits and expenses 1,473,727 1,529,816
----------- -----------
Gain from operations before federal income tax expense
and net realized capital gains (losses) on investments 174,199 137,575
Federal income tax expense 33,563 50,598
----------- -----------
Gain from operations before net realized capital gains
(losses) on investments 140,636 86,977
Netrealized capital gains (losses) on investments (net of related federal
income taxes and amounts transferred
to interest maintenance reserve) 141 (1,041)
----------- -----------
Net income $ 140,777 $ 85,936
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
Life Investors Insurance Company of America
Statements of Changes in Capital and Surplus - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
TOTAL
COMMON PAID-IN UNASSIGNED CAPITAL AND
STOCK SURPLUS SURPLUS SURPLUS
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at January 1, 1997 $ 2,500 $ 266,236 $ 240,831 $ 509,567
Net income -- -- 85,936 85,936
Change in net unrealized capital
gains/losses -- -- 61,904 61,904
Change in non-admitted assets -- -- (471) (471)
Change in asset valuation reserve -- -- (8,641) (8,641)
Change in liability for reinsurance in
unauthorized companies -- -- 428 428
Dividend to stockholder -- -- (31,400) (31,400)
Surplus effect of ceding commissions
associated with the sale of a division -- -- 62 62
Surplus effect of reinsurance -- -- 5 5
Surplus effect of transfer of business -- -- (451) (451)
--------- --------- --------- ---------
Balance at December 31, 1997 2,500 266,236 348,203 616,939
Net income -- -- 140,777 140,777
Change in net unrealized capital
gains/losses -- -- (51,933) (51,933)
Change in non-admitted assets -- -- (547) (547)
Change in asset valuation reserve -- -- (30,377) (30,377)
Change in liability for reinsurance in
unauthorized companies -- -- (3,718) (3,718)
Dividend to stockholder -- -- (175,000) (175,000)
Tax benefit on stock options exercised -- -- 28,967 28,967
--------- --------- --------- ---------
Balance at December 31, 1998 $ 2,500 $ 266,236 $ 256,372 $ 525,108
========= ========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES.
6
<PAGE>
Life Investors Insurance Company of America
Statements of Cash Flows - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Premiums and other considerations, net of reinsurance $ 1,090,253 $ 1,209,734
Net investment income 568,796 459,740
Life and accident and health claims (257,428) (231,686)
Surrender benefits and other fund withdrawals (492,363) (450,499)
Other benefits to policyholders (103,229) (83,740)
Commissions, other expenses and other taxes (249,268) (221,439)
Federal income taxes (25,364) (44,267)
Cash received in connection with transfer of business -- 26,398
Cash received in connection with reinsurance transactions -- 15
Other, net 69,783 52,141
----------- -----------
Net cash provided by operating activities 601,180 716,397
INVESTING ACTIVITIES
Proceeds from investments sold, matured or repaid:
Bonds and preferred stocks 2,616,194 2,066,835
Common stocks 101,936 115,220
Mortgage loans on real estate 162,955 132,415
Real estate 1,311 1,087
Cash received as the result of ceding commissions associated with
the sale of a division -- 95
Other 8,536 6,351
----------- -----------
2,890,932 2,322,003
Cost of investments acquired:
Bonds and preferred stocks (2,697,323) (2,516,471)
Common stocks (113,781) (126,393)
Mortgage loans on real estate (281,867) (293,848)
Real estate (391) (431)
Policy loans (2,347) (1,493)
Other (43,569) (31,685)
----------- -----------
(3,139,278) (2,970,321)
----------- -----------
Net cash used in investing activities (248,346) (648,318)
FINANCING ACTIVITIES
Short-term notes payable/receivable to/from affiliate (6,800) (50,800)
Dividends to stockholders (175,000) (31,400)
----------- -----------
Net cash used in financing activities (181,800) (82,200)
----------- -----------
Increase (decrease) in cash and short-term investments 171,034 (14,121)
Cash and short-term investments at beginning of year 41,335 55,456
----------- -----------
Cash and short-term investments at end of year $ 212,369 $ 41,335
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
7
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis
(Dollars in thousands)
December 31, 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Life Investors Insurance Company of America (the "Company") is a stock life
insurance company and is a wholly-owned subsidiary of First AUSA Life Insurance
Company ("First AUSA"), which in turn, is a wholly-owned subsidiary of AEGON
USA, Inc. ("AEGON"). AEGON is a wholly-owned subsidiary of AEGON N.V., a holding
company organized under the laws of The Netherlands.
In connection with the sale of certain affiliates, the Company has assumed
various blocks of business from these former affiliates. In addition, the
Company has canceled or entered into coinsurance agreements with affiliates and
non-affiliates. The following is a description of those transactions:
o During 1993, the Company sold the Oakbrook Division (primarily group
health business). The initial transfer of risk occurred through an
indemnity reinsurance agreement. The policies have been assumed by the
reinsurer by novation as state regulatory and policyholder approvals were
received. Pursuant to the sales agreement, the Company will be liable for
any deficiency that results from payment of claims incurred prior to
January 1, 1994 exceeding the reserve transferred at the date of sale.
During 1997, the Company received $95 for ceding commissions related to
this sale; the commissions net of the related tax effect of $33 were
credited directly to unassigned surplus.
o During 1997, the Company assumed a block of business from a
non-affiliate. As a result of this transaction, the Company received
$26,398 of assets, significantly all of which were cash and short-term
securities, and $26,398 of liabilities. This transaction caused a taxable
event in the amount of $451, which was charged to unassigned surplus, as
the basis of the assets transferred differed for tax purposes.
o During 1997, the Company entered into reinsurance agreements with
non-affiliates. As a result of the agreements, the Company received $15
of assets, substantially all of which were cash and short-term
securities, and $7 of liabilities. The difference between assets and
liabilities, net of a tax effect of $3, was credited directly to
unassigned surplus.
8
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL STATEMENTS
The financial statements presented herein are prepared on a statutory basis for
the Company only and, as such, the accounts of the Company's wholly-owned
subsidiaries, Bankers United Life Assurance Company and Life Investors Agency
Group, are not consolidated with those of the Company; rather, the subsidiary is
carried at the Company's equity in its net assets.
NATURE OF BUSINESS
The Company sells a full line of insurance products, including individual,
credit and group coverages under life, annuity and accident and health policies.
The Company is licensed in 49 states, the District of Columbia, and Canada.
Sales of the Company's products are primarily through the general agency system.
BASIS OF PRESENTATION
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Such estimates and assumptions
could change in the future as more information becomes known, which could impact
the amounts reported and disclosed herein.
The accompanying financial statements have been prepared in conformity with
accounting practices prescribed or permitted by the Insurance Division,
Department of Commerce, of the State of Iowa ("Insurance Division"), which
practices differ from generally accepted accounting principles. The more
significant of these differences are as follows: (a) bonds are generally
reported at amortized cost rather than segregating the portfolio into
held-to-maturity (reported at amortized cost), available-for-sale (reported at
fair value), and trading (reported at fair value) classifications; (b)
acquisition costs of acquiring new business are expensed as incurred rather than
deferred and amortized over the life of the policies; (c) policy reserves on
traditional life products are based on statutory mortality rates and interest
which may differ from reserves based on reasonable assumptions of expected
mortality, interest, and withdrawals which include a provision for possible
unfavorable deviation from such assumptions; (d) policy reserves on certain
investment products use discounting methodologies based on statutory interest
rates rather than full account values; (e) reinsurance amounts are netted
against the corresponding asset or liability rather than shown as gross amounts
on the balance sheet; (f) deferred income taxes are not provided for the
difference between the financial statement and income tax bases of assets and
liabilities; (g) net realized gains or losses attributed to change in the level
of interest rates in the market are deferred and amortized
9
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
over the remaining life of the bond or mortgage loan, rather than recognized as
gains or losses in the statement of operations when the sale is completed; (h)
potential declines in the estimated realizable value of investments are provided
for through the establishment of a formula-determined statutory investment
reserve (reported as a liability), changes to which are charged directly to
surplus, rather than through recognition in the statement of operations for
declines in value, when such declines are judged to be other than temporary; (i)
certain assets designated as "non-admitted assets" have been charged to surplus
rather than being reported as assets; (j) revenues for universal life and
investment products consist of the entire premiums received rather than policy
charges for the cost of insurance, policy administration charges, amortization
of policy initiation fees and surrender charges assessed; (k) pension expense is
recorded as amounts are paid rather than accrued and expensed during the periods
in which the employees provide service; (l) gains or losses on dispositions of
business are charged or credited directly to unassigned surplus rather than
being reported in the statement of operations; (m) adjustments to federal income
tax of prior years are charged or credited directly to unassigned surplus rather
than being reported in the statement of operations; and (n) the financial
statements of subsidiaries are not consolidated with those of the Company. The
effects of these variances have not been determined by the Company.
In 1998, the National Association of Insurance Commissioners ("NAIC") adopted
codified statutory accounting principles ("Codification"). Codification will
likely change, to some extent, prescribed statutory accounting practices and may
result in changes to the accounting practices that the Company uses to prepare
its statutory-basis financial statements. Codification will require adoption by
the various states before it becomes the prescribed statutory basis of
accounting for insurance companies domesticated within those states.
Accordingly, before Codification becomes effective for the Company, the State of
Iowa must adopt Codification as the prescribed basis of accounting on which
domestic insurers must report their statutory-basis results to the Insurance
Division. At this time, it is unclear whether the State of Iowa will adopt
Codification. However, based on current guidance, management believes that the
impact of Codification will not be material to the Company's statutory-basis
financial statements.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all highly
liquid investments with remaining maturities of one year or less when purchased
to be cash equivalents.
10
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS
Investments in bonds (except those to which the Securities Valuation Office of
the NAIC has ascribed a value), mortgage loans on real estate and short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts. Amortization is computed using methods which result in a
level yield over the expected life of the security. The Company reviews its
prepayment assumptions on mortgage and other asset-backed securities at regular
intervals and adjusts amortization rates retrospectively when such assumptions
are changed due to experience and/or expected future patterns. Investments in
preferred stocks in good standing are reported at cost. Common stocks of
unaffiliated companies, which may include shares of mutual funds (money market
and other), are reported at market. Common stocks of the Company's subsidiaries
are recorded at the equity in net assets. Real estate is reported at cost less
allowances for depreciation. Depreciation is computed principally by the
straight-line method. Policy loans are reported at unpaid principal. Other
invested assets consist principally of investments in various joint ventures and
are recorded at equity in underlying net assets. Other "admitted assets" are
valued, principally at cost, as required or permitted by Iowa Insurance Laws.
Realized capital gains and losses are determined on the basis of specific
identification and are recorded net of related federal income taxes. The Asset
Valuation Reserve (AVR) is established by the Company to provide for anticipated
losses in the event of default by issuers of certain invested assets. These
amounts are determined using a formula prescribed by the NAIC and are reported
as a liability. The formula for the AVR provides for a corresponding adjustment
for realized gains and losses. Under a formula prescribed by the NAIC, the
Company defers, in the Interest Maintenance Reserve (IMR), the portion of
realized gains and losses on sales of fixed income investments, principally
bonds and mortgage loans, attributable to changes in the general level of
interest rates and amortizes those deferrals over the remaining period to
maturity of the security.
Interest income is recognized on an accrual basis. The Company does not accrue
income on bonds in default, mortgage loans on real estate in default and/or
foreclosure or which are delinquent more than twelve months, or real estate
where rent is in arrears for more than three months. Further, income is not
accrued when collection is uncertain. At December 31, 1998 and 1997, the Company
excluded investment income due and accrued of $31 and $1,630, respectively, with
respect to such practices.
AGGREGATE RESERVES FOR POLICIES
Life, annuity and accident and health benefit reserves are developed by
actuarial methods and are determined based on published tables using statutorily
specified interest rates and valuation methods that will provide, in the
aggregate, reserves that are greater than or equal to the minimum required by
law.
11
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
POLICY AND CONTRACT CLAIM RESERVES
Claim reserves represent the estimated accrued liability for claims reported to
the Company and claims incurred but not yet reported through the statement date.
These reserves are estimated using either individual case-basis valuations or
statistical analysis techniques. These estimates are subject to the effects of
trends in claim severity and frequency, and are continually reviewed and
adjusted as necessary as experience develops or new information becomes
available.
STOCK OPTION PLAN
AEGON N.V. sponsors a stock option plan for eligible employees of the Company.
Under this plan, certain employees have indicated a preference to immediately
sell shares received as a result of their exercise of the stock options; in
these situations, AEGON N.V. has settled such options in cash rather than
issuing stock to these employees. These cash settlements are paid by the
Company, and AEGON N.V. subsequently reimburses the Company for such payments.
Under statutory accounting principles, the Company does not record any expense
related to this plan, as the expense is recognized by AEGON N.V. However, the
Company is allowed to record a deduction in the consolidated tax return filed by
the Company and certain affiliates. The tax benefit of this deduction has been
credited directly to surplus.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 financial statements to
conform to the 1998 presentation.
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards (SFAS) No. 107, DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in the
statutory-basis balance sheet, for which it is practicable to estimate that
value. SFAS No. 119, DISCLOSURES ABOUT DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR
VALUE OF FINANCIAL INSTRUMENTS, requires additional disclosures about
derivatives. In cases where quoted market prices are not available, fair values
are based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates cannot be substantiated by comparisons to independent
markets and, in many cases, could not be realized in immediate settlement of the
instrument. SFAS No. 107 and No. 119 exclude certain financial instruments and
all nonfinancial instruments from their disclosure requirements and allow
companies to forego the disclosures when those estimates can only be made at
excessive cost. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
12
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
CASH AND SHORT-TERM INVESTMENTS: The carrying amounts reported in the
statutory-basis balance sheet for these instruments approximate their fair
values.
INVESTMENT SECURITIES: Fair values for fixed maturity securities (including
redeemable preferred stocks) are based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair values are
estimated using values obtained from independent pricing services or, in the
case of private placements, are estimated by discounting expected future cash
flows using a current market rate applicable to the yield, credit quality,
and maturity of the investments. The fair values for equity securities,
including affiliated common stock other than the Company's insurance
subsidiary, are based on quoted market prices and are recognized in the
statutory-basis balance sheet.
MORTGAGE LOANS AND POLICY LOANS: The fair values for mortgage loans are
estimated utilizing discounted cash flow analyses using interest rates
reflective of current market conditions and the risk characteristics of the
loans. The fair value of policy loans is assumed to equal their carrying
value.
SHORT-TERM NOTES RECEIVABLE FROM AFFILIATES AND SHORT-TERM NOTES PAYABLE TO
AFFILIATES: The fair values for short-term notes receivable from affiliates
and short-term notes payable to affiliates are assumed to equal their
carrying value.
INVESTMENT CONTRACTS: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using discounted cash flow
calculations based on interest rates currently being offered for similar
contracts with maturities consistent with those remaining for the contracts
being valued.
Fair values for the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.
13
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The following sets forth a comparison of the fair values and carrying values of
the Company's financial instruments subject to the provisions of SFAS No. 107
and No. 119:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
-------------------------- --------------------------
CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
------------ ------------ ---------- -----------
<S> <C> <C> <C> <C>
ADMITTED ASSETS
Cash and short-term investments $ 212,369 $ 212,369 $ 41,335 $ 41,335
Bonds 5,295,324 5,395,548 5,205,338 5,355,241
Preferred stocks 11,359 9,810 5,000 2,579
Common stock 130,938 130,938 122,821 122,821
Affiliated common stock, other
than insurance subsidiaries -- -- 493 493
Mortgage loans on real estate 1,214,797 1,316,723 1,085,179 1,142,860
Policy loans 38,737 38,737 36,390 36,390
Short-term notes receivable from
affiliates -- -- 8,500 8,500
LIABILITIES
Investment contract liabilities 4,428,562 4,418,285 4,411,259 4,392,559
Short-term notes payable to
affiliates 1,700 1,700 -- --
</TABLE>
3. INVESTMENTS
At December 31, 1998 and 1997, investments in affiliated entities were as
follows:
<TABLE>
<CAPTION>
1998 1997
----------------------- ----------------------
CARRYING CARRYING
AFFILIATE COST VALUE COST VALUE
--------- --------- -------- -------- ---------
<S> <C> <C> <C> <C>
Preferred:
Cadet Holding Corp. $ 5,068 $ -- $ 5,068 $ --
Common:
Bankers United Life Assurance Company 150,061 142,579 150,061 209,861
Cedar Income Fund, LTD -- -- 692 493
Life Investors Agency Group 1 -- -- --
-------- -------- -------- --------
$155,130 $142,579 $155,821 $210,354
======== ======== ======== ========
</TABLE>
14
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. INVESTMENTS (CONTINUED)
The carrying value and estimated fair value of investments in debt securities
were as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1998
Bonds:
United States Government and agencies $ 195,386 $ 5,343 $ 528 $ 200,201
State, municipal and other government 69,119 1,699 2,078 68,740
Public utilities 229,757 6,362 7,160 228,959
Industrial and miscellaneous 2,359,858 110,479 61,915 2,408,422
Mortgage-backed securities 2,441,204 59,272 11,250 2,489,226
---------- ---------- ---------- ----------
5,295,324 183,155 82,931 5,395,548
Preferred stocks 11,359 -- 1,549 9,810
---------- ---------- ---------- ----------
$5,306,683 $ 183,155 $ 84,480 $5,405,358
========== ========== ========== ==========
DECEMBER 31, 1997
Bonds:
United States Government and agencies $ 93,413 $ 3,131 $ 3 $ 96,541
State, municipal and other government 116,646 6,255 1,533 121,368
Public utilities 144,711 5,100 2,809 147,002
Industrial and miscellaneous 2,215,561 93,469 10,869 2,298,161
Mortgage-backed securities 2,635,007 61,016 3,854 2,692,169
---------- ---------- ---------- ----------
5,205,338 168,971 19,068 5,355,241
Preferred stocks 5,000 50 2,471 2,579
---------- ---------- ---------- ----------
$5,210,338 $ 169,021 $ 21,539 $5,357,820
========== ========== ========== ==========
</TABLE>
15
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. INVESTMENTS (CONTINUED)
The carrying value and estimated fair value of bonds at December 31, 1998, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without penalties.
CARRYING ESTIMATED
VALUE FAIR VALUE
---------- -----------
Due in one year or less $ 68,334 $ 66,031
Due one through five years 1,210,283 1,234,196
Due five through ten years 1,136,198 1,151,576
Due after ten years 439,305 454,519
---------- ----------
2,854,120 2,906,322
Mortgage-backed securities 2,441,204 2,489,226
---------- ----------
$5,295,324 $5,395,548
========== ==========
A detail of net investment income is presented below:
YEAR ENDED DECEMBER 31
1998 1997
---------- ----------
Interest on bonds $ 387,038 $ 383,251
Dividends from subsidiaries 80,000 --
Dividends on equity investments 1,283 821
Interest on mortgage loans 89,494 85,817
Rental income on real estate 13,756 13,062
Interest on policy loans 2,521 2,392
Other investment income/(loss) 3,793 (653)
--------- ---------
Gross investment income 577,885 484,690
Investment expenses 26,379 27,249
--------- ---------
Net investment income $ 551,506 $ 457,441
========= =========
Proceeds from sales and maturities of debt securities and related gross realized
gains and losses were as follows:
YEAR ENDED DECEMBER 31
1998 1997
------------ ------------
Proceeds $ 2,616,194 $ 2,066,835
=========== ===========
Gross realized gains $ 36,443 $ 30,120
Gross realized losses (10,361) (24,814)
----------- -----------
Net realized gains $ 26,082 $ 5,306
=========== ===========
16
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. INVESTMENTS (CONTINUED)
Gross unrealized gains and gross unrealized losses on equity securities,
including the stock of affiliated entities, were as follows:
DECEMBER 31
1998 1997
---------- ----------
Unrealized gains $ 43,606 $ 92,949
Unrealized losses (21,520) (13,220)
-------- --------
Net unrealized gains $ 22,086 $ 79,729
======== ========
At December 31, 1998, investments with an aggregate carrying value of $6,594,153
were on deposit with certain state regulatory authorities or were restrictively
held in bank custodial accounts for the benefit of such state regulatory
authorities, as required by statute.
Realized investment gains (losses) for investments are summarized below:
YEAR ENDED DECEMBER 31
1998 1997
-------- --------
Debt securities $ 26,082 $ 5,306
Short-term investments 410 (484)
Equity securities 225 15,064
Mortgage loans on real estate 11,366 1,334
Real estate 901 199
Other invested assets (3,247) (3,212)
-------- --------
35,737 18,207
Tax effect (14,255) (8,149)
Transfer to interest maintenance reserve (21,341) (11,099)
-------- --------
Net realized gains (losses) $ 141 $ (1,041)
======== ========
The maximum and minimum lending rates for mortgages during 1998 were 7.86% and
6.60%, respectively. The maximum percentage of any one mortgage loan to the
value of the underlying real estate at origination was 84%. Mortgage loans with
a carrying value of $7 were non-income producing for the previous twelve months.
Interest of $1 related to these mortgage loans was not accrued. The Company
requires all mortgage loans to carry fire insurance equal to the value of the
underlying property.
17
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. INVESTMENTS (CONTINUED)
During 1998 and 1997, mortgage loans of $0 and $13, respectively, were
foreclosed or acquired by deed and transferred to real estate. At December 31,
1998 and 1997, the Company held a mortgage loan loss reserve in the asset
valuation reserve of $14,237 and $14,001, respectively. At December 31, 1998,
the mortgage loan portfolio is diversified by geographic region and specific
collateral property type as follows:
<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION PROPERTY TYPE DISTRIBUTION
-------------------------------------------------- ------------------------------------------------
1998 1997 1998 1997
--------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
South Atlantic 23% 22% Office 35% 32%
E. North Central 20 14 Retail 31% 34%
Pacific 17 18 Industrial 22 5
Mountain 13 14 Apartment 10 10
Middle Atlantic 9 7 Other 2 19
W. South Central 7 8
E. South Central 5 8
W. North Central 3 4
New England 3 5
</TABLE>
4. REINSURANCE
The Company reinsures portions of risk on certain insurance policies which
exceed its established limits, thereby providing a greater diversification of
risk and minimizing exposure on larger risks. The Company remains contingently
liable with respect to any insurance ceded, and this would become an actual
liability in the event that the assuming insurance company became unable to meet
its obligation under the reinsurance treaty.
Reinsurance assumption and cession treaties are transacted primarily with
affiliates. Premiums earned reflect the following reinsurance assumed and ceded
amounts:
1998 1997
----------- -----------
Direct premiums $ 1,102,695 $ 1,212,443
Reinsurance assumed 22,319 29,042
Reinsurance ceded (75,308) (79,914)
----------- -----------
Net premiums earned $ 1,049,706 $ 1,161,571
=========== ===========
The Company received reinsurance recoveries in the amount of $28,929 and $27,557
during 1998 and 1997, respectively. At December 31, 1998 and 1997, estimated
amounts recoverable from reinsurers that have been deducted from policy and
contract claim reserves totaled $9,505 and $9,392, respectively. The aggregate
reserves for policies and contracts were reduced for reserve credits for
reinsurance ceded at December 31, 1998 and 1997 of $95,070 and $89,775,
respectively.
18
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
5. ACCIDENT AND HEALTH CLAIM LIABILITY
Unpaid claims include amounts for losses and related adjustment expenses and are
estimates of the ultimate net costs of all losses, reported and unreported.
These estimates are subject to the impact of future changes in claim severity,
frequency and other factors.
Activity in the liability for unpaid claims and related processing costs net of
reinsurance is summarized as follows:
<TABLE>
<CAPTION>
UNPAID CLAIMS UNPAID CLAIMS
LIABILITY BEGINNING CLAIMS LIABILITY END
OF YEAR INCURRED CLAIMS PAID OF YEAR
---------------------- ------------ --------------- ------------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
1998 $ - $183,474 $ 82,851 $100,623
1997 and prior 137,018 (2,988) 86,751 47,279
------------- -------- --------- --------
137,018 $180,486 $169,602 147,902
======== =========
Active life reserve 177,598 201,822
------------- -------
Total accident and health reserves $314,616 $349,724
============= ========
YEAR ENDED DECEMBER 31, 1997
1997 $ -- $174,786 $ 76,549 $ 98,237
1996 and prior 127,917 (16,608) 72,528 38,781
------------- -------- --------- ---------
127,917 $158,178 $149,077 137,018
======== =========
Active life reserve 153,277 177,598
------------- ---------
Total accident and health reserves $281,194 $314,616
============= =========
</TABLE>
The Company's unpaid claims reserve was decreased by $2,988 and $16,608 for the
years ended December 31, 1998 and 1997, respectively, for health claims that
occurred prior to those balance sheet dates. The redundancies in 1998 and 1997
resulted primarily from variances in the frequency of claims or claim severity.
6. INCOME TAXES
For federal income tax purposes, the Company joins in a consolidated tax return
filing with its parent and other affiliated companies. Under the terms of a tax
sharing agreement between the Company and its affiliates, the Company computes
federal income tax expense as if it were filing a separate income tax return,
except that tax credits and net operating loss carryforwards are determined on
the basis of the consolidated group. Additionally, the alternative minimum tax
is computed for the consolidated group and the resulting tax, if any, is
allocated back to the separate companies on the basis of the separate companies'
alternative minimum taxable income.
19
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
6. INCOME TAXES (CONTINUED)
Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to gain from operations before federal income
tax expense and net realized capital gains (losses) on investments for the
following reasons:
YEAR ENDED DECEMBER 31
1998 1997
--------- ----------
Computed tax at federal statutory rate (35%) $ 60,970 $ 48,151
Tax reserve adjustment 2,116 1,937
Excess tax depreciation (703) (325)
Deferred acquisition costs - tax basis 8,011 6,625
Prior year overaccrual (6,301) (2,755)
Dividend received deduction (28,073) (102)
Charitable contribution (1,183) (1,577)
Other items - net (1,274) (1,356)
-------- --------
Federal income tax expense $ 33,563 $ 50,598
======== ========
Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to realized gains (losses) due to differences
in book and tax asset bases at the time certain investments are sold.
Prior to 1984, as provided for under the Life Insurance Company Tax Act of 1959,
a portion of statutory income was not subject to current taxation but was
accumulated for income tax purposes in a memorandum account referred to as the
policyholders' surplus account. No federal income taxes have been provided for
in the financial statements on income deferred in the policyholders' surplus
account ($3,733 at December 31, 1998). To the extent dividends are paid from the
amount accumulated in the policyholders' surplus account, net earnings would be
reduced by the amount of tax required to be paid. Should the entire amount in
the policyholders' surplus account become taxable, the tax thereon computed at
current rates would amount to approximately $1,307.
The Company's federal income tax returns have been examined and closing
agreements have been executed with the Internal Revenue Service through 1992. An
examination is underway for years 1993 through 1995.
20
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
7. POLICY AND CONTRACT ATTRIBUTES
Participating life insurance policies were issued by the Company which entitle
policyholders to a share in the earnings of the participating policies, provided
that a dividend distribution, which is determined annually based on mortality
and persistency experience of the participating policies, is authorized by the
Company. Participating insurance constituted less than 1% of ordinary life
insurance in force at December 31, 1998 and 1997.
A portion of the Company's policy reserves and other policyholders' funds
relates to liabilities established on a variety of the Company's products that
are not subject to significant mortality or morbidity risk; however, there may
be certain restrictions placed upon the amount of funds that can be withdrawn
without penalty. The amount of reserves on these products, by withdrawal
characteristics, is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
------------------------- -------------------------
PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL
---------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal at book
value less surrender charge $1,251,829 28% $1,617,007 36%
Subject to discretionary withdrawal at book
value (minimal or no charges or
adjustments) 3,156,306 69 2,783,769 61
Not subject to discretionary withdrawal
provision 150,725 3 148,605 3
---------- -------- ---------- ------
4,558,860 100% 4,549,381 100%
Less reinsurance ceded 42,300 48,960
Total policy reserves on annuities and ---------- ----------
deposit fund liabilities $4,516,560 $4,500,421
========== ==========
</TABLE>
Reserves on the Company's traditional life products are computed using mean
reserving methodologies. These methodologies result in the establishment of
assets for the amount of the net valuation premiums that are anticipated to be
received between the policy's paid-through date to the policy's next anniversary
date. At December 31, 1998 and 1997, these assets (which are reported as
premiums deferred and uncollected) and the amounts of the related gross premiums
and loadings, are as follows:
21
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
7. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)
<TABLE>
<CAPTION>
GROSS LOADING NET
------------- ------------- -------------
<S> <C> <C> <C>
DECEMBER 31, 1998
Life and annuity:
Ordinary direct first year business $ 921 $ 500 $ 421
Ordinary direct renewal business 10,939 869 10,070
Group life direct business 2,264 5 2,259
Credit life direct business 1,262 -- 1,262
Reinsurance ceded (3,563) -- (3,563)
-------- -------- --------
Total life and annuity 11,823 1,374 10,449
Accident and health:
Direct 5,017 -- 5,017
Reinsurance ceded (3,704) -- (3,704)
-------- -------- --------
Total accident and health 1,313 -- 1,313
-------- -------- --------
$ 13,136 $ 1,374 $ 11,762
======== ======== ========
DECEMBER 31, 1997
Life and annuity:
Ordinary direct first year business $ 825 $ 479 $ 346
Ordinary direct renewal business 11,186 886 10,300
Group life direct business 146 -- 146
Credit life direct business 3,393 4 3,389
Reinsurance ceded (1,939) -- (1,939)
-------- -------- --------
Total life and annuity 13,611 1,369 12,242
Accident and health:
Direct 3,910 -- 3,910
Reinsurance ceded (2,963) -- (2,963)
-------- -------- --------
Total accident and health 947 -- 947
-------- -------- --------
$ 14,558 $ 1,369 $ 13,189
======== ======== ========
</TABLE>
At December 31, 1998 and 1997, the Company had insurance in force aggregating
$1,144,513 and $1,290,488, respectively, in which the gross premiums are less
than the net premiums required by the valuation standards established by the
Insurance Division, Department of Commerce, of the State of Iowa. The Company
established policy reserves of $5,898 and $6,614 to cover these deficiencies at
December 31, 1998 and 1997, respectively.
22
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
8. DIVIDEND RESTRICTIONS
The Company is subject to limitations, imposed by the State of Iowa, on the
payment of dividends to its parent company. Generally, dividends during any
twelve-month period may not be paid, without prior regulatory approval, in
excess of the greater of (a) 10 percent of statutory capital and surplus as of
the preceding December 31, or (b) statutory gain from operations for the
preceding year. Subject to the availability of unassigned surplus at the time of
such dividend, the maximum payment which may be made in 1999, without the prior
approval of insurance regulatory authorities, is $140,636.
The Company paid $175,000 and $31,400 in 1998 and 1997, respectively, in cash
dividends to First AUSA.
9. RETIREMENT AND COMPENSATION PLANS
The Company's employees participate in a qualified benefit plan sponsored by
AEGON. The Company has no legal obligation for the plan. The Company recognizes
pension expense equal to its allocation from AEGON. The pension expense is
allocated among the participating companies based on the FASB No. 87 expense as
a percent of salaries. The benefits are based on years of service and the
employee's compensation during the highest five consecutive years of employment.
Pension expense aggregated $1,605 and $1,121 for the years ended December 31,
1998 and 1997, respectively. The plan is subject to the reporting and disclosure
requirements of the Employee Retirement Income Security Act of 1974.
The Company's employees also participate in a contributory defined contribution
plan sponsored by AEGON which is qualified under Section 401(k) of the Internal
Revenue Service Code. Employees of the Company who customarily work at least
1,000 hours during each calendar year and meet the other eligibility
requirements are participants of the plan. Participants may elect to contribute
up to fifteen percent of their salary to the plan. The Company will match an
amount up to three percent of the participant's salary. Participants may direct
all of their contributions and plan balances to be invested in a variety of
investment options. The plan is subject to the reporting and disclosure
requirements of the Employee Retirement Income Security Act of 1974. Expense
related to this plan was $1,226 and $626 for the years ended December 31, 1998
and 1997, respectively.
AEGON sponsors supplemental retirement plans to provide the Company's senior
management with benefits in excess of normal pension benefits. The plans are
noncontributory and benefits are based on years of service and the employee's
compensation level. The plans are unfunded and nonqualified under the Internal
Revenue Service Code.
23
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
9. RETIREMENT AND COMPENSATION PLANS (CONTINUED)
plans for certain key employees of the Company. AEGON also sponsors an employee
stock option plan for individuals employed at least three years and a stock
purchase plan for its producers, with the participating affiliated companies
establishing their own eligibility criteria, producer contribution limits and
company matching formula. These plans have been accrued or funded as deemed
appropriate by management of AEGON and the Company.
In addition to pension benefits, the Company participates in plans sponsored by
AEGON that provide postretirement medical, dental and life insurance benefits to
employees meeting certain eligibility requirements. Portions of the medical and
dental plans are contributory. The expenses of the postretirement plans
calculated on the pay-as-you-go basis are charged to affiliates in accordance
with an intercompany cost sharing arrangement. The Company expensed $329 and
$155 for the years ended December 31, 1998 and 1997, respectively.
10. RELATED PARTY TRANSACTIONS
The Company shares certain officers, employees and general expenses with
affiliated companies.
The Company receives data processing, investment advisory and management,
marketing and administration services from certain affiliates. During 1998 and
1997, the Company paid $54,566 and $37,076, respectively, for such services,
which approximates their costs to the affiliates.
The Company provides office space, marketing and administrative services to
certain affiliates. During 1998 and 1997, the Company received $113,205 and
$7,355, respectively, for these services, which approximates their costs to the
Company.
Payables and receivables to and from affiliates bear interest at the thirty-day
commercial paper rate, 4.88% at December 31, 1998. During 1998 and 1997, the
Company paid net interest of $1,552 and $969, respectively, to affiliates.
Short-term notes payable to affiliates bear interest at rates ranging from 5.25%
to 5.35%.
During 1998, the Company purchased life insurance policies covering the lives of
certain employees of the Company. Premiums of $87,000 were paid to an affiliate
for these policies. At December 31, 1998, the cash surrender value of these
policies was $90,893.
24
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
11. COMMITMENTS AND CONTINGENCIES
The Company is a party to legal proceedings incidental to its business. Although
such litigation sometimes includes substantial demands for compensatory and
punitive damages, in addition to contract liability, it is management's opinion,
after consultation with counsel and a review of available facts, that damages
arising from such demands will not be material to the Company's financial
position.
The Company has guaranteed that AUSA Life Insurance Company, Inc., an affiliate,
will maintain capital and surplus amounts in excess of the statutory minimum
requirements of $3,000 through 1998. At December 31, 1998, AUSA Life Insurance
Company had capital and surplus of $303,246.
The Company is subject to insurance guaranty laws in the states in which it
writes business. These laws provide for assessments against insurance companies
for the benefit of policyholders and claimants in the event of insolvency of
other insurance companies. Assessments are charged to operations when received
by the Company, except where right of offset against other taxes paid is allowed
by law; amounts available for future offsets are recorded as an asset on the
Company's balance sheet. The future obligation has been based on the most recent
information available from the National Organization of Life and Health
Insurance Guaranty Associations (NOLHGA). Potential future obligations for
unknown insolvencies are not determinable by the Company. The Company has
established a reserve of $6,793 and $4,857 at December 31, 1998 and 1997,
respectively, for its estimated share of future guaranty fund assessments
related to several major insurer insolvencies. The guaranty fund expense was
$2,053 and $326 for December 31, 1998 and 1997, respectively.
12. YEAR 2000 (UNAUDITED)
The term Year 2000 issue generally refers to the improper processing of dates
and incorrect date calculations that might occur in computer software and
hardware and embedded-systems as the Year 2000 is approached. The use of
computer programs that rely on two-digit date fields to perform computations and
decision-making functions may cause systems to malfunction when processing
information involving dates after 1999. For example, any computer software that
has date-sensitive coding might recognize a code of 00 as the year 1900 rather
than the year 2000.
25
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
12. YEAR 2000 (UNAUDITED) (CONTINUED)
The Company has developed a Year 2000 Project Plan (the Plan) to address the
Year 2000 issue as it affects the Company's internal Information Technology
("IT") and non-IT systems, and to assess Year 2000 issues relating to third
parties with whom the Company has critical relationships.
The Plan for addressing internal systems generally includes an assessment of
internal IT and non-IT systems and equipment affected by the Year 2000 issue;
definition of strategies to address affected systems and equipment; remediation
of identified systems and equipment; internal testing and certification that
each internal system is Year 2000 compliant; and a review of existing and
revised business resumption and contingency plans to address potential Year 2000
issues. The Company has remediated and tested substantially all of its
mission-critical internal IT systems as of December 31, 1998. The Company
continues to remediate and test certain non-critical internal IT systems,
internal non-IT systems and will continue with a revalidation testing program
throughout 1999.
The Company's Year 2000 issues are more complex because a number of its systems
interface with other systems not under the Company's control. The Company's most
significant interfaces and uses of third-party vendor systems are in the bank,
financial services and trust areas. The Company utilizes various banks to handle
numerous types of financial and sales transactions. Several of these banks also
provide trustee and custodial services for the Company's investment holdings and
transactions. These services are critical to a financial services company such
as the Company as its business centers around cash receipts and disbursements to
policyholders and the investment of policyholder funds. The Company has received
written confirmation from its vendor banks regarding their status on Year 2000.
The banks indicate their dedication to resolving any Year 2000 issues related to
their systems and services prior to December 31, 1999. The Company anticipates
that a considerable effort will be necessary to ensure that its corrected or new
systems can properly interface with those business partners with whom it
transmits and receives data and other information (external systems). The
Company has undertaken specific testing regimes with these third-party business
partners and expects to continue working with its business partners on any
interfacing of systems. However, the timing of external system compliance cannot
currently be predicted with accuracy because the implementation of Year 2000
readiness will vary from one company to another.
26
<PAGE>
Life Investors Insurance Company of America
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
12. YEAR 2000 (UNAUDITED) (CONTINUED)
The Company does have some exposure to date-sensitive embedded technology such
as micro-controllers, but the Company views this exposure as minimal. Unlike
other industries that may be equipment intensive, like manufacturing, the
Company is a life insurance and financial services organization providing
insurance, annuities and pension products to its customers. As such, the primary
equipment and electronic devices in use are computers and telephone-related
equipment. This type of hardware can have date sensitive-embedded technology
which could have Year 2000 problems. Because of this exposure, the Company has
reviewed its computer hardware and telephone systems, with assistance from the
applicable vendors, and has upgraded, or replaced, or is in the process of
replacing any equipment that will not properly process date-sensitive data in
the Year 2000 or beyond. This undertaking has been substantially completed for
all operations including the Company.
For the Company, a reasonably likely worst case scenario might include one or
more of the Company's significant policyholder systems being non-compliant. Such
an event could result in a material disruption of the Company's operations.
Specifically, a number of the Company's operations could experience an
interruption in the ability to collect and process premiums or deposits, process
claim payments, accurately maintain policyholder information, accurately
maintain accounting records, and/or perform adequate customer service. Should
the worst case scenario occur, it could, dependent upon its duration, have a
material impact on the Company's business and financial condition. Simple
failures can be repaired and returned to production within a matter of hours
with no material impact. Unanticipated failures with a longer service disruption
period could have a more serious impact. For this reason, the Company is placing
significant emphasis on risk management and Year 2000 business resumption
contingency planning in 1999 by modifying its existing business resumption and
disaster recovery plans to address potential Year 2000 issues.
The actions taken by management under the Year 2000 Project Plan are intended to
significantly reduce the Company's risk of a material business interruption
based on the Year 2000 issues. It should be noted that the Year 2000 computer
problem, and its resolution, is complex and multifaceted, and any company's
success cannot be conclusively known until the Year 2000 is reached. In spite of
its efforts or results, the Company's ability to function unaffected to and
through the Year 2000 may be adversely affected by actions (or failure to act)
of third parties beyond our knowledge or control. It is anticipated that there
may be problems that will have to be resolved in the ordinary course of business
on and after the Year 2000. However, the Company does not believe that the
problems will have a material adverse affect on the Company's operations or
financial condition.
27
<PAGE>
[ERNST & YOUNG LLP LETTERHEAD]
Report of Independent Auditors on Other Financial Information
The Board of Directors
Life Investors Insurance Company of America
Our audits were conducted for the purpose of forming an opinion on the
statutory-basis financial statements taken as a whole. As explained in the third
paragraph of our auditors' report on the statutory-basis financial statements,
these financial statements do not purport to be presented in conformity with
generally accepted accounting principles. The accompanying supplemental schedule
of selected statutory-basis financial data is presented to comply with the
National Association of Insurance Commissioners' Annual Statement Instructions
and is not a required part of the statutory-basis financial statements. Such
information has been subjected to the auditing procedures applied in our audit
of the statutory-basis financial statements and, in our opinion, is fairly
stated in all material respects in relation to the statutory-basis financial
statements taken as a whole.
/s/ ERNST & YOUNG LLP
February 19, 1999
28
<PAGE>
Life Investors Insurance Company of America
Supplemental Schedule of Selected
Statutory-Basis Financial Data
(Dollars in thousands)
As of and for the year ended December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
Investment income earned:
U. S. Government bonds $ 14,169
Other bonds (unaffiliated) 371,577
Preferred stocks (unaffiliated) 571
Common stocks (unaffiliated) 704
Common stocks of affiliates 80,008
Mortgage loans on real estate 89,494
Real estate 13,756
Premium notes, policy loans and liens 2,521
Cash on hand and on deposit 1,338
Short-term investments 1,292
Other invested assets 930
Aggregate write-ins for investment income 1,538
Derivative instruments (13)
-----------
Total gross investment income $ 577,885
===========
Real estate owned, at book value less encumbrances $ 83,474
Mortgage loans on real estate by collateral classification, at book value:
Farm $ 6,817
Residential mortgages 566
Commercial mortgages 1,207,454
-----------
Total mortgage loans on real estate $ 1,214,837
===========
Mortgage loans on real estate by standing, at book value:
Good standing $ 1,206,736
Good standing with restructured terms 8,085
Interest overdue more than three months, not in foreclosure 16
Foreclosures in process --
-----------
Total mortgage loans on real estate $ 1,214,837
===========
Other long-term assets, at statement value $ 58,391
Bonds and stocks of parents, subsidiaries and affiliates, at book value:
Preferred stocks $ 5,068
Common stocks 150,062
-----------
Total bonds and stocks of parents, subsidiaries and affiliates $ 155,130
===========
</TABLE>
29
<PAGE>
Life Investors Insurance Company of America
Supplemental Schedule of Selected
Statutory-Basis Financial Data (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C>
Bonds by maturity, at statement value:
Due within one year $ 475,052
Over 1 year through 5 years 2,283,790
Over 5 years through 10 years 1,945,887
Over 10 years through 20 years 441,911
Over 20 years 148,684
-----------
Total bonds $ 5,295,324
===========
Bonds by class, at statement value:
Class 1 $ 3,507,723
Class 2 1,302,236
Class 3 325,845
Class 4 131,980
Class 5 27,540
Class 6 --
-----------
Total bonds $ 5,295,324
===========
Bonds by trading category, at statement value:
Total bonds publicly traded $ 3,987,356
Total bonds privately placed 1,307,968
-----------
Total bonds $ 5,295,324
===========
Preferred stocks, at statement value $ 11,359
Common stocks, at market value 273,517
Short-term investments, at book value 189,666
Cash on deposit 22,703
Life insurance in force:
Ordinary $12,089,372
Credit life 2,000,927
Group life 14,218,383
-----------
Total life insurance in force $28,308,682
===========
Amount of accidental death insurance in force under ordinary policies $ 372,358
Life insurance policies (certificates for group life) with disability provisions
in force:
Ordinary $ 179,047
Group life 81,708
</TABLE>
30
<PAGE>
Life Investors Insurance Company of America
Supplemental Schedule of Selected
Statutory-Basis Financial Data (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C>
Supplementary contracts in force:
Ordinary, not involving life contingencies:
Amount on deposit $ 664
Income payable 12,607
Ordinary, involving life contingencies - income payable 7,083
Annuities:
Ordinary:
Immediate - income payable $ 6,507
Deferred - fully paid (account balance) 1,484,083
Deferred - not fully paid (account balance) 2,448,577
Group:
Income payable $ 1,906
Fully paid (account balance) 42,292
Not fully paid (account balance) 83,389
Accident and health insurance (premiums in force):
Ordinary $ 98,637
Group 137,075
Credit 91,488
Deposit funds and dividend accumulations (account balance):
Deposit funds $ 20,047
Dividend accumulations 7,828
Claim payments for the year ended December 31, 1998 - by year in which losses
were incurred:
Group accident and health:
1998 $ 53,550
1997 29,452
1996 7,110
Other accident and health:
1998 20,573
1997 20,027
1996 5,258
Credit accident and health:
1998 8,728
1997 9,926
1996 4,576
</TABLE>
31
<PAGE>
Life Investors Insurance Company of America
Supplemental Schedule of Selected
Statutory-Basis Financial Data (continued)
NOTE - BASIS OF PRESENTATION
The accompanying schedule presents selected statutory-basis financial data as of
December 31, 1998 and for the year then ended for purposes of complying with
paragraph 9 of the Annual Audited Financial Reports in the General section of
the National Association of Insurance Commissioners' Annual Statement
Instructions and agrees to or is included in the amounts reported in the
Company's 1998 Statutory Annual Statement as filed with the Insurance Division,
Department of Commerce, of the State of Iowa.
Certain items required by paragraph 9 of the Annual Audited Financial Reports in
the General section of the National Association of Insurance Commissioners'
Annual Statement Instructions have been omitted from the schedule presented
herein as amounts are zero or items are not applicable.
32
<PAGE>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
SUMMARY OF INVESTMENTS - OTHER THAN
INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1998
(IN THOUSANDS) (UNAUDITED)
SCHEDULE I
<TABLE>
<CAPTION>
AMOUNT AT WHICH
MARKET SHOWN IN THE
Type of Investment COST (1) VALUE BALANCE SHEET
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED MATURITIES
Bonds:
United States Government and
government agencies and authorities 1,116,774 1,141,906 1,116,774
States, municipalities and political
subdivisions 82,574 90,773 82,574
Foreign governments 65,174 66,091 65,174
Public utilities 229,757 229,757 229,757
All other corporate bonds 3,801,045 3,867,819 3,801,045
Redeemable preferred stock 11,359 9,810 11,359
-------------------------------------
Total fixed maturities 5,306,683 5,406,156 5,306,683
EQUITY SECURITIES
Common stocks:
Public utilities 3,172 6,668 6,668
Banks, trust and insurance 7,161 10,335 10,335
Industrial, miscellaneous and all other 85,968 113,935 113,935
-------------------------------------
Total equity securities 96,301 130,938 130,938
Mortgage loans on real estate 1,214,797 1,214,797
Real estate 71,800 71,800
Real estate acquired in satisfaction of debt 6,819 6,819
Policy loans 38,737 38,737
Other long-term investments 58,391 58,391
Cash and short-term investments 212,369 212,369
--------- ---------
Total investments 7,005,897 7,040,534
========= =========
</TABLE>
(1) Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and adjusted for amortization of premiums or
accrual of discounts.
33
<PAGE>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
SUPPLEMENTARY INSURANCE INFORMATION
DECEMBER 31, 1998
(IN THOUSANDS) (UNAUDITED)
SCHEDULE III
<TABLE>
<CAPTION>
BENEFITS,
CLAIMS,
FUTURE POLICY POLICY AND NET LOSSES AND
BENEFITS AND UNEARNED CONTRACT PREMIUM INVESTMENT SETTLEMENT OPERATING PREMIUMS
EXPENSES PREMIUMS LIABILITIES REVENUE INCOME* EXPENSES EXPENSES* WRITTEN
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1998
Individual life 1,455,482 0 10,103 379,600 92,298 403,328 72,538 0
Individual health 160,471 84,968 37,369 144,965 20,675 108,552 71,347 96,709
Group life and health 84,527 8,977 50,438 202,580 10,526 143,347 47,991 172,599
Annuity 4,367,436 0 0 322,561 348,007 567,071 59,553 0
Aggregate of all other lines of business 0 0 0 0 80,000 0 0
-----------------------------------------------------------------------------------------
6,067,916 93,945 97,910 1,049,706 551,506 1,222,298 251,429
=========================================================================================
YEAR ENDED DECEMBER 31, 1997
Individual life 1,131,903 0 10,972 250,767 80,751 275,055 55,770 0
Individual health 132,971 83,333 37,601 130,533 19,485 94,338 72,277 92,183
Group life and health 81,059 9,079 44,766 193,426 10,267 120,782 51,414 147,998
Annuity 4,361,539 0 0 586,845 346,938 816,969 43,211 0
-----------------------------------------------------------------------------------------
5,707,472 92,412 93,339 1,161,571 457,441 1,307,144 222,672
=========================================================================================
</TABLE>
* Allocations of net investment income and other operating expenses are based on
a number of assumptions and estimates, and the results would change if
different methods were applied.
34
<PAGE>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
Reinsurance
December 31, 1998
(In Thousands) (Unaudited)
SCHEDULE IV
<TABLE>
<CAPTION>
ASSUMED PERCENTAGE
CEDED TO FROM OF AMOUNT
GROSS OTHER OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998
Life insurance in force 32,242,062 4,533,369 599,989 28,308,682 2.1%
Premiums:
Individual life 400,787 34,351 12,314 378,750 3.3%
Individual health 164,274 24,482 5,172 144,964 3.6%
Group life and health 215,205 15,973 3,348 202,580 1.7%
Annuity 322,429 502 1,485 323,412 0.5%
----------------------------------------------------------------------
1,102,695 75,308 22,319 1,049,706 2.1%
======================================================================
YEAR ENDED DECEMBER 31, 1997
Life insurance in force 32,049,197 3,123,804 646,128 29,571,521 2.2%
======================================================================
Premiums:
Individual life 283,431 36,023 2,474 249,882 1.0%
Individual health 163,062 34,577 2,048 130,533 1.6%
Group life and health 180,093 8,246 21,579 193,426 11.2%
Annuity 585,857 1,068 2,941 587,730 0.5%
----------------------------------------------------------------------
1,212,443 79,914 29,042 1,161,571 2.5%
======================================================================
</TABLE>
35
<PAGE>
PART II.
OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A)
Life Investors Insurance Company of America ("Life Investors") hereby
represents that the fees and charges 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 Life Investors.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities
Act of 1933 (the "Act") 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.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet
The Prospectus, consisting of ___ pages
The undertaking to file reports
Representation pursuant to Section 26(e)(2)(A)
The Rule 484 undertaking
The signatures
Written consent of the following persons:
(a) Roger Hallquist, Actuary
(b) John D. Cleavenger, Esq.
(c) Sutherland Asbill & Brennan LLP
(d) Ernst & Young LLP
<PAGE>
The following exhibits:
1. The following exhibits correspond to those required by paragraph A to
the instructions as to exhibits in Form N-8B-2:
A. (1) Resolution of the Board of Directors of Life Investors
establishing Life Investors Variable Life Account A (the
"Separate Account")
(2) Not Applicable (Custody Agreement)
(3) Distribution of Policies
(a) Form of Principal Underwriting Agreement
(b) Form of Broker-Dealer Supervision and Sales Agreement
(4) Not Applicable (Agreements between Life Investors, the principal
underwriter, or custodian other than those set forth above in A.
(1), (2), and (3))
(5) Specimen Flexible Premium Variable Life Insurance Policy
(a) Waiver of Premium Benefit
(b) Waiver of Monthly Deduction
(c) Level One-Year Term Insurance
(d) Additional Insured's Level One-Year Term Insurance
(e) Accidental Death Benefit
(f) Guaranteed Insurability Benefit
(g) Income Replacement Benefit
(h) Monthly Benefit
(i) Disability Income/Waiver of Premium Benefit Rider
(j) Children's Benefit
(6) (a) Certificate of Incorporation of Life Investors
(b) By-Laws of Life Investors
(7) Not Applicable (Any insurance policy under a contract between
the Separate Account and Life Investors)
(8) (a) Form of Participation Agreement regarding Janus Aspen Series
(b) Form of Participation Agreement regarding AIM Variable
Insurance Funds, Inc.
(c) Form of Participation Agreement regarding Oppenheimer
Variable Account Funds
(d) Form of Participation Agreement regarding Fidelity Variable
Insurance Products Funds
(9) Not Applicable (All other material contracts concerning the
Separate Account)
(10) Application for Flexible Premium Variable Life Insurance Policy
(11) Memorandum describing issuance, transfer and redemption
procedures
<PAGE>
2. Opinion of Counsel as to the legality of the securities being
registered
3. Not Applicable (Financial statements omitted from the prospectus
pursuant to Instruction 1(b) or (c) of Part I
4. Not Applicable
5. Opinion and consent of Roger Hallquist as to actuarial matters
pertaining to the securities being registered
6. Consent of Sutherland Asbill & Brennan LLP
7. Consent of Ernst & Young LLP
8. Powers of Attorney
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, Life
Investors Variable Life Account A, has duly caused this Registration Statement
to be signed on its behalf by the undersigned thereunto duly authorized, and its
seal to be hereunto affixed and attested, all in the City of Cedar Rapids and
State of Iowa on this 20th day of December, 1999.
(Seal) LIFE INVESTORS VARIABLE LIFE ACCOUNT A
(Registrant)
LIFE INVESTORS INSURANCE COMPANY
OF AMERICA
(Depositor)
/s/ CRAIG D. VERMIE /s/ REX B. ENO
- ----------------------- -----------------------
Craig D. Vermie Rex B. Eno
Vice President, Secretary President and Chairman of the Board
General Counsel and Director
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
Signature and Title Date
/s/ REX B. ENO 12/15/99
- ---------------------------- --------
Rex B. Eno
President and Chairman of the Board
/s/ PATRICK S. BAIRD 12/15/99
- ---------------------------- --------
Patrick S. Baird
Senior Vice President, Chief Operating Officer and Director
/s/ DOUGLAS C. KOLSRUD 12/15/99
- ---------------------------- --------
Douglas C. Kolsrud
Senior Vice President, Chief Investment Officer, Corporate Actuary
and Director
/s/ CRAIG D. VERMIE 12/15/99
- ---------------------------- --------
Craig D. Vermie
Vice President, Secretary, General Counsel and Director
/s/ ROBERT J. KONTZ 12/17/99
- ---------------------------- --------
Robert J. Kontz
Vice President and Corporate Controller
/s/ BRENDA K. CLANCY 12/20/99
- ---------------------------- --------
Brenda K. Clancy
Vice President, Treasurer and Chief Financial Officer and Director
/s/ JACK R. DYKHOUSE 12/15/99
- ---------------------------- --------
Jack R. Dykhouse
Executive Vice President and Director
/s/ WILLIAM L. BUSLER 12/16/99
- ---------------------------- --------
William L. Busler
Executive Vice President and Director
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
1. The following exhibits correspond to those required by paragraph A to
the instructions as to exhibits in Form N-8B-2:
A. (1) Resolution of the Board of Directors of Life Investors
establishing Life Investors Variable Life Account A (the
"Separate Account")
(3) Distribution of Policies
(a) Form of Principal Underwriting Agreement
(b) Form of Broker-Dealer Supervision and Sales Agreement
(5) Specimen Flexible Premium Variable Life Insurance Policy
(a) Waiver of Premium Benefit
(b) Waiver of Monthly Deduction
(c) Level One-Year Term Insurance
(d) Additional Insured's Level One-Year Term Insurance
(e) Accidental Death Benefit
(f) Guaranteed Insurability Benefit
(g) Income Replacement Benefit
(h) Monthly Benefit
(i) Disability Income/Waiver of Premium Benefit Rider
(j) Children's Benefit
(6) (a) Certificate of Incorporation of Life Investors
(b) By-Laws of Life Investors
(8) (a) Form of Participation Agreement regarding Janus Aspen Series
(b) Form of Participation Agreement regarding AIM Variable
Insurance Funds, Inc.
(c) Form of Participation Agreement regarding Oppenheimer
Variable Account Funds
(d) Form of Participation Agreement regarding Fidelity Variable
Insurance Products Funds
(10) Application for Flexible Premium Variable Life Insurance Policy
(11) Memorandum describing issuance, transfer and redemption
procedures
<PAGE>
2. Opinion of Counsel as to the legality of the securities being
registered
5. Opinion and consent of Roger Hallquist as to actuarial matters
pertaining to the securities being registered
6. Consent of Sutherland Asbill & Brennan LLP
7. Consent of Ernst & Young LLP
8. Powers of Attorney
EXHIBIT 1.A.(1)
CERTIFICATION
I, Sara L. Haas, being a duly constituted Assistant Secretary of Life
Investors Insurance Company of America, hereby certify that the following is a
true and correct copy of resolutions duly adopted by the Board of Directors of
the Company by Written Consent dated July 1, 1999 and that said resolutions are
still in full force and effect:
RESOLVED, that, in accordance with Iowa Insurance Law Section 508A.1
the officers of the Company be and they are authorized to establish the
Life Investors Variable Life Account A, as a separate account (the
"Account");
BE IT FURTHER RESOLVED that the Account shall be established for the
purpose of funding variable life insurance policies ("Policies") which
may be issued by the Company and shall constitute a separate account
into which are allocated amounts paid to the Company which are to be
applied under the terms of said Policies; and
BE IT FURTHER RESOLVED that the income, gains and losses, whether or
not realized, from assets allocated to the Account shall, in accordance
with the Policies, be credited to or charged against such Account
without regard to either income, gains or losses of another separate
account or of the Company; and
BE IT FURTHER RESOLVED that the portion of the assets of the Account
equal to the reserves and other policy liabilities with respect to the
Account shall not be chargeable with liabilities arising out of any
other business the Company may conduct; and
BE IT FURTHER RESOLVED that separate investment divisions be, and
hereby are, established within the Account to which payments under the
Policies will be allocated in accordance with instructions received
from policy owners, and that the appropriate officers be, and hereby
are, authorized to add, combine or remove any investment division of
the Account as they deem necessary or appropriate; and
<PAGE>
BE IT FURTHER RESOLVED that the income, gains and losses, whether or
not realized, from assets allocated to each investment division of the
Account shall in accordance with the Policies, be credited to or
charged against such investment division of the Account without regard
to other income, gains or losses of any other investment division of
the Account; and
BE IT FURTHER RESOLVED that the appropriate officers be authorized to
deposit such amount in the Account or in each investment division
thereof as may be necessary or appropriate to facilitate the
commencement of the Account's operations; and
BE IT FURTHER RESOLVED that the appropriate officers are authorized to
transfer funds from time to time between the Company's general account
and the Account in order to establish the Account or to support the
operation of the Policies with respect to the Account as deemed
necessary or appropriate and consistent with the terms of the Policies;
and
BE IT FURTHER RESOLVED that the appropriate officers of the Company are
authorized to change the designation of the Account to such other
designation as they may deem necessary or appropriate; and
BE IT FURTHER RESOLVED that the appropriate officers of the Company,
with such assistance from the Company's auditors, legal counsel and
independent consultant or others as they may require, be, and they
hereby are, authorized and directed to take all action necessary to:
(a) register the Account as a unit investment trust under the
Investment Company Act of 1940, as amended, and to change the
classification under which the Account is registered or to de-register
the Account as they deem necessary or appropriate; (b) register the
Policies in such amounts, which may be an indefinite amount, as the
officers of the Company shall from time to time deem appropriate under
the Securities Act of 1933; and (c) take all other actions which are
necessary in connection with the offering of said Policies for sale and
the operation of the Account in order to comply with the Investment
Company Act of 1940, as amended, the Securities Exchange Act of 1934
and the Securities Act of 1933, and other applicable Federal laws,
including the filing of any registration statements, any amendments to
registration statements, any undertakings, any applications, and any
amendments to such applications, for exemptions from the Investment
Company Act of 1940, as amended, or exemptions from other applicable
Federal laws as the officers of the Company shall deem necessary or
appropriate; and
BE IT FURTHER RESOLVED that the appropriate officers are authorized and
empowered to prepare, execute and cause to be filed with the Securities
and Exchange Commission on behalf of the Account, and by the Company as
sponsor and depositor, documents necessary for registering the Account
as an investment company under the Investment Company Act of 1940, as
amended, documents necessary for registering the Policies under
2
<PAGE>
the Securities Act of 1933, any applications for exemptions from the
Investment Company Act of 1940, as amended, or other applicable Federal
laws, and any and all amendments to the foregoing on behalf of the
Account and the Company and on behalf of and as attorneys for the
principal executive officer and/or the principal financial officer
and/or the principal accounting officer and/or any other officer of the
Company; and
BE IT FURTHER RESOLVED that John Cleavenger of 4333 Edgewood Road NE,
Cedar Rapids, Iowa 52499 is appointed agent for service under such
registration statements and is duly authorized to receive communication
and notices from the Securities and Exchange Commission with respect
thereto; and
BE IT FURTHER RESOLVED that the Company be authorized and directed to
obtain any required approvals with respect to the establishment of the
Account and marketing of the Policies, from the Commissioner of
Insurance of Iowa, and any other statutory or regulatory approvals
required by the Company as an Iowa Corporation; and
BE IT FURTHER RESOLVED that the appropriate officers of the Company be,
and they hereby are, authorized on behalf of the Account and on behalf
of the Company to take any and all action they may deem necessary or
advisable in order to sell the Policies, including any registrations,
filings, and qualifications of the Company, its officers, agents and
employees, and the Policies under the insurance and securities laws of
any of the states of the United States of America or other
jurisdiction, and in connection therewith to prepare, execute, deliver
and file all such applications, reports, covenants, resolutions,
applications for exemptions, consents to service of process, and other
papers and instruments as may be required under such laws, and to take
any and all further action which may be required under such law, and to
take any and all further action which said officers or counsel of the
Company may deem necessary or desirable (including entering into
whatever agreement may be necessary) in order to maintain such
registrations or qualifications for as long as the said officers or
counsel deem it to be in the best interests of the Account and the
Company; and
BE IT FURTHER RESOLVED that the appropriate officers are authorized in
the name and on behalf of the Account and the Company to execute and
file irrevocable written consent on the part of the Account and of the
Company to be used in such states wherein such consents to service of
process may be required under the insurance or securities laws therein
in connections with said registration or qualification of Policies and
to appoint the appropriate state official or such other person as may
be allowed by said insurance or securities laws, agent of the Account
and of the Company for the purpose of receiving and accepting process;
and
3
<PAGE>
BE IT FURTHER RESOLVED that the appropriate officers are authorized to
cause the Company to institute procedures for providing voting rights
for owners of such Policies with respect to securities owned by the
Account; and
BE IT FURTHER RESOLVED that the appropriate officers are authorized to
execute such agreement or agreements as deemed necessary and
appropriate with underwriters and distributors for the Policies to
provide distribution services, and with one or more qualified banks or
other qualified entities to provide administrative and/or custodial
services, all in connection with the establishment, operation and
maintenance of the Account and the design, issuance, and administration
of the Policies; and
BE IT FURTHER RESOLVED that the Company be authorized as deemed
necessary and appropriate either to enter into an agreement with a
qualified custodial bank for the purpose of the safekeeping of the
assets of the Account, or to undertake this safekeeping and custody of
assets after seeking and obtaining the required exemptive relief from
the Securities Exchange Commission; and
BE IT FURTHER RESOLVED that the appropriate officers of the Company,
and each of them are, hereby authorized to execute and deliver all such
documents and papers to do or cause to be done all such acts and things
as they may deem necessary or desirable to carry out the foregoing
resolutions and the intent and purposes thereof; and
BE IT FURTHER RESOLVED that the term "appropriate officers" as used
herein, shall include all of the elected and appointed officers of the
Company, either severally or individually, subject to any applicable
resolutions of the Board of Directors dealing with signing authority
for the Company.
Dated at Cedar Rapids, Iowa, this 1st day of July, 1999.
BY: S/ SARA L. HAAS
Sara L. Haas
4
EXHIBIT 1.A.3(a)
PRINCIPAL UNDERWRITING AGREEMENT
THIS PRINCIPAL UNDERWRITING AGREEMENT made and effective as of the 1st
day of October, 1999, by and between AFSG SECURITIES CORPORATION ("AFSG"), a
Pennsylvania corporation, and LIFE INVESTORS INSURANCE COMPANY OF AMERICA
("LIICA"), an Iowa corporation, on its own behalf and on behalf the separate
investment accounts of LIICA set forth in EXHIBIT A attached hereto and made a
part hereof (collectively, the "Account").
WITNESSETH:
WHEREAS, the Account was established or acquired by LIICA under the
laws of the State of Iowa, pursuant to a resolution of LIICA's Board of
Directors in order to set aside the investment assets attributable to certain
flexible premium life variable insurance policies and certain flexible premium,
multi-funded annuity contracts ("Contracts") issued by LIICA;
WHEREAS, LIICA has registered or will register the Account with the
Securities and Exchange Commission ("SEC") as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act") or will not register the Account
in proper reliance upon an exclusion from registration under the 1940 Act;
WHEREAS, LIICA has registered or will register the Contracts under the
Securities Act of 1933 (the "1933 Act") or that the Contracts 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;
WHEREAS, AFSG is and will continue to be registered as a broker-dealer
with the SEC under the Securities Exchange Act of 1934 (the "1934 Act"), and a
member of the National Association of Securities Dealers, Inc. (the "NASD")
prior to the offer and sale of the Contracts; and
<PAGE>
WHEREAS, LIICA proposes to have the Contracts sold and distributed
through AFSG, and AFSG is willing to sell and distribute such Contracts under
the terms stated herein;
NOW, THEREFORE, the parties, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT AS DISTRIBUTOR/PRINCIPAL UNDERWRITER. LIICA grants to
AFSG the exclusive right to be, and AFSG agrees to serve as, distributor and
principal underwriter of the Contracts during the term of this Agreement. AFSG
agrees to use its best efforts to solicit applications for the Contracts and
otherwise perform all duties and functions, which are necessary and proper for
the distribution of the Contracts.
2. PROSPECTUS. AFSG agrees to offer the Contracts for sale in
accordance with the registration statements and prospectus therefor then in
effect. AFSG is not authorized to give any information or to make any
representations concerning the Contracts other than those contained in the
current prospectus therefor filed with the SEC or in such sales literature as
may be authorized by LIICA.
3. CONSIDERATION. All premiums, purchase payments or other moneys
payable under the Contracts shall be remitted promptly in full together with
such application, forms and any other required documentation to LIICA or its
designated servicing agent and shall become the exclusive property of LIICA.
Checks or money orders in payment under the Contracts shall be drawn to the
order of "Life Investors Insurance Company of America" and funds may be remitted
by wire if prior written approval is obtained from LIICA.
4. COPIES OF INFORMATION. On behalf of the Account, LIICA shall furnish
AFSG with copies of all prospectuses, financial statements and other documents
which AFSG reasonably requests for use in connection with the distribution of
the Contracts.
5. REPRESENTATIONS. AFSG represents that it is (a) duly registered as a
broker-dealer under the 1934 Act, (b) a member in good standing of the NASD and
(c) to the extent necessary to offer the Contracts, duly registered or otherwise
qualified under the securities laws of any state
2
<PAGE>
or other jurisdiction. AFSG shall be responsible for carrying out its sales and
underwriting obligations hereunder in continued compliance with the NASD Rules
and federal and state securities and insurance laws and regulations. Further,
AFSG represents and warrants that it will adopt, abide by and enforce the
principles set forth in the Principles and Code of Ethical Market Conduct of the
Insurance Marketplace Standards Association as adopted by the Company.
6. OTHER BROKER-DEALER AGREEMENTS. AFSG is hereby authorized to enter
into written sales agreements with other independent broker-dealers for the sale
of the Contracts. All such sales agreements entered into by AFSG shall provide
that each independent broker-dealer will assume full responsibility for
continued compliance by itself and by its associated persons with the NASD Rules
and applicable federal and state securities and insurance laws, shall provide
that each independent broker-dealer will adopt, abide by and enforce the
principles set forth in the Principles and Code of Ethical Market Conduct of the
Insurance Marketplace Standards Association as adopted by the Company, and shall
be in such form and contain such other provisions as LIICA may from time to time
require. All associated persons of such independent broker-dealers soliciting
applications for the Contracts shall be duly and appropriately registered by the
NASD and licensed and appointed by LIICA for the sale of Contracts under the
insurance laws of the applicable states or jurisdictions in which such Contracts
may be lawfully sold. All applications for Contracts solicited by such
broker-dealers through their representatives, together with any other required
documentation and premiums, purchase payments and other moneys, shall be handled
as set forth in paragraph 3 above.
7. INSURANCE LICENSING AND APPOINTMENTS. LIICA shall apply for the
proper insurance licenses and appointments in appropriate states or
jurisdictions for the designated persons associated with AFSG or with other
independent broker-dealers that have entered into sales agreements with AFSG for
the sale of Contracts, provided that LIICA reserves the right to refuse to
appoint any proposed registered representative as an agent or broker, and to
terminate an agent or broker once appointed.
3
<PAGE>
8. RECORDKEEPING. LIICA and AFSG shall cause to be maintained and
preserved for the periods prescribed such accounts, books, and other documents
as are required of them by the 1940 Act, and 1934 Act, and any other applicable
laws and regulations. The books, accounts and records of LIICA, of the Account,
and of AFSG as to all transactions hereunder shall be maintained so as to
disclose clearly and accurately the nature and details of the transactions.
LIICA (or such other entity engaged by LIICA for this purpose), on behalf of and
as agent for AFSG, shall maintain AFSG's books and records pertaining to the
sale of Contracts to the extent as mutually agreed upon from time to time by
LIICA and AFSG; provided that such books and records shall be the property of
AFSG, and shall at all times be subject to such reasonable periodic, special or
other audit or examination by the SEC, NASD, any state insurance commissioner
and/or all other regulatory bodies having jurisdiction. LIICA shall be
responsible for sending on behalf of and as agent for AFSG all required
confirmations on customer transactions in compliance with applicable
regulations, as modified by an exemption or other relief obtained by LIICA. AFSG
shall cause LIICA to be furnished with such reports as LIICA may reasonably
request for the purpose of meeting its reporting and record-keeping requirements
under the insurance laws of the State of Iowa and any other applicable states or
jurisdictions. LIICA agrees that its records relating to the sale of Contracts
shall be subject to such reasonable periodic, special or other audit or
examination by the SEC, NASD, and any state insurance commissioner and/or all
other regulatory bodies having jurisdiction.
9. COMMISSIONS. LIICA shall have the responsibility for paying on
behalf of AFSG (a) any compensation to other independent broker-dealers and
their associated persons due under the terms of any sales agreements entered
into pursuant to paragraph 6 above, between AFSG and such broker-dealers as
agreed to by LIICA and (b) all commissions or other fees to associated persons
of AFSG which are due for the sale of the Contracts in the amounts and on such
terms and conditions as LIICA and AFSG determine. Notwithstanding the preceding
sentence, no
4
<PAGE>
broker-dealer, associated person or other individual or entity shall have an
interest in any deductions or other fees payable to AFSG as set forth herein.
10. EXPENSE REIMBURSEMENT. LIICA shall reimburse AFSG for all costs and
expenses incurred by AFSG in furnishing the services, materials, and supplies
required by the terms of this Agreement.
11. INDEMNIFICATION. LIICA agrees to indemnify AFSG for any losses
incurred as a result of any action taken or omitted by AFSG, or any of its
officers, agents or employees, in performing their responsibilities under this
Agreement in good faith and without willful misfeasance, gross negligence, or
reckless disregard of such obligations.
12. REGULATORY INVESTIGATIONS. AFSG and LIICA agree to cooperate fully
in any insurance or judicial regulatory investigation or proceeding arising in
connection with Contracts distributed under this Agreement. AFSG and LIICA
further agree to cooperate fully in any securities regulatory inspection,
inquiry, investigation or proceeding or any judicial proceeding with respect to
LIICA, AFSG, their affiliates and their representatives to the extent that such
inspection, inquiry, investigation or proceeding or judicial proceeding is in
connection with Contracts distributed under this Agreement. Without limiting the
foregoing:
(a) AFSG will be notified promptly of any customer complaint or notice
of any regulatory inspection, inquiry investigation or proceeding or judicial
proceeding received by LIICA with respect to AFSG or any representative or which
may affect LIICA's issuance of any Contracts marketed under this Agreement; and
(b) AFSG will promptly notify LIICA of any customer complaint or notice
of any regulatory inspection, inquiry, investigation or judicial proceeding
received by AFSG or any representative with respect to LIICA or its affiliates
in connection with any Contracts distributed under this Agreement.
In the case of a customer complaint, AFSG and LIICA will cooperate in
investigating such complaint and shall arrive at a mutually satisfactory
response.
5
<PAGE>
13. TERMINATION.
(a) This Agreement may be terminated by either party hereto upon 60
days' prior written notice to the other party.
(b) This Agreement may be terminated upon written notice of one party
to the other party hereto in the event of bankruptcy or insolvency of such party
to which notice is given.
(c) This Agreement may be terminated at any time upon the mutual
written consent of the parties hereto.
(d) AFSG shall not assign or delegate its responsibilities under this
Agreement without the written consent of LIICA.
(e) Upon termination of this Agreement, all authorizations, rights and
obligations shall cease except the obligations to settle accounts hereunder,
including payments or premiums or contributions subsequently received for
Contracts in effect at the time of termination or issued pursuant to
applications received by LIICA prior to termination.
14. REGULATORY IMPACT. This Agreement shall be subject to, among other
laws, the provisions of the 1940 Act and the 1934 Act and the rules,
regulations, and rulings thereunder and of the NASD, from time to time in
effect, including such exemptions from the 1940 Act as the SEC may grant, and
the terms hereof shall be interpreted and construed in accordance therewith.
AFSG shall submit to all regulatory and administrative bodies having
jurisdiction over the operations of the Account, present or future; and will
provide any information, reports or other material which any such body by reason
of this Agreement may request or require pursuant to applicable laws or
regulations.
15. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
6
<PAGE>
16. CHOICE OF LAW. This Agreement shall be construed, enforced and
governed by the laws of the State of Iowa.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective duly authorized officials as of the day and year
first above written.
AFSG SECURITIES CORPORATION LIFE INVESTORS INSURANCE COMPANY
OF AMERICA
By: S/ LISA A. WACHENDORF By: S/ PAUL REABURN
Title: VP Title: VP
7
<PAGE>
EXHIBIT A
1. Life Investors Variable Life Account A
EXHIBIT 1.A.3(b)
SELECTED BROKER AGREEMENT
THIS AGREEMENT, dated December_____,1999, is entered into by and
between AFSG SECURITIES CORPORATION ("Distributor"), a Pennsylvania corporation,
LIFE INVESTORS INSURANCE COMPANY OF AMERICA ("Company"), an Iowa corporation,
and INTERSECURITIES, INC. ("Broker"), a Delaware corporation. This Agreement
supersedes and replaces any prior Selected Broker Agreement among the parties
hereto.
WITNESSETH:
In consideration of the mutual promises contained herein, the parties hereto
agree as follows:
A. DEFINITIONS
-----------
(1) 1933 ACT -- The Securities Act of 1933, as amended, and regulations
issued pursuant thereto.
(2) 1934 ACT -- The Securities Exchange Act of 1934, as amended, and
regulations issued pursuant thereto.
(3) 1940 ACT -- The Investment Company Act of 1940, as amended, and
regulations issued pursuant thereto.
(4) ACCOUNTS -- Separate accounts established and maintained by Company
pursuant to the laws of Iowa, as applicable.
(5) CONTRACTS -- Private Contracts and/or Public Contracts, as the case may
be.
(6) FUNDS -- Open-end management investment companies registered under the
1940 Act, shares of which are sold to Accounts in connection with the
sale of Contracts, as described in the appropriate Prospectus or
Private Placement Memorandum.
(7) NASD -- The National Association of Securities Dealers, Inc.
(8) PRIVATE CONTRACTS -- Variable life insurance contracts and/or variable
annuity contracts not subject to, or exempt from registration under,
the 1933 Act and described in Schedule A attached hereto, issued by
Company and for which Distributor has been appointed the principal
underwriter pursuant to distribution agreements, copies of which have
been furnished to Broker.
(9) PRIVATE PLACEMENT MEMORANDUM -- Offering memoranda, including
amendments or supplements thereto, that describe Private Contracts.
(10) PROSPECTUS -- Prospectuses, including amendments or supplements
thereto, contained in a Registration Statement.
(11) PUBLIC CONTRACTS -- Variable life insurance contracts and/or variable
annuity contracts required to be registered under the 1933 Act and
described in Schedule B attached hereto, issued by Company and for
which Distributor has been appointed the principal underwriter pursuant
to distribution agreements, copies of which have been furnished to
Broker.
(12) REGISTRATION STATEMENT -- Registration statements, including amendments
thereto, relating to Contracts, Accounts and Funds, including financial
statements and all exhibits.
(13) SEC -- The Securities and Exchange Commission.
B. AGREEMENTS OF DISTRIBUTOR
-------------------------
(1) Pursuant to the authority delegated to it by Company, Distributor
hereby authorizes Broker to solicit applications for Contracts from
eligible persons during the term of this Agreement, provided that:
(a) Broker has been notified by Distributor that Contracts are
qualified for sale, or exempt from such qualification, under all
applicable securities and insurance laws of the states or
jurisdictions in which applications will be solicited; and
(b) there is an effective Registration Statement relating to those
Contracts that are Public Contracts.
Page 1 of 10
<PAGE>
In connection with the solicitation of applications for Contracts,
Broker is hereby authorized to offer riders that are available with
Contracts in accordance with instructions furnished by Distributor or
Company.
(2) During the term of this Agreement, Distributor shall notify Broker of
any action or circumstance that may prevent the lawful sale of
Contracts in any state or jurisdiction, including the issuance by the
SEC of any stop order with respect to a Registration Statement or the
initiation of any proceedings for that purpose or for any other purpose
relating to the registration and/or offering of Public Contracts.
(3) During the term of this Agreement, Distributor shall advise Broker of
any amendment to a Registration Statement or any amendment or
supplement to any Prospectus or Private Placement Memorandum.
C. AGREEMENTS OF BROKER
--------------------
(1) It is understood and agreed that Broker is a registered broker/dealer
under the 1934 Act and a member of the NASD and that the agents or
representatives of Broker who may solicit applications for Contracts
shall be duly registered representatives of Broker. If an agent or
representative ceases to be a registered representative of Broker, is
disqualified from continued NASD registration, has his or her
registration suspended by the NASD or otherwise fails to comply with
the rules or meet the standards imposed by this Agreement or by Broker,
Broker shall immediately notify such agent or representative and
Distributor that such agent or representative is no longer authorized
to solicit applications for Contracts.
(2) Commencing at such time as Distributor and Broker shall agree upon,
Broker agrees to make commercially reasonable efforts to find
purchasers for Contracts acceptable to Company, provided that Broker:
(a) shall only offer a Private Contract to a person who (i) meets the
definition of accredited investor under the 1933 Act, and (ii)
meets the definition of qualified purchaser under the 1940 Act, if
Accounts are not subject to registration under the 1940 Act
pursuant to Section 3(c)(7) thereof; and
(b) shall not solicit applications for Private Contracts in any manner
that constitutes a public offering or involves any form of general
solicitation or general advertising.
(3) In making commercially reasonable efforts to solicit applications for
Contracts, Broker shall engage in the following activities during the
term of this Agreement:
(a) regularly utilize only training, sales and promotional materials
relating to Contracts which have been approved by Company;
(b) establish and implement reasonable procedures for periodic
inspection and supervision of sales practices of its agents or
representatives and submit periodic reports to Distributor as may
be requested on the results of such inspections and the compliance
with such procedures;
(c) take reasonable steps to ensure that the various representatives
appointed by it shall not make recommendations to an applicant to
purchase a Contract in the absence of reasonable grounds to
believe that the purchase of the Contract is suitable for such
applicant. While not limited to the following, a determination of
suitability shall be based on information furnished to a
representative after reasonable inquiry of such applicant
concerning the applicant's insurance and investment objectives,
financial situation and needs, and, if applicable, the likelihood
that the applicant will make the premium payments contemplated by
the Contract; and
(d) adopt, abide by, and enforce the principles set forth in the
Principles and Code of Ethical Market Conduct of the Insurance
Marketplace Standards Association as adopted by Company and
provided to Broker with this Agreement.
(4) All payments for Contracts collected by agents or representatives of
Broker shall be held at all times in a fiduciary capacity and shall be
remitted promptly in full together with such applications, forms and
other required documentation to an office of Company designated by
Distributor. Checks or money orders in payment of initial premiums
shall
Page 2 of 10
<PAGE>
be drawn to the order of "Life Investors Insurance Company of America".
Broker acknowledges that Company retains the ultimate right to control
the sale of Contracts and that Distributor or Company shall have the
unconditional right to reject, in whole or part, any application for a
Contract. In the event Company or Distributor rejects an application,
Company shall immediately return all payments directly to the purchaser
and Broker shall be notified of such action. In the event that any
purchaser of a Contract elects to return such Contract pursuant to the
free look right, the purchaser shall receive a refund of either premium
payments or the value of the invested portion of such premiums as set
forth in the Contract and according to applicable state law. Broker
shall be notified of any such action.
(5) Broker shall act as an independent contractor, and nothing herein
contained shall constitute Broker, its agents or representatives, or
any employees thereof as employees of Company or Distributor in
connection with solicitation of applications for Contracts. Broker, its
agents or representatives, and its employees shall not hold themselves
out to be employees of Company or Distributor in this connection or in
any dealings with the public.
(6) Broker agrees that any material, including material it develops,
approves or uses for sales, training, explanatory or other purposes in
connection with the solicitation of applications for Contracts
hereunder (other than generic advertising materials which do not make
specific reference to Company or Contracts) shall only be used after
receiving the written consent of Distributor to such material and,
where appropriate, the endorsement of Company to be obtained by
Distributor.
(7) Solicitation and other activities by Broker shall be undertaken only in
accordance with applicable Company procedures and ethical principles
and applicable laws and regulations. No agent or representative of
Broker shall solicit applications for Contracts until duly licensed and
appointed by Company (such appointment not to be unreasonably withheld
by Company) as a life insurance and variable contract broker or agent
of Company in the appropriate states or other jurisdictions. Broker
shall ensure that such agents or representatives fulfill any training
requirements necessary to be licensed and that such agents or
representatives are properly supervised and controlled pursuant to the
rules and regulations of the SEC and the NASD. Broker shall certify
agents' and representatives' qualifications to the satisfaction of
Distributor. Broker will provide Distributor with a General
Recommendation of Agents substantially in the form attached hereto as
Exhibit "A" which will apply to all agents or subagents proposed to be
licensed and/or appointed by the Company. Any documentation regarding
the background investigation of agents conducted by Broker prior to
appointment shall be made available as required upon valid request by
any regulatory authority during the period the agent is appointed with
the Company. Broker shall provide, from time to time as requested by
Distributor, copies of insurance licenses for all states in which
Broker holds the licenses and/or insurance licenses for any states in
which Broker's affiliated insurance agency holds the licenses. Broker
understands and acknowledges that neither it nor its agents or
representatives is authorized by Distributor or Company to give any
information or make any representation in connection with this
Agreement or the offering of Contracts other than those contained in
the Prospectus or Private Placement Memorandum, as the case may be, or
other solicitation material authorized in writing by Distributor or
Company.
(8) Broker shall not have authority on behalf of Distributor or Company to:
make, alter or discharge any Contract or other form; waive any
forfeiture; extend the time of paying any premium; receive any monies
or premiums due, or to become due, to Company, except as set forth in
Section C(4) of this Agreement. Broker shall not expend, nor contract
for the expenditure of the funds of Distributor, nor shall Broker
possess or exercise any authority on behalf of Distributor by this
Agreement.
(9) Broker shall have the responsibility for maintaining the records of its
representatives who are licensed, registered and otherwise qualified to
sell Contracts. Broker shall maintain such other records as are
required of it by applicable laws and regulations. The books,
Page 3 of 10
<PAGE>
accounts and records of Company, Accounts, Distributor and Broker
relating to the sale of Contracts shall be maintained so as to clearly
and accurately disclose the nature and details of the transactions. All
records maintained by Broker in connection with this Agreement shall be
the property of Company and shall be returned to Company upon
termination of this Agreement, free from any claims or retention of
rights by Broker. Nothing in this Section C(9) shall be interpreted to
prevent Broker from retaining copies of any such records relating to
contract owner transactions which Broker is required to maintain in
order to comply with applicable federal, NASD, and state regulation.
Broker shall keep confidential any information obtained pursuant to
this Agreement and shall disclose such information only if Company has
authorized such disclosure or if such disclosure is expressly required
by any regulatory authority or court of competent jurisdiction. Broker
acknowledges that information regarding Contracts is proprietary
information and that in connection with the offer and sale of
Contracts, Broker may be required to execute confidentiality agreements
with third parties. Broker acknowledges and agrees that monetary
damages would not be a sufficient or adequate remedy for breach of the
confidentiality provisions of this Section C(9) and that Company or
Distributor shall be entitled to specific performance or injunctive
relief, in addition to any other legal or equitable remedy which may be
available. The confidentiality provisions of this Section C(9) shall
survive the termination of this Agreement.
D. COMPENSATION
------------
(1) Pursuant to the appropriate distribution agreement between Distributor
and Company, Distributor shall cause Company to arrange for the payment
of compensation for the sale of each Contract sold by an agent or
representative of Broker in accordance with Company's agreement with
the agent or representative, as the case may be, and the commission
schedule attached thereto. Such amounts shall be paid to Broker, or if
state insurance law requires, to an affiliated insurance agency,
provided, that with respect to payments to an affiliated insurance
agency, Broker:
(a) has obtained a letter from the SEC staff to the effect that the
staff will not recommend enforcement action if the affiliated
insurance agency is not registered as a broker-dealer with the
SEC; or
(b) has obtained from counsel an opinion, which shall be provided to
Distributor, that (i) Broker is entitled to rely on a no-action
letter issued by the SEC staff, a copy of which shall be provided
to Distributor, which granted no action relief to a broker-dealer
with respect to the distribution activities of the broker-dealer's
affiliated insurance agency when the insurance agency was not
registered as a broker-dealer with the SEC, and (ii) such
no-action letter has not been rescinded or modified.
All terms and conditions of Company's agreement with the agent or
representative, as the case may be, shall be incorporated by reference
herein to the extent such terms and conditions do not conflict with
this Agreement. Company shall identify to Broker with each such payment
the name of the agent or representative of Broker who solicited each
Contract covered by the payment.
(2) Neither Broker nor any of its agents or representatives shall have any
right to withhold or deduct any part of any premium it may receive for
purposes of payment of commission or otherwise. Neither Broker nor any
of its agents or representatives shall have an interest in any
compensation paid by Company to Distributor, now or hereafter, in
connection with the sale of Contracts hereunder.
E. COMPLAINTS AND INVESTIGATIONS
-----------------------------
(1) Broker and Distributor jointly agree to cooperate fully in any
insurance or securities regulatory investigation or proceeding or
judicial proceeding arising in connection with Contracts marketed under
this Agreement. Broker, upon receipt, shall notify Distributor of any
customer complaint or notice of any regulatory investigation or
proceeding or judicial proceeding in connection with Contracts. Broker
and Distributor further agree to cooperate fully in any securities
regulatory investigation or proceeding or judicial proceeding with
respect to Broker, Distributor, and their respective affiliates, agents
or
Page 4 of 10
<PAGE>
representatives to the extent that such investigation or proceeding is
in connection with Contracts marketed under this Agreement. Broker
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 Company's operations are being conducted in a manner consistent
with any applicable law or regulation. Each party shall bear its own
costs and expenses of complying with any regulatory requests, subject
to any right of indemnification that may be available pursuant to
Section G of this Agreement.
(2) Broker shall report promptly in writing to Distributor all customer
complaints relating to offers and sales of Contracts or made by or on
behalf of owners of Contracts, whether written or oral, and shall
assist Distributor and Company in resolving those complaints to the
satisfaction of all parties.
F. TERM OF AGREEMENT
-----------------
(1) This Agreement shall continue in force for one year from its effective
date and thereafter shall automatically be renewed every year for a
further one year period; provided that any party may unilaterally
terminate this Agreement upon thirty (30) days' written notice to the
other parties of its intention to do so. This Agreement shall
automatically terminate without notice upon:
(a) the bankruptcy or dissolution of Broker;
(b) any fraud or gross negligence by Broker in the performance of any
duties imposed by this Agreement or if Broker wrongfully withholds
or misappropriates, for Broker's own use, funds of Company, its
policyholders or applicants;
(c) any material breaches by Broker of this Agreement;
(d) any material violation of any applicable state or federal law
and/or administrative regulation in a jurisdiction where Broker
transacts business; or
(e) any failure of Broker to maintain a necessary license in any
jurisdiction, but only as to that jurisdiction and only until
Broker reinstates its license in such jurisdiction.
(2) Upon termination of this Agreement, all authorizations, rights and
obligations shall cease except: (a) the agreements contained in
Sections C(9) and E hereof; (b) the indemnity set forth in Section G
hereof; and (c) the obligations to settle accounts hereunder, including
commission payments on premiums subsequently received for Contracts in
effect at the time of termination or issued pursuant to applications
received by Broker prior to termination.
(3) Distributor and Company reserve the right, without notice to Broker, to
suspend, withdraw or modify the offering of Contracts or to change the
conditions of their offering.
G. INDEMNITY
---------
(1) Broker shall be held to the exercise of reasonable care in carrying out
the provisions of this Agreement.
(2) Distributor agrees to indemnify and hold harmless Broker and each
officer or director of Broker against any losses, claims, damages or
liabilities, joint or several, to which Broker or such officer or
director may become subject under applicable law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any allegedly untrue statement, or
alleged omission, of a material fact, when it would be necessary to
include a true statement of such fact in a Registration Statement, a
Prospectus or a Private Placement Memorandum, as the case may be, or in
any sales literature provided by Company or by Distributor in order to
make the statements contained therein not misleading.
(3) Broker agrees to indemnify and hold harmless Company and Distributor
and each of their current and former directors and officers and each
person, if any, who controls or has controlled Company or Distributor
within the meaning of the 1933 Act or the 1934 Act, against any losses,
claims, damages or liabilities, joint or several, to which Company or
Distributor or such director or officer or controlling person may
become subject under
Page 5 of 10
<PAGE>
applicable law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any:
(a) breach by Broker of any representation, warranty, covenant or
agreement contained in this Agreement;
(b) negligent act or omission or willful misconduct by Broker or any of
its agents, employees, representatives or affiliates with respect
to this Agreement;
(c) failure by Broker or any of its agents, employees, or affiliates to
comply with applicable law;
(d) unauthorized use of sales material or any verbal or written
misrepresentations or any unlawful sales practice concerning
Contracts by Broker, agents, employees, representatives or
affiliates; or
(e) claim by any agent, representative or employee of Broker for
commissions, service fees, development
allowances or other compensation or remuneration of any type;
(f) failure of Broker, its officers, employees, or agents to comply
with the provisions of this Agreement.
Broker shall reimburse Company and Distributor and any director,
officer or controlling person of either for any legal or other expenses
reasonably incurred by Company, Distributor, or such director, officer
or controlling person in connection with investigating or defending
against any such losses, claims, damages or liabilities or actions.
This indemnity agreement shall be in addition to any liability which
Broker may otherwise have.
(4) Any request for indemnification against a party (the "Indemnitor")
arising out of a claim from a third party must be made in writing
within a reasonable time after notice of a claim or receipt of a claim
from a third party ("Claim") has been received by the party seeking
indemnification (the "Indemnitee"). At any time after such request,
Indemnitor may deliver to the Indemnitee its written acknowledgment
that Indemnitee is entitled to indemnification. The Indemnitor shall
thereafter be entitled to assume the defense of the Claim and shall
bear all expenses associated therewith, including without limitation,
payment on a current basis of all previous expenses incurred by the
Indemnitee in relation to the Claim from the date the Claim was
brought. Until such time as Indemnitee receives notice of an
Indemnitor's election to assume the defense of any Claim, Indemnitee
may defend itself against the Claim and may hire counsel and other
experts of its choice and Indemnitor shall be liable for payment of
counsel and other expert fees on a current basis as the same are
billed. Indemnitor and Indemnitee shall cooperate with one another in
the defense of any such Claim and if either party becomes aware of any
significant developments, it shall notify the other party as soon as
practical.
(5) The provisions of this Section shall survive the termination of this
Agreement.
H. ASSIGNABILITY
-------------
This Agreement shall not be assigned by any party without the written
consent of the other parties.
I. GOVERNING LAW
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Iowa without regard to its law concerning
conflicts of law.
J. NOTICES
-------
All communications under the Agreement shall be in writing and shall be
deemed delivered on the third business day after being mailed by
certified mail, postage prepaid. Alternatively, communications shall be
deemed delivered on the first business day after being transmitted
timely, delivery charges prepaid, to a third party company or
governmental entity providing delivery services in the ordinary course
of business, which guarantees delivery to the other party on the next
business day. Notices shall be sent to the following addresses unless
and until the addressee notifies the other parties of a change in
address according to the terms of this Section:
Page 6 of 10
<PAGE>
(1) if to Distributor, to: (2) if to Company, to:
AFSG SECURITIES CORPORATION LIFE INVESTORS INSURANCE
4333 EDGEWOOD ROAD NE COMPANY OF AMERICA
CEDAR RAPIDS, IOWA 52499 ATTN: INDIVIDUAL DIVISION
Attention: 4333 EDGEWOOD ROAD NE
CEDAR RAPIDS, IOWA 52499
(319) 369-2345 (telephone no.)
(319) 369-2591 (fax no.) (319) 298-4113 (telephone no.)
(319) 369-2372 (fax no.)
(3) if to Broker, to:
INTERSECURITIES, INC.
201 HIGHLAND AVENUE
LARGO, FLORIDA 33770
Attention:
(813) 587-1800 (telephone no.)
(813) 587-1832 (fax no.)
K. ARBITRATION
-----------
Any disagreement, dispute, claim or controversy solely between Broker
and Distributor arising out of or relating to this Agreement shall be
subject to mandatory arbitration under the auspices, rules and bylaws
of the NASD, to the full extent applicable and as may be amended from
time to time.
In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
AFSG SECURITIES CORPORATION INTERSECURITIES, INC.
(Distributor) (Broker)
By: By:
------------------------- ------------------------
Title: Title:
---------------------- ---------------------
LIFE INVESTORS INSURANCE
COMPANY OF AMERICA
(Company)
By:
-------------------------
Title:
-----------------------
Page 7 of 10
<PAGE>
EXHIBIT A
GENERAL LETTER OF RECOMMENDATION
Broker hereby certifies to the Distributor and Company that all the following
requirements will be fulfilled in conjunction with the submission of
licensing/appointment papers for all applicants as agents of the Company
submitted by Broker. Broker will, upon request, forward proof of compliance with
same to the Company in a timely manner.
1. We have made a reasonable investigation of each applicant's identity,
residence and business reputation and declare that each applicant is
personally known to us, and based on this review we believe each
applicant has a good business reputation and is worthy of a license.
2. We have on file a U-4 form which was completed (and has been amended,
as required) 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, including but
not limited to: (i) checking for and investigating criminal arrest and
conviction records available to Broker on the CRD system; and (ii)
communicating with each employer of the applicant for 3 years prior to
the applicant's registration with our firm. 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.
At the time of application, in those states required by the Company, we
shall provide the Company with a copy of the entire U-4 form, or
designated pages, thereof, completed by each applicant, including any
amendments or updates thereto, and we certify those items are true
copies of the original.
3. We certify that all educational requirements have been met for the
specified state each applicant is requesting a license in, and that all
such persons have fulfilled the appropriate examination, education and
training requirements.
4. If the applicant is required to submit his picture, his signature, and
securities registration in the state in which he is applying for a
license, we certify that those items forwarded to the 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
the Company in order to place insurance chiefly and solely on his life
or property, or lives or property of his relatives, or property or
liability of his associates.
6. We will not permit any applicant to transact insurance in a state as an
agent until duly licensed and appointed therefor with the appropriate
State Insurance Department. No applicants have been given a contract or
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.
Page 8 of 10
<PAGE>
VARIABLE PROTECTOR
Selected Broker Agreement
Schedule B - Public Contracts
Applicable Life Insurance Contracts
Life Investors Insurance Company of America ("Company") and AFSG Securities
Corporation ("Distributor") authorize InterSecurities, Inc. ("Broker") to offer
and solicit for sale the following securities product through persons who are
registered with the NASD and in accordance with the appropriate state insurance
licensing requirements. Such persons, where required, have authorized Broker to
receive such commissions.
Name: VARIABLE PROTECTOR Form Number: APUL0600 699
A flexible premium variable life insurance product.
Commissions Payable up to Target Premium
Year 1:
90.0% of premiums received in the first policy year up to the
Policy's Target Premium.
2.50% of premiums received in the first policy year in excess
of the Policy's Target Premium.
Years 2 to 10:
2.50% of premiums received in policy years 2 to 10.
Years 11+:
0.00% of premiums received in policy year 11 and all
subsequent policy years.
TRAIL COMMISSIONS
- -----------------
While the agreement remains in force, and subject to its other conditions, trail
commissions will be paid beginning on the 6th policy anniversary and on each
policy anniversary thereafter on policies then in force having a Policy Value of
$5,000 or more (excluding policy loans). The amount payable will equal the trail
commission percentage shown below multiplied by the Policy Value (excluding
policy loans) on the then current policy anniversary.
0.25% of Policy Value (excluding policy loans)
CHARGEBACKS
- -----------
In the event of a Free Look surrender, the Company will charge back the
commission account with an amount equal to the total commission paid out.
OTHER ADJUSTMENTS
- -----------------
No commissions of any kind are payable on an above policy which replaces,
exchanges or terminates another life policy of the Company or any other
subsidiary of AEGON USA, Inc. unless such replacement is accomplished in
accordance with the Company's rules in force at that time. Producers acknowledge
that replacement of a contract sold hereunder is subject to all applicable laws
and regulations, including the preparation of appropriate replacement forms and
delivery of same to applicants and to the Company. Such reports are to be
furnished in the proper format on forms provided by the Company. Commissions on
reissued, replaced or converted policies, or for issue ages not published by the
Company, are not covered under this Schedule, but may be quoted upon request to
the Company's Home Office.
The Company reserves the right to adjust or chargeback commissions for decreases
in amounts of insurance not contractually allowed and for face amounts of
insurance in excess of $5,000,000.
Page 9 of 10
<PAGE>
INTERSECURITIES, INC.
Date:_______________ By:___________________________________
Title:________________________________
LIFE INVESTORS INSURANCE
COMPANY OF AMERICA
Date:_______________ By:___________________________________
Title:________________________________
AFSG SECURITIES CORPORATION
Date:_______________ By:___________________________________
Title:________________________________
Page 10 of 10
EXHIBIT 1.A.5
[LIFE INVESTORS INSURANCE
COMPANY OF AMERICA LOGO] Life Investors Insurance Company of America
A Stock Company
Home Office located at: 4333 Edgewood Road N.E.,
Cedar Rapids, Iowa 52499
(Hereafter called the Company, we our or us)
(319)398-8511
INSURED: JOHN DOE INITIAL FACE AMOUNT: $100,000
POLICY NUMBER: 710 01 SAMPLE POLICY DATE: JULY 01, 1999
OWNER: JOHN DOE
WE AGREE
- To pay Proceeds of this policy to the beneficiary upon
receiving due proof of the Insured's death prior to the
Maturity Date. THE AMOUNT OF THE DEATH BENEFIT PROCEEDS WILL
INCREASE OR DECREASE DEPENDING ON THE INVESTMENT EXPERIENCE
OF THE SUB- ACCOUNTS IN THE SEPARATE ACCOUNT AND ON THE
DEATH BENEFIT OPTION SELECTED AS DESCRIBED IN THE DEATH
BENEFIT PROVISION.
- To pay the Proceeds of this policy to the Owner if the
Insured is living on the Maturity Date. POLICY VALUES WILL
INCREASE OR DECREASE IN ACCORDANCE WITH THE POLICY VALUE
PROVISIONS AND THE INVESTMENT EXPERIENCE OF THE SUB-ACCOUNTS
IN THE SEPARATE ACCOUNT. POLICY VALUES ARE NOT GUARANTEED AS
TO DOLLAR AMOUNT.
- To provide you with the other rights and benefits of this
policy.
These agreements are subject to the provisions of this policy.
10 DAY RIGHT You may cancel this policy by delivering or mailing a written
TO CANCEL request to us or to the agent from whom it was purchased. You
must return the policy to us or the agent before midnight of
the tenth day after the day you receive it. Your written
request given by mail and return of the policy by mail are
effective on being postmarked, properly addressed and postage
prepaid. We must return all payments made for this policy,
less any withdrawals and indebtedness, after we receive notice
of cancellation and the returned policy.
Signed for us at our home office.
[Secretary Signature] [President Signature]
SECRETARY PRESIDENT
This policy is a legal contract between the policyowner and the Company.
READ YOUR POLICY CAREFULLY
Benefits paid under the Terminal Illness Accelerated Death Benefit may be
considered taxable income to you. We urge you to consult your personal tax
advisor regarding matters of possible taxation.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
TERMINAL ILLNESS ACCELERATED DEATH BENEFIT
PREMIUMS PAYABLE TO MATURITY DATE OR UNTIL PRIOR DEATH OF INSURED
PROCEEDS PAYABLE AT DEATH OR MATURITY DATE
NON-PARTICIPATING
SOME BENEFITS REFLECT INVESTMENT RESULTS
<PAGE>
DEFINITIONS
When we use the following words, this is what we mean:
ACCOUNTS Allocation options including the Fixed Account and the
Sub-accounts of the Separate Account.
AGE The Insured's age at the Insured's last birthday.
BENEFICIARY The person to receive the proceeds in the event of the
Insured's death.
DEATH BENEFIT Includes any Policy or Rider which provides a death
benefit on the Insured, excluding the supplementary rider for
accidental death benefit.
FIXED ACCOUNT Allocation option other than the Separate Account.
FUND A designated investment fund from which each Sub-account of
the Separate Account will buy shares.
IMMEDIATE A spouse, child, brother, sister, grandparent or grandchild of
the Insured or FAMILY Owner.
INDEBTEDNESS All policy loans, if any, plus any accrued interest you owe.
IN FORCE The period of time the Insured's life remains insured under
the terms of this policy.
INSURED The person whose life is insured under this policy as shown on
page 3.
INVESTMENT The later of the Policy Date or the date the first premium is
START DATE received at our home office.
MATURITY DATE The first Policy Anniversary following the Insured's 100th
birthday.
MONTHLY DATE The same day of each month as the Policy Date.
PHYSICIAN An individual licensed to practice medicine and treat injury
or illness in the state in which treatment is received and who
is acting within the scope of that license. A Physician must
be someone other than: (a) the Insured; (b) the Owner; (c) a
person who lives with the Insured or Owner; or (d) a person
who is part of the Insured's or Owner's Immediate Family.
PHYSICIAN'S A written statement acceptable to the Company and signed by a
STATEMENT Physician which:
(a) gives the Physician's diagnosis of the Insured's
terminal medical condition; and
(b) states with reasonable medical certainty the terminal
medical condition will result in the death of the
Insured within 12 months from the date of the
Physician's Statement. This statement must take into
consideration the ordinary and reasonable medical
care, advice, and treatment available in the same or
similar communities.
POLICY The same day and month as your policy date for each succeeding
ANNIVERSARY year your policy remains in force.
POLICY DATE The date coverage under this policy becomes effective and the
date from which policy anniversaries, policy years, and policy
months are determined.
PREMIUM A temporary holding account into which all premiums are
SUSPENSE allocated prior to the Investment Start Date. The
ACCOUNT Premium Suspense Account does not credit any interest
or investment return.
PAGE 2
<PAGE>
PROCEEDS The amount we are obligated to pay under the terms of this
policy when your policy is surrendered or when the Insured
dies. Upon Maturity the proceeds are equal to the Cash
Surrender Value providing the Insured is living.
REINSTATE To restore coverage after the policy has lapsed.
SEC The United States Securities and Exchange Commission.
SEPARATE A separate investment account shown on the Policy
ACCOUNT Specifications Page, which is composed of several Sub-accounts
established to receive and invest Net Premiums under the
Policy.
SPECIFIED The amount upon which death benefits are determined. The
AMOUNT Initial Specified Amount is shown on page 3.
SUB-ACCOUNT A sub-division of the Separate Account. Each Sub-account
invests exclusively in the shares of a specified Fund
Portfolio.
TERMINAL A condition resulting from injury or illness which, as
CONDITION determined by a Physician, has reduced the Insured's life
expectancy to not more than 12 months from the date of the
Physician's Statement.
TERMINATE The Insured's life is no longer insured under any of the terms
of this policy.
VALUATION DATE Any day we are required by law to value the assets of the
Separate Account.
VALUATION The period commencing at the end of one Valuation Date and
PERIOD continuing to the end of the next succeeding Valuation Date.
WRITTEN REQUEST A request in writing signed by you on a form agreeable to us.
YOU, YOUR The owner of this policy is as shown in the application,
unless subsequently changed as provided for in this policy.
The owner is the Insured unless otherwise stated.
PAGE 2A
<PAGE>
POLICY SPECIFICATIONS PAGE
POLICY NUMBER: 710 01 SAMPLE INSURED: JOHN DOE
INITIAL SPECIFIED AMOUNT: $100,000 AGE/SEX: 35 / MALE
MINIMUM SPECIFIED AMOUNT: $100,000 POLICY DATE: JULY 1, 1999
DEATH BENEFIT OPTION: LEVEL MATURITY DATE: JULY 1, 2064
NO LAPSE ENDING DATE: JULY 1, 2019
OWNER: JOHN DOE
ADMINISTRATIVE CHARGE:
GUARANTEED: $10.00 per month (all years)
CURRENT: $10.00 per month (all years)
EXPENSE CHARGE:
GUARANTEED: 5.00% of any premium collected (all years)
CURRENT: 5.00% of any premium payment collected (years 1-10)
2.50% of any premium payment collected (years 11+)
PARTIAL WITHDRAWAL FEE: lesser of $25.00 or 2% of amount withdrawn
TRANSFER FEE: $25.00 for the 13th and any subsequent transfers in a policy year.
SEPARATE ACCOUNT PROVISIONS:
SEPARATE ACCOUNT: Life Investors Variable Life Account A
MORTALITY AND EXPENSE RISK CHARGE:0.00002047 daily (0.75% annually)
Premiums are payable to Maturity Date or until prior death of the Insured. It is
possible that coverage will expire prior to the Maturity Date where either no
premiums are paid following payment of the Initial Premium or subsequent
premiums are insufficient to continue coverage to such date. Coverage will be
affected by changes in the current interest rate for the Fixed Account, Loans,
Withdrawals, Administrative and Expense Charges, and Cost of Insurance in
addition to the investment experience of the Sub-accounts of the Separate
Account.
If the insured is living on the Maturity Date, we will pay the Proceeds equal to
the Cash Surrender Value, if any, to you.
THE TAX STATUS OF THIS POLICY MAY CHANGE. WE URGE YOU TO CONSULT YOUR PERSONAL
TAX ADVISOR EACH YEAR REGARDING MATTERS OF POSSIBLE TAXATION.
PREMIUM CLASS: TOBACCO
TYPE PAYABLE TO PLANNED
OF SPECIFIED INSURED'S PREMIUM
COVERAGE AMOUNT AGE PAYMENTS
(ANNUAL)
BASIC POLICY $100,000 100 $1,080.00
Total Planned Premium Payments...................... $1,080.00
Basic Policy Initial Premium........................ $1,080.00
PAGE 3
<PAGE>
SURRENDER CHARGES
End of Surrender End of Surrender
Policy Year Charge Policy Year Charge
- ----------- --------- ----------- ---------
1 $2,800 11 $1,400
2 2,660 12 1,260
3 2,520 13 1,120
4 2,380 14 980
5 2,240 15 840
6 2,100 16 700
7 1,960 17 560
8 1,820 18 420
9 1,680 19 280
10 1,540 20 0
PAGE 3A
<PAGE>
TABLE OF MINIMUM MONTHLY PREMIUMS
End of Year End of Year
Sum of All Sum of All
Minimum Minimum Minimum Minimum
Monthly Monthly Monthly Monthly
Policy Year Premium Premiums Policy Year Premium Premiums
- ----------- ------- ---------- ----------- ------- -----------
1 $43.33 $ 519.96 11 $43.33 $ 5,719.56
2 43.33 1,039.92 12 43.33 6,239.52
3 43.33 1,559.88 13 43.33 6,759.48
4 43.33 2,079.84 14 43.33 7,279.44
5 43.33 2,599.80 15 43.33 7,799.40
6 43.33 3,119.76 16 43.33 8,319.36
7 43.33 3,639.72 17 43.33 8,839.32
8 43.33 4,159.68 18 43.33 9,359.28
9 43.33 4,679.64 19 43.33 9,879.24
10 43.33 5,199.60 20 43.33 10,399.20
PAGE 3B
<PAGE>
PART 1. GENERAL PROVISIONS
THE CONTRACT Your policy is issued in consideration of the application and
the payment of premiums as provided for in this policy.
Your policy and the copy of the application attached to it
contain the entire contract between you and us. Any statements
made in the application either by you or by the Insured will,
in the absence of fraud, be considered representations and not
warranties. Also, any written statement made either by you or
by the Insured will not be used to void your policy nor defend
against a claim under your policy unless the statement is
contained in the application.
No change or waiver of any of the provisions of this policy
will be valid unless made in writing by us and signed by our
president, a vice president, our secretary or an officer of
the company. No agent or other person has the authority to
change or waive any provision of your policy.
Any extra benefit rider attached to this policy will become a
part of this policy and will be subject to all the terms and
conditions of this policy unless we state otherwise in the
rider.
SUICIDE If the Insured, whether sane or insane, dies by suicide within
two years from the Policy Date, our liability will be limited
to an amount equal to the premiums paid for this policy.
If the Insured, whether sane or insane, dies by suicide within
two years from the effective date of any increase in the
Specified Amount, our liability for the amount of increase
will be limited to the Cost of Insurance for the increase.
If you were a Missouri citizen at the time of issue or
reinstatement, the following provision will apply: The suicide
of the Insured is no defense to payment of regular life
insurance benefits, nor is the suicide of the Insured while
insane a defense to payment of accidental death benefits, if
any, available under this policy, unless we can show that the
Insured intended suicide when he applied for these benefits.
If this Policy is reinstated, this Section will be reinstated.
A new two-year period shall apply beginning on the date of
reinstatement. If the Insured, whether sane or insane, dies by
suicide within two years from the reinstatement date, our
liability will be limited to an amount equal to the premiums
paid from the date of reinstatement.
INCONTESTABILITY We cannot contest this policy, except for fraud or non-payment
of Monthly Deduction, after it has been in force during the
lifetime of the Insured for two years after:
(a) the Policy Date;
(b) the effective date of any increase in the Specified
Amount, and then only for the increased amount; or
(c) the effective date of reinstatement of this policy.
In the absence of fraud, only statements material to such
reinstatement shall be contested during the lifetime of the
Insured for two years after the effective date of
reinstatement.
ASSIGNMENT You may assign your policy. The assignment must be in writing
and filed at our home office. We assume no responsibility for
the validity or effect of any assignment of this policy or of
any interest in it. Any proceeds which become payable to an
assignee will be payable in a single sum and will be subject
to proof of the assignee's interest and the extent of the
assignment.
PAGE 4
<PAGE>
MISSTATEMENT If the age and/or sex of the Insured has been misstated, the
OF AGE OR SEX death benefits will be adjusted to that which would have been
purchased by the most recent cost of insurance charge at the
correct age and/or sex.
BENEFICIARY When we receive due proof of the Insured's death, we will pay
the proceeds of this policy to the beneficiary or
beneficiaries who are named in the application for this policy
unless you subsequently change the beneficiary. In that event,
we will pay the proceeds to the beneficiary named in your last
change of beneficiary request as provided for in this policy.
If a primary or contingent beneficiary dies before the
Insured, that beneficiary's interest in this policy ends with
that beneficiary's death. Only those beneficiaries who survive
the Insured will be eligible to share in the proceeds. If no
beneficiary survives the Insured, we will pay the proceeds of
this policy to you, if living, otherwise to your estate.
CHANGE OF OWNER If you have reserved the right to change the owner or
OR BENEFICIARY beneficiary, you can file a written request with us on a form
satisfactory to the Company to make such a change. If you have
not reserved the right to change the beneficiary, the written
consent of the irrevocable beneficiary will be required.
Your written request will not be effective until it is
recorded in our home office records. After it has been so
recorded, it will take effect as of the date you signed the
request. However, if the Insured dies before the request has
been so recorded, the request will not be effective as to
those proceeds we have paid before your request was recorded
in our home office records.
NONPARTICIPATING This policy will not share in our surplus distributions.
ILLUSTRATIVE A new projection is available on an annual basis. Additional
REPORTS projections are available but may incur a fee, not to exceed
$25.00.
PREMIUMS The Initial Premium is the premium due on the Policy Date, and
is payable in advance. All premiums are payable to us in
advance and must be mailed to our home office or to an agent
authorized by us to collect premiums. A premium receipt signed
by a company officer will be provided upon request.
PLANNED PREMIUM The amount and frequency of the planned premium payments are
PAYMENTS shown on page 3 of your policy. However, premium payments are
flexible and the Owner may change the amount and frequency of
payments. Interruption of planned premium payments or
reduction in the amount of planned premium payments may cause
your policy to enter the Grace Period prior to Maturity Date.
UNSCHEDULED Additional premiums may be paid at any time before the
PREMIUMS Maturity Date, provided that the policy is in force and there
is no indebtedness.
We reserve the right to limit the amount of premiums that may
be paid on the policy if we determine that: (a) the amount is
below our current minimum payment requirement; or (b) payment
of a greater amount may cause the proceeds of this policy to
lose their tax status as life insurance under the Internal
Revenue Code; or (c) payment of a greater amount would
increase the Death Benefit by application of the Death Benefit
Ratio (unless we are provided evidence of insurability
satisfactory to us.)
The minimum amount of any premium that will be accepted is
$25.00.
PAGE 5
<PAGE>
CONTINUATION If planned premium payments are not paid and no unscheduled
OF COVERAGE premiums are received, this policy will continue in force
unless the conditions of the Grace Period provision apply. If
the Insured is living on the Maturity Date, any proceeds will
become payable unless a different nonforfeiture option has
been elected.
GRACE PERIOD If the Cash Surrender Value on any Monthly Date is not
sufficient to pay the Monthly Deduction then due, a grace
period of 61 days will begin when notice has been sent to your
last known address of record. If sufficient premium is not
paid by the end of the grace period, the policy will terminate
without value. If the Insured dies during the grace period, we
will pay the Death Benefit, less any indebtedness and any
unpaid Monthly Deduction.
During the period beginning on the Policy Date and ending on
the No Lapse Ending Date shown on page 3, the policy will not
enter the grace period if on any Monthly Date the sum of the
premiums that have been paid, less any indebtedness and
partial withdrawals, equals or exceeds the sum of all Minimum
Monthly Premiums beginning with the Policy Date. The Minimum
Monthly Premium is the amount you must pay to guarantee
coverage until the No Lapse Ending Date listed on the Policy
Specifications Page.
For the period beginning on the Policy Date and ending on the
No Lapse Ending Date, the Minimum Monthly Premiums and the sum
of all Minimum Monthly Premiums for each policy year are shown
on page 3B. The Minimum Monthly Premium is increased for each
policy month following the date of an increase in the
Specified Amount, or when an extra benefit rider is added or
increased. The Minimum Monthly Premium is decreased for each
policy month following the date an extra benefit rider is
decreased or discontinued. The Minimum Monthly Premium will
not decrease following the date of decrease in the Specified
Amount. The new Minimum Monthly Premiums will be shown on a
new page 3B. Any new No Lapse Ending Date will be shown on a
new page 3.
In any case, the policy will lapse if the total indebtedness
equals or exceeds the Cash Surrender Value.
REINSTATEMENT If a premium is not received before the end of the 61 day
grace period, your policy will terminate without value and no
further premium payments may be made.
However, even if your policy terminates, during the lifetime
of the Insured, this policy can be reinstated if it was
terminated because a grace period ended without sufficient
payment. Any reinstatement must be done within 5 years from
the end of the grace period. We will require:
(1) Your written request to reinstate this policy,
(2) the Insured's written consent to reinstatement,
(3) Evidence of insurability satisfactory to us,
(4) Payment or reinstatement of any indebtedness, and
(5) Payment of enough premium to keep this policy in
force for at least 3 months.
The date of reinstatement will be the Monthly Date on or
following the date the application for reinstatement is
approved by us, so long as the Insured is still living. If all
the conditions for reinstatement are satisfied, coverage under
this Policy will be effective as though it had continued in
force from the lapse date to the date of reinstatement.
Your policy cannot be reinstated if your policy was
surrendered for cash.
PAGE 6
<PAGE>
PARTIAL After the first policy year, one cash withdrawal per policy
WITHDRAWALS year may be made during the lifetime of the Insured. We must
receive a written request at our home office.
The withdrawal amount will be equal to the amount of the
withdrawal requested plus a fee equal to the lesser of $25.00
or 2% of the amount requested for each withdrawal. No
surrender charges apply to partial withdrawals. The minimum
withdrawal amount is $500.00. You must specify the Account
from which the withdrawal will be taken. The withdrawal fee
will be removed from one of the Accounts.
The Policy Value will be reduced by the withdrawal amount. If
the Death Benefit Option of this policy is Level, the
Specified Amount will also be reduced by the withdrawal amount
(without the fee). However, no withdrawal will be allowed if
the resulting Specified Amount would be less than the Minimum
Specified Amount as shown on page 3.
If the amount of the withdrawal request is greater than or
equal to the Cash Surrender Value, or if less than $500 of
Cash Surrender Value remains, the withdrawal will be
considered a surrender and the Cash Surrender Value provision
will apply.
We reserve the right to defer any withdrawals from the Fixed
Account for the period allowed by law, but not more than six
months. We will not defer a withdrawal if it is to be applied
for the payment of premiums to us.
Reductions in the Specified Amount due to any Partial
Withdrawals will be in the following order:
1) To the most recent increase in the Specified Amount.
2) To the next most recent increase in the Specified
Amount.
3) To the Initial Specified Amount or the current
Specified Amount if less.
ANNUAL REPORT We will send you, at least once a year, an Annual Report which
shows the current Death Benefit, Policy Value, the amount of
indebtedness, premiums paid, and Monthly Deductions since the
last report. Additional activity within each Sub-account
showing investment experience will also be provided.
POLICY PAYMENT All proceeds to be paid upon termination will be paid
in one sum unless otherwise elected under the Settlement
Options of this policy.
All payments and transfers from the Sub-accounts will be
processed as provided in this policy unless one of the
following situations exist:
1. The New York Stock Exchange is closed; or
2. The SEC requires that trading be restricted or
declares an emergency; or
3. The SEC allows us to defer payments to protect our
policyowners.
We reserve the right to defer the payment of any Fixed Account
values for the period permitted by law, but not more than six
months.
EXCHANGE At any one time the Owner may exercise the Exchange Privilege,
PRIVILEGE which results in the transfer of the entire amount in the
Sub-accounts to the Fixed Account, and the allocation of all
future net premiums to the Fixed Account. This will serve as
an exchange of the Policy for the equivalent of a flexible
premium fixed benefit life insurance policy. No charge will be
imposed on such transfer.
PAGE 7
<PAGE>
Part 2. SEPARATE ACCOUNT PROVISIONS
SEPARATE ACCOUNT The variable benefits under this Policy are provided through
the Separate Account as shown on the Policy Specifications
page. The assets of the Separate Account are our property.
Assets equal to the reserve and other contractual liabilities
under all policies issued in connection with the Separate
Account will not be charged with liabilities arising out of
any other business we may conduct. If the assets of the
Separate Account exceed the liabilities arising under the
policies supported by the Separate Account, then the excess
may be used to cover liabilities of our general account. The
assets of the Separate Account shall be valued as often as any
policy benefits vary, but at least monthly.
SUB-ACCOUNTS The Separate Account has various Sub-accounts with different
investment objectives. We reserve the right to add or remove
any Sub-account of the Separate Account. Income, if any, and
any gains or losses, realized or unrealized, from assets in
each Sub-account are credited to, or charged against, the
amount allocated to that Sub-account without regard to income,
gains, or losses in other Sub-accounts. Any amount charged
against the investment base for federal or state income taxes
will be deducted from that Sub-account. The assets of each
Sub-account are invested in shares of a corresponding Fund
portfolio. The value of a portfolio share is based on the
value of the net assets of the portfolio determined at the end
of each Valuation Period in accordance with applicable law.
TRANSFERS The owner may transfer all or a portion of this Policy's value
in each Account to other Accounts. We will charge a $25 fee
for each transfer in excess of twelve per policy year. This
charge will be deducted from one of the Accounts from which
funds were transferred. A request for a transfer must be made
in a form satisfactory to us. The transfer will ordinarily
take effect on the first Valuation Date on or following the
date the request is received by us in our home office. We will
treat all transfer requests received on the same day as a
single request. A minimum of $100 (or, if the Account is less
than $100, the entire amount in the Account) must be
transferred out of each Account from which money is being
transferred.
ADDITION, We reserve the right to transfer assets of the Separate
DELETION Account, which we determine to be associated with the class of
OR SUBSTITUTION contracts to which this policy belongs, to another Separate
OF INVESTMENTS Account. If this type of transfer is made, the term "Separate
Account", as used in this policy, shall mean the Separate
Account to which the assets were transferred. We also reserve
the right to add, delete, or substitute investments held by
any Sub-account.
We reserve the right, when permitted by law, to:
1. De-register the Separate Account under the Investment
Company Act of 1940;
2. Manage the Separate Account under the direction of a
committee at any time;
3. Restrict or eliminate any voting privileges of owners
or other persons who have voting privileges as to the
Separate Account;
4. Combine the Separate Account or any Sub-account(s)
with one or more other Separate Accounts or
Sub-accounts;
5. Operate the Separate Account as a management
investment company;
6. Establish additional Sub-accounts to invest in either
a new Fund or in shares of another diversified,
open-end registered investment company;
7. Fund additional classes or variable life insurance
contracts through the Separate Account.
PAGE 8
<PAGE>
CHANGE OF We reserve the right to change the investment objective of a
INVESTMENT Sub-account. If required by law or regulation, an investment
OBJECTIVE objective of the Separate Account, or of a Fund portfolio
designated for a Sub-account, will not be materially changed
unless a statement of the change is filed with and approved by
the appropriate insurance official of the state of our
domicile or deemed approved in accordance with such law or
regulation. If required, approval of or change of any
investment objective will be filed with the Insurance
Department of the state where this policy is delivered.
UNIT VALUE Some of the policy values fluctuate with the investment
results of the Sub-accounts. In order to determine how
investment results affect the policy values, a unit value is
determined for each Sub-account. The unit value of each
Sub-account was originally established at $10 per unit. The
unit value may increase or decrease from one Valuation Period
to the next. Unit values also will vary between Sub-accounts.
The unit value of any Sub-account at the end of a Valuation
Period is the result of:
1. The total value of the assets held in the
Sub-account. This value is determined by multiplying
the number of shares of the designated Fund portfolio
owned by the Sub-account times the net asset value
per share; minus
2. The accrued charges for mortality and expense
experience. The daily amount of this charge is no
greater than the net assets of the Sub-account
multiplied by the Mortality and Expense Risk Charge
shown on the Policy Specifications page; minus
3. The accrued amount of reserve for any taxes or other
economic burden resulting from the application of tax
laws that are determined by us to be properly
attributable to the Sub-account; and the result
divided by
4. The number of outstanding units in the Sub-account.
The use of the unit value in determining contract values is
described in the Policy Values provisions.
PAGE 9
<PAGE>
Part 3. POLICY VALUES
SPECIFIED The Specified Amount for your policy is shown on page 3. After
AMOUNT the first Policy Anniversary, you may change the Specified
Amount at any time by sending a written request to our home
office, subject to the restrictions set forth below for
increases in the Specified Amount. However, you may change the
Specified Amount only once during a 12-month period. Any
change in the Specified Amount will take effect on the first
Monthly Date following approval of your written request.
If you request a change in the Specified Amount or Death
Benefit Option, we will issue a new Policy Specifications Page
(page 3) upon approval.
INCREASE IN You may, prior to the Insured's age 86 and upon completion
THE SPECIFIED of a new application, increase the Specified Amount as
AMOUNT described above. Any increase will be subject to our
underwriting requirements as well as Suicide Exclusions and
Incontestability restrictions (see page 4).
DECREASE IN You may, upon written request, decrease the Specified Amount
THE SPECIFIED as described above. The decrease will be applied against the
AMOUNT most recent increase in the Specified Amount. It will then be
applied to other increases in the reverse order in which they
occurred. No decrease in Specified Amount below the minimum
shown on page 3 will be allowed.
DEATH BENEFIT This policy will provide the following death benefits:
INCREASING: The Death Benefit is the greater of the Specified Amount plus
the Policy Value or the Policy Value multiplied by the Death
Benefit Ratio.
LEVEL: The Death Benefit is the greater of the Specified Amount or
the Policy Value multiplied by the Death Benefit Ratio.
DEATH BENEFIT RATIOS
--------------------------------------------------------------
Age Ratio Age Ratio
--------------------------------------------------------------
0-40 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 75-90 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 95-99 1.00
60 1.30
PAGE 10
<PAGE>
After the first Policy Anniversary, you may change the Death
Benefit Option upon written request but not more often than
once during a 12 month period. The change will go into effect
on the Monthly Date on or following the date we approve the
request.
If you change from LEVEL to INCREASING, the Specified Amount
will be decreased by the Policy Value. The resulting Specified
Amount must not be less than the minimum Specified Amount
shown on the Policy Specifications Page. If you change from
INCREASING to LEVEL, the Specified Amount will be increased by
the amount of the Policy Value.
The Death Benefit Option for this policy is disclosed on page
3.
We will pay the Death Benefit, less any indebtedness and any
Monthly Deductions due, if the Insured dies while this policy
is in force, subject to the terms of this policy. We will pay
as soon as we receive written due proof at our home office
that the Insured has died. The Death Benefit payable will be
calculated as of the actual date of death.
INTEREST FROM If the proceeds under this policy are not paid within thirty
DATE OF DEATH days after we receive due proof of the death of the Insured
(or where required by law within thirty days after the death
of the Insured), we will pay interest on the proceeds from the
date of death to the date of payment. The interest rate will
be determined by us, but never less than 3%.
POLICY VALUE At the end of any Valuation Period, the Policy Value is equal
to the sum of the Sub-account values plus the Fixed Account
value.
NET PREMIUMS The Net Premium is any premium collected minus the Expense
Charge. The Expense Charge is disclosed on page 3. We may use
an Expense Charge lower than the Guaranteed Expense Charge but
will never charge in excess of the Guaranteed Expense Charge.
Any change in the Expense Charge will be applied uniformly to
all members of the same premium class.
ALLOCATION OF All net premiums received prior to the Investment Start Date
NET PREMIUMS will be allocated to the Premium Suspense Account. On the
first Valuation Date on or following the Investment Start
Date, the values in the Premium Suspense Account will be
transferred to the Sub-accounts of the Separate Account and
the Fixed Account in accordance with the Owner's allocation as
shown in the application. All net premiums received on or
after the Investment Start Date will be allocated to the
Sub-accounts of the Separate Account and the Fixed Account on
the first Valuation Date on or following the date the premium
is received at our home office.
Any allocation to an Account is limited to no less than 5% of
total premium. No fractional percentages may be permitted. No
more than 10 accounts may be receiving current premium
allocations. The current premium allocation may be changed by
the Owner. Only 4 premium allocation changes are permitted
within one policy year. The request for change of allocations
must be in a form satisfactory to us. The allocation change
will be effective on the date the request for change is
recorded by us.
MONTHLY On the Policy Date and each Monthly Date thereafter, a Monthly
DEDUCTION Deduction will be withdrawn from the Policy Value. Each
Monthly Deduction consists of:
1. The monthly Cost of Insurance; plus
2. The Administrative Charge (see page 3); plus
3. Any premium for additional benefits provided by
riders (see page 3); plus
4. Any charges for substandard premium class rating.
Deductions will be withdrawn from each Sub-account and the
Fixed Account on a pro-rata basis.
PAGE 11
<PAGE>
COST OF The Monthly Cost of Insurance is determined by multiplying the
INSURANCE difference between the Death Benefit divided by 1.0024663 and
the Policy Value at the beginning of each month, by the
Monthly Per Dollar Cost of Insurance Rate. The Monthly Cost of
Insurance Rate is based on the Insured's:
-Sex,
-Attained age, and
-Premium class shown on page 3.
The Monthly Guaranteed Maximum Cost of Insurance Rates are
shown in the Insured's Guaranteed Maximum Cost of Insurance
Table on pages 18 and 18A. We may use Cost of Insurance Rates
lower than the guaranteed rates but will never charge rates in
excess of the Guaranteed Maximum Cost of Insurance Rates. Any
change in the Cost of Insurance Rates will be applied
uniformly to all members of the same premium class.
SUB-ACCOUNT At the end of any Valuation Period, the Sub-account value is
VALUE equal to the number of units that the Policy has in the
Sub-account, multiplied by the unit value of that Sub-account.
The number of units that the Policy has in each Sub-account is
equal to:
1. The initial units purchased on the Investment Start
Date; plus
2. Units purchased at the time of additional Net
Premiums are allocated to the Sub-account; plus
3. Units purchased through transfers from another
Sub-account or the Fixed Account; minus
4. Those units that are redeemed to pay for monthly
deductions as they are due; minus
5. Any units that are redeemed to pay for partial
withdrawals; minus
6. Any units that are redeemed as part of a transfer to
another Account.
FIXED ACCOUNT At the end of any Valuation Period, the Fixed Account
VALUE value is equal to:
1. The sum of all Net Premiums allocated to the Fixed
Account; plus
2. Any amounts transferred from a Sub-account to the
Fixed Account; plus
3. Total interest credited to the Fixed Account; minus
4. Any amounts charged to pay for monthly deductions as
they are due; minus
5. Any amounts withdrawn from the Fixed Account to pay
for partial withdrawals; minus
6. Any amounts transferred from the Fixed Account to a
Sub-account.
We reserve the right to defer payment of any amounts from the
Fixed Account for no longer than six months after we receive
such written request.
INTEREST RATE The guaranteed interest rate for amounts in the Fixed Account
is .24663% per month, compounded monthly which is equivalent
to 3% per year, compounded annually.
We may use current interest rates greater than the guaranteed
rates to calculate the Fixed Account Value. These interest
rates will be declared by us. We may apply a rate of interest
less than the current rate to separate portions of the Fixed
Account Value including the amount of the Fixed Account Value
equal to any outstanding loan(s). However, each rate cannot be
less than the guaranteed rate.
If any interest in excess of the Guaranteed Interest Rate is
declared by us, the following interest rates will apply to the
Fixed Account Value. It will not be applied to the portion of
the Fixed Account Value equal to any outstanding loans.
- For All Policy Years, the current interest rate will be
applied.
If no interest in excess of the guaranteed interest rate is
declared by us, the Guaranteed Interest Rate will be applied
to the total Fixed Account Value, including any outstanding
loans.
PAGE 12
<PAGE>
EXTENDED You may elect to extend the Maturity Date shown on page 3, by
MATURITY DATE submitting a written request to our home office. The written
request must be received in our office 30 days prior to the
original Maturity Date.
1. The Death Benefit will be equal to the greater of the
Death Benefit payable on the original Maturity Date
or the Policy Value multiplied by 1.05;
2. Interest will be credited to the Fixed Account Value
as stated in the Interest Rate section of the Policy
Value provisions;
3. The Sub-account Values, Policy Value and Cash
Surrender Value will continue as stated in the
Policy. The Administrative Charge and Expense Charge
will be reduced to zero;
4. Monthly Deductions will be calculated on a basis of
the Monthly Cost of Insurance being $0.00;
5. Interest will continue to accumulate on Policy Loans
as stated in the Loan Interest provision of the
Policy;
6. The Extended Maturity Date will apply to the Base
Insured Rider if attached to the Policy. All other
riders attached to the Policy will terminate as of
original Maturity Date;
7. No future premium payments will be accepted, except
for the amount required for the Policy to continue in
force;
8. No further Policy Loans may be initiated against the
Policy; and
9. You may not increase or decrease the Death Benefit.
This provision may not be exercised if the event of this
option disqualifies the Policy as life insurance under any
applicable section included in the Internal Revenue Code of
1986 (as amended).
PAGE 13
<PAGE>
Part 4. LOAN VALUES
LOANS Upon written request you can borrow up to the available Loan
Value of your policy. The amount of any policy loan may be
limited to no less than $250, except as noted below. The loan
date is the date we process a loan request. Payment will
usually be made within seven days of the date we receive
proper loan request, subject to the Policy Payment section of
the General Provisions of this Policy. Loans have priority
over the claims of any assignee or other person. Your policy
is the sole security of all loans.
The Loan Value of your policy is:
- 90% of the Cash Surrender Value, less six months of Monthly
Deductions.
A policy which becomes over-loaned will not lapse until one
month after notice has been mailed to the last known address
of the owner. Your policy will become over-loaned when your
total indebtedness equals or exceeds the Policy Value, less
any applicable Surrender Charge.
When a loan is made, an amount equal to the loan plus interest
in advance until the next Anniversary will be withdrawn from
the Accounts and transferred to the loan reserve. The loan
reserve is a portion of the Fixed Account used as collateral
for any policy loan. The owner must specify the Account or
Accounts from which the withdrawal will be made.
At each anniversary, we will compare the amount of the
outstanding loan (including interest in advance until the next
Anniversary, if not paid) to the amount in the loan reserve.
We will also make this comparison anytime the owner repays all
or part of the loan. At each such time, if the amount of the
outstanding loan exceeds the amount in the loan reserve, we
will withdraw the difference from the Accounts from which the
loan originated, and transfer it to the loan reserve, in the
same fashion as when a loan is made. If the amount in the loan
reserve exceeds the amount of the outstanding loan, we will
withdraw the difference from the loan reserve and transfer it
to the Accounts in accordance with the owner's current
allocation instructions. However, we reserve the right to
require the transfer to the Fixed Account if such loans were
originally transferred from the Fixed Account.
LOAN INTEREST The Loan Interest Rate is 5.66% per annum, charged in advance.
PROVISION On each policy anniversary loan interest for the next year is
due in advance. Interest not paid when due will be added to
the loan.
Certain loan amounts taken after the tenth policy anniversary
will be considered preferred loan amounts. Preferred loan
amounts are equal to 25% of the Policy Value. The Loan
Interest Rate for preferred loan amounts is 3.85% per annum,
charged in advance.
LOAN REPAYMENT You can repay all or part of a loan at any time while this
policy is in force. Each payment must be at least $25.00
unless the loan amount is less than $25.00 in which case full
payment is required.
The policy will not lapse for failure to repay any loan or
interest until the total indebtedness shall equal or exceed
the Policy Value less any applicable Surrender Charge.
PAGE 14
<PAGE>
Part 5. NONFORFEITURE OPTIONS
CASH You may surrender your policy for its Cash Surrender Value
SURRENDER VALUE which may be paid in cash or under an elected Settlement
Option.
Your Cash Surrender Value is determined as follows:
- The Policy Value, MINUS
- The Surrender Charge, if any, MINUS
- Any Indebtedness.
We may require that your policy be sent in with your written
request before making surrender payment. We may defer payment
of any Cash Surrender Value earned from the Fixed Account for
not more than six months. When you surrender your policy for
its Cash Surrender Value, your policy will terminate.
SURRENDER The Surrender Charges are disclosed on page 3A for the Initial
CHARGE Specified Amount. We may use Surrender Charges lower than
those shown, but will never charge in excess of those shown on
page 3A.
If an increase in the Specified Amount is requested and
approved, additional Surrender Charges will apply to the
policy. These additional Surrender Charges are shown on pages
21, 21A, 22, and 22A. They are listed by the Insured's
attained age and sex at the time of the increase and by
duration.
REDUCED PAID- If you elect in writing, we will use the Cash Surrender
UP INSURANCE Value to buy a nonparticipating Paid-Up Endowment at Age 100
Insurance Policy at the net single premium rate for the
Insured's attained age for an amount equal to or less than the
current Specified Amount of this policy, payable under the
same conditions as this policy.
If there is any excess Cash Surrender Value remaining,
following the purchase of the paid-up insurance, such excess
shall be returned to you in cash.
If a Paid-Up Policy is surrendered the amount of surrender
proceeds is determined by multiplying the Endowment at Age 100
Net Single Premium at the Insured's then attained age by the
amount of Reduced Paid-Up Insurance.
BASIS USED FOR All Nonforfeiture Options for this policy are based on the
CALCULATION Commissioner's Male or Female 1980 Standard Ordinary Mortality
Table (S or NS), Age Last Birthday, with an assumed interest
rate of 3% compounded annually. Reserves are not less than the
required minimum reserves and shall never be less than the
Cash Surrender Value.
All of the values are equal to or greater than the minimums
set by laws of the states where the policy is delivered. If
required, we have filed a detailed statement about this with
your State Insurance Department. It shows the figures and
methods used.
PAGE 15
<PAGE>
Part 6. TERMINAL ILLNESS ACCELERATED DEATH BENEFIT
You may elect to receive a portion of the Policy's Death Benefit in a Single Sum
Benefit, when the Insured, specified on page 3, has incurred a Terminal
Condition while the policy is in force.
When we receive your request and proof satisfactory to us that the Insured has
incurred a Terminal Condition we will pay the Single Sum Benefit to the Owner.
We will make payment when all of the terms and conditions of proof have been met
and subject to the conditions and limitations within this benefit.
The Single Sum Benefit may only be elected once.
Payment of the Single Sum Benefit will result in reductions of the Policy's
values and benefits, as described below.
The Single Sum Benefit is equal to:
The Policy Death Benefit in effect on the date the Single Sum Benefit
is paid.
MULTIPLIED BY
The Election Percentage. A percentage equal to no less than 25% but no
more than 75% of the Policy's Death Benefit, subject to a maximum
benefits of $500,000. If the maximum benefit of $500,000 is paid, the
election percentage will equal $500,000 divided by the Policy's Death
Benefit. This could result in an election percentage of less than 25%.
DIVIDED BY
(1+ i), where i equals the greater of (A) and (B) on the date the
Single Sum Benefit is paid. (A) equals the current yield on 90 day
treasury bills; and (B) equals the current maximum statutory adjustable
Policy Loan Interest Rate.
MINUS
Indebtedness, if any, at the time the Single Sum Benefit is paid,
multiplied by the Election Percentage.
Benefit and The Policy's Specified Amount, Policy Value, Surrender
Value Reduction Charge, and indebtedness, if any, as those amounts exist on
the date the Single Sum Benefit is paid, will be reduced by
the Election Percentage. The Policy Value in the Fixed Account
and each Sub-account will be reduced by the Election
Percentage.
At the time of payment we will provide you with
revised policy specification pages which reflect the
reduction of all values applicable to the Policy and
all benefits it provides.
REQUEST FOR The Request for Acceleration may be given to us any time after
ACCELERATION the date the Insured incurs a Terminal Condition as defined on
page 2A. This request must identify the Insured and be sent to
us at our Home Office.
Request Forms We will send request forms to the Owner when the request for
acceleration is received. If we do not send the request form
within 15 days, the Owner will be considered to have complied
with the Proof of Terminal Condition requirements by giving us
a Physician Statement acceptable to us and a written statement
of the nature and extent of the Terminal Condition.
Proof of Written proof of the Insured's Terminal Condition must be
Terminal received by us at our Home Office before we will make a Single
Condition Sum Benefit payment. This proof will include a properly
completed request form and a Physician Statement acceptable to
us. We may request additional medical information from the
Physician submitting the statement, or any other Physician
providing care to the Insured. We will not unreasonably
withhold our acceptance of Proof of Terminal Condition. All
benefits described in the provision will be available as soon
as we receive satisfactory Proof of Terminal Condition.
Physical We reserve the right to have a Physician of our choosing
Examination examine the Insured, at our expense, prior to making a Single
Sum Benefit payment. In the event that the Physician we choose
provides a different diagnosis of the Insured's medical
condition, we reserve the right to rely on the statement from
the Physician of our choosing for acceleration request
purposes.
PAGE 16
<PAGE>
Payment of All terminal illness accelerated death benefits will be paid
Accelerated to the Owner. Upon the death of the Owner, if other than the
Benefits Insured, we will pay the benefits to the estate of the Owner.
BENEFIT Payment of the Single Sum Benefit is subject to the following
CONDITIONS rules:
(a) You must complete a form provided by us, signed by
the Owner;
(b) The Policy must be in force;
(c) The Policy or an eligible term rider must not be
within two years of expiration or endowment at the
time the benefit is requested;
(d) If there is an irrevocable beneficiary or assignee,
they must consent in writing to payment of this
benefit;
(e) Your Policy is not eligible for this benefit if:
(1) the Terminal Condition is the
result of intentionally
self-inflicted injuries;
(2) the Owner is required by law to use
this benefit to meet the claims of
creditors, whether in bankruptcy or
otherwise; or
(3) you are required by a government
agency to use this benefit to apply
for, obtain, or keep a government
benefit or entitlement; and
(f) You must provide proof that the Insured has met
conditions under the Benefits provision, including an
attending Physician's Statement and any other proof
we may require. We reserve the right to seek a second
medical opinion or have the Insured examined at our
expense by a Physician we choose.
Annual The Annual Statement for this Policy will reflect payment of
Statement the Single Sum Benefit, if paid during the prior year, as well
as resulting reductions in Policy Value, Death Benefit, and
remaining benefits and values.
Consent for We must obtain consent from any irrevocable beneficiary and
Benefit Payment any assignee record before the Single Sum Benefit is paid. An
assignee's consent is required only to the extent that
benefits paid would reduce this Policy's values and benefits
below the amounts assigned.
PAGE 17
<PAGE>
MALE AND FEMALE TOBACCO (T)
GUARANTEED MAXIMUM COST OF INSURANCE RATES**
<TABLE>
<CAPTION>
MALE FEMALE MALE FEMALE
MONTHLY COST MONTHLY COST MONTHLY COST MONTHLY COST
ATTAINED OF INSURANCE OF INSURANCE ATTAINED OF INSURANCE OF INSURANCE
AGE PER $1000* PER $1000* AGE PER $1000* PER $1000*
------ ------------- ------------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
0 $.2192 $.1567 50 $ .8333 $ .5642
1 .0858 .0700 51 .9108 .6050
2 .0825 .0667 52 .9983 .6517
3 .0808 .0650 53 1.0975 .7033
4 .0775 .0642 54 1.2058 .7558
5 .0733 .0625 55 1.3217 .8100
6 .0692 .0608 56 1.4442 .8633
7 .0650 .0592 57 1.5733 .9133
8 .0625 .0583 58 1.7092 .9625
9 .0617 .0575 59 1.8550 1.0150
10 .0625 .0567 60 2.0175 1.0775
11 .0675 .0583 61 2.2008 1.1558
12 .0767 .0608 62 2.4075 1.2567
13 .0892 .0642 63 2.6383 1.3792
14 .1033 .0683 64 2.8908 1.5158
15 .1467 .0800 65 3.1583 1.6600
16 .1633 .0842 66 3.4383 1.8067
17 .1750 .0883 67 3.7283 1.9483
18 .1842 .0925 68 4.0325 2.0917
19 .1900 .0950 69 4.3625 2.2475
20 .1933 .0975 70 4.7267 2.4317
21 .1933 .0992 71 5.1358 2.6650
22 .1900 .1017 72 5.5983 2.9508
23 .1867 .1042 73 6.1108 3.2908
24 .1817 .1067 74 6.6725 3.6783
25 .1758 .1092 75 7.2725 4.1017
26 .1725 .1133 76 7.8858 4.5517
27 .1708 .1167 77 8.5017 5.0217
28 .1708 .1208 78 9.1242 5.5183
29 .1733 .1258 79 9.7750 6.0592
30 .1775 .1317 80 10.4758 6.6650
31 .1833 .1367 81 11.2467 7.3525
32 .1908 .1425 82 12.1008 8.1342
33 .2008 .1500 83 13.0242 9.0367
34 .2125 .1583 84 13.9858 10.0150
35 .2267 .1675 85 14.9533 11.0542
36 .2433 .1817 86 15.9033 12.1458
37 .2642 .1983 87 16.8783 13.2792
38 .2875 .2175 88 17.8942 14.4600
39 .3142 .2383 89 18.9042 15.6875
40 .3450 .2633 90 19.9233 17.0483
41 .3783 .2900 91 20.9833 18.5133
42 .4150 .3167 92 22.2125 20.1383
43 .4550 .3433 93 23.7892 22.0467
44 .4992 .3700 94 25.9392 24.6025
45 .5458 .3983 95 29.3217 28.4183
46 .5942 .4275 96 35.0825 34.4900
47 .6467 .4575 97 45.0833 44.7700
48 .7033 .4900 98 62.0958 61.9967
49 .7650 .5258 99 83.3333 83.3333
</TABLE>
* See Cost of Insurance, page 12.
** When any insurance is sold on a substandard risk, the guaranteed cost of
insurance rates shown above are increased 25% for each additional rating
class above standard.
PAGE 18
<PAGE>
MALE AND FEMALE NON-TOBACCO (NT)
GUARANTEED MAXIMUM COST OF INSURANCE RATES**
<TABLE>
<CAPTION>
MALE FEMALE MALE FEMALE
MONTHLY COST MONTHLY COST MONTHLY COST MONTHLY COST
ATTAINED OF INSURANCE OF INSURANCE ATTAINED OF INSURANCE OF INSURANCE
AGE PER $1000* PER $1000* AGE PER $1000* PER $1000*
------ ------------- ------------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
0 $ .2192 $ .1567 50 $ .4275 $ .3617
1 .0858 .0700 51 .4667 .3892
2 .0825 .0667 52 .5117 .4208
3 .0808 .0650 53 .5633 .4558
4 .0775 .0642 54 .6208 .4917
5 .0733 .0625 55 .6850 .5300
6 .0692 .0608 56 .7550 .5683
7 .0650 .0592 57 .8292 .6058
8 .0625 .0583 58 .9117 .6433
9 .0617 .0575 59 1.0042 .6858
10 .0625 .0567 60 1.1075 .7358
11 .0675 .0583 61 1.2225 .7975
12 .0767 .0608 62 1.3550 .8742
13 .0892 .0642 63 1.5050 .9683
14 .1033 .0683 64 1.6717 1.0742
15 .1133 .0717 65 1.8542 1.1883
16 .1233 .0750 66 2.0517 1.3067
17 .1308 .0775 67 2.2633 1.4275
18 .1358 .0800 68 2.4933 1.5525
19 .1392 .0825 69 2.7483 1.6917
20 .1400 .0842 70 3.0367 1.8550
21 .1383 .0858 71 3.3658 2.0542
22 .1358 .0867 72 3.7458 2.2983
23 .1325 .0883 73 4.1758 2.5908
24 .1292 .0900 74 4.6483 2.9275
25 .1250 .0917 75 5.1533 3.3033
26 .1225 .0942 76 5.6867 3.7100
27 .1208 .0958 77 6.2442 4.1458
28 .1200 .0983 78 6.8292 4.6175
29 .1200 .1017 79 7.4600 5.1400
30 .1208 .1042 80 8.1567 5.7342
31 .1233 .1075 81 8.9375 6.4175
32 .1267 .1108 82 9.8183 7.2050
33 .1317 .1150 83 10.7950 8.0933
34 .1375 .1200 84 11.8483 9.0725
35 .1442 .1258 85 12.9542 10.1317
36 .1517 .1342 86 14.0983 11.2633
37 .1617 .1442 87 15.2633 12.4658
38 .1725 .1550 88 16.4442 13.7400
39 .1842 .1667 89 17.6575 15.0958
40 .1983 .1808 90 18.9208 16.5442
41 .2133 .1958 91 20.2633 18.1183
42 .2292 .2108 92 21.7350 19.8775
43 .2467 .2258 93 23.4792 21.9458
44 .2658 .2408 94 25.8192 24.6025
45 .2875 .2575 95 29.3217 28.4183
46 .3108 .2750 96 35.0825 34.4900
47 .3358 .2942 97 45.0833 44.7700
48 .3633 .3142 98 62.0958 61.9967
49 .3933 .3367 99 83.3333 83.3333
</TABLE>
* See Cost of Insurance, page 12.
** When any insurance is sold on a substandard risk, the guaranteed cost of
insurance rates shown above are increased 25% for each additional rating
class above standard.
PAGE 18A
<PAGE>
Part 7. PAYMENT OF PROCEEDS
SETTLEMENT You may, during the Insured's lifetime, request that we pay
OPTIONS the proceeds under one of the following settlement options. We
will also use any other method of payment that is agreeable to
you and us. The following options do not depend on the
investment experience of the Sub-Accounts.
OPTION 1 - Interest Payments -
(Payment of interest on the proceeds at such times and for a
period that is agreeable to you and us.) Withdrawal of
proceeds may be made in amounts of at least $100. At the end
of the period, any remaining proceeds will be paid in either a
single sum or under other any other method we approve.
OPTION 2 - Payments for a Specified Period -
(Monthly payments for a specified number of years.) The amount
of each monthly payment for each $1,000 of proceeds applied
under this option is shown in Option 2 Table. The monthly
payments for any period not shown will be furnished upon
request.
Option 2 Table
PAYMENTS FOR A SPECIFIED PERIOD
--------------------------------------------------
Number of Amount of
Years Payable Monthly Payments
--------------------------------------------------
5 $17.91
10 9.61
15 6.87
20 5.51
25 4.71
30 4.18
--------------------------------------------------
OPTION 3 - Life Income -
(Monthly payments for the life of the person who is to receive
the income.) We will require satisfactory proof of the
person's age and sex. Payments can be guaranteed for 10 or 20
years or as the "Guaranteed Return of Policy Proceeds." The
amount of each monthly payment for each $1,000 of proceeds
applied under this option is shown in Option 3 Table. The
monthly payments for any ages not shown will be furnished upon
request.
Option 3 Table
LIFE INCOME
- -------------------------------------------------------------------------------
MONTHLY INCOME PAYMENTS
- -------------------------------------------------------------------------------
Guaranteed For Guaranteed For
Life 10 Years
M AGE F M AGE F
- -------------------------------------------------------------------------------
$3.84 50 $3.53 $3.82 50 $3.52
4.20 55 3.81 4.15 55 3.79
4.67 60 4.17 4.59 60 4.14
5.33 65 4.68 5.17 65 4.61
6.26 70 5.39 5.89 70 5.24
- -------------------------------------------------------------------------------
Guaranteed Return of Guaranteed For
Policy Proceeds 20 Years
M AGE F M AGE F
- -------------------------------------------------------------------------------
$3.71 50 $3.47 $3.74 50 $3.49
4.00 55 3.71 4.02 55 3.73
4.37 60 4.02 4.34 60 4.03
4.84 65 4.42 4.69 65 4.38
5.45 70 4.94 5.02 70 4.77
- -------------------------------------------------------------------------------
PAGE 19
<PAGE>
OPTION 4 - Payments of a Specified Amount -
(Monthly payments of a specified amount until the proceeds and
interest are fully paid.)
OPTION 5 - Joint and Survivor Life Income -
(Monthly payments during the joint lifetime of two persons and
continued during the lifetime of the survivor.) We will pay
the amount retained, with interest, in equal monthly payments,
as shown in the Option 5 Table for example. The monthly
payment for other age or sex combinations will be furnished
upon request.
Option 5 Table
- --------------------------------------------------------------------------------
JOINT AND SURVIVOR LIFE INCOME
- --------------------------------------------------------------------------------
MONTHLY PAYMENTS FOR EACH
$1,000 OF AMOUNT RETAINED
- --------------------------------------------------------------------------------
AGE OF OTHER PAYEE*
AGE (FEMALE)
OF ------------------------------------------------------------------
ONE 15 Years 10 Years Less 5 Years
PAYEE* Less than than Less than Same as
(MALE) Male Male Payee's Male Male
Payee's Payee's Payee's
- --------------------------------------------------------------------------------
50 $2.98 $3.08 $3.19 $3.30
55 3.10 3.23 3.36 3.51
60 3.26 3.42 3.60 3.80
65 3.45 3.67 3.91 4.18
70 3.72 4.00 4.34 4.72
- --------------------------------------------------------------------------------
* Age nearest birthday.
- --------------------------------------------------------------------------------
OTHER The proceeds will be paid in any other manner agreed to by us.
SETTLEMENT
OPTIONS
CONDITIONS Proceeds of less than $1,000 may not be applied under any
settlement option. We may change the payment frequency if
payments under an option become less than $20.
A corporation may receive payments under a life income option
only if the payments are based on the life of the Insured, or
a surviving spouse or a dependant of the Insured.
If a settlement option is requested, we will prepare an
agreement to be signed which will state the terms and
conditions under which the payments will be made. This
agreement will include a statement regarding the withdrawal
value, if any, and to whom any remaining proceeds will be paid
following the death of the person receiving the payments.
A beneficiary may select a settlement option only after the
Insured's death. However, you may provide that the beneficiary
will not be permitted to change the settlement option you have
selected.
PROCEEDS EXEMPT To the extent permitted by law, each option payment and any
FROM CLAIMS withdrawal shall be free from legal process and the claim of
OFCREDITORS any creditor of the person entitled to them.
RATE OF INTEREST Options 1 through 5 are based on a guaranteed interest rate of
3.0% using the "1983 Table a" Mortality Table with projection.
PAGE 20
<PAGE>
SURRENDER CHARGES PER $1000 OF
INCREASES IN SPECIFIED AMOUNTS (MALE TOBACCO)
<TABLE>
<CAPTION>
Duration
Attained
Age 1 2 3 4 5 6 7 8 9 10
--- - - - - - - - - - --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
18 19.00 18.05 17.10 16.15 15.20 14.25 13.30 12.35 11.40 10.45
19 19.00 18.05 17.10 16.15 15.20 14.25 13.30 12.35 11.40 10.45
20 20.00 19.00 18.00 17.00 16.00 15.00 14.00 13.00 12.00 11.00
21 20.00 19.00 18.00 17.00 16.00 15.00 14.00 13.00 12.00 11.00
22 20.00 19.00 18.00 17.00 16.00 15.00 14.00 13.00 12.00 11.00
23 21.00 19.95 18.90 17.85 16.80 15.75 14.70 13.65 12.60 11.55
24 21.00 19.95 18.90 17.85 16.80 15.75 14.70 13.65 12.60 11.55
25 22.00 20.90 19.80 18.70 17.60 16.50 15.40 14.30 13.20 12.10
26 22.00 20.90 19.80 18.70 17.60 16.50 15.40 14.30 13.20 12.10
27 23.00 21.85 20.70 19.55 18.40 17.25 16.10 14.95 13.80 12.65
28 23.00 21.85 20.70 19.55 18.40 17.25 16.10 14.95 13.80 12.65
29 24.00 22.80 21.60 20.40 19.20 18.00 16.80 15.60 14.40 13.20
30 24.00 22.80 21.60 20.40 19.20 18.00 16.80 15.60 14.40 13.20
31 25.00 23.75 22.50 21.25 20.00 18.75 17.50 16.25 15.00 13.75
32 26.00 24.70 23.40 22.10 20.80 19.50 18.20 16.90 15.60 14.30
33 27.00 25.65 24.30 22.95 21.60 20.25 18.90 17.55 16.20 14.85
34 27.00 25.65 24.30 22.95 21.60 20.25 18.90 17.55 16.20 14.85
35 28.00 26.60 25.20 23.80 22.40 21.00 19.60 18.20 16.80 15.40
36 29.00 27.55 26.10 24.65 23.20 21.75 20.30 18.85 17.40 15.95
37 30.00 28.50 27.00 25.50 24.00 22.50 21.00 19.50 18.00 16.50
38 31.00 29.45 27.90 26.35 24.80 23.25 21.70 20.15 18.60 17.05
39 32.00 30.40 28.80 27.20 25.60 24.00 22.40 20.80 19.20 17.60
40 33.00 31.35 29.70 28.05 26.40 24.75 23.10 21.45 19.80 18.15
41 34.00 32.30 30.60 28.90 27.20 25.50 23.80 22.10 20.40 18.70
42 35.00 33.25 31.50 29.75 28.00 26.25 24.00 22.75 21.00 19.25
43 36.00 34.20 32.40 30.60 28.80 27.00 25.20 23.40 21.60 19.80
44 38.00 36.10 34.20 32.30 30.40 28.50 26.60 24.70 22.80 20.90
45 39.00 37.05 35.10 33.15 31.20 29.25 27.30 25.35 23.40 21.45
46 41.00 38.95 36.90 34.85 32.80 30.75 28.70 26.65 24.60 22.55
47 42.00 39.90 37.80 35.70 33.60 31.50 29.40 27.30 25.20 23.10
48 44.00 41.80 39.60 37.40 35.20 33.00 30.80 28.60 26.40 24.20
49 46.00 43.70 41.40 39.10 36.80 34.50 32.20 29.90 27.60 25.30
</TABLE>
Years 11-20 are shown on page 21A.
PAGE 21
<PAGE>
SURRENDER CHARGES PER $1000 OF
INCREASES IN SPECIFIED AMOUNTS (MALE TOBACCO)
<TABLE>
<CAPTION>
Duration
Attained 20 &
Age 11 12 13 14 15 16 17 18 19 THEREAFTER
--- -- -- -- -- -- -- -- -- -- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
18 9.50 8.55 7.60 6.65 5.70 4.75 3.80 2.85 1.90 -0-
19 9.50 8.55 7.60 6.65 5.70 4.75 3.80 2.85 1.90 -0-
20 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 -0-
21 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 -0-
22 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 -0-
23 10.50 9.45 8.40 7.35 6.30 5.25 4.20 3.15 2.10 -0-
24 10.50 9.45 8.40 7.35 6.30 5.25 4.20 3.15 2.10 -0-
25 11.00 9.90 8.80 7.70 6.60 5.50 4.40 3.30 2.20 -0-
26 11.00 9.90 8.80 7.70 6.60 5.50 4.40 3.30 2.20 -0-
27 11.50 10.35 9.20 8.05 6.90 5.75 4.60 3.45 2.30 -0-
28 11.50 10.35 9.20 8.05 6.90 5.75 4.60 3.45 2.30 -0-
29 12.00 10.80 9.60 8.40 7.20 6.00 4.80 3.60 2.40 -0-
30 12.00 10.80 9.60 8.40 7.20 6.00 4.80 3.60 2.40 -0-
31 12.50 11.25 10.00 8.75 7.50 6.25 5.00 3.75 2.50 -0-
32 13.00 11.70 10.40 9.10 7.80 6.50 5.20 3.90 2.60 -0-
33 13.50 12.15 10.80 9.45 8.10 6.75 5.40 4.05 2.70 -0-
34 13.50 12.15 10.80 9.45 8.10 6.75 5.40 4.05 2.70 -0-
35 14.00 12.60 11.20 9.80 8.40 7.00 5.60 4.20 2.80 -0-
36 14.50 13.05 11.60 10.15 8.70 7.25 5.80 4.35 2.90 -0-
37 15.00 13.50 12.00 10.50 9.00 7.50 6.00 4.50 3.00 -0-
38 15.50 13.95 12.40 10.85 9.30 7.75 6.20 4.65 3.10 -0-
39 16.00 14.40 12.80 11.20 9.60 8.00 6.40 4.80 3.20 -0-
40 16.50 14.85 13.20 11.55 9.90 8.25 6.60 4.95 3.30 -0-
41 17.00 15.30 13.60 11.90 10.20 8.50 6.80 5.10 3.40 -0-
42 17.50 15.75 14.00 12.25 10.50 8.75 7.00 5.25 3.50 -0-
43 18.00 16.20 14.40 12.60 10.80 9.00 7.20 5.40 3.60 -0-
44 19.00 17.10 15.20 13.30 11.40 9.50 7.60 5.70 3.80 -0-
45 19.50 17.55 15.60 13.65 11.70 9.75 7.80 5.85 3.90 -0-
46 20.50 18.45 16.40 14.35 12.30 10.25 8.20 6.15 4.10 -0-
47 21.00 18.90 16.80 14.70 12.60 10.50 8.40 6.30 4.20 -0-
48 22.00 19.80 17.60 15.40 13.20 11.00 8.80 6.60 4.40 -0-
49 23.00 20.70 18.40 16.10 13.80 11.50 9.20 6.90 4.60 -0-
</TABLE>
Attained Ages 50-85 are shown on page 22.
PAGE 21A
<PAGE>
SURRENDER CHARGES PER $1000 OF
INCREASES IN SPECIFIED AMOUNTS (MALE TOBACCO)
<TABLE>
<CAPTION>
DURATION
ATTAINED
AGE 1 2 3 4 5 6 7 8 9 10
--- - - - - - - - - - --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 47.00 44.65 42.30 39.95 37.60 35.25 32.90 30.55 28.20 25.85
51 49.00 46.55 44.10 41.65 39.20 36.75 34.30 31.85 29.40 26.95
52 51.00 48.45 45.90 43.35 40.80 38.25 35.70 33.15 30.60 28.05
53 53.00 50.35 47.70 45.05 42.40 39.75 37.10 34.45 31.80 29.15
54 56.00 53.20 50.40 47.60 44.80 42.00 39.20 36.40 33.60 30.80
55 58.00 55.10 52.20 49.30 46.40 43.50 40.60 37.70 34.80 31.90
56 58.00 55.10 52.20 49.30 46.40 43.50 40.60 37.70 34.80 31.90
57 58.00 55.10 52.20 49.30 46.40 43.50 40.60 37.70 34.80 31.90
58 58.00 55.10 52.20 49.30 46.40 43.50 40.60 37.70 34.80 31.90
59 58.00 55.10 52.20 49.30 46.40 43.50 40.60 37.70 34.80 31.90
60 58.00 55.10 52.20 49.30 46.40 43.50 40.60 37.70 34.80 31.90
61 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
62 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
63 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
64 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
65 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
66 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
67 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
68 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
69 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
70 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
71 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
72 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
73 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
74 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
75 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
76 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
77 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
78 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
79 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
80 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
81 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
82 57.00 54.15 51.30 48.45 45.60 42.75 39.90 37.05 34.20 31.35
83 52.00 49.40 46.80 44.20 41.60 39.00 36.40 33.80 31.20 28.60
84 45.00 42.75 40.50 38.25 36.00 33.75 31.50 29.25 27.00 24.75
85 40.00 38.00 36.00 34.00 32.00 30.00 28.00 26.00 24.00 22.00
</TABLE>
Years 11-20 are shown on page 22A.
PAGE 22
<PAGE>
SURRENDER CHARGES PER $1000 OF
INCREASES IN SPECIFIED AMOUNTS (MALE TOBACCO)
<TABLE>
<CAPTION>
DURATION
ATTAINED 20 &
AGE 11 12 13 14 15 16 17 18 19 THEREAFTER
--- -- -- -- -- -- -- -- -- -- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 23.50 21.15 18.80 16.45 14.10 11.75 9.40 7.05 4.70 -0-
51 24.50 22.05 19.60 17.15 14.70 12.25 9.80 7.35 4.90 -0-
52 25.50 22.95 20.40 17.85 15.30 12.75 10.20 7.65 5.10 -0-
53 26.50 23.85 21.20 18.55 15.90 13.25 10.60 7.95 5.30 -0-
54 28.00 25.20 22.40 19.60 16.80 14.00 11.20 8.40 5.60 -0-
55 29.00 26.10 23.20 20.30 17.40 14.50 11.60 8.70 5.80 -0-
56 29.00 26.10 23.20 20.30 17.40 14.50 11.60 8.70 5.80 -0-
57 29.00 26.10 23.20 20.30 17.40 14.50 11.60 8.70 5.80 -0-
58 29.00 26.10 23.20 20.30 17.40 14.50 11.60 8.70 5.80 -0-
59 29.00 26.10 23.20 20.30 17.40 14.50 11.60 8.70 5.80 -0-
60 29.00 26.10 23.20 20.30 17.40 14.50 11.60 8.70 5.80 -0-
61 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
62 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
63 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
64 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
65 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
66 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
67 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
68 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
69 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
70 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
71 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
72 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
73 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
74 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
75 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
76 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
77 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
78 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
79 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
80 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 5.70 -0-
81 28.50 25.65 22.80 19.95 17.10 14.25 11.40 8.55 0.00 -0-
82 28.50 25.65 22.80 19.95 17.10 14.25 11.40 0.00 0.00 -0-
83 26.00 23.40 20.80 18.20 15.60 13.00 0.00 0.00 0.00 -0-
84 22.50 20.25 18.00 15.75 13.50 0.00 0.00 0.00 0.00 -0-
85 20.00 18.00 16.00 14.00 0.00 0.00 0.00 0.00 0.00 -0-
</TABLE>
PAGE 22A
<PAGE>
Part 8. SUMMARY OF POLICY BENEFITS
LIVING BENEFITS Your policy has certain guaranteed values which are available
to you during your lifetime. These values consist of the cash
surrender values or loan values. You may use these values:
- To provide supplemental income (see page 19).
- As collateral for a loan or as the basis for a policy loan
(see page 14).
- To continue some insurance protection if you cannot or do
not wish to continue paying premiums (see pages 5 and 15).
- To obtain cash by surrendering your policy (see page 15).
- To obtain cash by partial withdrawal, (see page 7).
The available Cash Surrender Value of your policy is:
- The Policy Value (see page 11).
MINUS - The Surrender Charge, if any (see page 15).
MINUS - Any Indebtedness (see definition, page 2).
The available Loan Value of your policy is:
- 90% of the Cash Surrender Value, less six months of
Monthly Deductions (see page 15).
DEATH PROCEEDS The amount payable to the beneficiary is the total of the
following amounts determined on the date of the Insured's
death:
- The death benefit amount of this policy (see page
10).
PLUS - Any additional insurance on the Insured's life
provided by an extra benefit rider (see page 3).
MINUS - Any Indebtedness (see definition, page 2).
MINUS - Any Monthly Deductions due (see page 11).
EXTRA The extra benefits, if any, listed on page 3 are fully
BENEFIT RIDERS described in the extra benefit riders that are attached to
this policy.
Part 9. YOUR RIGHTS
During the Insured's lifetime and unless otherwise provided in this policy,
you have the exclusive right to assign this policy, to receive every
benefit and to exercise every right, privilege and option this policy
grants or that we allow. Some of your rights are:
- To change the owner or beneficiary. (Change of Owner and Beneficiary,
page 5).
- To transfer money between Accounts. (Transfers, page 8)
- To withdraw cash. (Partial Withdrawals, page 7).
- To surrender this policy. (Nonforfeiture Options, page 15).
- To stop premium payments but keep the policy in force. (Continuation
of Coverage, page 6).
- To change the frequency of premium payments. (Premiums, page 5).
- To change the Specified Amount. (Increase or Decrease in The
Specified Amount, page 10).
- To change the Death Benefit Option. (Change in the Death Benefit
Option, page 10).
- To borrow on the life insurance base policy. (Policy Loans, page 14).
- To reinstate the policy after lapse. (Reinstatement, page 6).
- To receive policy benefits as income. (Settlement Options, pages 19,
and 20).
To exercise any of these rights, or to apply for the proceeds or any
benefits under this policy, communicate with our nearest representative or
directly with our home office. Please notify us promptly of any change of
address.
PAGE 23
<PAGE>
Life Investors Insurance Company of America
Home Office located at 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499
[LIFE INVESTORS INSURANCE COMPANY OF AMERICA LOGO]
Flexible Premium Variable Life Insurance Policy
Terminal Illness Accelerated Death Benefit
Premiums Payable to Maturity Date or Until Prior Death of Insured
Proceeds Payable at Death or Maturity Date
Non-Participating
Some Benefits Reflect Investment Results
INDEX
Page
Annual Report ................................................. 7
Assignment .................................................... 4
Basis Used for Calculations ................................... 15
Beneficiary ................................................... 5
Cash Surrender Value .......................................... 15
Change of Owner or Beneficiary ................................ 5
Change of Specified Amount .................................... 10
Continuation of Coverage ...................................... 6
Contract ...................................................... 4
Cost of Insurance ............................................. 12
Death Benefit Options ......................................... 10
Definitions ................................................... 2
Exchange Privilege ............................................ 7
Extended Maturity Date ........................................ 13
Fixed Account Value ........................................... 12
General Provisions ............................................ 4
Grace Period .................................................. 6
Guaranteed Cost of Insurance Rates ............................ 18
Illustrative Reports .......................................... 5
Incontestability .............................................. 4
Indebtedness .................................................. 2
Interest from Date of Death ................................... 11
Interest Rate ................................................. 12
Loan Values ................................................... 14
Loan Interest ................................................. 14
Misstatement of Age or Sex .................................... 5
Monthly Deduction ............................................. 11
Nonforfeiture Options ......................................... 15
Non-participating ............................................. 5
Partial Withdrawals ........................................... 7
Payment Intervals (Premiums) .................................. 5
Payment of Proceeds ........................................... 19
Policy Loans .................................................. 14
Policy Value .................................................. 11
Policy Specifications ......................................... 3
Premiums ...................................................... 5
Reduced Paid-Up Insurance ..................................... 15
Reinstatement ................................................. 6
Separate Account .............................................. 8
Settlement Options ............................................ 19
Specified Amount .............................................. 10
Sub-Account Value ............................................. 12
Suicide Exclusion ............................................. 4
Surrender Charge .............................................. 15
Terminal Illness Accelerated Death Benefit .................... 16
Transfers ..................................................... 8
Unit Value .................................................... 9
- - Please examine your policy and the attached copy of the application
carefully. Contact your agent if you desire additional service or
information.
- - If you change your address, please notify us at the home office giving
your full name and policy number.
- - Your policy is a valuable asset. For your own protection, let us advise
you regarding any suggestion to terminate or exchange this policy.
EXHIBIT 1.A.5(a)
[LIFE INVESTORS INSURANCE COMPANY OF AMERICA LOGO]
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
Home Office located at: 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499
A Stock Company
(Hereafter called the Company, we, our or us)
WAIVER OF PREMIUM BENEFIT RIDER
This extra benefit rider, attached to and made a part of the policy, provides as
described below, waiver of premium in the event of total and permanent
disability of the Insured.
We agree to waive payment of premiums for the policy and any riders when we
receive proof of the following:
1. That the Insured is totally and permanently disabled.
2. That the disability began while this rider was in force.
3. That the disability has lasted continuously for at least six months
during the Insured's lifetime. 4. That the disability commenced prior
to the policy anniversary following the Insured's 60th birthday.
PREMIUMS TO BE WAIVED
We will waive the Waiver of Premium Benefit as shown on page 3, while the
Insured is totally and permanently disabled. Premiums waived will be in the same
frequency of payment as when disability began. No premium will be waived for the
due date which is more than one year prior to our receipt at the home office of
written notice and proof of the Insured's disability.
When you claim waiver of premiums, you are to pay premiums for at least six
months or until we approve the claim. If we waive a premium that has been paid,
we will refund it, or include it in the proceeds payable under the policy.
If total and permanent disability begins in the grace period of an unpaid
premium, we will not waive that premium.
No Premiums will be waived for periods of Total Disability during which you are
not under the normal and customary care of a physician. No Premiums will be
waived after Total Disability ceases.
Separate periods of Total Disability beginning while this benefit is in force
will be considered as one continuous disability period unless such separate
periods are:
1. due to unrelated causes; or
2. due to the same or related causes, but are separated by at least six
months during which the Insured has returned to work.
Page 1 of 4
<PAGE>
POLICY BENEFITS CONTINUE
Benefits under the policy will be the same as if the premiums waived had been
paid in cash. This rider will not affect the Nonforfeiture Options in the
policy, if any. It is possible that coverage will expire prior to the Maturity
Date based on the amount of premium being waived. If the current interest or
cost of insurance change, this would also affect coverage.
DEFINITION OF TOTAL AND PERMANENT DISABILITY
Disability shall be considered to be total when the Insured is unable to
gainfully perform the major duties of his or her regular occupation.
During the first two years of disability, occupation means the Insured's
occupation at the time disability began. The Insured's occupation includes
attending school or college as a full time student.
After the first two years of disability, occupation means any occupation for
which the Insured is reasonably suited by education, training or experience.
Such total disability shall be presumed to be permanent (but only for the
purpose of determining the commencement of liability hereunder) when it is
present and has existed continuously for not less than six consecutive months.
If the total disability begins while the Insured is retired or temporarily
unemployed, the word "occupation' means the last regular occupation at which the
Insured was gainfully employed on a full time basis before the injury or
sickness started.
PRESUMED DISABILITIES
We will consider the total and permanent loss of any of the following as a total
and permanent disability even though the Insured engages in an occupation:
1. The sight of both eyes.
2. The use of both hands or both feet.
3. The use of one hand and one foot.
NOTICE AND PROOF
Before we waive any premium, we must receive at our home office written notice
and due proof of the total and permanent disability. The notice and proof must
reach us:
1. While the Insured is living; and
2. While the Insured is totally and permanently disabled; and
3. Not later than one year after the due date of any premium that is to be
waived.
However, these time limits will not apply if we are satisfied that notice (or
proof) was given as soon as reasonably possible.
Page 2 of 4
<PAGE>
At reasonable intervals, we can require due proof that the total and permanent
disability is continuing. If proof is not given, we will stop waiving premiums.
After the first two years of total and permanent disability, we will not
ordinarily require proof more often than once a year.
As part of due proof, we can require that the Insured be examined by doctors of
our choice.
You have the obligation to inform us immediately if you are no longer disabled
or if you return to work.
DISABILITIES NOT COVERED
We will not waive premiums if the Insured's disability results from:
1. War, declared or undeclared, or
2. The Insured's military service for any country at war, or 3.
Intentionally self-inflicted injury.
THE CONTRACT
In this rider "policy" means the policy in which you have requested that this
rider be included. "Page 3" means page 3 of the policy.
This rider is issued in consideration of the application and the payment of
premiums as provided. The amount of premium and the premium-paying period for
this rider are shown on page 3.
The Insured is the person shown as the Insured on page 3.
This rider is a part of the policy. All provisions of the policy which are not
inconsistent with the provisions of this rider apply to this rider.
RIDER DATE
Rider months, years and anniversaries are measured from the rider date. The
rider date is the policy date unless a different rider date is shown in the
policy. When used in the rider, "date of issue" means the rider date.
INCONTESTABILITY
This rider is subject to the Incontestability provisions of the policy. However,
the contestable period shall, as far as this rider is concerned, be measured
from the date of issue of this rider.
Page 3 of 4
<PAGE>
TERMINATION
This rider will terminate on the earliest of the following dates:
1. Unless the Insured is totally and permanently disabled, the policy
anniversary following the Insured's 60th birthday.
2. The date this rider or the policy lapses for failure to pay a premium.
3. The date the policy becomes paid up, expires, matures as an endowment
or otherwise terminates.
4. The date a Nonforfeiture Option under the policy, if any, becomes
effective.
Any premium on the policy falling due on or after the termination of this rider
shall automatically be reduced by the premium for this rider.
You may terminate this rider by written request.
Termination will not affect any claim which may be made because of total and
permanent disability which began prior to termination.
Signed for us at our home office.
[Secretary Signature] [President Signature]
SECRETARY PRESIDENT
Page 4 of 4
EXHIBIT 1.A.5(b)
[LIFE INVESTORS INSURANCE COMPANY OF AMERICA LOGO]
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
Home Office located at: 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499
A Stock Company
(Hereafter called the Company, we, our or us)
WAIVER OF MONTHLY DEDUCTION RIDER
This extra benefit rider, attached to and made a part of the policy, provides as
described below, waiver of monthly deduction in the event of total and permanent
disability of the Insured.
We agree to waive payment of Monthly Deductions for the policy when we receive
proof of the following:
1. That the Insured is totally and permanently disabled.
2. That the disability began while this rider was in force.
3. That the disability has lasted continuously for at least six months
during the Insured's lifetime.
4. That the disability commenced prior to the policy anniversary following
the Insured's 60th birthday.
WAIVER OF MONTHLY DEDUCTION
We will waive the Monthly Deduction, as described in the Policy, if the Primary
Insured suffers six months of continuous Total Disability due to Injury or
Sickness.
We will return to the Policy Value all Monthly Deductions since the start of the
Total Disability.
On each Monthly Anniversary thereafter we will waive the Monthly Deduction for
as long as Total Disability continues.
No Monthly Deductions will be waived for periods of Total Disability during
which you are not under the normal and customary care of a physician. No Monthly
Deductions will be waived after Total Disability ceases. You have an obligation
to inform us immediately when the Insured's Total Disability ceases, the Insured
returns to work, or the Insured is not under the normal and customary care of a
physician.
Separate periods of Total Disability beginning while this benefit is in force
will be considered as one continuous disability period unless such separate
periods are:
1. due to unrelated causes; or
2. due to the same or related causes, but are separated by at least six
months during which the Insured has returned to work.
Page 1 of 4
<PAGE>
POLICY BENEFITS CONTINUE
Benefits under the policy will be the same as if the monthly deductions waived
had been paid in cash. This rider will not affect the Nonforfeiture Options or
the Table of Guaranteed Values in the policy, if any.
DEFINITION OF TOTAL AND PERMANENT DISABILITY
Disability shall be considered to be total when the Insured is unable to
gainfully perform the major duties of his or her regular occupation.
During the first two years of disability, occupation means the Insured's
occupation at the time disability began. The Insured's occupation includes
attending school or college as a full time student.
After the first two years of disability, occupation means any occupation for
which the Insured is reasonably suited by education, training or experience.
Such total disability shall be presumed to be permanent (but only for the
purpose of determining the commencement of liability hereunder) when it is
present and has existed continuously for not less than six consecutive months.
If the total disability begins while the Insured is retired or temporarily
unemployed, the word "occupation" means the last regular occupation at which the
Insured was gainfully employed on a full time basis before the injury or
sickness started.
PRESUMED DISABILITIES
We will consider the total and permanent loss of any of the following as a total
and permanent disability even though the Insured engages in an occupation:
1. The sight of both eyes.
2. The use of both hands or both feet.
3. The use of one hand and one foot.
NOTICE AND PROOF
Before we waive any monthly deduction, we must receive at our home office
written notice and due proof of the total and permanent disability. The notice
and proof must reach us:
1. While the Insured is living; and
2. While the Insured is totally and permanently disabled; and
3. Not later than one year after the due date of any monthly deduction
that is to be waived.
However, these time limits will not apply if we are satisfied that notice (or
proof) was given as soon as reasonably possible.
At reasonable intervals, we can require due proof that the total and permanent
disability is continuing. If proof is not given, we will stop waiving monthly
deductions. After the first two years of total and permanent disability, we will
not ordinarily require proof more often than once a year.
As part of due proof, we can require that the Insured be examined by doctors of
our choice at our expense.
Page 2 of 4
<PAGE>
DISABILITIES NOT COVERED
We will not waive Monthly Deductions if the Insured's disability results from:
1. War, declared or undeclared, or
2. Committing or attempting to commit a felonious act; or 3. The Insured's
military service for any country at war, or 4. Intentionally
self-inflicted injury.
THE CONTRACT
In this rider "policy" means the policy in which you have requested that this
rider be included. "Page 3" means page 3 of the policy.
This rider is issued in consideration of the application and the premiums as
provided. The amount of premium and the premium-paying period for this rider are
shown on page 3.
The Insured is the person shown as the Insured on page 3.
This rider is a part of the policy. All provisions of the policy which are not
inconsistent with the provisions of this rider apply to this rider.
RIDER DATE
Rider months, years and anniversaries are measured from the rider date. The
rider date is the policy date unless a different rider date is shown in the
policy. When used in the rider, "date of issue" means the rider date.
INCONTESTABILITY
This rider is subject to the Incontestability provisions of the policy. However,
the contestable period shall, as far as this rider is concerned, be measured
from the date of issue of this rider.
TERMINATION
This rider will terminate on the earliest of the following dates:
1. Unless the Insured is totally and permanently disabled, the policy
anniversary following the Insured's 60th birthday.
2. The date this rider or the policy lapses for failure to pay a premium.
3. The date the policy becomes paid up, expires, matures as an endowment
or otherwise terminates.
4. The date a Nonforfeiture Option under the policy, if any, becomes
effective.
Any premium on the policy falling due on or after the termination of this rider
shall automatically be reduced by the premium for this rider.
Page 3 of 4
<PAGE>
You may terminate this rider by written request.
Termination will not affect any claim which may be made because of total and
permanent disability which began prior to termination.
Signed for us at our home office.
[Secretary Signature] [President Signature]
SECRETARY PRESIDENT
Page 4 of 4
EXHIBIT 1.A.5(c)
[LIFE INVESTORS INSURANCE COMPANY OF AMERICA LOGO]
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
Home Office located at: 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499
A Stock Company
(Hereafter called the Company, we, our or us)
LEVEL ONE YEAR TERM INSURANCE RIDER
This extra benefit rider, attached to and made a part of the policy, provides as
described below, level term insurance on the Insured.
We agree to pay the death benefits to your beneficiary when we receive due proof
at our home office of the following:
1. That the Insured's death occurred while this rider was in force.
2. That the Insured's death occurred before the expiry date of this rider.
INSURED
The Insured is the person shown as the Insured on page 3.
EXPIRY DATE
The expiry date means the rider anniversary at the end of the period of coverage
for this rider shown on page 3.
AMOUNT OF DEATH BENEFIT
The amount of death benefit payable is shown on page 3. This amount is payable
in addition to the proceeds payable under the policy.
TERMINATION
This rider will terminate on the earliest of the following dates:
1. The expiry date of this rider.
2. The date the policy terminates.
3. The date the rider or policy lapses for failure to pay a premium.
4. The death of the Insured.
5. The date the conversion option is exercised.
6. The date a Nonforfeiture Option under the policy, if any, becomes
effective.
You may terminate this rider by written request. Our acceptance of a premium for
any period after the date of termination of this rider shall create no liability
for us, nor will it constitute a waiver of the termination. Any premium which
has been accepted by us will be refunded.
Page 1 of 3
<PAGE>
THE CONTRACT
In this rider "policy" means the policy in which you have requested that this
rider be included. "Page 3" means page 3 of the policy.
This rider is issued in consideration of the application and the payment of
premiums as provided.
The amount of insurance under this rider, the amount of premium and the
premium-paying period are shown on page 3.
If a waiver of premium rider is included in the policy, that rider will also
apply to this rider.
This rider is a part of the policy. All provisions of the policy which are not
inconsistent with the provisions of this rider apply to this rider.
RIDER DATE
Rider months, years and anniversaries are measured from the rider date. The
rider date is the policy date unless a different rider date is shown in an
endorsement attached to the policy. When used in the rider, "effective date"
means the rider date.
INCONTESTABILITY
This rider is subject to the Incontestability provisions of the policy. However,
the contestable period shall as far as this rider is concerned, be measured from
the date of issue of this rider.
NON-PARTICIPATION
This rider will not share in our surplus earnings.
BASIS OF COMPUTATION
We use the Male and Female 1980 CSO, (S or NS), Age Last Birthday. Reserves are
not less than the required minimum reserves.
MONTHLY INSURANCE CHARGE FOR THIS RIDER
While this rider is in force, a Monthly Cost of Insurance Charge for this
coverage will be included in the Monthly Deduction to the Policy Value. The
Monthly Guaranteed Maximum Cost of Insurance Rates are shown in the Monthly
Guaranteed Maximum Cost of Insurance Rates Table as shown in the policy to which
this rider is attached. We may use Cost of Insurance Rates lower than the
guaranteed maximum rates but will never charge rates in excess of the guaranteed
maximum rates. Any change to the Cost of Insurance Rates will be applied
uniformly to all members of the same premium class. The Monthly Guaranteed
Maximum Cost of Insurance Rate is based on the Insured's:
- Sex,
- Attained age, and
- Premium class shown on page 3 of the policy.
RENEWAL
If this rider is in force on any Expiry Date, and the Insured is age 99 or less,
it may be renewed on that date or within 31 days thereafter without evidence of
insurability. Renewal will be for one year.
Upon renewal, this rider will continue in force upon deduction of the Monthly
Cost of Insurance Charges, for the Insured's then attained age, until the next
Expiry Date, subject to the provisions of this rider and the policy.
Page 2 of 3
<PAGE>
CONVERSION
While in force this rider may be converted to a new policy without evidence of
insurability. This conversion option is available while no premium is in
default, and prior to the Insured's 75th birthday. The new policy will be issued
for an amount not exceeding the amount Insured by this rider.
A rider providing benefits in event of total and permanent disability, or
additional benefits in event of death by accident, will be included in the new
policy without evidence of insurability only if:
a) such a rider is in force under the terms of the policy to which this
rider is attached at the date of conversion,
b) the Insured is not totally and permanently disabled on the date of
conversion, and
c) only if on the date of conversion, we customarily issue such riders
with new policies at the then attained insurance age of the Insured.
Such conversion will be made only on your written request.
The date of issue of the policy will be the date of conversion. The plan of
insurance under the new policy will be a plan of level premium whole life or
endowment insurance which we issue on the policy date of the new policy, at our
then current rates.
INCONTESTABILITY AND SUICIDE
If the rider is converted in accordance with the Conversion Option, the
Incontestability and Suicide provisions in the new policy shall be void.
CONTINUATION
If the policy to which this rider is attached is converted prior to the Expiry
Date, then this rider may be continued on the new policy without evidence of
insurability and at the same premium rate.
Signed for us at our home office.
[Secretary Signature] [President Signature]
SECRETARY PRESIDENT
Page 3 of 3
EXHIBIT 1.A.5(d)
[LIFE INVESTORS INSURANCE COMPANY OF AMERICA LOGO]
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
Home Office located at: 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499
A Stock Company
(Hereafter called the Company, we, our or us)
ADDITIONAL INSUREDS LEVEL ONE YEAR
TERM INSURANCE RIDER
This extra benefit rider, attached to and made a part of the policy, provides as
described below, one year term insurance on the Additional Insured.
We agree to pay the death benefits to your beneficiary when we receive due proof
at our home office of the following:
1. The death of the Additional Insured under this rider.
2. That the Additional Insured's death occurred while this rider was in
force.
3. That the Additional Insured's death occurred before the expiry date of
this rider.
ADDITIONAL INSURED
The Additional Insured is the person shown as the Additional Insured on page 3.
EXPIRY DATE
The expiry date means the rider anniversary at the end of the period of coverage
for this rider shown on page 3.
AMOUNT OF DEATH BENEFIT
The amount of death benefit payable is shown on page 3. This amount is payable
in addition to the proceeds payable under the policy.
TERMINATION
This rider will terminate on the earliest of the following dates:
1. The expiry date of this rider.
2. The date the policy terminates.
3. The date the rider or policy lapses for failure to pay a premium.
4. The death of the Additional Insured.
5. The date the conversion option is exercised.
6. The date a Nonforfeiture Option under the policy, if any, becomes
effective.
Page 1 of 3
<PAGE>
You may terminate this rider by written request. Our acceptance of a premium for
any period after the date of termination of this rider shall create no liability
for us, nor will it constitute a waiver of the termination. Any premium which
has been accepted by us will be refunded.
THE CONTRACT
In this rider "policy" means the policy in which you have requested that this
rider be included. "Page 3" means page 3 of the policy.
This rider is issued in consideration of the application and the payment of
premiums as provided.
The amount of insurance under this rider, the amount of premium and the
premium-paying period are shown on page 3.
If a waiver of premium rider is included in the policy, that rider will also
apply to this rider.
This rider is a part of the policy. All provisions of the policy which are not
inconsistent with the provisions of this rider apply to this rider.
RIDER DATE
Rider months, years and anniversaries are measured from the rider date. The
rider date is the policy date unless a different rider date is shown in an
endorsement attached to the policy. When used in the rider, "effective date"
means the rider date.
INCONTESTABILITY
This rider is subject to the Incontestability provisions of the policy. However,
the contestable period shall as far as this rider is concerned, be measured from
the date of issue of this rider.
NON-PARTICIPATION
This rider will not share in our surplus earnings.
BASIS OF COMPUTATION
We use the Male and Female 1980 CSO, (S or NS), Age Last Birthday. Reserves are
not less than the required minimum reserves.
MONTHLY INSURANCE CHARGE FOR THIS RIDER
While this rider is in force, a Monthly Cost of Insurance Charge for this
coverage will be included in the Monthly Deduction to the Policy Value. The
Monthly Guaranteed Maximum Cost of Insurance Rates are shown in the Monthly
Guaranteed Maximum Cost of Insurance Rates Table as shown in the policy to which
this rider is attached. We may use Cost of Insurance Rates lower than the
guaranteed maximum rates but will never charge rates in excess of the guaranteed
maximum rates. Any change to the Cost of Insurance Rates will be applied
uniformly to all members of the same premium class. The Monthly Guaranteed
Maximum Cost of Insurance Rate is based on the Additional Insured's:
- Sex,
- Attained age, and
- Premium class shown on page 3 of the policy.
Page 2 of 3
<PAGE>
RENEWAL
If this rider is in force on any Expiry Date, and the Additional Insured is age
99 or less, it may be renewed on that date or within 31 days thereafter without
evidence of insurability. Renewal will be for one year.
Upon renewal, this rider will continue in force upon deduction of the Monthly
Cost of Insurance Charges, for the Additional Insured's then attained age, until
the next Expiry Date, subject to the provisions of this rider and the policy.
CONVERSION
While in force this rider may be converted to a new policy without evidence of
insurability. This conversion option is available while no premium is in
default, and prior to the Additional Insured's 75th birthday. The new policy
will be issued for an amount not exceeding the amount Insured by this rider.
A rider providing benefits in event of total and permanent disability, or
additional benefits in event of death by accident, will be included in the new
policy without evidence of insurability only if:
a) such a rider is in force under the terms of the policy to which this
rider is attached at the date of conversion,
b) the Additional Insured is not totally and permanently disabled on the
date of conversion, and
c) only if on the date of conversion, we customarily issue such riders
with new policies at the then attained insurance age of the Additional
Insured.
Such conversion will be made only on your written request.
The date of issue of the policy will be the date of conversion. The plan of
insurance under the new policy will be a plan of level premium whole life or
endowment insurance which we issue on the policy date of the new policy, at our
then current rates.
INCONTESTABILITY AND SUICIDE
If the rider is converted in accordance with the Conversion Option, the
Incontestability and Suicide provisions in the new policy shall be void.
CONTINUATION
If the policy to which this rider is attached is converted prior to the Expiry
Date, then this rider may be continued on the new policy without evidence of
insurability and at the same premium rate.
Signed for us at our home office.
[Secretary Signature] [President Signature]
SECRETARY PRESIDENT
Page 3 of 3
EXHIBIT 1.A.5(e)
[LIFE INVESTORS INSURANCE COMPANY OF AMERICA LOGO]
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
Home Office located at: 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499
A Stock Company
(Hereafter called the Company, we, our or us)
ACCIDENTAL DEATH BENEFIT RIDER
This extra benefit rider, attached to and made a part of the policy, provides
accidental death benefits, subject to the terms and conditions described below.
We agree to pay the additional amount of death benefits shown on page 3 to the
beneficiary when we receive due proof that the Insured's death:
1. Resulted directly and independently of all other causes, solely from
accidental bodily injury,
2. Was not caused or contributed, directly or indirectly, wholly or in
part, by a sickness, disease or physical or mental infirmity or any
other cause,
3. Occurred while this rider is in force,
4. Occurred within ninety (90) days after the bodily injury, and
5. Injury occurred on or before the policy anniversary on which the
attained age of Insured is sixty-five (65).
RISKS NOT COVERED
We will not pay the accidental death benefit if the Insured's death is caused or
contributed to by or results directly or indirectly, wholly or in part, from:
1. Suicide or intentionally self-inflicted injury while sane or insane. If
the Insured was a Missouri citizen at the time of issue or
reinstatement, the following will, apply: Intentionally self-inflicted
injury while sane.
2. Sickness, disease or physical or mental infirmity, pregnancy or any
other kind of illness, or any medical or surgical care, diagnosis, or
treatment for such condition.
3. Committing, or aiding and abetting in the commission of, or attempting
to commit an assault or felony.
4. Being engaged in or attempting to engage in an illegal activity or
occupation.
5. Engaging in or attempting to engage in "Russian roulette" type
activities.
6. War, declared or undeclared, or any act of war.
7. The voluntary use of any drug, whether legal or illegal.
8. Being intoxicated, whether from alcohol or drugs.
9. Being under the influence of any narcotic, sedative, alcohol or other
drug.
10. Poison, gas or fumes voluntarily taken, administered, absorbed or
inhaled.
11. An accident that occurs while the Insured was driving a motor vehicle
while he or she had alcohol or any intoxicant, narcotic, sedative or
other drug physically present in his or her body.
Page 1 of 3
<PAGE>
12. Operating, riding in, or descending from any kind of aircraft if it is
being flown for test or experimental purposes, or if the Insured:
a. Is a pilot, officer, or member of the crew; or
b. Has any duties aboard the aircraft or duties which require
descent from it; or
c. Is giving or receiving any kind of training or instruction.
13. The Insured's military service for any country at war.
14. The Insured's engaging in or attempting to engage in autoerotic
asphyxia type behavior.
DEFINITION OF ACCIDENTAL BODILY INJURY
Accidental bodily injury means an accident or injury which is the direct cause
of the death when the accident, injury, and death resulted directly and
independently of all other causes, solely from accidental bodily injury.
AUTOPSY
We will, at our expense, have the right to examine the body of the Insured and
to have an autopsy performed, unless prohibited by law, at any time after we
receive due proof of the death of the Insured.
THE CONTRACT
In this rider, "policy" means the policy in which you have requested that this
rider be included. "Page 3" means page 3 of the policy.
The Insured is the person shown as the Insured on Page 3.
ACCIDENTAL DEATH BENEFIT
This rider is a part of the policy. All provisions of the policy which are not
inconsistent with the provisions of this rider apply to this rider.
Whenever premiums are waived under the policy, premiums shall likewise be waived
under this rider.
RIDER DATE
Rider months, years and anniversaries are measured from the rider date. The
rider date is the policy date unless a different rider date is shown in the
policy. When used in the rider, "date of issue" means the rider date.
Page 2 of 3
<PAGE>
INCONTESTABILITY
This rider is subject to the Incontestability provisions of the policy. However,
the contestable period shall, as far as this rider is concerned, be measured
from the date of issue of this rider.
TERMINATION
This rider will terminate on the earliest of the following dates:
1. The anniversary following the Insured's 65th birthday. 2. The date this rider
or the policy lapses for failure to pay a premium. 3. The date the policy
becomes paid-up, expires, matures as an endowment or otherwise
terminates.
4. The date a Nonforfeiture Option under the policy, if any, becomes effective.
You may terminate this rider by written request.
Termination will not affect any claim which began prior to termination.
PREMIUMS
This rider is issued in consideration of the application and payment of premiums
as provided.
- - The amount of premium and the premium-paying period for this rider is
shown on page 3.
- - Payment of any premiums for this rider will not create or increase any
cash, loan, paid-up or extended term insurance value, if any, or
dividend, if any, under the policy.
Signed for us at our home office.
[Secretary Signature] [President Signature]
SECRETARY PRESIDENT
Page 3 of 3
EXHIBIT 1.A.5(f)
[LIFE INVESTORS INSURANCE COMPANY OF AMERICA LOGO]
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
Home Office located at: 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499
A Stock Company
(Hereafter called the Company, we, our or us)
GUARANTEED INSURABILITY BENEFIT RIDER
This extra benefit rider, attached to and made a part of the policy, provides as
described below, options to purchase additional insurance without evidence of
insurability.
We agree:
1. To let you buy a policy or increase your current Specified Amount on
the life of the Insured on a regular or alternate option date. We will
not ask for evidence of insurability.
2. To pay your beneficiary the amount of insurance provided by this rider
if the Insured dies during the three-month period prior to an alternate
option date.
REGULAR OPTION DATES
Regular option dates will be the policy anniversaries following the Insured's
22nd, 25th, 28th, 31st, 34th, 37th and 40th birthdays.
ALTERNATE OPTION DATES
Alternate option dates will be three months after each of the following events
which occur after the date of this rider:
1. The marriage of the Insured.
2. The birth of a child to the Insured and the Insured's spouse. 3. The
legal adoption of a child by the Insured. 4. The Insured's graduation
from a 4 year college.
If you buy a policy on an alternate option date, we will cancel the next regular
option which has not already been cancelled. However, you may buy a new policy
on each alternate option date even though all regular options have been
cancelled.
If more than one child is born at the same time, or if the Insured adopts more
than one child at a time, we will allow you to buy more than one policy on the
same alternate option date. We also may allow you to buy one policy equal to the
maximum amount of this rider, as shown on page 3, multiplied by the number of
children.
The number of regular option dates to be cancelled will be equal to the number
of policies purchased, or if one policy is purchased, the number of policies
that would have been purchased if they had not been combined.
Page 1 of 4
<PAGE>
THE CONTRACT
In this rider, "policy" means the policy in which you have requested that this
rider be included. "Page 3" means page 3 of the policy.
This rider is issued in consideration of the application and the payment of
premiums as provided. The amount of premium and the premium-paying period for
this rider are shown on page 3.
The Insured is the person shown as the Insured on Page 3.
This rider is a part of the policy. All provisions of the policy which are not
inconsistent with the provisions of this rider apply to this rider. This rider
will not increase the guaranteed values of the policy, if any.
Whenever premiums are waived under the policy, premiums shall likewise be waived
under this rider.
INSURANCE
We will pay your beneficiary the insurance death benefit provided by this rider
when we receive proof that the Insured died during the three-month period before
an alternate option date. The amount of the death benefit will be the maximum
amount that could have been bought on that option date. The death benefit will
be added to the death benefit of the policy.
THE NEW POLICY
NEW POLICY
New issue of the plan you select or an increased coverage on your existing plan.
AMOUNT OF NEW POLICY
The face amount for each new policy may not be less than the minimum amount or
greater than the maximum amount of this rider, as shown on page 3. The new
policy must be within the established issue limits for the plan you select.
PLAN
The new policy may be on any level premium whole life or endowment plan being
issued by us on the option date on a person of the Insured's age, except a plan
providing coverage of more than one person or including an option to purchase
additional insurance. We may include in the new policy any exclusion included in
this policy or which we are including in policies being issued on the option
date on persons of the Insured's sex and age who are in a standard risk class.
The new policy will not include a waiver of premium rider or an accidental death
benefit rider unless the Insured submits evidence of insurability satisfactory
to us at the time of issue of the new policy.
PREMIUMS
Premiums for the new policy will be for the same class of risk as for this rider
and for the Insured's age and sex.
Page 2 of 4
<PAGE>
APPLICATION
You must apply for the new policy and pay the first premium. If an alternate
option is being elected, we must receive the application by the option date. If
a regular option is elected, we must receive it by the option date or within
sixty days before the option date.
If an alternate option is being exercised, you must give proof satisfactory to
us of the marriage, birth, adoption or graduation.
OWNER AND BENEFICIARY
The owner and beneficiary of the new policy will be as requested in the
application for the new policy.
POLICY DATE
If a regular or alternate option is elected, the date of the new policy will be
the option date. Insurance provided by the new policy will be effective on the
date of the new policy if the Insured is then living.
UNDERWRITING SAVINGS CREDIT
We will allow a credit when you buy each new policy. The credit will not be less
than $5, plus an additional $1 for each full $1,000 by which the face amount of
the new policy exceeds $5,000. We will apply the credit to reduce the first
premium for the new policy.
RIDER DATE
Rider months, years and anniversaries are measured from the rider date. The
rider date is the policy date unless a different rider date is shown in the
policy. When used in the rider, "date of issue" means the rider date.
INCONTESTABILITY
This rider is subject to the Incontestability provisions of the policy. However,
the contestable period shall, as far as this rider is concerned, be measured
from the date of issue of this rider.
TERMINATION
This rider will terminate on the earliest of the following dates:
1. The anniversary following the Insured's 40th birthday.
2. The date this rider or the policy lapses for failure to pay a premium.
3. The date the policy becomes paid-up, expires, matures as an endowment
or otherwise terminates.
4. The date a Nonforfeiture Option under the policy, if any, becomes
effective .
Page 3 of 4
<PAGE>
You may terminate this rider by written request.
Termination will not affect an alternate option or the term insurance resulting
from a marriage, birth, adoption, death or graduation which occurred before this
rider terminated.
Signed for us at our home office.
[Secretary Signature] [President Signature]
SECRETARY PRESIDENT
Page 4 of 4
EXHIBIT 1.A.5(g)
[LIFE INVESTORS INSURANCE COMPANY OF AMERICA LOGO]
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
Home Office located at: 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499
A Stock Company
(Hereafter called the Company, we, our or us)
INCOME REPLACEMENT BENEFIT RIDER
This extra benefit rider, attached to and made a part of the policy, provides a
monthly benefit for a period of 20 years to the beneficiary upon receipt of due
proof of death of the Insured.
We agree to pay the monthly benefit to your beneficiary when we receive due
proof at our Home Office of the following:
1. That the Insured's death occurred while this rider was in force.
2. That the Insured's death occurred before the expiry date of this rider.
INSURED
The Insured is the person shown as the Insured on page 3.
EXPIRY DATE
The expiry date means the rider date following the Insured's 95th birthday.
AMOUNT OF BENEFIT
We will pay the monthly benefit, which is specified on page 3, for a period of
20 years to your beneficiary upon receipt of due proof of death of the Insured.
At the end of 20 years, we will pay a lump sum death benefit of 100 times the
monthly benefit.
If the beneficiary dies prior to the payment of full benefits under this rider,
any remaining proceeds will be paid to their beneficiary over the remaining
period. If no beneficiary has been designated by you or if the designated
beneficiary does not survive you, any remaining proceeds will be paid to the
first of the following classes of successive preference beneficiaries of which a
member survives you: (a) you; (b) your spouse; (c) your children, including
legally adopted children, but not step children; (d) your parents; (e) your
brothers and sisters; (f) your estate.
In determining such person or persons, we may rely upon an affidavit by a member
of any of the classes of preference beneficiaries. Payment based upon such
affidavit shall be full acquittance unless, before such payment is made, we have
received at our Home Office written notice of a valid claim by some other
person.
If two or more persons become entitled to benefits as preference beneficiaries,
they shall share equally. Any benefits payable to a minor may be paid to the
legally appointed guardian of the minor's estate. This amount is payable in
addition to the proceeds payable under the policy.
Page 1 of 3
<PAGE>
TERMINATION
This rider will terminate on the earliest of the following dates:
1. The expiry date of this rider.
2. The date the policy terminates.
3. The date the rider or policy lapses for failure to pay a premium.
4. The death of the Insured.
5. The date a Nonforfeiture Option under the policy, if any, becomes
effective.
You may terminate this rider by written request. Our acceptance of a premium for
any period after the date of termination of this rider shall create no liability
for us, nor will it constitute a waiver of the termination. Any premium which
has been accepted by us will be refunded.
THE CONTRACT
In this rider "policy" means the policy in which you have requested that this
rider be included. "Page 3" means page 3 of the policy.
If a waiver of premium or waiver of monthly deductions rider is included in the
policy, that rider will also apply to this rider.
This rider is a part of the policy. All provisions of the policy which are not
inconsistent with the provisions of this rider apply to this rider. All
definitions of the policy which are not inconsistent with the definitions of
this rider apply to this rider.
CONVERSION PRIVILEGE This rider is not convertable.
RIDER DATE
Rider months, years and anniversaries are measured from the rider date. The
rider date is the policy date unless a different rider date is shown in an
endorsement attached to the policy. When used in the rider, "effective date"
means the rider date.
INCONTESTABILITY
This rider is subject to the Incontestability provisions of the policy. However,
the contestable period shall as far as this rider is concerned, be measured from
the date of issue of this rider.
NON-PARTICIPATION
This rider will not share in our surplus earnings.
BASIS OF COMPUTATION
We use the Male and Female 1980 CSO, (S or NS), Age Last Birthday. Reserves are
not less than the required minimum reserves.
PREMIUMS
This rider is issued in consideration of the application and payment of premiums
as provided.
- The amount of premium and the premium paying period for this
rider are shown on Page 3 of this rider.
- Payment on any premiums for this rider will not create or
increase any cash, loan, paid-up, or extend term insurance
value, if any, or dividend, if any, under the policy.
Page 2 of 3
<PAGE>
GUARANTEED MAXIMUM PREMIUM SCHEDULE
ANNUAL PREMIUMS FOR RIDER BENEFITS
Policy Number: 110 01 SAMPLE
Issue Age 35/ Male
Tobacco
TOTAL TOTAL
POLICY ANNUAL ANNUAL POLICY ANNUAL ANNUAL
YEAR PREMIUM PREMIUM YEAR PREMIUM PREMIUM
1 240.00 240.00 31 9,245.00 94,531.00
2 240.00 480.00 32 10,080.00 104,611.00
3 240.00 720.00 33 10,958.00 115,569.00
4 240.00 960.00 34 11,858.00 127,427.00
5 240.00 1,200.00 35 12,816.00 140,243.00
6 240.00 1,440.00 36 13,878.00 154,121.00
7 240.00 1,680.00 37 15,053.00 169,174.00
8 240.00 1,920.00 38 16,387.00 185,561.00
9 240.00 2,160.00 39 17,888.00 203,449.00
10 240.00 2,400.00 40 19,526.00 222,975.00
11 1,598.00 3,998.00 41 21,339.00 244,314.00
12 1,739.00 5,737.00 42 23,785.00 268,099.00
13 1,895.00 7,632.00 43 26,348.00 294,447.00
14 2,057.00 9,689.00 44 29,003.00 323,450.00
15 2,241.00 11,930.00 45 31,799.00 355,249.00
16 2,419.00 14,349.00 46 34,844.00 390,093.00
17 2,660.00 17,009.00 47 37,647.00 427,740.00
18 2,907.00 19,916.00 48 40,770.00 468,510.00
19 3,195.00 23,111.00 49 44,240.00 512,750.00
20 3,515.00 26,626.00 50 47,941.00 560,691.00
21 3,857.00 30,483.00 51 51,768.00 612,459.00
22 4,226.00 34,709.00 52 55,206.00 667,665.00
23 4,608.00 39,317.00 53 58,561.00 726,226.00
24 5,018.00 44,335.00 54 62,219.00 788,445.00
25 5,438.00 49,773.00 55 65,828.00 854,273.00
26 5,909.00 55,682.00 56 69,444.00 923,717.00
27 6,435.00 62,117.00 57 73,141.00 996,858.00
28 7,029.00 69,146.00 58 77,065.00 1,073,923.00
29 7,700.00 76,846.00 59 82,107.00 1,156,030.00
30 8,440.00 85,286.00 60 88,601.00 1,244,631.00
Signed for us at our home office.
[Secretary Signature] [President Signature]
SECRETARY PRESIDENT
Page 3 of 3
EXHIBIT 1.A.5(h)
[LIFE INVESTORS INSURANCE COMPANY OF AMERICA LOGO]
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
Home Office located at: 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499
A Stock Company
(Hereafter called the Company, we, our or us)
MONTHLY BENEFIT RIDER
This extra benefit rider, attached to and made a part of the policy, provides as
described below, a monthly benefit to the beneficiary upon due proof of the
Insured's death.
We agree to provide a monthly benefit to the beneficiary when we receive due
proof at our home office of the following:
1. That the Insured's death occurred while this rider was in force.
2. That the Insured's death occurred before the termination date of this
rider as stated in the Termination provision.
INSURED
The Insured is the person shown as the insured on page 3.
EXPIRY DATE
The expiry date is the earliest of: (a) the rider anniversary following the
Insured's 65th birthday; or (b) the rider anniversary 20 years after the rider
date.
AMOUNT OF INSURANCE
The amount of monthly benefit payable under this rider as shown on page 3. This
amount will be payable in addition to the proceeds payable under the policy. The
monthly benefit payments will cease on the expiry date.
NON-PARTICIPATION
This rider will not share in our surplus earnings. No guaranteed values under
the policy shall be increased by reason of this rider.
PAYMENT TO EXECUTORS
If the beneficiary dies after the death of the insured, the then commuted value
of the entire amount remaining unpaid under this rider will be payable to the
executors, administrators or assignees of the beneficiary. The commuted values
are shown in the Table of Commuted Values in this rider.
Page 1 of 3
<PAGE>
THE CONTRACT
In this rider, "policy" means the policy to which this rider is attached. In
this rider, "page 3" means the page 3 of the policy.
This rider is issued in consideration of the application and the payment of
premiums as provided. The amount of premium and the premium-paying period for
this rider are shown on page 3.
If a waiver of premiums rider is attached to the policy, that rider will also
apply to this rider.
This rider is part of the policy. All provisions of the policy which are not
inconsistent with the provisions of this rider apply to this rider.
RIDER DATE
Rider months, years and anniversaries are measured from the rider date. The
rider date is the Policy Date unless a different rider date is shown in the
policy or in an endorsement to the policy or this rider.
INCONTESTABILITY
This rider is subject to the incontestability provisions of the policy. However,
the contestable period for this rider shall be measured from the rider date.
TERMINATION
This rider will terminate on the earliest of the following dates:
1. The expiry date of this rider.
2. The date the policy terminates.
3. The date of death of the Insured.
4. The date a Nonforfeiture Option under the policy, if any, becomes
effective.
Our acceptance of a premium for any period after the date of termination of this
rider shall create no liability for us; nor will it constitute a wavier of the
termination unless we expressly agree to it in writing. Any such premium which
has been accepted by us will be refunded.
You may terminate this rider by written request.
REINSTATEMENT
This rider may be reinstated upon presentation of evidence of insurability
satisfactory to us and payment of all past due premiums with interest as
provided by the policy, provided that, in accordance with its terms, the policy
is reinstated at the time of reinstatement of the rider.
COMMUTATION
Any commutation of payments to be made under this rider shall be at any interest
rate of 3% per year.
Page 2 of 3
<PAGE>
EXCESS INTEREST
The monthly benefit amount provided by this rider may be increased by such share
of interest in excess of 3% per year, computed on the amount payable hereunder
remaining with us, as may be declared by us.
TABLE OF COMMUTED VALUES
(AT POLICY ANNIVERSARY DATE FOR EACH $10 OF MONTHLY BENEFIT)
YEARS TO EXPIRY COMMUTED VALUE
20 $1815
19 1746
18 1678
17 1606
16 1532
15 1456
14 1378
13 1297
12 1214
11 1129
10 1041
9 950
8 857
7 760
6 661
5 559
4 454
3 345
2 234
1 119
Signed for us at our home office.
[Secretary Signature] [President Signature]
SECRETARY PRESIDENT
Page 3 of 3
EXHIBIT 1.A.5(i)
[LIFE INVESTORS INSURANCE COMPANY OF AMERICA LOGO]
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
Home Office located at: 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499
A Stock Company
(Hereafter called the Company, we, our or us)
DISABILITY INCOME/WAIVER OF PREMIUM BENEFIT RIDER
This extra benefit rider, attached to and made part of the policy, provides as
described below a disability income benefit and waiver of premium benefit in the
event of total and permanent disability.
We agree to pay the Disability Income Benefit shown on page 3 and to waive the
Waiver of Premium Amount shown on page 3 when we receive proof of the following:
1. That the Insured is totally and permanently disabled.
2. That the disability began while this rider was in force.
3. That the disability has lasted continuously for at least six months
during the Insured's lifetime.
4. That the disability began prior to the policy anniversary following the
Insured's 60th birthday.
WAIVER OF PREMIUM AMOUNT
We will waive monthly, 1/12 of the annual Waiver of Premium Amount shown on page
3 while the Insured is totally and permanently disabled. No premium will be
waived the due date of which is more than one year prior to our receipt at the
home office of written notice and proof of the Insured's disability.
When you claim waiver of premiums, you are to pay premiums for at least six
months or until we approve the claim. If we waive a premium that has been paid,
we will refund it, or include it in the proceeds payable under the policy.
If total and permanent disability begins in the grace period of an unpaid
premium, we will not waive that premium.
POLICY BENEFITS CONTINUE
Benefits under the policy will be the same as if the Waiver of Premium Amount
had been paid in cash. This rider will not affect the Guaranteed Value Options
or the Table of Guaranteed Values in the policy, if any.
DISABILITY INCOME BENEFIT
During the period that the Waiver of Premium Amount is paid, we will pay to you
monthly, 1/12 of the annual Disability Income Benefit shown on page 3.
Page 1 of 3
<PAGE>
DEFINITION OF TOTAL AND PERMANENT DISABILITY
Disability shall be considered to be total when the Insured is unable to
gainfully perform the major duties of his or her regular occupation.
During the first two years of disability, occupation means the Insured's
occupation at the time disability began. The Insured's occupation includes
attending school or college as a full time student.
After the first two years of disability, occupation means any occupation for
which the Insured is reasonably suited by education, training or experience.
Such total disability shall be presumed to be permanent (but only for the
purpose of determining the commencement of liability hereunder) when it is
present and has existed continuously for not less than six consecutive months.
If the total disability begins while the Insured is retired or temporarily
unemployed, the word "occupation" means the last regular occupation at which the
Insured was gainfully employed on a full time basis before the injury or
sickness started.
PRESUMED DISABILITIES
We will consider the total and permanent loss of any of the following as a total
and permanent disability even though the Insured engages in an occupation:
1. The sight of both eyes.
2. The use of both hands or both feet.
3. The use of one hand and one foot.
NOTICE AND PROOF
Before we pay the Disability Income Benefit and waive any Waiver of Premium
Amount, we must receive at our home office written notice and due proof of the
total and permanent disability. The notice and proof must reach us:
1. While the Insured is living; and
2. While the Insured is totally and permanently disabled; and
3. Not later than one year after the due date of any premium that is to be
waived; and
4. Before the policy anniversary following the Insured's 60th birthday.
However, these time limits will not apply if we are satisfied that notice (or
proof) was given as soon as reasonably possible. At reasonable intervals, we can
require due proof that the total and permanent disability is continuing. If
proof is not given, all benefits will cease. After the first two years of total
and permanent disability, we will not require proof more often than once a year.
As part of due proof, we, at our own expense, shall have the right to have the
Insured examined by doctors of our choice.
DISABILITIES NOT COVERED
We will not provide benefits under this rider if the Insured's disability
results from:
1. War, declared or undeclared, or
2. The Insured's military services or any country at war, or
3. Intentionally self-inflicted injury.
Page 2 of 3
<PAGE>
THE CONTRACT
In this rider "policy" means the policy in which you have requested that this
rider be included. "Page 3" means page 3 of the policy.
This rider is issued in consideration of the application and the payment of
premiums as provided. The amount of premium and the premium-paying period for
this rider are shown on page 3.
The Insured is the person shown as the Insured on page 3.
This rider is a part of the policy. All provisions of the policy which are not
inconsistent with the provisions of this rider apply to this rider.
RIDER DATE
Rider months, years and anniversaries are measured from the rider date. The
rider date is the policy date unless a different rider date is shown in an
endorsement attached to the policy. When used in the rider, "effective date"
means the rider date.
INCONTESTABILITY
This rider is subject to the incontestability provisions of the policy. However,
the contestable period shall as far as this rider is concerned, be measured from
the date of issue of this rider.
TERMINATION
This rider will terminate at the earliest of the following dates:
1. Unless the Insured is totally and permanently disabled, the policy
anniversary following the Insured's 60th birthday. In which case the
disability income and waiver of premium benefits shall continue no
longer than the policy anniversary following the Insured's 65th
birthday.
2. The date the rider or the policy lapses for failure to pay a premium.
3. The date the policy becomes paid up, expires, matures as an endowment
or otherwise terminates.
4. The date a Guaranteed Value Option under the policy, if any, becomes
effective.
Any premiums on the policy falling due on or after the termination of this rider
shall automatically be reduced by the premium for this rider.
You may terminate this rider by written request.
Termination will not affect any claim which may be made because of total and
permanent disability which began prior to termination.
Signed for us at our home office.
[Secretary Signature] [President Signature]
SECRETARY PRESIDENT
Page 3 of 3
EXHIBIT 1.A.5(j)
[LIFE INVESTORS INSURANCE COMPANY OF AMERICA LOGO]
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
Home Office located at: 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499
A Stock Company
(Hereafter called the Company, we, our or us)
CHILDRENS BENEFIT RIDER
This extra benefit rider, attached to and made a part of the policy, provides as
described below, term insurance on each insured dependent child of the Insured.
While this rider and policy remain in force, we agree:
1. To pay the amount of insurance provided by this rider to the
beneficiary when we receive due proof of the death of an insured
dependent child of the Insured on or before the expiry date of this
rider.
2. To continue this rider in force until the Expiry Date without any
further premiums being paid when we receive due proof of the death of
the Insured.
INSURED
The Insured is the person shown as the Insured on page 3 of the policy.
DEPENDENT CHILD
A dependent child is a child, stepchild, or legally adopted child of the
Insured. A child is not a dependent child prior to becoming 14 days old.
To become an insured dependent child at the time of application, a dependent
child must:
1. Be named in the application for this rider, unless specifically
excluded;
2. Be under 18 years old on the date of the application; and
3. Receive principal support from the Insured.
To become an insured dependent child after the date of the application, a child
must:
1. Become a dependent child after the date of the application;
2. Be under 18 years old on the date the child becomes a dependent child;
3. Receive principal support from the Insured;
4. Provide evidence of insurability if the child is a stepchild of the
Insured; and
5. Provide evidence of insurability, if at the time of application for
this rider that child was specifically excluded.
EXPIRY DATE
The expiry date of this rider is the policy anniversary after every insured
dependent child has reached his or her 25th birthday.
Page 1 of 4
<PAGE>
AMOUNT OF INSURANCE
We will pay a death benefit to the beneficiary upon our receipt of due proof of
the death of any insured dependent child of the Insured. The amount of death
benefit with respect to each insured dependent child is $1,000 per unit
multiplied by the number of units shown on page 3. After one rider year, the
Insured, upon completion of a new application, may increase the death benefit of
an insured dependent child. Any increase will be subject to our underwriting
requirements as well as the Incontestability provision of this rider.
OWNERSHIP
Unless the Insured requests otherwise, the following ownership arrangement will
apply:
1. You, the Insured, are the owner of this rider.
2. Upon your death, the insurance on each insured dependent child will be
owned by your spouse at the time of your death if that child had been
born to, or legally adopted by that spouse.
3. If you have died and if any requirement of 2 above is not met with
respect to an insured dependent child, the insurance on that insured
dependent child will be owned by that child.
BENEFICIARY
Unless the Insured requests otherwise, the beneficiary arrangement of this rider
will be as follows:
1. The Insured, if living.
2. If the Insured is not living, the beneficiary of the insurance on each
insured dependent child will be the Insured's spouse at the time of the
Insured's death if that insured dependent child had been born to, or
legally adopted by that spouse.
3. If the Insured is not living and if any requirement of 2 above is not
met with respect to an insured dependent child, the beneficiary of the
insurance on that insured dependent child will be that child's estate.
REINSTATEMENT
If this rider lapses, the Insured may reinstate it at any time during his
lifetime by submitting the following items:
1. A written application for reinstatement.
2. Evidence of insurability satisfactory to us for the Insured and each
dependent child.
3. Overdue premiums with interest as provided by the policy.
You must also reinstate the policy at the time you reinstate this rider.
PAID-UP INSURANCE UPON DEATH OF INSURED
Upon the death of the Insured while this policy is in force other than under a
Nonforfeiture Option, any insurance provided by this rider shall become paid-up
term insurance for the unexpired period.
THE CONTRACT
In this rider "policy" means the policy in which you have requested that this
rider be included. "Page 3" means page 3 of the policy.
This rider is issued in consideration of the application and the payment of
premiums as provided. The amount of premium and the premium-paying period for
this rider are shown on page 3.
Page 2 of 4
<PAGE>
If a waiver of premium rider is included in the policy, that rider will also
apply to this rider.
This rider is a part of the policy. All provisions of the policy which are not
inconsistent with the provisions of this rider apply to this rider.
RIDER DATE
Rider months, years and anniversaries are measured from the rider date. The
rider date is the policy date unless a different rider date is shown in the
policy. When used in the rider, "date of issue" means the rider date.
INCONTESTABILITY
We cannot contest this rider after it has been in force during the lifetime of
the Insured for two years after the later of:
1. The Rider Date;
2. The effective date of any increase in the death benefit of an insured
dependent child, and then for the increased amount only;
3. The effective date that any insured dependent child is added by
endorsement, and then for that child only; or
4. The effective date of reinstatement of this rider.
Only statements material to such reinstatement shall be contestable for one year
from the date of reinstatement.
TERMINATION
The term insurance on an insured dependent child shall terminate on the earliest
of the following dates:
1. The expiry date of this rider.
2. The date this rider or policy lapses for failure to pay a premium.
3. The date the policy becomes paid-up, expires, matures as an endowment
or otherwise terminates.
4. The date a Nonforfeiture Option under the policy, if any, becomes
effective.
5. The conversion of the policy to another policy under which premiums
would not continue to the expiry date of this rider.
6. The policy anniversary following the date of marriage for that child.
7. The policy anniversary following that child's 25th birthday.
CONVERSION
When the insurance on the life of an insured dependent child terminates for any
reason provided above, except for lapse of rider, while the basic policy
continues in force other than as paid-up or extended term insurance, that child
has the option to convert to an individual policy. Such insurance may be
converted at the then attained age to any level premium whole life or endowment
plan of insurance then being issued by us, for the then current rates and
limits, without further evidence of insurability in accordance with the
following:
1. Proper written application for the new policy accompanied by the first
premium must be made to us at our home office within 31 days after such
expiry.
2. The policy date of the new policy shall be the date such application is
made and the premium is paid.
Page 3 of 4
<PAGE>
3. The amount of insurance on any insured dependent child under the new
policy may be increased up to the lesser of :
a) 5 times the death benefit at the termination date, or
b) 50,000.
4. The new policy shall not provide for benefits in event of total
disability or for benefits in event of total disability or for any
accidental death benefit unless at the time of conversion the life to
be insured submits evidence of insurability which is satisfactory to
us.
Signed for us at our home office.
[Secretary Signature] [President Signature]
SECRETARY PRESIDENT
Page 4 of 4
EXHIBIT 1-A-6(a)
AMENDED AND SUBSTITUTED ARTICLES OF INCORPORATION
OF
GREATER IOWA LIFE INSURANCE COMPANY
'69 DEC 17 PM 2:13
Secretary of State
IOWA
ARTICLE I
NAME
The new name of this corporation is Greater Iowa Life Insurance Company,
which name shall become Life Investors Insurance Company of America at the close
of business on December 31, 1969. The Corporation was originally incorporated
under the laws of the State of Iowa relating to corporations for pecuniary
profit under the name of Columbia Catholic Life Insurance Company, on September
26, 1930.
ARTICLE II
PLACE OF BUSINESS
The location of this corporation's principal place of business was in Cedar
Rapids, Linn County, Iowa, and its present principal place of business and
registered office is Life Investors Building, 375 Collins Avenue, N.E., Cedar
Rapids, Linn County, Iowa.
ARTICLE III
OBJECTS AND POWERS
The objects and powers of this corporation shall be:
1. To insure the lives of individuals on the level premium or legal reserve
plans; to grant, purchase and dispose of annuities; receive and execute trusts,
including the power to hold in trust the proceeds of any life insurance policy
issued by it; to insure either individually, or on the group or franchise plan
the health of persons and against personal injuries, disablement, or death,
resulting from accident; and to reinsure any part of said risks. To have all the
power conferred by the laws of the State of Iowa upon corporations organized for
the purposes of insuring the lives of individuals, and to issue all such forms
of insurance contracts as pertain to or may be connected with the business of
life insurance as it now is or may be hereafter carried on in the United States.
2. To have the right to buy, hold, sell, and convey personal property and
such real estate as may be necessary or convenient for proper conduct of the
affairs of the corporation, or as may be permitted by law.
3. To have all the powers conferred by law on a life insurance company
organized for the purposes above set forth; and in connection therewith to have
all powers conferred by law on all corporations organized and doing business
under and by the authority of Chapters 491, 506, 508, 509, 511, and 515 of the
Code of Iowa, 1958.
4. To organize an investment company or companies within the meaning of
Section 508.33, Code of Iowa, as now or hereafter amended, and to own stock in
such investment company.
ARTICLE IV
CAPITAL STOCK
The authorized capital stock of the corporation shall be $2,887,500 divided
into shares of a par value of $1.65 each. All stock issued by the corporation
shall be common stock. All stock shall be issued for cash or property as
provided by law and when issued shall be fully paid and nonassessable and shall
be issued at such times and in such amounts as the Board of Directors of the
corporation may from time to time determine, subject to such approval of the
Insurance Commissioner as may be required by law.
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<PAGE>
ARTICLE V
CORPORATE PERIOD
The corporate period of this corporation is perpetual, and shall continue
to be, unless sooner dissolved by a majority vote of the stockholders at any
annual meeting or a special meeting called for that purpose or by unanimous
consent as by law provided.
ARTICLE VI
DIRECTORS AND OFFICERS
The affairs of this corporation shall be managed by a Board of Directors
not less than seven (7) nor more than thirty (30). The term of Board members
shall be for three years, with one-third being elected each year or nearly as
possible.
The Directors shall elect a Chairman of the Board, a President, on or more
Vice Presidents, a Secretary, a Treasurer and such other officers, including an
Executive Committee, with authority to act for the Board, as they see fit or as
may be provided for by the By-Laws of the corporation. The term of such officers
shall be for one (1) year.
The Directors who now constitutes the Board and who will continue to serve
until the next annual stockholders meeting are: Ronald L. Jensen, Samuel E.
Orebaugh, Parnell E. Proctor, Theron P. Thomsen and William D. Travie, all
of Cedar Rapids, Iowa. Present Directors Kenyon D. Hoffman and Harvey L.
Clark of Cedar Rapids, Iowa have resigned effective at the close of
business on December 31, 1969, and will serve until that time.
Effective at the close of business on December 31, 1969, the following
additional persons (with addresses shown) will serve as Directors until the next
annual meeting of the stockholders:
<TABLE>
<S> <C>
Mary C. Carvey, Boone, Iowa George G. Wheary, Jr., Racine, Wis
Charles E. Sinn, Fresno, Calif. W.V. Mc Gahey, Scottsdale, Arizona
William C. Brown, Dubuque, Iowa Gordon R. Connor, Wausau, Wis.
Elmer M. Smith, Des Moines, Iowa Melvin L. Sheffel, Malvern, Iowa
Fred H. Hansen, Red Oak, Iowa Forest Evashevski, Iowa City, Iowa
Donavan F. Ward, Dubuque, Iowa C. H. Stark, Cedar Rapids, Iowa
E. A. Larson, Ottumwa, Iowa James D. Hennessy, Council Bluffs, IA
James E. Bromwell, Cedar Rapids IA. John W. Marvel, Webster City, Iowa
Clemens J. Smith, New Hampton, Iowa Mildred M. Moe, Council Bluffs, IA
Louis Fellman, Cedar Rapids, Iowa
Richard Verstegen, Sioux City, Iowa
</TABLE>
The number of Directors shall be fixed by the By-Laws. Directors and the
officers shall serve until their successors have been elected and qualified. The
Board of Directors shall have the authority to fill all vacancies for the
unexpired portion of a term.
The holder or holders, jointly or severally, of not less then one-fifth
(1/5) but less than a majority of the shares of the capital stock of the
corporation shall be entitled to nominate Directors, to be elected, or
appointed, as the case may be. In the event such nomination shall be made, there
shall be elected or appointed to the extent that the total number to be elected
or appointed is divisible such proportionate number from the persons so
nominated as the shares of stock held by persons making such nominations bear to
the whole number of shares issued; provided the holder or holders of the
minority shares of stock shall only be entitled to one-fifth (1/5) (disregarding
fractions) of the total number of Directors to be elected for each one-fifth
(1/5) of the entire capital stock of the corporation
-2-
<PAGE>
held by them. This provision shall not be construed to prevent the holders of a
majority of the stock of the corporation from electing the majority of its
directors. Vacancies occurring from time to time shall be filled so as to
preserve and secure to such minority and majority stockholders proportionate
representation as herein provided.
ARTICLE VII
ANNUAL AND SPECIAL MEETINGS
The annual meeting of this corporation shall be held on the final Thursday
of April of each calendar year at Ten O'Clock (10:00) a.m. The meeting shall be
at the office of the corporation unless otherwise specified by the Board of
Directors. No notice of said meeting shall be required if held at the
corporation's office, but if held elsewhere, or in the event of a special
meeting, a notice shall be mailed to each stockholder by regular mail at least
ten (10) days prior to the date of such Meeting, addressed to the last address
of the stockholder as it appears on the stock books of the corporation, on a day
to be fixed by the Board of Directors, which shall not be more then thirty (30)
days prior to the meeting date. Five (5%) per cent of the number of shares of
outstanding stock, represented personally or by proxy shall constitute a quorum.
In the event a quorum is not present when the meeting is called, the meeting
shall be adjourned from day to day, until a quorum is achieved.
ARTICLE VIII
PROXIES
No proxy shall be valid for more than sixty (60) days from the date of its
execution, and shall not be valid more than thirty (30) days after the meeting
for which it is executed. It may be revoked at any time by the stockholder who
executed it.
Corporate shareholders may vote through a properly designated
representative or through a properly executed proxy. All proxies must be filed
with the Secretary at least one (1) day prior to an election or meeting at which
they are to be used or for such additional time as may be provided by the
By-Laws.
ARTICLE IX
CORPORATE INSTRUMENTS - SEAL
All instruments executed by the corporation which are required to be
acknowledged and which affect an interest in real estate, shall be executed by
the president or any vice president and attested by the secretary or assistant
secretary, and all other instruments executed by the corporation, including any
releases or mortgages or liens, may be executed by the president or any vice
president, or the secretary or the treasurer. Notwithstanding any of the
foregoing provisions, any written instrument may be executed by any officer or
officers, agent or agents or other person or persons specifically designated by
resolution of the Board of Directors of this corporation. The corporation shall
have a corporate seal which shall bear the words, "Greater Iowa Life Insurance
Company, Des Moines, Iowa" around the edge, with the words "Corporate Seal" in
the middle, which shall be used until the close of business on December 31,
1969, after which the corporate seal shall bear the words, "Life Investors
Insurance Company of America", around the edge and the words "Corporate Seal" in
the middle.
ARTICLE X
STOCKHOLDERS' LIABILITY
The private property of the shareholders of this corporation shall be
exempt from corporate liabilities, and this article shall not be amended.
-3-
<PAGE>
ARTICLE XI
BY-LAWS
The Board of Directors, at any regular or special meeting, is authorized to
adopt, alter, amend or repeal By-Laws and to adopt new By-Laws not inconsistent
with the law or these Articles of Incorporation, by an affirmative vote of a
majority of the membership of the Board as distinguished from a majority of a
quorum.
The stockholders of the corporation may at any regular or special meeting
called for the purpose, repeal, alter, or amend any existing By-Laws made by the
Board of Directors, or adopt such By-Laws as they deem appropriate by a majority
vote.
ARTICLE XII
AMENDMENTS
Subject to the approval of the Insurance Commissioner of the State of Iowa,
these Articles, except Article X, may be amended at any annual meeting of the
shareholders or at any special meeting thereof called for that purpose, and such
amendment shall be made by the affirmative vote of a majority of the shares of
common stock in attendance at said meeting, in person or by proxy, provided,
however, that a quorum is present at said meeting. For the purpose of this
article, as well as all other articles of these Article of Incorporation, a
quorum is hereby Established to be the stockholders in person or by proxy
representing five (5%) per cent of the issued and outstanding stock of the
corporation. At any meeting of the stockholders to consider and act upon any
proposed amendment to the Articles of Incorporation, the stockholders may adopt
any modification or revision thereof proposed at said meeting.
ARTICLE XIII
LIABILITY OF OFFICERS AND DIRECTORS
Each Director and Officer of this corporation, and his heirs, executors and
administrators, shall be and are hereby indemnified by the corporation against
personal liability arising out of judgements, decrees, demands and claims of
every name, nature and description whatsoever, together with related expenses
(including attorneys' fees), including payments in compromise and related
expenses (including attorneys' fees, in settling cases, reasonable incurred by
him in connection with any claim, action, suit or proceeding made or instituted
by or on behalf of any person, firm or corporation, against him by reason of any
action or omission to act by him as a director or officer of this corporation,
except as to which: 1) he shall have been adjudged in any such action, suit or
proceeding to have been derelict in the performance of his duty as such Director
or officer, or 2) in the event no adjudication shall have been made in any
action, suit or proceeding with respect to the presence or absence of such
dereliction, he shall be adjudged by the Board of Directors to have been
derelict in the performance of his duties as such Director or Officer; provided,
however, that in the event the liability and expenses against which
indemnification is hereby granted shall be incurred by more than one Director,
then, if the Directors who shall have not incurred such liability and expenses
shall not constitute a majority of the Directors, such an adjudication may be
made by the stockholders of the corporation holding a majority of the voting
stock of the corporation outstanding and entitled to vote.
Without limiting or affecting the scope of the foregoing obligation to
indemnify said Officers and Directors, each Officer and Director shall be fully
indemnified and protected by this corporation in any action or omission to act
taken in good faith in accordance with the advice, recommendation or opinion of
the attorneys for this corporation or the accountants employed from time to time
to supervise or audit the books and accounts of this corporation. The foregoing
right
-4-
<PAGE>
of indemnification shall not be exclusive of other rights to which each such
person may be entitled by law, and shall be available whether or not the
Director or Officer shall be a Director or Officer at the time of incurring such
expense and liability.
In the absence of fraud, or undisclosed conflict of interest such as may be
required to be reported by Insurance Department Regulations or action of the
Board of Directors, no contract or transaction between this corporation and any
other association or corporation shall be affected by the fact that any Director
or Officer of this corporation is interested in, or is a Director or Officer of
such other association or corporation, and any Director or Officer of this
corporation individually may be a party to, or may be interested in any such
contract or transaction of the corporation, and no such contract or transaction
of the corporation with any person, firm, association or corporation shall be
affected by the fact that any Director or Officer of the corporation is a part
to or interested in any such contract or transaction or in any way connected
with any such person, firm, association or corporation, and each and every
person who may become a Director or Officer of this corporation is hereby
relieved from all liability which may otherwise exist by reason of contracting
with the corporation for the benefit of himself or any other person, firm,
association or corporation in which he may be in any wise interested.
Dated this 11 day of December 1969.
ATTEST:
/s/ KENYON D. HOFFMAN By /s/ SAMUEL E. OREBAUGH
- ---------------------------------- -----------------------------
Kenyon D. Hoffman, Asst. Secretary Samuel E. Orebaugh, President
STATE OF IOWA )
) SS.
COUNTY OF LINN )
Subscribed and sworn to before me by Samuel E. Orebaugh and Kenyon D.
Hoffman this 11 day of December, A.D. 1969.
[SEAL]
/s/ WILLIAM S. THURMAN
------------------------------------------
Notary Public in and for Linn County, Iowa
My Commission Expired
July 4, 1972
- ---------------------
Approved 12-17-1969
Elizabeth A. Nolan
Assistant Attorney General [STAMP]
-5-
<PAGE>
CERTIFICATE OF AMENDED AND SUBSTITUTED
ARTICLES OF INCORPORATION
GREATER IOWA LIFE INSURANCE COMPANY
Samuel E. Orebaugh and Leo C. Barry being the duly elected and qualified
and acting President and Secretary respectively of Greater Iowa Life Insurance
Company, hereby certify that the attached resolution adopting Amended and
Substituted Articles of Incorporation for said corporation was duly adopted by
unanimous vote at a special meeting of the stockholders held in Cedar Rapids,
Iowa, on the 11th day of December, 1969, and that due and timely notice of the
time, place and purpose of said meeting was given to the stockholders, all of
whom were present and voting at said meeting.
Executed this 11th day of December, 1969.
/s/ SAMUEL E. OREBAUGH /s/ KENYON D. HOFFMAN
- ---------------------------------- -----------------------------------
Samuel E. Orebaugh, President Kenyon D. Hoffman, Asst. Secretary
STATE OF IOWA )
) SS.
COUNTY OF LINN )
[SEAL]
Subscribed and sworn to before me this 11th day of December, 1969
/s/ JOHN M. HARRINGTON
----------------------------------------
John M. Harrington, Notary Public in and
for Linn County, Iowa
[SEAL]
ACKNOWLEDGEMENT
STATE OF IOWA )
) SS.
COUNTY OF LINN )
On this 11th day of December, A.D., 1969, before me A Notary Public in and
for the County of Linn, State of Iowa, personally appeared Samuel E. Orebaugh,
President, and Leo C. Barry, Secretary of Greater Iowa Life Insurance Company,
an Iowa corporation, who being duly sworn by me, each for himself, did say that
they are respectively the President and Secretary of said Corporation; and that
the attached Amended and Substituted Articles of Incorporation of Greater Iowa
Life Insurance Company were by them signed and sealed on behalf of the said
Greater Iowa Life Insurance Company by authority of its Board of Directors and
Stockholders, and each of them acknowledged the execution of said resolution to
be his voluntary act and deed and that of said Greater Iowa Life Insurance
Company, by it and each of then voluntarily executed.
In Witness Whereof, I have hereunto signed by name and affixed my Notarial
Seal the day and year last above written.
/s/ JOHN M. HARRINGTON
--------------------------------------------
[SEAL] John M. Harrington, Notary Public in and for
Linn County, State of Iowa
[STAMP] OFFICE OF THE SECRETARY OF STATE
This instrument recorded in Book V-24,
Page 296, December 17, 1969, Expires
Perpetual., Cert. No. 21998, Receipt
No.____, Filed By Patterson, Lorentzen,
Driffield, Trimmons & Toch, Des Moines
Iowa, Filing Fee, $2076., Recording
Fee $4.00 Secretary of State
-6-
<PAGE>
ARTICLES OF AMENDMENT
TO THE
AMENDED AND SUBSTITUTED ARTICLES OF INCORPORATION
OF
LIVE INVESTORS INSURANCE COMPANY OF AMERICA
1. The name of the corporation is Life Investors Insurance Company of America.
It was originally incorporated in Iowa on June 23, 1959 as Investors Life
Insurance Company of Iowa.
2. Article IV of the Amended and Substituted Articles of Incorporation of Life
Investors Insurance Company of America which became effective at the close of
business on December 31, 1969, be and it hereby is amended to read as follows:
ARTICLE IV. CAPITAL STOCK. The authorized capital stock of this
Corporation shall be $2,887,500 divided into shares of a par value
of $2.48. All stock issued by the corporation shall be common
stock. All stock shall be issued for cash or property as provided
for by law and when issued shall be fully paid and non-assessable
and shall be issued at such time and in such amounts as the Board
of Directors of the Corporation may from time to time determine,
subject to such approval of the insurance commissioner as may be
required by law. Six Hundred Six Thousand Sixty-One (606,061)
shares of the common stock shall be the initial issued and
outstanding shares of the Corporation.
3. The foregoing amendment to the Articles of Incorporation was adopted by the
shareholders on September 30, 1974.
4. There were 606,061 shares of stock outstanding and entitled to vote thereon.
5. All 606,061 shares were voted in favor of the foregoing Amendment to the
Articles of Incorporation.
6. The change in Par Value per share from $1.65 to $2.48 increases paid-up
capital by $503,030.63 and reduces paid-in surplus by $503,030.63.
Dated this 1st day of October, 1974.
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
By: /s/ LEO C. BARRY
---------------------------------------
Leo C. Barry, Vice President
[SEAL] [STAMP]
By: /s/ HARVEY L. CLARK
---------------------------------------
Harvey L. Clark, Assistant Secretary
STATE OF IOWA )
) SS.
COUNTY OF LINN )
On this 1st day of October, 1974, before me, a Notary Public in and for
said County and State, personally appeared Leo C. Barry, to me personally known,
who being duly sworn did say that he is the Vice President of Life Investors
Insurance Company of America, that the seal affixed to said instrument is the
seal of the said Company and that said instrument was signed and sealed on
behalf of the said Company by authority of the Board of Directors and the said
Leo C. Barry acknowledged the execution of said instrument to be the voluntary
act and deed of said Company by them voluntarily executed.
/s/ JUDY K. NEVE
---------------------------------------
Judy K. Neve, Notary Public in and
for said County and State
[SEAL]
My commission expires: 9/30/76
<PAGE>
ARTICLES OF AMENDMENT
TO THE
AMENDED AND SUBSTITUTED ARTICLES OF INCORPORATION
OF
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
1. The name of the Corporation is Life Investors Insurance Company of America.
It was originally incorporated in Iowa on June 23, 1959 as Investors Life
Insurance Company of Iowa.
2. Article II of the Amended and Substituted Articles of Incorporation of Life
Investors Insurance Company of America, be and it hereby is amended to read as
follows:
ARTICLE II. PLACE OF BUSINESS. The location of this
Corporation's original Principal place of business was in
Cedar Rapids, Linn County, Iowa, and its present principal
place of business and registered office is Life Investors
Building, 4333 Edgewood Road Northeast, Cedar Rapids, Linn
County, Iowa.
3. The foregoing amendment to the Articles of Incorporation was adopted by the
shareholders on April 21, 1975.
4. There were 606,061 shares of stock outstanding and entitled to vote thereon,
and all 606,061 shares were voted in favor of the foregoing Amendment to the
Articles of Incorporation.
Dated this 21st day of April, 1975. [STAMP]
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
By /s/ LEO C. BARRY
---------------------------------------
Leo C. Barry, Vice President
[STAMP] [SEAL]
By /s/ HARVEY L. CLARK
---------------------------------------
Harvey L. Clark, Assistant Secretary
STATE OF IOWA )
) SS
COUNTY OF LINN )
On this 21st day of April, 1975, before me, a Notary Public, in and for
said County and State, personally appeared Leo C. Barry, to me personally known,
who being duly sworn did say that he is the Vice President of Life Investors
Insurance Company of America, that the seal affixed to said instrument is the
seal of the said Company and that said instrument was signed and sealed on
behalf of the said Company by authority of the Board of Directors and the said
Leo C. Barry acknowledged the execution of said instrument to be the voluntary
act and deed of said Company by them voluntarily executed.
[SEAL] /s/ JODY K. NEVE
---------------------------------------
[STAMP] Jody K. Neve, Notary Public in and
for said County and State
My Commission Expires: 9/30/76
<PAGE>
Mailed A225057
July 24, 1984 #69679
ARTICLES OF AMENDMENT, THE AMENDED AND SUBSTITUTED
ARTICLES OF INCORPORATION OF
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
(1) The name of the Corporation is Life Investors Insurance Company of
America. It was originally incorporated in Iowa on June 23, 1959, as Investors
Life Insurance Company of Iowa.
(2) The second sentence of Article VI of the Amended and Substituted
Articles of Incorporation of Life Investors Insurance Company of America, be and
it hereby is amended to read as follows:
"The term of Board members shall be for one (1) year".
(3) The foregoing Amendment to said Amended and Substituted Articles of
Incorporation was adopted by the stockholders at a special stockholders' meeting
held on January 24, 1984.
(4) There were 606,061 shares of stock outstanding and entitled to vote
thereon, and all such shares were voted in favor of the foregoing Amendment to
said Articles of Incorporation.
(5) The foregoing Amendment shall become effective on June 20, 1984.
Dated this 18th day of May, 1984.
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
By: /s/ ROBERT D. RAY
---------------------------------------
Robert D. Ray, Chairman of the Board
and President
[SEAL]
By: /s/ George R. Lambert
---------------------------------------
George R. Lambert, Secretary
Jun 20 10 10 AM '84
RECEIVED
SECRETARY OF STATE
IOWA
<PAGE>
State of Iowa )
) SS
County of Linn )
On this 18th day of May, 1984, before me, a Notary Public in and for said
County and State, personally appeared Robert D. Ray and George R. Lambert, to me
personally known, who being duly sworn did say that they are the Chairman of the
Board and President and Secretary of Live Investors Insurance Company of
America, respectively, that the seal affixed to said instrument is the seal of
said Company and that said instrument was signed and sealed on behalf of said
Company by authority of the Board of Directors and the said Robert D. Ray and
George R. Lambert acknowledged the execution of said instrument to be the
voluntary act and deed of said Company by them voluntarily executed.
[SEAL] /s/ LUANN ROBY
---------------------------------------
LuAnn Roby, Notary Public in and for
said State and County
My Commission expires September 8, 1985.
<PAGE>
CERTIFICATE OF APPROVAL
The foregoing Articles of Amendment to the Amended and Substituted Articles
of Incorporation of Life Investors Insurance Company of America are approved as
being in accordance with Title XX of the Iowa Code, the laws of the United
States, and the Constitution and laws of the state.
Dated this 13th day of June, 1984.
THOMAS J. MILLER
Attorney General
/s/ FRED M. HASKINS
---------------------------
By: Fred M. Haskins
Assistant Attorney General
APPROVED
JUN 14 1984
COMMISSIONER IF INSURANCE
INSURANCE DEPARTMENT OF IOWA
[STAMP]
<PAGE>
[SEAL] ELAINE BAXTER IOWA 1990 NOTICE
Secretary of State ANNUAL REPORT The 1991 annual report will be
State of Iowa for an mailed to the registered agent
IOWA CORPORATION at the registered office.
Required by Iowa Code chapter [??]
1. Corporation Name
4910-D-I-069679
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
4333 EDGEWOOD RD NW
CEDAR RAPIDS IA 52404
2. Registered Agent and Registered Office in Iowa
4333 EDGEWOOD RD NW
CEDAR RAPIDS IA 52404
3. Address of the Principal Office of the Corporation
4333 Edgewood Road NE
Cedar Rapids, IA 52499
4. Stock Authorized and Issued
<TABLE>
<S> <C> <C> <C>
Shares Class Series (if any)
------ ----- ---------------
A.
AUTHORIZED SHARES 1,164,315 Common ----------
(May be found in Articles of Incorporation)
B.
SHARES ISSUED 1,008,065 Common ----------
& OUTSTANDING
(May be found in corporate records)
</TABLE>
NOTICE
[ILLEBABLE]
5. Does the corporation own agricultural land in Iowa?
[ ] Yes [X] No
If yes, you must state number of acres here. _____
6. Is the corporation a "family farm corporation"? [ ] Yes [X] No
7. Filing fee is enclosed.................................................$30.00
8. SIGNED /s/ CRAIG D. VERMIE, Assistant Secretary 319/398/8511
------------------------------------------------------------------
Craig D. Vermie Signature and Title Phone [illegible]
- --------------------------------------------------------------------------------
CHANGE OF REGISTERED AGENT OR OFFICE
The corporation applies to change its registered agent or officer.
a. The name of the corporation is stated in Item one of this annual report.
b. The name and address of the current registered agent and registered office
are as stated in Item two of this annual report.
c. After any change is made, the address of the registered office and the
business address of the registered agent will be identical.
d. The new registered agent is
/s/ CRAIG D. VERMIE
---------------------------------------------------------------------------
e. The street address of the new registered office in Iowa is:
4333 Edgewood Road NE
---------------------------------------------------------------------------
(Street Address)
Cedar Rapids, IA 52499
---------------------------------------------------------------------------
(City, State, Zip Code)
/s/ CRAIG D. VERMIE
---------------------------------------------------------------------------
Signature of [illegible]
Assistant Secretary
---------------------------------------------------------------------------
[illegible]
- --------------------------------------------------------------------------------
f. TO BE COMPLETED IF THE REGISTERED AGENT HAS CHANGED
I hereby consent to be appointed registered agent for the corporation named in
this annual report.
/s/ CRAIG D. VERMIE
---------------------------------------------------------------------------
Signature of new registered agent
- --------------------------------------------------------------------------------
Make checks payable to
SECRETARY OF STATE ALL ITEMS MUST BE Return this report to the
Hoover Building COMPLETED - READ Secretary of State
Des Moines, Iowa 50319 INSTRUCTIONS ON postmarked no later than
515/281-5294 REVERSE March 31, 1990.
STATE OF IOWA
Secretary of State Office
# C-8926
[SEAL] I hereby certify that this is a true and complete
document(s) to which the seal is affixed as filed
in this office beginning 17 day of December 1969 to
and including the date below.
DATED September 16, 1999
[ILLEGABLE]
-------------------
Secretary of State
By /s/ Patty Rindhart
---------------------
Patty Rindhart
EXHIBIT 1.A.6(b)
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
Cedar Rapids, Iowa
Bylaws
(as amended to April 27, 1989)
ARTICLE I.
SECTION 1. The principal office of the Corporation shall be in the City
of Cedar Rapids, Linn County, Iowa.
SECTION 2. The business of the Corporation may be conducted, and the
branch offices and agencies may be established, anywhere in the United States of
America.
SECTION 3. The Corporation will have a corporate seal.
ARTICLE II.
DIRECTORS
SECTION 1. The number of directors shall be not less than seven (7) nor
more than thirty (30); such directors to be elected in the manner provided in
the Articles of Incorporation; each shall have the power to do all lawful acts
or things pertaining to the business and affairs of the Corporation as are not
by law, by the Articles of Incorporation, or by these Bylaws directed or
required to be exercised or done otherwise.
SECTION 2. Regular meetings of the Board of Directors shall be held
without notice at some place within the State of Iowa as the Board of Directors
shall determine, immediately following the annual shareholder's meeting or, at
the discretion of the President, not later than thirty (30) days subsequent to
the annual shareholders' meeting. If such meeting is not held immediately
following the annual shareholders' meeting, the President shall give five (5)
days written notice of the time and place of such meeting. Members of the Board
of Directors, or any committee designated by the Board, may participate in any
regular or special meeting of the Board or any such committee by conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this provision shall constitute presence in person at such meeting.
SECTION 3. Special meetings of the Board of Directors may be called by
the President and shall be called by him upon the written request of five (5)
Directors specifying the purpose for which the meeting is to be called, by
giving five (5) days written notice
<PAGE>
thereof to each Director, specifying the time and place of the meeting.
SECTION 4. Special meetings of the directors may be held at any time
and place and for any purpose, without notice, when all of the directors have
executed written waivers consenting to said meeting and when a quorum of
directors are present.
SECTION 5. A majority of all of the directors shall be requisite to
constitute a quorum for the transaction of business at all meetings, provided a
lesser number may adjourn the meeting from time to time without notice other
than announcement at a meeting. A majority of the vote of those present shall be
sufficient to adopt any measure, unless these Bylaws or the Articles of
Incorporation prescribe a different vote.
SECTION 6. Except as otherwise provided by law, by the Articles of
Incorporation, or by these Bylaws, the Board of Directors shall have power to
delegate any of its powers to any committee, officer, or agent and to grant the
power to redelegate.
SECTION 7. Notice of special meetings of the shareholders or directors
shall be in writing and shall be deemed to have been given by depositing the
same in the United States Post Office mailbox in a postpaid wrapper, addressed
to such person at his address as the same appears on the books of the
Corporation; and such notice shall be regarded as having been given on the day
of such deposit.
SECTION 8. Any action required to be taken at a meeting of the
shareholders or directors or any action which may be taken at a meeting of the
shareholders or directors or a committee of directors, may be taken without a
meeting if a consent in writing setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof or all of the directors or all of the members of the committee of
directors, as the case may be. Such consent shall have the same force and effect
as a unanimous vote.
ARTICLE III.
OFFICERS
SECTION 1. The Board of Directors at its regular meeting following the
annual meeting of stockholders each year shall elect a Chairman of the Board, a
President, a Secretary, and a Treasurer; and the Board of Directors may from
time to time appoint such other officers and employees as they choose, including
an actuarial consultant, a medical director, and legal counsel. One person may
hold more than one office except that the offices of President, Secretary, and
Treasurer may not be combined.
2
<PAGE>
SECTION 2. Subordinate Officers. The Board of Directors may appoint
such other officers as it may deem desirable who shall serve at the pleasure of
the Board and have such authority and perform such duties as from time to time
may be prescribed by the Board.
ARTICLE IV.
SALARIES
Salaries of all officers shall be fixed by the Board of Directors by
resolution entered of record on their minutes. Such compensation may be per diem
as to officers who do not devote a regular or substantial time to the business.
Annual or monthly compensation, with or without bonus arrangements, may be
provided for any officer.
ARTICLE V.
COMMITTEES
The Board may appoint an Executive Committee of three (3) or more
directors and/or officers, a majority whom shall constitute a quorum. The
Executive Committee shall keep minutes of its proceedings in the minute book of
the Corporation and shall meet on the call of the President. The Board may
establish such other committees as it deems appropriate.
ARTICLE VI.
STOCK AND RESTRICTIONS ON STOCK TRANSFERS
The stock of the Corporation shall be issued at such times and under
such conditions as shall be determined by the Board of Directors, and shall be
paid for in cash or in property as provided by law.
ARTICLE VII.
Attorney--in--Fact, Departmental Managers, Branch Managers, Agents,
Clerks, and other employees may be appointed or engaged by the President,
subject to the control of directors, upon such terms and with such powers and
duties as they may prescribe.
3
<PAGE>
ARTICLE VIII.
FUNDS AND INVESTMENTS
SECTION 1. The funds of the Corporation shall be deposited in
the name of the Corporation in such depositaries as the Board of
Directors shall designate; and shall be disbursed only upon checks,
drafts, or other orders bearing such personal or facsimile signatures
as may be authorized from time to time by resolution of the Board of
Directors.
SECTION 2. The funds of the Corporation shall be invested or
otherwise employed in the manner authorized or permitted by the
statutes of the State of Iowa.
ARTICLE IX.
SECTION 1. All policies shall be valid when signed by the
President and the Secretary.
SECTION 2. The fiscal year of the Corporation shall commence on
the 1st day of January and terminate on the 31st day of December in
each year.
ARTICLE X.
AMENDMENTS
The Bylaws may be amended, altered, or repealed, and new Bylaws
may be adopted by the Board of Directors at any regular or special
meeting of the Board of Directors by a majority vote of the Board of
Directors.
Adopted by the Board of Directors on April 25, 1974.
4
<PAGE>
Special Stockholders Meeting December 11, 1969
Greater Iowa Life Insurance Company
Resolution
Whereas Life Investors Insurance Company of America, an Iowa corporation
has taken action to terminate its corporate existence effective at the close of
business on December 31, 1969, and;
Whereas the Insurance Commission of the State of Iowa has approved a plan
for the consolidation of the business, assets and liabilities of Life Investors
Insurance Company of America and Greater Iowa Life Insurance Company and the
continuance of Greater Iowa Life Insurance Company under the corporate name of
Life Investors Insurance Company of America, effective at the close of business
on December 31, 1969, and;
Whereas the Boards of Directors of said companies have heretofore taken
action approving said plan, a copy of which appears in the prior minutes of the
Board of Directors of Greater Iowa Life Insurance Company, and;
Whereas conformity with said plan necessitates amendments to the Articles
of Incorporation of Greater Iowa Life Insurance Company, and;
Whereas it appears that consummation of such plan would be of benefit to
the policyholders and stockholders of said companies, as well as to all other
persons concerned; and would be in the public interest and would both be in
restraint of trade of otherwise materially affect free competition,
Now Therefore Be It Resolved In Furtherance thereof:
That the attached Amended and Substituted Articles of Incorporation of
greater Iowa Life Insurance Company are hereby approved and adopted, subject to
the approval of the Insurance Commissioner and Attorney General of the State of
Iowa; and the officers of the Company are hereby authorized to file the same
with the Secretary of State and so all other things necessary to carry them into
force and effect.
<PAGE>
CERTIFICATION
I, Kenyon D. Hoffman, Assistant Secretary of Greater Iowa Life Insurance
Company, being first duly sworn on oath say and depose that the attached
Resolution is a copy of a resolution adopted by the stockholders of said company
at its meeting of December 11, 1969.
/s/ KENYON D. HOFFMAN
------------------------------------------
Kenyon D. Hoffman, Assistant Secretary
Subscribed and sworn to before me to this 12th day of December, 1969.
[ILLEGIBLE]
------------------------------------------
Notary Public in and for Linn County, Iowa
[SEAL]
EXHIBIT 1.A.8(a)
JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 22ND day of __JULY____, 1999, between JANUS
ASPEN SERIES, an open-end management investment company organized as a Delaware
business trust (the "Trust"), and LIFE INVESTORS COMPANY OF AMERICA, a life
insurance company organized under the laws of the State of Iowa (the "Company"),
on its own behalf and on behalf of each segregated asset account of the Company
set forth on Schedule A, as may be amended from time to time (the "Accounts").
W I T N E S S E T H:
WHEREAS, the Trust has registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and has registered the offer
and sale of its Institutional Shares ("shares") under the Securities Act of
1933, as amended (the "1933 Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has received an order from the Securities and
Exchange Commission ("SEC") granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
to the extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the Company has registered or will register (unless
registration is not required under applicable law) certain variable life
insurance policies and/or variable annuity contracts under the 1933 Act (the
"Contracts"); and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act or alternatively, has properly relied
on the exclusion from registration in 3(c)(11), 3(c)(1) or 3(c)(7) of the 1940
Act; and
-1-
<PAGE>
WHEREAS, the Company desires to utilize shares of one or more
Portfolios as an investment vehicle of the Accounts;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I
SALE OF TRUST SHARES
1.1 The Trust shall make shares of its Portfolios available to the
Accounts at the net asset value next computed after receipt of such purchase
order by the Trust (or its agent), as established in accordance with the
provisions of the then current prospectus of the Trust. Shares of a particular
Portfolio of the Trust shall be ordered in such quantities and at such times as
determined by the Company to be necessary to meet the requirements of the
Contracts. The Trustees of the Trust (the "Trustees") may refuse to sell shares
of any Portfolio to any person, or suspend or terminate the offering of shares
of any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Trustees acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, necessary in the best interests of the shareholders of such
Portfolio.
1.2 The Trust will redeem any full or fractional shares of any
Portfolio when requested by the Company on behalf of an Account at the net asset
value next computed after receipt by the Trust (or its agent) of the request for
redemption, as established in accordance with the provisions of the then current
prospectus of the Trust. The Trust shall make payment for such shares in the
manner established from time to time by the Trust, but in no event shall payment
be delayed for a greater period than is permitted by the 1940 Act.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints
the Company as its agent for the limited purpose of receiving and accepting
purchase and redemption orders resulting from investment in and payments under
the Contracts. Receipt by the Company shall constitute receipt by the Trust
provided that i) such orders are received by the Company in good order prior to
the time the net asset value of each Portfolio is priced in accordance with its
prospectus and ii) the Trust receives notice of such orders by 10:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the SEC.
1.4 Purchase orders that are transmitted to the Trust in accordance
with Section 1.3 shall be paid for no later than 12:00 noon New York time on the
same Business Day that the Trust receives notice of the order.
Payments shall be made in federal funds transmitted by wire.
-2-
<PAGE>
1.5 Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Trust will be recorded in the appropriate title for each
Account or the appropriate subaccount of each Account.
1.6 The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any income dividends or
capital gain distributions payable on the Trust's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on a Portfolio's shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
dividends and capital gain distributions in cash. The Trust shall notify the
Company of the number of shares so issued as payment of such dividends and
distributions.
1.7 The Trust shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6 p.m. New York
time.
1.8 The Trust agrees that its shares will be sold only to Participating
Insurance Companies and their separate accounts and to certain qualified pension
and retirement plans to the extent permitted by the Exemptive Order. No shares
of any Portfolio will be sold directly to the general public. The Company agrees
that Trust shares will be used only for the purposes of funding the Contracts
and Accounts listed in Schedule A, as amended from time to time.
1.9 The Trust agrees that all Participating Insurance Companies shall
have the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding to those contained in Section 2.8 and
Article IV of this Agreement.
ARTICLE II
OBLIGATIONS OF THE PARTIES
2.1 The Trust shall prepare and be responsible for filing with the SEC
and any state regulators requiring such filing all shareholder reports, notices,
proxy materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the Trust.
The Trust shall bear the costs of registration and qualification of its shares,
preparation and filing of the documents listed in this Section 2.1 and all taxes
to which an issuer is subject on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust shall either (a) provide
the Company (at the Company's expense) with as many copies of the Trust's
current prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments
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or supplements to any of the foregoing, as the Company shall reasonably request;
or (b) provide the Company with a camera ready copy of such documents in a form
suitable for printing. The Trust shall provide the Company with a copy of its
statement of additional information in a form suitable for duplication by the
Company. The Trust (at its expense) shall provide the Company with copies of any
Trust-sponsored proxy materials in such quantity as the Company shall reasonably
require for distribution to Contract owners. The Trust shall provide the
materials described in this Section 2.2 promptly after receipt of SEC comments
(if any) and shall use best efforts to provide such materials within a
reasonable time prior to required printing and distribution of such materials.
2.3 (a) The Company shall bear the costs of printing and distributing
the Trust's prospectus, statement of additional information, shareholder reports
and other shareholder communications to owners of and applicants for policies
for which the Trust is serving or is to serve as an investment vehicle. The
Company shall bear the costs of distributing proxy materials (or similar
materials such as voting solicitation instructions) to Contract owners. The
Company assumes sole responsibility for ensuring that such materials are
delivered to Contract owners in accordance with applicable federal and state
securities laws.
(b) If the Company elects to include any materials provided by the
Trust, specifically prospectuses, SAIs, shareholder reports and proxy materials,
on its web site or in any other computer or electronic format, the Company
assumes sole responsibility for maintaining such materials in the form provided
by the Trust and for promptly replacing such materials with all updates provided
by the Trust.
2.4 The Company agrees and acknowledges that the Trust's adviser, Janus
Capital Corporation ("Janus Capital"), is the sole owner of the name and mark
"Janus" and that all use of any designation comprised in whole or part of Janus
(a "Janus Mark") under this Agreement shall inure to the benefit of Janus
Capital. Except as provided in Section 2.5, the Company shall not use any Janus
Mark on its own behalf or on behalf of the Accounts or Contracts in any
registration statement, advertisement, sales literature or other materials
relating to the Accounts or Contracts without the prior written consent of Janus
Capital. Upon termination of this Agreement for any reason, the Company shall
cease all use of any Janus Mark(s) as soon as reasonably practicable.
2.5 (a) The Company shall furnish, or cause to be furnished, to the
Trust or its designee, a copy of each Contract prospectus or statement of
additional information in which the Trust or its investment adviser is named
prior to the filing of such document with the SEC. The Company shall furnish, or
shall cause to be furnished, to the Trust or its designee, each piece of sales
literature or other promotional material in which the Trust or its investment
adviser is named, at least fifteen Business Days prior to its use. No such
material shall be used if the Trust or its designee reasonably objects to such
use within fifteen Business Days after receipt of such material.
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(b) The Trust 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 or its investment adviser is named, at least
fifteen Business Days prior to its use. No such material shall be used if the
Company or its designee reasonably objects to such use within fifteen Business
Days after receipt of such material.
2.6 The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust or
its investment adviser in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from the
registration statement or prospectus for the Trust shares (as such registration
statement and prospectus may be amended or supplemented from time to time),
reports of the Trust, Trust-sponsored proxy statements, or in sales literature
or other promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the written
permission of the Trust or its designee.
2.7 The Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Contracts (as such registration 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 written permission of the Company.
2.8 So long as, and to the extent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges for
variable policyowners, the Company will provide pass-through voting privileges
to owners of policies whose cash values are invested, through the Accounts, in
shares of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each Account, the
Company will vote shares of the Trust held by the Account and for which no
timely voting instructions from policyowners are received as well as shares it
owns that are held by that Account, in the same proportion as those shares for
which voting instructions are received. The Company and its agents will in no
way recommend or oppose or interfere with the solicitation of proxies for Trust
shares held by Contract owners without the prior written consent of the Trust,
which consent may be withheld in the Trust's sole discretion.
2.9 The Company shall notify the Trust of any applicable state
insurance laws that restrict the Portfolios' investments or otherwise affect the
operation of the Trust and shall notify the Trust of any changes in such laws.
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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 Iowa and that
it has legally and validly established each Account as a segregated asset
account under such law on the date set forth in Schedule A.
3.2 The Company represents and warrants that each Account has been
registered or, prior to any issuance or sale of the Contracts, will be
registered as a unit investment trust in accordance with the provisions of the
1940 Act or alternatively, has not registered an Account in proper reliance upon
the exclusion from registration in 3(c)(11), 3(c)(1) or 3(c)(7) of the 1940 Act.
For its unregistered Accounts which are exempt from registration under the 1940
Act in reliance upon Section 3(c)(1) or Section 3(c)(7) thereof, the Company
represents and agrees that:
(a) AFSG Securities Corporation is the principal underwriter for
each such unregistered Account and its subaccounts and is a
registered broker-dealer under the Securities and Exchange Act
of 1934 (the "1934 Act"),
(b) the shares of the Portfolios of the Trust are and will
continue to be the only investment securities held by the
corresponding Account subaccounts; and
(c) with regard to each Portfolio, the Company, on behalf of the
corresponding Account subaccount will:
i. vote such shares held by it in the same proportion as
the vote of all other holders of such shares; and
ii. refrain from substituting shares of another security
for such shares unless the SEC has approved such
substitution in the manner provided in Section 26 of
the 1940 Act.
3.3 The Company represents and warrants that the Contracts or interests
in the Accounts (1) are or, prior to issuance, will be registered as securities
under the 1933 Act or, alternatively (2) are not registered because they are
properly exempt from registration under the 1933 Act or will be offered
exclusively in transactions that are properly exempt from registration under the
1933 Act. The Company further represents and warrants that the Contracts will be
issued and sold in compliance in all material respects with all applicable
federal and state laws; and the sale of the Contracts shall comply in all
material respects with state insurance suitability requirements.
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3.4 Each party represents and warrants to the other that it will use
best efforts to ensure that any of its trading systems implicated under this
Agreement prior to, during and after the calendar year 2000 will recognize
accurate century data, and user interfaces and operation environments will
comply with Year 2000 application standards. Notwithstanding any other provision
of this Agreement, no party shall be liable for any indirect, special or
consequential losses even if the party has notice of the possibility of such
loss.
3.5 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Delaware.
3.6 The Trust represents and warrants that the Trust shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Trust shall be registered under the 1940 Act prior to any issuance or sale of
such shares. The Trust shall amend its registration statement under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify its shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Trust.
3.7 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in Section
817(h) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
3.8 The Trust represents that it intends to qualify as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
3.9 The Trust's Institutional Shares currently do not intend to make
any payments to finance distribution expenses pursuant to Rule 12b-1 under the
1940 Act or otherwise, although they may make such payments in the future. To
the extent that the Trust decides to finance distribution expenses for the
Institutional Shares pursuant to Rule 12b-1, the Trust undertakes to have a
board of trustees, a majority of whom are not interested persons of the Trust,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
3.10 The Trust represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Trust are and shall continue to be at
all times covered by a blanket fidelity bond or similar coverage for the benefit
of the Trust in an amount not less than the minimal coverage as required
currently by Rule 17g-(1) of the 1940 Act or related provisions as may be
promulgated from time to time. The aforesaid Bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
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ARTICLE IV
POTENTIAL CONFLICTS
4.1 The parties acknowledge that the Trust's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. An irreconcilable material conflict may arise
for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Trustees shall promptly inform the Company if they determine that an
irreconcilable material conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Exemptive Order by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the Trustees, or a majority of
its disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its expense and to the extent reasonably practicable (as determined by the
Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any appropriate
group (I.E., annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected Contract owners
the option of making such a change; and (b) establishing a new registered
management investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position
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or would preclude a majority vote, the Company may be required, at the Trust's
election, to withdraw the affected Account's investment in the Trust and
terminate this Agreement with respect to such Account; provided, however that
such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Any such withdrawal and termination must take place
within six (6) months after the Trust gives written notice that this provision
is being implemented. Until the end of such six (6) month period, the Trust
shall continue to accept and implement orders by the Company for the purchase
and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Trust and terminate this Agreement with
respect to such Account within six (6) months after the Trustees inform the
Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Until the end of such six (6) month period, the Trust shall continue
to accept and implement orders by the Company for the purchase and redemption of
shares of the Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the Contracts
if an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within six (6)
months after the Trustees inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the 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 Exemptive
Order, and said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Exemptive Order) on terms and conditions materially
different from those contained in the Exemptive Order, then the Trust and/or the
Participating Insurance Companies, as appropriate, shall take
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such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such rules are applicable.
ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Trust and each of its Trustees, officers, employees and agents
and each person, if any, who controls the Trust within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Article V) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses are related to the sale or acquisition of the
Trust's shares or the Contracts 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
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omission was made in reliance upon and accurately derived from written
information furnished to the Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company.
5.2 INDEMNIFICATION BY THE TRUST. The Trust agrees to indemnify and
hold harmless the Company and each of its directors, officers, employees and
agents and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Article V) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Trust) or
expenses (including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal counsel
fees incurred in connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or regulation, or at
common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus for the Trust (or any amendment or
supplement thereto), (collectively, "Trust Documents" for the purposes
of this Article V), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately
derived from written information furnished to the Trust by or on behalf
of the Company for use in Trust Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Company Documents) or wrongful conduct of the Trust or
persons under its control, with respect to the sale or acquisition of
the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written information
furnished to the Company by or on behalf of the Trust; or
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(d) arise out of or result from any failure by the Trust to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Trust.
5.3 Neither the Company nor the Trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
such Indemnified Party's willful misfeasance, bad faith or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
5.4 Neither the Company nor the Trust shall be liable under the
indemnification provisions of 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 the Indemnified Parties,
the indemnifying party shall be entitled to participate, at its own expense, in
the defense of such action. The indemnifying party also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from the indemnifying party to the Indemnified
Party of an election to assume such defense, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the
indemnifying party will not be liable to the Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
ARTICLE VI
TERMINATION
6.1 (a) This Agreement may be terminated by either party for any reason
by ninety (90) days advance written notice delivered to the other party.
(b) This Agreement may be terminated by the Company immediately
upon written notice to the Trust with respect to any Portfolio:
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(i) based upon the Company's determination that shares of such
Portfolio are not reasonably available to meet the requirements of the
Contracts; or
(ii) in the event any of the Portfolio's shares are not
registered, issued or sold in accordance with applicable state and/or federal
law or such law precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company; or
(iii) in the event that such Portfolio ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably believes that the
Trust may fail to so qualify; or
(iv) in the event that such Portfolio fails to meet the
diversification requirements specified in this Agreement.
6.2 Notwithstanding any termination of this Agreement, the Trust shall,
at the option of the Company, continue to make available additional shares of
the Trust (or any Portfolio) pursuant to the terms and conditions of this
Agreement for all Contracts in effect on the effective date of termination of
this Agreement, provided that the Company continues to pay the costs set forth
in Section 2.3.
6.3 The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.8 shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contract owners in accordance with Section 6.2.
ARTICLE VII
NOTICES
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:
Janus Aspen Series
100 Fillmore Street
Denver, Colorado 80206
Attention: General Counsel
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If to the Company:
Life Investors Insurance Company of America
C/o PFL Life Insurance company
4333 Edgewood Road, N.E.
Cedar Rapids, IA 52499
Attn: Financial Markets Division Counsel
ARTICLE VIII
MISCELLANEOUS
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
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 State of Colorado.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc., and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
8.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
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8.8 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the prior written approval of the other
party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
JANUS ASPEN SERIES
By: S/ BONNIE HOWE
Name: BONNIE M. HOWE
Title: ASSISTANT VICE PRESIDENT
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
By: S/ REX B. ENO
Name: REX B. ENO
Title: PRESIDENT
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SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and Contracts Funded
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
Life Investors Variable Life Account Variable Universal Life
July 1, 1999 Form No. APUL0600 699
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EXHBIT 1.A.8(b)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
AFSG SECURITIES CORPORATION
<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.....................................12
5.3 Monitoring for Material Irreconcilable Conflicts............12
5.4 Conflict Remedies...........................................13
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.......................................................15
6.1 Events of Termination.......................................15
6.2 Notice Requirement for Termination..........................16
6.3 Funds To Remain Available...................................16
6.4 Survival of Warranties and Indemnifications.................16
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6.5 Continuance of Agreement for Certain Purposes...............17
Section 7. Parties To Cooperate Respecting Termination.......................17
Section 8. Assignment........................................................17
Section 9. Notices...........................................................17
Section 10. Voting Procedures................................................18
Section 11. Foreign Tax Credits..............................................18
Section 12. Indemnification..................................................19
12.1 Of AVIF by LIFE COMPANY and UNDERWRITER.....................19
12.2 Of A LIFE COMPANY and UNDERWRITER by AVIF...................21
12.3 Effect of Notice............................................23
12.4 Successors..................................................23
Section 13. Applicable Law...................................................24
Section 14. Execution in Counterparts........................................24
Section 15. Severability.....................................................24
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
Section 21. Amendments.......................................................26
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ____ day of _________,
1999 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"), Life Investors Insurance Company of America, an Iowa 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 AFSG Securities Corporation, 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
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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
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.
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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 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
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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.
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.
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(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
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 Participant, 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;
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(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 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
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COMPANY have any liability resulting from AVIF's 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.
(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 Iowa 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 Iowa 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
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<PAGE>
state laws, including, without limitation, the 1933 Act, the 1934 Act, the 1940
Act and Iowa 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.
(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 reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
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
12b-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-(1) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
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
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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.
(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 fifteen (15)
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.
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<PAGE>
(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.
(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.
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(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 fifteen (15) 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.
(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.
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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.
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;
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(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
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 AVIF's 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
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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 AVIF's 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.
(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.
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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.
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 AVIF's 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
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(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
(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.
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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
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), 6.1(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.
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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.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
AFSG SECURITIES CORPORATION
4333 Edgewood Road NE
Cedar Rapids, IA 52499
Facsimile: (319) 297-8290
Attn: General Counsel
Financial Markets Division
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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.
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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
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 AVIF's 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
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(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
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
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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.
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 AVIF's 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
AVIF's 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
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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
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.
23
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(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
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.
24
<PAGE>
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.
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
25
<PAGE>
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
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.
26
<PAGE>
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.
SECTION 21. AMENDMENTS
No provision of this Agreement may be amended or modified in any manner
except by a written agreement executed by all parties hereto.
27
<PAGE>
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.
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
LIFE INVESTORS INSURANCE COMPANY OF
AMERICA, on behalf of itself and its
separate accounts
Attest: S/ JOHN D. CLEAVENGER By: S/ PAUL REABURN
Name: JOHN D. CLEAVENGER Name: PAUL REABURN
Title: VP - DIVISION GENERAL COUNSEL Title: VP -LIICA
AFSG SECURITIES CORPORATION
Attest: S/ FRANK A. CAMP By: S/ LARRY N. NORMAN
Name: FRANK A. CAMP Name: LARRY N. NORMAN
Title: SECRETARY Title: PRESIDENT
28
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Government Securities Fund
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Life Investors Variable Life Account A
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
Life Investors Insurance Company of America
Policy Form No. APUL0600 699
29
<PAGE>
SCHEDULE B
EXPENSE ALLOCATIONS
<TABLE>
<CAPTION>
LIFE COMPANY AVIF / AIM
<S> <C>
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
(Account) supplements (Fund)
- ---------------------------------------------------------- ------------------------------------------------------
printing Account and Fund prospectuses and supplements a camera ready Fund prospectus and printing costs of
Fund prospectus to existing policy holders with
amounts allocated to the Fund
- ---------------------------------------------------------- ------------------------------------------------------
text composition and printing Account SAIs text composition and printing Fund SAIs
- ---------------------------------------------------------- ------------------------------------------------------
mailing and distributing Account SAIs to policy owners mailing and distributing Fund SAIs 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 as 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
proxies related to the Account to 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>
30
EXHIBIT 1.A.8(c)
PARTICIPATION AGREEMENT
Among
OPPENHEIMER VARIABLE ACCOUNT FUNDS,
OPPENHEIMERFUNDS, INC.
and
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
THIS AGREEMENT (the "Agreement"), made and entered into as of
the 19TH day of October, 1999 by and among Life Investors Insurance Company of
America (hereinafter the "Company"), on its own behalf and on behalf of each
separate account of the Company named in Schedule 1 to this Agreement, as may be
amended from time to time by mutual consent (hereinafter collectively the
"Accounts"), Oppenheimer Variable Account Funds (hereinafter the "Fund") and
OppenheimerFunds, Inc. (hereinafter the "Adviser").
WHEREAS, the Fund is an open-end management investment company
and is available to act as the investment vehicle for separate accounts now in
existence or to be established at any date hereafter for variable life insurance
policies, variable annuity contracts and other tax-deferred products
(collectively, the "Variable Insurance Products") offered by insurance companies
(hereinafter "Participating Insurance Companies");
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each designated a "Portfolio", and each representing
the interests in a particular managed pool of securities and other assets;
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<PAGE>
WHEREAS, the Fund has obtained an order from the Securities
and Exchange Commission, dated July 16, 1986 (File No. 812-6324) granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Mixed and Shared Funding Exemptive Order");
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act");
WHEREAS, the Adviser is duly registered as an investment
adviser under the federal Investment Advisers Act of 1940;
WHEREAS, the Company has registered or will register certain
variable annuity and/or life insurance contracts under the 1933 Act (hereinafter
"Contracts") (unless an exemption from registration is available);
WHEREAS, the Accounts are or will be 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 contracts (the Contract(s) and the Account(s) covered by the
Agreement are specified in Schedule 1 attached hereto, as may be modified by
mutual consent from time to time);
WHEREAS, the Company has registered or will register the
Accounts as unit investment trusts under the 1940 Act (unless an exemption from
registration is available);
-2-
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Portfolios (the
Portfolios covered by this Agreement are specified in Schedule 2 attached hereto
as may be modified by mutual consent from time to time), on behalf of the
Accounts to fund the Contracts named in Schedule 1, as may be amended from time
to time by mutual consent, and the Fund is authorized to sell such shares to
unit investment Funds such as the Accounts at net asset value; and
NOW, THEREFORE, in consideration of their mutual promises, the
Fund, the Adviser and the Company agree as follows:
ARTICLE I. PURCHASE AND REDEMPTION OF FUND SHARES
1.1. The Fund agrees to sell to the Company those shares of
the Fund which the Company orders on behalf of the Account, executing such
orders on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the order for the shares of the Fund. For purposes
of this Section 1.1, the Company shall be the designee of the Fund for receipt
of such orders from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives written (or facsimile)
notice of such order 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 is
open for trading and on which the Fund calculates its net asset value pursuant
to the rules of the SEC.
1.2. The Company shall pay for Fund shares by 2:00 p.m. New
York time on the next Business Day after it places an order to purchase Fund
shares in accordance with Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire or by a credit for any shares redeemed.
-3-
<PAGE>
1.3. The Fund agrees to make Fund shares available for
purchase at the applicable net asset value per share by the Company for their
separate Accounts listed in Schedule 1 on those days on which the Fund
calculates its net asset value pursuant to rules of the SEC; provided, however,
that the Board of Trustees of the Fund (hereinafter the "Trustees") may refuse
to sell shares of any Portfolio to any person, or suspend or terminate the
offering of shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Trustees, acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, in the best interests of the shareholders
of any Portfolio.
1.4. The Fund agrees to redeem, upon the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption and receipt by such designee shall constitute receipt by
the Fund; provided that the Fund receives written (or facsimile) notice of such
request for redemption by 9:30 a.m. New York time on the next following Business
Day. Payment shall be made within the time period specified in the Fund's
prospectus or statement of additional information, in federal funds transmitted
by wire to the Company's account as designated by the Company in writing from
time to time.
1.5. The Company agrees to purchase and redeem the shares of
the Portfolios named in Schedule 2 offered by the then current prospectus and
statement of additional information of the Fund in accordance with the
provisions of such prospectus and statement of additional information. The
Company shall not permit any person other than a Contract owner to
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<PAGE>
give instructions to the Company which would require the Company to redeem or
exchange shares of the Fund.
1.6. The Fund shall make the net asset value per share for
each portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:00
p.m. central time) and shall use its best efforts to make such net asset value
per share available by 5:00 p.m. central time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts
are or will be registered under the 1933 Act; or that the Contracts are not
registered in proper reliance on an exemption from registration under the 1933
Act; that the Contracts will be issued and sold in compliance in all material
respects with all applicable Federal and State laws and that the sale of the
Contracts shall comply in all material respects with state insurance suitability
requirements. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account under Section 508A.1 of the Iowa
Insurance Code and has registered or, prior to any issuance or sale of the
Contracts, will register each Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts, or that the Company will not register the Account in proper
reliance upon an exclusion from registration under the 1940 Act.
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 all applicable federal and
state securities laws and that the Fund is and shall
-5-
<PAGE>
remain registered under the 1940 Act.
2.3. The Fund represents that it intends to qualify as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986 ("the Code"), as amended, and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently
treated as annuity contracts or life insurance contracts under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Fund immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. The Fund represents that each Plan adopted under Rule
12b-1 under the 1940 Act to finance distribution expenses of Class 2 shares of
the Fund has been approved by a vote of a majority of the Trustees of the Fund
who are not "interested persons" (as defined in the 1940 Act) of the Fund or the
Adviser.
2.6. The Fund and the Adviser each represent and warrant that
all of their respective Trustees, directors, officers, employees, investment
advisers, and other individual/entities dealing with the money and/or securities
of the Fund are and shall continue to be at all times covered by a blanket
fidelity bond or similar coverage for the benefit of the Fund in an amount not
less than the minimal coverage as required currently by Rule 17g-(1) of the 1940
Act or related provisions as may be promulgated from time to time. The aforesaid
Bond shall include coverage for larceny and embezzlement and shall be issued by
a reputable bonding company.
-6-
<PAGE>
ARTICLE III. SALES MATERIAL, PROSPECTUSES AND OTHER REPORTS
3.1. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee, each piece of sales literature or other
promotional material in which the Fund or the Adviser is named, at least ten
Business Days prior to its use. No such material shall be used if the Fund or
its designee reasonably object to such use within ten Business Days after
receipt of such material. "Business Day" shall mean any day in which the New
York Stock Exchange is open for trading and in which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
3.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sale literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund.
3.3. The Fund and the Adviser 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 is named, at least ten Business
Days prior to its use. No such material shall be used if the Company or its
designee reasonably object to such use within ten Business Days after receipt of
such material. "Business Day" shall mean any day in which the New York Stock
-7-
<PAGE>
Exchange is open for trading and in which the Fund calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission.
3.4. The Fund and the Adviser shall not give any information
or make any representations or statements on behalf of the Company or concerning
the Company other than the information or representations contained in the
registration statement or prospectus for the Company shares, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in reports or proxy statements for the Company, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
3.5. For purposes of this Article III, the phrase "sales
literature or other promotional material" means 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
billboard or electronic media), and sales literature (such as brochures,
circulars, market letters and form letters), distributed or made generally
available to customers or the public.
3.6. The Fund shall provide a copy of its current prospectus
within a reasonable period of its filing date, and provide other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus for the Fund is supplemented or amended) to have
the prospectus for the Contracts and the Fund's prospectus printed together in
one document (such printing to be at the Company's expense). The Adviser shall
be permitted to review and approve the typeset form of the Fund's Prospectus
prior to such printing.
3.7. The Fund or the Adviser at its expense shall provide the
Company with either: (i) a copy of the Fund's proxy material, reports to
shareholders, other information relating
-8-
<PAGE>
to the Fund necessary to prepare financial reports, and other communications to
shareholders for printing and distribution to Contract owners, or (ii) camera
ready and/or printed copies, if appropriate, of such material for distribution
to Contract owners, within a reasonable period of the filing date for definitive
copies of such material. The Adviser shall be permitted to review and approve
the typeset form of such proxy material, shareholder reports and communications
prior to such printing provided such materials have been provided within a
reasonable period.
3.8. If and to the extent required by law the Company shall:
3.8(a). solicit voting instructions from Contract owners;
3.8(b). vote the Fund shares in accordance with instructions
received from Contract owners; and
3.8(c). vote Fund shares for which no instructions have been
received in a particular separate account in the same proportion as Fund shares
of such portfolio for which instructions have been received in that separate
account, 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 reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law. The Company shall be
responsible for assuring that each if its separate accounts participating in the
Fund calculates voting privileges in a manner consistent with the voting
provisions set forth in the Mixed and Shared Funding Exemptive Order.
3.9 The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders.
-9-
<PAGE>
ARTICLE IV. FEES AND EXPENSES
4.1. The Fund and Adviser 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 Fund or Adviser, except as provided herein.
4.2. All expenses incident to performance by each party of its
respective duties under this Agreement shall be paid by that party. 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 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, and the preparation of all statements
and notices required by any federal or state law. The Fund or the Adviser shall
bear the expenses of setting the Fund's prospectus in type, setting in type and
printing the Fund's proxy materials and the Fund's reports to shareholders
(including the costs of printing a prospectus that constitutes an annual
report), the preparation of all statements and notices required by any federal
or state law, and all taxes on the issuance or transfer of the Fund's shares.
4.3. The Company shall bear the expenses of distributing the
Fund's prospectus, proxy materials and reports to owners of Contracts issued by
the Company.
4.4. In the event the Fund adds one or more additional
Portfolios and the parties desire to make such Portfolios available to the
respective Contract owners as an underlying investment medium, a new Schedule 2
or an amendment to this Agreement shall be executed by the parties authorizing
the issuance of shares of the new Portfolios to the particular Account. The
amendment may also provide for the sharing of expenses for the establishment of
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<PAGE>
new Portfolios among Participating Insurance Companies desiring to invest in
such Portfolios and the provision of funds as the initial investment in the new
Portfolios.
ARTICLE V. POTENTIAL CONFLICTS
5.1. The Board of Trustees of the Fund (the "Board") will
monitor the Fund for the existence of any material irreconcilable conflict
between the interests of the Contract owners of all separate accounts investing
in the Fund. An irreconcilable material conflict may arise for a variety of
reasons, including: (a) an action by any state insurance regulatory authority;
(b) a change in applicable federal or state insurance, tax, or securities laws
or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a decision
by an insurer to disregard the voting instructions of Contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
5.2. The Company has reviewed a copy of the Mixed and Shared
Funding Exemptive Order, and in particular, has reviewed the conditions to the
requested relief set forth therein. The Company agrees to be bound by the
responsibilities of a participating insurance company as set forth in the Mixed
and Shared Funding Exemptive Order, including without limitation the requirement
that the Company 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 in monitoring such conflicts under the Mixed and Shared Funding
Exemptive Order, by providing the Board in a timely manner with all information
reasonably necessary for the Board to consider
-11-
<PAGE>
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 and by confirming in writing, at the Fund's request, that the
Company is unaware of any such potential or existing material irreconcilable
conflicts.
5.3. If it is determined by a majority of the Board, or a
majority of its disinterested Trustees, that a material irreconcilable conflict
exists, the Company shall, at its expense and to the extent reasonably
practicable (as determined by a majority of the disinterested trustees), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to an 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.
5.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and that
decision could conflict with the majority of Contract owner instructions, the
Company may be required, at the Fund's election, to withdraw the Account's
investment in the Fund and terminate this Agreement; provided, however, that
such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and termination must
take place within six (6)
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months after the Fund gives written notice that this provision is being
implemented, and until the end of the 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, subject to applicable regulatory requirements.
5.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the Account's investment in the Fund and terminate this Agreement
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,
subject to applicable regulatory limitation.
5.6. For purposes of Sections 5.3 through 5.6 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 5.3 to
establish a new funding medium for Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict. In the event that the Board determines
that any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the particular 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,
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<PAGE>
provided, however, that such withdrawal and termination shall be limited to the
extent required by any such material irreconcilable conflict as determined by a
majority of the disinterested members of the Board.
ARTICLE VI. INDEMNIFICATION
6.1. Indemnification by The Company
6.1(a). The Company agrees to indemnify and hold harmless the
Adviser and the Fund, each member of their Board of Trustees or Board of
Directors, each of their respective Officers and each person, if any, who
controls the Fund within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 6.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of the Fund's shares or
the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the Registration
Statement or prospectus for the Contracts or contained in the Contracts or sales
literature for the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
Agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or
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<PAGE>
on behalf of the Fund for use in the Registration Statement or prospectus for
the Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the Fund not supplied
by the Company, or persons under its control) or wrongful conduct of the Company
or persons under its control, with respect to the sale or distribution of the
Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement, prospectus,
or sales literature of the Fund or any amendment thereof or supplement thereto
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading if
such a statement or omission was made in reliance upon information furnished to
the Fund by or on behalf of the Company; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this agreement or arise
out of or result from any other material breach of this Agreement by the
Company, as limited by and in accordance with the provisions of sections 6.1(b)
and 6.1 (c) hereof.
6.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or duties
under this Agreement or to the Fund, whichever is applicable.
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<PAGE>
6.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
6.1(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.
6.2. Indemnification by the Adviser
6.2(a). The Adviser agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 6.2)
against any and all losses, claims, damages, liabilities (including amounts paid
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<PAGE>
in settlement with the written consent of the Adviser) 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 of) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or prospectus or sales literature of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to the
Adviser or Fund by or on behalf of the Company for use in the Registration
Statement or prospectus for the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in the
Registration Statement, prospectus or sale literature for the Contracts not
supplied by the Adviser or persons under its control) or wrongful conduct of the
Fund, Adviser or persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement, prospectus,
or sales literature covering the Contracts, or any amendment thereof 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
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<PAGE>
statements therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on behalf of the Fund;
or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Adviser; as limited by and in accordance with the provision of Sections 6.2(b)
and 6.2(c) hereof.
6.2(b). The Adviser shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is applicable.
6.2(c). The Adviser shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Adviser in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser's election to
assume the defense thereof, the Indemnified Party shall bear the
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<PAGE>
fees and expenses of any additional counsel retained by it, and the Adviser will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
6.2(d). The Company agrees promptly to notify the Adviser of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of each Account.
6.3. Indemnification by the Fund.
6.3(a). The Fund agrees to indemnify and hold harmless the
Company, and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 6.3)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Fund) or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements result from the gross negligence, bad faith or willful misconduct
of the Board or any member thereof, are related to the operations of the Fund
and 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 6.3(b) and 6.3(c) hereof.
6.3(b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an
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<PAGE>
Indemnified Party as such may arise from such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement or to the Company, the
Fund, the Adviser or each Account, whichever is applicable.
6.3(c). The Fund shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of such
claim shall not relieve the Fund from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this indemnification provision. In case any such action is brought against
the Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund shall also be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
6.3(d). The Company and the Adviser agree promptly to notify
the Fund of the commencement of any litigation or proceedings against it or any
of its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or sale or acquisition of shares of the Fund.
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<PAGE>
ARTICLE VII. APPLICABLE LAW
7.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the State of New
York.
7.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Mixed and Shared Funding Exemptive Order) and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE VIII. TERMINATION
8.1. This Agreement shall terminate with respect to some or
all Portfolios: 8.1(a). at the option of any party upon six
month's advance written notice to the other
parties;
8.1(b). at the option of the Company to the extent that shares
of Portfolios are not reasonably available to meet the requirements of its
Contracts or are not appropriate funding vehicles for the Contracts, as
determined by the Company reasonably and in good faith. Prompt notice of the
election to terminate for such cause and an explanation of such cause shall be
furnished by the Company; or
8.1(c). as provided in Article V.
8.2. It is understood and agreed that the right of any party
hereto to terminate this Agreement pursuant to Section 8.1(a) may be exercised
for cause or for no cause.
8.3. Effect of Termination. Notwithstanding any termination of
this Agreement, the Fund and the Adviser 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,
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<PAGE>
for all Contracts in effect on the effective date of termination of this
Agreement for which shares of the Fund serve as the underlying investment medium
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 8.3 shall not apply (i) to any
terminations under Article V and the effect of such Article V terminations shall
be governed by Article V if this Agreement, or (ii) if the further sale of
additional shares of the Fund to the contracts is prohibited by law or by
regulatory authorities.
ARTICLE X. 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 to
the other party.
If to the Fund:
Oppenheimer Variable Account Fund
6803 S. Tucson Way
Englewood, CO 80112
Attn: Brian Wixted, Treasurer
If to the Adviser:
OppenheimerFunds, Inc.
2 World Trade Center
New York, NY 10048-0203
Attn: Andrew J. Donohue, General Counsel
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<PAGE>
If to the Company:
Life Investors Insurance Company of America
4333 Edgewood Rd. NE
Cedar Rapids, IA 52499
Attn: Individual Division General Counsel
ARTICLE XI. MISCELLANEOUS
11.1. Subject to the requirements of legal process and
regulatory authority, each party hereto shall treat as confidential the names
and addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information without the express
written consent of the affected party until such time as it may come into the
public domain.
11.2. 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.
11.3. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and the
same instrument.
11.4. 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.
11.5. Each party hereto shall cooperate with, and promptly
notify each other party and all appropriate governmental authorities (including
without limitation the Securities and Exchange Commission, the National
Association of Securities Dealers, Inc. and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
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<PAGE>
11.6. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
11.7. It is understood by the parties that this Agreement is
not an exclusive arrangement in any respect.
11.8. The Company and the Adviser each understand and agree
that the obligations of the Fund under this Agreement are not binding upon any
shareholder of the Fund personally, but bind only the Fund and the Fund's
property; the Company and the Adviser each represent that it has notice of the
provisions of the Declaration of Fund of the Fund disclaiming shareholder
liability for acts or obligations of the Fund.
11.9. This Agreement shall not be assigned by any party hereto
without the prior written consent of all the parties.
11.10. This Agreement sets forth the entire agreement between
the parties and supercedes all prior communications, agreements and
understandings, oral or written, between the parties regarding the subject
matter hereof.
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 as of the date specified
below.
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<PAGE>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
By: S/PAUL REABURN
Title: V.P.
Date: OCT. 14, 1999
OPPENHEIMER VARIABLE ACCOUNT
FUNDS
By: S/______________________
Title: SECRETARY AND VICE PRESIDENT
Date: OCTOBER 19, 1999
OPPENHEIMERFUNDS, INC.
By: S/_______________________
Title: EXECUTIVE VICE PRESIDENT
Date: OCTOBER 19, 1999
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<PAGE>
SCHEDULE 1
SEPARATE ACCOUNTS POLICY
Life Investors Variable Life Account A Variable Protector
- -- Established by the Board of Directors Policy Form No. APUL0600 699
on July 1, 1999 (including successor forms,
addenda, and endorsements - may
vary by state)
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<PAGE>
SCHEDULE 2
PORTFOLIOS COVERED BY THE AGREEMENT
Oppenheimer Main Street Growth and Income Fund/VA
Oppenheimer Multiple Strategies Fund/VA
Oppenheimer Bond Fund/VA
Oppenheimer Strategic Bond Fund/VA
Oppenheimer High Income Fund/VA
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EXHIBIT 1.A.8(d)
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND,
FIDELITY DISTRIBUTORS CORPORATION
and
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
THIS AGREEMENT, made and entered into as of the 1st day of October,
1999 by and among LIFE INVESTORS INSURANCE COMPANY OF AMERICA, (hereinafter the
"Company"), an Iowa corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and the VARIABLE INSURANCE PRODUCTS FUND, an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts (hereinafter
the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated October 15, 1985 (File No. 812-6102), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity
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<PAGE>
and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors of
the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid variable annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as
a unit investment trust under the 1940 Act or will not register the Account in
proper reliance upon an exclusion from registration under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of the Fund. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 9:30 a.m. Boston time on
the next following Business Day.
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<PAGE>
"Business Day" shall mean any day on which the New York Stock Exchange is open
for trading and on which the Fund calculates its net asset value pursuant to the
rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available under the variable annuity contracts with the form
number(s) which are listed on Schedule A attached hereto and incorporated herein
by this reference, as such Schedule A may be amended from time to time hereafter
by mutual written agreement of all the parties hereto, (the "Contracts") shall
be invested in the Fund, in such other Funds advised by the Adviser as may be
mutually agreed to in writing by the parties hereto, or in the Company's general
account, provided that such amounts may also be invested in an investment
company other than the Fund if (a) such other investment company, or series
thereof, has investment objectives or policies that are substantially different
from the investment objectives and policies of all the Portfolios of the Fund;
or (b) the Company gives the Fund and the Underwriter 45 days written notice of
its intention to make such other investment company available as a funding
vehicle for the Contracts; or (c) such other
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<PAGE>
investment company was available as a funding vehicle for the Contracts prior to
the date of this Agreement and the Company so informs the Fund and Underwriter
prior to their signing this Agreement (a list of such funds appearing on
Schedule C to this Agreement); or (d) the Fund or Underwriter consents to the
use of such other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act or that the Contracts 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; that the Contracts will be issued and sold in compliance in
all material respects with all applicable Federal and State laws and that the
sale of the Contracts shall comply in all material respects with state insurance
suitability requirements. The Company further represents and warrants that it is
an insurance company duly organized and in good standing under applicable law
and that it has legally and validly established each Account prior to any
issuance or sale thereof as a segregated asset account under the Iowa insurance
laws and has registered or, prior to any issuance or sale of the Contracts, will
register each Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account for the
Contracts or that it has not registered the Account in proper reliance upon an
exclusion from registration under the 1940 Act.
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2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Iowa and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently treated
as endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. (a) With respect to Initial Class shares, the Fund currently
does not intend to make any payments to finance distribution expenses pursuant
to Rule 12b-1 under the 1940 Act or otherwise, although it may make such
payments in the future. The Fund has adopted a "no fee" or "defensive" Rule
12b-1 Plan under which it makes no payments for distribution expenses. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
the Fund undertakes to have a board of trustees, a majority of whom are not
interested persons of the Fund, formulate and approve any plan under Rule 12b-1
to finance distribution expenses.
(b) With respect to Service Class shares, the Fund has adopted a
Rule 12b-1 Plan under which it makes payments to finance distribution expenses.
The Fund represents and warrants that it has a board of trustees, a majority of
whom are not interested persons of the Fund, which has formulated and approved
the Fund's Rule 12b-1 Plan to finance distribution expenses of the Fund and that
any changes to the Fund's Rule 12b-1 Plan will be approved by a similarly
constituted board of trustees.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Iowa and the Fund and the Underwriter represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of Iowa to the extent required to perform this Agreement.
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2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Iowa and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Iowa and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. 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 printed
copies of the Fund's current prospectus and Statement of Additional Information
as the Company may reasonably request. If requested by the Company in lieu
thereof, the Fund shall provide camera-ready film containing the Fund's
prospectus and Statement of Additional Information, and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus and/or Statement of Additional Information for the
Fund is amended during the year) to have the prospectus for the Contracts and
the Fund's prospectus printed together in one document, and to have the
Statement of Additional Information for the Fund and the Statement of Additional
Information for the Contracts printed together in one document.
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Alternatively, the Company may print the Fund's prospectus and/or its Statement
of Additional Information in combination with other fund companies' prospectuses
and statements of additional information. Except as provided in the following
three sentences, all expenses of printing and distributing Fund prospectuses and
Statements of Additional Information shall be the expense of the Company. For
prospectuses and Statements of Additional Information provided by the Company to
its existing owners of Contracts in order to update disclosure annually as
required by the 1933 Act and/or the 1940 Act, the cost of printing shall be
borne by the Fund. If the Company chooses to receive camera-ready film in lieu
of receiving printed copies of the Fund's prospectus, the Fund will reimburse
the Company in an amount equal to the product of A and B where A is the number
of such prospectuses distributed to owners of the Contracts, and B is the Fund's
per unit cost of typesetting and printing the Fund's prospectus. The same
procedures shall be followed with respect to the Fund's Statement of Additional
Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and Statements of Additional Information, which are
covered in Section 3.1) to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii) vote Fund shares for which no instructions have been received
in a particular separate account in the same proportion as
Fund shares of such portfolio for which instructions have been
received in that separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
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3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee reasonably objects
to such use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
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<PAGE>
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
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<PAGE>
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all times comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and
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<PAGE>
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 affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the end of the foregoing six month period, the Underwriter
and Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
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7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each trustee of the Board and officers and each person, if any, who controls
the Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained
in the Contracts or sales literature for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information furnished to the
Company by or on behalf of the Fund for use in the Registration
Statement or prospectus for the Contracts or in the Contracts or
sales literature (or any amendment or supplement) or otherwise for
use in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the Fund
not supplied by the Company, or persons under its
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control) or wrongful conduct of the Company or persons under its
control, with respect to the sale or distribution of the Contracts
or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company;
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed against an
Indemnified Party as such may arise from such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties under
this Agreement or to the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Company in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Company of any such
claim shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, the
Company shall be entitled to participate, at its own expense, in the
defense of such action. The Company also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by such party
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independently in connection with the defense thereof other than
reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company
of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for 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, regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus or sales literature of
the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to the Underwriter or Fund by or on behalf of the
Company for use in the Registration Statement or prospectus
for the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or
Underwriter or persons under their control, with respect to
the sale or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof 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
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therein not misleading, if such statement or omission was made
in reliance upon information furnished to the Company by or on
behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, 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 Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
15
<PAGE>
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements result
from the gross negligence, bad faith or willful misconduct of the Board or any
member thereof, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the
diversification requirements specified in Article VI of this
Agreement);or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
16
<PAGE>
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by sixty (60) days
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts;
or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund
may fail to so qualify; or
17
<PAGE>
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or
the Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in
its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Underwriter
or an affiliate of either has suffered a material adverse change
in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives the Fund and the
Underwriter the written notice specified in Section 1.6(b)
hereof and at the time such notice was given there was no
notice of termination outstanding under any other provision of
this Agreement; provided, however any termination under this
Section 10.1(h) shall be effective forty five (45) days after
the notice specified in Section 1.6(b) was given.
10.2. EFFECT OF TERMINATION. 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"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise
18
<PAGE>
available under the Contracts without first giving the Fund or the Underwriter
90 days notice of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Life Investors Insurance Company of America
4333 Edgewood Road, NE
Cedar Rapids, IA 52499
Attention: Individual Division, Law Department
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. MISCELLANEOUS
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
19
<PAGE>
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 any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
The Company shall promptly notify the Fund and the Underwriter of any change in
control of the Company.
12.9. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any),
as soon as practical and in any event within 90 days after
the end of each fiscal year;
(b) the Company's quarterly statements (statutory) (and GAAP,
if any), as soon as practical and in any event within 45
days after the end of each quarterly period:
(c) any financial statement, proxy statement, notice or report
of the Company sent to stockholders and/or policyholders,
as soon as practical after the delivery thereof to
stockholders;
20
<PAGE>
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and
Exchange Commission or any state insurance regulator, as
soon as practical after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or
special audit made by them of the books of the Company, as
soon as practical after the receipt thereof.
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.
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
By: s/ Rex B. Eno
Rex B. Eno
President
VARIABLE INSURANCE PRODUCTS FUND
By: s/ ROBERT C. POZEN
Robert C. Pozen
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: s/ KEVIN J. KELLY
Kevin J. Kelly
Vice President
21
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded by Separate Account
- -------------------------------------- ---------------------------------
Life Investors Variable Life Account A APUL0600 699
July 1, 1999
22
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by the
Company either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide the last Annual Report to the Company
pursuant to the terms of Section 3.3 of the Agreement to which this
Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund) (This and related
steps may occur later in the chronological process due to possible uncertainties
relating to the proposals.)
23
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion
into envelopes (envelopes and return envelopes are provided and paid for by
the Insurance Company). Contents of envelope sent to Customers by Company
will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed
to the Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a
small, single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and
reviewed and approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund MUST allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure and has not been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram
C. Jones, Trustee," then that is the exact legal name to be printed
on the Card and is the signature needed on the Card.
24
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be NOT RECEIVED for purposes of vote tabulation. Any
Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of SHARES.) Fidelity Legal must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
25
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Janus
AIM
Oppenheimer
26
<PAGE>
SUB-LICENSE AGREEMENT
Agreement effective as of this 1st day of October, 1999, by and between
Fidelity Distributors Corporation (hereinafter called "Fidelity"), a corporation
organized and existing under the laws of the Commonwealth of Massachusetts, with
a principal place of business at 82 Devonshire Street, Boston, Massachusetts,
and Life Investors Insurance Company of America (hereinafter called "Company"),
a company organized and existing under the laws of the State of Iowa, with a
principal place of business at 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499.
WHEREAS, FMR Corp., a Massachusetts corporation, the parent company of
Fidelity, is the owner of the trademark and the tradename "FIDELITY INVESTMENTS"
and is the owner of a trademark in a pyramid design (hereinafter, collectively
the "Fidelity Trademarks"), a copy of each of which is attached hereto as
Exhibit "A"; and
WHEREAS, FMR Corp. has granted a license to Fidelity (the "Master License
Agreement") to sub-license the Fidelity Trademarks to third parties for their
use in connection with Promotional Materials as hereinafter defined; and
WHEREAS, Company is desirous of using the Fidelity Trademarks in connection
with distribution of "sales literature and other promotional material" with
information, including the Fidelity Trademarks, printed in said material (such
material hereinafter called the Promotional Material). For the purpose of this
Agreement, "sales literature and other promotional material" shall have the same
meaning as in the certain Participation Agreement dated as of the 14th day of
June, 1999, among Fidelity, Company and Variable Insurance Products Fund
(hereinafter "Participation Agreement"); and
WHEREAS, Fidelity is desirous of having the Fidelity Trademarks used in
connection with the Promotional Material.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy whereof is hereby acknowledged,
and of the mutual promises hereinafter set forth, the parties hereby agree as
follows:
1. Fidelity hereby grants to Company a non-exclusive, non-transferable
license to use the Fidelity Trademarks in connection with the promotional
distribution of the Promotional Material and Company accepts said license,
subject to the terms and conditions set forth herein.
2. Company acknowledges that FMR Corp. is the owner of all right, title and
interest in the Fidelity Trademarks and agrees that it will do nothing
inconsistent with the ownership of the Fidelity Trademarks by FMR Corp., and
that it will not, now or hereinafter, contest any registration or application
for registration of the Fidelity Trademarks by FMR Corp., nor will it, now or
hereafter, aid anyone in contesting any registration or application for
registration of the Fidelity Trademarks by FMR Corp.
1
<PAGE>
3. Company agrees to use the Fidelity Trademarks only in the form and
manner approved by Fidelity and not to use any other trademark, service mark or
registered trademark in combination with any of the Fidelity Trademarks without
approval by Fidelity.
4. Company agrees that it will place all necessary and proper notices and
legends in order to protect the interests of FMR Corp. and Fidelity therein
pertaining to the Fidelity Trademarks on the Promotional Material including, but
not limited to, symbols indicating trademarks, service marks and registered
trademarks. Company will place such symbols and legends on the Promotional
Material as requested by Fidelity or FMR Corp. upon receipt of notice of same
from Fidelity or FMR Corp.
5. Company agrees that the nature and quality of all of the Promotional
Material distributed by Company bearing the Fidelity Trademarks shall conform to
standards set by, and be under the control of, Fidelity.
6. Company agrees to cooperate with Fidelity in facilitating Fidelity's
control of the use of the Fidelity Trademarks and of the quality of the
Promotional Material to permit reasonable inspection of samples of same by
Fidelity and to supply Fidelity with reasonable quantities of samples of the
Promotional Material upon request.
7. Company shall comply with all applicable laws and regulations and obtain
any and all licenses or other necessary permits pertaining to the distribution
of said Promotional Material.
8. Company agrees to notify Fidelity of any unauthorized use of the
Fidelity Trademarks by others promptly as it comes to the attention of Company.
Fidelity or FMR Corp. shall have the sole right and discretion to commence
actions or other proceedings for infringement, unfair competition or the like
involving the Fidelity Trademarks and Company shall cooperate in any such
proceedings if so requested by Fidelity or FMR Corp.
9. This agreement shall continue in force until terminated by Fidelity.
This agreement shall automatically terminate upon termination of the Master
License Agreement. In addition, Fidelity shall have the right to terminate this
agreement at any time upon notice to Company, with or without cause. Upon any
such termination, Company agrees to cease immediately all use of the Fidelity
Trademarks and shall destroy, at Company's expense, any and all materials in its
possession bearing the Fidelity Trademarks, and agrees that all rights in the
Fidelity Trademarks and in the goodwill connected therewith shall remain the
property of FMR Corp. Unless so terminated by Fidelity, or extended by written
agreement of the parties, this agreement shall expire on the termination of that
certain Participation Agreement.
10. Company shall indemnify Fidelity and FMR Corp. and hold each of them
harmless from and against any loss, damage, liability, cost or expense of any
nature whatsoever, including without limitation, reasonable attorneys' fees and
all court costs, arising out of use of the Fidelity Trademarks by Company.
2
<PAGE>
11. In consideration for the promotion and advertising of Fidelity as a
result of the distribution by Company of the Promotional Material, Company shall
not pay any monies as a royalty to Fidelity for this license.
12. This agreement is not intended in any manner to modify the terms and
conditions of the Participation Agreement. In the event of any conflict between
the terms and conditions herein and thereof, the terms and conditions of the
Participation Agreement shall control.
13. This agreement shall be interpreted according to the laws of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereunto set their hands and seals, and
hereby execute this agreement, as of the date first above written.
FIDELITY DISTRIBUTORS CORPORATION
By: S/ KEVIN J. KELLY
Name: _____________________
Title: _____________________
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
By: S/ REX B. ENO
Name: Rex B. Eno
Title: President
3
<PAGE>
EXHIBIT A
Int. Cl.: 36
Prior U.S. Cls.: 101 and 102
Reg. No. 1,481,040
UNITED STATES PATENT AND TRADEMARK OFFICE REGISTERED MAR. 15, 1988
SERVICE MARK
PRINCIPAL REGISTER
[FIDELITY INVESTMENTS LOGO]
FIDELITY
INVESTMENTS
FMR CORP. (MASSACHUSETTS CORPORATION) FIRST USE 2-22-1984; IN COMMERCE
82 DEVONSHIRE STREET 2-22-1984.
BOSTON, MA 02109, ASSIGNEE OF
FIDELITY DISTRIBUTORS CORPORATION NO CLAIM IS MADE TO THE EXCLUSIVE
(MASSACHUSETTS CORPORATION) BOSTON, RIGHT TO USE "INVESTMENTS", APART
MA 02109 FROM THE MARK AS SHOWN.
FOR: MUTUAL FUND AND STOCK BROKERAGE SER. NO. 641,707, FILED 1-28-1987
SERVICES, IN CLASS 36 (U.S. CLS. 101
AND 102) RUSS HERMAN, EXAMINING ATTORNEY
4
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND II,
FIDELITY DISTRIBUTORS CORPORATION
and
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
THIS AGREEMENT, made and entered into as of the 1st of October, 1999,
by and among LIFE INVESTORS INSURANCE COMPANY OF AMERICA, (hereinafter the
"Company"), an Iowa corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts
(hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity
1
<PAGE>
and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors of
the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid variable annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as
a unit investment trust under the 1940 Act or will not register the Account in
proper reliance upon an exclusion from registration under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of the Fund. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 9:30 a.m. Boston time on
the next following Business Day.
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"Business Day" shall mean any day on which the New York Stock Exchange is open
for trading and on which the Fund calculates its net asset value pursuant to the
rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available under the variable annuity contracts with the form
number(s) which are listed on Schedule A attached hereto and incorporated herein
by this reference, as such Schedule A may be amended from time to time hereafter
by mutual written agreement of all the parties hereto, (the "Contracts") shall
be invested in the Fund, in such other Funds advised by the Adviser as may be
mutually agreed to in writing by the parties hereto, or in the Company's general
account, provided that such amounts may also be invested in an investment
company other than the Fund if (a) such other investment company, or series
thereof, has investment objectives or policies that are substantially different
from the investment objectives and policies of all the Portfolios of the Fund;
or (b) the Company gives the Fund and the Underwriter 45 days written notice of
its intention to make such other investment company available as a funding
vehicle for the Contracts; or (c) such other
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<PAGE>
investment company was available as a funding vehicle for the Contracts prior to
the date of this Agreement and the Company so informs the Fund and Underwriter
prior to their signing this Agreement (a list of such funds appearing on
Schedule C to this Agreement); or (d) the Fund or Underwriter consents to the
use of such other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act or that the Contracts 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; that the Contracts will be issued and sold in compliance in
all material respects with all applicable Federal and State laws and that the
sale of the Contracts shall comply in all material respects with state insurance
suitability requirements. The Company further represents and warrants that it is
an insurance company duly organized and in good standing under applicable law
and that it has legally and validly established each Account prior to any
issuance or sale thereof as a segregated asset account under the Iowa insurance
laws and has registered or, prior to any issuance or sale of the Contracts, will
register each Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account for the
Contracts or that it has not registered the Account in proper reliance upon an
exclusion from registration under the 1940 Act.
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<PAGE>
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Iowa and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently treated
as endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. (a) With respect to Initial Class shares, the Fund currently
does not intend to make any payments to finance distribution expenses pursuant
to Rule 12b-1 under the 1940 Act or otherwise, although it may make such
payments in the future. The Fund has adopted a "no fee" or "defensive" Rule
12b-1 Plan under which it makes no payments for distribution expenses. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
the Fund undertakes to have a board of trustees, a majority of whom are not
interested persons of the Fund, formulate and approve any plan under Rule 12b-1
to finance distribution expenses.
(b) With respect to Service Class shares, the Fund has adopted a
Rule 12b-1 Plan under which it makes payments to finance distribution expenses.
The Fund represents and warrants that it has a board of trustees, a majority of
whom are not interested persons of the Fund, which has formulated and approved
the Fund's Rule 12b-1 Plan to finance distribution expenses of the Fund and that
any changes to the Fund's Rule 12b-1 Plan will be approved by a similarly
constituted board of trustees.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Iowa and the Fund and the Underwriter represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of Iowa to the extent required to perform this Agreement.
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<PAGE>
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Iowa and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Iowa and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. 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 printed
copies of the Fund's current prospectus and Statement of Additional Information
as the Company may reasonably request. If requested by the Company in lieu
thereof, the Fund shall provide camera-ready film containing the Fund's
prospectus and Statement of Additional Information, and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus and/or Statement of Additional Information for the
Fund is amended during the year) to have the prospectus for the Contracts and
the Fund's prospectus printed together in one document, and to have the
Statement of Additional Information for the Fund and the Statement of Additional
Information for the Contracts printed together in one document.
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<PAGE>
Alternatively, the Company may print the Fund's prospectus and/or its Statement
of Additional Information in combination with other fund companies' prospectuses
and statements of additional information. Except as provided in the following
three sentences, all expenses of printing and distributing Fund prospectuses and
Statements of Additional Information shall be the expense of the Company. For
prospectuses and Statements of Additional Information provided by the Company to
its existing owners of Contracts in order to update disclosure annually as
required by the 1933 Act and/or the 1940 Act, the cost of printing shall be
borne by the Fund. If the Company chooses to receive camera-ready film in lieu
of receiving printed copies of the Fund's prospectus, the Fund will reimburse
the Company in an amount equal to the product of A and B where A is the number
of such prospectuses distributed to owners of the Contracts, and B is the Fund's
per unit cost of typesetting and printing the Fund's prospectus. The same
procedures shall be followed with respect to the Fund's Statement of Additional
Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and Statements of Additional Information, which are
covered in Section 3.1) to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate
account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
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<PAGE>
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee reasonably objects
to such use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
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<PAGE>
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
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<PAGE>
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all times comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and
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<PAGE>
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 affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the end of the foregoing six month period, the Underwriter
and Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
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<PAGE>
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each trustee of the Board and officers and each person, if any, who controls
the Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained
in the Contracts or sales literature for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information furnished to the
Company by or on behalf of the Fund for use in the Registration
Statement or prospectus for the Contracts or in the Contracts or
sales literature (or any amendment or supplement) or otherwise for
use in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the Fund
not supplied by the Company, or persons under its
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<PAGE>
control) or wrongful conduct of the Company or persons under its
control, with respect to the sale or distribution of the Contracts
or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company;
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed against an
Indemnified Party as such may arise from such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties under
this Agreement or to the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Company in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Company of any such
claim shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, the
Company shall be entitled to participate, at its own expense, in the
defense of such action. The Company also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by such party
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independently in connection with the defense thereof other than
reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company
of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for 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, regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the Registration Statement or prospectus or sales
literature of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made
in reliance upon and in conformity with information
furnished to the Underwriter or Fund by or on behalf of
the Company for use in the Registration Statement or
prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Registration Statement,
prospectus or sales literature for the Contracts not
supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or
Underwriter or persons under their control, with respect
to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof 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
14
<PAGE>
therein not misleading, if such statement or omission
was made in reliance upon information furnished to the
Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms
of this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply
with the diversification requirements specified in
Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter
in this Agreement or arise out of or result from any
other material breach of this Agreement by the
Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, 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 Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
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<PAGE>
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements result
from the gross negligence, bad faith or willful misconduct of the Board or any
member thereof, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms
of this Agreement (including a failure to comply with
the diversification requirements specified in Article VI
of this Agreement);or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
16
<PAGE>
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by sixty (60) days
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts;
or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund
may fail to so qualify; or
17
<PAGE>
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or
the Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in
its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Underwriter
or an affiliate of either has suffered a material adverse change
in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives the Fund and the
Underwriter the written notice specified in Section 1.6(b)
hereof and at the time such notice was given there was no
notice of termination outstanding under any other provision of
this Agreement; provided, however any termination under this
Section 10.1(h) shall be effective forty five (45) days after
the notice specified in Section 1.6(b) was given.
10.2. EFFECT OF TERMINATION. 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"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise
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<PAGE>
available under the Contracts without first giving the Fund or the Underwriter
90 days notice of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Life Investors Insurance Company of America
4333 Edgewood Road, NE
Cedar Rapids, IA 52499
Attention: Individual Division, Law Department
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. MISCELLANEOUS
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
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<PAGE>
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 any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
The Company shall promptly notify the Fund and the Underwriter of any change in
control of the Company.
12.9. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any),
as soon as practical and in any event within 90 days after
the end of each fiscal year;
(b) the Company's quarterly statements (statutory) (and GAAP,
if any), as soon as practical and in any event within 45
days after the end of each quarterly period:
(c) any financial statement, proxy statement, notice or report
of the Company sent to stockholders and/or policyholders,
as soon as practical after the delivery thereof to
stockholders;
20
<PAGE>
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and
Exchange Commission or any state insurance regulator, as
soon as practical after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or
special audit made by them of the books of the Company, as
soon as practical after the receipt thereof.
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.
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
By: S/ REX B. ENO
Rex B. Eno
President
VARIABLE INSURANCE PRODUCTS FUND II
By: S/ ROBERT C. POZEN
Robert C. Pozen
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: S/ KEVIN J. KELLY
Kevin J. Kelly
Vice President
21
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded by Separate Account
- -------------------------------------- ---------------------------------
Life Investors Variable Life Account A APUL0600 699
July 1, 1999
22
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by the
Company either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide the last Annual Report to the Company
pursuant to the terms of Section 3.3 of the Agreement to which this
Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
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5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion
into envelopes (envelopes and return envelopes are provided and paid for by
the Insurance Company). Contents of envelope sent to Customers by Company
will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed
to the Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a
small, single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and
reviewed and approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund MUST allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure and has not been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram
C. Jones, Trustee," then that is the exact legal name to be printed
on the Card and is the signature needed on the Card.
24
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter, a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be NOT RECEIVED for purposes
of vote tabulation. Any Cards that have "kicked out" (e.g.
mutilated, illegible) of the procedure are "hand verified," i.e.,
examined as to why they did not complete the system. Any questions
on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of SHARES.) Fidelity Legal must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
25
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SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Janus
AIM
Oppenheimer
26
<PAGE>
SUB-LICENSE AGREEMENT
Agreement effective as of this 1st of October, 1999, by and between
Fidelity Distributors Corporation (hereinafter called "Fidelity"), a corporation
organized and existing under the laws of the Commonwealth of Massachusetts, with
a principal place of business at 82 Devonshire Street, Boston, Massachusetts,
and Life Investors Insurance Company of America (hereinafter called "Company"),
a company organized and existing under the laws of the State of Iowa, with a
principal place of business at 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499.
WHEREAS, FMR Corp., a Massachusetts corporation, the parent company of
Fidelity, is the owner of the trademark and the tradename "FIDELITY INVESTMENTS"
and is the owner of a trademark in a pyramid design (hereinafter, collectively
the "Fidelity Trademarks"), a copy of each of which is attached hereto as
Exhibit "A"; and
WHEREAS, FMR Corp. has granted a license to Fidelity (the "Master License
Agreement") to sub-license the Fidelity Trademarks to third parties for their
use in connection with Promotional Materials as hereinafter defined; and
WHEREAS, Company is desirous of using the Fidelity Trademarks in connection
with distribution of "sales literature and other promotional material" with
information, including the Fidelity Trademarks, printed in said material (such
material hereinafter called the Promotional Material). For the purpose of this
Agreement, "sales literature and other promotional material" shall have the same
meaning as in the certain Participation Agreement dated as of the 14th day of
June, 1999, among Fidelity, Company and Variable Insurance Products Fund II
(hereinafter "Participation Agreement"); and
WHEREAS, Fidelity is desirous of having the Fidelity Trademarks used in
connection with the Promotional Material.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy whereof is hereby acknowledged,
and of the mutual promises hereinafter set forth, the parties hereby agree as
follows:
1. Fidelity hereby grants to Company a non-exclusive, non-transferable
license to use the Fidelity Trademarks in connection with the promotional
distribution of the Promotional Material and Company accepts said license,
subject to the terms and conditions set forth herein.
2. Company acknowledges that FMR Corp. is the owner of all right, title and
interest in the Fidelity Trademarks and agrees that it will do nothing
inconsistent with the ownership of the Fidelity Trademarks by FMR Corp., and
that it will not, now or hereinafter, contest any registration or application
for registration of the Fidelity Trademarks by FMR Corp., nor will it, now or
hereafter, aid anyone in contesting any registration or application for
registration of the Fidelity Trademarks by FMR Corp.
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<PAGE>
3. Company agrees to use the Fidelity Trademarks only in the form and
manner approved by Fidelity and not to use any other trademark, service mark or
registered trademark in combination with any of the Fidelity Trademarks without
approval by Fidelity.
4. Company agrees that it will place all necessary and proper notices and
legends in order to protect the interests of FMR Corp. and Fidelity therein
pertaining to the Fidelity Trademarks on the Promotional Material including, but
not limited to, symbols indicating trademarks, service marks and registered
trademarks. Company will place such symbols and legends on the Promotional
Material as requested by Fidelity or FMR Corp. upon receipt of notice of same
from Fidelity or FMR Corp.
5. Company agrees that the nature and quality of all of the Promotional
Material distributed by Company bearing the Fidelity Trademarks shall conform to
standards set by, and be under the control of, Fidelity.
6. Company agrees to cooperate with Fidelity in facilitating Fidelity's
control of the use of the Fidelity Trademarks and of the quality of the
Promotional Material to permit reasonable inspection of samples of same by
Fidelity and to supply Fidelity with reasonable quantities of samples of the
Promotional Material upon request.
7. Company shall comply with all applicable laws and regulations and obtain
any and all licenses or other necessary permits pertaining to the distribution
of said Promotional Material.
8. Company agrees to notify Fidelity of any unauthorized use of the
Fidelity Trademarks by others promptly as it comes to the attention of Company.
Fidelity or FMR Corp. shall have the sole right and discretion to commence
actions or other proceedings for infringement, unfair competition or the like
involving the Fidelity Trademarks and Company shall cooperate in any such
proceedings if so requested by Fidelity or FMR Corp.
9. This agreement shall continue in force until terminated by Fidelity.
This agreement shall automatically terminate upon termination of the Master
License Agreement. In addition, Fidelity shall have the right to terminate this
agreement at any time upon notice to Company, with or without cause. Upon any
such termination, Company agrees to cease immediately all use of the Fidelity
Trademarks and shall destroy, at Company's expense, any and all materials in its
possession bearing the Fidelity Trademarks, and agrees that all rights in the
Fidelity Trademarks and in the goodwill connected therewith shall remain the
property of FMR Corp. Unless so terminated by Fidelity, or extended by written
agreement of the parties, this agreement shall expire on the termination of that
certain Participation Agreement.
10. Company shall indemnify Fidelity and FMR Corp. and hold each of them
harmless from and against any loss, damage, liability, cost or expense of any
nature whatsoever, including without limitation, reasonable attorneys' fees and
all court costs, arising out of use of the Fidelity Trademarks by Company.
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11. In consideration for the promotion and advertising of Fidelity as a
result of the distribution by Company of the Promotional Material, Company shall
not pay any monies as a royalty to Fidelity for this license.
12. This agreement is not intended in any manner to modify the terms and
conditions of the Participation Agreement. In the event of any conflict between
the terms and conditions herein and thereof, the terms and conditions of the
Participation Agreement shall control.
13. This agreement shall be interpreted according to the laws of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereunto set their hands and seals, and
hereby execute this agreement, as of the date first above written.
FIDELITY DISTRIBUTORS CORPORATION
By: S/KEVIN J. KELLY
Name: _____________________
Title: _____________________
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
By: S/ REX B.ENO
Name: Rex B. Eno
Title: President
3
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EXHIBIT A
Int. Cl.: 36
Prior U.S. Cls.: 101 and 102
Reg. No. 1,481,040
UNITED STATES PATENT AND TRADEMARK OFFICE REGISTERED MAR. 15, 1988
SERVICE MARK
PRINCIPAL REGISTER
[FIDELITY INVESTMENTS LOGO]
FIDELITY
INVESTMENTS
FMR CORP. (MASSACHUSETTS CORPORATION) FIRST USE 2-22-1984; IN COMMERCE
82 DEVONSHIRE STREET 2-22-1984.
BOSTON, MA 02109, ASSIGNEE OF
FIDELITY DISTRIBUTORS CORPORATION NO CLAIM IS MADE TO THE EXCLUSIVE
(MASSACHUSETTS CORPORATION) BOSTON, RIGHT TO USE "INVESTMENTS", APART
MA 02109 FROM THE MARK AS SHOWN.
FOR: MUTUAL FUND AND STOCK BROKERAGE SER. NO. 641,707, FILED 1-28-1987
SERVICES, IN CLASS 36 (U.S. CLS. 101
AND 102) RUSS HERMAN, EXAMINING ATTORNEY
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<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND III,
FIDELITY DISTRIBUTORS CORPORATION
and
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
THIS AGREEMENT, made and entered into as of the 1st day of October,
1999 by and among LIFE INVESTORS INSURANCE COMPANY OF AMERICA, (hereinafter the
"Company"), an Iowa corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and the VARIABLE INSURANCE PRODUCTS FUND III, an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts
(hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity
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and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors of
the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid variable annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as
a unit investment trust under the 1940 Act or will not register the Account in
proper reliance upon an exclusion from registration under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of the Fund. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 9:30 a.m. Boston time on
the next following Business Day.
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<PAGE>
"Business Day" shall mean any day on which the New York Stock Exchange is open
for trading and on which the Fund calculates its net asset value pursuant to the
rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available under the variable annuity contracts with the form
number(s) which are listed on Schedule A attached hereto and incorporated herein
by this reference, as such Schedule A may be amended from time to time hereafter
by mutual written agreement of all the parties hereto, (the "Contracts") shall
be invested in the Fund, in such other Funds advised by the Adviser as may be
mutually agreed to in writing by the parties hereto, or in the Company's general
account, provided that such amounts may also be invested in an investment
company other than the Fund if (a) such other investment company, or series
thereof, has investment objectives or policies that are substantially different
from the investment objectives and policies of all the Portfolios of the Fund;
or (b) the Company gives the Fund and the Underwriter 45 days written notice of
its intention to make such other investment company available as a funding
vehicle for the Contracts; or (c) such other
3
<PAGE>
investment company was available as a funding vehicle for the Contracts prior to
the date of this Agreement and the Company so informs the Fund and Underwriter
prior to their signing this Agreement (a list of such funds appearing on
Schedule C to this Agreement); or (d) the Fund or Underwriter consents to the
use of such other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act or that the Contracts 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; that the Contracts will be issued and sold in compliance in
all material respects with all applicable Federal and State laws and that the
sale of the Contracts shall comply in all material respects with state insurance
suitability requirements. The Company further represents and warrants that it is
an insurance company duly organized and in good standing under applicable law
and that it has legally and validly established each Account prior to any
issuance or sale thereof as a segregated asset account under the Iowa insurance
laws and has registered or, prior to any issuance or sale of the Contracts, will
register each Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account for the
Contracts or that it has not registered the Account in proper reliance upon an
exclusion from registration under the 1940 Act.
4
<PAGE>
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Iowa and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently treated
as endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. (a) With respect to Initial Class shares, the Fund currently
does not intend to make any payments to finance distribution expenses pursuant
to Rule 12b-1 under the 1940 Act or otherwise, although it may make such
payments in the future. The Fund has adopted a "no fee" or "defensive" Rule
12b-1 Plan under which it makes no payments for distribution expenses. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
the Fund undertakes to have a board of trustees, a majority of whom are not
interested persons of the Fund, formulate and approve any plan under Rule 12b-1
to finance distribution expenses.
(b) With respect to Service Class shares, the Fund has adopted a
Rule 12b-1 Plan under which it makes payments to finance distribution expenses.
The Fund represents and warrants that it has a board of trustees, a majority of
whom are not interested persons of the Fund, which has formulated and approved
the Fund's Rule 12b-1 Plan to finance distribution expenses of the Fund and that
any changes to the Fund's Rule 12b-1 Plan will be approved by a similarly
constituted board of trustees.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Iowa and the Fund and the Underwriter represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of Iowa to the extent required to perform this Agreement.
5
<PAGE>
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Iowa and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Iowa and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. 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 printed
copies of the Fund's current prospectus and Statement of Additional Information
as the Company may reasonably request. If requested by the Company in lieu
thereof, the Fund shall provide camera-ready film containing the Fund's
prospectus and Statement of Additional Information, and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus and/or Statement of Additional Information for the
Fund is amended during the year) to have the prospectus for the Contracts and
the Fund's prospectus printed together in one document, and to have the
Statement of Additional Information for the Fund and the Statement of Additional
Information for the Contracts printed together in one document.
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<PAGE>
Alternatively, the Company may print the Fund's prospectus and/or its Statement
of Additional Information in combination with other fund companies' prospectuses
and statements of additional information. Except as provided in the following
three sentences, all expenses of printing and distributing Fund prospectuses and
Statements of Additional Information shall be the expense of the Company. For
prospectuses and Statements of Additional Information provided by the Company to
its existing owners of Contracts in order to update disclosure annually as
required by the 1933 Act and/or the 1940 Act, the cost of printing shall be
borne by the Fund. If the Company chooses to receive camera-ready film in lieu
of receiving printed copies of the Fund's prospectus, the Fund will reimburse
the Company in an amount equal to the product of A and B where A is the number
of such prospectuses distributed to owners of the Contracts, and B is the Fund's
per unit cost of typesetting and printing the Fund's prospectus. The same
procedures shall be followed with respect to the Fund's Statement of Additional
Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and Statements of Additional Information, which are
covered in Section 3.1) to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate
account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
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3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee reasonably objects
to such use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
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<PAGE>
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
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<PAGE>
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all times comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and
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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 affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the end of the foregoing six month period, the Underwriter
and Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
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7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each trustee of the Board and officers and each person, if any, who controls
the Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained
in the Contracts or sales literature for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information furnished to the
Company by or on behalf of the Fund for use in the Registration
Statement or prospectus for the Contracts or in the Contracts or
sales literature (or any amendment or supplement) or otherwise for
use in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the Fund
not supplied by the Company, or persons under its
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control) or wrongful conduct of the Company or persons under its
control, with respect to the sale or distribution of the Contracts
or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company;
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed against an
Indemnified Party as such may arise from such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties under
this Agreement or to the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Company in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Company of any such
claim shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, the
Company shall be entitled to participate, at its own expense, in the
defense of such action. The Company also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by such party
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<PAGE>
independently in connection with the defense thereof other than
reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company
of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for 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, regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the Registration Statement or prospectus or sales
literature of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made
in reliance upon and in conformity with information
furnished to the Underwriter or Fund by or on behalf of
the Company for use in the Registration Statement or
prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Registration Statement,
prospectus or sales literature for the Contracts not
supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or
Underwriter or persons under their control, with respect
to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof 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
14
<PAGE>
therein not misleading, if such statement or omission
was made in reliance upon information furnished to the
Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms
of this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply
with the diversification requirements specified in
Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter
in this Agreement or arise out of or result from any
other material breach of this Agreement by the
Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, 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 Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
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<PAGE>
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements result
from the gross negligence, bad faith or willful misconduct of the Board or any
member thereof, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms
of this Agreement (including a failure to comply with
the diversification requirements specified in Article VI
of this Agreement);or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
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<PAGE>
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by sixty (60) days
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts;
or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund
may fail to so qualify; or
17
<PAGE>
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or
the Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in
its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Underwriter
or an affiliate of either has suffered a material adverse change
in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives the Fund and the
Underwriter the written notice specified in Section 1.6(b)
hereof and at the time such notice was given there was no
notice of termination outstanding under any other provision of
this Agreement; provided, however any termination under this
Section 10.1(h) shall be effective forty five (45) days after
the notice specified in Section 1.6(b) was given.
10.2. EFFECT OF TERMINATION. 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"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise
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available under the Contracts without first giving the Fund or the Underwriter
90 days notice of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Life Investors Insurance Company of America
4333 Edgewood Road, NE
Cedar Rapids, IA 52499
Attention: Individual Division, Law Department
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. MISCELLANEOUS
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
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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 any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
The Company shall promptly notify the Fund and the Underwriter of any change in
control of the Company.
12.9. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any),
as soon as practical and in any event within 90 days after
the end of each fiscal year;
(b) the Company's quarterly statements (statutory) (and GAAP,
if any), as soon as practical and in any event within 45
days after the end of each quarterly period:
(c) any financial statement, proxy statement, notice or report
of the Company sent to stockholders and/or policyholders,
as soon as practical after the delivery thereof to
stockholders;
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<PAGE>
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and
Exchange Commission or any state insurance regulator, as
soon as practical after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or
special audit made by them of the books of the Company, as
soon as practical after the receipt thereof.
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.
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
By: S/ REX B. ENO
Rex B. Eno
President
VARIABLE INSURANCE PRODUCTS FUND III
By: S/ ROBERT C. POZEN
Robert C. Pozen
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: S/ KEVIN J. KELLY
Kevin J. Kelly
Vice President
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SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded by Separate Account
- -------------------------------------- ---------------------------------
Life Investors Variable Life Account A APUL0600 699
July 1, 1999
22
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by the
Company either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide the last Annual Report to the Company
pursuant to the terms of Section 3.3 of the Agreement to which this
Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
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5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion
into envelopes (envelopes and return envelopes are provided and paid for by
the Insurance Company). Contents of envelope sent to Customers by Company
will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed
to the Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a
small, single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and
reviewed and approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund MUST allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure and has not been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram
C. Jones, Trustee," then that is the exact legal name to be printed
on the Card and is the signature needed on the Card.
24
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter, a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be NOT RECEIVED for purposes
of vote tabulation. Any Cards that have "kicked out" (e.g.
mutilated, illegible) of the procedure are "hand verified," i.e.,
examined as to why they did not complete the system. Any questions
on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of SHARES.) Fidelity Legal must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
25
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Janus
AIM
Oppenheimer
26
<PAGE>
SUB-LICENSE AGREEMENT
Agreement effective as of this 1st of October, 1999, by and between
Fidelity Distributors Corporation (hereinafter called "Fidelity"), a corporation
organized and existing under the laws of the Commonwealth of Massachusetts, with
a principal place of business at 82 Devonshire Street, Boston, Massachusetts,
and Life Investors Insurance Company of America (hereinafter called "Company"),
a company organized and existing under the laws of the State of Iowa, with a
principal place of business at 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499.
WHEREAS, FMR Corp., a Massachusetts corporation, the parent company of
Fidelity, is the owner of the trademark and the tradename "FIDELITY INVESTMENTS"
and is the owner of a trademark in a pyramid design (hereinafter, collectively
the "Fidelity Trademarks"), a copy of each of which is attached hereto as
Exhibit "A"; and
WHEREAS, FMR Corp. has granted a license to Fidelity (the "Master License
Agreement") to sub-license the Fidelity Trademarks to third parties for their
use in connection with Promotional Materials as hereinafter defined; and
WHEREAS, Company is desirous of using the Fidelity Trademarks in connection
with distribution of "sales literature and other promotional material" with
information, including the Fidelity Trademarks, printed in said material (such
material hereinafter called the Promotional Material). For the purpose of this
Agreement, "sales literature and other promotional material" shall have the same
meaning as in the certain Participation Agreement dated as of the 14th day of
June, 1999, among Fidelity, Company and Variable Insurance Products Fund III
(hereinafter "Participation Agreement"); and
WHEREAS, Fidelity is desirous of having the Fidelity Trademarks used in
connection with the Promotional Material.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy whereof is hereby acknowledged,
and of the mutual promises hereinafter set forth, the parties hereby agree as
follows:
1. Fidelity hereby grants to Company a non-exclusive, non-transferable
license to use the Fidelity Trademarks in connection with the promotional
distribution of the Promotional Material and Company accepts said license,
subject to the terms and conditions set forth herein.
2. Company acknowledges that FMR Corp. is the owner of all right, title and
interest in the Fidelity Trademarks and agrees that it will do nothing
inconsistent with the ownership of the Fidelity Trademarks by FMR Corp., and
that it will not, now or hereinafter, contest any registration or application
for registration of the Fidelity Trademarks by FMR Corp., nor will it, now or
hereafter, aid anyone in contesting any registration or application for
registration of the Fidelity Trademarks by FMR Corp.
1
<PAGE>
3. Company agrees to use the Fidelity Trademarks only in the form and
manner approved by Fidelity and not to use any other trademark, service mark or
registered trademark in combination with any of the Fidelity Trademarks without
approval by Fidelity.
4. Company agrees that it will place all necessary and proper notices and
legends in order to protect the interests of FMR Corp. and Fidelity therein
pertaining to the Fidelity Trademarks on the Promotional Material including, but
not limited to, symbols indicating trademarks, service marks and registered
trademarks. Company will place such symbols and legends on the Promotional
Material as requested by Fidelity or FMR Corp. upon receipt of notice of same
from Fidelity or FMR Corp.
5. Company agrees that the nature and quality of all of the Promotional
Material distributed by Company bearing the Fidelity Trademarks shall conform to
standards set by, and be under the control of, Fidelity.
6. Company agrees to cooperate with Fidelity in facilitating Fidelity's
control of the use of the Fidelity Trademarks and of the quality of the
Promotional Material to permit reasonable inspection of samples of same by
Fidelity and to supply Fidelity with reasonable quantities of samples of the
Promotional Material upon request.
7. Company shall comply with all applicable laws and regulations and obtain
any and all licenses or other necessary permits pertaining to the distribution
of said Promotional Material.
8. Company agrees to notify Fidelity of any unauthorized use of the
Fidelity Trademarks by others promptly as it comes to the attention of Company.
Fidelity or FMR Corp. shall have the sole right and discretion to commence
actions or other proceedings for infringement, unfair competition or the like
involving the Fidelity Trademarks and Company shall cooperate in any such
proceedings if so requested by Fidelity or FMR Corp.
9. This agreement shall continue in force until terminated by Fidelity.
This agreement shall automatically terminate upon termination of the Master
License Agreement. In addition, Fidelity shall have the right to terminate this
agreement at any time upon notice to Company, with or without cause. Upon any
such termination, Company agrees to cease immediately all use of the Fidelity
Trademarks and shall destroy, at Company's expense, any and all materials in its
possession bearing the Fidelity Trademarks, and agrees that all rights in the
Fidelity Trademarks and in the goodwill connected therewith shall remain the
property of FMR Corp. Unless so terminated by Fidelity, or extended by written
agreement of the parties, this agreement shall expire on the termination of that
certain Participation Agreement.
10. Company shall indemnify Fidelity and FMR Corp. and hold each of them
harmless from and against any loss, damage, liability, cost or expense of any
nature whatsoever, including without limitation, reasonable attorneys' fees and
all court costs, arising out of use of the Fidelity Trademarks by Company.
2
<PAGE>
11. In consideration for the promotion and advertising of Fidelity as a
result of the distribution by Company of the Promotional Material, Company shall
not pay any monies as a royalty to Fidelity for this license.
12. This agreement is not intended in any manner to modify the terms and
conditions of the Participation Agreement. In the event of any conflict between
the terms and conditions herein and thereof, the terms and conditions of the
Participation Agreement shall control.
13. This agreement shall be interpreted according to the laws of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereunto set their hands and seals, and
hereby execute this agreement, as of the date first above written.
FIDELITY DISTRIBUTORS CORPORATION
By: S/ KEVIN J. KELLY
Name: _____________________
Title: _____________________
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
By: S/ REX B. ENO
Name: Rex B. Eno
Title: President
3
<PAGE>
EXHIBIT A
Int. Cl.: 36
Prior U.S. Cls.: 101 and 102
Reg. No. 1,481,040
UNITED STATES PATENT AND TRADEMARK OFFICE REGISTERED MAR. 15, 1988
SERVICE MARK
PRINCIPAL REGISTER
[FIDELITY INVESTMENTS LOGO]
FIDELITY
INVESTMENTS
FMR CORP. (MASSACHUSETTS CORPORATION) FIRST USE 2-22-1984; IN COMMERCE
82 DEVONSHIRE STREET 2-22-1984.
BOSTON, MA 02109, ASSIGNEE OF
FIDELITY DISTRIBUTORS CORPORATION NO CLAIM IS MADE TO THE EXCLUSIVE
(MASSACHUSETTS CORPORATION) BOSTON, RIGHT TO USE "INVESTMENTS", APART
MA 02109 FROM THE MARK AS SHOWN.
FOR: MUTUAL FUND AND STOCK BROKERAGE SER. NO. 641,707, FILED 1-28-1987
SERVICES, IN CLASS 36 (U.S. CLS. 101
AND 102) RUSS HERMAN, EXAMINING ATTORNEY
4
[LOGO] Life Investors Insurance Company of America HOME OFFICE:
4333 EDGEWOOD RD., N.E.
CEDAR RAPIDS, IA 52499
New Business
Conversion Policy # __________
Rewrite Number _______________
APPLICATION FOR LIFE INSURANCE
Agent Name: ___________________________________________
Agent Number: _________________________________________
Broker/Dealer:(If Applicable) _________________________
Date Faxed: (If Applicable) ___________________________
Amount of initial premium with application $ ________________
Amount to be applied to application
$ ________________
$ ________________
$ ________________
DO:
------------------
o Complete the entire application (front and back).
o Print application in black ink.
o Have applicant initial all changes.
o Obtain all required signatures.
o Include certification if a trust is owner of the policy.
o Attach additional sheet of paper if necessary.
DON'T:
------------------
o Do not use pencil or whiteout.
o Do not accept or send money on applications that total more than
$1,000,000.00
o Do not submit an agent check as the initial premium.
o Do not submit starter checks or deposit slips for checkomatic withdrawals.
<PAGE>
LIFE APPLICATION-PART 1 - Life Investors Insurance Company of America
APPLICATION #_________
SECTION 1. PROPOSED PRIMARY INSURED
1. Last Name First Name M.I.
________________________________________|_______________________________|_______
2. Address Apt# City
_____________________________|__________|_______________________________________
State Zip Code 3. Years at Address 4. Home Phone 5.Driver License Number State
______|_________|___________________|_____________|_______________________|_____
6. Sex 7. Date of Birth 8. Age 9. Place of Birth - State/County
o Male MM-DD-YYYY
o Female |_____________________|____________|_______________________________
10. Social Security Number
__________________________
11. Height 12. Weight 13. Marital Status 14. Employer Years
ft in lbs
___________|___________|_________________|_________________________________|____
15. Occupation & Duties
________________________________________________________________________________
16. Employer's Address 17. Business Phone Number
( ) -_____-________
____________________________________________________|___________________________
18. Have you used TOBACCO or any other product containing NICOTINE in the last
5 years? [ ] No [ ] Yes, Date of last use ________________
19. Rate Class Quoted: [ ] Preferred non-tobacco [ ] Preferred tobacco
[ ] Standard non-tobacco [ ] Standard tobacco
[ ] Preferred Plus (Term Only)
[ ] Other _______________________________________________
SECTION 2. PROPOSED ADDITIONAL/JOINT INSURED - if more than one please use a
supplemental application
1. Last Name First Name M.I.
________________________________________|_______________________________|_______
2. Address Apt# City
_____________________________|__________|_______________________________________
State Zip Code 3. Years at Address 4. Home Phone 5.Driver License Number State
______|_________|___________________|_____________|_______________________|_____
6. Sex 7. Date of Birth 8. Age 9. Place of Birth - State/County
o Male MM-DD-YYYY
o Female |_____________________|____________|_______________________________
10. Social Security Number
__________________________
11. Height 12. Weight 13. Marital Status 14. Relationship to Proposed Insured
ft in lbs
___________|___________|_________________|______________________________________
15. Employer Years
_________________________________|_______
16. Occupation & Duties
________________________________________________________________________________
17. Employer's Address 18. Business Phone Number
( ) -_____-________
____________________________________________________|___________________________
19. Have you used TOBACCO or any other product containing NICOTINE in the last
5 years? [ ] No [ ] Yes, Date of last use ________________
20. Rate Class Quoted: [ ] Preferred non-tobacco [ ] Preferred tobacco
[ ] Standard non-tobacco [ ] Standard tobacco
[ ] Preferred Plus (Term Only)
[ ] Other _______________________________________________
SECTION 3. APPLICANT/OWNER IF OTHER THAN THE PROPOSED PRIMARY INSURED
1. Last Name First Name M.I.
________________________________________|_______________________________|_______
2. Address Apt# City
_____________________________|__________|_______________________________________
State Zip Code 3. Home Phone 4. Social Security Number/Tax ID#
( ) -_____-_________
______|_________|_______________________|________________________
5. Date of Birth/Trust Date 6. Relationship to the Proposed Primary Insured
M M - D D - Y Y Y Y
_____________________________|__________________________________________________
SECTION 4. CHILDREN'S INSURANCE RIDER
COVERAGE AMOUNT ($1,000 MINIMUM TO $15,000 TERM/25,000 UL MAXIMUM COVERAGE FOR
CHILDREN 18 AND UNDER) $ __________________________
Name Relationship Date of Birth Height Weight
- ----------------------------------------------------------------------
________|__________________|MM-DD-YYYY ____ft______in|__________lbs
- ----------------------------------------------------------------------
________|__________________|MM-DD-YYYY ____ft______in|__________lbs
- ----------------------------------------------------------------------
________|__________________|MM-DD-YYYY ____ft______in|__________lbs
- ----------------------------------------------------------------------
Are all children listed? [ ] Yes [ ] No
Are children living with proposed primary insured? [ ] Yes [ ] No
If not, explain why: ___________________________________________________________
<PAGE>
LIFE APPLICATION
________________________________________________________________________________
SECTION 5. PRIMARY BENEFICIARY - If percentage shares are not given they will be
equal, or to the survivor
Name Percent Relationship Social Security Number/Tax ID#
- --------------------------------------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
SECTION 6. CONTINGENT BENEFICIARY - If percentage shares are not given they will
be equal, or to the survivor
Name Percent Relationship Social Security Number/Tax ID#
- --------------------------------------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
SECTION 7. PROPOSED PLAN OF INSURANCE:
1. [ ] Universal Life __________________________________________________________
[ ] Variable Life (complete sections 11-16) _________________________________
[ ] Term Life (indicate term period) ________________________________________
[ ] Joint Life ______________________________________________________________
[ ] Other ___________________________________________________________________
2. No Lapse Period (if applicable) [ ] 20 years [ ] 30 years [ ] Age 100
3. Modal Premium $ _____________________________________________________________
[ ] Include rider(s) in stated premium
4. Face/Specified Amount $ _____________________________________________________
5. Excess: Modal Premium $ _____________________________________________________
Lump Sum Deposit $ __________________________________________________
6. Total Initial Life Premium $ ________________________________________________
7. Automatic Premium Loan (APL) [ ] Yes [ ] No
Automatic Premium Payment Authorization (APPA) [ ] Yes [ ] No
8. If Application is approved other than as requested:
[ ] Adjust premium [ ] Adjust face
9. Benefit/Riders Benefit Units
Monthly $ Amount
[ ] Waiver of Premium Benefit (WP) _______________________
[ ] Waiver of Monthly Deduction _______________________
[ ] Children's Rider _______________________
[ ] Additional Insured Rider (AIR) _______________________
[ ] Base Insured Rider (BIR) _______________________
[ ] Accidental Death Benefit (ADB) _______________________
[ ] Guaranteed Insurability Rider (GIR) _______________________
[ ] Double Waiver of Premium (DWP) _______________________
[ ] Completion of Deposit Rider (CDR) _______________________
[ ] Income Replacement Rider (IRBR) _______________________
[ ] Level Term Period (years) [ ]10 [ ]15 [ ]20 [ ]25 [ ]30
[ ] Other ___________________________________ _______________________
[ ] Other ___________________________________ _______________________
SECTION 8. DEATH BENEFIT OPTION:
[ ] A) Level benefit [ ] B) Increasing benefit
SECTION 9. PREMIUMS PAYABLE:
Planned Modal Premium: $_____________________
Billing Method: [ ] Checkomatic ____|____ Draft Date (1ST thru 28TH)
[ ] Payroll Deduct [ ] Direct Bill [ ] Military Allot
[ ] Civil Service Allot
Billing Frequency: [ ] Single Premium [ ] Semi-annual [ ] Monthly
[ ] Annual [ ] Quarterly [ ] Other___________
Billing Address:________________________________________________________________
SECTION 10: OTHER INSURANCE IN FORCE FOR ALL PROPOSED INSUREDS NONE
Proposed Insured Name Company Amount of insurance Year issued Replacement?
_________________________|_________|_|_|_|_|_|_|_|_|_|__|__________|___Yes ___No
_________________________|_________|_|_|_|_|_|_|_|_|_|__|__________|___Yes ___No
_________________________|_________|_|_|_|_|_|_|_|_|_|__|__________|___Yes ___No
_________________________|_________|_|_|_|_|_|_|_|_|_|__|__________|___Yes ___No
IS THIS INTENDED TO BE A 1035 EXCHANGE? [ ] Yes [ ] No [ ]
Anticipated Cash Value Transfer $ __________________________
1. Will the insurance applied for on any proposed insured
replace or change any existing life or annuity policy? [ ] Yes [ ] No
IF YES, COMPLETE REPLACEMENT FORMS, IF APPROPRIATE.
2. To your knowledge, will the initial and/or future
premiums come from dividends, policy loans, withdrawals
or cash surrender? If yes, provide details below. [ ] Yes [ ] No
Life Investors Policy number __________________________ [ ] Non-Life Investors
Dividends $________________________________________ Loan $___________________
Surrender: [ ] Yes [ ] No
<PAGE>
LIFE APPLICATION
________________________________________________________________________________
SECTION 11. PERSONAL FINANCIAL STATEMENT
A) Gross Income Current Yr $ ______ _________ _________
B) Gross Income Previous Yr $ ______ _________ _________
C) Net Worth $ ______ _________ _________
For over $1 million applied coverage complete a separate financial questionnaire
12. COMPLETE FOR BUSINESS COVERAGE
A) Current Estimated Market Value $________ ________ ______
B) Assets $________ ________ ______
C) Liabilities $________ ________ ______
D) Net Worth $________ ________ ______
E) Percentage of business owned by Proposed Insured _________%
SECTION 13. PREMIUM ALLOCATIONS - (For Variable Plans Only) Must add up to 100%
and be a whole number.
5% minimum for each allocation/limit of 10 funds
<TABLE>
<CAPTION>
<S> <C> <C>
JANUS GROWTH __|__|__% AIM GROWTH __|__|__% OPPEN. HIGH INCOME __|__|__%
JANUS WORLDWIDE GRO. __|__|__% AIM INTERN. EQUITY __|__|__% FIDELITY INDEX 500 __|__|__%
JANUS BALANCED __|__|__% AIM GOV. SECURITIES __|__|__% FIDELITY MONEY MKT. __|__|__%
JANUS AGGR. GROWTH __|__|__% OPPEN. GROWTH & INC. __|__|__% FIDELITY GROWTH __|__|__%
JANUS CAPITAL APPR. __|__|__% OPPEN. MULTIPLE STRAT. __|__|__% FIDELITY CONTRAFUND __|__|__%
AIM VALUE __|__|__% OPPENHEIMER BOND __|__|__% FIDELITY GROWTH & INC. __|__|__%
AIM CAPITAL APPREC. __|__|__% OPPEN. STRAT. BOND __|__|__% FIXED ACCOUNT __|__|__%
OTHER ____________ __|__|__% OTHER________________ __|__|__% OTHER _______________ __|__|__%
</TABLE>
SECTION 14. Investment Objective
[ ] Long-Term Growth [ ] Tax Credit [ ] Short-Term Growth
[ ] Income [ ] Safety of Principal [ ] Other _____________________
SECTION 15. SUITABILITY FOR VARIABLE LIFE INSURANCE POLICY - Complete for all
variable plans
A) Have you, the Proposed Insured, and Purchaser, if
other than the Proposed Insured, received the current
Prospectus for the policy? [ ] Yes [ ] No
B) DO YOU UNDERSTAND THAT UNDER THE POLICY APPLIED FOR
(EXCLUSIVE OF ANY OPTIONAL BENEFITS), THE AMOUNT OF
DEATH BENEFIT AND THE ENTIRE AMOUNT OF THE POLICY
VALUE MAY INCREASE OR DECREASE DEPENDING UPON THE
INVESTMENT EXPERIENCE? [ ] Yes [ ] No
C) With this in mind, is the policy in accord with your
insurance objectives and your anticipated financial
needs? [ ] Yes [ ] No
SECTION 16. TO BE COMPLETED BY APPLICANT/OWNER
Telephone Transfer Authorization: (See Prospectus for telephone transfer
procedures.)
Your policy applied for, if issued, will automatically receive telephone
transfer privileges described in the applicable prospectus unless instructions
to the contrary are indicated below. These privileges allow you to give the
registered representative/agent of record for this policy authority to make
telephone transfers and to change the allocation of future payments among the
Sub-Accounts on your behalf according to your instructions.
[ ] I do NOT want telephone transfer privileges.
Life Investors Insurance Company of America will not be liable for complying
with telephone instructions it reasonably believes to be authentic, nor for any
loss, damage, costs or expense in acting on such telephone instructions, and
Policyowners will bear the risk of any such loss. Life Investors Insurance
Company of America will employ reasonable procedures to confirm that telephone
instructions are genuine, such as requiring forms of personal identification
prior to acting upon such telephone instruction, providing written confirmation
of such transactions to Policyowners and/or tape recording of telephone transfer
request instructions received. If Life Insurance Company does not employ
such procedures, it may be liable for losses due to unauthorized or fraudulent
instructions.
<PAGE>
LIFE APPLICATION - PART 2
________________________________________________________________________________
SECTION 17. GENERAL INFORMATION - Provide details to "yes" answers in REMARKS.
Include question number and related insured.
1. Have you or any Proposed Insured,
(A) Ever had life, disability or health insurance
declined, rated, modified, issued with an exclusion
rider, canceled, or not renewed? [ ] Yes [ ] No
(B) Is there an application for life, accident or
sickness insurance now pending or contemplated on any
proposed insured in this or any other company? If
yes, give details in Agent's Report, Question 3. [ ] Yes [ ] No
(C) Within the past 5 years traveled or resided, or do
you intend to travel or reside, outside the United
States or Canada? If "yes," please indicate the
destination(s), purpose, and duration. [ ] Yes [ ] No
(D) Ever used or been convicted for possession of drugs,
including but not limited to hallucinogens (LSD),
Opiates (Heroin, Morphine), Marijuana, Cocaine,
Sedatives or Inhalants? [ ] Yes [ ] No
(E) Within the past 3 years been charged with or
convicted of any felony, or been on probation? [ ] Yes [ ] No
(F) Within the past 5 years been convicted of, a moving
traffic violation, or plead guilty or no contest to,
reckless driving or driving under the influence of
alcohol or drugs? If "yes," list the violation(s),
provide conviction(s) and date(s) of occurrence. [ ] Yes [ ] No
(G) Within the past 5 years engaged in, or planned to
engage in, any sport including but not limited to:
scuba diving, skydiving, or auto, motorcycle or
motorboat racing? If "yes", please complete Sports
Questionnaire, (Section 20). [ ] Yes [ ] No
(H) Within the past 5 years made, or contemplated making,
any flight other than as a fare-paying passenger? [ ] Yes [ ] No
If "yes," will you accept an exclusion rider? If "no"
please complete Aviation Questionnaire, (Section 19).
(I) Had any weight change in the past year? [ ] Yes [ ] No
(J) Within the past 5 years been partially or totally
disabled due to injury or disease? [ ] Yes [ ] No
(K) Are you presently or do you intend to become a member
of the Armed Forces, National Guard or a Reserve
Unit? If "yes," please provide date(s). [ ] Yes [ ] No
(L) Do you exercise? If "yes," describe type, how often
per week, and how long per session? [ ] Yes [ ] No
(M) Have you or any Proposed Insured ever used or are
currently using alcoholic beverages? [ ] Yes [ ] No
If "yes," please provide type of drinks consumed, the
number of occasions a year, and the number of drinks
consumed on those occasions.
Remarks
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
SECTION 18. NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONAL PHYSICIAN
(If none, so state)
Primary Insured Joint or Additional Insured Children
______________________ ___________________________ _______________________
______________________ ___________________________ _______________________
______________________ ___________________________ _______________________
______________________ ___________________________ _______________________
Date and reason last Date and reason last Date and reason last
consulted this physician consulted this physician consulted this physician
______________________ ___________________________ _______________________
______________________ ___________________________ _______________________
<PAGE>
LIFE APPLICATION
SECTION 19. AVIATION QUESTIONNAIRE (Complete if applicable)
Type of License Now Held _________________ Date of Issue ______________________
Do you have an IFR (Instrument Flight Rating)? [ ] Yes [ ] No
If expired, do you intend to renew? [ ] Yes [ ] No
Total solo hours flown as pilot. _______ Date of last flight as pilot. _________
Have you ever had an airplane accident? If yes, explain. [ ] Yes [ ] No
________________________________________________________________________________
Do you intend to fly outside the U.S.? If yes, explain. [ ] Yes [ ] No
________________________________________________________________________________
Is the aircraft you fly kept at an airport with suitable maintenance facilities?
If no, explain. [ ] Yes [ ] No
________________________________________________________________________________
Do you want full coverage if an extra premium is necessary? [ ] Yes [ ] No
Do any of your duties require you to make flights?
If yes, explain. [ ] Yes [ ] No
________________________________________________________________________________
Hours as Pilot or Co-Pilot
Contemplated Past One to Two
TYPE OF FLYING Next 12 Months 12 Months Years Ago
COMMERCIAL (Flying for pay)
Scheduled passenger airline
- --------------------------------------------------------------------------------
Employer owned aircraft for
employee transportation
- --------------------------------------------------------------------------------
Crop dusting or aerial
spraying
- --------------------------------------------------------------------------------
Check flying of repaired or
production line aircraft
- --------------------------------------------------------------------------------
Student instruction
- --------------------------------------------------------------------------------
Freight carrying or
non-scheduled passenger service,
charter or sight-seeing flying
- --------------------------------------------------------------------------------
Other (describe)
- --------------------------------------------------------------------------------
NON-COMMERCIAL (not flying
for pay)
Pleasure
- --------------------------------------------------------------------------------
Personal business
transportation
- --------------------------------------------------------------------------------
Instruction as student
- --------------------------------------------------------------------------------
Other (describe)
- --------------------------------------------------------------------------------
MILITARY
- --------------------------------------------------------------------------------
SECTION 20. SPORTS QUESTIONNAIRE (Complete if applicable)
1. Parachuting - Skydiving - Jumps per year ________ Total No. of Jumps _______
Name of club ___________________________________
2. Racing - Have you engaged in or do you contemplate engaging in any of the
following form(s) of racing? Give details below.
[ ] Automobile [ ] Hydroplane [ ] Motorcycle [ ] Motorboat
[ ] Other(s) Specify ___________________________________________________________
<TABLE>
<CAPTION>
Last 12 Months Contemplated Next 12 Months
---------------------- Average ---------------------------
Types of Number of Total Miles Speed of Fastest Speed Number of Total Miles
Racing* Races Raced Fastest Race Attained Races Raced
<S> <C> <C> <C> <C> <C> <C>
_____________ __________ __________ ____________ ____________ _________ ____________
_____________ __________ __________ ____________ ____________ _________ ____________
_____________ __________ __________ ____________ ____________ _________ ____________
</TABLE>
* Examples:
Automobile - midget, sportscar, stock car, championship, drag, kart.
Motorcycle - hill climbing, cross country, circular track
Motorboat - unmodified, modified, experimental. Unlimited hydroplane - jet,
other.
Over what type track do you race? (e.g., oval, simulated road.)_________________
Do you race professionally or for cash prizes? _________________________________
Additional remarks clarifying answers to above questions _______________________
3. Scuba Diving - Have you engaged in or do you contemplate engaging in any form
of scuba diving? [ ] Yes [ ] No Give details below.
<TABLE>
<CAPTION>
Last 12 Months Contemplated Next 12 Months
--------------------------------------- --------------------------------------
Number of Dives Avg Time Underwater Number of Dives Avg Time Underwater
Depth of Dives (Feet) Per Dive Per Dive
- --------------------- --------------- -------------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Less Than 75 _______________ ____________________ ________________ ____________________
76-100 _______________ ____________________ ________________ ____________________
100 and Over _______________ ____________________ ________________ ____________________
</TABLE>
LIFE APPLICATION
________________________________________________________________________________
SECTION 21. MEDICAL QUESTIONS - Each question must be individually asked and
answered.
Give the details of "Yes" answers below. Identify question number; state signs,
symptoms and diagnosis of each illness or injury. List the details and results
of any treatment; List the name, full address and dates of each health care
provider consulted.
To the best of your knowledge, has any Proposed Insured within the last 10 years
had or been told by a member of the medical profession that he or she had, or
has been treated for:
1) Illness, injury or disease of the eyes, ears, nose or
throat? [ ] Yes [ ] No
2) Epilepsy, seizures, chronic headaches, head injury,
paralysis, or other disorder of the nervous system? [ ] Yes [ ] No
3) Anxiety, depression, affective disorder, eating
disorder, psychotic disorder, or other psychiatric
treatment? [ ] Yes [ ] No
4) Asthma, emphysema, tuberculosis, shortness of breath,
persistent hoarseness or cough, or other respiratory
illness or disease? [ ] Yes [ ] No
5) High blood pressure, heart attack, stroke, heart
murmur, palpitation, arrhythmia, chest pain,
rheumatic fever, or other illness or disease of the
heart or circulatory system? [ ] Yes [ ] No
6) Ulcer, colitis, Crohn's disease, diverticulitis,
hepatitis, intestinal bleeding, or illness or disease
of the gallbladder, stomach, intestines, or liver? [ ] Yes [ ] No
7) Sugar, albumin, or blood in urine, or other illness
or disease of the kidneys, bladder, or urinary
system? [ ] Yes [ ] No
8) Diabetes, thyroid disorder, cholesterol elevation,
anemia, or other illness or disease of the blood? [ ] Yes [ ] No
9) Arthritis, gout, lupus, illness, injury or disease of
the back, spine or joints, or other illness, injury
or disease of the muscles or bones? [ ] Yes [ ] No
10) Disease or disorder of the skin, cysts, tumor, skin
cancer or any other cancer or malignancy? [ ] Yes [ ] No
11) Any illness or disease of the male or female
reproductive organs, sexually transmitted disease,
prostate problems, irregular menstruation or abnormal
pap test? [ ] Yes [ ] No
12) An examination, treatment or consultation with a
doctor or health care provider other than above? [ ] Yes [ ] No
13) Had or been advised to have a check-up, consultation,
lab test, EKG, X-Ray, or other diagnostic test? [ ] Yes [ ] No
14) Received or been advised to have treatment for drug
usage, whether legal or illegal, alcoholism or been a
member of AA? [ ] Yes [ ] No
15) Are you currently under the observation of a
physician or taking medication? [ ] Yes [ ] No
16) Family History: Is there a history of cardiovascular
disease or cancer in parent/siblings prior to age 60? [ ] Yes [ ] No
FAMILY HISTORY
Age if Age of
Insured Living? Status of Health Death? Cause of Death?
- ------- ------- ---------------- ------ ------------------------
Father _______ ________________ ______ ________________________
Mother _______ ________________ ______ ________________________
Sibling(s) _______ ________________ ______ ________________________
Age if Age of
Spouse Living? Status of Health Death? Cause of Death?
- ------- ------- ---------------- ------ ------------------------
Father _______ ________________ ______ ________________________
Mother _______ ________________ ______ ________________________
Sibling(s) _______ ________________ ______ ________________________
SECTION 21A. DETAILS TO "YES" ANSWERS FOR MEDICAL QUESTIONS SECTION
<TABLE>
<CAPTION>
Name, Address and Phone# of
Question # Proposed Insured's Name Date, Diagnosis, Treatment, Results, and Duration Attending Doctor and Hospital
- ---------- ----------------------- ------------------------------------------------- -----------------------------
<S> <C> <C> <C>
__________ _______________________ _________________________________________________ _____________________________
__________ _______________________ _________________________________________________ _____________________________
__________ _______________________ _________________________________________________ _____________________________
__________ _______________________ _________________________________________________ _____________________________
__________ _______________________ _________________________________________________ _____________________________
__________ _______________________ _________________________________________________ _____________________________
__________ _______________________ _________________________________________________ _____________________________
__________ _______________________ _________________________________________________ _____________________________
__________ _______________________ _________________________________________________ _____________________________
__________ _______________________ _________________________________________________ _____________________________
__________ _______________________ _________________________________________________ _____________________________
__________ _______________________ _________________________________________________ _____________________________
</TABLE>
<PAGE>
LIFE APPLICATION
________________________________________________________________________________
SECTION 21B. MEDICAL QUESTIONS - CONTINUED - Provide details to "yes" answer in
REMARKS. Include related insured.
Please complete the AIDS question for the state the application is signed in as
indicated below. If this state is not listed, answer the first question.
17) Have you or any Proposed Insured EVER been diagnosed as
having or been treated for AIDS, or AIDS Related
Complex (ARC) or tested positive for the AIDS virus? [ ] Yes [ ] No
For applicants in:
ARIZONA Have you or any Proposed Insured EVER, been
diagnosed as having or been treated for AIDS,
or AIDS Related Complex (ARC)? [ ] Yes [ ] No
CALIFORNIA Have you or any Proposed Insured EVER, had or
been told you/they have AIDS, or AIDS Related
Complex (ARC), or been tested for HIV
antibodies for the purpose of obtaining
insurance? [ ] Yes [ ] No
CONNECTICUT Have you or any Proposed Insured EVER, been
diagnosed as having or been treated for
Acquired Immune Deficiency Syndrome (AIDS),
AIDS Related Complex (ARC), or AIDS related
conditions? [ ] Yes [ ] No
FLORIDA Have you or any Proposed Insured EVER, tested
positive for exposure to the HIV infection,
or been diagnosed as having ARC, or AIDS
caused by the HIV infection? [ ] Yes [ ] No
GEORGIA,HAWAII, ILLINOIS, NEW JERSEY Have you or any
Proposed insured EVER, been diagnosed as
having or been treated, by a member of the
medical profession for AIDS, or AIDS Related
Complex (ARC)? [ ] Yes [ ] No
MAINE Have you or any Proposed Insured EVER, been
diagnosed as having or been treated for AIDS,
or AIDS Related Complex (ARC)? ANSWER THIS
QUESTION NO IF YOU HAVE TESTED POSITIVE FOR
HIV AND HAVE NOT DEVELOPED SYMPTOMS OF THE
DISEASE AIDS. [ ] Yes [ ] No
MARYLAND, MASSACHUSETTS, NEW MEXICO, and NORTH CAROLINA
Have you or any Proposed Insured EVER, been
diagnosed as having or been treated for
Acquired Immune Deficiency Syndrome (AIDS) or
AIDS Related Complex (ARC), or tested
positive for Human Immunodeficiency Virus
(HIV)? [ ] Yes [ ] No
MISSOURI, OHIO Have you or any Proposed Insured EVER,
been diagnosed as having or been treated for
AIDS, or AIDS Related Complex (ARC) or tested
positive for the HTLV-III test? [ ] Yes [ ] No
NORTH DAKOTA Have you been diagnosed or treated by
a member of the medical profession as having
AIDS, ARC or the HIV infection? [ ] Yes [ ] No
VERMONT Have you or any Proposed Insured EVER, been
diagnosed, by a person licensed as a medical
physician, as having or been treated for AIDS
or AIDS Related Complex (ARC)? [ ] Yes [ ] No
WASHINGTON Have you or any Proposed Insured EVER had or
been treated or diagnosed by a member of the
medical profession for immune deficiency
disorder, AIDS (Acquired Immune Deficiency
Syndrome) or ARC (AIDS Related Complex) or
test results indicating exposure to the AIDS
virus? [ ] Yes [ ] No
WISCONSIN Have you or any Proposed Insured EVER, been
diagnosed, by a member of the medical
profession as having or been treated for
AIDS, or AIDS Related Complex (ARC) or tested
positive for the AIDS virus? Tests for
HIV/AIDS must be limited to FDA-licensed
blood test. Test results received at
anonymous counseling and testing sites or
from home test kits need not be disclosed. [ ] Yes [ ] No
REMARKS
SECTION 22. FAIR CREDIT REPORTING PRE-NOTICE
A routine investigative consumer report may possibly be made regarding your
general reputation, character, mode of living and personal characteristics. This
information may be obtained through personal interviews with your friends,
neighbors and associates. Should you desire additional information on the nature
and scope of such a report, you may write the Underwriting Department, Life
Investors Insurance Company of America, 4333 Edgewood Road N.E., Cedar Rapids,
Iowa 52499, (319) 398-8511.
Information regarding your insurability will be treated as confidential. Life
Investors Insurance Company of America or its reinsurers may, however, make a
brief report thereon to the Medical Information Bureau, a non-profit membership
organization of life insurance companies, which operates an information exchange
on behalf of its members. If you apply to another Bureau member for life or
health insurance coverage, or a claim for benefits is submitted to such a
company, the Bureau, upon request, will supply such company with the information
in its file.
Upon receipt of a request from you, the Bureau will arrange disclosure of any
information it may have in your file. If you question the accuracy of
information in the Bureau's file, you may contact the Bureau and seek a
correction in accordance with the procedures set forth in the Federal Fair
Credit Reporting Act. The address of the Bureau's information office is Post
Office Box 105, Essex Station, Boston, Massachusetts 02122, telephone number
(617) 426-3660.
Life Investors Insurance Company of America or its reinsurers may also release
information in this 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.
<PAGE>
LIFE APPLICATION
________________________________________________________________________________
SECTION 23. TAXPAYER ID
TAXPAYER IDENTIFICATION NUMBER STATEMENT
Taxpayer Identification Number of Policyholder:_________________________________
Social Security Number or Employer Identification Number
- --------------------------------------------------------------------------------
Check the box if you ARE NOT subject to backup withholding under the
provisions of section 3406(a)(1)(C) of the Internal Revenue Code [ ]
- --------------------------------------------------------------------------------
Check the box if you ARE subject to backup withholding under the
provisions of section 3406(a)(1)(C) of the Internal Revenue Code [ ]
- --------------------------------------------------------------------------------
The Internal Revenue Service does not require your consent to any provision of
this document other than the following certification required to avoid backup
withholding.
- --------------------------------------------------------------------------------
Under penalties of perjury, I hereby certify (1) that the Social Security or
Taxpayer I.D. number listed above is correct and (2) that my current status
regarding backup withholding is correct.
- --------------------------------------------------------------------------------
SECTION 24. AUTHORIZATION TO OBTAIN INFORMATION
I authorize any physician, medical professional, hospital, clinic, other medical
care institution, the Medical Information Bureau, Inc., insurance company,
Department of Motor Vehicle Records, consumer reporting agency, or employer
having information available as to employment, other insurance coverage, medical
care, advice or treatment with respect to any physical or mental condition
regarding me to give such information to Life Investors Insurance Company of
America, its reinsurers, or any consumer reporting agency except the Medical
Information Bureau acting on Life Insurance Company's behalf.
I authorize Life Investors Insurance Company of America to obtain an
investigative consumer report on me.
I understand that this information will be used by Life Investors Insurance
Company of America or its reinsurers, to determine eligibility for life
insurance.
I agree that this authorization is valid for two and one-half years from the
date signed. I know that I have the right to receive a copy of this
authorization upon request. I agree that a photographic copy of this
authorization is as valid as the original.
I have received a copy of the "Notice of Information Practices" attached to this
application.
I also hereby authorize Life Investors Insurance Company of America to provide
its affiliated companies any and all information provided herein and obtained
hereafter on me.
This authorization shall be valid from the date signed below until affirmatively
withdrawn in writing by myself.
SECTION 25. REPRESENTATIONS
I represent that the statements and answers in this application are true and
complete to the best of my knowledge.
I understand that I should consult my own tax and/or legal counsel as to the
consequences of using this product in conjunction with my own particular tax or
financial plan.
It is agreed that:
(a) the statements and answers given in this application, and any amendments or
application supplements to it or statements made to the medical examiner,
will be the basis of any insurance issued;
(b) no agent or medical examiner has the authority to make or alter any
contract for the Company;
(c) if a premium deposit is given in exchange for the Conditional Receipt, no
insurance shall take effect unless all of the conditions set out in that
receipt are satisfied;
(d) if a premium deposit is not given, no insurance shall take effect unless
all of the following conditions are satisfied;
(1) a policy issued by the Company is delivered to and accepted by the
owner during the lifetime of each person to be covered by such policy,
(2) the full first premium is paid, and (3) the health and
insurability of each person proposed for insurance has not changed
since the date of this application.
Signed at ______________________________ __________________ on _______________
(city) (state) (date)
_____________________________ _________________________________________________
Signature of proposed insured Print Agent Name Social Security # of Agent
_____________________________ _________________________________________________
Signature of Additional/ Signature of Agent State License #
Joint Insured
_____________________________ _________________________________________________
Signature of Additional/ Signature of Agent State License #
Joint Insured
_____________________________ _________________________________________________
Signature of applicant Signature of Agent State License #
(owner) other than the
proposed insured
(If business insurance,
show title of officer and
name of firm)
_____________________________ _________________________________________________
Signature of parent or legal Signature of Agent State License #
guardian for insured(s)
Total Amount Paid: $ ______________ [ ] Check [ ] COM [ ] Other ________________
<PAGE>
LIFE INSURANCE INVESTORS COMPANY OF AMERICA
FRAUD WARNING
The following states require that insurance applicants acknowledge a fraud
warning statement.
Please refer to the fraud warning statement for your state as indicated below.
For applicants in ARKANSAS
- --------------------------
Any person who knowingly presents a false or fraudulent claim for payment of a
loss or benefit or knowingly presents false information in an application for
insurance is guilty of a crime and may be subject to fines and confinement in
prison.
_______________________________________________ ____________________________
Applicant's Signature Date
For applicants in COLORADO
- --------------------------
It is unlawful to knowingly provide false, incomplete, or misleading facts or
information to an insurance company for the purpose of defrauding or attempting
to defraud the company. Penalties may include imprisonment, fines, denial of
insurance, and civil damages. Any insurance company or agent of an insurance
company who knowingly provides false, incomplete, or misleading facts or
information to a policyholder or claimant for the purpose of defrauding or
attempting to defraud the policyholder or claimant with regard to a settlement
or award payable from insurance proceeds shall be reported to the Colorado
Division of Insurance within the Department of Regulatory Agencies.
_______________________________________________ ____________________________
Applicant's Signature Date
For applicants in FLORIDA
- -------------------------
Any person who knowingly and with intent to injure, defraud, or deceive any
insurer files a statement of claim or an application containing any false,
incomplete, or misleading information is guilty of a felony in the third degree.
_______________________________________________ ____________________________
Applicant's Signature Date
For applicants in KENTUCKY, OHIO, and PENNSYLVANIA
- --------------------------------------------------
Any person who knowingly and with intent to defraud any insurance company or
other person files an application for insurance or a statement of claim
containing any materially false information or conceals for the purpose of
misleading, information concerning any fact material thereto commits a
fraudulent insurance act, which is a crime and subjects such person to criminal
and civil penalties.
_______________________________________________ ____________________________
Applicant's Signature Date
For applicants in MAINE, VIRGINIA and DISTRICT OF COLUMBIA
- ----------------------------------------------------------
It is a crime to knowingly provide false, incomplete or misleading information
to an insurance company for the purpose of defrauding the company. Penalties
include imprisonment, fines and denial of insurance benefits.
_______________________________________________ ____________________________
Applicant's Signature Date
For applicants in MINNESOTA
- ---------------------------
A person who files a claim with intent to defraud or helps commit a fraud
against an insurer is guilty of a crime.
_______________________________________________ ____________________________
Applicant's Signature Date
For applicants in NEW JERSEY
- ----------------------------
Any person who includes any false or misleading information on an application
for an insurance policy is subject to criminal and civil penalties.
_______________________________________________ ____________________________
Applicant's Signature Date
For applicants in NEW MEXICO
- ----------------------------
Any person who knowingly presents a false or fraudulent claim for payment of a
loss or benefit or knowingly presents false information in an application for
insurance is guilty of a crime and may be subject to fines and criminal
penalties.
_______________________________________________ ____________________________
Applicant's Signature Date
<PAGE>
AGENT'S REPORT
1. a) How long have you known the Proposed Insured?
_____________________________________________________________________________
b) Relationship to the Proposed Primary Insured:
_____________________________________________________________________________
c) Are you financially responsible for the Proposed Primary Insured?
[ ] Yes [ ] No
2. Did you give the "Notice of Information Practices" to the Proposed Insured?
[ ] Yes [ ] No
3. Are you submitting or do you plan to submit an application on any
Proposed Insured on this application to any other company?
[ ] Yes [ ] No
Company Name ___________________________
Face amount $___________________________
Total face amount to be placed with all companies
_________________________________________________
4. Will the policy applied for replace or change any existing life insurance
policy or annuity?
[ ] Yes [ ] No
If "Yes", explain and submit special replacement form if required in your
state._______________________________________________________________________
5. Medical Examination
Are you arranging for the Medical Requirements
[ ] Yes Paramedical Service used: ___________________________________________
[ ] No Request Life Insurance Investors Company of America order medical
reqs.
6. Was the money taken with the application?
[ ] Yes [ ] No
If "Yes", was the Conditional Receipt completed and given to the applicant?
[ ] Yes [ ] No
7. Did you ask all questions in the presence of the Proposed Insured(s)?
[ ] Yes [ ] No
8. Was a Confidential Service Sheet or some other needs analysis tool completed
during the interview?
[ ] Yes [ ] No
(If "No," explain) _________________________________________
9. Are you aware of anything about the health, habits, avocation,
environment or mode of living, except as may be related directly or
indirectly to sexual orientation, which may affect the insurability of any
person proposed for insurance?
[ ] Yes [ ] No
10. If Proposed Insured is a juvenile (ages 0 through 15):
(a) Did you personally see child? [ ] Yes [ ] No
(b) Does child live with parents? [ ] Yes [ ] No
(If "No," explain) __________________________________________________________
(c) Life insurance in force on parent's life?
_________________________________________________________________________
(d) Life insurance applied for or in force on brothers and sisters?
_________________________________________________________________________
11. Is Proposed Insured or Owner related to any InterSecurities, Inc.
officer or employee?
[ ] Yes [ ] No
12. Is Proposed Insured or Owner a licensed Representative of any Broker/
Dealer?
[ ] Yes [ ] No
If "Yes," Name and Address of Broker/Dealer
____________________________________________________________________________
13. Type of Sale (check two)
[ ] Direct [ ] Pension or Profit Sharing
[ ] Personal Needs Analysis [ ] Salary Savings (EICS)
[ ] Estate Planning [ ] Gift
[ ] Business Insurance [ ] Salary Allotment
Purpose of Policy
[ ] Personal Insurance [ ] Business Insurance
[ ] Mortgage [ ] Buy-Sell
[ ] Retirement [ ] Key Employee
[ ] Education [ ] Executive Bonus
[ ] Estate Liquidity [ ] Deferred Compensation
[ ] Income to Family [ ] Split Dollar
[ ] Cash Accumulation [ ] Reserve Split Dollar
[ ] Wealth Replacement [ ] Other
14. Was this plan sold, presented or illustrated as a VEBA, welfare benefit
concept as defined under IRC Section 419, Charitable Legacy Plan, Charitable
Retirement Plan, Charitable Remainder Life Program, or other similar
arrangement?
[ ] Yes [ ] No
If "Yes," have you completed and attached the required Disclosure,
Acknowledgment and Release Form and the accompanying Attorney's Statement?
[ ] Yes [ ] No
15. Did you comply with all requirements relative to obtaining Informed Consent
for HIV and AIDS testing?
[ ] Yes [ ] No
Writing Agent Name _____________________________________________________________
Agent No. ______________________________________________________________________
Agent's Telephone Number _______________________________________________________
Agent's Social Security Number _________________________________________________
Agent's Fax Number _____________________________________________________________
Percent of Agent's Split _______________________________________________________
Split Agent Name _______________________________________________________________
Agent No. Percent of Agent's Split _____________________________________________
Split Agent Name _______________________________________________________________
Agent No. Percent of Agent's Split _____________________________________________
Remarks _______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
I submit this application assuming full responsibility for delivery of any
coverage issued and for immediate transmittal to the Company of the first
premium when collected. I know of no condition affecting the insurability of any
person proposed for insurance not fully set forth herein. I certify that a
Notice of Information Practices statement was given to the Applicant when this
application was taken. (If applicable)
$________________ has been paid by the Applicant with this application
____________________________________________________________________
Signature of Writing Agent
<PAGE>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
(Hereafter called the Company, we, our or us) (319-398-8511)
Home Office located at: 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499
ALL PREMIUM CHECKS MUST BE MADE PAYABLE TO THE INSURANCE COMPANY - DO NOT MAKE
CHECK PAYABLE TO THE AGENT OR LEAVE THE PAYEE BLANK.
Received from _______________________ this _______ day of ______________, ______
an automatic payment authorization to withdraw the sum of _____ from my account,
cash/check for the sum of _______________________________________ ,
in connection with the application with LIFE INVESTORS INSURANCE COMPANY OF
AMERICA. You understand and agree that, subject to the Conditions of Coverage
stated below, the insurance shall be effective on the date of the application,
or the date of performance of any medical examination or other Underwriting
requirements required by LIFE INSURANCE INVESTORS COMPANY OF AMERICA, whichever
is later, or any later date requested by the applicant. Any offer of insurance
and/or any insurance that comes into effect according to the terms of this
conditional receipt shall only become effective if the Conditions of Coverage
provision below is satisfied.
Liability Limits
The insurance which may take effect under this receipt before the policy and/or
certificate is delivered shall not exceed: (a) the amount applied for, or (b)
$500,000, whichever is smaller, less all other sums payable by the Company for
the death of a proposed insured under any other receipt or pending application.
If a proposed insured is not yet 15 days old or is more than 60 years old, no
insurance shall take effect until the policy and/or certificate is delivered.
If the insurance is not approved, a full refund of the amount shown above will
be made upon surrender of this receipt.
Conditions of Coverage
1. If all of the following conditions of coverage have been met, then
insurance will go into force on the effective date subject to the liability
limits shown above and subject to the conditions of the policy applied for.
The conditions of coverage are that:
(a) the full first premium on the premium mode selected for the policy
benefits applied for, including any additional premium required for
restrictions or benefits, is paid when the application is signed, and
(b) each proposed insured has completed any required medical examinations,
diagnostic tests, interviews or supplied LIFE INVESTORS INSURANCE COMPANY
OF AMERICA with any additional information, and
(c) each proposed insured is, on the effective date, insurable and
acceptable to the Company under its rules, limits and underwriting
standards for the plan and for the amount applied for without modification
and at the rate of premium paid.
2. If insurance does not take effect, under these conditions, then no
insurance shall take effect unless a policy is delivered to and accepted by
the applicant, and the full first premium paid before any change in the
insurability of any proposed insured since the date of application.
3. The "Effective Date" is the latest of:
(a) the date of the application, or
(b) the date all required medical examinations or diagnostic tests are
completed, or
(c) the date of issue if any requested in the application unless
underwriting is not yet completed, or
(d) the date of underwriting approval.
4. If insurance does not take effect as provided in this receipt, or if the
sum receipted for herein is less than the full first premium on the premium
mode selected and for the policy applied for, the Company's only liability
shall be to accept this receipt as cash toward payment on the first payment
on the first premium of any policy and/or certificate issued under the
application, or return the amount paid if no policy and/or certificate is
issued.
Type of Policy and/or Certificate ______________________________________________
____________________________________ ________________________________________
Signature of Applicant Signature of Licensed Agent
____________________________________ ________________________________________
Signature of Applicant Signature of Licensed Agent
<PAGE>
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
Home Office: 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499
NOTICE OF INFORMATION PRACTICES
(Please detach and give to the Proposed Insured)
Thank you for applying to Life Investors Insurance Company of America. We
appreciate your efforts in completing each part of the application truthfully,
accurately and completely.
Underwriting
Once we receive your application, we will begin an evaluation process called
underwriting to determine whether you are eligible for insurance and, if so, the
rate you should pay for that insurance. We may find that we are unable to give
you the insurance you have applied for or that we are able to give it to you
only on a modified basis or at a rate greater than our lowest rate. For example,
if you have ever used any kind of tobacco or any other nicotine product, you may
not be eligible for our lowest rate. Your application will be our primary source
of information; therefore, it must be true, complete, and accurate. You must
inform us of a change to any answer in any part of your application before
accepting delivery of a policy; in fact, you agree to do so when you sign your
application. We may seek information from other sources to help us evaluate the
information you give us on your application.
Contestability
We strongly urge you to review the completed application closely for accuracy. A
claim may be denied or your coverage may be rescinded or contested by a lawsuit
if the application is incomplete or if it contains false statements,
misrepresentations, acts omissions, or is procured by fraud. If the policy is
rescinded or the lawsuit is successful, the policy will be void and coverage
will be lost. Any policy that is delivered to you will indicate when and under
what circumstances it may be contested as required by law. Please be aware that
if the application contains false or deceptive statements and you submitted it
with the intent to defraud or to facilitate fraud against us, you may also be
guilty of insurance fraud.
Replacement of Existing Coverage
If you intend to replace existing coverage, tell the agent of your intention and
answer "yes" to the replacement question in the application; state law may
require the agent to give you information that will help you compare the policy
you are applying for with the policy you intend to replace. If you are undecided
about keeping existing coverage, indicating an intention to replace existing
coverage may help you get the information you need to make a decision. If you do
replace existing coverage, the new policy may contain new suicide and
contestable periods as required by law. The following would be considered
replacement; you stop paying premiums on an existing policy or surrender an
existing policy before or shortly after applying to us or you borrow from an
existing policy to pay premiums for the insurance for which you are applying.
State law may define replacement to include other situations. Please ask your
agent if you are unsure.
Insurance Information Practices
We will rely primarily on information provided by you. We may supplement that
information with information from other sources such as medical professionals
who have treated you. In some cases, we may ask a consumer reporting agency to
collect information and submit an inves tigative consumer report to us as
explained in this Notice under Federal Fair Credit Reporting Act. You may
request to be interviewed in connection with the preparation of this report. In
certain limited situations, we are allowed by law to disclose necessary items of
personal information to third parties without your specific authorization. You
have the right to be told about, and to see and copy if you wish, items of
personal information about you that appear in our files, including information
contained in investigative consumer reports. You also have the right to seek
correction of information you believe to be inaccurate. We will send you a more
detailed explanation of our information practices if you send us a written
request. You may send your request to the Director of Underwriting, Life
Investors Insurance Company of America, 4333 Edgewood Road N.E., Cedar Rapids,
Iowa 52499.
Fair Credit Reporting Pre-Notice
A routine investigative consumer report may possibly be made regarding your
general reputation, character, mode of living, and personal characteristics.
This information may be obtained through personal interviews with your friends,
neighbors and associates. Should you desire additional information on the nature
and scope of such a report, you may write the Underwriting Department, Life
Investors Insurance Company of America, 4333 Edgewood Road N.E., Cedar Rapids,
Iowa 52499. You have the right to request additional information concerning the
nature and scope of the investigation to be performed. To make this request, you
must write the Underwriting Department, Life Investors Insurance Company of
America, 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499. You are entitled to
be interviewed in connection with any investigative consumer report and to
receive a copy of such report.
MIB Disclosure Notice
Information regarding your insurability will be treated as confidential. Life
Investors Insurance Company of America or its reinsurers may, however, make a
brief report to the Medical Information Bureau, a non-profit membership
organization of life insurance companies, which operates an information exchange
on behalf of its members. If you apply to another Bureau member for life or
health insurance coverage, or a claim for benefits is submitted to such a
Company, the Bureau, upon request, will supply such company with the information
in its file.
Upon receipt of a request from you, the Bureau will arrange disclosure of any
information it may have in your file. If you question the accuracy of
information in the Bureau's file, you may contact the Bureau and seek a
correction in accordance with the procedures set forth in the Federal Fair
Credit Reporting Act. The address of the Bureau's information office is Post
Office Box 105, Essex Station, Boston, Massachusetts 02122, telephone number
(617)426-3660.
Life Investors Insurance Company of America or its reinsurers may also release
information in this 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.
EXHIBIT 1.A.11
DESCRIPTION OF ISSUANCE,
TRANSFER AND REDEMPTION PROCEDURES
FOR VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
ISSUED BY
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
This document sets forth the administrative procedures that
will be followed by Life Investors Insurance Company of America (the "Company")
in connection with the issuance of its variable universal life insurance policy
("Policy" or "Policies") and acceptance of payments thereunder, the transfer of
assets held thereunder, and the redemption by owners of the Policy ("Owners") of
their interests in those Policies. 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 (File No. 333-_____) as filed
with the Securities and Exchange Commission ("Commission" or "SEC").
I. PROCEDURES RELATING TO PURCHASE AND ISSUANCE OF THE POLICIES AND
ACCEPTANCE OF PREMIUMS
A. OFFER OF THE POLICIES, APPLICATION, INITIAL PREMIUMS, AND
ISSUANCE
1. OFFER OF THE POLICIES. The Policies are offered and issued
for premiums pursuant to underwriting standards in accordance
with state insurance laws. Premiums for the Policies are not
the same for all Owners selecting the same Specified Amount.
Insurance is based on the principle of pooling and
distribution of mortality risks, which assumes that each Owner
pays charges commensurate with the Insured's mortality risk as
actuarially determined utilizing factors such as age, sex, and
premium class of the Insured. Uniform charges for all Insureds
would discriminate unfairly in favor of those Insureds
representing greater risk. Although there is no uniform charge
for all Insureds, there is a uniform charge for all Insureds
of the same premium class and same Specified Amount.
2. APPLICATION. Persons wishing to purchase a Policy must
complete an application and submit it to the Company through
an authorized agent of the Company. The application must
specify the name of the Insured and provide certain required
information about the Insured. The application also must
specify a premium payment plan, which contemplates level
premiums at specified intervals, designate Net Premium
allocation percentages, select the initial Specified Amount,
and name the Beneficiary. Before an application will be deemed
complete so that underwriting will proceed, the application
must include the Insured's signature and date of birth, a
signed authorization, a valid authorized agent's state code,
and suitability
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information. The initial premium and Specified Amount selected
must meet certain minimums for the Policy.
3. RECEIPT OF APPLICATION AND UNDERWRITING. Upon receipt of a
completed application in good order from an applicant, the
Company will follow its established insurance underwriting
procedures for life insurance designed to determine whether
the proposed Insured is insurable. This process may involve
such verification procedures as medical examinations and may
require that further information be provided about the
proposed Insured before a determination can be made.
The underwriting process determines the premium class
to which the Insured is assigned if the application is
accepted. The Company currently places Insureds in the
following premium classes, based on the Company's
underwriting: a male or female or unisex premium class, and a
tobacco (smoker) or preferred (non-smoker) or super-preferred
premium class. Juveniles (persons under age 18) are placed in
a male or female or unisex preferred premium class. This
original premium class applies to the initial Specified
Amount. The premium class may change upon an increase in
Specified Amount.
The Company reserves the right to reject an
application for any reason permitted by law. If an application
is rejected, any premium received will be returned, without
interest.
4. ISSUANCE OF POLICY. When the underwriting procedure has
been completed and the application has been approved, the
Policy is issued.
5. INITIAL PREMIUM. An applicant must pay an initial premium
which, if not submitted with the application or during the
underwriting period, must be submitted when the Policy is
delivered. Coverage becomes effective as of the date the
Company receives the initial premium, but is limited to
$500,000 until the application is approved. Moreover, if the
proposed Insured is under the age of 15 days at death or is
more than 60 years old, no insurance shall take effect until
the policy is delivered. The Policy Date is used to measure
Policy Months, Policy Years, and Policy Anniversaries. The
Policy Date is the date coverage under this policy becomes
effective. If the Policy Date would have occurred on the 29th,
30th or 31st day of any month, the Company will designate the
28th day of the month as the Policy Date. For a premium to be
received in "good order", it must be received in cash (U.S.
currency) or by check payable in U.S. currency, and must
clearly identify the purpose for the payment.
The initial premium must be at least equal to the
minimum initial premium for a Policy. The minimum initial
premium for a Policy depends on a number of
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factors, such as the Insured's age, sex, and premium class of
the proposed Insured, the requested Specified Amount, and any
supplemental benefits.
B. ADDITIONAL PREMIUMS
1. ADDITIONAL PREMIUMS PERMITTED. Additional premiums may be
paid in any amount, and at any time, subject to the following
limits:
o A premium must be at least $25.
o Total premiums paid in a Policy Year may not exceed
guideline premium limitations for life insurance set
forth in the Internal Revenue Code.
2. REFUND OF EXCESS PREMIUM AMOUNTS. If at any time a premium
is paid that would result in total premiums exceeding limits
established by law to qualify a Policy as a life insurance
policy, the Company will only accept that portion of the
premium that would make total premiums equal the maximum
amount that may be paid under the Policy. The excess premium
will be refunded. The Company will also refund premiums if
payment of a greater amount would increase the death benefit
by application of the death benefit ratio. The Company will
monitor Policies and will attempt to notify an Owner on a
timely basis if the Owner's Policy is in jeopardy of becoming
a modified endowment contract under the Internal Revenue Code.
3. PLANNED PREMIUMS. At the time of application, each Owner
will select a plan for paying premiums at specified intervals.
The Owner may change the planned premium frequency and amount
by providing a written notice to the Home Office. Any such
change must comply with the premium limits for additional
premiums discussed above.
4. ALLOCATING PREMIUMS
a. INITIAL PREMIUMS. Prior to the Investment Start
Date, the Company will place the Initial Premiums
(less charges) in the Premium Suspense Account. On
the first Valuation Date on or following the
Investment Start Date the Company will transfer the
amounts in the Premium Suspense Account to the Fixed
Account and/or the Separate Account in accordance
with the allocation instructions. The Investment
Start Date is the later of the Policy Date or the
date on which the Company receives the first premium
it's Home Office.
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b. OTHER PREMIUMS. Other premiums received by the
Company after the Investment Start Date will be
allocated in accordance with allocation instructions
on the Valuation Date on or following the date the
premium is received at the Home Office.
c. ELECTRONIC FUNDS TRANSFER. An Owner may arrange
with the Company to have monthly premiums paid via
pre-authorized, automatic deductions from the Owner's
checking account. The Company will notify the Owner's
bank of the automatic deduction, and funds will be
deducted from the Owner's checking account and
credited to the Owner's Policy on the next Valuation
Date.
C. OVERPAYMENTS AND UNDERPAYMENTS In accordance with industry
practice, the Company will establish procedures to handle
errors in initial and additional premium payments to refund
overpayments and collect underpayments, except for de minimis
amounts. The Company will issue a refund check for any minimal
overpayment in excess of the guideline annual premium amount.
For larger overpayments, the Company will place the premium in
a suspense account to determine whether the premium actually
is in excess of the guideline annual premium or whether the
premium was intended for another policy issued by the Company.
In the case of an underpayment, if the Cash Surrender Value on
a Monthly Date is less than the Monthly Deduction to be made
on that date and the Policy is not in a No-Lapse Period, the
Policy will be in default and a grace period will begin. The
Company will notify Owners of the required premium that must
be paid prior to the end of the grace period.
D. PREMIUMS UPON INCREASE IN SPECIFIED AMOUNT, PREMIUMS DURING A
GRACE PERIOD, AND PREMIUMS UPON REINSTATEMENT
1. PREMIUMS UPON INCREASE IN SPECIFIED AMOUNT. Generally, no
premium is required for an increase in Specified Amount.
However, depending on the Policy Value at the time of an
increase in the Specified Amount and the amount of the
increase requested, an additional premium or change in the
amount of planned premiums may be advisable. Also, the Minimum
Monthly Premium for the No- Lapse Period will increase and the
No-Lapse Period will begin anew. See "Changing the Specified
Amount."
2. PREMIUMS DURING A GRACE PERIOD. If the Cash Surrender Value
on a Monthly Date is less than the amount of the Monthly
Deduction due on that date, and the Policy is not in a
No-Lapse Period, the Policy will be in default and a grace
period will begin. During the No-Lapse Period, the Policy will
remain in force, regardless of the sufficiency of the Cash
Surrender Value, if the total premiums paid less any
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withdrawals and Indebtedness, is greater than or equal to the
cumulative Minimum Monthly Premium for the Policy. The Minimum
Monthly Premium is the amount necessary to guarantee coverage
for a No-Lapse Period. The Minimum Monthly Premium is based in
part on the No-Lapse Period selected (20 Policy Years, 30
Policy Years or to Insured's age 100), sex, age, and premium
class of the Insured, the requested Specified Amount and any
supplemental benefits and riders.
o The grace period will end 61 days after the date on
which the Company sends a grace period notice stating
the amount required to be paid during the grace
period to the Owner's last known address and to any
assignee of record. The Policy does not lapse, and
the insurance coverage continues, until the
expiration of this grace period.
o If the grace period ends prior to the end of the
No-Lapse Period, the required premium must be large
enough to provide the lesser of (1) the Minimum
Monthly Premium required at the end of the grace
period, or (2) an amount large enough to provide an
increase in the Cash Surrender Value to cover the
Monthly Deductions for the grace period. If the grace
period ends after the end of the No-Lapse Period, the
required premium must be large enough to provide an
increase in the Cash Surrender Value to cover the
Monthly Deductions for the grace period.
o Failure to make a sufficient payment within the grace
period will result in lapse of the Policy without
value or benefits payable.
3. PREMIUMS UPON REINSTATEMENT. A Policy that lapses without
value may be reinstated at any time within five years after
lapse by submitting: evidence of the Insured's insurability
satisfactory to the Company; Written Notice requesting
reinstatement of the policy; the Insured's written consent to
reinstatement; payment or reinstatement of any Indebtedness;
and payment of enough premium to keep the Policy in force for
at least 3 months.
E. ALLOCATIONS OF NET PREMIUMS AMONG THE SEPARATE ACCOUNT AND THE
FIXED ACCOUNT
1. NET PREMIUM. The net premium is equal to the premium paid
less the premium expense charge.
2. THE SEPARATE ACCOUNT. An Owner may allocate Net Premiums to
one or more of the Subaccounts of Life Investors Variable Life
Account A (the "Separate Account"). The Separate Account
currently consists of twenty Subaccounts, the assets of each
of which are used to purchase shares of one portfolio from the
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following mutual funds: Janus Aspen Series, Fidelity Variable
Insurance Products Funds, AIM Variable Insurance Funds and
Oppenheimer Variable Account Funds (the "Funds"). The Funds
are registered under the Investment Company Act of 1940 as
open-end management investment companies. Additional
Subaccounts may be added from time to time to invest in any of
the portfolios of the Funds or any other investment company.
When an Owner allocates an amount to a Subaccount
(either by Net Premium allocation, transfer of Policy Value or
repayment of a Policy loan) the Policy is credited with units
in that Subaccount. The number of units is determined by
dividing the amount allocated, transferred or repaid to the
Subaccount by the Subaccount's unit value for the Valuation
Date when the allocation, transfer or repayment is effected. A
Subaccount's unit value is determined for each Valuation
Period after the date of establishment (the unit value for
each Subaccount was arbitrarily set at $10 when the Subaccount
was established) by multiplying the value of a unit for a
Subaccount for the prior Valuation Period by the net
investment factor for the Subaccount for the current Valuation
Period. The net investment factor is an index used to measure
the investment performance of a Subaccount from one Valuation
Period to the next (net of the mortality and expense charge
and any applicable taxes).
3. THE FIXED ACCOUNT. Owners also may allocate Net Premiums to
the Fixed Account, which guarantees a minimum fixed rate of
interest.
4. ALLOCATIONS AMONG THE SEPARATE ACCOUNT AND THE FIXED
ACCOUNT. Net Premiums are allocated to the Subaccounts and the
Fixed Account in accordance with the following procedures:
a. GENERAL. In the application for the Policy, the
Owner will specify the percentage of Net Premium to
be allocated to each Subaccount of the Separate
Account and/or the Fixed Account. The percentage of
each Net Premium that may be allocated to any
Subaccount or the Fixed Account must be a whole
number not less than 5%, and the sum of the
allocation percentages must be 100%. Such allocation
percentages may be changed at any time (up to 4 times
per Policy year) by the Owner submitting a written
notice or telephone instructions to the Home Office,
provided that the 5%/100% requirements described
above are met.
b. ALLOCATION PRIOR TO THE INVESTMENT START DATE.
Prior to the Investment Start Date, all Net Premiums
will be allocated to the Premium Suspense Account. On
the Valuation Date on or following the Investment
Start Date, the amounts in the Premium Suspense
Account will be transferred to the
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Fixed Account and/or the Separate Account in
accordance with the allocation instructions.
c. ALLOCATION AFTER THE INVESTMENT START DATE. Net
Premiums received after the Investment Start Date
will be allocated to the Subaccounts or Fixed Account
in accordance with the allocation percentages in
effect on the Valuation Date on or following the date
that the premium is received at the Home Office,
unless other instructions by written notice accompany
the premium, in which case the Net Premium will be
allocated in accordance with those instructions,
provided such instructions comply with the Company's
allocation rules.
F. LOAN REPAYMENTS AND INTEREST PAYMENTS
1. LOAN REPAYMENTS. The Owner may repay all or part of the
Indebtedness at any time while the Policy is in force and the
Insured is living. The Indebtedness is equal to the sum of all
outstanding Policy loans including both principal plus any
accrued interest. Repayments of Indebtedness must be sent to
the Home Office and will be credited as of the date received.
Repayments of Indebtedness will not be subject to a premium
expense charge. If the Death Benefit becomes payable while a
Policy loan is outstanding, the Indebtedness will be deducted
in calculating the Death Benefit.
2. ALLOCATION FOR REPAYMENT OF POLICY LOANS. On the date the
Company receives a repayment of all or part of a loan, an
amount equal to the repayment will be transferred from the
loan reserve (part of the Fixed Account) to the Subaccounts
and the Fixed Account. If no direction is provided, the amount
will be allocated in accordance with the Owner's current
allocation instructions.
3. INTEREST ON LOAN RESERVE. On each Monthly Date, the amount
in the loan reserve will be credited with interest at a
minimum guaranteed annual effective rate of 3%. See "Policy
Loans" below.
4. NOTICE OF EXCESSIVE INDEBTEDNESS. If the Indebtedness
exceeds the Policy Value less the Surrender Charge on any
Monthly Date the Policy will lapse. The Company will send
Owners and any assignee of record, notice of the lapse. The
notice will specify the amount that must be paid to prevent
termination. This amount must be paid to the Home Office
within a 61-day grace period to avoid termination. A Policy
that terminates due to excessive Indebtedness can be
reinstated.
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II. TRANSFERS
A. TRANSFERS AMONG THE SUBACCOUNTS AND THE FIXED ACCOUNT
The Owner may transfer Policy Value between and among
the Subaccounts of the Separate Account and the Fixed Account
by written or telephone request to the Home Office.
In any Policy Year, the Owner may make an unlimited
number of transfers; however, the Company will impose a
transfer processing fee of $25 for each transfer in excess of
12 during any Policy Year. For purposes of the transfer
processing fee, each transfer request is considered one
transfer, regardless of the number of Subaccounts affected by
the transfer. Any unused "free" transfers do not carry over to
the next year.
The minimum amount that may be transferred from each
Subaccount or the Fixed Account is $100 or the balance in the
Subaccount or the Fixed Account if less than $100. There is no
minimum amount that must remain in a Subaccount or the Fixed
Account following a transfer. If a transfer request does not
conform to this provision, the transfer will be rejected.
For any class of Policies, the Company reserves the
right to modify, restrict, suspend, or eliminate the transfer
privileges (including telephone transfer privileges) at any
time and for any reason.
B. DOLLAR COST AVERAGING
The dollar-cost averaging program permits Owners to
systematically transfer on a monthly basis a set dollar amount
from a "source" account (either the Fixed Account, the AIM VI
Government Securities Fund Subaccount, the Oppenheimer Bond
Fund/VA Subaccount or the Fidelity VIP Money Market
Subaccount) to any combination of Subaccounts and/or the Fixed
Account. Owners may elect to participate in the dollar-cost
averaging program at any time by sending the Company a written
request. To use the dollar-cost averaging program, Owners must
transfer at least $100 from the source account and the source
account must have at least $5,000 in Policy Value. Once
elected, dollar-cost averaging remains in effect from the date
the Company receives the Owner's request until the value of
the source account is depleted, or until the Owner cancels the
program by written request. There is no additional charge for
dollar-cost averaging. A transfer under this program is not
considered a transfer for purposes of assessing a transfer
processing fee. The Company reserves the right to discontinue
offering the dollar-cost averaging
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program at any time and for any reason. Dollar-cost averaging
is not available while Owners are participating in the asset
rebalancing program.
C. ASSET REBALANCING
An Owner may instruct the Company to automatically
rebalance (on a semi-annual basis) the Policy Value to return
to the percentages specified in the Owner's allocation
instructions. An Owner may elect to participate in the asset
rebalancing program at any time by sending the Company a
written request at the Home Office and having a minimum Policy
Value of at least $5,000. The percentage allocations must be
in whole percentages and be at least 5%. Subsequent changes to
the percentage allocations may be made at any time by written
or telephone instructions to the Home Office (up to 4 times
per Policy Year). Once elected, asset rebalancing remains in
effect from the date an Owner's written request is received
until the Owner instructs the Company to discontinue asset
rebalancing or a transfer is made to or from any Subaccount
other than under a scheduled rebalancing. There is no
additional charge for using asset rebalancing, and an asset
rebalancing transfer is not considered a transfer for purposes
of assessing a transfer processing fee. The Company reserves
the right to discontinue offering the asset rebalancing
program at any time and for any reason. Asset rebalancing is
not available while an Owner is participating in the
dollar-cost averaging program.
D. TRANSFER ERRORS
In accordance with industry practice, the Company
will establish procedures to address and to correct errors in
amounts transferred among the Subaccounts and the Fixed
Account, except for de minimis amounts. The Company will
correct errors it makes and will assume any risk associated
with the error. Owners will not be penalized in any way for
errors made by the Company. The Company will take any gain
resulting from the error.
III. "REDEMPTION" PROCEDURES
A. "FREE-LOOK" RIGHTS
The Policy provides for an initial free-look period
during which an Owner may cancel the Policy by returning it to
the Company or to an agent of the Company who sold it before
the end of 10 days after the Policy is received. The free-look
period may be longer in some states. Upon returning the Policy
to the Company or to an authorized agent for forwarding to the
Home Office, the Policy will be deemed void from the
beginning. Within seven days after the Company or the Home
Office
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receives the cancellation request and Policy, the Company or
the Home Office will refund all payments made under the Policy
(less any withdrawals and Indebtedness).
B. SURRENDERS
1. REQUESTS FOR CASH SURRENDER VALUE. The Owner may surrender
the Policy at any time for its Cash Surrender Value. The Cash
Surrender Value on any Valuation Date is the Policy Value less
any applicable surrender charge minus any Indebtedness. The
Cash Surrender Value will be determined by the Company on the
Valuation Date on or following the date on which the Home
Office receives all required documents, including a
satisfactory written request signed by the Owner. The written
request must include the Policy number, signature of the
Owner, and clear instructions regarding the request. The
Company will cancel the Policy as of the date the written
request is received at the Home Office and the Company will
ordinarily pay the Cash Surrender Value within seven days
following receipt of the written request and all other
required documents.
2. SURRENDER OF POLICY -- SURRENDER CHARGES. If the Policy is
surrendered during the first 19 Policy Years or the first 19
years after an increase in Specified Amount, the Company will
deduct a surrender charge based on the Specified Amount at
issue, or increase, as applicable. The surrender charge will
be deducted before any surrender proceeds are paid. The
surrender charge is set forth in each Policy and depends on
the Insured's age at issue, or on the Policy Anniversary
preceding an increase, sex and premium class. It is calculated
as an amount per thousand of the Specified Amount at issue (or
increase).
C. WITHDRAWALS
1. WHEN WITHDRAWALS ARE PERMITTED. At any time after the first
Policy Year, the Owner may, by submitting a written request to
the Home Office, withdraw a portion of the Cash Surrender
Value subject to the following conditions:
o The minimum amount that may be withdrawn is the
lesser of $500 or the Cash Surrender Value if less
than $500 (withdrawal of the Cash Surrender Value
will be considered a Surrender of the Policy).
o The amount withdrawn must be less than the
then-current Cash Surrender Value and may not reduce
the Cash Surrender Value below $500.
o No more than 1 withdrawal may be made during a Policy
Year.
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o A withdrawal processing fee equal to the lesser of
$25 or 2% of the amount withdrawn will be assessed on
each withdrawal. The withdrawal processing fee will
be deducted from the Policy Value along with the
amount requested to be withdrawn.
o When the Owner requests a withdrawal, the Owner must
direct how the withdrawal will be deducted from the
Policy Value.
o The Company generally will pay a withdrawal request
within seven days after the Valuation Date when the
Home Office receives the request and all the
documents required for such a payment.
o The Company may delay making a payment if: (1) the
disposal or valuation of the Separate Account's
assets is not reasonably practicable because the New
York Stock Exchange is closed for other than a
regular holiday or weekend, trading is restricted by
the SEC, or the SEC declares that an emergency
exists; or (2) the SEC by order permits postponement
of payment to protect Life Investor's Policy Owners.
The Company also may defer making payments
attributable to a check that has not cleared, and may
defer payment of proceeds from the Fixed Account for
a withdrawal, surrender or Policy loan request for up
to six months from the date the request is received.
o If the Level Death Benefit is in effect, a withdrawal
will reduce the Specified Amount dollar-for-dollar.
If the Specified Amount reflects increases in the
Initial Specified Amount, the withdrawal will reduce
first the most recent increase, and then the next
most recent increase, if any, in reverse order, and
finally the Initial Specified Amount. If the
Increasing Death Benefit is in effect, the Specified
Amount is unaffected by the withdrawal.
D. LAPSES
If a sufficient premium has not been received by the
61st day after a grace period notice is sent, the Policy will
lapse without value and no amount will be payable to the
Owner.
E. MONTHLY DEDUCTIONS
On each Monthly Date, redemptions in the form of
deductions will be made from the Policy Value for the Monthly
Deduction, which is a charge compensating the Company for the
services and benefits provided, costs and expenses incurred,
and risks assumed by the Company in connection with the
Policy. The Monthly Deduction consists of four components: (a)
the cost of insurance charge; (b) a monthly
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administrative charge; (c) any charges for additional benefits
added by riders to the Policy; (d) any charges for substandard
premium class ratings. The Monthly Deduction will be deducted
from the Subaccounts of the Separate Account and the Fixed
Account on a pro rata basis.
1. COST OF INSURANCE CHARGE. The cost of insurance charge is
the primary charge for the death benefit provided by the
Policy. The cost of insurance charge is calculated monthly,
and depends on a number of variables, including the age, sex,
premium class, and Specified Amount of the Insured. The charge
varies from Policy to Policy and from Monthly Date to Monthly
Date. The charge is calculated separately for the Specified
Amount at issue and for any increase in the Specified Amount.
The cost of insurance charge is equal to the
Company's current monthly cost of insurance rate for the
Insured multiplied by the net amount at risk under the Policy
for the Specified Amount at issue or increase. The net amount
at risk is equal to the difference between (1) the death
benefit at the beginning of the month divided by 1.0024663,
and (2) the Policy Value at the beginning of the month.
The Company's current cost of insurance rates may be
less than the guaranteed rates. Current cost of insurance
rates will be determined based on the Company's expectations
as to future mortality, investment earnings, expenses and
persistency. These rates may change from time to time, but
they will never be more than the guaranteed maximum rates set
forth in the Owner's policy. The Company can change the rates
without notice to Owners. The maximum cost of insurance rates
are based on the Insured's age last birthday at the start of
the Policy Year, sex, and tobacco use. The guaranteed maximum
rates are based on the Commissioner's 1980 Standard Ordinary
Smoker and Non-Smoker Mortality Tables.
2. MONTHLY ADMINISTRATIVE CHARGE. The current monthly
administrative charge is $10 per month and is guaranteed never
to exceed $10 a month. This charge is designed to reimburse
the Company for expenses associated with underwriting
applications, increases in Specified Amount, riders, various
overhead and other expenses associated with providing the
services and benefits provided by the Policy, sales and
marketing expenses, and other costs of doing business, such as
federal, state and local premium and other taxes and fees.
3. SUPPLEMENTAL BENEFIT CHARGES. An Owner may add supplemental
benefits to the Policy. These benefits are made available by
the Company through riders to the Policy. If any additional
benefits are added to a Policy, charges for these benefits
will be deducted monthly as part of the Monthly Deduction.
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4. SUBSTANDARD RATING CHARGES. If the Insured is placed in a
substandard premium class, an additional charge will be
deducted. This charge compensates the Company for the
additional mortality risk assumed.
F. DEATH BENEFITS
No change in death benefits will be permitted that
will result in the Policy being disqualified as a life
insurance policy under Section 7702 of the Internal Revenue
Code.
1. PAYMENT OF DEATH PROCEEDS. As long as the Policy remains in
force, the Company will pay the death benefit to the
Beneficiary upon receipt at the Home Office of due proof of
the Insured's death. The death benefit is equal to the amount
of insurance determined under the Death Benefit Option in
effect on the date of the Insured's death, plus any
supplemental death benefit provided by riders, minus any
Indebtedness on the date of death and, if the date of death
occurred during a grace period, minus the past due Monthly
Deductions. The death benefit will be paid to the Beneficiary
in a lump sum generally within seven days after the Valuation
Date by which the Company has received at the Home Office all
materials necessary to constitute due proof of death. If a
payment option is elected, the death benefit will be applied
to the option within seven days after the Valuation Date by
which the Company received due proof of death and payments
will begin under that option when provided by the option.
2. DEATH BENEFIT OPTIONS. The Policy Value on the Insured's
date of death is used in determining the amount of insurance.
Under the Level Death Benefit, the death benefit is the
greater of (1) the Specified Amount, or (2) the applicable
percentage amount of the Policy Value based on the Insured's
age at the start of the current Policy Year, as determined
using the table of percentages prescribed by federal income
tax law. Under the Increasing Death Benefit, the death benefit
is the greater of (1) the Specified Amount plus the Policy
Value, or (2) the applicable percentage amount of the Policy
Value based on the Insured's age at the start of the current
Policy Year, as determined using the table of percentages
prescribed by federal income tax law. The percentage is 250%
to age 40 and declines thereafter as the Insured's age
increases. A table of percentages is shown in the prospectus
under "Death Benefit Options." The Company may change the
table if the table of percentages currently in effect becomes
inconsistent with any federal income tax laws and/or
regulations.
Under the Level Death Benefit, the death benefit
ordinarily will not change. Under the Increasing Death
Benefit, the death benefit will vary directly with the
investment performance of the Policy Value.
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3. CHANGING THE DEATH BENEFIT OPTION. The Death Benefit Option
is selected in the application for the Policy. The Owner, by
written request submitted to, and received by, the Home
Office, may change the Death Benefit Option on the Policy
subject to the following rules:
o After the first Policy Year, the Death Benefit Option
may be changed only once each twelve month period;
o The resulting Specified Amount must be at least equal
to the Minimum Specified Amount;
o The effective date of the change will be the Monthly
Date on or following the date when the Company
approves the request;
o When a change from the Level Death Benefit to the
Increasing Death Benefit is made, the Specified
Amount will be decreased by the Policy Value on the
effective date of the change;
o When a change from the Increasing Death Benefit to
Level Death Benefit is made, the Specified Amount
after the change will be increased by the Policy
Value on the effective date of the change; and
o Only one Death Benefit Option change is allowed for a
Policy. Before approving a change in Death Benefit
Option, the Company will review the Guideline Annual
Premiums.
4. CHANGING THE SPECIFIED AMOUNT. The initial Specified Amount
is set at the time the Policy is issued. The minimum initial
Specified Amount is $100,000 for issue ages 0 to 49 and
$50,000 for issue ages 50 to 85. The Owner may increase or
decrease the Specified Amount from time to time, subject to
the following conditions:
o Only one change (increase or decrease) may be made
during any 12 month period.
RULES FOR INCREASES
o To increase the Specified Amount, the Owner must see
an agent authorized by the Company.
-14-
<PAGE>
o Any increase in the Specified Amount must be at least
$10,000 and an application on a prescribed form must
be submitted. The Company may require additional
evidence of insurability. When an increase in
Specified Amount is requested, the Company conducts
underwriting before approving the increase to
determine whether a different premium class will
apply to the increase. If an increase in Specified
Amount is approved, a different premium class may
apply to the increase, based on the Insured's
circumstances at the time of the increase.
o There must be enough Cash Surrender Value to make a
Monthly Deduction that includes the cost of insurance
for the increase.
o If approved, the increase in Specified Amount will
become effective on the next Monthly Date after the
Company approves the request.
o No increases will be allowed after the Policy
Anniversary when the Insured is age 85.
o Revised pages to the Policy will be sent to the Owner
indicating the amount of the increase, the effective
date of the increase, the premium class for the
increase and any changes in premium.
RULES FOR DECREASES
o To decrease the Specified Amount, the Owner must
submit a written request to the Home Office.
o The Specified Amount after the decrease must be at
least $100,000 for issue ages 0 to 49 and $50,000 for
issue ages 0 to 85.
o The effective date of any decrease in Specified
Amount will be the next Monthly Date after written
request is processed.
o Any decrease will first be used to reduce the most
recent increase, then the next most recent increases,
then the initial Specified Amount.
o No surrender charge will be deducted upon a decrease
in Specified Amount.
o The surrender charge will not be reduced upon a
decrease in Specified Amount.
-15-
<PAGE>
G. POLICY LOANS
1. POLICY LOANS. The Owner may obtain a Policy loan from the
Company at any time by submitting a written or telephone
request to the Home Office. The maximum Loan Amount is 90% of
the Policy's Cash Surrender Value less 6 months of Monthly
Deductions at the time of the loan. Policy loans will be
processed on the Valuation Date on or following the date the
request is received and loan proceeds generally will be sent
to the Owner within seven days thereafter.
2. COLLATERAL FOR POLICY LOANS. When a Policy loan is made, an
amount equal to the loan proceeds plus interest in advance is
transferred from the Policy Value in the Subaccounts or Fixed
Account to the Loan Reserve. This withdrawal is made in
accordance with the owner's instructions.
3. INTEREST ON POLICY LOANS. The Company charges interest in
advance on any outstanding Policy loan at an annual effective
interest rate of 5.66%. Interest is due and payable at the
beginning of each Policy Year while a Policy loan is
outstanding. If, on any Policy Anniversary, the interest
accrued has not been paid, the amount of the interest is added
to the loan and becomes part of the outstanding Indebtedness.
The Company will allocate annually the amount of unpaid
interest transferred from each Subaccount and the Fixed
Account in accordance with the current premium allocation.
4. EFFECT OF POLICY LOANS. If the death benefit becomes
payable while a Policy loan is outstanding, the Indebtedness
will be deducted in calculating the death benefit. If the
Indebtedness exceeds the Policy Value, less any applicable
Surrender Charge, on any Monthly Date, the Policy will lapse.
The Company will send the Owner, and any assignee of record,
notice of the lapse. The Owner will have a 61-day grace period
to submit a sufficient payment to avoid termination.
H. PAYMENT OPTIONS
The Policy offers five methods of receiving proceeds
payable under the Policy. In addition to these methods, which
are described below, payment may be made by any other method
to which the Company agrees. If proceeds from a surrender or
death benefits are to be applied to a payment option, the
proceeds will usually be applied within seven days of the
Valuation Date on or following the date on which the Company
receives the request and all required documentation at the
Home Office.
-16-
<PAGE>
o INTEREST PAYMENTS. The Company will pay interest at
agreed upon intervals. Withdrawals of at least $100
may be made at any time, and the Company will pay
interest to the date of withdrawal on the amount
withdrawn.
o PAYMENTS FOR A SPECIFIED PERIOD. The Company will
make equal payments at the end of each monthly
interval for a fixed number of years. The present
value of any unpaid payments may be withdrawn at any
time.
o LIFE INCOME. The Company will make equal payments at
the end of each monthly interval for as long as the
payee is alive. The amount of each payment is based
on the payee's age and sex at the start of the first
monthly interval. The Company may require proof of
the payee's age and sex. The payee may not withdraw
the present value of the payments. If the payee dies
during a certain period, the Company will continue
the payments to the successor payee to the end of the
certain period, or the successor payee may have the
present value of any remaining payments (in the
certain period) paid in one sum.
o PAYMENTS OF A SPECIFIED AMOUNT. The Company will make
equal monthly payments until the amount put under
this method together with compound interest has been
paid. The unpaid balance may be withdrawn at any
time.
o JOINT AND SURVIVOR LIFE INCOME. The Company will make
equal payments at the end of each monthly interval as
long as at least one of the two payees is alive. The
Company will base each payment on the age and sex of
both payees at the start of the first monthly
interval. The Company may require proof of the age
and sex of each payee. The payees may not withdraw
the present value of any payments.
I. LUMP SUM PAYMENTS BY THE COMPANY
Lump sum payments of withdrawals, surrenders or death
benefits from the Subaccounts will be made within seven days
of the Valuation Date on or following the date on which the
Company receives the request and all required documentation at
the Home Office. The Company may postpone the processing of
any such transactions for any of the following reasons:
1. If the disposal or valuation of the Separate Account's
assets is not reasonably practicable because the New York
Stock Exchange ("NYSE") is closed for trading other than for
customary holiday or weekend closings, or trading on the NYSE
is otherwise restricted, or an emergency exists, as determined
by the Securities and Exchange Commission ("SEC").
-17-
<PAGE>
2. When the SEC by order permits a delay for the protection of
Owners.
3. If the payment is attributable to a check that has not
cleared.
The Company may defer for up to six months after the
date the Company receives the request, the payment of any
proceeds from the Fixed Account for a withdrawal, surrender or
Policy loan request.
J. EXCHANGE PRIVILEGE
At any time, while the Policy is in force during the
life of the Insured, the Owner may exchange the Policy without
evidence of insurability to a universal life policy on the
life of the Insured providing benefits that do not vary with
the investment experience of the Separate Account. This
conversion is accomplished by the transfer of the entire
Policy Value in the Subaccounts to the Fixed Account and the
allocation of all future premiums to the Fixed Account. No
charge will be imposed on the transfer in exercising this
exchange privilege.
K. REDEMPTION ERRORS
In accordance with industry practice, the Company
will establish procedures to address and to correct errors in
amounts redeemed from the Subaccounts and the Fixed Account,
except for de minimis amounts. The Company will assume the
risk of any errors caused by the Company.
L. MISSTATEMENT OF AGE OR SEX
If the Insured's age or sex has been misstated in the
application, the Death Benefit under the Policy will be the
amount that would have been provided by the correct age and
sex. The adjustment will be based on the ratio of the correct
cost of insurance for the most recent Monthly Date for that
benefit to the cost of insurance charge that was made.
M. INCONTESTABILITY
The Policy limits the Company's right to contest the
Policy as issued or as increased, except for material
misstatements contained in the application, after it has been
in force during the Insured's lifetime for a minimum period,
generally for two years from the Issue Date of the Policy or
effective date of the increase.
-18-
EXHIBIT 2
Life Investors Insurance Company
of America
4333 Edgewood Rd. NE
Cedar Rapids, IA 52499
November 1,1999
Ladies and Gentlemen:
As Vice President and General Counsel, Individual Division, of Life Investors
Insurance Company of America (the "Company"), I have general supervision of the
legal affairs of the Company's Individual Division. In connection with the
proposed registration statement under the Securities Act of 1933, as amended, of
certain variable universal life insurance policies (the "Contracts") to be
issued by the Company through Life Investors Variable Life Account A (the
"Separate Account"), I have been advised by members of our legal staff
concerning the establishment of the Separate Account by the Board of Directors
of the Company on July 1, 1999 as a separate account for assets applicable to
variable life insurance policies, pursuant to the provisions of the Iowa
Insurance Laws. I have further been advised by members of our legal staff
concerning such other documents and matters of law as I deem necessary and
appropriate for this opinion, and I therefore advise you that:
1. The Company was duly organized and is a validly existing corporation under
the laws of the State of Iowa.
2. The Company has been duly authorized by the Iowa Department of Insurance to
issue variable life insurance policies.
3. The Separate Account is a separate account of the Company duly created and
validly existing pursuant to the laws of the State of Iowa. The assets of the
Separate Account are owned by the Company. The income, gains and losses,
realized or unrealized, from assets allocated to the Separate Account must be
credited to or charged against the Separate Account, without regard to other
income, gains or losses of the Company.
4. The Contracts, when issued in accordance with the prospectus constituting a
part of the Registration Statement and upon compliance with applicable local
law, will be legal, validly issued and binding obligations of the Company in
accordance with their respective terms.
5. The portion of the assets held in the Separate Account equal to reserves and
other contract liabilities with respect to the Separate Account is not
chargeable with liabilities arising out of any other business the Company may
conduct.
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the heading "Legal Matters" in the
prospectus constituting a part of the Registration Statement.
Very truly yours,
s/ JOHN D. CLEAVENGER
- ---------------------
John D. Cleavenger
Vice President and General Counsel, Individual Division
EXHIBIT 5
Roger Hallquist, F.S.A., M.A.A.A.
Actuary
Phone (319) 398-7962
Fax: (319) 369-2378
November 1, 1999
Gentlemen:
This opinion is furnished in connection with the registration by Life Investors
Insurance Company of America of its Variable Universal Life Insurance Policy
("the Policy"), under the Securities Act of 1933 (the "Registration Statement").
The prospectus included in the Registration Statement on Form S-6 describes the
Policy. I have reviewed the Policy form and I have participated in the
preparation and review of the Registration Statement and Exhibits thereto. In my
opinion:
(1) The illustrations of policy account values, cash surrender values,
and death benefits included in the section of the prospectus entitled,
"ILLUSTRATIONS", based on the assumptions stated in this section, are consistent
with the provisions of the Policy. The rate structure of the Policy has not been
designed so as to make the relationship between premiums and benefits, as shown
in the illustrations, appear more favorable to a prospective purchaser of a
Policy for males age 35 than to prospective purchasers of Policies on males of
other ages or on females.
(2) The Example of Surrender Charges is consistent with the provisions
of the Policy.
I hereby consent to the use of this opinion as an Exhibit to the Registration
Statement and to the reference to my name in the prospectus.
Sincerely,
S/ ROGER HALLQUIST
- ---------------------------------
Roger Hallquist, F.S.A., M.A.A.A.
Actuary
[Letterhead of Sutherland Asbill & Brennan LLP]
December 21, 1999
Life Investors Insurance Company of America
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499
Re: Life Investors Variable Life Account A
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the prospectus filed as part of the initial filing of the Form S-6
registration statement for Life Investors Variable Life Account A. In giving
this consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933.
Sincerely,
SUTHERLAND ASBILL & BRENNAN LLP
By: /s/ STEPHEN E. ROTH
--------------------------------
Stephen E. Roth, Esq.
EXHIBIT 7
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Financial Statements"
and to the use of our report dated February 19, 1999 with respect to the
statutory-basis financial statements and schedules of Life Investors Insurance
Company of America, included in the Registration Statement (Form S-6) and
related Prospectus of Life Investors Variable Life Account A for the
registration of flexible premium variable life insurance policies.
/s/ ERNST & YOUNG LLP
---------------------
Des Moines, Iowa
December 20, 1999
POWER OF ATTORNEY
The undersigned, acting in the capacity or capacities stated opposite their
respective names below on behalf of LIFE INVESTORS VARIABLE LIFE ACCOUNT A, a
separate account established by Life Investors Insurance Company of America
under the laws of the State of Iowa, hereby make, constitute, and appoint CRAIG
D. VERMIE AND JOHN D. CLEAVENGER, and each of them, singularly, as his true and
lawful attorney-in-fact with full power:
(1) to sign and cause to be filed with the Securities and Exchange
Commission, a registration statement on Form S-6 under the Securities
Act of 1933, as amended (the "1933 Act") and the Investment Company Act
of 1940, as amended, on behalf of Life Investors Variable Life Account
A;
(2) to sign and cause to be filed with the Securities and Exchange
Commission and all amendments to such Form S-6 registration statement
including post-effective amendments pursuant to Rule 485 under the 1933
Act; and
(3) to take any and all other actions of whatever kind or nature in
connection with such registration statements which said
attorneys-in-fact may deem advisable, including providing any
certifications or exhibits, and making any requests for acceleration.
Signature Title Date
/s/ REX B. ENO President and Chairman December 15, 1999
- ----------------- of the Board
Rex B. Eno
<PAGE>
POWER OF ATTORNEY
The undersigned, acting in the capacity or capacities stated opposite their
respective names below on behalf of LIFE INVESTORS VARIABLE LIFE ACCOUNT A, a
separate account established by Life Investors Insurance Company of America
under the laws of the State of Iowa, hereby make, constitute, and appoint CRAIG
D. VERMIE AND JOHN D. CLEAVENGER, and each of them, singularly, as his true and
lawful attorney-in-fact with full power:
(1) to sign and cause to be filed with the Securities and Exchange
Commission, a registration statement on Form S-6 under the Securities
Act of 1933, as amended (the "1933 Act") and the Investment Company Act
of 1940, as amended, on behalf of Life Investors Variable Life Account
A;
(2) to sign and cause to be filed with the Securities and Exchange
Commission and all amendments to such Form S-6 registration statement
including post-effective amendments pursuant to Rule 485 under the 1933
Act; and
(3) to take any and all other actions of whatever kind or nature in
connection with such registration statements which said
attorneys-in-fact may deem advisable, including providing any
certifications or exhibits, and making any requests for acceleration.
Signature Title Date
/s/ PATRICK S. BAIRD Senior Vice President, December 15, 1999
- -------------------- Chief Operating Officer
Patrick S. Baird and Director
<PAGE>
POWER OF ATTORNEY
The undersigned, acting in the capacity or capacities stated opposite their
respective names below on behalf of LIFE INVESTORS VARIABLE LIFE ACCOUNT A, a
separate account established by Life Investors Insurance Company of America
under the laws of the State of Iowa, hereby make, constitute, and appoint CRAIG
D. VERMIE AND JOHN D. CLEAVENGER, and each of them, singularly, as his true and
lawful attorney-in-fact with full power:
(1) to sign and cause to be filed with the Securities and Exchange
Commission, a registration statement on Form S-6 under the Securities
Act of 1933, as amended (the "1933 Act") and the Investment Company Act
of 1940, as amended, on behalf of Life Investors Variable Life Account
A;
(2) to sign and cause to be filed with the Securities and Exchange
Commission and all amendments to such Form S-6 registration statement
including post-effective amendments pursuant to Rule 485 under the 1933
Act; and
(3) to take any and all other actions of whatever kind or nature in
connection with such registration statements which said
attorneys-in-fact may deem advisable, including providing any
certifications or exhibits, and making any requests for acceleration.
Signature Title Date
/s/ DOUGLAS C. KOLSRUD Senior Vice President, December 15, 1999
- ---------------------- Chief Investment Officer,
Douglas C. Kolsrud Corporate Actuary and
Director
<PAGE>
POWER OF ATTORNEY
The undersigned, acting in the capacity or capacities stated opposite their
respective names below on behalf of LIFE INVESTORS VARIABLE LIFE ACCOUNT A, a
separate account established by Life Investors Insurance Company of America
under the laws of the State of Iowa, hereby make, constitute, and appoint CRAIG
D. VERMIE AND JOHN D. CLEAVENGER, and each of them, singularly, as his true and
lawful attorney-in-fact with full power:
(1) to sign and cause to be filed with the Securities and Exchange
Commission, a registration statement on Form S-6 under the Securities
Act of 1933, as amended (the "1933 Act") and the Investment Company Act
of 1940, as amended, on behalf of Life Investors Variable Life Account
A;
(2) to sign and cause to be filed with the Securities and Exchange
Commission and all amendments to such Form S-6 registration statement
including post-effective amendments pursuant to Rule 485 under the 1933
Act; and
(3) to take any and all other actions of whatever kind or nature in
connection with such registration statements which said
attorneys-in-fact may deem advisable, including providing any
certifications or exhibits, and making any requests for acceleration.
Signature Title Date
/s/ CRAIG D. VERMIE Vice President, Secretary, December 15, 1999
- ------------------- General Counsel and
Craig D. Vermie Director
<PAGE>
POWER OF ATTORNEY
The undersigned, acting in the capacity or capacities stated opposite their
respective names below on behalf of LIFE INVESTORS VARIABLE LIFE ACCOUNT A, a
separate account established by Life Investors Insurance Company of America
under the laws of the State of Iowa, hereby make, constitute, and appoint CRAIG
D. VERMIE AND JOHN D. CLEAVENGER, and each of them, singularly, as his true and
lawful attorney-in-fact with full power:
(1) to sign and cause to be filed with the Securities and Exchange
Commission, a registration statement on Form S-6 under the Securities
Act of 1933, as amended (the "1933 Act") and the Investment Company Act
of 1940, as amended, on behalf of Life Investors Variable Life Account
A;
(2) to sign and cause to be filed with the Securities and Exchange
Commission and all amendments to such Form S-6 registration statement
including post-effective amendments pursuant to Rule 485 under the 1933
Act; and
(3) to take any and all other actions of whatever kind or nature in
connection with such registration statements which said
attorneys-in-fact may deem advisable, including providing any
certifications or exhibits, and making any requests for acceleration.
Signature Title Date
/s/ ROBERT J. KONTZ Vice President and December 17, 1999
- ------------------- Corporate Controller
Robert J. Kontz
<PAGE>
POWER OF ATTORNEY
The undersigned, acting in the capacity or capacities stated opposite their
respective names below on behalf of LIFE INVESTORS VARIABLE LIFE ACCOUNT A, a
separate account established by Life Investors Insurance Company of America
under the laws of the State of Iowa, hereby make, constitute, and appoint CRAIG
D. VERMIE AND JOHN D. CLEAVENGER, and each of them, singularly, as his true and
lawful attorney-in-fact with full power:
(1) to sign and cause to be filed with the Securities and Exchange
Commission, a registration statement on Form S-6 under the Securities
Act of 1933, as amended (the "1933 Act") and the Investment Company Act
of 1940, as amended, on behalf of Life Investors Variable Life Account
A;
(2) to sign and cause to be filed with the Securities and Exchange
Commission and all amendments to such Form S-6 registration statement
including post-effective amendments pursuant to Rule 485 under the 1933
Act; and
(3) to take any and all other actions of whatever kind or nature in
connection with such registration statements which said
attorneys-in-fact may deem advisable, including providing any
certifications or exhibits, and making any requests for acceleration.
Signature Title Date
/s/ BRENDA K. CLANCY Vice President, Treasurer December 20, 1999
- -------------------- and Chief Financial
Brenda K. Clancy Officer and Director
<PAGE>
POWER OF ATTORNEY
The undersigned, acting in the capacity or capacities stated opposite their
respective names below on behalf of LIFE INVESTORS VARIABLE LIFE ACCOUNT A, a
separate account established by Life Investors Insurance Company of America
under the laws of the State of Iowa, hereby make, constitute, and appoint CRAIG
D. VERMIE AND JOHN D. CLEAVENGER, and each of them, singularly, as his true and
lawful attorney-in-fact with full power:
(1) to sign and cause to be filed with the Securities and Exchange
Commission, a registration statement on Form S-6 under the Securities
Act of 1933, as amended (the "1933 Act") and the Investment Company Act
of 1940, as amended, on behalf of Life Investors Variable Life Account
A;
(2) to sign and cause to be filed with the Securities and Exchange
Commission and all amendments to such Form S-6 registration statement
including post-effective amendments pursuant to Rule 485 under the 1933
Act; and
(3) to take any and all other actions of whatever kind or nature in
connection with such registration statements which said
attorneys-in-fact may deem advisable, including providing any
certifications or exhibits, and making any requests for acceleration.
Signature Title Date
/s/ JACK R. DYKHOUSE Executive Vice President December 15, 1999
- -------------------- and Director
Jack R. Dykhouse
<PAGE>
POWER OF ATTORNEY
The undersigned, acting in the capacity or capacities stated opposite their
respective names below on behalf of LIFE INVESTORS VARIABLE LIFE ACCOUNT A, a
separate account established by Life Investors Insurance Company of America
under the laws of the State of Iowa, hereby make, constitute, and appoint CRAIG
D. VERMIE AND JOHN D. CLEAVENGER, and each of them, singularly, as his true and
lawful attorney-in-fact with full power:
(1) to sign and cause to be filed with the Securities and Exchange
Commission, a registration statement on Form S-6 under the Securities
Act of 1933, as amended (the "1933 Act") and the Investment Company Act
of 1940, as amended, on behalf of Life Investors Variable Life Account
A;
(2) to sign and cause to be filed with the Securities and Exchange
Commission and all amendments to such Form S-6 registration statement
including post-effective amendments pursuant to Rule 485 under the 1933
Act; and
(3) to take any and all other actions of whatever kind or nature in
connection with such registration statements which said
attorneys-in-fact may deem advisable, including providing any
certifications or exhibits, and making any requests for acceleration.
Signature Title Date
/s/ WILLIAM L. BUSLER Executive Vice President December 16, 1999
- --------------------- and Director
William L. Busler
