As filed with the Securities and Exchange Commission on August 1, 1997
Registration No. 333-19123
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 2 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
RELIASTAR BANKERS SECURITY VARIABLE LIFE SEPARATE ACCOUNT I
(Exact Name of Registrant)
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 Woodbury Road
Woodbury, New York 11797
(Name and Address of principal executive office of depositor)
---------------------------------
Stewart D. Gregg
Counsel
ReliaStar Bankers Security Life Insurance Company
20 Washington Avenue South
Minneapolis, MN 55440
Copy to:
Robert B. Saginaw
Counsel
ReliaStar Bankers Security Life Insurance Company
20 Washington Avenue South
Minneapolis, MN 55440
It is proposed that this filing will become effective
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on August 8, 1997 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title and Amount of Securities Being Registered:
Flexible Premium Variable Life Insurance Policies -- Registration of an
indefinite amount of securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940.
Registrant has chosen to register an indefinite amount of securities in
accordance with Rule 24f-2. The Rule 24f-2 Notice for Registrant's most recent
fiscal year was filed on or about February 21, 1997.
Approximate date of proposed public offering:
As soon as practicable after the effective date of the Registration Statement.
---------------------------------
<PAGE>
RELIASTAR BANKERS SECURITY VARIABLE LIFE SEPARATE ACCOUNT I
CROSS REFERENCE SHEET
(Reconciliation and Tie Sheet)
Item Number of
Form N-8B-2 Heading in the Prospectus
----------- -------------------------
1 Cover Page
2 Cover Page
3 Not Applicable
4 Distribution of the Policies
5 ReliaStar Bankers Security Life Insurance
Company and the Variable Account
6 The Variable Account
7 Not Applicable
8 Not Applicable
9 Not Applicable
10 Summary; Death Benefit; Payment and
Allocation of Premiums; Death Benefit
Guarantee; Accumulation Value; Policy Lapse
and Reinstatement; Surrender Benefits;
Investments of the Variable Account;
Transfers; Policy Loans; Free Look and
Conversion Rights; Voting Rights; General
Provisions; Appendix A; Appendix B
11 Deductions and Charges; Investments of the
Variable Account
12 Investments of the Variable Account
13 Deductions and Charges
14 The Policies; General Definitions;
Distribution of the Policies
15 Payment and Allocation of Premiums;
Investments of the Variable Account
16 Payment and Allocation of Premiums;
Surrender Benefits; Investments of the
Variable Account
17 Surrender Benefits; Policy Loans; Free Look
and Conversion Rights; General Provisions
18 The Variable Account; Investments of the
Variable Account; Payment and Allocation of
Premiums
<PAGE>
Item Number of
Form N-8B-2 Heading in the Prospectus
----------- -------------------------
19 Voting Rights; General Provisions
20 Not Applicable
21 Policy Loans
22 Not Applicable
23 Bonding Arrangements
24 Definitions; General Provisions
25 ReliaStar Bankers Security Life Insurance
Company
26 Not Applicable
27 ReliaStar Bankers Security Life Insurance
Company; Other Contracts Issued by Us
28 Management
29 ReliaStar Bankers Security Life Insurance
Company
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Not Applicable
36 Not Applicable
37 Not Applicable
38 Distribution of the Policies
39 Distribution of the Policies
40 Distribution of the Policies
41 Distribution of the Policies
42 Not Applicable
43 Not Applicable
44 Investments of the Variable Account; Payment
and Allocation of Premiums; Deductions and
Charges
45 Not Applicable
46 Investments of the Variable Account;
Deductions and Charges
<PAGE>
Item Number of
Form N-8B-2 Heading in the Prospectus
----------- -------------------------
47 Investments of the Variable Account
48 ReliaStar Bankers Security Life Insurance
Company; State Regulation
49 Not Applicable
50 The Variable Account
51 Cover Page; The Policies; Death Benefit;
Payment and Allocation of Premiums;
Deductions and Charges; Policy Lapse and
Reinstatement; General Provisions; Free Look
and Conversion Rights
52 Investments of the Variable Account
53 Federal Tax Matters
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Not Applicable
<PAGE>
SELECT*LIFE NY
AUGUST 8, 1997 PROSPECTUS
FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE POLICY
[LOGO] RELIASTAR
RELIASTAR BANKERS SECURITY LIFE
<PAGE>
[LOGO] RELIASTAR
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 Woodbury Road
Woodbury, New York 11797
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
RELIASTAR BANKERS SECURITY VARIABLE LIFE SEPARATE ACCOUNT I
OF
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
This Prospectus describes a flexible premium variable life insurance
policy (the "Policy") offered by ReliaStar Bankers Security Life Insurance
Company ("we", "us", "our", or "the Company"). This Policy is designed to
provide lifetime insurance protection up to Age 95, provided the Policy's Cash
Surrender Value (that is, the amount that would be paid to you upon surrender of
the Policy) is sufficient to pay certain monthly charges imposed under the
Policy (including the cost of insurance and certain administrative charges). It
also is designed to provide maximum flexibility in connection with premium
payments and death benefits by giving the Policy owner ("you", "your") the
opportunity to allocate net premiums among investment alternatives with
different investment objectives. A Policy owner may, subject to certain
restrictions, including limitations on premium payments, vary the frequency and
amount of premium payments and increase or decrease the level of death benefits
payable under the Policy. This flexibility allows a Policy owner to provide for
changing insurance needs under a single insurance contract.
The Policy provides for a death benefit payable at the Insured's death.
As long as the Policy remains in force, the death benefit will never be less
than the current Face Amount less any Policy loans and unpaid charges. The
minimum Face Amount of the Policy is currently $25,000. The Face Amount may be
increased, subject to certain limitations, provided that the increase is not
less than $5,000. Generally, the Policy will remain in force as long as the
Policy's Cash Surrender Value (that is, the amount that would be paid to you
upon surrender of the Policy) is sufficient to pay certain monthly charges
imposed in connection with the Policy (including the cost of insurance and
certain administrative charges). In addition, the Policy will remain in force
until the Insured reaches Age 65 (or five Policy Years, if longer), without
regard to the Cash Surrender Value, if on each Monthly Anniversary the total
premiums paid on the Policy, less any partial withdrawals and Policy loans,
equals or exceeds the total required Minimum Monthly Premium payments specified
in your Policy (which is a feature of the Policy called the "Death Benefit
Guarantee").
(Continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE INVESTMENT FUNDS, INTERESTS IN THE FIXED ACCOUNT AND
INTERESTS IN THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY A BANK, AND THE SHARES AND INTERESTS ARE NOT FEDERALLY INSURED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY INVESTMENT IN THE POLICY
INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE THE POSSIBLE LOSS OF
PRINCIPAL.
THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE. A
CURRENT PROSPECTUS FOR EACH OF THE FUNDS MUST ACCOMPANY THIS PROSPECTUS AND
SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS AUGUST 8, 1997.
46263a
<PAGE>
Net premiums paid under the Policy are allocated, according to your
instructions, either to the ReliaStar Bankers Security Variable Life Separate
Account I (the "Variable Account"), which is one of our separate accounts or,
with the exception of policies issued in New Jersey, to our General Account (the
"Fixed Account"). Any amounts allocated to the Variable Account will be
allocated to one or more Sub-Accounts of the Variable Account. The assets of
each Sub-Account will be invested solely in the shares of one of the three
portfolios available through The Alger American Fund, one of the four portfolios
of Fidelity's Variable Insurance Products Fund ("VIP"), in one of the three
portfolios of Fidelity's Variable Insurance Products Fund II ("VIP II"), in one
of the four portfolios of Janus Aspen Series, in one of the two portfolios
available through Neuberger&Berman Advisers Management Trust, in one of the five
funds available through the Northstar Variable Trust, in one of the four
portfolios available through the OCC Accumulation Trust, or in one of the three
funds available through Putnam Variable Trust (collectively the "Funds"). The
accompanying prospectus for each of the Funds describes the investment
objectives and attendant risks of each of the Funds and portfolios. These
prospectuses are contained in the accompanying book entitled "Select*Product
Mutual Funds."
If net premiums are allocated to the Variable Account, the amount of
the Policy's death benefit may, and the Policy's Accumulation Value (that is,
the total amount that a Policy provides for investment at any time) will,
reflect the investment performance of the Sub-Accounts of the Variable Account
that you select. You bear the entire investment risk for any amounts allocated
to the Variable Account; no minimum Accumulation Value in the Variable Account
is guaranteed. Regardless of how net premiums are allocated, the Policy's death
benefit may, and the Policy's Accumulation Value will, also depend upon the
frequency and amount of premiums paid, any partial withdrawals, loans, and the
charges and deductions assessed in connection with the Policy.
The Policy provides for a "free look" period after the issuance of the
Policy. See "Free Look and Conversion Rights -- Free Look Rights."
THE CHARGES IMPOSED UPON EARLY SURRENDER OR LAPSE WILL BE SIGNIFICANT.
FOR EXAMPLE, IF YOU MAKE PREMIUM PAYMENTS NO GREATER THAN THE MINIMUM MONTHLY
PREMIUM PAYMENTS SPECIFIED IN YOUR POLICY, YOU CAN EXPECT THAT DURING AT LEAST
THE EARLY POLICY YEARS, ALL OR SUBSTANTIALLY ALL OF YOUR PREMIUM PAYMENTS WILL
BE REQUIRED TO PAY THE SURRENDER CHARGE AND OTHER CHARGES ASSOCIATED WITH THE
POLICY. AS A RESULT, YOU SHOULD PURCHASE A POLICY ONLY IF YOU HAVE THE FINANCIAL
CAPABILITY TO KEEP IT IN FORCE FOR A SUBSTANTIAL PERIOD. ALSO, CHARGES IMPOSED
UPON SURRENDER OR THE LAPSE OF THE POLICY WILL USUALLY EXCEED THE ACCUMULATION
VALUE OF THE POLICY DURING THE EARLY POLICY YEARS, WHICH MEANS THAT PAYMENTS
SUFFICIENT TO MAINTAIN THE DEATH BENEFIT GUARANTEE WILL BE REQUIRED TO AVOID
LAPSE DURING THIS PERIOD OF TIME. THESE SAME CONSIDERATIONS APPLY AFTER A
REQUESTED INCREASE IN FACE AMOUNT, WHICH CREATES THE POSSIBILITY OF ADDITIONAL
CHARGES UPON SURRENDER OR LAPSE OF THE POLICY. SEE "PAYMENT AND ALLOCATION OF
PREMIUMS - AMOUNT AND TIMING OF PREMIUMS", "DEATH BENEFIT GUARANTEE", AND
"DEDUCTIONS AND CHARGES - SURRENDER CHARGE."
REPLACING EXISTING INSURANCE WITH A POLICY DESCRIBED IN THIS PROSPECTUS
MAY NOT BE TO YOUR ADVANTAGE. IN ADDITION, IT MAY NOT BE TO YOUR ADVANTAGE TO
PURCHASE THIS POLICY TO OBTAIN ADDITIONAL INSURANCE PROTECTION IF YOU ALREADY
OWN ANOTHER FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING OR SOLICITATION IN ANY
JURISDICTION IN WHICH SUCH OFFERING OR SOLICITATION MAY NOT LAWFULLY BE MADE. NO
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING FUND PROSPECTUSES AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS ENTIRE PROSPECTUS SHOULD BE READ TO COMPLETELY UNDERSTAND THE
POLICY BEING OFFERED.
THE PRIMARY PURPOSE OF THE POLICY IS TO PROVIDE INSURANCE PROTECTION
FOR THE BENEFICIARY NAMED IN THE POLICY. NO CLAIM IS MADE THAT THE POLICY IS IN
ANY WAY SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.
<PAGE>
DEFINITIONS....................................................................7
PART 1. SUMMARY
How does the Policy compare to traditional life insurance?...............12
What is the Death Benefit?...............................................12
What flexibility do you have to adjust the amount of the Death
Benefit?...............................................................13
What is the Death Benefit Guarantee?.....................................13
If the Death Benefit Guarantee is not in effect, what will cause
the Policy to lapse?...................................................13
What is the Fixed Account?...............................................13
What is the Variable Account?............................................13
What are the minimum and maximum premium payments allowed?...............14
How are premiums allocated to the investment options?....................14
Who are the investment advisers of the Funds?............................14
What are the charges against the variable account?.......................14
What are the investment advisory fees and other fund expenses after
reimbursement?.........................................................15
What charges do we make against each premium payment?....................17
What charges do we make against the Accumulation Value?..................17
What charges do we make upon lapse or total surrender of the Policy?.....17
What is the value of the Policy if you surrender it?.....................18
Can you make partial withdrawals?........................................18
What are the free look and conversion rights?............................18
Can you transfer between the Sub-Accounts and/or the Fixed Account?......18
Can you borrow against the value of the Policy?..........................18
Are Death Benefit proceeds taxable income to the beneficiary?............19
Are Accumulation Value increases included in your taxable income?........19
Will exercising certain Policy rights have tax consequences?.............19
Who sells the Policies?..................................................19
PART 2. DETAILED INFORMATION
ReliaStar Bankers Security Life Insurance Company........................19
The Variable Account.....................................................20
Performance Information..................................................20
The Policies.............................................................21
Death Benefit............................................................21
Death Benefit Options...........................................22
Which Death Benefit Option to Choose............................24
Requested Changes in Face Amount................................24
Insurance Protection............................................26
Change in Death Benefit Option..................................27
Accelerated Benefit.............................................27
Payment and Allocation of Premiums.......................................28
Issuing the Policy..............................................28
Allocation of Premiums..........................................29
Amount and Timing of Premiums...................................29
Planned Periodic Premiums.......................................30
Unscheduled Additional Premiums.................................30
Paying Premiums by Mail.........................................31
Death Benefit Guarantee..................................................31
Accumulation Value.......................................................32
<PAGE>
Deductions and Charges...................................................33
Premium Expense Charge..........................................33
Monthly Deduction...............................................33
Surrender Charge................................................34
Partial Withdrawal and Transfer Charges.........................35
Reduction of Charges............................................35
Policy Lapse and Reinstatement...........................................36
Surrender Benefits.......................................................36
Total Surrender.................................................37
Partial Withdrawal..............................................37
Transfers................................................................38
Telephone/Fax Instructions......................................38
Dollar Cost Averaging Service...................................39
Portfolio Rebalancing Service...................................39
Policy Loans.............................................................40
Free Look and Conversion Rights..........................................42
Free Look Rights................................................42
Conversion Rights...............................................42
Investments of the Variable Account......................................43
The Alger American Fund:
Alger American Growth Portfolio........................44
Alger American MidCap Growth Portfolio.................45
Alger American Small Capitalization Portfolio..........45
Fidelity's Variable Insurance Products Fund ("VIP"):
Equity-Income Portfolio................................45
Growth Portfolio.......................................45
High Income Portfolio..................................45
Money Market Portfolio.................................45
Fidelity's Variable Insurance Products Fund II ("VIP II"):
Contrafund Portfolio...................................45
Index 500 Portfolio....................................46
Investment Grade Bond Portfolio........................46
Janus Aspen Series:
Aggressive Growth Portfolio............................46
Growth Portfolio.......................................46
International Growth Portfolio.........................46
Worldwide Growth Portfolio.............................46
Neuberger&Berman Advisers Management Trust ("AMT"):
Limited Maturity Bond Portfolio........................46
Partners Portfolio.....................................46
Northstar Variable Trust ("Northstar"):
Northstar Growth Fund..................................47
Northstar High Yield Bond Fund.........................47
Northstar Income and Growth Fund.......................47
Northstar International Value Fund.....................47
Northstar Multi-Sector Bond Fund.......................47
<PAGE>
OCC Accumulation Trust:
Equity Portfolio...................................48
Global Equity Portfolio............................48
Managed Portfolio..................................48
Small Cap Portfolio................................48
Putnam Variable Trust
Putnam VT Diversified Income Fund..................49
Putnam VT Growth & Income Fund.....................49
Putnam VT Voyager Fund.............................49
Addition, Deletion, or Substitution of Investments...................49
Voting Rights........................................................49
General Provisions...................................................50
Benefits at Age 95..........................................50
Ownership...................................................50
Proceeds....................................................51
Beneficiary.................................................51
Postponement of Payments....................................51
Settlement Options..........................................52
Incontestability............................................53
Misstatement of Age and Sex.................................53
Suicide.....................................................53
Termination.................................................53
Amendment...................................................53
Reports.....................................................54
Dividends...................................................54
Collateral Assignment.......................................54
Optional Insurance Benefits.................................54
Federal Tax Matters..................................................55
Policy Proceeds.............................................55
Taxation of Distributions...................................56
Taxation of Policies Held by Pension, Certain Deferred
Compensation Plans and Other Arrangements.................57
Taxation of ReliaStar Bankers Security Life Insurance
Company...................................................57
Other Considerations........................................58
Legal Developments Regarding Employment -- Related Benefit Plans.....58
Distribution of the Policies.........................................58
Management...........................................................59
Directors and Officers......................................59
State Regulation.....................................................61
Legal Proceedings....................................................61
Bonding Arrangements.................................................61
Legal Matters........................................................61
Experts ............................................................62
Registration Statement Contains Further Information..................62
Financial Statements.................................................62
Appendix A - The Fixed Account......................................A-1
Appendix B - Calculation of Accumulation Value......................B-1
Appendix C - Illustration of Accumulation Values, Surrender
Charges, Cash Surrender Values and Death Benefits....C-1
Appendix D - Maximum Surrender Charge Per $1,000 of Face Amount.....D-1
Appendix E - Surrender Charge Whole Life Premium Per $1,000 of
Face Amount..........................................E-1
<PAGE>
PART 3. FUND PROSPECTUSES ("SELECT*PRODUCT MUTUAL FUNDS")
The Alger American Fund:
Alger American Growth Portfolio........................Alger-1
Alger American MidCap Growth Portfolio.................Alger-1
Alger American Small Capitalization Portfolio..........Alger-1
Fidelity's Variable Insurance Products Fund ("VIP"):
Equity-Income Portfolio....................................VIP
Growth Portfolio...........................................VIP
High Income Portfolio......................................VIP
Money Market Portfolio.....................................VIP
Fidelity's Variable Insurance Products Fund II ("VIP II"):
Contrafund Portfolio.......................................VIP
Index 500 Portfolio........................................VIP
Investment Grade Bond Portfolio............................VIP
Janus Aspen Series:
Aggressive Growth Portfolio............................Janus-1
Growth Portfolio.......................................Janus-1
International Growth Portfolio.........................Janus-1
Worldwide Growth Portfolio.............................Janus-1
Neuberger&Berman Advisers Management Trust ("AMT"):
Limited Maturity Bond Portfolio..........................N&B-1
Partners Portfolio.......................................N&B-1
Northstar Variable Trust ("Northstar"):
Northstar Growth Fund..............................Northstar-1
Northstar High Yield Bond Fund.....................Northstar-1
Northstar Income and Growth Fund...................Northstar-1
Northstar International Value Fund.................Northstar-1
Northstar Multi-Sector Bond Fund...................Northstar-1
OCC Accumulation Trust:
Equity Portfolio.........................................OCC-1
Global Equity Portfolio..................................OCC-1
Managed Portfolio........................................OCC-1
Small Cap Portfolio......................................OCC-1
Putnam Variable Trust:
Putnam VT Diversified Income Fund..................Putnam VT-1
Putnam VT Growth & Income Fund.....................Putnam VT-1
Putnam VT Voyager Fund.............................Putnam VT-1
<PAGE>
DEFINITIONS
ACCUMULATION VALUE. The total value attributable to a specific Policy, which
equals the sum of the Variable Accumulation Value (the total of the
values in each Sub-Account of the Variable Account) and the Fixed
Accumulation Value (the value in the Fixed Account). See "Accumulation
Value" at page 32 and Appendix B.
AGE. The Insured's age at the last birthday determined as of the beginning of
each Policy Year.
THE ALGER AMERICAN FUND.
Alger American Growth Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
CASH SURRENDER VALUE. The Accumulation Value less any Surrender Charge, Loan
Amount and unpaid Monthly Deductions.
CASH VALUE. The Accumulation Value less any Surrender Charge.
CODE. Internal Revenue Code of 1986, as amended.
DEATH BENEFIT. The amount determined under the applicable Death Benefit Option
(the Level Amount Option or the Variable Amount Option). The proceeds
payable to the beneficiary of the Policy upon the death of the Insured
under either Death Benefit Option will be reduced by any Loan Amount
and any unpaid Monthly Deductions. See "Death Benefit" at page 21.
DEATH BENEFIT GUARANTEE. A feature of the Policy guaranteeing that the Policy
will not lapse before the Insured reaches Age 65 (or five Policy Years,
if longer) if, on each Monthly Anniversary, the total premiums paid on
the Policy, less any partial withdrawals and any Loan Amount, equals or
exceeds the total required Minimum Monthly Premium payments specified
in your Policy, including the Minimum Monthly Premium for the current
Monthly Anniversary. See "Death Benefit Guarantee" at page 31.
DEATH BENEFIT OPTION. Either of two death benefit options available under the
Policy (the Level Amount Option and the Variable Amount Option). See
"Death Benefit --Death Benefit Options" at page 22.
FACE AMOUNT. The minimum Death Benefit under the Policy as long as the Policy
remains in force. See "Death Benefit" at page 21.
FIXED ACCOUNT. The assets of ReliaStar Bankers Security Life Insurance Company
other than those allocated to the Variable Account or any other
separate account. See Appendix A.
FIXED ACCUMULATION VALUE. The value attributable to a specific Policy to the
extent such amount is attributable to the Fixed Account (our General
Account). Unlike the Variable Accumulation Value, the Fixed
Accumulation Value will not reflect the investment performance of the
Funds. See "Accumulation Value" at page 32 and Appendix B.
FUNDS. Any open-end management investment company (or portfolio thereof) or unit
investment trust (or series thereof) in which a Sub-Account invests as
described herein. See "Investments of the Variable Account" at page 43.
INSURED. The person upon whose life the Policy is issued.
<PAGE>
ISSUE DATE. The date insurance coverage under a Policy begins.
JANUS ASPEN SERIES.
Aggressive Growth Portfolio
Growth Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
LEVEL AMOUNT OPTION. One of two Death Benefit Options available under the
Policy. Under this option, the Death Benefit is the greater of the
current Face Amount or the corridor percentage of Accumulation Value on
the Valuation Date on or next following the date of the Insured's
death. See "Death Benefit--Death Benefit Options" at page 22.
LOAN AMOUNT. The sum of all unpaid Policy loans including unpaid interest due
thereon. See "Policy Loans" at page 40.
MINIMUM FACE AMOUNT. The minimum Face Amount shown in the Policy (currently
$25,000).
MINIMUM MONTHLY PREMIUM. A monthly premium amount specified in the Policy and
determined by us at issuance of the Policy. The initial Minimum Monthly
Premium will depend upon the Insured's sex, Age at issue, Rate Class,
optional insurance benefits added by rider, and the Initial Face
Amount. A requested increase or decrease in the Face Amount, a change
in the Death Benefit Option, or the addition or termination of a Policy
rider may change the Minimum Monthly Premium. The Minimum Monthly
Premium determines the payments required to maintain the Death Benefit
Guarantee. See "Death Benefit Guarantee" at page 31.
MONTHLY ANNIVERSARY. The same date in each succeeding month as the Policy Date.
Whenever the Monthly Anniversary falls on a date other than a Valuation
Date, the Monthly Anniversary will be considered to be the next
Valuation Date. The first Monthly Anniversary is on the Policy Date.
MONTHLY DEDUCTION. A monthly charge deducted from the Accumulation Value of the
Policy. This charge includes the cost of insurance, the Monthly
Administrative Charge, the Monthly Mortality and Expense Risk Charge,
and any charges for optional insurance benefits. See "Deductions and
Charges - Monthly Deduction" at page 33.
MONTHLY ADMINISTRATIVE CHARGE. A monthly charge to reimburse us for expenses
incurred in administering the Policy. This charge is part of the
Monthly Deduction. The amount of this charge is currently $7.50 per
month and is guaranteed not to exceed the product of $5.00 and the
ratio (not to exceed 2.00) of (a) the Consumer Price Index (for all
urban households) for the preceding September to (b) the Consumer Price
index for September 1985. See "Deductions and Charges--Monthly
Deduction" at page 33.
MONTHLY MORTALITY AND EXPENSE RISK CHARGE. A monthly charge to compensate us for
certain mortality and expense risks we assume under the Policy. The
Mortality and Expense Risk Charge is anticipated to be charged at an
annual rate of .60 of 1% (.60%) of the Variable Accumulation Value of
the Policy but in no event will it exceed .9 of 1% (.90%) for the
duration of the Policy. See "Deductions and Charges - Monthly Mortality
and Expense Risk Charge" at page 34.
NET PREMIUM. The gross premium less a Premium Expense Charge deducted from each
premium.
<PAGE>
NEUBERGER&BERMAN ADVISERS MANAGEMENT TRUST ("AMT").
Limited Maturity Bond Portfolio
Partners Portfolio
NORTHSTAR VARIABLE TRUST ("NORTHSTAR").
Northstar Growth Fund
Northstar High Yield Bond Fund
Northstar Income and Growth Fund
Northstar International Value Fund
Northstar Multi-Sector Bond Fund
OCC ACCUMULATION TRUST.
Equity Portfolio
Global Equity Portfolio
Managed Portfolio
Small Cap Portfolio
PLANNED PERIODIC PREMIUM. The scheduled premium selected by you of a level
amount at a fixed interval. The initial Planned Periodic Premium you
select will be shown in the Policy. See "Payment and Allocation of
Premiums -- Planned Periodic Premiums" at page 30.
POLICY, POLICIES. The flexible premium variable life insurance Policy offered by
us and described in this Prospectus.
POLICY ANNIVERSARY. The same date in each succeeding year as the Policy Date.
Whenever the Policy Anniversary falls on a date other than a Valuation
Date, the Policy Anniversary will be considered to be the next
Valuation Date.
POLICY DATE. The Policy Date is used in determining Policy Years, Policy Months,
Monthly Anniversaries, and Policy Anniversaries. The Policy Date will
be shown in the Policy.
POLICY MONTH. A month beginning on the Monthly Anniversary.
POLICY YEAR. A year beginning on the Policy Anniversary.
PREMIUM EXPENSE CHARGE. An amount deducted from each premium payment. The
Premium Expense Charge is currently 5.00% of each premium payment. See
"Deductions and Charges --Premium Expense Charge" at page 33.
PREMIUM RELATED SURRENDER CHARGE REDUCTION. A reduction to the Surrender Charge
when total premiums paid are less than the Surrender Charge Whole Life
Premium. See "Deductions and Charges--Surrender Charge" at page 34.
PUTNAM VARIABLE TRUST.
Putnam VT Diversified Income Fund
Putnam VT Growth and Income Fund
Putnam VT Voyager Fund
RATE CLASS. A group of Insureds we determine based on our expectation that they
will have similar mortality experience.
<PAGE>
SEC. Securities and Exchange Commission.
SIGNATURE GUARANTEE. A guarantee of your signature by a member firm of the New
York, American, Boston, Midwest, Philadelphia, or Pacific Stock
Exchange, or by a commercial bank (not a savings bank) which is a
member of the Federal Deposit Insurance Corporation, or, in certain
cases, by a member firm of the National Association of Securities
Dealers, Inc. that has entered into an appropriate agreement with us.
SUB-ACCOUNT. A sub-division of the Variable Account. Each Sub-Account invests
exclusively in the shares of a specified Fund.
SURRENDER CHARGE. A charge imposed upon total surrender or lapse of the Policy
during the first 15 Policy Years and the first 15 years following any
requested increase in Face Amount. See "Deductions and Charges
--Surrender Charge" at page 34.
SURRENDER CHARGE WHOLE LIFE PREMIUM. An amount used in calculating the Premium
Related Surrender Charge Reduction. The Surrender Charge Whole Life
Premium will equal the amount obtained by dividing the Face Amount or
the amount of a requested increase, as the case may be, by $1,000, and
multiplying the result by the applicable factor from Appendix E. See
"Deductions and Charges--Surrender Charge" at page 34.
UNIT VALUE. The unit measure by which the value of the Policy's interest in each
Sub-Account is determined. See Appendix B.
VALUATION DATE. Each day on which the New York Stock Exchange is open for
business except for a day that a Sub-Account's corresponding Fund does
not value its shares. The New York Stock Exchange is currently closed
on weekends and on the following holidays: New Year's Day; Martin
Luther King Day; Presidents' Day; Good Friday; Memorial Day; July
Fourth; Labor Day; Thanksgiving Day; and Christmas Day. See Appendix B.
VALUATION PERIOD. The period between two successive Valuation Dates, commencing
at the close of business of a Valuation Date and ending at the close of
business of the next Valuation Date. See Appendix B.
VARIABLE ACCOUNT. ReliaStar Bankers Security Variable Life Separate Account I, a
separate investment account established by us to receive and invest Net
Premiums paid under the Policy. See "The Variable Account" at page 20.
VARIABLE ACCUMULATION VALUE. The value attributable to a specific Policy to the
extent such amount is attributable to the Variable Account. See
"Accumulation Value" at page 32 and Appendix B.
VARIABLE AMOUNT OPTION. One of two Death Benefit Options available under the
Policy. Under this option, the Death Benefit is the greater of the Face
Amount plus the Accumulation Value of the Policy, or the Accumulation
Value multiplied by the corridor percentage on the Valuation Date on or
next following the date of the Insured's death. See "Death Benefit
--Death Benefit Options" at page 22.
VIP. Fidelity's Variable Insurance Products Fund ("VIP")
Equity-Income Portfolio
Growth Portfolio
High Income Portfolio
Money Market Portfolio
<PAGE>
VIP II. Fidelity's Variable Insurance Products Fund II ("VIP II")
Contrafund Portfolio
Index 500 Portfolio
Investment Grade Bond Portfolio
WE, US, OUR. ReliaStar Bankers Security Life Insurance Company.
YOU, YOUR. The Policy owner as designated in the application for the Policy or
as subsequently changed. If a Policy has been absolutely assigned, the
assignee is the Policy owner. A collateral assignee is not the Policy
owner.
<PAGE>
PART 1. SUMMARY
This is a brief summary of the Policy's features. More detailed
information follows later in this Prospectus.
HOW DOES THE POLICY COMPARE TO TRADITIONAL LIFE INSURANCE?
Like traditional life insurance:
* The Policy provides a guaranteed minimum amount of life
insurance coverage.
* As long as you meet the requirements for the Death Benefit
Guarantee, your Policy will remain in force until the Insured
reaches Age 65 (or five Policy Years, if longer).
* You can surrender the Policy while the Insured is living and
receive its Cash Surrender Value.
* The Policy has a loan value.
* The Fixed Accumulation Value is guaranteed.
Unlike traditional life insurance:
* You choose where the Net Premiums for the Policy are invested.
* You may transfer existing values among the investment options.
* The Variable Accumulation Value may increase or decrease based
on the investment performance of the Funds you select.
* You choose between two Death Benefit Options.
* You choose the amount and frequency of your premium payments.
* After the first Policy Year, you can increase or decrease the
Face Amount.
WHAT IS THE DEATH BENEFIT?
You choose one of two Death Benefit Options --the Level Amount Option
or the Variable Amount Option. The Death Benefit under the Level Amount Option
is the greater of the Face Amount or the corridor percentage multiplied by the
Accumulation Value on the Valuation Date on or next following the date of the
Insured's death. The Death Benefit under the Variable Amount Option is equal to
the greater of the Face Amount plus the Accumulation Value, or the corridor
percentage multiplied by the Accumulation Value on the Valuation Date on or next
following the date of the Insured's death. See "Death Benefit."
The proceeds payable upon the death of the Insured under either Death
Benefit Option will be reduced by any Loan Amount and any unpaid Monthly
Deductions.
The Death Benefit will never be less than the Face Amount as long as
the Policy is in force and there is no Loan Amount or unpaid Monthly Deductions.
<PAGE>
Under certain circumstances a part of the Death Benefit may be paid to
you when the Insured has been diagnosed as having a terminal illness. See
"Accelerated Benefit."
WHAT FLEXIBILITY DO YOU HAVE TO ADJUST THE AMOUNT OF THE DEATH BENEFIT?
After the second Policy Year, you have flexibility to adjust the Death
Benefit by increasing or decreasing the Face Amount. You cannot decrease the
Face Amount below the Minimum Face Amount shown in the Policy. Any increase in
the Face Amount must be at least $5,000 and may require additional evidence of
insurability satisfactory to us and will result in additional charges. See
"Death Benefit --Requested Changes in Face Amount."
Generally, you may also change the Death Benefit Option at any time
after the second Policy Year. See "Death Benefit --Change in Death Benefit
Option."
For a discussion of available techniques to adjust the amount of
insurance protection to satisfy changing insurance needs, see "Death Benefit
- --Insurance Protection."
WHAT IS THE DEATH BENEFIT GUARANTEE?
Until the Insured reaches Age 65 (or five Policy Years, if longer), if
you meet the requirements for the Death Benefit Guarantee we will not lapse your
Policy, even if the Cash Surrender Value is not sufficient to cover the Monthly
Deduction that is due. See "Death Benefit Guarantee."
IF THE DEATH BENEFIT GUARANTEE IS NOT IN EFFECT, WHAT WILL CAUSE THE POLICY TO
LAPSE?
The Policy will only lapse if the Cash Surrender Value is less than the
Monthly Deduction due and if a grace period of 61 days expires without a
sufficient payment. The Policy thus differs in two important respects from
traditional life insurance. First, the failure to pay a Planned Periodic Premium
will not automatically cause the Policy to lapse. Second, even if Planned
Periodic Premiums have been paid, the Policy may lapse. See "Policy Lapse and
Reinstatement --Lapse."
WHAT IS THE FIXED ACCOUNT?
The Fixed Account consists of all of our assets other than those in our
separate accounts (including the Variable Account). We credit interest of at
least 4% per year on any amounts you have in the Fixed Account. From time to
time we may guarantee interest in excess of 4%. Interests in the Fixed Account
have not been registered under the Securities Act of 1933 nor is the Fixed
Account subject to the restrictions of the Investment Company Act of 1940. See
Appendix A, "The Fixed Account."
WHAT IS THE VARIABLE ACCOUNT?
The ReliaStar Bankers Security Variable Life Separate Account I is one
of our separate accounts. Only premiums from our variable life insurance
policies are invested in the Variable Account. See "The Variable Account."
The Variable Account is divided into Sub-Accounts. Premiums allocated
to each Sub-Account are invested in shares, at net asset value, of the Fund
corresponding to that Sub-Account. The Variable Accumulation Value of the Policy
will vary with, among other things, the investment performance of the Funds to
which Policy premiums are allocated and the charges deducted from the Variable
Accumulation Value. See "Accumulation Value."
<PAGE>
WHAT ARE THE MINIMUM AND MAXIMUM PREMIUM PAYMENTS ALLOWED?
With certain restrictions, you can choose when you pay premiums and how
much each payment will be. In most cases, however, payment of cumulative
premiums sufficient to maintain the Death Benefit Guarantee will be required to
keep the Policy in force during at least the first several Policy Years. See
"Death Benefit Guarantee." We may choose not to accept a payment of less than
$25.00. We do, however, reserve the right to limit the amount of any payment and
certain maximum limits apply. We will return to you any premium paid to the
extent that total premiums paid, both scheduled and unscheduled, would exceed
the current maximum premium payments allowed for life insurance under Federal
tax law. See "Payment and Allocation of Premiums --Amount and Timing of
Premiums."
HOW ARE PREMIUMS ALLOCATED TO THE INVESTMENT OPTIONS?
You choose the premium allocation on the application. You can allocate
premiums to the Fixed Account and/or one or more Sub-Accounts of the Variable
Account. The Fixed Account is not available to allocate premiums under policies
issued in New Jersey. The initial allocation remains in effect for any future
premium payments until you change it. See "Payment and Allocation of Premiums
- --Allocation of Premiums."
WHO ARE THE INVESTMENT ADVISERS OF THE FUNDS?
Fred Alger Management, Inc. ("Alger Management") is the investment
manager for the three Alger American Portfolios and is responsible for the
overall administration of the Fund, subject to the supervision of the Board of
Trustees.
Fidelity Management & Research Company ("FMR") is the investment
adviser of VIP's four portfolios and of VIP II's three portfolios.
Each of the four portfolios of Janus Aspen Series has an investment
advisory agreement with Janus Capital Corporation ("Janus Capital"). Janus
Capital is the investment adviser of the four portfolios of Janus Aspen Series.
Neuberger&Berman Management, with the assistance of Neuberger&Berman,
LLC as sub-adviser, selects investments for AMT Limited Maturity Bond
Investments and AMT Partners Investments.
Northstar Investment Management Corporation, an affiliate of ours, is
the investment adviser for the five funds of the Northstar Variable Trust.
Certain of the Northstar Funds are sub-advised by third party investment
advisers.
OpCap Advisors is the investment manager for each of the four OCC
Accumulation Trust Portfolios and is a subsidiary of Oppenheimer Capital, a
registered investment adviser.
Putnam Investment Management, Inc. ("Putnam Management") is the
investment adviser of Putnam Variable Trust's three funds.
WHAT ARE THE CHARGES AGAINST THE VARIABLE ACCOUNT?
Certain charges will be deducted as a percentage of the value of the
net assets of the Variable Account to compensate us for certain risks assumed in
connection with the Policy. These charges will not be deducted from assets in
the Fixed Account.
<PAGE>
TAXES. Currently no charge is made to the Variable Account for Federal
income taxes that may be attributable to the Variable Account. We may, however,
make such a charge in the future. Charges for other taxes, if any, attributable
to the Variable Account may also be made.
WHAT ARE THE INVESTMENT ADVISORY FEES AND OTHER FUND EXPENSES AFTER
REIMBURSEMENT?
Because the Variable Account purchases shares of the Funds, the net
asset value of the investments of the Variable Account will reflect the
investment advisory fees and other expenses incurred by the Funds. Set forth
below is information provided by each Fund on its total 1996 annual expenses as
a percentage of the Fund's average net assets. For more information concerning
these expenses, see the prospectuses for the Funds that are contained in the
accompanying book entitled "Select*Product Mutual Funds".
EXPENSES
<TABLE>
<CAPTION>
TOTAL INVESTMENT
MANAGEMENT OTHER FUND ANNUAL
FUNDS FEES EXPENSES EXPENSES
- ----- ---- -------- --------
<S> <C> <C> <C>
Alger American Growth Portfolio (a) 0.75% 0.04% 0.79%
Alger American MidCap Growth Portfolio (a) 0.80% 0.04% 0.84%
Alger American Small Capitalization Portfolio (a) 0.85% 0.03% 0.88%
Fidelity's VIP Equity-Income Portfolio (a) (e) 0.51% 0.07% 0.58%
Fidelity's VIP Growth Portfolio (a) (e) 0.61% 0.08% 0.69%
Fidelity's VIP High Income Portfolio (a) 0.59% 0.12% 0.71%
Fidelity's VIP Money Market Portfolio 0.21% 0.09% 0.30%
Fidelity's VIP II Contrafund Portfolio (a) (e) 0.61% 0.13% 0.74%
Fidelity's VIP II Index 500 Portfolio (a) (f) 0.13% 0.15% 0.28%
Fidelity's VIP II Investment Grade Bond Portfolio(a) 0.45% 0.13% 0.58%
Janus Aggressive Growth Portfolio (a) (b) 0.72% 0.04% 0.76%
Janus Growth Portfolio (a) (b) 0.65% 0.04% 0.69%
Janus International Growth Portfolio (a) (b) 0.05% 1.21% 1.26%
Janus Worldwide Growth Portfolio (a) (b) 0.66% 0.14% 0.80%
Neuberger&Berman AMT Limited Maturity Bond Portfolio (a) 0.65% 0.13% 0.78%
Neuberger&Berman AMT Partners Portfolio (a) 0.84% 0.11% 0.95%
Northstar Growth Fund (c) 0.75% 0.05% 0.80%
Northstar High Yield Bond Fund (c) 0.75% 0.05% 0.80%
Northstar Income & Growth fund (c) 0.75% 0.05% 0.80%
Northstar International Value Fund (c) 0.75% 0.05% 0.80%
Northstar Multi-Sector Bond Fund (c) 0.75% 0.05% 0.80%
OCC Equity Portfolio (a) (d) 0.80% 0.22% 1.02%
OCC Global Equity Portfolio (a) (d) 0.80% 0.63% 1.43%
OCC Managed Portfolio (a) (d) 0.80% 0.10% 0.90%
OCC Small Cap Portfolio (a) (d) 0.80% 0.22% 1.02%
Putnam VT Diversified Income Fund 0.70% 0.13% 0.83%
Putnam VT Growth and Income Fund 0.49% 0.05% 0.54%
Putnam VT Voyager Fund 0.57% 0.06% 0.63%
</TABLE>
(a) The Company or its affiliates may receive compensation from an
affiliate or affiliates of certain of the Funds based upon an annual
percentage of the average net assets held in that Fund by the Company
and
<PAGE>
by certain of the Company's insurance company affiliates. These amounts
are intended to compensate the Company or the Company's affiliates for
administrative, recordkeeping, distribution in some cases, and other
services provided by the Company and its affiliates to Funds and/or the
Funds' affiliates. Payments of such amounts by an affiliate or
affiliates of the Funds do not increase the fees paid by the Funds or
their shareholders.
(b) The fees and expenses in the table above are based on gross expenses
before expense offset arrangements for the fiscal year ended December
31, 1996. The information for each Portfolio is net of fee waivers or
reductions from Janus Capital. Fee reductions for the Growth,
Aggressive Growth, International Growth, and Worldwide Growth
Portfolios reduce the management fee to the level of the corresponding
Janus retail fund. Other waivers, if applicable, are first applied
against the management fee and then against other expenses. Without
such waivers or reductions, the Management Fee, Other Expenses and
Total Operating Expenses would have been: 0.79%, 0.04%, and 0.83% for
the Janus Aggressive Growth Portfolio; 0.79%, 0.04%, and 0.83% for the
Janus Growth Portfolio; 1.00%, 1.21%, and 2.21% for the Janus
International Growth Portfolio; and 0.77%, 0.14%, and 0.91% for the
Janus Worldwide Growth Portfolio. Janus Capital may modify or terminate
the waivers or reductions at any time upon at least 90 days' notice to
the Trustees of Janus Aspen Series.
(c) The investment adviser to the Northstar Variable Trust has agreed to
reimburse the five Northstar Funds for any expenses in excess of 0.80%
of each Fund's average daily net assets. In the absence of the
investment adviser's expense reimbursements, the actual expenses that
would have been paid by each Fund during its fiscal year ended December
31, 1996 would have been: 1.70% for the Northstar Growth Fund, 1.73%
for the Northstar High Yield Bond Fund, 1.40% for the Northstar Income
and Growth Fund, and 1.68% for the Northstar Multi-Sector Bond Fund.
The International Value Fund commenced operations on August 8, 1997.
Absent expense reimbursement, the actual expenses for this fund are
estimated to be 1.90%. Expense reimbursements are voluntary. There is
no assurance of ongoing reimbursement.
(d) The annual expenses of OCC Accumulation Trust Portfolio (the
"Portfolios") as of December 31, 1996 have been restated to reflect new
management fee and expense limitation arrangements in effect as of May
1, 1996. Additionally, Other Expenses are shown gross of certain
expense offsets afforded the Portfolios which effectively lowered
overall custody expenses. Effective May 1, 1996, the expenses of the
Portfolios were contractually limited by OpCap Advisors so that their
respective annualized operating expenses (net of any expense offsets)
do not exceed 1.25% of their respective average daily net assets.
Furthermore, through December 31, 1997, the annualized operating
expenses of the Equity, Managed, and Small Cap Portfolios will be
voluntarily limited by OpCap Advisors so that annualized operating
expenses (net of any expense offsets) of these Portfolios do not exceed
1.00% of their respective average daily net assets. Without such
contractual and voluntary expense limitations and without giving effect
to any expense offsets, the Management Fees, Other Expenses and Total
Investment Fund Expenses incurred for the fiscal year ended December
31, 1996 would have been .80%, .31% and 1.11% respectively for the
Equity Portfolio; .80%, 1.04%, 1.84% respectively for the Global Equity
Portfolio; .80%, .10% and .90% respectively for the Managed Portfolio;
and .80%, .26% and 1.06% respectively for the Small Cap Portfolio.
Expense reimbursements are voluntary. There is no assurance of ongoing
reimbursement.
(e) A portion of the brokerage commissions that certain funds pay was used
to reduce funds expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby interest
earned on invested cash balances was used to reduce custodian and
transfer agent expenses. Including these reductions, the total
operating expenses presented in the table would have been .56% for
Fidelity's VIP Equity Income Portfolio, .67% for Fidelity's VIP Growth
Portfolio and .71% for Fidelity's VIP II Contrafund Portfolio.
<PAGE>
(f) FMR agreed to reimburse a portion of Fidelity's VIP II Index 500
Portfolio's expenses during the period. Without this reimbursement, the
funds' management fee, other expenses and total expenses would have
been .28%, .15%, and .43%, respectively. Expense reimbursements are
voluntary. There is no assurance of ongoing reimbursement.
WHAT CHARGES DO WE MAKE AGAINST EACH PREMIUM PAYMENT?
We deduct an amount (the Premium Expense Charge) from each premium and
credit the remaining premium (the Net Premium) to the Fixed Account or to the
Variable Account in accordance with your instructions. The Premium Expense
Charge is 5.00% of each premium payment. See "Deductions and Charges - Premium
Expense Charge."
WHAT CHARGES DO WE MAKE AGAINST THE ACCUMULATION VALUE?
The Accumulation Value of the Policy is subject to several charges
- --the Monthly Deduction and transfer and partial withdrawal charges.
The Monthly Deduction will be deducted monthly from both the Fixed
Accumulation Value and the Variable Accumulation Value and includes the cost of
insurance, the Monthly Administrative Charge, the Monthly Mortality and Expense
Risk Charge, and charges for optional insurance benefits (other than any Waiver
of Monthly Deduction rider). The cost of insurance will be determined by
multiplying the applicable cost of insurance rate(s) by the net amount at risk.
The Monthly Administrative Charge is currently $7.50 per month and is guaranteed
not to exceed the product of $5.00 and the ratio (not to exceed 2.00) of (a) the
Consumer Price Index (for all urban households) for the preceding September to
(b) the Consumer Price Index for September 1985. The Monthly Mortality and
Expense Risk Charge is anticipated to be equal to one-twelfth of .60 of 1%
(.60%) of the Variable Accumulation Value (that is, the total value attributable
to a specific Policy in the Sub-Accounts of the Variable Account) but in no
event will it exceed .9 of 1% (.90%) for the duration of the Policy. The charges
for optional insurance benefits will vary depending upon the benefit(s)
selected. See "Deductions and Charges --Monthly Deduction."
There is currently no charge imposed for each transfer but we presently
charge $10.00 for each partial withdrawal. The charge for transfers is
guaranteed not to exceed $25.00 per transfer for transfers in excess of 12 per
Policy Year for the duration of the Policy. The charge for partial withdrawals
is guaranteed not to exceed $25.00 for the duration of the Policy. See
"Deductions and Charges --Partial Withdrawal and Transfer Charges."
WHAT CHARGES DO WE MAKE UPON LAPSE OR TOTAL SURRENDER OF THE POLICY?
During the first 15 years the Policy is in force and the first 15 years
following a requested increase in the Face Amount, there is a charge if the
Policy lapses or you surrender the Policy (the Surrender Charge). See
"Deductions and Charges --Surrender Charge" and Appendixes D and E.
The maximum Surrender Charge on the Initial Face Amount and on any
requested increases in Face Amount will be determined on the Policy Date and on
the effective date of any such requested increase, as the case may be. This
maximum charge then remains level during the first five years in the relevant
15-year period, and then reduces in equal monthly increments until it becomes
zero at the end of 15 years. Thus, if the Policy remains in force during the
entire relevant 15-year period, you do not pay this charge.
The Surrender Charge on the Initial Face Amount will depend upon the
Initial Face Amount, the Insured's Age on the Policy Date, the Insured's sex,
and the Insured's Rate Class. The Surrender Charge on any requested increase in
Face Amount will depend upon the Face Amount of the increase, the Insured's Age
on the effective date of the increase, the Insured's sex, and the Insured's Rate
Class on the effective date of the increase.
<PAGE>
The Surrender Charge imposed upon early surrender or lapse will be
significant. As a result, you should purchase a Policy only if you have the
financial capability to keep it in force for a substantial period of time.
WHAT IS THE VALUE OF THE POLICY IF YOU SURRENDER IT?
In general, the Cash Surrender Value is the amount you would receive if
you surrender the Policy. To determine the Cash Surrender Value, your
Accumulation Value is reduced by the Surrender Charge, if any, and any Loan
Amount and unpaid Monthly Deductions.
CAN YOU MAKE PARTIAL WITHDRAWALS?
Yes, you can withdraw part of your Cash Surrender Value. Each partial
withdrawal must be at least $500. You will not incur a Surrender Charge, but
partial withdrawals are subject to a processing charge. We currently make a
$10.00 charge for each partial withdrawal. The charge is guaranteed not to
exceed $25.00 per partial withdrawal. Only one partial withdrawal is allowed in
any Policy Year. See "Surrender Benefits --Partial Withdrawal."
WHAT ARE THE FREE LOOK AND CONVERSION RIGHTS?
You have a limited free look period during which you have a right to
return the Policy and receive a refund of all premiums paid. See "Free Look and
Conversion Rights -- Free Look Rights." The Policy must be returned to us by
midnight of the 20th day after you receive it.
Also, the Policy may in effect be converted in whole or in part to a
"fixed benefit" policy (providing benefits that do not vary with the investment
performance of the Variable Account) at any time during the first two Policy
Years by transferring all or part of the Accumulation Value of the Policy from
the Variable Account to the Fixed Account. For policies issued in Connecticut
and New Jersey, the conversion right may be exercised by transferring to a
different permanent fixed benefit life insurance policy offered by us in those
states. See "Free Look and Conversion Rights --Conversion Rights." Similar
conversion rights will be available for requested increases in the Face Amount.
See "Free Look and Conversion Rights."
CAN YOU TRANSFER BETWEEN THE SUB-ACCOUNTS AND/OR THE FIXED ACCOUNT?
Subject to certain restrictions, you can transfer all or part of your
Accumulation Value between the investment options of the Policy. We currently
allow up to twelve transfers per year. Transfers from the Fixed Account are
subject to certain additional restrictions. We reserve the right to limit you to
12 transfers per year and to make a charge for each transfer in excess of 12.
(Transfers to or from the Fixed Account are not available for policies issued in
New Jersey.) We currently make no charge for each transfer. This charge is
guaranteed not to exceed $25.00 per transfer for transfers in excess of 12 per
year. To the extent, however, that you request a transfer from the Variable
Account to the Fixed Account in connection with exercising your conversion
rights under the Policy, the limit on the number of transfers and the charge
will not apply. See "Free Look and Conversion Rights--Conversion Rights" and
"Transfers."
CAN YOU BORROW AGAINST THE VALUE OF THE POLICY?
At any time after the first Policy Year, you can borrow the Cash Value
of the Policy less any existing Loan Amount. Each loan must be at least $500.
Interest is payable in advance for each Policy Year and accrues daily at an
effective annual rate that will not exceed 6.00% (which is 5.66% when payable in
advance). After the tenth Policy Year, we will charge interest at an annual rate
of 4.00% (which is 3.85% when payable in advance)
<PAGE>
on the portion of your Loan Amount that is not in excess of (a) the Accumulation
Value, less (b) the total of all premiums paid net of all partial withdrawals.
See "Policy Loans."
ARE DEATH BENEFIT PROCEEDS TAXABLE INCOME TO THE BENEFICIARY?
Under current Federal tax law, as long as the Policy qualifies as life
insurance the Death Benefit under the Policy will be subject to the same Federal
income tax treatment as proceeds of traditional life insurance. Therefore, the
Death Benefit should not be taxable income to the beneficiary. See "Federal Tax
Matters --Policy Proceeds."
ARE ACCUMULATION VALUE INCREASES INCLUDED IN YOUR TAXABLE INCOME?
Under current Federal tax law, as long as the Policy qualifies as life
insurance, Accumulation Value increases will also be subject to the same Federal
income tax treatment as traditional life insurance cash values. Therefore, any
increases should accumulate on a tax deferred basis. See "Federal Tax Matters
- --Policy Proceeds."
WILL EXERCISING CERTAIN POLICY RIGHTS HAVE TAX CONSEQUENCES?
A change of owners, a partial withdrawal, a total surrender, or a
Policy loan may have tax consequences depending on the particular circumstances.
See "Federal Tax Matters --Policy Proceeds."
WHO SELLS THE POLICIES?
The Policies are sold by licensed insurance agents who are also
registered representatives of broker-dealers registered under the Securities
Exchange Act of 1934 and who are members of the National Association of
Securities Dealers, Inc. Washington Square Securities, Inc., an affiliate of
ours, is the Principal Underwriter of the Policies. See "Distribution of the
Policies."
PART 2. DETAILED INFORMATION
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
We are a stock life insurance company incorporated under the laws of
the State of New York in 1917 under the name The Morris Plan Insurance Society.
In 1946 we adopted the name Bankers Security Life Insurance Society, and in 1996
we adopted our present name. We are authorized to transact business in all
states, the District of Columbia, and the Dominican Republic. We were the first
company to write credit life insurance and until 1950 our business was confined
to credit life insurance on a group and individual basis initiated in connection
with loans made by banks and other lenders. In 1950 we began writing ordinary
life insurance. In 1962 we acquired, through merger, Postal Life Insurance
Company, a New York chartered stock life insurance company. In 1971 we acquired,
through merger, Congressional Life Insurance Company, a New York chartered stock
life insurance company. In 1996 we acquired, through merger, The North Atlantic
Life Insurance Company of America, also a New York chartered stock life
insurance company.
Our principal office is located at 1000 Woodbury Road, Suite 102, P.O.
Box 9004, Woodbury, New York 11797.
On December 20, 1979, we became a wholly-owned subsidiary of United
Services Life Insurance Company ("United Services") which became an indirect,
wholly owned subsidiary of ReliaStar Financial Corp. ("ReliaStar"), formerly The
NWNL Companies, Inc., when ReliaStar acquired USLICO Corporation on January 17,
1995. ReliaStar is a holding company whose subsidiaries specialize in life
insurance and related financial services businesses.
<PAGE>
On July 1, 1997, ReliaStar Financial Corp., the Company's ultimate parent
(ReliaStar), completed the acquisition of Security-Connecticut Corporation
("SRC"). SRC is a holding company with two primary subsidiaries: Security
Connecticut Life Insurance Company of Avon, Connecticut, and Lincoln Security
Life Insurance Company ("LSL") of Brewster, New York. As of December 31, 1996,
LSL had assets of $365 million and total shareholders equity of $45 million. It
is management's current intent, pending regulatory approval, to merge LSL with
and into the Company.
THE VARIABLE ACCOUNT
The Variable Account is a Separate Account of ours, established by the
Board of Directors on March 23, 1982 pursuant to the laws of the State of New
York. The Variable Account will receive and invest the Net Premiums paid and
allocated to it under this Policy. In addition, the Variable Account currently
receives and invests net premiums for another class of scheduled premium
variable life insurance policy and may do so for additional classes in the
future. The Variable Account meets the definition of a "separate account" under
the federal securities laws and has been registered with the SEC as a unit
investment trust under the Investment Company Act of 1940. The registration does
not involve supervision by the SEC of the management or investment policies or
practices of the Variable Account, us, or the Funds.
We own the assets of the Variable Account. However, the New York laws
under which the Variable Account was established provide that the Variable
Account cannot be charged with liabilities arising out of any other business we
may conduct. We are required to maintain assets which are at least equal to the
reserves and other liabilities of the Variable Account. We may transfer assets
which exceed these reserves and liabilities to our general account (the Fixed
Account).
For a description of the Fixed Account, see Appendix A to this
Prospectus.
PERFORMANCE INFORMATION
Performance information for the Sub-Accounts of the Variable Account
and the Funds available for investment by the Variable Account may appear in
advertisements, sales literature, or reports to Policy owners or prospective
purchasers. Performance information for the Sub-Accounts will reflect deductions
of Fund expenses and be adjusted to reflect the Mortality and Expense Risk
Charge, but will not reflect deductions for the cost of insurance or the
Surrender Charge. Quotations of performance information for the Funds will be
accompanied by performance information for the Sub- Accounts. Performance
information for the Funds will take into account all fees and charges at the
Fund level, but will not reflect any deductions from the Variable Account.
Performance information reflects only the performance of a hypothetical
investment during a particular time period in which the calculations are based.
Performance information showing total returns and average annual total returns
may be provided for periods prior to the date a Sub-Account commenced operation.
Such performance information will be calculated based on the assumption that the
Sub-Accounts were in existence for the same periods as those indicated for the
Funds, with the level of charges at the Variable Account level that were in
effect at the inception of the Sub-Accounts. Performance information should be
considered in light of the investment objectives and policies, characteristics
and quality of the portfolio of the Fund in which the Sub-Account invests, and
the market conditions during the given period of time, and should not be
considered as a representation of what may be achieved in the future.
We may also provide individualized hypothetical illustrations of Policy
Accumulation Value, Cash Surrender Value and Death Benefit based on historical
investment returns of the Funds. These illustrations will reflect deductions for
Fund expenses and Policy and Variable Account charges, including the Monthly
Deduction, Premium Expense Charge and the Surrender Charge. These hypothetical
illustrations will be based on
<PAGE>
the actual historical experience of the Funds as if the Sub-Accounts had been in
existence and a Policy issued for the same periods as those indicated for the
Funds.
Performance of the Sub-Accounts and/or the Funds as reported from time
to time in advertisements and sales literature may be compared to other variable
life insurance issuers in general or to the performance of particular types of
variable life insurance policies investing in mutual funds, or investment series
of mutual funds with investment objectives similar to each of the Sub-Accounts,
whose performance is reported by Lipper Analytical Services, Inc. ("Lipper") and
Morningstar, Inc. ("Morningstar") or reported by other services, companies,
individuals or other industry or financial publications of general interest,
such as FORBES, MONEY, THE WALL STREET JOURNAL, BUSINESS WEEK, BARRON'S,
KIPLINGER'S PERSONAL FINANCE, and FORTUNE. Lipper and Morningstar are
independent services which monitor and rank the performances of variable life
insurance issuers in each of the major categories of investment objectives on an
industry-wide basis.
Lipper's and Morningstar's rankings include variable annuity issuers as
well as variable life insurance issuers. The performance analysis prepared by
Lipper and Morningstar ranks such issuers on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges, redemption fees
or certain expense deductions at the separate account level into consideration.
We may also compare the performance of each Sub-Account in advertising
and sales literature to the Standard & Poor's Index of 500 common stocks and the
Dow Jones Industrials, which are widely used measures of stock market
performance. We may also compare the performance of each Sub-Account to other
widely recognized indices. Unmanaged indices may assume the reinvestment of
dividends, but typically do not reflect any "deduction" for the expense of
operating or managing an investment portfolio.
THE POLICIES
The Policies are flexible premium variable life insurance contracts
with death benefits, cash values, and other features of traditional life
insurance contracts. They are "flexible premium" because premiums do not have to
be paid according to a fixed schedule. They are "variable" because, to the
extent Accumulation Value is attributable to the Variable Account, Accumulation
Values and, under certain circumstances, the Death Benefit will increase and
decrease based on the investment performance of the Funds in which the
Sub-Accounts to which you allocate your premium payments invest.
DEATH BENEFIT
Like traditional life insurance, we pay a death benefit if the Insured
dies while the Policy is in force. The proceeds payable upon the death of the
Insured will be the Death Benefit (see "Death Benefit Options" below) reduced by
any Loan Amount and unpaid Monthly Deductions. All or part of the proceeds may
be paid in cash to your beneficiaries or under one or more of the settlement
options we offer. See "General Provisions --Settlement Options."
The Policy provides two Death Benefit Options: the Level Amount Option
and the Variable Amount Option. You choose the Death Benefit Option on the
application for the Policy. Subject to certain limitations, you can change the
Death Benefit Option after issuance of the Policy. See "Death Benefit --Change
in Death Benefit Option."
The Death Benefit may vary with the Policy's Accumulation Value. Under
the Level Amount Option, the Death Benefit will only vary with the Accumulation
Value whenever the Accumulation Value multiplied by the corridor percentage (see
"Death Benefit Options --Level Amount Option") exceeds the Face Amount of the
Policy. The Death Benefit under the Variable Amount Option will always vary with
the Accumulation Value because the Death Benefit equals the Face Amount plus the
Accumulation Value, or the corridor percentage of
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the Accumulation Value. Under either Death Benefit Option, however, the Death
Benefit will never be less than the current Face Amount of the Policy and will
be payable only as long as the Policy remains in force. The proceeds payable
upon the death of the Insured under either Death Benefit Option will be reduced
by any Loan Amount and any unpaid Monthly Deductions.
In addition to affecting the amount of the Death Benefit as described
above, the Accumulation Value generally determines how long the Policy remains
in force. See "Policy Lapse and Reinstatement." This means that, to the extent
Accumulation Value is attributable to the Variable Account, the investment
performance of the Variable Account (and the underlying Funds) may affect the
duration of the Policy by affecting the amount of Accumulation Value. You bear
the investment risk with respect to any amounts allocated to the Variable
Account. If, however, the Death Benefit Guarantee is in effect (see "Death
Benefit Guarantee"), the Policy will stay in force until the Insured reaches Age
65 (or five Policy Years, if longer) without regard to the investment
performance under the Policy.
Appendix C illustrates Accumulation Values, Surrender Charges, Cash
Surrender Values, and Death Benefits assuming different levels of premium
payments and investment returns for selected Ages and Face Amounts.
DEATH BENEFIT OPTIONS
The Level Amount Option and the Variable Amount Option are described
below.
LEVEL AMOUNT OPTION. The Death Benefit is the greater of the current
Face Amount of the Policy or the corridor percentage multiplied by the
Accumulation Value on the Valuation Date on or next following the date of the
Insured's death. The corridor percentage is 250% for an Insured Age 40 or below,
and the percentage declines with increasing Ages as shown below in the Corridor
Percentage Table. Accordingly, under the Level Amount Option the Death Benefit
will remain level unless the corridor percentage of Accumulation Value exceeds
the current Face Amount, in which case the amount of the Death Benefit will vary
as the Accumulation Value varies.
ILLUSTRATION OF LEVEL AMOUNT OPTION. For purposes of this illustration,
assume that the Insured is under Age 40, and that there is no Loan Amount. Under
the Level Amount Option, a Policy with a $100,000 Face Amount will generally
have a $100,000 Death Benefit. However, because the Death Benefit must be equal
to or be greater than 250% of the Accumulation Value, any time the Accumulation
Value of the Policy exceeds $40,000, the Death Benefit will exceed the $100,000
Face Amount. Each additional dollar added to the Accumulation Value above
$40,000 will increase the Death Benefit by $2.50. Thus, if the Accumulation
Value exceeds $40,000 and increases by $100 because of investment performance or
premium payments, the Death Benefit will increase by $250. A Policy owner with
an Accumulation Value of $50,000 will be entitled to a Death Benefit of $125,000
($50,000 X 250%); an Accumulation Value of $75,000 will yield a Death Benefit of
$187,500 ($75,000 X 250%); and an Accumulation Value of $100,000 will yield a
Death Benefit of $250,000 ($100,000 X 250%).
Similarly, as long as the Accumulation Value exceeds $40,000, each
dollar taken out of the Accumulation Value will reduce the Death Benefit by
$2.50. If, for example, the Accumulation Value is reduced from $75,000 to
$70,000 because of partial withdrawals, charges, or negative investment
performance, the Death Benefit will be reduced from $187,500 to $175,000. If at
any time, however, the Accumulation Value multiplied by the corridor percentage
is less than the Face Amount, the Death Benefit will equal the current Face
Amount of the Policy.
The corridor percentage becomes lower as the Insured's Age increases.
If the current Age of the Insured in the illustration above were, for example,
50 (rather than under Age 40), the corridor percentage would be 185%. The Death
Benefit would not exceed the $100,000 Face Amount unless the Accumulation Value
exceeded
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approximately $54,055 (rather than $40,000), and each $1 then added to or taken
from the Accumulation Value would change the Death Benefit by $1.85 (rather than
$2.50).
CORRIDOR PERCENTAGE TABLE
Insured's Age on Corridor Percentage
Previous Policy Anniversary of Accumulation Value
--------------------------- ---------------------
40 or younger 250%
41 243
42 236
43 229
44 222
45 215
46 209
47 203
48 197
49 191
50 185
51 178
52 171
53 164
54 157
55 150
56 146
57 142
58 138
59 134
60 130
61 128
62 126
63 124
64 122
65 120
66 119
67 118
68 117
69 116
70 115
71 113
72 111
73 109
74 107
75-90 105
91 104
92 103
93 102
94 101
95 100
VARIABLE AMOUNT OPTION. The Death Benefit is equal to the greater of
the current Face Amount plus the Accumulation Value of the Policy, or the
corridor percentage multiplied by the Accumulation Value on the
<PAGE>
Valuation Date on or next following the date of the Insured's death. The
corridor percentage is 250% for an Insured Age 40 or below, and the percentage
declines with increasing Ages as shown in the Corridor Percentage Table above.
Accordingly, under the Variable Amount Option the amount of the Death Benefit
will always vary as the Accumulation Value varies.
ILLUSTRATION OF VARIABLE AMOUNT OPTION. For purposes of this
illustration, assume that the Insured is under Age 40 and that there is no Loan
Amount. Under the Variable Amount Option, a Policy with a Face Amount of
$100,000 will generally pay a Death Benefit of $100,000 plus the Accumulation
Value. Thus, for example, a Policy with an Accumulation Value of $20,000 will
have a Death Benefit of $120,000 ($100,000 + $20,000); an Accumulation Value of
$40,000 will yield a Death Benefit of $140,000 ($100,000 + $40,000). The Death
Benefit, however, must be at least 250% of the Accumulation Value. As a result,
if the Accumulation Value of the Policy exceeds approximately $66,667, the Death
Benefit will be greater than the Face Amount plus the Accumulation Value. Each
additional dollar of the Accumulation Value above $66,667 will increase the
Death Benefit by $2.50. Thus, if the Accumulation Value exceeds $66,667 and
increases by $100 because of investment performance or premium payments, the
Death Benefit will increase by $250. A Policy owner with an Accumulation Value
of $75,000 will be entitled to a Death Benefit of $187,500 ($75,000 X 250%); an
Accumulation Value of $100,000 will yield a Death Benefit of $250,000 ($100,000
X 250%); and an Accumulation Value of $125,000 will yield a Death Benefit of
$312,500 ($125,000 X 250%).
Similarly, any time the Accumulation Value exceeds $66,667, each dollar
taken out of the Accumulation Value will reduce the Death Benefit by $2.50. If,
for example, the Accumulation Value is reduced from $75,000 to $70,000 because
of partial withdrawals, charges, or negative investment performance, the Death
Benefit will be reduced from $187,500 to $175,000. If at any time, however, the
Accumulation Value multiplied by the corridor percentage is less than the Face
Amount plus the Accumulation Value, then the Death Benefit will be the current
Face Amount plus the Accumulation Value of the Policy.
The corridor percentage becomes lower as the Insured's Age increases.
If the current Age of the Insured in the illustration above were, for example,
50 (rather than under 40), the corridor percentage would be 185%. The amount of
the Death Benefit would be the sum of the Accumulation Value plus $100,000
unless the Accumulation Value exceeded approximately $117,647 (rather than
$66,667), and each $1 then added to or taken from the Accumulation Value would
change the Death Benefit by $1.85 (rather than $2.50).
WHICH DEATH BENEFIT OPTION TO CHOOSE
If you prefer to have premium payments and favorable investment
performance reflected partly in the form of an increasing Death Benefit, you
should choose the Variable Amount Option. If you are satisfied with the amount
of your existing insurance coverage and prefer to have premium payments and
favorable investment performance reflected to the maximum extent in the
Accumulation Value, you should choose the Level Amount Option.
REQUESTED CHANGES IN FACE AMOUNT
Subject to certain limitations, you may request an increase or decrease
in the Face Amount. No increase or decrease in the Face Amount will be permitted
during the first Policy Year.
INCREASES. For an increase in the Face Amount, a written request must
be submitted to us. We may also require additional evidence of insurability
satisfactory to us. The effective date of the increase will be the Monthly
Anniversary on or next following our approval of the increase. The increase may
not be less than $5,000 and no increase will be permitted after the Insured
reaches Age 75. We will deduct any charges associated with the increase (the
increases in the cost of insurance and the Surrender Charge upon lapse or total
surrender -- see "Effect of Requested Changes in Face Amount" below) from the
Accumulation Value, whether or not you pay an
<PAGE>
additional premium in connection with the increase. You will be entitled to
limited conversion rights with respect to requested increases in Face Amount.
See "Free Look and Conversion Rights."
DECREASES. For a decrease in the Face Amount, a written request must
also be submitted to us. Any decrease in the Face Amount will be effective on
the Monthly Anniversary on or next following our receipt of a written request.
The Face Amount remaining in force after any requested decrease may not be less
than the Minimum Face Amount shown in the Policy. Under our current policies,
the Minimum Face Amount is $25,000, but we reserve the right to establish a
different Minimum Face Amount in the future. If, following a decrease in Face
Amount, the Policy would no longer qualify as life insurance under Federal tax
law (see "Federal Tax Matters -- Policy Proceeds"), the decrease will be limited
to the extent necessary to meet these requirements.
For purposes of determining the cost of insurance, decreases in the
Face Amount will be applied to reduce the current Face Amount in the following
order:
(a) The Face Amount provided by the most recent increase;
(b) The next most recent increases successively; and
(c) The Face Amount when the Policy was issued.
By reducing the current Face Amount in this manner, the Rate Class
applicable to the most recent increase in Face Amount will be eliminated first,
then the Rate Class applicable to the next most recent increase, and so on, for
the purposes of calculating the cost of insurance. This assumption will affect
the cost of insurance under the Policy only if different Rate Classes have been
applied to the current Face Amount. A Rate Class is a group of Insureds we
determine based upon our expectation that they will have similar mortality
experience. We currently place Insureds into standard Rate Classes or into
substandard Rate Classes that involve a higher mortality risk (for example, a
200% Rate Class or a 300% Rate Class). In an otherwise identical Policy, an
Insured in the standard Rate Class will have a lower cost of insurance than an
Insured in a substandard Rate Class with higher mortality risks. See "Deductions
and Charges -- Monthly Deduction."
For example, assume that the Initial Face Amount was $50,000 with a
standard Rate Class, and that successive increases of $25,000 (at a Rate Class
of 200%) and $50,000 (at a Rate Class of 300%) were added. If a decrease of
$50,000 or less is requested, the amount of insurance at a 300% Rate Class will
be reduced first. If a decrease of more than $50,000 is requested, the amount at
a 300% Rate Class will be eliminated, and the excess over $50,000 will next
reduce the amount of insurance at a 200% Rate Class.
EFFECT OF REQUESTED CHANGES IN FACE AMOUNT. An increase or decrease in
Face Amount will affect the Monthly Deduction because the cost of insurance
depends upon the Face Amount. The charge for certain optional insurance benefits
may also be affected. See "Deductions and Charges -- Monthly Deduction." An
increase in the Face Amount will increase the Surrender Charge, but a decrease
in the Face Amount will not reduce the Surrender Charge. The Surrender Charge
is, however, imposed only upon lapse or total surrender of the Policy and not
upon a requested decrease in Face Amount. See "Deductions and Charges --
Surrender Charge."
An increase in the Face Amount will increase the Minimum Monthly
Premium as of the effective date of the increase. Therefore, additional premium
payments may be required to maintain the Death Benefit Guarantee. A decrease in
the Face Amount will reduce the Minimum Monthly Premium as of the effective date
of the decrease. See "Death Benefit Guarantee."
The additional Surrender Charge on a requested increase in the Face
Amount will reduce the Cash Surrender Value (which is the Accumulation Value
less any Surrender Charge, Loan Amount and unpaid
<PAGE>
Monthly Deductions). If the resulting Cash Surrender Value is not sufficient to
cover the Monthly Deduction, the Policy may lapse unless the Death Benefit
Guarantee is in effect. See "Policy Lapse and Reinstatement -- Lapse" and "Death
Benefit Guarantee."
INSURANCE PROTECTION
You may increase or decrease the pure insurance protection provided by
the Policy (that is, the difference between the Death Benefit and the
Accumulation Value) in one of several ways as insurance needs change. These ways
include increasing or decreasing the Face Amount of insurance, changing the
level of premium payments, and, to a lesser extent, making a partial withdrawal
under the Policy. Although the consequences of each of these methods will depend
upon the individual circumstances, they may be generally summarized as follows:
(a) A decrease in the Face Amount will, subject to the corridor percentage
limitations (see "Death Benefit -- Death Benefit Options"), decrease
the pure insurance protection without reducing the Accumulation Value.
If the Face Amount is decreased, the Policy charges generally will
decrease as well. (Note that the Surrender Charge will NOT be reduced.
See "Deductions and Charges -- Surrender Charge.")
(b) An increase in the Face Amount (which is generally subject to
underwriting approval -- see "Death Benefit -- Requested Changes in
Face Amount") will likely increase the amount of pure insurance
protection, depending on the amount of Accumulation Value and the
resultant corridor percentage limitation. If the insurance protection
is increased, the Policy charges generally will increase as well.
(c) A partial withdrawal will reduce the Death Benefit. See "Surrender
Benefits -- Partial Withdrawal." However, it has a limited effect on
the amount of pure insurance protection and charges under the Policy,
because the decrease in the Death Benefit is usually equal to the
amount of Accumulation Value withdrawn. The primary use of a partial
withdrawal is to withdraw Accumulation Value. Furthermore, it results
in a reduced amount of Accumulation Value and increases the possibility
that the Policy will lapse.
(d) Under the Level Amount Option, until the corridor percentage of
Accumulation Value exceeds the Face Amount, (i) an increased level of
premium payments will reduce the amount of pure insurance protection,
and (ii) a reduced level of premium payments will increase the amount
of pure insurance protection.
(e) Under the Variable Amount Option, until the corridor percentage of
Accumulation Value exceeds the Face Amount plus the Accumulation Value,
the level of premium payments will not affect the amount of pure
insurance protection. (However, both the Accumulation Value and the
Death Benefit will be increased if premium payments are increased, and
reduced if premium payments are reduced.)
(f) Under either Death Benefit Option, if the Death Benefit is the corridor
percentage of Accumulation Value, then (i) an increased level of
premium payments will increase the amount of pure insurance protection
(subject to underwriting approval -- see "Payment and Allocation of
Premiums -- Amount and Timing of Premiums"), and (ii) a reduced level
of premium payments will reduce the pure insurance protection.
THE TECHNIQUES DESCRIBED IN THIS SECTION FOR CHANGING THE
AMOUNT OF PURE INSURANCE PROTECTION UNDER THE POLICY (FOR
EXAMPLE, CHANGING THE FACE AMOUNT, MAKING A PARTIAL
WITHDRAWAL, AND CHANGING THE AMOUNT OF PREMIUM PAYMENTS) MUST
BE CONSIDERED TOGETHER WITH THE OTHER RESTRICTIONS AND
CONSIDERATIONS DESCRIBED ELSEWHERE IN THIS PROSPECTUS.
<PAGE>
CHANGE IN DEATH BENEFIT OPTION
After the first two Policy Years, and at least two years after any
increase in Face Amount, you may change the Death Benefit Option once each
Policy Year. The change is effective on the Monthly Anniversary on or next
following the date we receive your request. You must submit a written request to
change the Death Benefit Option. A change in the Death Benefit Option will also
change the Face Amount. If the Death Benefit Option is changed from the Level
Amount Option to the Variable Amount Option, the Face Amount will be decreased
by an amount equal to the Accumulation Value on the effective date of the
change. You cannot change from the Level Amount Option to the Variable Amount
Option if the resulting Face Amount would fall below the Minimum Face Amount
(currently $25,000).
If the Death Benefit Option is changed from the Variable Amount Option
to the Level Amount Option, the Face Amount will be increased by an amount equal
to the Policy's Accumulation Value on the effective date of the change.
An increase or decrease in Face Amount resulting from a change in the
Death Benefit Option will affect the future Monthly Deductions because the cost
of insurance depends upon the Face Amount. The charge for certain optional
insurance benefits may also be affected. See "Deductions and Charges -- Monthly
Deduction." The Surrender Charge, however, will not be affected by an increase
or decrease in Face Amount resulting from a change in Death Benefit Option.
Changes in the Death Benefit Option do not require additional evidence
of insurability.
ACCELERATED BENEFIT
Under certain circumstances, the Accelerated Benefit allows a Policy
owner to accelerate benefits from the Policy that would be otherwise payable
upon the death of the Insured. The benefit may vary state-by-state and your
registered representative should be consulted as to whether and to what extent
the rider is available in a particular state and on any particular Policy.
Generally, we will provide an Accelerated Benefit if the Insured has a
terminal illness that will result in the death of the Insured within 12 months,
as certified by a physician.
The Accelerated Benefit will not be more than 50% of the amount that
would be payable at the death of the Insured. The Accelerated Benefit will first
be used to pay off any outstanding Policy loans and interest due. The remainder
of the Accelerated Benefit will be in a lump sum to the Policy owner.
Limitations, as described in the Accelerated Benefit Rider, may apply.
A lien will be established against the Policy for the amount of the
Accelerated Benefit plus the administrative charge, plus interest on the lien.
Any proceeds from the Policy will be first used to repay this lien. The Policy
owner's access to the Cash Value will be reduced by the amount of the lien. The
proceeds payable to the beneficiary will be reduced by the amount of the lien.
The administrative charge will not exceed $300 and will be assessed at
the time the benefit is accelerated.
The premium payable on the Policy will not be affected by the
Accelerated Benefit.
Receipt of a benefit under the Accelerated Benefit Rider may give rise
to Federal or State income tax. A competent tax adviser should be consulted for
further information.
<PAGE>
The above information is not intended to be a complete summary of the
Rider. All of the terms and provisions of the Accelerated Benefit are set forth
in the Rider and should be referred to in order to fully ascertain its benefits
and limitations.
PAYMENT AND ALLOCATION OF PREMIUMS
ISSUING THE POLICY
To apply for a Policy, an individual must complete an application and
personally deliver it to our licensed agent. The minimum Face Amount is
currently $25,000, but we reserve the right to specify a different minimum Face
Amount in the future for issuing a new Policy. We will generally only issue a
Policy to an applicant Age 75 or less who supplies evidence of insurability
satisfactory to us. Acceptance is subject to our underwriting rules and we
reserve the right to reject an application for any reason permitted by law.
SPONSORED MARKET PLANS. Policies may be purchased under sponsored
arrangements where permitted by state law. A "sponsored arrangement" includes an
arrangement where an employer permits group solicitation of its employees or an
association permits group solicitations of its members for the purchase of
Policies on an individual basis.
All participants in sponsored arrangements are individually
underwritten. Persons purchasing under a sponsored arrangement may apply for
simplified underwriting. If simplified underwriting is granted, the cost of
insurance may increase as a result of higher than anticipated mortality
experience. However, any such increase will not cause the cost of insurance
charge to exceed the guaranteed rates set forth in the Policy.
COVERAGE. Coverage under a Policy begins on the later of the Issue Date
or the date we receive at least the minimum initial premium (see immediately
following section). In general, if the applicant pays at least the minimum
initial premium with the application, the Issue Date will be the later of the
date of the application or the date of any medical examination required by our
underwriting procedures. However, if underwriting approval has not occurred
within 45 days after we receive the application or if you authorize premiums to
be paid by bank account monthly deduction, the Issue Date will be the date of
underwriting approval.
If you authorize premiums to be paid by government allotment, the Issue
Date generally will be, subject to our underwriting approval, the first day of
the month in which we receive the first Minimum Monthly Premium through
government allotment, whether or not a Minimum Monthly Premium is collected with
the application. If a Minimum Monthly Premium is collected with the application,
it will be allocated to the Sub-Accounts of the Variable Account and the Fixed
Account on the Valuation Date next following the Issue Date.
MINIMUM INITIAL PREMIUM. The minimum initial premium is three Minimum
Monthly Premiums. See "Death Benefit Guarantee." If, however, you authorize
premiums to be paid by bank account monthly deduction or government allotment,
we will accept one Minimum Monthly Premium together with the required
authorization forms. The Minimum Monthly Premium is specified in the Policy and
determines the payments required to maintain the Death Benefit Guarantee.
CREDITING NET PREMIUMS. We will credit Net Premiums to the Sub-Accounts
of the Variable Account and to the Fixed Account (except for policies issued in
New Jersey) on the basis of the applicant's allocation on the latest of the
following dates:
* The Valuation Date following the date of underwriting
approval.
* The Valuation Date on or next following the Policy Date.
<PAGE>
* The Valuation Date on or next following the date we have
received at least the required minimum initial premium
payment.
* In the case of Policies issued under government allotment
programs, the Valuation Date next following the Issue Date.
Until the date on which Net Premiums are credited as described above,
premium payments will be held in our General Account. No interest will be earned
on these premium payments during this period of time.
REFUNDING PREMIUM. We will return all premiums paid without interest if
any of the following occur:
* We send notice to the applicant that the insurance is
declined.
* The applicant refuses an offer for an alternative policy.
* The applicant does not supply required medical exams or tests
within 30 days of the date of the application.
* The applicant returns the Policy under the limited free look
right. See "Free Look and Conversion Rights -- Free Look
Rights."
ALLOCATION OF PREMIUMS
You choose the initial allocation of your Net Premiums (your gross
premiums less the Premium Expense Charge) to the Fixed Account and the
Sub-Accounts of the Variable Account on the application for the Policy. (The
Fixed Account is not available for Net Premium allocation under policies issued
in New Jersey.) You may change the allocation at any time by notifying us in
writing. Changes will not be effective until the date we receive your request
and will only affect premiums we receive on or after that date. The premium
allocation may be 100% to the Fixed Account or the Sub-Accounts or divided among
the Fixed Account and the Sub-Accounts in whole percentage points totaling 100%.
We reserve the right to adjust any allocation to eliminate fractional
percentages. Changing the Net Premium allocation will not affect the allocation
of existing Accumulation Value.
AMOUNT AND TIMING OF PREMIUMS
The amount and frequency of premium payments will affect the
Accumulation Value, the Cash Surrender Value, and how long the Policy will
remain in force (including affecting whether the Death Benefit Guarantee is in
effect -- see "Death Benefit Guarantee"). After the initial premium, you may
determine the amount and timing of subsequent premium payments within the
following restrictions:
* IN MOST CASES, PAYMENT OF CUMULATIVE PREMIUMS SUFFICIENT TO
MAINTAIN THE DEATH BENEFIT GUARANTEE WILL BE REQUIRED TO KEEP
THE POLICY IN FORCE DURING AT LEAST THE FIRST SEVERAL POLICY
YEARS. SEE "DEATH BENEFIT GUARANTEE."
* We may choose not to accept any premium less than $25.00.
* We reserve the right to limit the amount of any premium
payment. In general, during the first Policy Year we will not
accept total premium payments in excess of $250,000 on the
life of any Insured, whether such payments are received on a
Policy or on any other insurance policy issued by us or our
affiliates. Also, we will not accept any premium payment in
excess of $50,000 on
<PAGE>
any Policy after the first Policy Year. At our discretion,
however, we may waive any of these premium limitations.
* We may require additional evidence of insurability
satisfactory to us if any premium would increase the
difference between the Death Benefit and the Accumulation
Value (that is, the net amount at risk). A premium payment
would increase the net amount at risk if at the time of
payment the Death Benefit would be based upon the applicable
percentage of Accumulation Value. See "Death Benefit -- Death
Benefit Options."
* In no event may the total of all premiums paid, both scheduled
and unscheduled, exceed the current maximum premium payments
allowed for life insurance under Section 7702 of the Federal
Internal Revenue Code. If at any time a premium is paid which
would result in total premiums exceeding the current maximum
premiums allowed, we will only accept that portion of the
premium which would make total premiums equal the maximum. Any
part of the premium in excess of that amount will be returned,
and no further premiums will be accepted until allowed by the
current maximum premium limitations.
* If you contemplate a large premium payment under this Policy,
and you wish to avoid Modified Endowment Contract
classification, you may contact us in writing before making
the payment and we will tell you the maximum amount which can
be paid into the Policy. See "Federal Tax Matters -- Policy
Proceeds."
PLANNED PERIODIC PREMIUMS
You may choose a Planned Periodic Premium schedule which indicates a
preference as to future amounts and frequency of payment. The Planned Periodic
Premiums may be paid annually, semi-annually, quarterly or, if you choose, you
can pay the Planned Periodic Premiums by bank account monthly deduction or
government allotment.
The amount and frequency of your initial Planned Periodic Premium will
be shown in the Policy. You may change the Planned Periodic Premium at any time
by written request. We may limit the amount of any increase if such an increase
would result in planned periodic premiums that are larger than (a) the maximum
premium we would accept under the terms of the Amount and Timing of Premium
Payments provision in the Policy or (b) the planned periodic premium which would
total more than $50,000 per year.
As mentioned above, the amount and frequency of premium payments will
affect Accumulation Value, Cash Surrender Value, and how long the Policy will
remain in force. Failure to make any Planned Periodic Premium payment will not,
however, necessarily result in lapse of the Policy. On the other hand, making
Planned Periodic Premium payments will not guarantee that the Policy remains in
force. See "Death Benefit Guarantee" and "Policy Lapse and Reinstatement."
UNSCHEDULED ADDITIONAL PREMIUMS
Premiums, other than Planned Periodic Premiums, may be paid at any time
while the Policy is in force. We may limit the number and amount of these
additional payments.
<PAGE>
PAYING PREMIUMS BY MAIL
Planned Periodic Premiums and Unscheduled Additional Premiums may be
paid to the Company by mailing them to:
ReliaStar Bankers Security Life Insurance Company
P.O. Box 802511
Chicago, Illinois 60680-2511
DEATH BENEFIT GUARANTEE
If you meet the requirements described below, we guarantee that we will
not lapse the Policy even if the Cash Surrender Value is not sufficient to cover
the Monthly Deduction that is due. This feature of the Policy is called the
"Death Benefit Guarantee." The Death Benefit Guarantee expires at the Insured's
Age 65 (or five Policy Years, if longer).
In general, the two most significant benefits from the Death Benefit
Guarantee are as follows. First, during the early Policy Years, the Cash
Surrender Value will generally not be sufficient to cover the Monthly Deduction,
so that the Death Benefit Guarantee will be necessary to avoid lapse of the
Policy. See "Policy Lapse and Reinstatement." This occurs because the Surrender
Charge usually exceeds the Accumulation Value in these years. In this regard,
you should consider that if you request an increase in Face Amount, an
additional Surrender Charge would apply for the fifteen years following the
increase, which could create a similar possibility of lapse as exists during the
early Policy Years. Second, to the extent the Cash Surrender Value declines due
to poor investment performance, or due to an additional Surrender Charge after a
requested increase, the Cash Surrender Value may not be sufficient even in later
Policy Years to cover the Monthly Deduction, so that the Death Benefit Guarantee
may also be necessary in later Policy Years to avoid lapse of the Policy. THUS,
EVEN THOUGH THE POLICY PERMITS PREMIUM PAYMENTS THAT ARE LESS THAN THE MINIMUM
MONTHLY PREMIUMS, YOU MAY LOSE THE SIGNIFICANT PROTECTION PROVIDED BY THE DEATH
BENEFIT GUARANTEE BY PAYING LESS THAN THE MINIMUM MONTHLY PREMIUMS.
REQUIREMENTS
The Death Benefit Guarantee will be in effect if the sum of all
premiums paid minus any partial withdrawals and any loans are equal to or
greater than the sum of the Minimum Monthly Premiums since the Policy Date,
including the Minimum Monthly Premium for the current Monthly Anniversary.
The requirements for the Death Benefit Guarantee must be satisfied as
of each Monthly Anniversary, even though you do not have to pay premiums
monthly.
EXAMPLE: The Policy Date is January 1, 1997. The Minimum Monthly
Premium is $100 per month. No Policy loans or partial withdrawals are taken and
no Face Amount changes have occurred.
Case 1. You pay $100 each month. The Death Benefit Guarantee is
maintained.
Case 2. You pay $1,000 on January 1, 1997. The $1,000 maintains the
Death Benefit Guarantee without your paying any additional
premiums for the next 10 months (through October 31, 1997).
However, you must pay at least $100 by November 1, 1997 to
maintain the Death Benefit Guarantee through November 30,
1997.
<PAGE>
The amount of the initial Minimum Monthly Premium will be determined by
us at issuance of the Policy and will be shown in the Policy. The initial
Minimum Monthly Premium will depend upon the Insured's sex, Age at issue, Rate
Class, optional insurance benefits added by rider, and the Initial Face Amount.
The following Policy changes may change the Minimum Monthly Premium:
* A requested increase or decrease in the Face Amount. See
"Death Benefit -- Requested Changes in Face Amount."
* A change in the Death Benefit Option. See "Death Benefit --
Change in Death Benefit Option."
* The addition or termination of a Policy rider. See "General
Provisions -- Optional Insurance Benefits."
We will notify you in writing of any changes in the Minimum Monthly
Premium.
If, as of any Monthly Anniversary, you have not made sufficient premium
payments to maintain the Death Benefit Guarantee, we will send you notice of the
premium payment required to maintain it. If we do not receive the required
premium payment within 61 days from the date of our notice, the Death Benefit
Guarantee will terminate. THE DEATH BENEFIT GUARANTEE CANNOT BE REINSTATED.
Even if the Death Benefit Guarantee terminates, the Policy will not
necessarily lapse. For a discussion of the circumstances under which the Policy
may lapse, see "Policy Lapse and Reinstatement."
ACCUMULATION VALUE
The Accumulation Value of the Policy (that is, the total value
attributable to a specific Policy in the Variable Account and the Fixed Account)
is equal to the sum of the Variable Accumulation Value (the amount attributable
to the Variable Account) plus the Fixed Accumulation Value (the amount
attributable to the Fixed Account). The Accumulation Value should be
distinguished from the Cash Surrender Value that would actually be paid to you
upon total surrender of the Policy, which is the Accumulation Value less any
Surrender Charge, Loan Amount and unpaid Monthly Deductions. See "Surrender
Benefits -- Total Surrender." The Accumulation Value should also be
distinguished from the Cash Value, which determines the amount available for
Policy loans, and is the Accumulation Value less any Surrender Charge. See
"Policy Loans."
The Variable Accumulation Value will increase or decrease to reflect
the investment performance of the Funds in which Sub-Accounts of the Variable
Account have been invested. The Variable Accumulation Value will also be
increased by (a) any Net Premiums credited to the Variable Account and (b) any
transfers from the Fixed Account. The Variable Accumulation Value will also be
reduced by (a) the Monthly Deduction attributable to the Variable Account, (b)
partial withdrawals from the Variable Account, (c) any transfer and partial
withdrawal charges attributable to the Variable Account, and (d) any amounts
transferred from the Variable Account to the Fixed Account (including amounts
transferred from the Variable Account to the Fixed Account as security for
Policy loans -- see "Policy Loans"). The Variable Accumulation Value will
generally vary daily.
The Fixed Accumulation Value will be increased by (a) any Net Premiums
credited to it in the Fixed Account, (b) any interest credited to it in the
Fixed Account (determined at our discretion, but guaranteed not to be less than
4%), and (c) any amounts transferred from the Variable Account to it in the
Fixed Account (including amounts transferred to the Fixed Account as security
for Policy loans -- see "Policy Loans"). The Fixed Accumulation Value will be
reduced by (a) the Monthly Deduction attributable to it in the Fixed Account,
(b) partial withdrawals from it in the Fixed Account, (c) any transfer and
partial withdrawal charges attributable to the Fixed Account, and (d) any
amounts transferred from the Fixed Account to the Variable Account.
<PAGE>
For a detailed discussion of the calculation of Accumulation Value, see
Appendix B. An illustration of various Accumulation Values, Surrender Charges,
Cash Surrender Values, and Death Benefits, assuming different levels of premium
payments and various investment returns for selected Ages and Face Amounts, is
shown in Appendix C.
DEDUCTIONS AND CHARGES
Some of these charges are deducted from each premium payment. Certain
other charges are deducted monthly from both the Fixed Account and the Variable
Account, or from the Variable Account only. A charge is also made for each
partial withdrawal and a charge may be made for each transfer.
PREMIUM EXPENSE CHARGE
We deduct a Premium Expense Charge, which is 5% of each premium
payment. The amount remaining after we have deducted the Premium Expense Charge
is called the Net Premium. The Net Premium is then credited to the Fixed Account
and the Sub-Accounts of the Variable Account according to your allocation.
MONTHLY DEDUCTION
We deduct the charges described below from the Accumulation Value of
the Policy on a monthly basis. The total of these charges is called the Monthly
Deduction.
The Monthly Deduction will be deducted on each Monthly Anniversary from
the Fixed Account and the Sub-Accounts of the Variable Account on a
proportionate basis depending on their relative Accumulation Values at that
time. For purposes of determining these proportions, the Fixed Accumulation
Value is reduced by the Loan Amount. Because the cost of insurance portion of
the Monthly Deduction can vary from month to month, the Monthly Deduction itself
will vary in amount from month to month.
If the Cash Surrender Value is not sufficient to cover the Monthly
Deduction on a Monthly Anniversary and the Death Benefit Guarantee is not in
effect, the Policy may lapse. See "Death Benefit Guarantee" and "Policy Lapse
and Reinstatement."
COST OF INSURANCE. We will determine the monthly cost of insurance by
multiplying the applicable cost of insurance rate or rates by the net amount at
risk under the Policy. The net amount at risk under the Policy for a Policy
Month is (a) the Death Benefit at the beginning of the Policy Month divided by
1.004074 (which reduces the net amount at risk, solely for purposes of computing
the cost of insurance, by taking into account assumed monthly earnings at an
annual rate of 5%), less (b) the Accumulation Value immediately before the
Monthly Deduction, minus the cost of any rider benefits other than any Waiver of
Monthly Deduction rider, for the month. As a result, the net amount at risk may
be affected by changes in the Accumulation Value or in the Death Benefit.
The Rate Class of an Insured may affect the cost of insurance. A Rate
Class is a group of Insureds we determine based upon our expectation that they
will have similar mortality experience. We currently place Insureds into
standard Rate Classes or into substandard Rate Classes that involve a higher
mortality risk. In an otherwise identical Policy, an Insured in a standard Rate
Class will have a lower cost of insurance than an Insured in a Rate Class with
higher mortality risks.
If there is an increase in the Face Amount and the Rate Class
applicable to the increase is different from that for the Initial Face Amount or
any prior requested increases in Face Amount, the net amount at risk will be
calculated separately for each Rate Class. For purposes of determining the net
amount at risk for each Rate Class, the Accumulation Value will first be assumed
to be part of the Initial Face Amount. If the Accumulation Value is
<PAGE>
greater than the Initial Face Amount, it will then be assumed to be part of each
increase in order, starting with the first increase.
Cost of insurance rates will be based on the sex, Issue Age, Policy
Year and Rate Class(es) of the Insured. The actual monthly cost of insurance
rates will reflect our expectations as to future experience. They will not,
however, be greater than the guaranteed cost of insurance rates shown in the
Policy, which are based on the Commissioner's 1980 Standard Ordinary Mortality
Tables for smokers or nonsmokers, respectively.
MONTHLY ADMINISTRATIVE CHARGE. Each month we deduct an administrative
charge of $7.50 which is guaranteed not to exceed the product of $5.00 and the
ratio (not to exceed 2.00) of (a) the Consumer Price Index (for all urban
households) for the preceding September to (b) the Consumer Price Index for
September 1985.
MONTHLY MORTALITY AND EXPENSE RISK CHARGE. Each month it is currently
anticipated that we will deduct this charge at an annual rate of .60 of 1%
(.60%) of the Variable Accumulation Value but in no event will it exceed .9 of
1% (.90%).
OPTIONAL INSURANCE BENEFIT CHARGES. Each month we deduct charges for
any optional insurance benefits added to the Policy by rider. See "General
Provisions -- Optional Insurance Benefits."
SURRENDER CHARGE
During the first 15 years the Policy is in force and the first 15 years
following a requested increase in the Face Amount, there is a Surrender Charge
if you surrender the Policy or the Policy lapses. The maximum Surrender Charge
for the Initial Face Amount or any requested increase in Face Amount will be
determined on the Policy Date or on the effective date of any requested increase
respectively. The Surrender Charge remains level for the first five years in the
relevant 15 year period, and then reduces in equal monthly increments until it
becomes zero at the end of 15 years. Thus if the Policy remains in force during
the entire relevant 15-year period, you do not pay the Surrender Charge. The
Surrender Charge will vary depending on the Age of the Insured, the sex of the
Insured, and the Rate Class of the Insured (on the Policy Date or on the
effective date of an increase in Face Amount).
The Surrender Charge for the Initial Face Amount or any requested
increase in Face Amount is determined by multiplying (i) the applicable
Surrender Charge per $1,000 Face Amount from Appendix D by (ii) the Initial Face
Amount or the Face Amount of the increase, as applicable, and by (iii) the
applicable percentage from the Surrender Charge Percentage Table below, and then
dividing this amount by 1000. Then the Surrender Charge is reduced by the
Premium Related Surrender Charge Reduction.
The Premium Related Surrender Charge Reduction will apply only to the
Surrender Charge for the Initial Face Amount when the cumulative premiums are
less than the Surrender Charge Whole Life Premium. The Premium Related Surrender
Charge Reduction will be zero when the cumulative premiums equal or exceed the
Surrender Charge Whole Life Premium. The Premium Related Surrender Charge
Reduction also will be zero for any requested increase in Face Amount. The
Premium Related Surrender Charge Reduction for the Initial Face Amount is
calculated by multiplying 70% by the excess of (i) the Surrender Charge Whole
Life Premium over (ii) the cumulative premiums. The Surrender Charge Whole Life
premium is calculated by multiplying (i) the applicable Surrender Charge Whole
Life premium per $1000 of Face Amount from Appendix E by (ii) the Initial Face
Amount, and then dividing by 1000.
EXAMPLE. The following example illustrates how the Surrender Charge is
determined. Assume that a male nonsmoker, Age 35 buys a Policy with an initial
Face Amount of $100,000 and he surrenders the Policy during the third Policy
Year at which time he has paid cumulative premiums of $2,000.
<PAGE>
Based on these assumptions the Surrender Charge will be the result of
multiplying (i) $16.20 (from Appendix D for a male nonsmoker Age 35) by (ii)
$100,000 (the Initial Face Amount) and by (iii) 100% (the applicable percentage
from the Surrender Charge Percentage Table), and then dividing by 1000, which
results in a Surrender Charge of $1,620 ($16.20 x $100,000 x 100% / 1000).
The Surrender Charge Whole Life Premium is determined by multiplying
(i) $11.64 (from Appendix E for a male nonsmoker Age 35) by (ii) $100,000 (the
Initial Face Amount), and then dividing by 1000, which results in a Surrender
Charge Whole Life Premium of $1,164 ($11.64 x $100,000 / 1000). The Surrender
Charge Whole Life Premium of $1,164 is less than the cumulative premium of
$2,000, so the Premium Related Surrender Charge Reduction is zero.
The additional Surrender Charge for requested increases in Face Amount
will be calculated in the same manner as illustrated in the example above,
except that the Premium Related Surrender Charge is zero for requested increases
in Face Amount.
SURRENDER CHARGE PERCENTAGE TABLE
If surrender or lapse occurs in the last The following percentage of the
month of Policy Year:* Surrender Charge will be payable:**
---------------------- -----------------------------------
1 through 5 100%
6 90%
7 80%
8 70%
9 60%
10 50%
11 40%
12 30%
13 20%
14 10%
15 and later 0%
* For requested increases, years are measured from the date of the
increase.
** The percentages reduce equally for each Policy Month during the years
shown. For example, during the seventh Policy Year, the percentage
reduces equally each month from 90% at the end of the sixth Policy Year
to 80% at the end of the seventh Policy Year.
PARTIAL WITHDRAWAL AND TRANSFER CHARGES
We currently make no charge for transfers. We currently charge $10.00
for each partial withdrawal. The charge for transfers is guaranteed not to
exceed $25.00 per transfer for transfers in excess of 12 per Policy Year for the
duration of the Policy. The charge for partial withdrawals is guaranteed not to
exceed $25.00 for the duration of the Policy. The transfer charge will not be
imposed on transfers that occur as a result of Policy loans or the exercise of
conversion rights.
REDUCTION OF CHARGES
Any of the charges under the Policy, as well as the minimum Face Amount
set forth in this Prospectus, may be reduced because of special circumstances
that result in lower sales, administrative, or mortality expenses. For example,
special circumstances may exist in connection with group or sponsored
arrangements, sales to our policyholders or those of affiliated insurance
companies, or sales to employees or clients of members of our
<PAGE>
affiliated group of insurance companies. The amount of any reductions will
reflect the reduced sales effort and administrative costs resulting from, or the
different mortality experience expected as a result of, the special
circumstances. Reductions will not be unfairly discriminatory against any
person, including the affected Policy owners and owners of all other policies
funded by the Variable Account.
POLICY LAPSE AND REINSTATEMENT
LAPSE. Unlike traditional life insurance policies, the failure to make
a Planned Periodic Premium will not by itself cause the Policy to lapse. If the
Death Benefit Guarantee is not in effect, the Policy will lapse if, as of any
Monthly Anniversary, the Cash Surrender Value is less than the Monthly Deduction
due, and a grace period of 61 days expires without a sufficient premium payment.
A sufficient premium payment is any premium payment such that the Net Premium is
larger than the sum of 1 + 2 where 1 is the amount by which the Accumulation
Value is less than the Surrender Charge as of the beginning of the grace period
and 2 is the sum of past due Monthly Deductions.
During the early Policy Years, the Cash Surrender Value will generally
not be sufficient to cover the Monthly Deduction, so that premium payments
sufficient to maintain the Death Benefit Guarantee will be required to avoid
lapse. See "Death Benefit Guarantee."
The Policy does not lapse, and the insurance coverage continues, until
the expiration of a 61-day grace period which begins on the date we send you
written notice indicating that the Cash Surrender Value is less than the Monthly
Deduction due. Our written notice to you will indicate the amount of the payment
required to avoid lapse. Failure to make a sufficient premium payment within the
grace period will result in lapse of the Policy without value.
If the Insured dies during the grace period, the proceeds payable will
equal the amount of the Death Benefit on the Valuation Date on or next following
the date of the Insured's death, reduced by any Loan Amount and any unpaid
Monthly Deductions.
If the Death Benefit Guarantee is in effect, we will not lapse the
Policy. See "Death Benefit Guarantee."
REINSTATEMENT. Reinstatement means putting a lapsed Policy back in
force. You may reinstate a lapsed Policy by written request any time within five
years after it has lapsed if it has not been surrendered for its Cash Surrender
Value.
To reinstate the Policy and any riders you must submit evidence of
insurability satisfactory to us and you must pay a premium large enough such
that the Net Premium is as large as the sum of the Surrender Charge after
reinstatement, plus the Monthly Deductions for the date of reinstatement and the
following Monthly Anniversary.
The Death Benefit Guarantee cannot be reinstated. See "Death Benefit
Guarantee."
SURRENDER BENEFITS
Subject to certain limitations, you may make a total surrender of the
Policy or a partial withdrawal of the Policy's Cash Surrender Value by sending
us a written request. The amount available for a total surrender or partial
withdrawal will be determined at the end of the Valuation Period during which
your written request is received. Any amounts payable from the Variable Account
upon total surrender or partial withdrawal will generally be paid within seven
days of receipt of your written request. Postponement of payments may, however,
occur in certain circumstances. See "General Provisions -- Postponement of
Payments."
<PAGE>
TOTAL SURRENDER
By making a written request, you may surrender the Policy at any time
for its Cash Surrender Value. The Cash Surrender Value is the Accumulation Value
of the Policy reduced by any Surrender Charge, Loan Amount and unpaid Monthly
Deductions. If the Cash Surrender Value at the time of a surrender exceeds
$25,000, the written request must include a Signature Guarantee. An illustration
of Accumulation Values, Surrender Charges, Cash Surrender Values, and Death
Benefits assuming different levels of premium payments and investment returns
for selected Ages and Face Amounts, is shown in Appendix C.
PARTIAL WITHDRAWAL
After the first Policy Year, you may also withdraw part of the Policy's
Cash Surrender Value by sending us a written request. If the amount being
withdrawn exceeds $25,000, the written request must include a Signature
Guarantee. Only one partial withdrawal is allowed in any Policy Year. We
currently make a $10.00 charge for each partial withdrawal. This charge is
guaranteed not to exceed $25.00 for each partial withdrawal. See "Deductions and
Charges -- Partial Withdrawal and Transfer Charges." The amount of any partial
withdrawal must be at least $500 and, during the first 15 Policy Years, may not
be more than 20% of the Cash Surrender Value on the date we receive your written
request.
Unless you specify a different allocation, we make partial withdrawals
from the Fixed Account and the Sub-Accounts of the Variable Account on a
proportionate basis based upon the Accumulation Value. These proportions will be
determined at the end of the Valuation Period during which your written request
is received. For purposes of determining these proportions, any outstanding Loan
Amount is first subtracted from the Fixed Accumulation Value.
EFFECT OF PARTIAL WITHDRAWALS. The Accumulation Value will be reduced
by the amount of any partial withdrawal. The Death Benefit will also be reduced
by the amount of the withdrawal, or, if the Death Benefit is based on the
corridor percentage of Accumulation Value (see "Death Benefit -- Death Benefit
Options"), by an amount equal to the corridor percentage times the amount of the
partial withdrawal.
If the Level Amount Option is in effect, the Face Amount will be
reduced by the amount of the partial withdrawal. When increases in the Face
Amount have occurred previously, we reduce the current Face Amount by the amount
of the partial withdrawal in the following order:
(a) The Face Amount provided by the most recent increase;
(b) The next most recent increases successively; and
(c) The Face Amount when the policy was issued.
(This assumption also applies to requested decreases in Face Amount --
see "Death Benefit -- Requested Changes in Face Amount.") Thus, partial
withdrawals may affect the way in which the cost of insurance is calculated and
the amount of pure insurance protection under the Policy. See "Death Benefit --
Requested Changes in Face Amount", "Deductions and Charges -- Monthly Deduction"
and "Death Benefit -- Insurance Protection."
We do not allow a partial withdrawal if the Face Amount after a partial
withdrawal would be less than the Minimum Face Amount (currently $25,000).
If the Variable Amount Option is in effect, a partial withdrawal does
not affect the Face Amount.
<PAGE>
A partial withdrawal may also cause the termination of the Death
Benefit Guarantee because the amount of the partial withdrawal is deducted from
the total premiums paid in calculating whether sufficient premiums have been
paid in order to maintain the Death Benefit Guarantee.
Like partial withdrawals, Policy loans are a means of withdrawing funds
from the Policy. See "Policy Loans." A partial withdrawal or a Policy loan may
have tax consequences depending on the circumstances of such withdrawal or loan.
See "Federal Tax Matters -- Policy Proceeds."
TRANSFERS
You may transfer all or part of the Variable Accumulation Value between
the Sub-Accounts or to the Fixed Account subject to any conditions the Funds
whose shares are involved may impose. (Transfers to or from the Fixed Account
are not available for Policies issued in New Jersey.) Transfer requests must be
in writing. Telephone/fax transfers are available when you complete a
telephone/fax form. See "Telephone/Fax Instructions." You may also direct us to
automatically make periodic transfers under the Dollar Cost Averaging or
Portfolio Rebalancing services as described below.
To transfer all or part of the Variable Accumulation Value from a
Sub-Account, Accumulation Units are redeemed and their values are reinvested in
other Sub-Accounts, or the Fixed Account, as directed in your request. We will
effect transfers, and determine all values in connection with transfers, at the
end of the Valuation Period during which we receive your request, except as
otherwise specified for the Dollar Cost Averaging or Portfolio Rebalancing
services. With respect to future Net Premium payments, however, your current
premium allocation will remain in effect unless (i) you have requested the
Portfolio Rebalancing service, or (ii) you are transferring all of the Variable
Accumulation Value from the Variable Account to the Fixed Account in exercise of
conversion rights. See "Free Look and Conversion Rights -- Conversion Rights."
Transfers from the Fixed Account to the Variable Account are subject to
the following additional restrictions: (i) your transfer request must be
postmarked no more than 30 days before or after the Policy Anniversary in any
year, and only one transfer is permitted during this period, (ii) the Fixed
Accumulation Value after the transfer must be at least equal to the Loan Amount,
(iii) no more than 50% of the Fixed Accumulation Value, less any Loan Amount,
may be transferred unless the balance, after the transfer, would be less than
$1,000, in which event the full Fixed Accumulation Value, less any Loan Amount,
may be transferred, and (iv) you must transfer at least the lesser of $500 or
the total Fixed Accumulation Value, less any Loan Amount. See Appendix A. Some
of these restrictions may be waived for transfers due to the Portfolio
Rebalancing service.
TELEPHONE/FAX TRANSFER INSTRUCTIONS. You are allowed to enter certain
types of instructions either by telephone or by fax if you complete a
telephone/fax instruction authorization form. If you complete the form, you can
enter the following types of instructions by telephone or fax: transfers between
Sub-Accounts or changes of allocations among fund options, and change of
Sub-Account for variable annuitization payouts. If the Owner completes the
telephone/fax form, the Owner agrees that we will not be liable for any loss,
liability, cost or expense when we act in accordance with the telephone/fax
transfer instructions that are received and, if by telephone, are recorded on
voice recording equipment. If a telephone/fax transfer request is later
determined not to have been made by the Owner or was made without the Owner's
authorization, and loss results from such unauthorized transfer, the Owner bears
the risk of this loss. Any requests via fax are considered telephone requests
and are bound by the conditions in the telephone/fax transfer authorization form
you sign. Any fax request should include your name, daytime telephone number,
Policy number and the names of the Sub-Accounts from which and to which money
will be transferred and the allocation percentage. The Company will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. In the event the Company does not employ such procedures, the Company
may be liable for any losses due to unauthorized or fraudulent instructions.
Such procedures may include, among others, requiring forms of personal
identification
<PAGE>
prior to acting upon telephone/fax instructions, providing written confirmation
of such instructions, and/or tape recording telephone instructions.
DOLLAR COST AVERAGING SERVICE. You may request this service if your
Face Amount is at least $100,000 and your Accumulation Value, less any Loan
Amount, is at least $5,000. If you request this service, you direct us to
automatically make specific periodic transfers of a fixed dollar amount from any
of the Sub-Accounts to one or more of the Sub-Accounts or to the Fixed Account.
No transfers from the Fixed Account are permitted under this service. Transfers
of this type may be made on a monthly, quarterly, semi-annual, or annual basis.
This service is intended to allow you to use "Dollar Cost Averaging", a long
term investment method which provides for regular investments over time. We make
no guarantees that Dollar Cost Averaging will result in a profit or protect
against loss. You may discontinue this service at any time by notifying us in
writing.
If you are interested in the Dollar Cost Averaging service you may
obtain a separate application form and full information concerning this service
and its restrictions from us or our registered representative.
If you are using the Dollar Cost Averaging service, this service will
be discontinued immediately (i) on receipt of any request to begin a Portfolio
Rebalancing service, (ii) if the Policy is in the grace period on any date when
Dollar Cost Averaging transfers are scheduled, or (iii) if the specified
transfer amount from any Sub-Account is more than the Accumulation Value in that
Sub-Account.
We reserve the right to discontinue, modify, or suspend this service.
Any such modification or discontinuation would not affect any Dollar Cost
Averaging service requests already commenced.
PORTFOLIO REBALANCING SERVICE. You may request this service if your
Face Amount is at least $200,000 and your Accumulation Value, less any Loan
Amount, is at least $10,000. If you request this service, you direct us to
automatically make periodic transfers to maintain your specified percentage
allocation of Accumulation Value, less any Loan Amount, among the Sub-Accounts
of the Variable Account and the Fixed Account; your allocation of future Net
Premium payments will also be changed to be equal to this specified percentage
allocation. Transfers made under this service may be made on a quarterly,
semi-annual, or annual basis. This service is intended to maintain the
allocation you have selected consistent with your personal objectives.
The Accumulation Value in each Sub-Account of the Variable Account and
the Fixed Account will grow or decline at different rates over time. Portfolio
Rebalancing will periodically transfer Accumulation Values from those accounts
that have increased in value to those accounts that have increased at a slower
rate or declined in value. If all accounts decline in value, it will transfer
Accumulation Values from those that have decreased less in value to those that
have decreased more in value. We make no guarantees that Portfolio Rebalancing
will result in a profit or protect against loss. You may discontinue this
service at any time by notifying us in writing.
If you are interested in the Portfolio Rebalancing service you may
obtain a separate application form and full information concerning this service
and its restrictions from us or our registered representative.
If you are using the Portfolio Rebalancing service, this service will
be discontinued immediately (i) on receipt of any request to change the
allocation of premiums to the Fixed Account and Sub-Account of the Variable
Account, (ii) on receipt of any request to begin a Dollar Cost Averaging
service, (iii) upon receipt of any request to transfer Accumulation Value among
the Fixed Account or Sub-Accounts, or (iv) if the policy is in the grace period
or the Accumulation Value, less any Loan Amount, is less than $7,500 on any
Valuation Date when Portfolio Rebalancing transfers are scheduled.
We reserve the right to discontinue, modify, or suspend this service.
Any such modification or discontinuation could affect Portfolio Rebalancing
services currently in effect, but only after 30 days notice to affected Policy
owners.
<PAGE>
TRANSFER LIMITS. We currently allow 12 transfers in a Policy Year. We
reserve the right to limit you to no more than 12 transfers per Policy Year. All
transfers that are effective on the same Valuation Date will be treated as one
transfer transaction. Transfers made due to the Dollar Cost Averaging or
Portfolio Rebalancing services do not currently count toward the limit on number
of transfers.
TRANSFER CHARGES. While there is currently no charge imposed on a
transfer we reserve the right to make a charge not to exceed $25.00 per transfer
for transfers in excess of 12 per Policy Year for the duration of the Policy.
See "Deductions and Charges -- Partial Withdrawal and Transfer Charges." In no
event, however, will any charge be imposed in connection with the exercise of a
conversion right or transfers occurring as the result of Policy Loans. All
transfers are also subject to any charges and conditions imposed by the Fund
whose shares are involved. All transfers that are effective on the same
Valuation Date will be treated as one transfer transaction.
POLICY LOANS
GENERAL. As long as the Policy remains in effect, you may borrow money
from us at any time after the first Policy Year using the Policy as security for
the loan. You may not borrow at any time more than the Loan Value of the Policy,
which is equal to the Cash Value less the existing Loan Amount. Each Policy loan
must be at least $500.
Loan requests may be made in writing or by telephoning us on any
Valuation Date. Any loan request in excess of $25,000 will require a Signature
Guarantee and telephone loan requests cannot exceed $10,000. No election form is
currently required to make telephone loan requests. We will employ reasonable
procedures to confirm that loan requests made by telephone are genuine. In the
event we do not employ such procedures, we may be liable for any losses due to
unauthorized or fraudulent instructions. Such procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmations of such instructions
and/or tape recording telephone instructions.
Policy loans have priority over the claims of any assignee or other
person. A Policy loan may be repaid in whole or in part at any time while the
Insured is living.
The loan proceeds will normally be paid to you within seven days after
we receive your request. Payment of loan proceeds to you may be postponed under
certain circumstances. See "General Provisions -- Postponement of Payments."
When you make a payment on a Policy loan, you must tell us that you are
making a loan payment; otherwise, we will treat it as a premium payment and it
will be subject to the Premium Expense Charge. See "Deductions and Charges -
Premium Expense Charge." We reserve the right to treat a loan payment as a
premium payment if doing so will prevent your policy from lapsing or prevent
borrowing from your policy to pay premiums.
The total of your outstanding Policy loans including unpaid interest
due thereon is called the "Loan Amount."
IMMEDIATE EFFECT OF POLICY LOANS. When we make a Policy loan, an amount
equal to the Policy loan (which includes interest payable in advance) will be
segregated within the Accumulation Value of your Policy and held in the Fixed
Account as security for the loan (this includes loans taken on policies issued
in New Jersey). As described below, you will pay interest to us on the Policy
loan, but we will also credit interest to you on the amount held in the Fixed
Account as security for the loan. The amount segregated in the Fixed Account as
security for the Policy loan will be included as part of the Fixed Accumulation
Value under the Policy, but will (as described below) be credited with interest
on a basis different from other amounts in the Fixed Account.
<PAGE>
Unless you specify differently, amounts held as security for the Policy
loan will come proportionately from the Fixed Accumulation Value and the
Variable Accumulation Value (with the proportions being determined as described
below). Assets equal to the portion of the Policy loan coming from the Variable
Accumulation Value will be transferred from the Sub-Accounts of the Variable
Account to the Fixed Account, THEREBY REDUCING THE ACCUMULATION VALUE HELD IN
THE SUB-ACCOUNTS. These transfers are not treated as transfers for the purposes
of the transfer charge or the limit on the number of transfers.
ILLUSTRATION OF DETERMINATION OF PROPORTIONS. The segregated amount
that will be security for a Policy loan will come from the Fixed Accumulation
Value and the Variable Accumulation Value in the same proportion that the sum of
(a) the Policy's Fixed Accumulation Value, less any existing Loan Amount, and
(b) the Policy's Variable Accumulation Value, bear to the Policy's total
Accumulation Value less any existing Loan Amount (determined, in each case, at
the end of the Valuation Period during which your request is received).
This can be illustrated as follows. Assume that the Fixed Accumulation
Value is $5,000 and the Variable Accumulation Value is $6,000, with Sub-Account
XXX = $2,000, and Sub-Account YYY = $4,000. Assume that the existing Loan Amount
is $1,000, and the new Policy loan request is $5,000. For purposes of
determining the proportions, we first subtract the existing Loan Amount from the
Fixed Accumulation Value, and then we add the Variable Accumulation Value, which
in our example would be ($5,000 - $1,000) + $6,000 = $10,000. The proportionate
percentages of the Policy loan coming from the Fixed Accumulation Value and the
Variable Accumulation Value are then determined as a percentage of this total,
which would be $4,000/$10,000 = 40% from the Fixed Accumulation Value, and
$6,000/$10,000 = 60% from the Variable Accumulation Value. The percentage
deducted from the Variable Accumulation Value would be distributed as follows:
$2,000/$10,000 = 20% from Sub-Account XXX; and $4,000/$10,000 = 40% from
Sub-Account YYY. The actual amounts coming from the various Accounts in
connection with the new $5,000 Policy loan would be 40% X $5,000 = $2,000 from
the Fixed Account; 20% X $5,000 = $1,000 from Sub-Account XXX; and 40% X $5,000
= $2,000 from Sub-Account YYY.
EFFECT ON INVESTMENT PERFORMANCE. Amounts coming from the Variable
Account as security for Policy loans will no longer participate in the
investment performance of the Variable Account. All amounts held in the Fixed
Account as security for Policy loans (that is, the Loan Amount) will only be
credited with interest at an effective annual rate currently equal to 4.00%. NO
ADDITIONAL INTEREST WILL BE CREDITED TO THESE AMOUNTS. On the Policy
Anniversary, any interest credited on these amounts will be credited to the
Fixed Account and the Variable Account according to the premium allocation then
in effect. See "Payment and Allocation of Premiums -- Allocation of Premiums."
Although Policy loans may be repaid in whole or in part at any time
before the Insured's Age 95, Policy loans will permanently affect the Policy's
potential Accumulation Value. As a result, to the extent that the Death Benefit
depends upon the Accumulation Value (see "Death Benefit -- Death Benefit
Options"), Policy loans will also affect the Death Benefit under the Policy.
This effect could be favorable or unfavorable depending on whether the
investment performance of the assets allocated to the Sub-Account(s) is less
than or greater than the interest being credited on the assets transferred to
the Fixed Account while the loan is outstanding. Compared to a Policy under
which no loan is made, values under the Policy will be lower when such interest
credited is less than the investment performance of assets held in the
Sub-Account(s).
EFFECT ON POLICY COVERAGE. If, on any Monthly Anniversary, the Loan
Amount is greater than the Accumulation Value less the then applicable Surrender
Charge, we will notify you. If we do not receive sufficient payment within 61
days from the date we send notice to you, the Policy will lapse and terminate
without value. Our written notice to you will indicate the amount of the payment
required to avoid lapse. The Policy may, however, later be reinstated. See
"Policy Lapse and Reinstatement."
<PAGE>
A Policy loan may also cause termination of the Death Benefit
Guarantee, because the Loan Amount is deducted from the total premiums paid in
calculating whether sufficient premiums have been paid in order to maintain the
Death Benefit Guarantee. See "Death Benefit Guarantee."
Proceeds payable upon the death of the Insured will be reduced by any
Loan Amount.
INTEREST. The interest rate charged on Policy loans will be an annual
rate of 5.66%, payable in advance. After the tenth Policy Year, we will charge
interest at an annual rate of 3.85%, payable in advance, on that portion of your
Loan Amount that is not in excess of (a) the Accumulation Value, less (b) the
total of all premiums paid and all partial withdrawals. Any excess of this
amount will be charged interest at the annual rate of 5.66%.
Interest is payable in advance (for the rest of the Policy Year) at the
time any Policy loan is made and at the beginning of each Policy Year thereafter
(for that entire Policy Year). If interest is not paid when due, it will be
deducted from the Cash Surrender Value as an additional Policy loan (see
"Immediate Effect of Policy Loans" above) and will be added to the existing Loan
Amount.
Because we charge interest in advance, any interest that we have not
earned will be refunded to you upon lapse or surrender of the Policy or
repayment of the Policy Loan.
REPAYMENT OF LOAN AMOUNT. The Loan Amount may be repaid any time while
the Insured is living. See "General Provisions -- Benefits at Age 95." If not
repaid, the Loan Amount will be deducted by us from any amount payable under the
Policy. As described above, unless you provide us with notice to the contrary,
any payments on the Policy will generally be treated as premium payments, which
are subject to the Premium Expense Charge, rather than repayments on the Loan
Amount. Any repayments on the Loan Amount will result in amounts being
reallocated from the Fixed Account and to the Sub-Accounts of the Variable
Account according to your current premium allocation.
TAX CONSIDERATIONS. A Policy loan may have tax consequences depending
on the circumstances of the loan. See "Federal Tax Matters -- Policy Proceeds."
FREE LOOK AND CONVERSION RIGHTS
FREE LOOK RIGHTS
The Policy provides for an initial free look period during which you
have a right to return the Policy for cancellation and receive a refund of all
premiums paid. You must return the Policy to us or your agent and ask us to
cancel the Policy by midnight of the 20th day after receiving it.
CONVERSION RIGHTS
During the first two Policy Years and the first two years following a
requested increase in Face Amount, we provide you with an option to convert the
Policy or any requested increase in Face Amount to a life insurance policy under
which the benefits do not vary with the investment experience of the Variable
Account. For policies issued in all states, except Connecticut and New Jersey,
this option is made available by permitting you to transfer all or a part of
your Variable Accumulation Value to the Fixed Account. For policies issued in
Connecticut and New Jersey, you may exchange this Policy for a different
permanent fixed benefit life insurance policy that is offered by us in those
states. The two conversion right options are discussed below.
GENERAL OPTION. In all states except Connecticut and New Jersey, you
may exercise your conversion right by transferring all or any part of your
Variable Accumulation Value to the Fixed Account. If, at any time
<PAGE>
during the first two Policy Years or the first two years following a requested
increase in Face Amount, you request transfer from the Variable Account to the
Fixed Account and indicate that you are making the transfer in exercise of your
conversion right, the transfer will not be subject to the transfer charge and
will not count against the limit on the number of transfers. At the time of such
transfer, there is no effect on the Policy's Death Benefit. Face Amount, net
amount at risk, Rate Class(es) or Issue Age -- only the method of funding the
Accumulation Value under the Policy will be affected. See "Death Benefit",
"Accumulation Value" and Appendix A, "The Fixed Account."
If you transfer all of the Variable Accumulation Value from the
Variable Account to the Fixed Account and indicate that you are making this
transfer in exercise of your Conversion Right, we will automatically credit all
future premium payments on the policy to the Fixed Account unless you request a
different allocation.
CONNECTICUT AND NEW JERSEY. During the first two policy years and
during the first 24 months following a requested increase in Face Amount, you
may convert the Policy or the Face Amount increase to any fixed benefit whole
life insurance policy offered by us. No evidence of insurability will be
required for the conversion. In order to convert to a new policy, we must
receive a written conversion request; if the entire Policy is being converted,
the Policy must be surrendered to us; the conversion must be made while the
Policy is in force; and any outstanding Loan Amount must be repaid.
The new policy will have the same Issue Age and premium class as the
Policy. If the entire Policy is being converted, the effective date of the
conversion will be the date on which we receive both your written conversion
request and the Policy. If you are converting a Face Amount increase, the
effective date of the conversion will be the date on which we receive your
written conversion request.
On the effective date of the conversion, the new policy will have, at
your option, either:
(a) A death benefit which is equal to the Death Benefit of the
Policy on the effective date of the conversion, or in the case
of a Face Amount increase, a death benefit equal to the
increase in Face Amount; or
(b) A net amount at risk which equals the Death Benefit of the
Policy on the effective date of the conversion, less the
Accumulation Value on that date, or in the case of a Face
Amount increase, a net amount at risk which equals the Face
Amount increase on the effective date of conversion less the
Accumulation Value on that date which is considered to be part
of the Face Amount increase.
The conversion will be subject to an equitable adjustment in payments
and Policy values to reflect variances, if any, in the payments and Policy
values under the Policy and the new policy. An additional premium payment may be
required. The new Policy's provisions and charges will be the same as those that
would have been in effect had the new Policy been issued on the Policy Date.
INVESTMENTS OF THE VARIABLE ACCOUNT
There are currently 28 investment alternatives available under the
Variable Account. Alger Management is the investment manager for the three Alger
American Funds and is responsible for the overall administration of the Fund,
subject to the supervision of the Board of Trustees. Fidelity Management &
Research Company is the investment adviser for the four portfolios of VIP and
the three portfolios of VIP II. Each of the four portfolios of Janus Aspen
Series has an investment advisory agreement with Janus Capital. Neuberger&Berman
Management, with the assistance of Neuberger&Berman, LLC as sub-adviser, selects
investments for AMT Limited Maturity Bond Investments and AMT Partners
Investments. Northstar Investment Management Corporation, an affiliate of the
Company, is the investment adviser of the five Northstar Funds. Certain of the
Northstar Funds are sub-
<PAGE>
advised by third-party investment advisers. OpCap Advisors is the investment
manager for each of the four OCC Accumulation Trust Portfolios and is a
subsidiary of Oppenheimer Capital, a registered investment adviser. Putnam
Management is the investment adviser for the three funds of Putnam Variable
Trust.
We reserve the right to establish additional Sub-Accounts of the
Variable Account, each of which could invest in a new Fund with a specified
investment objective. The Variable Account currently consists of 28 investment
options; you are permitted, however, to participate in a maximum of seventeen
investment options over the lifetime of your Policy. You do not have to choose
your investment options in advance, but upon participation in the seventeenth
Fund since the issue of the Policy you would only be able to transfer within the
seventeen Funds already utilized and which are still available.
The Company has entered into service agreements with the managers or
distributors of certain of the Funds pursuant to which the Company or its
affiliates may receive from affiliates of the Funds compensation for providing
administrative, recordkeeping, distribution in some cases, and other services to
the Funds or their affiliates. Such compensation is paid based upon assets
invested in the particular Funds, or based upon aggregated net asset goals.
Currently, the Company has service arrangements with Alger, Fidelity, Janus,
Neuberger&Berman, and OCC.
The Funds currently offered are described below. A brief summary of
investment objectives is contained in the description of each Fund. In addition,
you should read the prospectuses of the Funds, which are contained in the
accompanying "Select*Product Mutual Funds" book, for more detailed information
and particularly, a more thorough explanation of investment objectives of the
Funds. There is no assurance that any Fund will achieve its investment
objective(s). There is a possibility that one Fund might become liable for any
misstatement, inaccuracy or incomplete disclosure in another Fund's prospectus.
The Fund shares may be available to fund benefits under both variable
annuity and variable life contracts and policies. This could, in the future,
result in an irreconcilable conflict between the interests of the holders of the
different types of variable contracts. The Funds have advised us that they will
monitor for such conflicts and will promptly provide us with information
regarding any such conflicts should they arise or become imminent and we will
promptly advise the Funds if we become aware of any such conflicts. If any such
material irreconcilable conflict arises we will arrange to eliminate and remedy
such conflict up to and including establishing a new management investment
company and segregating the assets underlying the variable policies and
contracts at no cost to the holders of the policies and contracts. For a brief
explanation of the conflicts that may be involved in such situations, refer to
the following sections in the Fund Prospectuses: "Participating Insurance
Companies and Plans" in The Alger American Fund Prospectus, "FMR and Its
Affiliates" in Fidelity's VIP and VIP II Prospectuses, "Conflicts of Interest"
in Janus Aspen Series Prospectus, "Distribution and Redemption of Trust Shares"
in the Neuberger&Berman Advisers Management Trust Prospectus, "Management of the
Fund" in the OCC Accumulation Trust Prospectus, and "Sales and Redemptions" in
the Putnam Variable Trust Prospectus.
The Funds described below distribute dividends and capital gains.
However, distributions are automatically reinvested in additional Fund shares,
at net asset value. The Sub-Account receives the distributions which are then
reflected in the Unit Value of that Sub-Account. See "Accumulation Value."
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO has the investment objective of long
term capital appreciation. Except during temporary defensive periods, the
Portfolio invests at least 65% of its total assets in equity securities of
companies that, at the time of purchase of the securities, have total market
capitalization of $1 billion or greater. The Portfolio may invest up to 35% of
its total assets in equity securities of companies that, at the time of
purchase, have total market capitalization of less than $1 billion.
<PAGE>
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO has the investment objective of
long term capital appreciation. Except during temporary defensive periods, the
Portfolio invests at least 65% of its total assets in equity securities of
companies that, at the time of purchase of the securities, have total market
capitalization within the range of companies included in the S&P MidCap 400
Index, updated quarterly. The S&P MidCap 400 Index is designed to track the
performance of medium capitalization companies. The Portfolio may invest up to
35% of its total assets in equity securities of companies that, at the time of
purchase, have total market capitalization outside the range of companies
included in the S&P Mid-Cap 400 Index and in excess of that amount (up to 100%
of its assets) during temporary defensive periods.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO has the investment
objective of long term capital appreciation. Except during temporary defensive
periods, the Portfolio invests at least 65% of its total assets in equity
securities of companies that, at the time of purchase, have "total market
capitalization" - present market value per share multiplied by the total number
of shares outstanding - within the range of companies included in the Russell
2000 Growth Index ("Russell Index") or the S&P Small Cap 600 Index ("S&P
Index"). Both indexes are broad indexes of small capitalization stocks. The
Portfolio may invest up to 35% of its total assets in equity securities of
companies that, at the time of purchase, have total market capitalization
outside of the combined range of these indices, and in excess of that amount (up
to 100% of its assets) during temporary defensive periods.
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND (VIP)
EQUITY-INCOME PORTFOLIO seeks reasonable income by investing primarily
in income-producing equity securities. In choosing these securities the
portfolio will also consider the potential for capital appreciation. The
portfolio's goal is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's Composite Index of 500 Stocks.
GROWTH PORTFOLIO seeks to achieve capital appreciation. The portfolio
normally purchases common stocks, although its investments are not restricted to
any one type of security. Capital appreciation may also be found in other types
of securities, including bonds and preferred stocks.
HIGH INCOME PORTFOLIO seeks to obtain a high level of current income by
investing primarily in high-yielding, lower-rated fixed-income securities
(sometimes referred to as "junk bonds"), while also considering growth of
capital. Lower-rated fixed-income securities are considered speculative and
involve greater risk of default than higher-rated fixed-income securities and
are more sensitive to the issuer's capacity to pay. Consult the VIP Prospectus
for further information on the risks associated with the portfolio's investment
in lower-rated fixed-income securities.
MONEY MARKET PORTFOLIO seeks to obtain as high a level of current
income as is consistent with preserving capital and providing liquidity. The
portfolio will invest only in high-quality U.S. dollar denominated money market
instruments of domestic and foreign issuers. An investment in the portfolio is
not insured or guaranteed by the U.S. Government, and there can be no assurance
that the Portfolio will maintain a stable net asset value per share of $1.00.
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II (VIP II)
CONTRAFUND PORTFOLIO seeks capital appreciation by investing in
companies believed to be undervalued due to an overly pessimistic appraisal by
the public. The portfolio invests primarily in common stock and securities
convertible into common stock, but it has the flexibility to invest in any type
of security that may produce capital appreciation.
<PAGE>
INDEX 500 PORTFOLIO seeks to provide investment results that correspond
to the total return (i.e., the combination of capital changes and income) of
common stocks publicly traded in the United States. In seeking this objective,
the portfolio attempts to duplicate the composition and total return of the
Standard & Poor's Composite Index of 500 Stocks while keeping transaction costs
and other expenses low. The portfolio is designed as a long-term investment
option.
INVESTMENT GRADE BOND PORTFOLIO seeks as high a level of current income
as is consistent with the preservation of capital by investing in a broad range
of investment-grade fixed-income securities.
JANUS ASPEN SERIES
AGGRESSIVE GROWTH PORTFOLIO is a nondiversified fund that seeks
long-term growth of capital by investing primarily in common stocks. The
Portfolio intends to normally invest at least 50% of its equity assets in
securities issued by medium-sized companies.
GROWTH PORTFOLIO is a diversified fund that seeks long-term growth of
capital in a manner consistent with the preservation of capital by investing in
common stocks of issuers of any size. Generally, this Portfolio emphasizes
issuers with larger market capitalizations.
INTERNATIONAL GROWTH PORTFOLIO is a diversified fund that seeks
long-term growth of capital by investing primarily in common stocks of foreign
issuers of any size. The Portfolio normally invests at least 65% of its total
assets in issuers from at least five different countries excluding the United
States.
WORLDWIDE GROWTH PORTFOLIO is a diversified fund that seeks long-term
growth of capital in a manner consistent with the preservation of capital by
investing primarily in common stocks of foreign and domestic issuers of any
size. Worldwide Growth Portfolio normally invests in issuers from at least five
different countries including the United States.
NEUBERGER&BERMAN ADVISERS MANAGEMENT TRUST ("AMT")
LIMITED MATURITY BOND PORTFOLIO seeks to provide the highest current
income consistent with low risk to principal and liquidity; and secondarily,
total return. It invests in a diversified portfolio primarily consisting of U.S.
Government and Agency securities and investment grade debt securities issued by
financial institutions, corporations, and others. "Investment grade" debt
securities are those receiving one of the four highest ratings from Moody's
Investor Service, Inc. ("Moody's"), Standard & Poor's Rating Group (S&P"), or
another nationally recognized statistical rating organization ("NRSRO").
Securities in which the portfolio may invest include mortgage-backed and asset
backed securities, repurchase agreements with respect to U.S. Government and
Agency securities, and foreign investments. The portfolio may also invest in
fixed, variable or inflation-indexed debt securities.
PARTNERS PORTFOLIO seeks capital growth through an investment approach
that is designed to increase capital with reasonable risk. It invests in a
portfolio, which in turn, invests principally in common stocks of medium to
large capitalization established companies, using a value-oriented approach.
Neuberger&Berman Management looks for securities believed to be under valued
based on strong fundamentals, including a low price-to-earnings ratio,
consistent cash flow, and the company's track record through all parts of the
market cycle. Up to 15% of the portfolio's net assets, measured at the time of
investment, may be invested in corporate debt securities that are below
investment grade or in comparable unrated securities. Securities rated below
investment grade, as well as comparable unrated securities, are often considered
to be speculative and usually entail greater risk.
<PAGE>
NORTHSTAR VARIABLE TRUST (NORTHSTAR)
NORTHSTAR GROWTH FUND is a diversified portfolio with an investment
objective of long-term growth of capital through investments in equity
securities of companies that are believed to provide above average potential for
capital appreciation. Navellier Fund Management, Inc. serves as sub-adviser to
the Fund and is responsible for the day-to-day investment management of the
Fund, subject to the supervision of the investment adviser and the Trustees of
the Fund. All fees and expenses of the sub-advisory agreement are borne by the
investment adviser.
NORTHSTAR HIGH YIELD BOND FUND is a diversified portfolio with an
investment objective of seeking high income consistent with the preservation of
capital. Under normal market conditions, this Investment Fund invests
predominantly in high-yield, high-risk, lower-rated U.S. dollar denominated debt
securities. These securities are commonly known as "junk bonds." Most of the
securities in which the Investment Fund invests are rated, at the time of
investment, at least Caa by Moody's Investors Service, Inc. ("Moody's") or CCC
by Standard & Poor's Corporation ("S&P") or, if not rated, are of comparable
quality in the opinion of the investment adviser. The Investment Fund may,
however, invest in securities in the lowest rating categories of Moody's and
S&P, which are "C" in the case of Moody's and "D" in the case of S&P.
NORTHSTAR INCOME AND GROWTH FUND is a diversified portfolio with an
investment objective of seeking current income balanced with the objective of
achieving capital appreciation. This Fund will seek to achieve its objective
through investments in common and preferred stocks, convertible securities,
investment grade corporate debt securities and government securities, selected
for their prospects of producing income and capital appreciation. Wilson/Bennett
Capital Management, Inc. ("Wilson/Bennett") is the sub-adviser to this Fund and
is responsible for the day-to-day investment management of the Fund, subject to
the supervision of the investment adviser and the Trustees of the Fund. All fees
and expenses of the subadvisory arrangement are borne by the investment adviser.
NORTHSTAR INTERNATIONAL VALUE FUND is a diversified portfolio with the
objective of long-term capital appreciation. The Fund invests primarily in
foreign companies with a market capitalization of greater than $1 billion, but
may hold up to 25% of its assets in companies with smaller market
capitalization. This Fund will seek to achieve its objective through investments
in common stocks, preferred stocks, American, European and Global depository
receipts, as well as convertible securities. It may also invest in other
higher-risk securities of companies located in at least three countries other
than the U.S., including Western Europe, North and South America, Australia,
Asian and other nations. Up to 25% of its assets may be invested in securities
of issuers located in countries with emerging markets. Brandes Investment
Partners, L.P. ("Brandes") is the sub-adviser to this Fund and is responsible
for the day-to-day investment management of the Fund, subject to the supervision
of the investment adviser and the Trustees of the Fund. All fees and expenses of
the sub-advisory agreement are borne by the investment adviser.
NORTHSTAR MULTI-SECTOR BOND FUND is a diversified portfolio with an
investment objective of maximizing current income. This Fund will seek to
achieve its objective by investment in the following sectors of the fixed income
securities markets: (a) securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or instrumentalities;
(b) investment grade corporate debt securities; (c) investment grade or
comparable quality debt securities issued by foreign corporate issuers, and
securities issued by foreign governments and their political subdivisions,
limited to 35% of assets determined at the time of investment; and (d)
high-yield high-risk fixed income securities of U.S. and foreign issuers,
limited to 50% of assets determined at the time of investment.
<PAGE>
OCC ACCUMULATION TRUST
EQUITY PORTFOLIO seeks long term capital appreciation through
investment in securities (primarily equity securities) of companies that are
believed by the Manager to be undervalued in the marketplace in relation to
factors such as the companies' assets or earnings. It is the manager's intention
to invest in securities of companies which in the Manager's opinion possess one
or more of the following characteristics: undervalued assets, valuable consumer
or commercial franchises, securities valuation below peer companies, substantial
and growing cash flow and/or a favorable price to book value relationship. The
Portfolio will invest primarily in stocks listed on the New York Stock Exchange.
In addition, it may also purchase securities listed on other domestic securities
exchanges, securities traded in the domestic over-the-counter market and foreign
securities provided that they are listed on a domestic or foreign securities
exchange or represented by American depository receipts listed on a domestic
securities exchange or traded in domestic or foreign over-the-counter markets.
GLOBAL EQUITY PORTFOLIO seeks long term capital appreciation through
pursuit of a global investment strategy primarily involving equity securities.
The Portfolio may invest anywhere in the world with no requirement that any
specific percentage of its assets be committed to any given country. Under
normal circumstances, at least 65 percent of the Portfolio's total assets will
be invested in equity securities in at least three different countries, one of
which may be the United States. Opportunities for capital appreciation may also
be presented by debt securities. The Portfolio may invest up to 35 percent of
its total assets in debt obligations with remaining maturities of one year or
more of U.S. or foreign corporate, governmental or bank issuers. It is the
present intention of the Portfolio, although not a fundamental policy, not to
invest more than 5 percent of its total assets in debt securities rated below
investment grade. Although there is no minimum rating for this category of debt
instruments of the Portfolio, the Portfolio does not intend to invest in bonds
which are in default.
MANAGED PORTFOLIO seeks to achieve growth of capital over time through
investment in a portfolio consisting of common stocks, bonds and cash
equivalents, the percentages of which will vary based on the Manager's
assessments of the relative outlook for such investments. In seeking to achieve
its investment objective, the types of equity securities in which the Portfolio
may invest are likely to be the same as those in which the Equity Portfolio
invests, although securities of the type in which the Small Cap Portfolio
invests may, to a lesser extent, be included. Debt securities are expected to be
predominately investment grade intermediate to long term U.S. Government and
corporate debt, although the Portfolio will also invest in high quality short
term money market and cash equivalent securities and may invest almost all of
its assets in such securities when the Manager deems it advisable in order to
preserve capital. In addition, the Portfolio may also purchase foreign
securities provided that they are listed on a domestic or foreign securities
exchange or are represented by American depository receipt listed on a domestic
securities exchange or traded in domestic or foreign over-the counter markets.
SMALL CAP PORTFOLIO seeks capital appreciation through investments in a
diversified portfolio consisting primarily of equity securities of companies
with market capitalizations of under $1 billion. The Portfolio may purchase
securities in initial public offerings, or shortly after such offerings have
been completed, when the Manager believes that such securities have
greater-than-average market appreciation potential. Under normal circumstances
at least 65% of the Portfolio's assets will be invested in equity securities.
The majority of securities purchased by the Portfolio will be traded on the New
York Stock Exchange, the American Stock Exchange or in the over-the-counter
market, and will also include options, warrants, bonds notes and debentures
which are convertible into or exchangeable for, or which grant a right to
purchase or sell securities. In addition, the Portfolio may also purchase
foreign securities provided that they are listed on a domestic or foreign
securities exchange or traded in domestic or foreign over-the-counter markets.
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PUTNAM VARIABLE TRUST
PUTNAM VT DIVERSIFIED INCOME FUND seeks high current income consistent
with capital preservation by investing in the following three sectors of the
fixed income securities markets: a U.S. Government Sector, a High Yield Sector
(which invests primarily in securities that are commonly known as "junk bonds")
and an International Sector. Consult the Putnam Variable Trust Prospectus for
further information on the risks associated with this Fund's investments in
high-yield higher-risk fixed income securities.
PUTNAM VT GROWTH AND INCOME FUND seeks capital growth and current
income by investing primarily in common stocks that offer potential for capital
growth, current income, or both.
PUTNAM VT VOYAGER FUND seeks capital appreciation by investing
primarily in common stocks that Putnam Management believes have potential for
capital appreciation that is significantly greater than that of market averages.
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to compliance with applicable law and, if
required, approval by the Insurance Department, to make additions to, deletions
from, or substitutions for the shares that are held by the Variable Account or
that the Variable Account may purchase. We reserve the right to eliminate the
shares of any of the Funds and to substitute shares of another Fund or of
another open-end, registered investment company. We will not substitute any
shares attributable to your interest in a Sub-Account of the Variable Account
without notice and prior approval of the SEC, to the extent required by the
Investment Company Act of 1940 or other applicable law. Nothing contained herein
shall prevent the Variable Account from purchasing other securities of other
Funds or classes of policies, or from permitting a conversion between Funds or
classes of policies on the basis of requests made by Policy owners.
We also reserve the right to establish additional Sub-Accounts of the
Variable Account, each of which would invest in a new Fund, or in shares of
another investment company, with a specified investment objective. New Sub-
Accounts may be established when, in our sole discretion, marketing needs or
investment conditions warrant, and any new Sub-Accounts will be made available
to existing Policy owners on a basis to be determined by us. We may also
eliminate one or more Sub-Accounts if, in our sole discretion, marketing, tax,
regulatory requirements, or investment conditions warrant.
In the event of any such substitution or change, we may make such
changes in this and other policies as may be necessary or appropriate to reflect
such substitution or change. You may transfer the portion of the Accumulation
Value affected without payment of a Transfer Charge. If deemed by us to be in
the best interests of persons having voting rights under the Policies, the
Variable Account may be operated as a management company under the Investment
Company Act of 1940, it may be deregistered under that Act in the event such
registration is no longer required, or it may be combined with our other
separate accounts.
VOTING RIGHTS
You have the right to instruct us how to vote the Fund shares
attributable to the Policy at regular meetings and special meetings of the
Funds. We will vote the Fund shares held in Sub-Accounts according to the
instructions received, as long as:
* The Variable Account is registered as a unit investment trust
under the Investment Company Act of 1940; and
* The assets of the Variable Account are invested in Fund
shares.
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If we determine that, because of applicable law or regulation, we do
not have to vote according to the voting instructions received, we will vote the
Fund shares at our discretion.
All persons entitled to voting rights and the number of votes they may
cast are determined as of a record date, selected by us, not more than 90 days
before the meeting of the Fund. All Fund proxy materials and appropriate forms
used to give voting instructions will be sent to persons having voting
interests.
Any Fund shares held in the Variable Account for which we do not
receive timely voting instructions, or which are not attributable to Policy
owners, will be voted by us in proportion to the instructions received from all
Policy owners having a voting interest in the Fund. Any Fund shares held by us
or any of our affiliates in general accounts will, for voting purposes, be
allocated to all separate accounts having voting interests in the Fund in
proportion to each account's voting interest in the respective Fund, and will be
voted in the same manner as are the respective account's votes.
Owning the Policy does not give you the right to vote at meetings of
our stockholders.
DISREGARD OF VOTING INSTRUCTIONS. We may, when required by state
insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
subclassification or investment objective of any Fund or to approve or
disapprove an investment advisory contract for any Fund. In addition, we may
disregard voting instructions in favor of changes initiated by a Policy owner in
the investment policy or the investment adviser of any Fund if we reasonably
disapprove of such changes. A change would be disapproved only if the proposed
change is contrary to state law or prohibited by state regulatory authorities or
we determine that the change would have an adverse effect on the Variable
Account in that the proposed investment policy for a Fund may result in
speculative or unsound investments. In the event we do disregard voting
instructions, a summary of that action and the reasons for such action will be
included in the next annual report to owners.
GENERAL PROVISIONS
BENEFITS AT AGE 95
If the Insured is living at Age 95 and the Policy is in force, the Cash
Surrender Value of the Policy will automatically be applied to purchase single
premium paid-up life insurance, unless you notify us in writing on or before the
Insured's attained Age 95 that the Cash Surrender Value should be paid in cash.
While the Cash Surrender Value of the new paid-up policy will be the same as
this Policy, the face amount of the new policy will be whatever the single
premium will purchase.
OWNERSHIP
While the Insured is alive, subject to the Policy's provisions you may:
* Change the amount and frequency of premium payments.
* Change the allocation of premiums.
* Change the Death Benefit Option.
* Change the Face Amount.
* Make transfers between accounts.
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* Surrender the Policy for cash.
* Make a partial withdrawal for cash.
* Receive a cash loan.
* Assign the Policy as collateral.
* Change the beneficiary.
* Transfer ownership of the Policy.
* Enjoy any other rights the Policy allows.
PROCEEDS
At the Insured's death, the proceeds payable include the Death Benefit
then in force:
* Plus any additional amounts provided by rider on the life of
the Insured;
* Plus any Policy loan interest that we have collected but not
earned;
* Minus any Loan Amount; and
* Minus any unpaid Monthly Deductions.
BENEFICIARY
You may name one or more beneficiaries on the application when you
apply for the Policy. You may later change beneficiaries by written request. If
no beneficiary is surviving when the Insured dies, the Death Benefit will be
paid to you, if surviving, or otherwise to your estate.
POSTPONEMENT OF PAYMENTS
Payments from the Variable Account for Death Benefits, cash surrender,
partial withdrawal, or loans will generally be made within seven days after we
receive all the documents required for the payments.
We may, however, delay making a payment when we are not able to
determine the Variable Accumulation Value because (i) the New York Stock
Exchange is closed, other than customary weekend or holiday closings, or trading
on the New York Stock Exchange is restricted by the SEC, (ii) the SEC by order
permits postponement for the protection of Policyholders, or (iii) an emergency
exists, as determined by the SEC, as a result of which disposal of securities is
not reasonably practicable or it is not reasonably practicable to determine the
value of the Variable Account's net assets. Transfers and allocation to and
against any Sub-Account of the Variable Account may also be postponed under
these circumstances.
Any of the payments described above which are made from the Fixed
Account may be delayed up to six months from the date we receive the documents
required. We will pay interest at the same rate we are currently paying on
proceeds at death from the date of the request to the date of payment if we
delay payment more than 10 days. No additional interest will be credited to any
delayed payments. The time a payment from the Fixed Account may be delayed and
the rate of interest paid on such amounts may vary among states.
<PAGE>
SETTLEMENT OPTIONS
Settlement Options are ways you can choose to have the Policy's
proceeds paid. These options apply to proceeds paid:
* At the Insured's death.
* On total surrender of the Policy.
The proceeds are paid to one or more payees. The proceeds may be paid
in a lump sum or may be applied to one of the following Settlement Options.
Proceeds will be paid in one sum unless one or more Options are requested. A
combination of options may be used. At least $2,500 must be applied to any
option for each payee under that option. Under an installment Option, each
payment must be at least $25.00. We may adjust the interval between payments to
make each payment at least $25.00.
Proceeds applied to any Option no longer earn interest at the rate
applied to the Fixed Account or participate in the investment performance of the
Funds.
Option 1 -- Proceeds are left with us to earn interest. Withdrawals and
any changes are subject to our approval.
Option 2 -- Proceeds and interest are paid in equal installments of a
specified amount until the proceeds and interest are all paid.
Option 3 -- Proceeds and interest are paid in equal installments for a
specified period until the proceeds and interest are all paid.
Option 4 -- The proceeds provide an annuity payment with a specified
number of months "certain." The payments are continued for the life of
the primary payee. If the primary payee dies before the certain period
is over, the remaining payments are paid to a contingent payee.
Option 5 -- The proceeds provide a life income for two payees. When one
payee dies, the surviving payee receives two-thirds of the amount of
the joint monthly payment for life.
Option 6 -- The proceeds are used to provide an annuity based on the
rates in effect when the proceeds are applied. We do not apply this
Option if a similar option would be more favorable to the payee at that
time.
INTEREST ON SETTLEMENT OPTIONS. We base the interest rate for proceeds
applied under Options 1 and 2 on the interest rate we declare on funds that we
consider to be in the same classification based on the Option, restrictions on
withdrawal, and other factors. The interest rate will never be less than an
effective annual rate of 3.50%.
In determining amounts to be paid under Options 3 and 4, we assume
interest at an effective annual rate of 3.50%. Also, for Option 3 and "certain"
periods under Option 4, we credit any excess interest we may declare on funds
that we consider to be in the same classification based on the Option,
restrictions on withdrawal, and other factors.
<PAGE>
INCONTESTABILITY
After the Policy has been in force during the Insured's lifetime for
two years from the Policy's Issue Date, we cannot claim the Policy is void or
refuse to pay any proceeds unless the Policy has lapsed.
If you make a Face Amount increase or a premium payment which requires
proof of insurability, the corresponding Death Benefit increase has its own
two-year contestable period measured from the date of the increase.
If the Policy is reinstated, the contestable period is measured from
the date of reinstatement with respect to statements made on the application for
reinstatement.
MISSTATEMENT OF AGE AND SEX
If the Insured's Age or sex or both are misstated (except where unisex
rates apply), the Death Benefit will be the amount that the most recent cost of
insurance would purchase using the current cost of insurance rate for the
correct Age and sex.
SUICIDE
If the Insured commits suicide within two years of the Policy's Issue
Date, we do not pay the Death Benefit. Instead, we refund all premiums paid for
the Policy and any attached riders, minus any Loan Amounts and partial
withdrawals.
If you make a Face Amount increase or a premium payment which requires
proof of insurability, the corresponding Death Benefit increase has its own
two-year suicide limitation for the proceeds associated with that increase. If
the Insured commits suicide within two years of the effective date of the
increase, we pay the Death Benefit prior to the increase and refund the cost of
insurance for that increase.
TERMINATION
The Policy terminates when any of the following occurs:
* The Policy lapses. See "Policy Lapse and Reinstatement."
* The Insured dies.
* The Policy is surrendered for its Cash Surrender Value.
* The Policy is amended according to the amendment provision
described below and you do not accept the amendment.
AMENDMENT
We reserve the right to amend the Policy, subject to the approval of
the Insurance Department, in order to include any future changes relating to the
following:
* Any SEC rulings and regulations.
* The Policy's qualification for treatment as a life insurance
policy under the following:
- The Internal Revenue Code of 1986, as amended.
<PAGE>
- Internal Revenue Service rulings and regulations.
- Any requirements imposed by the Internal Revenue Service.
REPORTS
ANNUAL STATEMENT. We will send you an Annual Statement once each year
free of charge, showing the Face Amount, Death Benefit, Accumulation Value, Cash
Surrender Value, Loan Amount, premiums paid, Planned Periodic Premiums, interest
credits, partial withdrawals, transfers, and charges since the last statement.
Additional statements are available upon request. We may make a charge
not to exceed $50.00 for each additional Annual Statement you request.
PROJECTION REPORT. Upon request, we will provide you a report
projecting future results based on the Death Benefit Option you specify, the
Planned Periodic Premiums you specify, the Accumulation Value of your Policy at
the end of the prior Policy Year, and any other assumptions specified by you or
us (subject to any SEC limitations). We may make a charge not to exceed $50.00
for each Projection Report you request.
DIVIDENDS
The Policy does not entitle you to participate in our surplus. We do
not pay you dividends under the Policy.
The Sub-Account receives any dividends paid by the related Fund. Any
such dividend is credited to you through the calculation of the Sub-Account's
daily Unit Value.
COLLATERAL ASSIGNMENT
You may assign the benefits of the Policy as collateral for a debt.
This limits your rights to the Cash Surrender Value and the beneficiary's rights
to the proceeds. An assignment is not binding on us until we receive written
notice.
OPTIONAL INSURANCE BENEFITS
The Policy can include additional benefits, in the form of riders to
the Policy, if our requirements for issuing such benefits are met. We currently
offer the following benefit riders:
ACCELERATED BENEFIT RIDER. Under certain circumstances a part of the
Death Benefit may be paid to you when the Insured has been diagnosed as having a
terminal illness. This Rider may not be available in all states. Ask your
registered representative about the availability of this Rider in your state.
See "Accelerated Benefit Rider."
ACCIDENTAL DEATH BENEFIT RIDER. Provides an additional benefit if the
Insured dies from an accidental injury.
ADDITIONAL INSURED RIDER. Provides a 10 year, guaranteed level premium
and level term coverage for the Insured, the Insured's spouse, or a child of the
Insured.
WAIVER OF MONTHLY DEDUCTION RIDER. The Monthly Deduction for the Policy
is waived while the Insured is totally disabled under the terms of the rider.
<PAGE>
COST OF LIVING INCREASE RIDER. Provides optional increases in Face
Amount on the life of the Insured every two years based on the cost of living
without evidence of insurability.
WAIVER OF SPECIFIED PREMIUM RIDER. Contributes a specified amount of
premium to the Policy each month while the Insured is totally disabled under the
terms of the rider. This rider may not be available in all states. Ask your
registered representative about the availability of this rider in your state.
FEDERAL TAX MATTERS
The following discussion is not intended to be a complete description
of the tax status of the Policies. Rather, it provides information about how we
believe the tax laws apply in the most commonly occurring circumstances. The tax
treatment of certain aspects of the Policies, such as surrenders and partial
withdrawals, is uncertain or may be changed by regulations adopted in the
future. For these reasons, Policy owners are advised to consult with their own
tax advisers with regard to the tax implications of the Policies.
POLICY PROCEEDS
GENERAL. The Policy should qualify as a life insurance contract as long
as it satisfies certain definitional tests under Section 7702 and 817(d) of the
Internal Revenue Code (the "Code") and as long as the underlying investments for
the Contract satisfy diversification requirements under section 817(h) of the
Code (see "Diversification Requirements"). Section 7702 of the Code provides
that the Policy will so qualify if it satisfies a cash value accumulation test
or a guideline premium requirement and falls within a cash value corridor. The
qualification of the Policy under Section 7702 depends in part upon the Death
Benefit payable under the Policy at any time. To the extent a change in the
Policy, such as a decrease in Face Amount or a change in Death Benefit Option,
would cause the Policy not to qualify, we will not make the change. Also, if at
any time a premium is paid which would result in total premiums exceeding the
current maximum premiums allowed, we will only accept that portion of the
premium which would make total premiums equal the maximum. See "Payment and
Allocation of Premiums -- Amount and Timing of Premiums."
MODIFIED ENDOWMENT CONTRACTS. In 1988 Congress created a new
classification of life insurance policies known as "Modified Endowment
Contracts." Policy loans, partial surrenders and partial withdrawals of cash
from a policy which is classified as a Modified Endowment Contract are taxable
as ordinary income to the Policy owner. Additionally, taxable distributions, if
made before the Policy owner is 591/2, are subject to a Federal income tax
penalty of 10%.
Modified Endowment Contract classification may be avoided by limiting
the amount of premiums paid under the Policy. If you contemplate a large premium
payment under this Policy, and you wish to avoid Modified Endowment Contract
classification, you may contact us in writing before making the payment and we
will tell you the maximum amount which can be paid into the Policy.
DIVERSIFICATION REQUIREMENTS. Flexible premium variable life insurance
policies such as these Policies will be treated as life insurance contracts
under the Code as long as the separate accounts funding them are "adequately
diversified" under section 817(h) of the Code and regulations issued by the
Treasury Department. If the Variable Account is determined to be not adequately
diversified, Policy owners in the Variable Account will be treated as the owners
of the underlying assets and thus currently taxable on earnings and gains. The
investment adviser of the respective mutual fund investment options has
responsibility for maintaining the investment diversification required under the
Code.
In connection with the issuance of temporary diversification
regulations, the Internal Revenue Service stated that it anticipates the
issuance of regulations or rulings prescribing the circumstances in which an
owner's control of the investments of a separate account may cause the owner,
rather than the insurance company, to be
<PAGE>
treated as the owner of the assets in the account. If the Policy owner is
considered the owner of the assets of the separate account, income and gains
from the account would be included in the owner's gross income.
The ownership rights under the Policy offered in the Prospectus are
similar to, but different in certain respects from, those described by the
Internal Revenue Service, in rulings in which it determined that the owners were
not owners of separate account assets. For example, the owner of the Policy has
additional flexibility in allocating payments and cash values. These differences
could result in the owner being treated as the owner of the assets of the
separate account. In addition, we do not know what standards will be set forth
in the regulations or rulings which the Internal Revenue Service has stated it
expects to be issued. The number of underlying investment options available
under a variable product may also be relevant in determining whether the product
qualifies for the desired tax treatment. We reserve the right to modify the
Policy as necessary to attempt to prevent the Policy owner from being considered
as owner of the assets of the separate account.
DEATH BENEFITS. The Death Benefit proceeds payable under either the
Level Amount Option or the Variable Amount Option will be excludable from the
gross income of the beneficiary under Section 101(a) of the Code.
TAXATION OF DISTRIBUTIONS
SURRENDERS AND PARTIAL WITHDRAWALS. A surrender or lapse of the Policy
may have tax consequences. Upon surrender, the owner will not be taxed on the
Cash Surrender Value except for the amount, if any, that exceeds the gross
premiums paid less the untaxed portion of any prior withdrawals. The amount of
any Policy loan will, upon surrender or lapse, be added to the Cash Surrender
Value and treated, for this purpose, as if it had been received. The treatment
of a preferred loan is unclear; such a loan may be considered a withdrawal
instead of an indebtedness of the Policy owner. A loss incurred upon surrender
is generally not deductible. The tax consequences of a surrender may differ if
the proceeds are received under any income payment settlement option.
A complete surrender of the Policy will, and a partial withdrawal may,
under Section 72(e)(5) of the Code, be included in your gross income to the
extent that the distribution exceeds your investment in the Policy. Withdrawals
or partial surrenders generally are not taxable unless the total of such
withdrawals exceeds total premiums paid to the date of withdrawal less the
untaxed portion of any prior withdrawals. During the first 15 policy years,
however, an additional amount may be taxable if the partial surrender results in
or is necessitated by a reduction in benefits. A qualified tax adviser should be
consulted regarding the tax consequences of any surrender or partial withdrawal
during the first 15 policy years.
The increase in Accumulation Value of the Policy will not be included
in gross income unless and until there is a total surrender or partial
withdrawal under the Policy. A complete surrender of the Policy will, and a
partial withdrawal may, under Section 72(e)(5) of the Code, be included in your
gross income to the extent the distribution exceeds your investment in the
Policy.
The Unemployment Compensation Amendments of 1992 require us to withhold
Federal income tax at the rate of 20% on most distributions from qualified
plans, unless the distribution is an "eligible rollover distribution" as defined
by the Unemployment Compensation Act of 1992 and the Policy owner files a
written request with us for a direct rollover to an individual retirement
account as described in 408(b) of the Code, or as applicable, to another
qualified plan or a Section 403(b) arrangement that accepts rollovers.
POLICY LOANS. Under Section 72(e)(5) of the Code, loans received under
the Policy will be generally recognized as loans for tax purposes and will not
be considered to be distributions subject to tax. Pursuant to Section 163 of the
Code, interest paid to us with respect to the loan may or may not be deductible,
depending upon a number of factors. If the Policy is a Modified Endowment
Contract, a Policy loan or assignment of any portion of the Accumulation Value
will be taxable in an amount equal to the lesser of the amount of the
<PAGE>
loan/assignment or the excess of Accumulation Value over the Owner's investment
in the Policy. Due to the complexity of these factors, a Policy owner should
consult a competent tax adviser as to the deductibility of interest paid on any
Policy loans.
OTHER TAXES. Federal estate taxes and state and local estate,
inheritance and other taxes may become due depending on applicable law and your
circumstances or the circumstances of the Policy beneficiary if you or the
Insured dies. Any person concerned about the estate implications of the Policy
should consult a competent tax adviser.
TAXATION OF POLICIES HELD BY PENSION, CERTAIN DEFERRED COMPENSATION PLANS AND
OTHER ARRANGEMENTS
PENSION AND PROFIT-SHARING PLANS. If a Policy is purchased by a trust
which forms part of a pension or profit-sharing plan qualified under Section
401(a) of the Code for the benefit of participants covered under the plan, the
Federal income tax treatment of such Policies will be somewhat different from
that described above. A competent tax adviser should be consulted on these
matters.
DEFERRED COMPENSATION PLANS FOR PUBLIC EMPLOYEES AND EMPLOYEES OF TAX
EXEMPT ORGANIZATIONS. Section 457 of the Code permits state and local government
employers and tax exempt employers to establish deferred compensation plans for
eligible employees and independent contractors. Eligible plans limit the amount
of compensation which may be deferred. Distribution from eligible plans may
occur only upon the death of the employee, attainment of age 701/2, separation
from service or in the event of an unforseeable emergency. Amounts deferred may
be transferred directly to another eligible deferred compensation plan. The
employer will be the Owner and Beneficiary of all policies issued to an eligible
plan. Policies are subject to the claims of the employer's general creditors.
Death Benefit proceeds payable to the employer, some or all of which are
subsequently paid by the employer to the employee's beneficiary under the plan
will not be excludable from gross income under Section 101(a) or Section 101(b)
of the Code and will be taxable as ordinary income. An employee has no present
legal right or vested interest in such policies; an employee is entitled to
distributions only in accordance with eligible plan provisions.
OTHER ARRANGEMENTS. In addition, 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 may vary depending
on the particular facts and circumstances of each individual arrangement.
Therefore, if you are contemplating the use of a Policy in any arrangement the
value of which depends in part on its tax consequences, you should be sure to
consult a qualified tax advisor regarding the tax attributes of the particular
arrangements.
TAXATION OF RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
We do not initially expect to incur any income tax burden upon the
earnings or the realized capital gains attributable to the Variable Account.
Based on this expectation, no charge is being made currently to the Variable
Account for Federal income taxes which may be attributable to the Account. If,
however, we determine that we may incur such tax burden, we may assess a charge
for such burden from the Variable Account.
We may also incur state and local taxes, in addition to premium taxes,
in several states. At present these taxes are not significant. If there is a
material change in state or local tax laws, charges for such taxes, if any,
attributable to the Variable Account, may be made.
<PAGE>
OTHER CONSIDERATIONS
The foregoing discussion is general and is not intended as tax advice.
Any person concerned about these tax implications should consult a competent tax
adviser. This discussion is based on our understanding of the present Federal
income tax laws as they are currently interpreted by the IRS. No representation
is made as to the likelihood of continuation of these current laws and
interpretations. It should be further understood that the foregoing discussion
is not exhaustive and that special rules not described in this Prospectus may be
applicable in certain situations. Moreover, no attempt has been made to consider
any applicable state or other tax laws.
LEGAL DEVELOPMENTS REGARDING EMPLOYMENT-RELATED BENEFIT PLANS
The Policy is based on actuarial tables which distinguish between men
and women and therefore provide different benefits to men and women of the same
Age. Employers and employee organizations should consider, in consultation with
legal counsel, the impact of the Supreme Court decision of July 6, 1983 in
ARIZONA GOVERNING COMMITTEE V. NORRIS. That decision stated that optional
annuity benefits provided under an employee's deferred compensation plan could
not, under Title VII of the Civil Rights Act of 1964, vary between men and women
on the basis of sex. Employers and employee organizations should also consider,
in consultation with legal counsel, the impact of Title VII generally, and
comparable state laws that may be applicable, on any employment-related
insurance or benefit plan for which a Policy may be purchased.
Because of the NORRIS decision, the charges under the Policy that vary
depending on sex may in some cases not vary on the basis of the Insured's sex.
Unisex rates to be provided by us will apply, if requested on the application,
for tax-qualified plans and those plans where an employer believes that the
NORRIS decision applies. In this case, references made to the mortality tables
applicable to this Policy are to be disregarded and substituted with an 60% male
40% female blend of the 1980 Commissioner's Standard Ordinary Smoker and
Non-Smoker Mortality Tables, Age Last Birthday.
DISTRIBUTION OF THE POLICIES
The Policies will be sold by licensed insurance agents who are also
registered representatives of broker-dealers registered with the SEC under the
Securities Exchange Act of 1934 who are members of the National Association of
Securities Dealers, Inc.
The Policies will be distributed by the general distributor, Washington
Square Securities, Inc., ("WSSI"), a Minnesota corporation, which is an
affiliate of ours. WSSI is a securities broker-dealer registered with the SEC
and is a member of the National Association of Securities Dealers, Inc. It is
primarily a mutual funds dealer and has dealer agreements under which it markets
shares of more than 50 mutual funds. It also markets limited partnerships and
other tax-sheltered or tax-deferred investments, and acts as general distributor
(principal underwriter) for variable annuity products issued by us and variable
products issued by our affiliates. The Policies may also be sold through other
broker-dealers authorized by WSSI and applicable law to do so. Registered
representatives of such broker-dealers may be paid on a different basis than
described below.
Registered representatives who sell the Policies will receive
commissions based on a commission schedule. In the first Policy Year,
commissions generally will be no more than 55% of the premiums paid up to the
annualized Minimum Monthly Premium, plus 3% of any additional premium. In any
subsequent Policy Year, commissions generally will be 3% of premiums paid in
that year. Corresponding commissions will be paid upon a requested increase in
Face Amount. In addition, a commission of .25% of the average monthly
Accumulation Value during each Policy Year may be paid. Further, registered
representatives may be eligible to receive certain overrides, expense allowances
and other benefits based on the amount of earned commissions.
<PAGE>
MANAGEMENT
PRINCIPAL OCCUPATION
DIRECTORS AND OFFICERS AND BUSINESS EXPERIENCE
- ---------------------- -----------------------
Stephen A. Carb* Partner of Carb, Luria, Glassner, Cook & Kufeld
(law firm) since 1962.
James Cochran** Executive Vice President of ReliaStar Bankers
Security Life Insurance Company since 1996;
Executive Vice President and Chief Operating
Officer of ReliaStar United Services Life
Insurance Company ("RUSL") since 1996: Senior Vice
President, Product Development and Strategic
Planning of RUSL from 1995 to 1996; Senior Vice
President, Product Development from 1990 to 1995.
R. Michael Conley*** Senior Vice President of ReliaStar Financial Corp.
since 1991; Senior Vice President, ReliaStar
Employee Benefits of ReliaStar Life Insurance
Company since 1986; President of NWNL Benefits
Corporation since 1988; Executive Vice President
of ReliaStar Bankers Security Life Insurance
Company since 1996; Director of various
subsidiaries of ReliaStar Financial Corp.
Richard R. Crowl*** Senior Vice President, General Counsel and
Secretary of ReliaStar Financial Corp. since 1996;
Senior Vice President and General Counsel of
ReliaStar Life Insurance Company, ReliaStar
Bankers Security Life Insurance Company, Northern
Life Insurance Company, and ReliaStar United
Services Life Insurance Company since 1996;
Executive Vice President and General Counsel of
Washington Square Advisers, Inc. since 1986; Vice
President and Associate General Counsel of
ReliaStar Financial Corp. from 1989 to 1996; Vice
President and Associate General Counsel of
ReliaStar Life Insurance Company from 1985 to
1996; Director and Senior Vice President of
various subsidiaries of ReliaStar Financial Corp.
John H. Flittie*** Vice Chairman, President and Chief Operating
Officer of ReliaStar Life Insurance Company since
1996; President and Chief Operating Officer of
ReliaStar Financial Corp. and ReliaStar Life
Insurance Company since 1993; Vice Chairman, Chief
Executive Officer and President of ReliaStar
Bankers Security Life Insurance Company since
1996; Vice Chairman of ReliaStar United Services
Life Insurance Company and ReliaStar Bankers
Security Life Insurance Company since 1995; Senior
Executive Vice President and Chief Operating
Officer of ReliaStar Financial Corp. and ReliaStar
Life Insurance Company from 1992 to 1993; Senior
Executive Vice President and Chief Operating
Officer of ReliaStar Financial Corp. from 1991 to
1992; Executive Vice President and Chief Financial
Officer of ReliaStar Financial Corp. and ReliaStar
Life Insurance Company from 1989 to 1991; Director
of Community First BankShares, Inc. and Director
and Officer of various subsidiaries of ReliaStar
Financial Corp.
James T. Hale* Senior Vice President of Dayton Hudson Corporation
since 1981.
Wayne R. Huneke*** Senior Vice President, Chief Financial Officer and
Treasurer of ReliaStar Financial Corp. and
ReliaStar Life Insurance Company since 1994; Vice
President, Treasurer and Chief Accounting Officer
from 1990 to 1994; Director and Officer of various
subsidiaries of ReliaStar Financial Corp.
<PAGE>
PRINCIPAL OCCUPATION
DIRECTORS AND OFFICERS AND BUSINESS EXPERIENCE
- ---------------------- -----------------------
Kenneth U. Kuk*** Senior Vice President of ReliaStar Financial Corp.
and ReliaStar Life Insurance Company since 1996;
Vice President, Strategic Marketing of ReliaStar
Financial Corp. and ReliaStar Life Insurance
Company since 1996; Vice President of Investments
of ReliaStar Financial Corp. from 1991 to 1996;
President of Washington Square Advisers, Inc.
since 1995; Chairman of ReliaStar Mortgage
Corporation since 1988; Director of National
Commercial Finance Association and Director and
Officer of various subsidiaries of ReliaStar
Financial Corp.
Richard E. Nolan* Senior Counsel of Davis Polk & Wardwell (law firm)
since 1996 and Partner from 1990 to 1996.
Fioravante G. Perrotta* Retired 1996; Formerly Senior Partner of Rogers &
Wells (law firm) since 1970.
Robert C. Salipante*** Senior Vice President of Personal Financial
Services of ReliaStar Financial Corp. and
ReliaStar Life Insurance Company since 1996;
Executive Vice President of ReliaStar Bankers
Security Life Insurance Company since 1996; Senior
Vice President of Individual Division and
Technology of ReliaStar Life Insurance Company
since 1996; Senior Vice President of Strategic
Marketing and Technology of ReliaStar Financial
Corp. and ReliaStar Life Insurance Company from
1994 to 1996; Senior Vice President and Chief
Financial Officer of ReliaStar Financial Corp. and
ReliaStar Life Insurance Company from 1992 to
1994; Executive Vice President of Ameritrust
Corporation from 1988 to 1992; Director and
Officer of various subsidiaries of ReliaStar
Financial Corp.
David J. Sloane** Executive Vice President and Chief Operating
Officer of ReliaStar Bankers Security Life
Insurance Company since 1990.
John G. Turner*** Chairman and Chief Executive Officer of ReliaStar
Financial Corp. and ReliaStar Life Insurance
Company since 1993; Chairman of ReliaStar United
Services Life Insurance Company and ReliaStar
Bankers Security Life Insurance Company since
1995; Chairman of Northern Life Insurance Company
since 1992; Chairman, President and Chief
Executive Officer of ReliaStar Financial Corp. and
ReliaStar Life Insurance Company in 1993;
President and Chief Executive Officer of ReliaStar
Financial Corp. and ReliaStar Life Insurance
Company from 1991 to 1993; President and Chief
Operating Officer of ReliaStar Financial Corp.
from 1989 to 1991; President and Chief Operating
Officer of ReliaStar Life Insurance Company from
1986 to 1991; Director and Officer of various
subsidiaries of ReliaStar Financial Corp.
Charles B. Updike* Partner of Schoeman, Marsh & Updike (law firm)
since 1976.
Ross M. Weale* President of Waccabuc Enterprise, Inc. (management
consulting firm) since 1996; President and Chief
Executive Officer of Country Bank (financial
institution) from 1986 to 1996.
<PAGE>
PRINCIPAL OCCUPATION
DIRECTORS AND OFFICERS AND BUSINESS EXPERIENCE
- ---------------------- -----------------------
Steven W. Wishart*** Senior Vice President and Chief Investment Officer
of ReliaStar Financial Corp. since 1989; Senior
Vice President of ReliaStar Life Insurance Company
since 1981; President and Chief Executive Officer
of ReliaStar Investment Research, Inc. (formerly
WSCR, Inc.) since 1996; President of Washington
Square Capital Inc. from 1981 to 1996; President
of WSCR, Inc. from 1986 to 1996; Director of
National Benefit Resources Group Services Inc. and
Director and Officer of various subsidiaries of
ReliaStar Financial Corp.
* Director
** Officer
*** Director and Officer
The Executive Committee of our Board of Directors consists of Directors Turner,
Flittie, Hale, Huneke, and Weale.
The Compliance Committee of our Board of Directors consists of Directors Weale,
Carb, Hale, Nolan, Perrotta, and Updike.
STATE REGULATION
We are subject to the laws of the State of New York governing insurance
companies and to regulation and supervision by the Insurance Department of the
State of New York. An annual statement in a prescribed form is filed with the
Insurance Department each year, and in each state we do business, covering our
operations for the preceding year and our financial condition as of the end of
that year. Our books and accounts are subject to review by the Insurance
Division and a full examination of our operations is conducted periodically
(usually every three years) by the National Association of Insurance
Commissioners. This regulation does not, however, involve supervision or
management of our investment practices or policies.
In addition, we are subject to regulation under the insurance laws of
other jurisdictions in which we operate.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a
party. We are engaged in litigation of various kinds; however, our management
does not believe that any of this litigation is of material importance in
relation to our total assets.
BONDING ARRANGEMENTS
An insurance company blanket bond is maintained providing $25,000,000
coverage for our officers and employees and those of Washington Square
Securities, Inc., (WSSI), subject to a $500,000 deductible.
LEGAL MATTERS
Legal matters in connection with the Variable Account and the Policy
described in this Prospectus have been passed upon by Robert B. Saginaw,
Esquire, Attorney for the Company.
<PAGE>
EXPERTS
The statement of assets and liabilities of ReliaStar Bankers Security
Variable Life Separate Account I as of December 31, 1996, the related statements
of operations and changes in net assets for the years ended December 31, 1996
and 1995, and the annual financial statements of ReliaStar Bankers Security Life
Insurance Company included in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports which are included
herein, and have been so included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
The statement of operations and changes in net assets for the year
ended December 31, 1994 included in this Prospectus has been audited by KPMG
Peat Marwick LLP, independent auditors, as stated in their report which is
included herein, and has been so included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
Actuarial matters included in this Prospectus have been examined by
Steven P. West, F.S.A., M.A.A.A., as stated in the opinion filed as an exhibit
to the Registration Statement.
REGISTRATION STATEMENT CONTAINS FURTHER INFORMATION
A Registration Statement has been filed with the SEC under the
Securities Act of 1933 with respect to the Policies. This Prospectus does not
contain all information included in the Registration Statement, its amendments
and exhibits. For further information concerning the Variable Account, the
Funds, the Policies and us, please refer to the Registration Statement.
Statements in this Prospectus concerning provisions of the Policy and
other legal documents are summaries. Please refer to the documents as filed with
the SEC for a complete statement of the provisions of those documents.
Information may be obtained from the SEC's principal office in
Washington, D.C., for a fee it prescribes, or examined there without charge.
FINANCIAL STATEMENTS
The financial statements for the Variable Account reflect the
operations of the Variable Account and its Sub-Accounts as of and for the three
months ended March 31, 1997; and as of December 31, 1996 and for each of the
three years in the period then ended. The December 31, 1996 financial statements
are audited. The March 31, 1997 financial statements are unaudited. The periods
they cover are not necessarily indicative of the longer term performance of the
assets held in the Variable Account.
The financial statements of ReliaStar Bankers Security Life Insurance
Company which are included in this Prospectus should be distinguished from the
financial statements of the Variable Account and should be considered only as
bearing upon the ability of ReliaStar Bankers Security Life Insurance Company to
meet its obligations under the Policies. They should not be considered as
bearing on the investment performance of the assets held in the Variable
Account.
These financial statements are as of and for the three months ended
March 31, 1997, and as of December 31, 1996 and for each of the two years in the
period ended December 31, 1996. The December 31, 1996 financial statements are
audited. The March 31, 1997 financial statements are unaudited. The periods
covered are not necessarily indicative of the longer term performance of the
Company.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To ReliaStar Bankers Security Life Insurance Company
and ReliaStar Bankers Security Variable Life Separate Account I Policyowners:
We have audited the accompanying statement of assets and liabilities of
ReliaStar Bankers Security Variable Life Separate Account I as of December 31,
1996, and the related statements of operations and changes in net assets for the
years ended December 31, 1996 and 1995. These financial statements are the
responsibility of the management of ReliaStar Bankers Security Life Insurance
Company. Our responsibility is to express an opinion on these financial
statements based on our audits. The statement of operations and changes in net
assets for the year ended December 31, 1994 was audited by other auditors whose
report dated February 2, 1995 expressed an unqualified opinion on the statement.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the ReliaStar Bankers Security
Variable Life Separate Account I as of December 31, 1996, and the results of its
operations and changes in net assets for the years ended December 31, 1996 and
1995, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Minneapolis, MN
January 31, 1997
<PAGE>
RELIASTAR BANKERS SECURITY VARIABLE LIFE SEPARATE ACCOUNT I
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
SUB-ACCOUNTS
------------
COMMON MONEY ASSET TOTAL
STOCK MARKET BOND ALLOCATION SUB-ACCOUNTS
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in USLICO Series
Fund Portfolios (see below) $11,426,420 $ 5,083,111 $ 1,199,475 $ 5,447,240 $23,156,246
Policy loans 1,024,694 663,172 5,815 363,266 2,056,947
----------- ----------- ----------- ----------- -----------
TOTAL ASSETS 12,451,114 5,746,283 1,205,290 5,810,506 25,213,193
----------- ----------- ----------- ----------- -----------
LIABILITIES:
Net accrued for policy related
transactions due to ReliaStar Bankers 397,396 346,574 30,230 280,447 1,054,647
Amounts payable to ReliaStar Bankers 375,000 125,000 1,000,000 1,000,000 2,500,000
----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES 772,396 471,574 1,030,230 1,280,447 3,554,647
----------- ----------- ----------- ----------- -----------
NET ASSETS - FOR VARIABLE LIFE
INSURANCE POLICIES $11,678,718 $ 5,274,709 $ 175,060 $ 4,530,059 $21,658,546
=========== =========== =========== =========== ===========
Investments basis data:
Shares Owned 862,089 5,083,111 119,651 459,625
Cost $ 9,652,511 $ 5,083,111 $ 1,204,793 $ 5,015,173
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RELIASTAR BANKERS SECURITY VARIABLE LIFE SEPARATE ACCOUNT I
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SUB-ACCOUNTS
------------
COMMON MONEY ASSET TOTAL
STOCK MARKET BOND ALLOCATION SUB-ACCOUNTS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Reinvested dividends $ 1,730,933 $ 239,222 $ 79,033 $ 616,657 $ 2,665,845
Expenses:
Mortality and expense risk charges 52,648 25,332 6,246 26,396 110,622
------------ ------------ ------------ ------------ ------------
Net investment income 1,678,285 213,890 72,787 590,261 2,555,223
NET UNREALIZED GAINS (LOSSES) ON
INVESTMENTS 218,820 -- (45,487) (58,160) 115,173
NET REALIZED GAINS (LOSSES) ON
INVESTMENTS 112,451 -- (2,455) 45,103 155,099
------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations 2,009,556 213,890 24,845 577,204 2,825,495
FROM POLICY RELATED TRANSACTIONS:
Transfers in for net premiums 750,758 525,344 26,137 771,955 2,074,194
Transfers between sub-accounts 7,794 (9,177) 1,629 (246) --
Transfers for withdrawal/surrender (629,285) (289,528) (7,385) (389,029) (1,315,227)
TRANSFER OF INVESTMENT AND OPERATING
RESULTS TO RELIASTAR BANKERS (397,332) (247,087) (28,931) (362,831) (1,036,181)
------------ ------------ ------------ ------------ ------------
Net increase in net assets 1,741,491 193,442 16,295 597,053 2,548,281
NET ASSETS, BEGINNING OF YEAR 9,937,227 5,081,267 158,765 3,933,006 19,110,265
------------ ------------ ------------ ------------ ------------
NET ASSETS, END OF YEAR $ 11,678,718 $ 5,274,709 $ 175,060 $ 4,530,059 $ 21,658,546
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RELIASTAR BANKERS SECURITY VARIABLE LIFE SEPARATE ACCOUNT I
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
SUB-ACCOUNTS
------------
COMMON MONEY ASSET TOTAL
STOCK MARKET BOND ALLOCATION SUB-ACCOUNTS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Reinvested dividends $ 766,217 $ 265,384 $ 88,556 $ 374,017 $ 1,494,174
Expenses:
Mortality and expense risk charges 43,747 24,562 6,089 23,138 97,536
------------ ------------ ------------ ------------ ------------
Net investment income 722,470 240,822 82,467 350,879 1,396,638
NET UNREALIZED GAINS ON INVESTMENTS 1,606,225 -- 113,035 649,668 2,368,928
NET REALIZED GAINS ON INVESTMENTS 21,777 -- -- 5,314 27,091
------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations 2,350,472 240,822 195,502 1,005,861 3,792,657
FROM POLICY RELATED TRANSACTIONS:
Transfers in for net premiums 806,287 520,818 27,169 859,175 2,213,449
Transfers between sub-accounts 16,931 (2,784) -- (14,147) --
Transfers for withdrawal/surrender (569,134) (411,810) (15,701) (364,839) (1,361,484)
TRANSFER OF INVESTMENT AND OPERATING
RESULTS TO RELIASTAR BANKERS (435,407) (246,086) (179,318) (509,281) (1,370,092)
------------ ------------ ------------ ------------ ------------
Net increase in net assets 2,169,149 100,960 27,652 976,769 3,274,530
NET ASSETS, BEGINNING OF YEAR 7,768,078 4,980,307 131,113 2,956,237 15,835,735
------------ ------------ ------------ ------------ ------------
NET ASSETS, END OF YEAR $ 9,937,227 $ 5,081,267 $ 158,765 $ 3,933,006 $ 19,110,265
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RELIASTAR BANKERS SECURITY VARIABLE LIFE SEPARATE ACCOUNT I
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
SUB-ACCOUNTS
------------
COMMON MONEY ASSET TOTAL
STOCK MARKET BOND ALLOCATION SUB-ACCOUNTS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Reinvested dividends $ 751,944 $ 167,844 $ 79,455 $ 326,897 $ 1,326,140
Expenses:
Mortality and expense risk charges 38,943 23,541 5,721 19,168 87,373
------------ ------------ ------------ ------------ ------------
Net investment income 713,001 144,303 73,734 307,729 1,238,767
NET UNREALIZED LOSSES ON
INVESTMENTS (645,732) -- (123,218) (399,781) (1,168,731)
NET REALIZED GAINS (LOSSES) ON
INVESTMENTS 14,527 -- (2,933) -- 11,594
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations 81,796 144,303 (52,417) (92,052) 81,630
FROM POLICY RELATED TRANSACTIONS:
Transfers in for net premiums 862,124 683,395 28,067 919,831 2,493,417
Transfers between sub-accounts 21,000 (39,241) 131 18,110 --
Transfers for withdrawal/surrender (633,567) (301,779) (8,746) (270,052) (1,214,144)
TRANSFER OF INVESTMENT AND OPERATING
RESULTS FROM (TO) RELIASTAR BANKERS (261,278) (273,280) 35,467 (264,132) (763,223)
------------ ------------ ------------ ------------ ------------
Net increase in net assets 70,075 213,398 2,502 311,705 597,680
NET ASSETS, BEGINNING OF YEAR 7,698,003 4,766,909 128,611 2,644,532 15,238,055
------------ ------------ ------------ ------------ ------------
NET ASSETS, END OF YEAR $ 7,768,078 $ 4,980,307 $ 131,113 $ 2,956,237 $ 15,835,735
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RELIASTAR BANKERS SECURITY VARIABLE LIFE SEPARATE ACCOUNT I - NOTES TO FINANCIAL
STATEMENTS - DECEMBER 31, 1996
(1) ORGANIZATION - ReliaStar Bankers Security Variable Life Separate Account I
("Separate Account I") was established by ReliaStar Bankers Security Life
Insurance Company ("ReliaStar Bankers"), previously Bankers Security Life
Insurance Society, in 1986 under New York insurance laws. Separate Account I
operates as a unit investment trust under the Investment Company Act of 1940 and
is used to fund certain benefits for variable life insurance policies issued by
ReliaStar Bankers. The assets of Separate Account I and its sub-accounts are the
property of ReliaStar Bankers. The portion of Separate Account I assets
applicable to the variable life policies will not be charged with liabilities
arising out of any other business ReliaStar Bankers may conduct. The net assets
maintained in the sub-accounts provide the basis for the periodic determination
of the amount of increased or decreased benefits under the policies. The net
assets may not be less than the amount required under the state insurance law to
provide for death benefits (without regard to the minimum death benefit
guarantee) and other policy benefits. Additional assets are held in ReliaStar
Bankers' general account to cover the contingency that the guaranteed minimum
death benefit might exceed the death benefit which would have been payable in
the absence of such guarantee.
In January 1995, ReliaStar Bankers became an indirect wholly-owned subsidiary of
ReliaStar Financial Corp. ("ReliaStar"), a financial services company based in
Minneapolis, Minnesota. Prior to that time ReliaStar Bankers was an indirect
wholly-owned subsidiary of USLICO Corporation. USLICO Series Fund ("Series
Fund") is an open-end diversified management investment company whose shares are
sold only to ReliaStar Bankers and other affiliates separate accounts.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) VALUATION OF INVESTMENTS - Investments in shares of the Series Fund are
valued at the reported net asset value of the respective portfolios. The
aggregate cost of the investments acquired and the aggregate proceeds of
investments sold, for the year ended December 31, 1996, were:
Cost of Shares Proceeds from
Sub-account Acquired Shares Sold
----------------- ------------------ -----------------
Common Stock $ 1,730,933 $ 496,949
Money Market 239,222 119,626
Bond 79,033 170,973
Asset Allocation 616,657 388,530
------- -------
Total $ 2,665,845 $ 1,176,078
(b) SECURITY TRANSACTIONS - Purchases and sales are recorded on the trade
date.
(c) FEDERAL INCOME TAXES - ReliaStar Bankers is taxed as a life insurance
company under the Internal Revenue Code of 1986, as amended (the "Code"). Since
the sub-accounts are not separate entities from ReliaStar Bankers, and their
operations form a part of ReliaStar Bankers, they will not be taxed separately
as a "regulated investment company" under Sub-chapter M of the Code. Under
existing Federal income tax law, investment income of the sub-accounts, to the
extent that it is applied to increase reserves under a contract, is not taxed
and may be compounded for reinvestment without additional tax to ReliaStar
Bankers.
(d) CHARGES DEDUCTED FROM PREMIUMS - Transfers to the sub-accounts of
Separate Account I for net premiums represent gross premiums payable for a
policy year, less deductions for sales loads, administrative expenses, premium
taxes, risk charges and additional premiums, if any, for optional insurance
benefits.
(e) AMOUNTS PAYABLE TO RELIASTAR BANKERS - The amounts payable to ReliaStar
Bankers in each sub-account arises from the amount allocated from ReliaStar
Bankers to facilitate commencement of operations.
(f) DIVIDENDS - Dividends received on the shares held by the sub-accounts
of Separate Account I are reinvested to purchase additional shares of the
applicable portfolio of the Series Fund.
(g) TRANSFER OF INVESTMENT AND OPERATING RESULTS FROM (TO) RELIASTAR
BANKERS - The sub-accounts transfer their investment and operating results in
excess of amounts required to meet policyholder reserve and liability amounts to
ReliaStar Bankers. When investment and operating results are insufficient to
meet reserve requirements, ReliaStar Bankers transfers to the sub-accounts
amounts sufficient to fund the deficiency. Also included in this transfer are
cost of insurance charges totaling $789,100, $805,900 and $862,400 for all
sub-accounts for the years ended December 31, 1996, 1995 and 1994 respectively.
(3) ADMINISTRATION AND RELATED PARTY TRANSACTIONS - A daily charge is made by
ReliaStar Bankers against each sub-account's investments for mortality and
expense risks at an effective annual rate of .50%. The mortality risk assumed is
that insureds may live for a shorter period of time than estimated and,
therefore, a greater amount of death benefits than expected will be payable in
relation to the amount of premiums received. The expense risk assumed is that
expenses incurred in issuing and administering the policies will be greater than
estimated. Other costs of administering Separate Account I are absorbed by
ReliaStar Bankers.
<PAGE>
ReliaStar Financial Marketing Corporation, a direct wholly-owned ReliaStar
subsidiary, acts as principal underwriter (as defined in the Investment Company
Act of 1940) of Separate Account I's policies. Washington Square Advisers, Inc.
previously known as Washington Square Capital, Inc., also a direct wholly-owned
ReliaStar subsidiary, serves as investment adviser to the Series Fund with
respect to short-term and fixed maturity securities. Newbold's Asset Management,
Inc. serves as investment sub-adviser to the Series Fund with respect to equity
securities.
Certain officers and directors of ReliaStar and ReliaStar Bankers are also
officers and directors of ReliaStar Financial Marketing corporation, The Series
Fund and Washington Square Advisers, Inc.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Policyowners
ReliaStar Bankers Security Variable Life Separate Account I:
We have audited the accompanying statement of operations and changes in net
assets of ReliaStar Bankers Security Variable Life Separate Account I (formerly
Bankers Security Variable Life Separate Account) (Separate Account I) for the
year ended December 31, 1994. This financial statement is the responsibility of
the Separate Account I's management. Our responsibility is to express an opinion
on this financial statement based on our audit.
We conducted our audit 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the results of operation and changes in net assets of the
ReliaStar Bankers Security Variable Life Separate Account I for the year ended
December 31, 1994, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Washington, D.C.
February 2, 1995
<PAGE>
RELIASTAR BANKERS SECURITY VARIABLE LIFE SEPARATE ACCOUNT I
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SUB-ACCOUNTS
------------
COMMON MONEY ASSET TOTAL
STOCK MARKET BOND ALLOCATION SUB-ACCOUNTS
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in USLICO Series Fund $11,092,753 $ 4,810,388 $ 1,158,406 $ 5,279,288 $22,340,835
Portfolios (see below)
Policy loans 1,027,737 660,771 5,685 389,155 2,083,348
----------- ----------- ----------- ----------- -----------
TOTAL ASSETS 12,120,490 5,471,159 1,164,091 5,668,443 24,424,183
----------- ----------- ----------- ----------- -----------
LIABILITIES
Net accrued (due) for policy related
transactions due to ReliaStar
Bankers 165,407 39,200 (14,139) 107,304 297,772
Amounts payable to ReliaStar Bankers 375,000 125,000 1,000,000 1,000,000 2,500,000
----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES 540,407 164,200 985,861 1,107,304 2,797,772
----------- ----------- ----------- ----------- -----------
NET ASSETS- FOR VARIABLE LIFE
INSURANCE POLICIES $11,580,083 $ 5,306,959 $ 178,230 $ 4,561,139 $21,626,411
=========== =========== =========== =========== ===========
Investments basis data:
Shares Owned 830,001 4,810,388 118,445 448,392
Cost $ 9,298,817 $ 4,810,388 $ 1,192,688 $ 4,895,973
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RELIASTAR BANKERS SECURITY VARIABLE LIFE SEPARATE ACCOUNT I
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SUB-ACCOUNTS
------------
COMMON MONEY ASSET TOTAL
STOCK MARKET BOND ALLOCATION SUB-ACCOUNTS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Reinvested dividends $ 29,788 $ 57,581 $ 11,999 $ 32,797 $ 132,165
Expenses:
Mortality and expense risk charges 14,274 6,214 1,461 6,728 28,677
------------ ------------ ------------ ------------ ------------
Net investment income 15,514 51,367 10,538 26,069 103,488
NET UNREALIZED GAINS (LOSSES) ON
INVESTMENTS 20,027 -- (28,964) (48,752) (57,689)
NET REALIZED GAINS (LOSSES)ON
INVESTMENTS 84,115 -- (533) 14,289 97,871
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets 119,656 51,367 (18,959) (8,394) 143,670
resulting from operations
FROM POLICY RELATED TRANSACTIONS:
Transfers in for net premiums 174,071 147,237 9,614 202,522 533,444
Transfers between sub-accounts 3,808 (3,674) -- (134) --
Transfers for withdrawal/surrender (303,761) (116,934) (1,662) (95,797) (518,154)
TRANSFER OF INVESTMENT AND OPERATING
RESULTS FROM (TO) RELIASTAR BANKERS (92,409) (45,746) 14,177 (67,117) (191,095)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets (98,635) 32,250 3,170 31,080 (32,135)
NET ASSETS, BEGINNING OF PERIOD 11,678,718 5,274,709 175,060 4,530,059 21,658,546
------------ ------------ ------------ ------------ ------------
NET ASSETS, END OF PERIOD $ 11,580,083 $ 5,306,959 $ 178,230 $ 4,561,139 $ 21,626,411
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RELIASTAR BANKERS SECURITY VARIABLE LIFE SEPARATE ACCOUNT I - NOTES TO FINANCIAL
STATEMENTS - MARCH 31, 1997
(1) ORGANIZATION - ReliaStar Bankers Security Variable Life Separate Account I
("Separate Account I") was established by ReliaStar Bankers Security Life
Insurance Company ("ReliaStar Bankers"), previously Bankers Security Life
Insurance Society, in 1986 under New York insurance laws. Separate Account I
operates as a unit investment trust under the Investment Company Act of 1940 and
is used to fund certain benefits for variable life insurance policies issued by
ReliaStar Bankers. The assets of Separate Account I and its sub-accounts are the
property of ReliaStar Bankers. The portion of Separate Account I assets
applicable to the variable life policies will not be charged with liabilities
arising out of any other business ReliaStar Bankers may conduct. The net assets
maintained in the sub-accounts provide the basis for the periodic determination
of the amount of increased or decreased benefits under the policies. The net
assets may not be less than the amount required under the state insurance law to
provide for death benefits (without regard to the minimum death benefit
guarantee) and other policy benefits. Additional assets are held in ReliaStar
Bankers' general account to cover the contingency that the guaranteed minimum
death benefit might exceed the death benefit which would have been payable in
the absence of such guarantee.
In January 1995, ReliaStar Bankers became an indirect wholly-owned subsidiary of
ReliaStar Financial Corp. ("ReliaStar"), a financial services company based in
Minneapolis, Minnesota. Prior to that time ReliaStar Bankers was an indirect
wholly-owned subsidiary of USLICO Corporation. USLICO Series Fund ("Series
Fund") is an open-end diversified management investment company whose shares are
sold only to ReliaStar Bankers and other affiliates separate accounts.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) VALUATION OF INVESTMENTS - Investments in shares of the Series Fund are
valued at the reported net asset value of the respective portfolios. The
aggregate cost of the investments acquired and the aggregate proceeds of
investments sold, for the three months ended March 31, 1997, were:
Cost of Shares Proceeds from
Sub-account Acquired Shares Sold
----------- ------------------ ----------------
Common Stock $ 29,788 $ 467,597
Money Market 57,581 330,304
Bond 11,999 23,571
Asset Allocation 32,797 166,286
--------- --------
Total $ 132,165 $ 987,758
(b) SECURITY TRANSACTIONS - Purchases and sales are recorded on the trade
date.
(c) FEDERAL INCOME TAXES - ReliaStar Bankers is taxed as a life insurance
company under the Internal Revenue Code of 1986, as amended (the "Code"). Since
the sub-accounts are not separate entities from ReliaStar Bankers, and their
operations form a part of ReliaStar Bankers, they will not be taxed separately
as a "regulated investment company" under Sub-chapter M of the Code. Under
existing Federal income tax law, investment income of the sub-accounts, to the
extent that it is applied to increase reserves under a contract, is not taxed
and may be compounded for reinvestment without additional tax to ReliaStar
Bankers.
(d) CHARGES DEDUCTED FROM PREMIUMS - Transfers to the sub-accounts of
Separate Account I for net premiums represent gross premiums payable for a
policy year, less deductions for sales loads, administrative expenses, premium
taxes, risk charges and additional premiums, if any, for optional insurance
benefits.
(e) AMOUNTS PAYABLE TO RELIASTAR BANKERS - The amounts payable to ReliaStar
Bankers in each sub-account arises from the amount allocated from ReliaStar
Bankers to facilitate commencement of operations.
(f) DIVIDENDS - Dividends received on the shares held by the sub-accounts
of Separate Account I are reinvested to purchase additional shares of the
applicable portfolio of the Series Fund.
(g) TRANSFER OF INVESTMENT AND OPERATING RESULTS FROM(TO) RELIASTAR BANKERS
- - The sub-accounts transfer their investment and operating results in excess of
amounts required to meet policyholder reserve and liability amounts to ReliaStar
Bankers. When investment and operating results are insufficient to meet reserve
requirements, ReliaStar Bankers transfers to the sub-accounts amounts sufficient
to fund the deficiency. Also included in this transfer are cost of insurance
charges totaling $218,700, $207,300 and $214,600 for all sub-accounts for the
three months ended March 31, 1997, 1996 and 1995, respectively.
(3) ADMINISTRATION AND RELATED PARTY TRANSACTIONS - A daily charge is made by
ReliaStar Bankers against each sub-account's investments for mortality and
expense risks at an effective annual rate of .50%. The mortality risk assumed is
that insureds may live for a shorter period of time than estimated and,
therefore, a greater amount of death benefits than expected will be payable in
relation to the amount of premiums received. The expense risk assumed is that
expenses incurred in issuing and administering the policies will be greater than
estimated. Other costs of administering Separate Account I are absorbed by
ReliaStar Bankers.
Washington Square Securities, Inc., a direct wholly-owned ReliaStar subsidiary,
acts as principal underwriter (as defined in the Investment Company Act of 1940)
of Separate Account I's policies. Washington Square Advisers, Inc., previously
known as Washington Square Capital, Inc., also a direct wholly-owned ReliaStar
subsidiary, serves as investment adviser to the Series Fund with respect to
<PAGE>
short-term and fixed maturity securities. Newbold's Asset Management, Inc.
serves as investment sub-adviser to the Series Fund with respect to equity
securities.
Certain officers and directors of ReliaStar and ReliaStar Bankers are also
officers and directors of Washington Square Securities, Inc., the Series Fund
and Washington Square Advisers, Inc.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholder
ReliaStar Bankers Security Life Insurance Company
(A Wholly Owned Subsidiary of ReliaStar United Services Life Insurance Company)
Woodbury, New York
We have audited the accompanying balance sheets of ReliaStar Bankers
Security Life Insurance Company as of December 31, 1996 and 1995, and the
related statements of income, shareholder's equity and cash flows for each of
the two years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ReliaStar Bankers Security
Life Insurance Company as of December 31, 1996 and 1995 and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, on January 17, 1995 the
Company was acquired by ReliaStar Financial Corp. (ReliaStar) and consequently
the financial statements reflect a new basis of accounting. In addition, in
December 1995 The North Atlantic Life Insurance Company of America, a subsidiary
of ReliaStar was merged into the Company. The merger was accounted for in a
manner similar to a pooling of interests.
Deloitte & Touche LLP
Minneapolis, Minnesota
March 31, 1997
<PAGE>
BALANCE SHEETS
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
December 31
------------------------------
(IN MILLIONS) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
INVESTMENTS
Fixed Maturity Securities (Amortized Cost: 1996, $1,297.5; 1995, $1,308.6) $1,356.7 $1,413.4
Equity Securities (Cost: 1996, $6.5; 1995, $5.8) 7.3 6.6
Mortgage Loans on Real Estate 276.3 233.9
Real Estate 1.6 7.2
Policy Loans 73.4 68.5
Other Invested Assets 5.6 4.9
Short-Term Investments 8.7 14.7
- ----------------------------------------------------------------------------------------------------------------
Total Investments 1,729.6 1,749.2
- ----------------------------------------------------------------------------------------------------------------
Cash (4.7) 13.6
Accounts and Notes Receivable 6.1 13.4
Reinsurance Receivable 26.1 32.1
Deferred Policy Acquisition Costs 131.8 113.5
Present Value of Future Profits 53.3 39.7
Property and Equipment, Net 7.9 7.8
Accrued Investment Income 25.1 25.7
Goodwill 16.9 17.3
Other Assets 1.5 8.4
Assets Held in Separate Accounts 403.3 272.9
- ----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $2,396.9 $2,293.6
================================================================================================================
LIABILITIES
Future Policy and Contract Benefits $1,575.0 $1,607.3
Pending Policy Claims 22.5 24.0
Other Policyholder Funds 8.7 5.7
Income Taxes 28.6 30.4
Other Liabilities 23.5 29.4
Liabilities Related to Separate Accounts 400.8 269.8
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities 2,059.1 1,966.6
- ----------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common Stock (1.4 Million Shares Issued and Outstanding) 2.8 2.8
Additional Paid-In Capital 165.4 165.4
Net Unrealized Investment Gains 28.0 41.8
Retained Earnings 141.6 117.0
- ----------------------------------------------------------------------------------------------------------------
Total Shareholder's Equity 337.8 327.0
- ----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $2,396.9 $2,293.6
================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENTS OF INCOME
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------
(IN MILLIONS) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES
Premiums $ 47.1 $ 53.4
Net Investment Income 137.0 134.0
Realized Investment Gains 3.5 .4
Policy and Contract Charges 65.7 59.4
Other Income 2.0 1.7
- ----------------------------------------------------------------------------------------------------------------
Total 255.3 248.9
- ----------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Benefits to Policyholders 154.1 163.2
Sales and Operating Expenses 44.8 30.9
Amortization of Deferred Policy Acquisition Costs
and Present Value of Future Profits 18.0 18.4
Dividends and Experience Refunds to Policyholders - .4
- ----------------------------------------------------------------------------------------------------------------
Total 216.9 212.9
- ----------------------------------------------------------------------------------------------------------------
Income before Income Taxes 38.4 36.0
Income Tax Expense 13.8 13.4
- ----------------------------------------------------------------------------------------------------------------
NET INCOME $ 24.6 $ 22.6
================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENTS OF SHAREHOLDER'S EQUITY
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK
Beginning and End of Year $ 2.8 $ 2.8
- ------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL
Beginning of Year 165.4 47.4
Purchase Accounting Adjustment - 78.8
Merger with Affiliate - 39.2
- ------------------------------------------------------------------------------------------------------------
End of Year 165.4 165.4
- ------------------------------------------------------------------------------------------------------------
NET UNREALIZED INVESTMENT GAINS (LOSSES)
Beginning of Year 41.8 (13.1)
Purchase Accounting Adjustment - 13.1
Merger with Affiliate - (9.9)
Change for the Year (13.8) 51.7
- ------------------------------------------------------------------------------------------------------------
End of Year 28.0 41.8
- ------------------------------------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
Beginning of Year - (1.9)
Purchase Accounting Adjustment - 1.9
- ------------------------------------------------------------------------------------------------------------
End of Year - -
- ------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Beginning of Year 117.0 113.4
Purchase Accounting Adjustment - (113.4)
Merger With Affiliate - 94.4
Net Income 24.6 22.6
- ------------------------------------------------------------------------------------------------------------
End of Year 141.6 117.0
- ------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDER'S EQUITY $ 337.8 $ 327.0
============================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------
(IN MILLIONS) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 24.6 $ 22.6
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
Interest Credited to Insurance Contracts 75.1 77.2
Future Policy Benefits (59.6) (39.2)
Capitalization of Policy Acquisition Costs (26.5) (26.1)
Amortization of Deferred Policy Acquisition Costs
and Present Value of Future Profits 18.0 18.4
Deferred Income Taxes 6.2 3.9
Net Change in Receivables and Payables 9.0 (12.0)
Other Assets 7.9 (.1)
Realized Investment Gains, Net (3.5) (.4)
Other (.2) (.1)
- ----------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 51.0 44.2
- ----------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from Sales of Fixed Maturity Securities 24.6 15.7
Proceeds from Maturities or Repayment of Fixed Maturity Securities
Available-for-Sale 134.6 67.7
Held-to-Maturity - 41.9
Cost of Fixed Maturity Securities Acquired
Available-for-Sale (146.5) (107.5)
Held-to-Maturity - (41.8)
Sale (Purchases) of Equity Securities, Net (.7) 2.3
Proceeds of Mortgage Loans Sold, Matured or Repaid 40.9 36.0
Cost of Mortgage Loans Acquired (83.4) (57.3)
Sales of Real Estate, Net 6.8 .1
Policy Loans Issued, Net (4.9) (8.6)
Sales of Other Invested Assets, Net .8 16.3
Sales (Purchases) of Short-Term Investments, Net 6.0 (11.0)
Cash Acquired with Merger of Affiliate - .6
- ----------------------------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities (21.8) (45.6)
- ----------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Deposits to Insurance Contracts 134.9 154.3
Maturities and Withdrawals from Insurance Contracts (182.4) (141.9)
- ----------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Financing Activities (47.5) 12.4
- ----------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash (18.3) 11.0
Cash at Beginning of Year 13.6 2.6
- ----------------------------------------------------------------------------------------------------------------
Cash at End of Year $ (4.7) $ 13.6
================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY)
NOTE 1. CHANGES IN ACCOUNTING PRINCIPLES
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF
Effective January 1, 1996, ReliaStar Bankers Security Life Insurance Company
(Bankers Security or the Company) adopted Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." SFAS No. 121 establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used and for long-lived assets and certain identifiable intangibles to be
disposed of. This Statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Measurement of an impairment
loss for long-lived assets and identifiable intangibles that an entity expects
to hold and use should be based on the fair value of the asset. Long-lived
assets and certain identifiable intangibles to be disposed of must be reported
at the lower of carrying amount or fair value less cost to sell. The adoption of
this standard did not have a significant effect on the financial results of the
Company.
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN
Effective January 1, 1995, the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures." SFAS No. 114 and
SFAS No. 118 require a company to measure impairment based upon the present
value of expected future cash flows discounted at the loan's effective interest
rate, the loan's observable market price or the fair value of the collateral if
the loan is collateral dependent. If foreclosure is probable, the measurement of
impairment must be based upon the fair value of the collateral. The adoption of
these standards did not have a significant effect on the financial results of
the Company.
NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company is principally engaged in the business of providing life insurance,
annuities and related financial service products. The Company operates primarily
in the United States and is authorized to conduct business in all 50 states.
BASIS OF PRESENTATION
The Company is a wholly-owned subsidiary of ReliaStar United Services Life
Insurance Company (United Services) which is a wholly-owned subsidiary of
ReliaStar Life Insurance Company (ReliaStar Life) whose ultimate parent is
ReliaStar Financial Corp. (ReliaStar). Bankers Security, United Services and
ReliaStar Life were formerly known as Bankers Security Life Insurance Society,
United Services Life Insurance Company and Northwestern National Life Insurance
Company, respectively. Prior to January 17, 1995 the Company's ultimate parent
was USLICO Corporation (USLICO).
On January 17, 1995, ReliaStar acquired USLICO and contributed all of the
capital stock of United Services and Bankers Security to ReliaStar Life. The
North Atlantic Life Insurance Company of America (NALIC), an affiliate of the
Company and a wholly-owned subsidiary of ReliaStar Life was merged into the
Company pursuant to a statutory merger (the Merger) which became effective as of
December 28, 1995. The financial statements for the year ended December 31, 1995
reflect the effects of the merger of NALIC into the Company, which was accounted
for in a manner similar to a pooling of interests, as of January 1, 1995.
The financial statements also reflect a new basis of accounting for the accounts
of the Company (excluding NALIC). Under the new basis of accounting the assets
and liabilities of the Company (excluding NALIC) were valued at their estimated
fair value as of the date USLICO was acquired. The excess of the purchase price
allocated to the Company (excluding NALIC) over the fair value of the net assets
acquired is reflected as goodwill on the balance sheets. This is known as the
purchase method of accounting under Accounting Principles Board Opinion No. 16
pushed down to the subsidiary's financial statements (push-down accounting).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets
<PAGE>
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
INVESTMENTS
Fixed maturity securities (bonds and redeemable preferred stocks) are classified
as available-for-sale and are valued at fair value.
Equity securities (common stocks and nonredeemable preferred stocks) are valued
at fair value.
Mortgage loans on real estate are carried at amortized cost less an impairment
allowance for estimated uncollectible amounts.
Investment real estate owned directly by the Company is carried at cost less
accumulated depreciation and allowances for estimated losses. Real estate
acquired through foreclosure is carried at the lower of fair value less
estimated costs to sell or cost.
Short-term investments are carried at amortized cost.
Unrealized investment gains and losses of equity securities and fixed maturity
securities classified as available-for-sale, net of related deferred policy
acquisition costs (DAC), present value of future profits (PVFP) and tax effects,
are accounted for as a direct increase or decrease in shareholder's equity.
Realized investment gains and losses enter into the determination of net income.
Realized investment gains and losses on sales of securities are determined on
the specific identification method. Write-offs of investments that decline in
value below cost on other than a temporary basis and the change in the allowance
for mortgage loans and wholly owned real estate are included with realized
investment gains and losses in the Statements of Income.
The Company records write-offs or allowances for its investments based upon an
evaluation of specific problem investments. The Company reviews, on a continual
basis, all invested assets (including marketable bonds, private placements,
mortgage loans and real estate investments) to identify investments where the
Company has credit concerns. Investments with credit concerns include those the
Company has identified as problem investments, which are issues delinquent in a
required payment of principal or interest, issues in bankruptcy or foreclosure,
and restructured or foreclosed assets. The Company also identifies investments
as potential problem investments, which are investments where the Company has
serious doubts as to the ability of the borrowers to comply with the present
loan repayment terms.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost, net of accumulated depreciation of
$1.9 million and $1.1 million at December 31, 1996 and 1995, respectively. The
Company provides for depreciation of property and equipment using straight-line
and accelerated methods over the estimated useful lives of the assets. Buildings
are generally depreciated over 35 to 50 years. Depreciation expense for 1996 and
1995 amounted to $.3 million and $.4 million, respectively.
SEPARATE ACCOUNTS
The Company operates separate accounts. The assets (principally investments) and
liabilities (principally to contractholders) of each account are clearly
identifiable and distinguishable from other assets and liabilities of the
Company. Assets are carried at fair value.
PREMIUM REVENUE AND BENEFITS TO POLICYHOLDERS
RECOGNITION OF TRADITIONAL LIFE, GROUP AND ANNUITY PREMIUM REVENUE AND BENEFITS
TO POLICYHOLDERS - Traditional life insurance products include those products
with fixed and guaranteed premiums and benefits, and consist principally of
whole life and term insurance policies and certain annuities with life
contingencies (immediate annuities). Life insurance premiums and immediate
annuity premiums are recognized as premium revenue when due. Group insurance
premiums are recognized as premium revenue over the time period to which the
premiums relate. Benefits and expenses are associated with earned premiums so as
to result in recognition of profits over the life of the contracts. This
association is accomplished by means of the provision for liabilities for future
policy benefits and unearned premiums and the amortization of DAC and PVFP.
<PAGE>
RECOGNITION OF UNIVERSAL LIFE-TYPE CONTRACTS REVENUE AND BENEFITS TO
POLICYHOLDERS - Universal life-type policies are insurance contracts with terms
that are not fixed and guaranteed. The terms that may be changed could include
one or more of the amounts assessed the policyholder, premiums paid by the
policyholder or interest accrued to policyholder balances. Amounts received as
payments for such contracts are not reported as premium revenues.
Revenues for universal life-type policies consist of charges assessed against
policy account values for deferred policy loading and the cost of insurance and
policy administration. Policy benefits and claims that are charged to expense
include interest credited to contracts and benefit claims incurred in the period
in excess of related policy account balances.
RECOGNITION OF INVESTMENT CONTRACT REVENUE AND BENEFITS TO POLICYHOLDERS -
Contracts that do not subject the Company to risks arising from policyholder
mortality or morbidity are referred to as investment contracts. Certain deferred
annuities are considered investment contracts. Amounts received as payments for
such contracts are not reported as premium revenues.
Revenues for investment contracts consist of investment income and policy
administration charges. Contract benefits that are charged to expense include
benefit claims incurred in the period in excess of related contract balances,
and interest credited to contract balances.
POLICY ACQUISITION COSTS
Those costs of acquiring new business, which vary with and are primarily related
to the production of new business, have been deferred to the extent that such
costs are deemed recoverable. Such costs include commissions, certain costs of
policy issuance and underwriting and certain variable agency expenses.
Costs deferred related to traditional life insurance are amortized over the
premium paying period of the related policies, in proportion to the ratio of
annual premium revenues to total anticipated premium revenues. Such anticipated
premium revenues are estimated using the same assumptions used for computing
liabilities for future policy benefits.
Costs deferred related to universal life-type policies and investment contracts
are amortized over the lives of the policies, in relation to the present value
of estimated gross profits from mortality, investment, surrender and expense
margins.
PRESENT VALUE OF FUTURE PROFITS
The present value of future profits reflects the estimated fair value of the
insurance business in-force at the date the Company was acquired by ReliaStar,
and represents the portion of the cost to acquire the Company that was allocated
to the value of future cash flows from insurance contracts existing at the date
of acquisition. Such value is the present value of the actuarially determined
projected net cash flows from the acquired insurance contracts. The weighted
average discount rate used to determine such value was approximately 15%.
An analysis of the PVFP asset account is presented below:
Year Ended December 31
----------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------
Balance, Beginning of Year $39.7 -
Acquisition - $75.6
Imputed Interest 3.8 4.4
Amortization (8.4) (8.5)
Impact of Net Unrealized Investment Gains and Losses 18.2 (31.8)
- -------------------------------------------------------------------------------
BALANCE, END OF YEAR $53.3 $39.7
- -------------------------------------------------------------------------------
Based on current conditions and assumptions as to future events on acquired
policies in-force, the Company expects that the net amortization of the initial
PVFP balance will be between 5% and 6% in each of the years 1997 through 2001.
The interest rates used to determine the amount of imputed interest on the
unamortized PVFP balance ranged from 5% to 8%.
GOODWILL
Goodwill is the excess of the amount paid to acquire the Company over the fair
value of the net assets acquired. Goodwill is amortized on straight-line basis
over 40 years. The carrying value of goodwill is monitored for impairment of
value based on the Company's estimated future earnings. The carrying value of
goodwill is reduced and a charge to income is recorded when an impairment in
value is identified. No such goodwill impairment charges have been recorded.
<PAGE>
FUTURE POLICY AND CONTRACT BENEFITS
Liabilities for future policy benefits for traditional life contracts are
calculated using the net level premium method and assumptions as to investment
yields, mortality, withdrawals and dividends. The assumptions are based on
projections of past experience and include provisions for possible unfavorable
deviation. These assumptions are made at the time the contract is issued or, for
purchased contracts, at the date of acquisition.
Liabilities for future policy and contract benefits on universal life-type and
investment contracts are based on the policy account balance.
The liabilities for future policy and contract benefits for group disabled life
reserves and long-term disability reserves are based upon interest rate
assumptions and morbidity and termination rates from published tables, modified
for Company experience.
INCOME TAXES
The Company files a consolidated Federal income tax return with United Services.
The provision for income taxes includes amounts currently payable and deferred
income taxes resulting from the cumulative differences in the assets and
liabilities determined on a tax return and financial statement basis.
INTEREST RATE SWAP AGREEMENTS
Interest rate swap agreements are used as hedges for asset/liability management
of adjustable rate and short-term invested assets. The Company does not enter
into any interest rate swap agreements for trading purposes. The interest rate
swap transactions involve the exchange of fixed and floating rate interest
payments without the exchange of underlying principal amounts and do not contain
other optional provisions. The difference between amounts paid and amounts
received on interest rate swaps is reflected in net investment income.
NOTE 3. INVESTMENTS
Investment income summarized by type of investment was as follows:
Year Ended December 31
-------------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------
Fixed Maturity Securities $108.7 $109.5
Equity Securities .4 .6
Mortgage Loans on Real Estate 23.3 20.1
Real Estate .9 1.4
Policy Loans 5.0 4.4
Other Invested Assets .5 2.8
Short-Term Investments 1.9 1.1
- -------------------------------------------------------------------------------
Gross Investment Income 140.7 139.9
Investment Expenses (3.7) (5.9)
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME $137.0 $134.0
===============================================================================
<PAGE>
Net pretax realized investment gains (losses) were as follows:
Year Ended December 31
-----------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------
Net Gains (Losses) on Sales of Investments
Fixed Maturity Securities $1.2 $ .2
Equity Securities - 1.6
Foreclosed Real Estate .7 -
Other 1.6 .4
- -------------------------------------------------------------------------------
3.5 2.2
- -------------------------------------------------------------------------------
Provisions for Losses:
Fixed Maturity Securities - (.2)
Equity Securities - (.2)
Mortgage Loans - (1.0)
Foreclosed Real Estate - (.4)
- -------------------------------------------------------------------------------
- (1.8)
- -------------------------------------------------------------------------------
PRETAX REALIZED INVESTMENT GAINS $3.5 $ .4
===============================================================================
Gross realized investment gains of $1.5 million and $.7 million and gross
realized investment losses of $.3 million and $.5 million were recognized on
sales of fixed maturity securities during the years ended December 31, 1996 and
1995, respectively. All 1996 and 1995 fixed maturity security sales were from
the available-for-sale portfolio.
The amortized cost and fair value of investments in fixed maturity securities by
type of investment were as follows:
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------------
Gross Unrealized
Amortized --------------------- Fair
(IN MILLIONS) Cost Gains (Losses) Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States Government and Government
Agencies and Authorities $ 38.2 $ 1.7 - $ 39.9
States, Municipalities and Political Subdivisions 9.9 .4 $ (.1) 10.2
Foreign Governments 13.4 .8 - 14.2
Public Utilities 122.9 8.6 (.3) 131.2
Corporate Securities 863.8 41.3 (3.4) 901.7
Mortgage-Backed/Structured Finance Securities 249.1 10.7 (.5) 259.3
Redeemable Preferred Stock .2 - - .2
- -------------------------------------------------------------------------------------------------------------------
TOTAL $1,297.5 $ 63.5 $(4.3) $1,356.7
===================================================================================================================
December 31, 1995
----------------------------------------------------------
Gross Unrealized
Amortized --------------------- Fair
(IN MILLIONS) Cost Gains (Losses) Value
- -------------------------------------------------------------------------------------------------------------------
United States Government and Government
Agencies and Authorities $ 42.5 $ 3.4 - $ 45.9
States, Municipalities and Political Subdivisions 9.8 .4 - 10.2
Foreign Governments 13.4 1.4 - 14.8
Public Utilities 129.8 15.0 $ (.1) 144.7
Corporate Securities 838.8 70.4 (2.3) 906.9
Mortgage-Backed/Structured Finance Securities 274.1 16.8 (.2) 290.7
Redeemable Preferred Stock .2 - - .2
- -------------------------------------------------------------------------------------------------------------------
TOTAL $1,308.6 $107.4 $ (2.6) $1,413.4
===================================================================================================================
</TABLE>
<PAGE>
The amortized cost and fair value of fixed maturity securities by contractual
maturity are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
-------------------------- --------------------------
Amortized Fair Amortized Fair
(IN MILLIONS) Cost Value Cost Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in One Year or Less $ 31.8 $ 32.1 $ 18.7 $ 18.9
Due After One Year Through Five Years 482.4 499.4 412.9 438.3
Due After Five Years Through Ten Years 394.9 416.8 447.3 488.6
Due After Ten Years 132.7 142.0 155.6 176.9
Mortgage-Backed/Structured Finance Securities 255.7 266.4 274.1 290.7
- ------------------------------------------------------------------------------------------------------------------
TOTAL $1,297.5 $1,356.7 $1,308.6 $1,413.4
==================================================================================================================
</TABLE>
The fair values for the marketable bonds are determined based upon the quoted
market prices for bonds actively traded. The fair values for marketable bonds
without an active market are obtained through several commercial pricing
services which provide the estimated fair values. Fair values of privately
placed bonds which are not considered problems are determined utilizing a
commercially available pricing model. The model considers the current level of
risk-free interest rates, current corporate spreads, the credit quality of the
issuer and cash flow characteristics of the security. Utilizing this data, the
model generates estimated market values which the Company considers reflective
of the fair value of each privately placed bond. Fair values for privately
placed bonds which are considered problems are determined through consideration
of factors such as the net worth of the borrower, the value of collateral, the
capital structure of the borrower, the presence of guarantees and the Company's
evaluation of the borrower's ability to compete in the relevant market.
At December 31, 1996, the largest industry concentration of the private
placement portfolio was consumer non-cyclical, where 23.6% of the portfolio was
invested, and the largest industry concentration of the marketable bond
portfolio was mortgage-backed/structured finance, where 23.4% of the portfolio
was invested. At December 31, 1996, the largest geographic concentration of
commercial mortgage loans was in the midwest region of the United States, where
approximately 31.4% of the commercial mortgage loan portfolio was invested.
At December 31, 1996 and 1995, gross unrealized appreciation of equity
securities was $.9 million and $1.0, respectively, and gross unrealized
depreciation was $.1 million and $.2 million, respectively.
Invested assets which were nonincome producing (no income received for the 12
months preceding the balance sheet date) were as follows:
December 31
-------------------
(IN MILLIONS) 1996 1995
- --------------------------------------------------------------------------------
Fixed Maturity Securities $ .1 -
Mortgage Loans on Real Estate .3 -
Real Estate 2.1 -
- --------------------------------------------------------------------------------
Total $2.5 -
================================================================================
Allowances for losses on investments are reflected on the Balance Sheets as a
reduction of the related assets and were as follows:
December 31
------------------------
(IN MILLIONS) 1996 1995
- --------------------------------------------------------------------------------
Mortgage Loans $1.0 $1.4
Foreclosed Real Estate .8 -
- --------------------------------------------------------------------------------
At December 31, 1996, and 1995, the total investment in impaired mortgage loans
(before allowances for credit losses), the related allowance for credit losses
and the average investment related to impaired mortgage loans and the interest
income recognized on impaired mortgage loans during 1996 and 1995 were as
follows:
(IN MILLIONS) 1996 1995
- --------------------------------------------------------------------------------
Impaired Mortgage Loans
Total Investment $2.7 $2.7
Allowance for Credit Losses 1.1 1.4
Average Investment 1.3 1.4
Interest Income Recognized .3 .3
- --------------------------------------------------------------------------------
<PAGE>
No increases to the allowance for credit losses account were recorded during
1996 and 1995, and the amount of decreases to the allowance account were $.3
million and $.1 million for the years ended December 31, 1996 and 1995,
respectively. The Company does not accrue interest income on impaired mortgage
loans when the likelihood of collection is doubtful. Cash receipts for interest
payments are recognized as income in the period received.
Noncash investing activities consisted of the following:
Year Ended December 31
------------------------
(IN MILLIONS) 1996 1995
- --------------------------------------------------------------------------------
Real Estate Assets Acquired Through Foreclosure $.4 $2.2
- --------------------------------------------------------------------------------
Effective December 31, 1995, the Company adopted the implementation guidance
contained in the Financial Accounting Series Special Report, "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities." Concurrent with the adoption of this implementation
guidance, the Company reclassified all of its held-to-maturity securities to
available-for-sale based upon a reassessment of the appropriateness of the
classifications of all securities held at that time. The amortized cost and net
unrealized appreciation of the securities reclassified were approximately $265
million and $12 million, respectively, at December 31, 1995.
The components or net unrealized investment gains reported in shareholders'
equity are shown below:
December 31
----------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------
Unrealized Investment Gains $61.5 $106.7
DAC/PVFP Adjustment (18.5) (42.4)
Deferred Income Taxes (15.0) (22.5)
- -------------------------------------------------------------------------------
Net Unrealized Investment Gains $28.0 $41.8
- -------------------------------------------------------------------------------
NOTE 4. INCOME TAXES
The income tax liability as reflected on the Balance Sheets consisted of the
following:
December 31
----------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------
Current Income Taxes $ (.6) $ .3
Deferred Income Taxes 29.2 30.1
- -------------------------------------------------------------------------------
TOTAL $28.6 $30.4
===============================================================================
The provision for income taxes reflected on the Statements of Income consisted
of the following:
Year Ended December 31
-------------------------
(IN MILLIONS) 1996 1995
- --------------------------------------------------------------------------------
Currently Payable $ 7.6 $ 9.5
Deferred 6.2 3.9
- --------------------------------------------------------------------------------
TOTAL $13.8 $13.4
================================================================================
The Internal Revenue Service has accepted, without examination, the Company's
tax returns for all years through 1993.
<PAGE>
Deferred income taxes reflect the impact for financial statement reporting
purposes of "temporary differences" between the financial statement carrying
amounts and tax bases of assets and liabilities. The "temporary differences"
that give rise to a significant portion of the deferred tax liabilities relate
to the following:
December 31
-------------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------
Future Policy and Contract Benefits $(30.7) $(31.7)
Investment Write-offs and Allowances (4.8) (6.6)
Other (6.7) (6.6)
- -------------------------------------------------------------------------------
Gross Deferred Tax Asset (42.2) (44.9)
- -------------------------------------------------------------------------------
Deferred Policy Acquisition Costs 31.7 28.9
Present Value of Future Profits 23.4 25.0
Net Unrealized Investment Gains 5.1 11.4
Other 11.2 9.7
- -------------------------------------------------------------------------------
Gross Deferred Tax Liability 71.4 75.0
- -------------------------------------------------------------------------------
NET DEFERRED TAX LIABILITY $29.2 $ 30.1
===============================================================================
Federal income tax regulations allowed certain special deductions for 1983 and
prior years which are accumulated in a memorandum tax account designated as
"policyholders' surplus." Generally, this policyholders' surplus account will
become subject to tax at the then current rates only if the accumulated balance
exceeds certain maximum limitations or if certain cash distributions are deemed
to be paid out of the account. At December 31, 1996, the Company has accumulated
approximately $11.3 million in its separate policyholders' surplus accounts.
Deferred taxes have not been provided on this temporary difference.
The difference between the U.S. federal income tax rate and the Company's tax
provision rate is summarized as follows:
Year Ended December 31
---------------------------
1996 1995
- --------------------------------------------------------------------------------
Statutory Tax Rate 35.0% 35.0%
Other .9 2.2
- --------------------------------------------------------------------------------
EFFECTIVE TAX RATE 35.9% 37.2%
================================================================================
Cash paid for federal income taxes was $9.0 million and $13.4 million for 1996
and 1995, respectively.
NOTE 5. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company participates in noncontributory defined benefit retirement plans
sponsored by ReliaStar Life covering substantially all employees. The plans,
which may be terminated as to accrual of additional benefits at any time by the
Board of Directors, provide benefits to employees upon retirement.
The benefits under the plans are based on years of service and the employee's
compensation during the last five years of employment. The Company's policy is
to fund the minimum required contribution necessary to meet the present and
future obligations of the plans. Contributions are intended to provide not only
for benefits attributed to service to date but also for those expected to be
earned in the future. Contributions are made to a tax-exempt trust. Plan assets
consist principally of investments in stock and bond mutual funds, common stock
and corporate bonds. Included in plan assets are 616,491 shares of ReliaStar
common stock with a fair value of $35.6 million.
The Company, United Services, ReliaStar Life and ReliaStar also have unfunded
noncontributory defined benefit plans providing for benefits to employees in
excess of limits for qualified retirement plans and for benefits to nonemployee
members of the ReliaStar Board of Directors.
<PAGE>
Net periodic pension expense for ReliaStar and its subsidiaries included the
following components:
Year Ended December 31
-----------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------
Service Cost - Benefits Earned During the Year $ 3.8 $ 3.4
Interest Cost on Projected Benefit Obligation 13.6 11.9
Actual Return on Plan Assets (23.0) (33.7)
Net Amortization and Deferral 8.4 19.1
- -------------------------------------------------------------------------------
Net Periodic Pension Expense $ 2.8 $ .7
===============================================================================
The above amounts are for ReliaStar and its subsidiaries as the Company's
portion is not determinable.
The following table sets forth for ReliaStar and its subsidiaries the funded
status of the plans as of December 31:
<TABLE>
<CAPTION>
Funded Plans Unfunded Plans
-------------------- -------------------
(IN MILLIONS) 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated Benefit Obligation
Vested $(164.7) $(157.1) $(11.8) $(10.7)
Nonvested (4.0) (5.1) (.5) (1.2)
Effect of Projected Future Compensation Increases (12.7) (10.6) (2.1) (2.1)
- ----------------------------------------------------------------------------------------------------------------
Projected Benefit Obligation (181.4) (172.8) (14.4) (14.0)
Plan Assets at Fair Value 184.9 169.9 - -
- ----------------------------------------------------------------------------------------------------------------
Plan Assets Greater (Less) Than Projected Benefit Obligation 3.5 (2.9) (14.4) (14.0)
Unrecognized Net Loss and Prior Service Cost 19.0 24.2 5.3 6.2
Unrecognized Transition Obligation (Asset) (.4) (.8) - .1
Additional Minimum Liability - - (3.5) (4.2)
- ----------------------------------------------------------------------------------------------------------------
Net Pension Asset (Liability) $ 22.1 $ 20.5 $(12.6) $(11.9)
================================================================================================================
</TABLE>
The above amounts are for ReliaStar and its subsidiaries as the Company's
portion is not determinable.
The projected benefit obligation was determined using an assumed discount rate
of 7.50% and 7.25% at January 1, 1997 and 1996, respectively, and a
weighted-average assumed long-term rate of compensation increase of 4.5%. The
assumed long-term rate of return on plan assets was 10%.
Prior to 1996, the Company's employees (excluding NALIC) participated in the
USLICO qualified non-contributory defined benefit pension plan covering
substantially all of its employees. The plan provided pension benefits that were
based on the employee's years of service and compensation during three
consecutive years in the last 10 years of employment preceding retirement.
These retirement plans for the Company's employees (excluding NALIC) have been
frozen at the benefit levels as of December 31, 1995. Retirement plan benefits
for employees are currently being provided under the ReliaStar plans.
Net periodic pension expense for all employee retirement plans of the Company
was $.4 million for the year ended December 31, 1996 and a pension credit
totaling $.4 million for the year ended December 31, 1995.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company participates in the postretirement health care and life insurance
benefits plans sponsored by ReliaStar Life or retired employees (and their
eligible dependents). Substantially all of the Company's employees will become
eligible for those benefits if they meet specified age and service requirements
and reach retirement age while working for the Company, unless the plans are
terminated or amended. The postretirement health care plan is contributory, with
retiree contributions adjusted annually; the life insurance plan provides a flat
amount of noncontributory life benefits and optional contributory coverage.
During 1996, ReliaStar Life amended these plans to reduce the level of benefits
provided to current and future retirees. The amendment resulted in a reduction
of the accumulated postretirement benefit obligation for ReliaStar and its
subsidiaries of approximately $9.9 million. The plan amendment will also reduce
current and future net periodic postretirement benefit costs as the unrecognized
prior service cost is amortized.
<PAGE>
The postretirement health care plans currently are not funded. The accumulated
postretirement benefit obligation (APBO) and the accrued postretirement benefit
liability were as follows:
December 31
----------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------
Retirees $ 7.3 $ .4
Fully Eligible Active Plan Participants .9 .5
Other Active Plan Participants 1.6 .8
- -------------------------------------------------------------------------------
Unfunded APBO 9.8 1.7
Unrecognized Prior Service Cost 8.9 -
Unrecognized Gain (Loss) 1.5 (.4)
- -------------------------------------------------------------------------------
ACCRUED POSTRETIREMENT BENEFIT LIABILITY $20.2 $1.3
===============================================================================
The above amounts for 1996 are for ReliaStar and its subsidiaries as the
Company's portion is not determinable. Amounts for the prior period are for the
Company only.
Net periodic postretirement benefit costs consisted of the following components:
Year Ended December 31
------------------------
(IN MILLIONS) 1996 1995
- --------------------------------------------------------------------------------
Service Cost - Benefits Earned $ .6 $ .1
Interest Cost on APBO 1.0 .1
Amortization of Prior Service Cost (1.2) -
- --------------------------------------------------------------------------------
NET PERIODIC POSTRETIREMENT BENEFIT COSTS $ .4 $ .2
================================================================================
The above amounts for 1996 are for ReliaStar and its subsidiaries as the
Company's portion is not determinable. Amounts for the prior period are for the
Company only.
The assumed health care cost trend rate used in measuring the APBO as of January
1, 1997 was 7.0%, decreasing gradually to 5.0% in the year 1999 and thereafter.
The assumed health care cost trend rate used in measuring the APBO as of January
1, 1996 was 10.0%, decreasing gradually to 5.0% in the year 2010 and thereafter.
The assumed discount rate used in determining the APBO was 7.50% and 7.25% at
January 1, 1997 and 1996, respectively. The assumed health care cost trend rate
has a significant effect on the amounts reported. For example, a
one-percentage-point increase in the assumed health care cost trend rate for
each year would increase the APBO for ReliaStar and its subsidiaries as of
December 31, 1996 approximately $.3 million and 1996 net postretirement health
care cost for ReliaStar and its subsidiaries by approximately $.1 million.
Net periodic postretirement benefit costs charged to expense by the Company was
$.2 million for the years ended December 31, 1996 and 1995.
SUCCESS SHARING PLAN AND ESOP
The Success Sharing Plan and ESOP (Success Sharing Plan) was designed to
increase employee ownership and reward employees when certain Company
performance objectives are met. Essentially all employees are eligible to
participate in the Success Sharing Plan. Employees of United Services and
Bankers Security (excluding NALIC) were first eligible to participate in the
Success Sharing Plan effective January 1, 1996. The Success Sharing Plan has
both qualified and nonqualified components. The nonqualified component is equal
to 25% of the annual award and is paid in cash to employees. The qualified
component is equal to 75% of the annual award, with 25% contributed to a
deferred investment account and the remaining 50% contributed to the ESOP
portion of the Success Sharing Plan. Costs charged to expense for the Success
Sharing Plan were $.7 million and $1.0 million for the years ended December 31,
1996 and 1995, respectively.
STOCK-BASED COMPENSATION
Officers and key employees of the Company participate in stock-based
compensation plans of ReliaStar. ReliaStar applies Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its stock-based compensation plans.
Accordingly, the Company has recorded no compensation expense for these
stock-based compensation plans other than for restricted stock and
performance-based awards.
<PAGE>
NOTE 6. RELATED PARTY TRANSACTIONS
The Company and its affiliates have entered into agreements whereby affiliates
and the Company provide certain management, administrative, legal, and other
services for each other. The net amounts billed to the Company were $22.4
million and $9.0 million 1996 and 1995, respectively. The costs allocated to the
Company under these agreements may not be indicative of costs the Company might
incur if these services were not provided by the Company's affiliates.
ReliaStar Life reinsures certain life policies written by the Company. Premiums
ceded under these agreements were $2.3 million and $2.8 million for the years
ended December 31, 1996 and 1995, respectively, and the net amount recoverable
by the Company under this reinsurance agreement was $3.3 million at December 31,
1996 and 1995.
NOTE 7. SHAREHOLDER'S EQUITY
DIVIDEND RESTRICTIONS
The ability of the Company to pay cash dividends to its parent is restricted by
law or subject to approval of the insurance regulatory authorities of the state
of New York. These authorities recognize only statutory accounting practices for
the ability of an insurer to pay dividends to its shareholders.
Under New York insurance law regulating the payment of dividends by the Company,
any such payment must be paid solely from the earned surplus of the Company and
advance notice thereof must be provided to the Superintendent of the New York
Department of Insurance (the Superintendent). Earned surplus means the earned
surplus as determined in accordance with statutory accounting practices
(unassigned funds), less the amount of such earned surplus which is attributable
to unrealized capital gains. Further, without approval of the Superintendent,
the Company may not pay in any calendar year any dividend which, when combined
with other dividends paid within the preceding 12 months, exceeds the lesser of
(i) 10% of the Company's statutory surplus at the prior year end or (ii) 100% of
the Company's statutory net investment income for the prior calendar year.
STATUTORY SURPLUS AND NET INCOME
Net income of the Company, as determined in accordance with statutory accounting
practices was $11.9 million and $13.5 million for 1996 and 1995, respectively.
The Company's statutory capital and surplus was $149.9 million and $139.6
million at December 31, 1996 and 1995, respectively.
NOTE 8. REINSURANCE
The Company is a member of reinsurance associations established for the purpose
of ceding the excess of life insurance over retention limits. Reinsurance
contracts do not relieve the Company from its obligations to policyholders.
Failure of reinsurers to honor their obligations could result in losses to the
Company; consequently, allowances are established for amounts deemed
uncollectible. The amount of the allowance for uncollectible reinsurance
receivables was immaterial at December 31, 1996 and 1995. The Company evaluates
the financial condition of its reinsurers and monitors concentrations of credit
risk to minimize its exposure to significant losses from reinsurer insolvencies.
At December 31, 1996, approximately 64% of the Company's reinsurance ceded was
with one reinsurer. The Company's retention limit is $300,000 per life for
individual coverage. For group coverage and reinsurance assumed, the retention
is $75,000 per life with per occurrence limitations, subject to certain
maximums. As of December 31, 1996, $3.2 billion of life insurance in force was
ceded to other companies. The Company has assumed $2.2 billion of life insurance
in force from other companies as of December 31, 1996.
The effect of reinsurance on premiums and recoveries is as follows:
Year Ended December 31
-----------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------
Direct Premiums $ 59.8 $66.6
Reinsurance Assumed 2.1 2.2
Reinsurance Ceded (14.8) (15.4)
- -------------------------------------------------------------------------------
NET PREMIUMS $47.1 $53.4
===============================================================================
REINSURANCE RECOVERIES $ 7.4 $ 7.8
===============================================================================
<PAGE>
NOTE 9. LIABILITY FOR UNPAID ACCIDENT AND HEALTH CLAIMS AND CLAIM ADJUSTMENT
EXPENSE
The change in the liability for unpaid accident and health claims and claim
adjustment expenses is summarized as follows:
(IN MILLIONS) 1996 1995
- --------------------------------------------------------------------------------
Balance at January 1 $11.3 $14.1
Less Reinsurance Recoverables 3.4 6.3
- --------------------------------------------------------------------------------
Net Balance at January 1 7.9 7.8
Incurred Related to:
Current Year 3.3 6.2
Prior Year (.2) 2.3
- --------------------------------------------------------------------------------
Total Incurred 3.1 8.5
Paid Related to:
Current Year .9 2.4
Prior Year 2.7 6.0
- --------------------------------------------------------------------------------
Total Paid 3.6 8.4
Net Balance at December 31 7.4 7.9
Plus Reinsurance Recoverables 2.1 3.4
- --------------------------------------------------------------------------------
Balance at December 31 $ 9.5 $11.3
================================================================================
The liability for unpaid accident and health claims and claim adjustment
expenses is included in Future Policy and Contract Benefits on the Balance
Sheets.
NOTE 10. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is a defendant in a number of lawsuits arising out of the normal
course of the business of the Company, some of which include claims for punitive
damages. In the opinion of management, the ultimate resolution of such
litigation will not result in any material adverse impact to the financial
condition of the Company.
FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to reduce its exposure to fluctuations in interest
rates. These financial instruments include commitments to extend credit and
interest rate swaps. Those instruments involve, to varying degrees, elements of
credit, interest rate, or liquidity risk in excess of the amount recognized in
the Balance Sheets.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual amount of those instruments. The Company uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance-sheet instruments. For interest rate swap transactions, the
contract or notional amounts do not represent exposure to credit loss. The
Company's exposure to credit loss is limited to those swaps where the Company
has an unrealized gain.
Unless otherwise noted, the Company does not require collateral or other
security to support financial instruments with credit risk.
<PAGE>
Contract or Notional Amount
December 31
------------------------------
(IN MILLIONS) 1996 1995
- --------------------------------------------------------------------------------
Financial Instruments Whose Contract
Amounts Represent Credit Risk
Commitments to Extend Credit $26.4 $9.0
Financial Instruments Whose Notional
or Contract Amounts Exceed the Amount
of Credit Risk
Interest Rate Swap Agreements 112.0 120.0
- --------------------------------------------------------------------------------
COMMITMENTS TO EXTEND CREDIT - Commitments to extend credit are legally binding
agreements to lend to a customer. Commitments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. They
generally may be terminated by the Company in the event of deterioration in the
financial condition of the borrower. Since some of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future liquidity requirements. The Company evaluates each
customer's creditworthiness on a case-by-case basis.
INTEREST RATE SWAP AGREEMENTS - The Company also enters into interest rate swap
agreements to manage interest rate exposure. The primary reason for the interest
rate swap agreements is to extend the duration of adjustable rate investments.
Interest rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amounts. Changes in market interest rates impact income
from adjustable rate investments and have an opposite (and approximately
offsetting) effect on the reported income from the swap portfolio. The risks
under interest rate swap agreements are generally similar to those of futures
contracts. Notional principal amounts are often used to express the volume of
these transactions but do not represent the much smaller amounts potentially
subject to credit risk.
LEASES
The Company has operating leases for office space and certain computer
processing and other equipment. Rental expense for these items was $1.2 million
and $.1 million for 1996 and 1995, respectively.
Future minimum aggregate rental commitments at December 31, 1996 for operating
leases were as follows:
(IN MILLIONS)
- --------------------------------------------------------------------------------
1997 - $1.3 2000 - $1.2
1998 - $1.3 2001 - $1.2
1999 - $1.3 2002 and thereafter - $3.0
- --------------------------------------------------------------------------------
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures are made in accordance with the requirements of SFAS
No. 107, "Disclosures about Fair Value of Financial Instruments." SFAS No. 107
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. 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, in many cases, could not be realized in immediate
settlement of the instrument.
SFAS No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the Company.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1996 and 1995. Although Management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date; therefore, current estimates of
fair value may differ significantly from the amounts presented herein.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
<PAGE>
FIXED MATURITY SECURITIES - The estimated fair value disclosures for debt
securities satisfy the fair value disclosure requirements of SFAS No. 107. (see
Note 3.)
EQUITY SECURITIES - Fair value equals carrying value as these securities are
carried at quoted market value.
MORTGAGE LOANS ON REAL ESTATE - The fair values for mortgage loans on real
estate are estimated using discounted cash flow analyses, using interest rates
currently being offered in the marketplace for similar loans to borrowers with
similar credit ratings. Loans with similar characteristics are aggregated for
purposes of the calculations.
CASH SHORT-TERM INVESTMENTS AND POLICY LOANS - The carrying amounts for these
assets approximate the assets' fair values.
OTHER FINANCIAL INSTRUMENTS REPORTED AS ASSETS - The carrying amounts for these
financial instruments (primarily premiums and other accounts receivable and
accrued investment income) approximate those assets' fair values.
INVESTMENT CONTRACT LIABILITIES - The fair value for deferred annuities was
estimated to be the amount payable on demand at the reporting date, as those
investment contracts have no defined maturity and are similar to a deposit
liability. The amount payable at the reporting date was calculated as the
account balance less applicable surrender charges.
The fair values for supplementary contracts without life contingencies and
immediate annuities were estimated using discounted cash flow analyses. The
discount rate was based upon treasury rates plus a pricing margin.
The carrying amounts reported for other investment contracts, which includes
participating pension contracts and retirement plan deposits, approximate those
liabilities' fair value.
CLAIM AND OTHER DEPOSIT FUNDS - The carrying amounts for claim and other deposit
funds approximate the liabilities' fair value.
OTHER FINANCIAL INSTRUMENTS REPORTED AS LIABILITIES - The carrying amounts for
other financial instruments (primarily normal payables of a short-term nature)
approximate those liabilities' fair values.
INTEREST RATE SWAPS - The fair value for interest rate swaps was estimated using
discounted cash flow analyses. The discount rate was based upon rates currently
being offered for similar interest rate swaps available from similar
counterparties.
<PAGE>
The carrying amounts and estimated fair values of the Company's financial
instruments as of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------- ------------------------
Carrying Fair Carrying Fair
(IN MILLIONS) Amount Value Amount Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Instruments Recorded as Assets
Fixed Maturity Securities $ 1,356.7 $ 1,356.7 $ 1,413.4 $ 1,413.4
Equity Securities 7.3 7.3 6.6 6.6
Mortgage Loans on Real Estate
Commercial 218.9 224.7 186.0 196.5
Residential and Other 57.4 58.7 47.9 49.1
Policy Loans 73.4 73.4 68.5 68.5
Cash and Short-Term Investments 4.0 4.0 28.3 28.3
Other Financial Instruments Recorded
as Assets 38.9 38.9 39.1 39.1
Financial Instruments Recorded as Liabilities
Investment Contracts
Deferred Annuities (770.4) (748.6) (836.2) (806.2)
Supplementary Contracts and Immediate
Annuities (2.9) (2.8) (4.4) (4.0)
Other Investment Contracts (12.3) (12.3) (.4) (.4)
Claim and Other Deposit Funds (1.1) (1.1) - -
Other Financial Instruments Recorded
as Liabilities (15.5) (15.5) (25.2) (25.2)
Off-Balance-Sheet Financial Instruments
Interest Rate Swaps - 1.4 - 4.7
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company's holdings of a particular financial
instrument. Because no market exists for a significant portion of the Company's
financial instruments, fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect on
fair value estimates and have not been considered in the estimates.
NOTE 12. SUBSEQUENT EVENT
On February 23, 1997, ReliaStar signed a definitive agreement to acquire and
merge Security-Connecticut Corporation (SRC) into ReliaStar. SRC is a holding
company with two primary subsidiaries: Security Connecticut Life Insurance
Company of Avon, Connecticut, and Lincoln Security Life Insurance Company (LSL)
of Brewster, New York. As of December 31, 1996, LSL had assets of $365 million
and total shareholders equity of $45 million. Completion of the merger is
expected in the second or third quarter of 1997, and is subject to normal
closing conditions, including approval by SRC shareholders and various
regulatory approvals. It is management's current intent, pending regulatory
approval, to merge LSL with and into the Company.
<PAGE>
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
Condensed Balance Sheet
(in millions)
(unaudited)
March 31, 1997
--------------
ASSETS
Fixed Maturity Securities, Available-for-Sale $1,325.7
Equity Securities 3.0
Mortgage Loans on Real Estate 277.4
Real Estate 1.8
Policy Loans 73.6
Other Invested Assets 5.8
Short-Term Investments 16.4
-------------
Total Investments 1,703.7
Cash (3.9)
Accounts and Notes Receivable 4.0
Reinsurance Receivable 26.6
Deferred Policy Acquisition Costs 135.9
Present Value of Future Profits 58.4
Property and Equipment, Net 7.6
Accrued Investment Income 25.1
Goodwill 16.8
Other Assets 0.8
Assets Held in Separate Accounts 407.5
-------------
TOTAL ASSETS $2,382.5
=============
LIABILITIES
Future Policy and Contract Benefits $1,560.8
Pending Policy Claims 23.4
Other Policyholder Funds 9.4
Income Taxes 25.0
Other Liabilities 26.5
Liabilities Related to Separate Accounts 405.0
-------------
TOTAL LIABILITIES 2,050.1
-------------
SHAREHOLDER'S EQUITY
Common Stock 2.8
Additional Paid-In Capital 165.4
Net Unrealized Investment Gains 17.2
Retained Earnings 147.0
-------------
TOTAL SHAREHOLDER'S EQUITY 332.4
-------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $2,382.5
=============
See accompanying notes to condensed financial statements.
<PAGE>
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
Condensed Statement of Income
(in millions)
(unaudited)
Three Months Ended
------------------
March 31, 1997
--------------
REVENUES
Premiums $11.8
Net Investment Income 33.5
Realized Investment Gains 0.7
Policy and Contract Charges 17.1
Other Income 0.5
---------
Total 63.6
---------
BENEFITS AND EXPENSES
Benefits to Policyholders 39.6
Sales and Operating Expenses 10.5
Amortization of Deferred Policy Acquisition Costs
and Present Value of Future Profits 5.4.
Dividends and Experience Refunds to Policyholders 0.3
Total 55.8
---------
Income Before Income Taxes 7.8
Income Tax Expense 2.4
---------
Net Income $5.4
=========
See accompanying notes to condensed financial statements.
<PAGE>
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
Condensed Statement of Cash Flows
(in millions)
(unaudited)
Three Months Ended
------------------
March 31, 1997
--------------
OPERATING ACTIVITIES
Net Income $5.4
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities
Interest Credited to Insurance Contracts 17.3
Future Policy Benefits (8.5)
Capitalization of Deferred Policy Acquisition Costs (6.0)
Amortization of Deferred Policy Acquisition Costs
and Present Value of Future Profits 5.4
Deferred Income Taxes (0.8)
Net Change in Receivables and Payables 9.4
Other Assets 0.8
Realized Investment Gains, Net (0.7)
Other 1.2
---------
Net Cash Provided by Operating Activities 23.5
---------
INVESTING ACTIVITIES
Proceeds from Sales of Available-for-Sale Fixed Maturity
Securities 22.2
Proceeds from Maturities or Repayment of Fixed Maturity
Securities 20.0
Cost of Fixed Maturity Securities Acquired (38.0)
Sales of Equity Securities, Net 4.5
Proceeds of Mortgage Loans Sold, Matured or Repaid 12.6
Cost of Mortgage Loans Acquired (14.1)
Sales of Real Estate and Leases, Net 0.2
Policy Loans Issued, Net (0.2)
Sales of Other Invested Assets, Net 0.6
Purchases of Short-Term Investments, Net (7.7)
---------
Net Cash Provided (Used) by Investing Activities 0.1
---------
FINANCING ACTIVITIES
Deposits to Insurance Contracts 29.2
Maturities and Withdrawals from Insurance Contracts (52.0)
Net Cash Used by Financing Activities (22.8)
---------
Increase (Decrease) in Cash 0.8
Cash at Beginning of Period (4.7)
---------
Cash at End of Period $(3.9)
=========
See accompanying notes to condensed financial statements.
<PAGE>
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
Notes to Condensed Financial Statements
(unaudited)
Note 1. Basis of Presentation
The condensed financial statements of ReliaStar Bankers Security Life Insurance
Company (the Company) have been prepared in conformity with generally accepted
accounting principles and such principles were applied on a basis consistent
with that reflected in the Financial Statements For the Years Ended December 31,
1996 and 1995. The financial information included herein has been prepared by
management without audit by independent certified public accountants.
The interim information furnished includes all adjustments and accruals
consisting only of normal, recurring accrual adjustments which are, in the
opinion of management, necessary for a fair statement of results for the interim
period. The results of operations for any interim period are not necessarily
indicative of results for the full year. The unaudited interim condensed
financial statements should be read in conjunction with the financial statements
and notes thereto contained in the Financial Statements For the Years Ended
December 31, 1996 and 1995.
Note 2. Acquisition
On July 1, 1997, ReliaStar Financial Corp., the Company's ultimate parent
(ReliaStar), completed the acquisition of Security-Connecticut Corporation
(SRC). SRC is a holding company with two primary subsidiaries: Security
Connecticut Life Insurance Company of Avon, Connecticut, and Lincoln Security
Life Insurance Company (LSL) of Brewster, New York. As of December 31, 1996, LSL
had assets of $365 million and total shareholders equity of $45 million. It is
management's current intent, pending regulatory approval, to merge LSL with and
into the Company.
<PAGE>
APPENDIX A
THE FIXED ACCOUNT
The Fixed Account consists of all of our assets other than those in our
separate accounts. We have complete ownership and control of all of the assets
of the Fixed Account.
Because of exemptions and exclusions contained in the Securities Act of
1933 and the Investment Company Act of 1940, the Fixed Account has not been
registered under these acts. Neither the Fixed Account nor any interest in it is
subject to the provisions of these acts and as a result the SEC has not reviewed
the disclosures in this Prospectus relating to the Fixed Account. However,
disclosures relating to the Fixed Account are subject to generally applicable
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
We guarantee both principal and interest on amounts credited to the
Fixed Account. We credit interest at an effective annual rate of at least 4%,
independent of the investment experience of the Fixed Account. From time to
time, we may guarantee interest at a rate higher than 4%.
ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN
EXCESS OF 4% PER YEAR WILL BE DETERMINED AT OUR SOLE DISCRETION. YOU ASSUME THE
RISK THAT INTEREST CREDITED TO THE FIXED ACCOUNT MAY NOT EXCEED THE MINIMUM
GUARANTEE OF 4% FOR A GIVEN YEAR.
We do not use a specific formula for determining excess interest
credits. However, we consider the following:
* General economic trends,
* Rates of return currently available on our investments,
* Rates of return anticipated in our investments, regulatory and
tax factors, and
* Competitive factors.
We are not aware of any statutory limitations to the maximum amount of
interest we may credit and our Board of Directors has not set any limitations.
The Fixed Accumulation Value of the Policy is the sum of the Net
Premiums credited to it in the Fixed Account. It is increased by transfers and
Loan Amounts from the Variable Account, and interest credits. It is decreased by
Monthly Deductions and partial withdrawals taken from it in the Fixed Account
and transfers to the Variable Account. The Fixed Accumulation Value will be
calculated at least monthly on the monthly anniversary date.
You may transfer all or part of your Fixed Accumulation Value to the
Sub-Accounts of the Variable Account, subject to the following transfer
limitations:
* The request to transfer must be postmarked no more than 30
days before the Policy Anniversary and no later than 30 days
after the Policy Anniversary. Only one transfer is allowed
during this period.
* The Fixed Accumulation Value after the transfer must be at
least equal to the Loan Amount.
* No more than 50% of the Fixed Accumulation Value (minus any
Loan Amount) may be transferred unless the balance, after the
transfer, would be less than $1,000. If the balance would be
less than $1,000, the full Fixed Accumulation Value (minus any
Loan Amount) may be transferred.
<PAGE>
* You must transfer at least:
- $500, or
- the total Fixed Accumulation Value (minus any Loan
Amount) if less than $500.
We make the Monthly Deduction from your Fixed Accumulation Value in
proportion to the total Accumulation Value of the Policy.
The Surrender Charge described in the Prospectus applies to the total
Accumulation Value, which includes the Fixed Accumulation Value. If the Owner
surrenders the Policy for its Cash Surrender Value, the Fixed Accumulation Value
will be reduced by any applicable Surrender Charge, any Loan Amount and unpaid
Monthly Deductions applicable to the Fixed Account.
<PAGE>
APPENDIX B
CALCULATION OF ACCUMULATION VALUE
The Accumulation Value of the Policy is equal to the sum of the
Variable Accumulation Value plus the Fixed Accumulation Value.
VARIABLE ACCUMULATION VALUE
The Variable Accumulation Value is the total of your values in each
Sub-Account. The value for each Sub-Account is equal to:
1 multiplied by 2, where:
1
Is your current number of Accumulation Units (described below).
2
Is the current Unit Value (described below).
The Variable Accumulation Value will vary from Valuation Date to
Valuation Date (described below) reflecting changes in 1 and 2 above.
ACCUMULATION UNITS. When transactions are made which affect the
Variable Accumulation Value, dollar amounts are converted to Accumulation Units.
The number of Accumulation Units for a transaction is found by dividing the
dollar amount of the transaction by the current Unit Value.
The number of Accumulation Units for a Sub-Account increases when:
* Net Premiums are credited to that Sub-Account; or
* Transfers from the Fixed Account or other Sub-Accounts are
credited to that Sub-Account.
The number of Accumulation Units for a Sub-Account decreases when:
* You take out a Policy loan from that Sub-Account;
* You take a partial withdrawal from that Sub-Account;
* We take a portion of the Monthly Deduction from that
Sub-Account; or
* Transfers are made from that Sub-Account to the Fixed Account
or other Sub-Accounts.
UNIT VALUE. The Unit Value for a Sub-Account on any Valuation Date is
equal to the previous Unit Value times the Net Investment Factor for that
Sub-Account (described below) for the Valuation Period (described below) ending
on that Valuation Date.
NET INVESTMENT FACTOR. The Net Investment Factor is a number that
reflects charges to the Policy and the investment performance during a Valuation
Period of the Fund in which a Sub-Account is invested. If the Net Investment
Factor is greater than one, the Unit Value is increased. If the Net Investment
Factor is less than one, the Unit Value is decreased. The Net Investment Factor
for a Sub-Account is determined by dividing 1 by 2.
<PAGE>
(1 / 2), where:
1
Is the result of:
* The net asset value per share of the Fund shares in which the
Sub-Account invests, determined at the end of the current
Valuation Period;
* Plus the per share amount of any dividend or capital gain
distributions made on the Fund shares in which the Sub-Account
invests during the current Valuation Period;
* Plus or minus a per share charge or credit for any taxes
reserved which we determine has resulted from the investment
operations of the Sub-Account and to be applicable to the
Policy.
2
Is the result of:
* The net asset value per share of the Fund shares held in the
Sub-Account, determined at the end of the last prior Valuation
Period;
* Plus or minus a per share charge or credit for any taxes
reserved for during the last prior Valuation Period which we
determine resulted from the investment operations of the
Sub-Account and was applicable to the Policy.
VALUATION DATE; VALUATION PERIOD. A Valuation Date is each day on which
the New York Stock Exchange is open for business except for a day that a
Sub-Account's corresponding Fund does not value its shares. The New York Stock
Exchange is currently closed on weekends and on the following holidays: New
Year's Day; Presidents' Day; Martin Luther King Day; Good Friday; Memorial Day;
July Fourth; Labor Day; Thanksgiving Day; and Christmas Day. A Valuation Period
is the period between two successive Valuation Dates, commencing at the close of
business of a Valuation Date and ending at the close of business on the next
Valuation Date.
FIXED ACCUMULATION VALUE
The Fixed Accumulation Value on the Policy Date is your Net Premium
credited to the Fixed Account on that date minus the Monthly Deduction
applicable to the Fixed Accumulation Value for the first Policy Month.
After the Policy Date, the Fixed Accumulation Value is calculated as:
1 + 2 + 3 + 4 - 5 - 6, where:
1
Is the Fixed Accumulation Value on the preceding Monthly Anniversary, plus
interest from the Monthly Anniversary to the date of the calculation.
2
Is the total of your Net Premiums credited to the Fixed Account since the
preceding Monthly Anniversary, plus interest from the date premiums are credited
to the date of the calculation.
3
Is the total of your transfers from the Variable Account to the Fixed Account
since the preceding Monthly Anniversary, plus interest from the date of transfer
to the date of the calculation.
<PAGE>
4
Is the total of your Loan Amount transferred from the Variable Account since the
preceding Monthly Anniversary.
5
Is the total of your transfers to the Variable Account from the Fixed Account
since the preceding Monthly Anniversary, plus interest from the date of transfer
to the date of the calculation.
6
Is the total of your partial withdrawals from the Fixed Account since the
preceding Monthly Anniversary, plus interest from the date of withdrawal to the
date of the calculation.
If the date of the calculation is a Monthly Anniversary, we also reduce
the Fixed Accumulation Value by the applicable Monthly Deduction for the Policy
Month following the Monthly Anniversary.
The minimum interest rate applied in the calculation of the Fixed
Accumulation Value is an effective annual rate of 4%. Interest in excess of the
minimum rate may be applied in the calculation of your Fixed Accumulation Value
in a manner which our Board of Directors determines.
<PAGE>
APPENDIX C
ILLUSTRATION OF ACCUMULATION VALUES, SURRENDER CHARGES,
CASH SURRENDER VALUES, AND DEATH BENEFITS
The following tables illustrate how the Accumulation Values, Cash
Surrender Values, and Death Benefits of a Policy may change with the investment
experience of the Variable Account. The tables show how the Accumulation Values,
Cash Surrender Values, and Death Benefits of a Policy issued to an Insured of a
given Age (who pays the given Planned Periodic Premiums annually) would vary
over time if the investment return of the assets held in the Funds were a
uniform, gross, after-tax, annual rate of 0 percent, 6 percent or 12 percent.
The tables on pages C-3 through C-8 illustrate a Policy issued to a
male Age 40, in a standard Rate Class and qualifying for non-smoker rates. The
Accumulation Values, Cash Surrender Values, and Death Benefits would be lower if
the Insured were in a substandard Rate Class or did not qualify for the
nonsmoker rates because the cost of insurance would be increased. The
Accumulation Values, Cash Surrender Values and Death Benefits would be different
from those shown if the gross annual investment returns averaged 0 percent, 6
percent, and 12 percent over a period of years, but fluctuated above and below
those averages for individual Policy Years.
Within the tables, the second and fifth columns illustrate the
Accumulation Value of the Policy over the designated period. The Accumulation
Value is the total amount that a Policy provides for investment at any time. The
third and sixth columns illustrate the Cash Surrender Value of a Policy over the
designated period. The Cash Surrender Value is equal to the Accumulation Value
less any Surrender Charges, Loan Amount (assumed to be zero in these
illustrations) and unpaid Monthly Deductions (also assumed to be zero). The
fourth and seventh columns illustrate the Death Benefit of a Policy over the
designated period. The second, third, and fourth columns assume that throughout
the life of the Policy, the monthly charge for the cost of insurance, the
Monthly Mortality and Expense Charge and the Monthly Administrative Charge are
based upon the maximums (i.e. guaranteed) permitted in the policy. The maximum
allowable cost of insurance rates are based on the 1980 Commissioners Standard
Ordinary Mortality Tables for Nonsmokers and Smokers. The fifth, sixth, and
seventh columns assume that the monthly charge for cost of insurance, the
Monthly Mortality and Expense Charge, and the Monthly Administrative Charge are
based on the current amounts expected to be charged. The Death Benefits also
vary between tables depending upon whether the Level Amount Death Benefit Option
(Tables at pages C-3 through C-5) or the Variable Amount Death Benefit Option
(Tables at pages C-6 through C-8) is illustrated.
The amounts shown for the Accumulation Values, Cash Surrender Values,
and Death Benefits reflect the fact that the net investment return of the
Sub-Accounts of the Variable Account is lower than the gross, after-tax return
on the assets held in the Funds as a result of the Funds' operating expenses.
The values shown take into account the daily total operating expenses paid by
the three funds available through The Alger American Fund, the four portfolios
available through Fidelity's VIP and the three portfolios available through
Fidelity's VIP II, the four funds of Janus Aspen Series, the two funds of
Neuberger&Berman Advisers Management Trust, the five funds available through
Northstar Variable Trust, the four funds available through the OCC Accumulatioon
Trust, and the three funds available through Putnam Variable Trust which
together are assumed to be at an average annual rate of 0.78% for all years.
This figure is derived based on an average of the Funds' 1996 operating expenses
net of any limitations on such expenses paid by the Funds. Thus, the illustrated
gross annual investment rates of return of 0 percent, 6 percent, and 12 percent
correspond to approximate net annual rates of return of -0.78%, 5.22%, and
11.22%, respectively. Without any expense reimbursement arrangements, total
operating expenses would be an average annual rate of 1.00%. Hypothetical Cash
Surrender Values, Accumulation Values, and the Death Benefit may be lower
without the expense reimbursement. Expense reimbursements are voluntary. While
it is currently anticipated that expense reimbursements will continue past the
current year, there is no assurance of ongoing reimbursements.
<PAGE>
The hypothetical values shown in the tables do not reflect any charges
for Federal income taxes attributable to the Variable Account because we do not
currently make any such charges. However, such charges may be made in the future
and, in that event, the gross annual investment return would have to exceed 0
percent, 6 percent, or 12 percent by an amount sufficient to cover the tax
charges in order to produce the Accumulation Values, Cash Surrender Values, and
Death Benefits illustrated. (See section entitled "Federal Tax Matters" in the
Prospectus).
The tables illustrate the Policy values that would result based upon
the hypothetical rates of return if premiums are paid as indicated, if all Net
Premiums are allocated to the Variable Account, and if no Policy loans have been
made. The tables are also based on the assumptions that the Policy owner has not
requested an increase or decrease in the Face Amount, that no partial
withdrawals have been made, that no transfers have been made, and total
operating expenses of the Funds continue as anticipated. Actual results will
depend on the expenses and performance of the investment choice made by the
owner.
Upon request, we will provide a comparable illustration based upon the
proposed Insured's Age, sex, underwriting classification, the Face Amount and
Planned Periodic Premium schedule requested, and any available riders requested.
<PAGE>
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE TO AGE 95
MALE ISSUE AGE: 40
NON-SMOKER
$1,200 ANNUAL PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 0%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
----------------------------------------------------- -----------------------------------------------------
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
POLICY ACCUMULATION CASH SURRENDER ACCUMULATION CASH SURRENDER
YEAR VALUE VALUE DEATH BENEFIT VALUE VALUE DEATH BENEFIT
- ----------- --------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1 769 0 100,000* 821 0 100,000*
2 1,510 0 100,000* 1,616 0 100,000*
3 2,222 392 100,000 2,386 556 100,000
4 2,903 1,073 100,000 3,129 1,299 100,000
5 3,554 1,724 100,000 3,842 2,012 100,000
6 4,171 2,524 100,000 4,525 2,878 100,000
7 4,753 3,289 100,000 5,177 3,713 100,000
8 5,300 4,019 100,000 5,797 4,516 100,000
9 5,809 4,711 100,000 6,382 5,284 100,000
10 6,278 5,363 100,000 6,929 6,014 100,000
11 6,704 5,972 100,000 7,437 6,705 100,000
12 7,082 6,533 100,000 7,907 7,358 100,000
13 7,406 7,040 100,000 8,334 7,968 100,000
14 7,670 7,487 100,000 8,716 8,533 100,000
15 7,868 7,868 100,000 9,049 9,049 100,000
16 7,994 7,994 100,000 9,326 9,326 100,000
17 8,043 8,043 100,000 9,548 9,548 100,000
18 8,010 8,010 100,000 9,708 9,708 100,000
19 7,886 7,886 100,000 9,802 9,802 100,000
20 7,662 7,662 100,000 9,827 9,827 100,000
AGE
70 0 0 0 4,903 4,903 100,000
**
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) ASSUMES A $1,200 PREMIUM (WHICH EXCEEDS THE ANNUALIZED MINIMUM MONTHLY
PREMIUM) IS PAID AT THE BEGINNING OF EACH POLICY YEAR. VALUES WILL BE DIFFERENT
IF PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
(2) ASSUMES THAT NO POLICY LOANS OR PARTIAL WITHDRAWALS HAVE BEEN MADE.
EXCESSIVE LOANS OR WITHDRAWALS MAY CAUSE THE POLICY TO LAPSE BECAUSE OF
INSUFFICIENT CASH SURRENDER VALUE.
*BASED ON (1) AND (2) ABOVE, THE DEATH BENEFIT GUARANTEE IS IN EFFECT DURING THE
YEARS SHOWN. THEREFORE, THE POLICY REMAINS IN FORCE EVEN THOUGH THE CASH
SURRENDER VALUE IS ZERO.
** POLICY TERMINATES PRIOR TO AGE 75.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 0%
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE TO AGE 95
MALE ISSUE AGE: 40
NON-SMOKER
$1,200 ANNUAL PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 6%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
----------------------------------------------------- -----------------------------------------------------
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
POLICY ACCUMULATION CASH SURRENDER ACCUMULATION CASH SURRENDER
YEAR VALUE VALUE DEATH BENEFIT VALUE VALUE DEATH BENEFIT
- ----------- --------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1 826 0 100,000* 879 0 100,000*
2 1,671 0 100,000* 1,784 0 100,000*
3 2,535 705 100,000 2,716 886 100,000
4 3,418 1,588 100,000 3,674 1,844 100,000
5 4,320 2,490 100,000 4,657 2,827 100,000
6 5,237 3,590 100,000 5,665 4,018 100,000
7 6,171 4,707 100,000 6,699 5,235 100,000
8 7,119 5,838 100,000 7,758 6,477 100,000
9 8,081 6,983 100,000 8,840 7,742 100,000
10 9,055 8,140 100,000 9,946 9,031 100,000
11 10,037 9,305 100,000 11,072 10,340 100,000
12 11,024 10,475 100,000 12,223 11,674 100,000
13 12,011 11,645 100,000 13,396 13,030 100,000
14 12,990 12,807 100,000 14,588 14,405 100,000
15 13,958 13,958 100,000 15,799 15,799 100,000
16 14,907 14,907 100,000 17,022 17,022 100,000
17 15,832 15,832 100,000 18,260 18,260 100,000
18 16,729 16,729 100,000 19,510 19,510 100,000
19 17,589 17,589 100,000 20,769 20,769 100,000
20 18,404 18,404 100,000 22,035 22,035 100,000
AGE
70 20,091 20,091 100,000 34,598 34,598 100,000
75 9,180 9,180 100,000 39,774 39,774 100,000
80 0 0 0 42,148 42,148 100,000
85 0 0 0 37,163 37,163 100,000
90 0 0 0 12,117 12,117 100,000
**
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) ASSUMES A $1,200 PREMIUM (WHICH EXCEEDS THE ANNUALIZED MINIMUM MONTHLY
PREMIUM) IS PAID AT THE BEGINNING OF EACH POLICY YEAR. VALUES WILL BE DIFFERENT
IF PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
(2) ASSUMES THAT NO POLICY LOANS OR PARTIAL WITHDRAWALS HAVE BEEN MADE.
EXCESSIVE LOANS OR WITHDRAWALS MAY CAUSE THE POLICY TO LAPSE BECAUSE OF
INSUFFICIENT CASH SURRENDER VALUE.
*BASED ON (1) AND (2) ABOVE, THE DEATH BENEFIT GUARANTEE IS IN EFFECT DURING THE
YEARS SHOWN. THEREFORE, THE POLICY REMAINS IN FORCE EVEN THOUGH THE CASH
SURRENDER VALUE IS ZERO.
** POLICY TERMINATES PRIOR TO AGE 95.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 6%
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE TO AGE 95
MALE ISSUE AGE: 40
NON-SMOKER
$1,200 ANNUAL PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 12%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
----------------------------------------------------- -----------------------------------------------------
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
POLICY ACCUMULATION CASH SURRENDER ACCUMULATION CASH SURRENDER
YEAR VALUE VALUE DEATH BENEFIT VALUE VALUE DEATH BENEFIT
- ----------- --------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1 882 0 100,000* 937 0 100,000*
2 1,839 9 100,000 1,959 129 100,000
3 2,876 1,046 100,000 3,074 1,244 100,000
4 4,001 2,171 100,000 4,290 2,460 100,000
5 5,222 3,392 100,000 5,616 3,786 100,000
6 6,546 4,899 100,000 7,063 5,416 100,000
7 7,984 6,520 100,000 8,643 7,179 100,000
8 9,546 8,265 100,000 10,370 9,089 100,000
9 11,243 10,145 100,000 12,257 11,159 100,000
10 13,089 12,174 100,000 14,320 13,405 100,000
11 15,097 14,365 100,000 16,578 15,846 100,000
12 17,279 16,730 100,000 19,055 18,506 100,000
13 19,652 19,286 100,000 21,771 21,405 100,000
14 22,232 22,049 100,000 24,754 24,571 100,000
15 25,040 25,040 100,000 28,031 28,031 100,000
16 28,098 28,098 100,000 31,634 31,634 100,000
17 31,435 31,435 100,000 35,604 35,604 100,000
18 35,084 35,084 100,000 39,983 39,983 100,000
19 39,081 39,081 100,000 44,822 44,822 100,000
20 43,466 43,466 100,000 50,176 50,176 100,000
AGE
70 122,856 122,856 142,513 149,138 149,138 173,000
75 202,054 202,054 216,198 249,956 249,956 267,454
80 329,751 329,751 346,239 415,953 415,953 436,751
85 528,017 528,017 554,418 683,725 683,725 717,911
90 827,111 827,111 868,467 1,110,468 1,110,468 1,165,992
95 1,304,129 1,304,129 1,317,170 1,808,440 1,808,440 1,826,525
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) ASSUMES A $1,200 PREMIUM (WHICH EXCEEDS THE ANNUALIZED MINIMUM MONTHLY
PREMIUM) IS PAID AT THE BEGINNING OF EACH POLICY YEAR. VALUES WILL BE DIFFERENT
IF PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
(2) ASSUMES THAT NO POLICY LOANS OR PARTIAL WITHDRAWALS HAVE BEEN MADE.
EXCESSIVE LOANS OR WITHDRAWALS MAY CAUSE THE POLICY TO LAPSE BECAUSE OF
INSUFFICIENT CASH SURRENDER VALUE.
*BASED ON (1) AND (2) ABOVE, THE DEATH BENEFIT GUARANTEE IS IN EFFECT DURING THE
YEARS SHOWN. THEREFORE, THE POLICY REMAINS IN FORCE EVEN THOUGH THE CASH
SURRENDER VALUE IS ZERO.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE
12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE TO AGE 95
MALE ISSUE AGE: 40
NON-SMOKER
$1,200 ANNUAL PREMIUM
$100,000 FACE AMOUNT
VARIABLE DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 0%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
----------------------------------------------------- -----------------------------------------------------
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
POLICY ACCUMULATION CASH SURRENDER ACCUMULATION CASH SURRENDER
YEAR VALUE VALUE DEATH BENEFIT VALUE VALUE DEATH BENEFIT
- ----------- --------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1 767 0 100,767* 818 0 100,819*
2 1,503 0 101,504* 1,610 0 101,610*
3 2,209 379 102,209 2,374 544 102,374
4 2,881 1,051 102,882 3,107 1,277 103,108
5 3,520 1,690 103,520 3,809 1,979 103,810
6 4,122 2,475 104,123 4,478 2,831 104,478
7 4,687 3,223 104,687 5,112 3,648 105,113
8 5,212 3,931 105,213 5,710 4,429 105,711
9 5,696 4,598 105,697 6,270 5,172 106,270
10 6,137 5,222 106,137 6,787 5,872 106,788
11 6,529 5,797 106,529 7,261 6,529 107,261
12 6,868 6,319 106,869 7,691 7,142 107,692
13 7,148 6,782 107,148 8,074 7,708 108,074
14 7,362 7,179 107,362 8,405 8,222 108,406
15 7,503 7,503 107,504 8,681 8,681 108,682
16 7,566 7,566 107,566 8,895 8,895 108,895
17 7,544 7,544 107,545 9,046 9,046 109,046
18 7,434 7,434 107,435 9,127 9,127 109,128
19 7,227 7,227 107,228 9,137 9,137 109,137
20 6,913 6,913 106,914 9,068 9,068 109,068
AGE
70 0 0 0 2,991 2,991 102,991
**
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) ASSUMES A $1,200 PREMIUM (WHICH EXCEEDS THE ANNUALIZED MINIMUM MONTHLY
PREMIUM) IS PAID AT THE BEGINNING OF EACH POLICY YEAR. VALUES WILL BE DIFFERENT
IF PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
(2) ASSUMES THAT NO POLICY LOANS OR PARTIAL WITHDRAWALS HAVE BEEN MADE.
EXCESSIVE LOANS OR WITHDRAWALS MAY CAUSE THE POLICY TO LAPSE BECAUSE OF
INSUFFICIENT CASH SURRENDER VALUE.
*BASED ON (1) AND (2) ABOVE, THE DEATH BENEFIT GUARANTEE IS IN EFFECT DURING THE
YEARS SHOWN. THEREFORE, THE POLICY REMAINS IN FORCE EVEN THOUGH THE CASH
SURRENDER VALUE IS ZERO.
** POLICY TERMINATES PRIOR TO AGE 75.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 0%
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE TO AGE 95
MALE ISSUE AGE: 40
NON-SMOKER
$1,200 ANNUAL PREMIUM
$100,000 FACE AMOUNT
VARIABLE DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 6%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
----------------------------------------------------- -----------------------------------------------------
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
POLICY ACCUMULATION CASH SURRENDER ACCUMULATION CASH SURRENDER
YEAR VALUE VALUE DEATH BENEFIT VALUE VALUE DEATH BENEFIT
- ----------- --------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1 823 0 100,824* 877 0 100,877*
2 1,663 0 101,664* 1,777 0 101,778*
3 2,520 690 102,520 2,702 872 102,702
4 3,392 1,562 103,392 3,648 1,818 103,649
5 4,277 2,447 104,278 4,616 2,786 104,616
6 5,174 3,527 105,175 5,603 3,956 105,604
7 6,081 4,617 106,082 6,611 5,147 106,611
8 6,996 5,715 106,996 7,636 6,355 107,636
9 7,916 6,818 107,917 8,676 7,578 108,677
10 8,839 7,924 108,839 9,730 8,815 109,730
11 9,759 9,027 109,760 10,793 10,061 110,794
12 10,671 10,122 110,671 11,868 11,319 111,868
13 11,566 11,200 111,567 12,948 12,582 112,949
14 12,436 12,253 112,437 14,031 13,848 114,031
15 13,273 13,273 113,273 15,111 15,111 115,112
16 14,066 14,066 114,067 16,180 16,180 116,180
17 14,808 14,808 114,808 17,236 17,236 117,237
18 15,489 15,489 115,490 18,272 18,272 118,273
19 16,098 16,098 116,098 19,282 19,282 119,282
20 16,619 16,619 116,619 20,258 20,258 120,258
AGE
70 11,720 11,720 111,721 26,213 26,213 126,214
75 0 0 0 23,409 23,409 123,409
80 0 0 0 11,728 11,728 111,729
**
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) ASSUMES A $1,200 PREMIUM (WHICH EXCEEDS THE ANNUALIZED MINIMUM MONTHLY
PREMIUM) IS PAID AT THE BEGINNING OF EACH POLICY YEAR. VALUES WILL BE DIFFERENT
IF PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
(2) ASSUMES THAT NO POLICY LOANS OR PARTIAL WITHDRAWALS HAVE BEEN MADE.
EXCESSIVE LOANS OR WITHDRAWALS MAY CAUSE THE POLICY TO LAPSE BECAUSE OF
INSUFFICIENT CASH SURRENDER VALUE.
*BASED ON (1) AND (2) ABOVE, THE DEATH BENEFIT GUARANTEE IS IN EFFECT DURING THE
YEARS SHOWN. THEREFORE, THE POLICY REMAINS IN FORCE EVEN THOUGH THE CASH
SURRENDER VALUE IS ZERO.
** POLICY TERMINATES PRIOR TO AGE 85.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 6%
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE TO AGE 95
MALE ISSUE AGE: 40
NON-SMOKER
$1,200 ANNUAL PREMIUM
$100,000 FACE AMOUNT
VARIABLE DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 12%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
----------------------------------------------------- -----------------------------------------------------
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
POLICY ACCUMULATION CASH SURRENDER ACCUMULATION CASH SURRENDER
YEAR VALUE VALUE DEATH BENEFIT VALUE VALUE DEATH BENEFIT
- ----------- --------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1 880 0 100,880* 935 0 100,935*
2 1,831 1 101,831* 1,952 122 101,952
3 2,859 1,029 102,859 3,058 1,228 103,058
4 3,970 2,140 103,970 4,260 2,430 104,260
5 5,170 3,340 105,170 5,565 3,735 105,566
6 6,466 4,819 106,466 6,983 5,336 106,984
7 7,864 6,400 107,865 8,525 7,061 108,525
8 9,374 8,093 109,375 10,200 8,919 110,200
9 11,004 9,906 111,005 12,019 10,921 112,019
10 12,762 11,847 112,763 13,994 13,079 113,995
11 14,657 13,925 114,658 16,138 15,406 116,139
12 16,697 16,148 116,697 18,470 17,921 118,470
13 18,887 18,521 118,888 21,003 20,637 121,003
14 21,237 21,054 121,237 23,754 23,571 123,755
15 23,753 23,753 123,754 26,743 26,743 126,743
16 26,446 26,446 126,446 29,983 29,983 129,984
17 29,325 29,325 129,326 33,503 33,503 133,504
18 32,405 32,405 132,405 37,323 37,323 137,324
19 35,694 35,694 135,695 41,471 41,471 141,471
20 39,203 39,203 139,203 45,974 45,974 145,974
AGE
70 87,485 87,485 187,485 119,310 119,310 219,311
75 120,040 120,040 220,041 186,574 186,574 286,574
80 153,139 153,139 253,139 288,438 288,438 388,438
85 176,949 176,949 276,949 441,809 441,809 541,809
90 168,279 168,279 268,279 673,744 673,744 773,744
95 89,344 89,344 189,344 1,029,074 1,029,074 1,129,074
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) ASSUMES A $1,200 PREMIUM (WHICH EXCEEDS THE ANNUALIZED MINIMUM MONTHLY
PREMIUM) IS PAID AT THE BEGINNING OF EACH POLICY YEAR. VALUES WILL BE DIFFERENT
IF PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
(2) ASSUMES THAT NO POLICY LOANS OR PARTIAL WITHDRAWALS HAVE BEEN MADE.
EXCESSIVE LOANS OR WITHDRAWALS MAY CAUSE THE POLICY TO LAPSE BECAUSE OF
INSUFFICIENT CASH SURRENDER VALUE.
*BASED ON (1) AND (2) ABOVE, THE DEATH BENEFIT GUARANTEE IS IN EFFECT DURING THE
YEARS SHOWN. THEREFORE, THE POLICY REMAINS IN FORCE EVEN THOUGH THE CASH
SURRENDER VALUE IS ZERO.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE
12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
APPENDIX D
MAXIMUM SURRENDER CHARGE PER $1,000 OF FACE AMOUNT
<TABLE>
<CAPTION>
Insured's Age at Insured's Age at
Policy Date or Policy Date or
Effective Date of Charge Per $1,000 of Face Amount Effective Date Charge Per $1,000 of Face Amount
Increase, as (Initial Face Amount or Amount of of Increase, as (Initial Face Amount or Amount of
Appropriate Requested Increase) Appropriate Requested Increase)
- ------------------- -------------------------------------- ------------------ --------------------------------------
Male Female Male Female
Nonsmoker Nonsmoker Nonsmoker Nonsmoker
and Standard and Standard and Standard and Standard
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
0 6.00 6.00 38 17.40 16.10
1 6.10 6.00 39 17.80 16.50
2 6.20 6.00 40 18.30 16.80
3 6.30 6.00 41 18.80 17.20
4 6.40 6.00 42 19.30 17.60
5 6.50 6.00 43 19.80 18.10
6 6.60 6.00 44 20.40 18.50
7 6.80 6.00 45 20.90 19.00
8 7.00 6.00 46 21.60 19.50
9 7.20 6.20 47 22.20 20.00
10 7.50 6.40 48 22.90 20.60
11 7.80 6.60 49 23.70 21.20
12 8.00 6.80 50 24.50 21.80
13 8.20 7.00 51 25.30 22.40
14 8.50 7.20 52 26.20 23.10
15 8.80 7.40 53 27.20 23.90
16 9.00 7.60 54 28.20 24.60
17 9.20 7.80 55 29.30 25.50
18 9.50 8.00 56 30.40 26.30
19 9.80 8.20 57 31.60 27.20
20 10.00 8.50 58 32.90 28.20
21 10.30 8.90 59 34.30 29.30
22 10.90 9.20 60 35.70 30.40
23 11.30 9.50 61 37.30 31.60
24 11.90 10.00 62 39.00 32.90
25 12.50 10.50 63 40.70 34.30
26 12.80 11.10 64 42.60 35.80
27 13.40 11.70 65 44.60 37.30
28 13.80 12.30 66 46.70 38.90
29 14.40 12.70 67 48.90 40.60
30 14.70 13.00 68 48.60 42.40
31 15.00 13.60 69 48.30 44.40
32 15.30 14.20 70 48.10 46.60
33 15.60 14.60 71 47.80 47.90
34 15.90 14.80 72 47.60 47.50
35 16.20 15.10 73 47.40 47.10
36 16.60 15.40 74 47.20 46.70
37 17.00 15.80 75 46.90 46.20
- ------------------- ------------------- ------------------ ------------------ ------------------- ------------------
</TABLE>
<PAGE>
APPENDIX E
SURRENDER CHARGE WHOLE LIFE PREMIUM PER $1,000 OF FACE AMOUNT
The following table provides the Surrender Charge Whole Life Premium factors
that are used in determining the Premium Related Surrender Charge Reduction. See
section entitled "Surrender Charge" in the Prospectus.
<TABLE>
<CAPTION>
Insured's Age Surrender Charge Whole Life Premium Insured's Age Surrender Charge Whole Life Premium
at Policy Date Per $1,000 of at Policy Date Per $1,000 of
Initial Face Amount Initial Face Amount
------------ --------------------------- ------------ ---------------------------
Male Female Male Female
Nonsmoker Nonsmoker Nonsmoker Nonsmoker
and Smoker and Smoker and Smoker and Smoker
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
0 $3.31 $2.81 38 $13.31 $11.43
1 3.34 2.85 39 13.93 11.94
2 3.45 2.94 40 14.58 12.47
3 3.55 3.04 41 15.27 13.02
4 3.67 3.13 42 16.00 13.61
5 3.79 3.24 43 16.77 14.22
6 3.92 3.35 44 17.58 14.87
7 4.06 3.46 45 18.44 15.55
8 4.21 3.58 46 19.36 16.27
9 4.36 3.71 47 20.32 17.03
10 4.53 3.85 48 21.35 17.83
11 4.70 3.99 49 22.44 18.67
12 4.87 4.13 50 23.60 19.57
13 5.05 4.29 51 24.84 20.52
14 5.24 4.45 52 26.15 21.52
15 5.42 4.61 53 27.55 22.59
16 5.61 4.78 54 29.04 23.71
17 5.80 4.96 55 30.63 24.91
18 6.00 5.14 56 32.31 26.18
19 6.21 5.33 57 34.11 27.54
20 6.42 5.53 58 36.03 28.99
21 6.65 5.74 59 38.08 30.55
22 6.89 5.96 60 40.28 32.23
23 7.14 6.19 61 42.63 34.03
24 7.41 6.44 62 45.15 35.98
25 7.69 6.69 63 47.84 38.06
26 8.00 6.96 64 50.72 40.29
27 8.32 7.24 65 53.79 42.67
28 8.66 7.53 66 57.09 45.23
29 9.02 7.84 67 60.62 47.98
30 9.40 8.16 68 64.41 50.96
31 9.80 8.50 69 68.50 54.21
32 10.22 8.86 70 72.90 57.75
33 10.67 9.24 71 77.65 61.62
34 11.14 9.63 72 82.75 65.84
35 11.64 10.05 73 88.20 70.41
36 12.17 10.49 74 94.00 75.36
37 12.73 10.95 75 100.17 80.71
- ------------------- ------------------- ------------------ ------------------ ------------------- ------------------
</TABLE>
<PAGE>
[LOGO] RELIASTAR
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 Woodbury Road
Woodbury, NY 11797
SELECT*LIFE NY PROSPECTUS 46263 (AUGUST 8, 1997)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant has duly
caused Post-Effective Amendment No. 2 to this Registration Statement to be
signed on its behalf, in the City of Minneapolis, and State of Minnesota, on the
25th day of July, 1997.
RELIASTAR BANKERS SECURITY VARIABLE LIFE SEPARATE ACCOUNT I
(Registrant)
By: RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(Depositor)
By: /s/ John H. Flittie
John H. Flittie
Vice Chairman, Chief Executive Officer, and President
As required by the Securities Act of 1933, Depositor has caused Post-Effective
Amendment No. 2 to this Registration Statement to be signed on its behalf, in
the City of Minneapolis and State of Minnesota, on this 25th day of July, 1997.
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(Depositor)
By: /s/ John H. Flittie
John H. Flittie
Vice Chairman, Chief Executive Officer, and President
As required by the Securities Act of 1933, Post-Effective Amendment No. 2 to
this Registration Statement has been signed on this 25th day of July, 1997 by
the following directors and officers of Depositor in the capacities indicated:
/s/ John H. Flittie Vice Chairman, Chief Executive Officer, and President
John H. Flittie
/s/ Rebecca B. Crunk Vice President, Treasurer, and Controller
Rebecca B. Crunk
Stephen A. Carb Wayne R. Huneke John G. Turner
R. Michael Conley Kenneth U. Kuk Charles B. Updike
Richard R. Crowl Richard E. Nolan Ross M. Weale
John H. Flittie Fioravante G. Perrotta Steven W. Wishart
James T. Hale Robert C. Salipante
* A majority of the Board of Directors
*Robert B. Saginaw, by signing his name hereto, does hereby sign this document
on behalf of each of the above-named directors of ReliaStar Bankers Security
Life Insurance Company pursuant to powers of attorney duly executed by such
persons.
/s/ Robert B. Saginaw
Robert B. Saginaw, Attorney-In-Fact
<PAGE>
PART II
Contents of Registration Statement
This Post-Effective Amendment No. 2 to the Registration Statement comprises the
following papers and documents:
The Facing Sheet.
The general form of Prospectus, consisting of 115 pages.
Undertakings to file reports.(2)
Rule 484 Undertaking.(2)
"Reasonableness" representation pursuant to Section 26(e)(2)(A) of the
Investment Company Act of 1940.(2)
The signatures.
Written consents of the following persons:
1. Robert B. Saginaw - Filed as EX-99.2.
2. Steve P. West, FSA, MAAA - Filed as EX-99.C6.
3.(a) Deloitte & Touche LLP - Filed as EX-99.C1A.
(b) KPMG Peat Marwick LLP - Filed as EX-99.C1B
The following exhibits:
1. The following exhibits correspond to those required by Paragraph A of
the instructions as to exhibits in Form N-8B-2:
A. (1) Resolutions of Board of Directors of ReliaStar Bankers
Security Life Insurance Company ("RBSL") establishing the
ReliaStar Bankers Security Variable Life Separate Account I.1
(2) Not applicable.
(3)(a) Form of General Distributor Agreement between Washington
Square Securities Inc. and RBSL.(2)
(b) Specimens of WSSI Selling Agreements.
(4) Not applicable.
(5) Form of Policy available (together with available Policy
riders).
(6)(a) Amended Charter of ReliaStar Bankers Security Life
Insurance Company.(1)
(6)(b) Amended By-laws of ReliaStar Bankers Security Life
Insurance Company.(1)
(7) Not applicable.
(8)(a) Participation Agreement with Fidelity's Variable Insurance
Products Fund and Fidelity Distributors Corporation and Form
of Amendment No. 1.(1)
(8)(b) Participation Agreement with Fidelity's Variable Insurance
Products Fund II and Fidelity Distributors Corporation and
Form of Amendment No. 1.(1)
(8)(c) Form of Service Contract with Fidelity Distributors
Corporation.(2)
(8)(d) Form of Service Agreement with Fidelity Investments
Institutional Operations Company, Inc.(2)
(8)(e) Form of Participation Agreement with Putnam Variable Trust
(formerly known as Putnam Capital Manager Trust) and Putnam
Mutual Funds Corp.(2)
(8)(f) Form of Management Services Agreement with ReliaStar Life
Insurance Company (formerly known as Northwestern National
Life Insurance Company).(1)
(8)(g) Form of Participation Agreement by and between ReliaStar
Bankers Security Life Insurance Company and Fred Alger
Management, Inc.
(8)(h) Form of Participation Agreement by and between ReliaStar
Bankers Security Life Insurance Company and Janus Aspen
Series.
<PAGE>
(8)(i) Form of Participation Agreement by and among ReliaStar
Bankers Security Life Insurance Company, Neuberger&Berman
Advisers Management Trust, Advisers Managers Trust and
Neuberger&Berman Management Incorporated ("NBMI").
(8)(j) Form of Participation Agreement by and between ReliaStar
Bankers Security Life Insurance Company and OpCap Advisors.
(8)(k) Form of Service Agreement by and between ReliaStar Bankers
Security Life Insurance Company and Fred Alger Management,
Inc.
(8)(l) Form of Service Agreement by and between ReliaStar Bankers
Security Life Insurance Company and Janus Capital Corporation.
(8)(m) Form of Service Agreement by and between ReliaStar Bankers
Security Life Insurance Company and NBMI.
(8)(n) Form of Service Agreement by and between ReliaStar Bankers
Security Life Insurance Company and OpCap Advisors.
(9) Not applicable.
(10) Policy application.
2. Opinion and consent of Robert B. Saginaw, Esquire, as to the legality
of the Securities being registered. See EX-99.2.
3. Not applicable.
4. Not applicable.
EX-99.C1A. Auditors' Consent - Deloitte & Touche LLP.
EX-99.C1B. Auditors' Consent - KPMG Peat Marwick LLP.
EX-99.C2. Not applicable.
EX-99.C3. Not applicable.
EX-99.C4. See EX-99.2.
EX-99.C5. Not applicable.
EX-99.C6. Actuarial Opinion and Consent.
EX-99.D1. Memorandum describing ReliaStar Bankers Security Life's
issuance, transfer and redemption procedures for the Policies
and ReliaStar Bankers Security Life's procedure for conversion
to the fixed account of the policy.(1)
EX-24. Powers of Attorney.
Stephen A. Carb(1)
Richard R. Crowl(1)
John H. Flittie(1)
James T. Hale(1)
Wayne R. Huneke(1)
Kenneth U. Kuk(1)
Richard E. Nolan(1)
Fioravante G. Perrotta(1)
Robert C. Salipante(1)
John G. Turner(1)
Charles B. Updike(1)
Ross M. Weale(1)
Steven W. Wishart(1)
R. Michael Conley(2)
EX-27. Financial Data Schedule as of March 31, 1997.
(1) Incorporated by reference to Registrant's Form S-6 Registration
Statement, File No. 333-19123, filed December 31, 1996.
(2) Incorporated by reference to Registrant's Form S-6 Registration
Statement, File No. 333-19123, filed May 9, 1997.
<PAGE>
INDEX TO EXHIBITS
1. EX-99.A.3.b. Specimens of WSSI Selling Agreements.
2. EX-99.A.5. Form of Policy available (together with available
Policy riders).
3. EX-99.A.8.g. Form of Participation Agreement by and between
ReliaStar Bankers Security Life Insurance Company and
Fred Alger Management, Inc.
4. EX-99.A.8.h. Form of Participation Agreement by and between
ReliaStar Bankers Security Life Insurance Company and
Janus Aspen Series.
5. EX-99.A.8.i. Form of Participation Agreement by and among
ReliaStar Bankers Security Life Insurance Company,
Neuberger&Berman Advisers Management Trust, Advisers
Managers Trust and Neuberger&Berman Management
Incorporated ("NBMI").
6. EX-99.A.8.j. Form of Participation Agreement by and between
ReliaStar Bankers Security Life Insurance Company and
OpCap Advisors.
7. EX-99.A.8.k. Form of Service Agreement by and between ReliaStar
Bankers Security Life Insurance Company and Fred
Alger Management, Inc.
8. EX-99.A.8.l. Form of Service Agreement by and between ReliaStar
Bankers Security Life Insurance Company and Janus
Capital Corporation.
9. EX-99.A.8.m. Form of Service Agreement by and between ReliaStar
Bankers Security Life Insurance Company and NBMI.
10. EX-99.A.8.n. Form of Service Agreement by and between ReliaStar
Bankers Security Life Insurance Company and OpCap
Advisors.
11. EX-99.A.10. Policy Application.
12. EX-99.2 Opinion and consent of Robert B. Saginaw, Esquire, as
to the legality of the Securities being registered.
13. EX-99.C1A. Auditors' Consent - Deloitte & Touche LLP.
14. EX-99.C1B. Auditors' Consent - KPMG Peat Marwick LLP.
15. EX-99.C6. Actuarial Opinion.
16. EX-27. Financial Data Schedule.
"A"
BROKER-DEALER AGENCY
SELLING AGREEMENT
This Agreement is made among the following three parties:
1. RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
Woodbury, New York 11797
a New York domiciled stock life insurance company
(hereinafter "INSURER"); and,
2. WASHINGTON SQUARE SECURITIES, INC.
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
an affiliate of Insurer, registered as a broker-dealer with
the Securities and Exchange Commission ("SEC") and a member
of the National Association of Securities Dealers, Inc.
("NASD") (hereinafter "GENERAL DISTRIBUTOR"); and,
3. ______________________________________
______________________________________
Street
______________________________________
City State ZIP
registered as a broker-dealer with the SEC and a member of the
NASD and licensed as an insurance agency (hereinafter
"BROKER-DEALER").
RECITALS:
WHEREAS, Broker-Dealer is licensed as an insurance agency in order to
satisfy state insurance law requirements with respect to the sale of traditional
life insurance policies as well as variable insurance products which are
registered securities with the SEC.
WHEREAS, the parties wish to enter into an agreement for the
distribution of Variable Contracts and Traditional Life Insurance Policies by
Broker-Dealer; and
WHEREAS, Insurer has appointed General Distributor as principal
underwriter and distributor (as those terms are defined by the Investment
<PAGE>
Company Act of 1940) of the Variable Contracts and has authorized General
Distributor to enter into selling agreements with registered broker-dealers for
the solicitation and sale of Variable Contracts; and,
WHEREAS, Insurer and General Distributor propose to have
Broker-Dealer's registered representatives who are licensed as life
insurance/variable contract agents in appropriate jurisdictions
("Representatives") solicit and sell Variable Contracts and Traditional Life
Insurance Policies; and,
WHEREAS, Insurer and General Distributor propose to have Broker-Dealer
provide certain supervisory and administrative services as hereinafter described
with respect to the solicitation and sales of Variable Contracts and Traditional
Life Insurance Policies.
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties now agree as follows:
1. DEFINITIONS
In this Agreement,
(a) The words "Variable Contract" shall mean those variable life
insurance policies and variable annuity contracts identified
in Section 1 of Compensation Schedule A attached hereto, and
as may hereafter be amended.
Insurer may in its sole discretion and without notice to
Broker-Dealer, suspend sales of any Variable Contracts or
amend any policies or contracts evidencing such Variable
Contracts if, in Insurer's opinion, such suspension or
amendment is: (1) necessary for compliance with federal,
state, or local laws, regulations, or administrative order(s);
or, (2) necessary to prevent administrative or financial
hardship to Insurer. In all other situations, Insurer shall
provide 30 days notice to Broker-Dealer prior to suspending
sales of any Variable Contracts or amending any policies or
contracts evidencing such Variable Contracts.
Insurer may issue and propose additional or successor
products, in which event Broker-Dealer will be informed of the
product and its related Commission Schedule. If Broker-Dealer
does not agree to distribute such product(s), it must notify
Insurer in writing within 30 days of receipt of the Commission
Schedule for such product(s). If Broker-Dealer does not
indicate disapproval of the new product(s) or the terms
contained in the related Commission Schedule, Broker-Dealer
will be deemed to have thereby agreed to distribute such
<PAGE>
product(s) and agreed to the related Commission Schedule which
shall be attached to and made a part of this Agreement.
(b) The words "Traditional Life Insurance Policy" shall mean those
life insurance policies and annuity contracts identified in
Section 2 of Compensation Schedule A attached hereto, and as
may hereafter be amended.
Insurer may in its sole discretion and without notice to
Broker-Dealer, suspend sales of any Traditional Life Insurance
Policies or amend any policies or contracts evidencing such
Traditional Life Insurance Policies if, in Insurer's opinion,
such suspension or amendment is: (1) necessary for compliance
with federal, state, or local laws, regulations, or
administrative order(s); or, (2) necessary to prevent
administrative or financial hardship to Insurer. In all other
situations, Insurer shall provide 30 days notice to
Broker-Dealer prior to suspending sales of any Traditional
Life Insurance Policies or amending any policies or contracts
evidencing such Traditional Life Insurance Policies.
Insurer may issue and propose additional or successor
products, in which event Broker-Dealer will be informed of the
product and its related Compensation Schedule. If
Broker-Dealer does not agree to distribute such product(s), it
must notify Insurer in writing within 30 days of receipt of
the Compensation Schedule for such product(s). If
Broker-Dealer does not indicate disapproval of the new
product(s) or the terms contained in the related Compensation
Schedule, Broker-Dealer will be deemed to have thereby agreed
to distribute such product(s) and agreed to the related
Compensation Schedule which shall be attached to and made a
part of this Agreement.
2. AGENCY APPOINTMENT
On the effective date, Insurer and General Distributor appoint
Broker-Dealer and Broker-Dealer accepts the appointment to solicit
sales of and to sell Variable Contracts and Traditional Life Insurance
Policies, pursuant to the terms of this Agreement.
<PAGE>
3. DUTIES OF BROKER-DEALER
(a) SUPERVISION OF REPRESENTATIVES. Broker-Dealer shall have full
responsibility for the training and supervision of all
Representatives who are engaged directly or indirectly in the
offer or sale of the Variable Contracts, and all such persons
shall be subject to the control of Broker-Dealer with respect
to such persons' securities regulated activities in connection
with the Variable Contracts. Broker-Dealer will cause the
Representatives to be trained in the sale of the Variable
Contracts, will cause such Representatives to qualify under
applicable federal and state laws to engage in the sale of the
Variable Contracts; will cause such Representatives to be
registered representatives of Broker-Dealer before such
Representatives engage in the solicitation of applications for
the Variable Contracts; and will cause such Representatives to
limit solicitation of applications for the Variable Contracts
to jurisdictions where Insurer has authorized such
solicitation. Broker-Dealer shall cause such Representatives'
qualifications to be certified to the satisfaction of General
Distributor and shall notify General Distributor if any
Representative ceases to be a registered representative of
Broker-Dealer or ceases to maintain the proper licensing
required for the sale of the Variable Contracts. All parties
shall be liable for their own negligence and misconduct under
this paragraph.
(b) REPRESENTATIVES INSURANCE COMPLIANCE. Broker-Dealer, prior to
allowing its Representatives to solicit for sales or sell the
Variable Contracts and Traditional Life Insurance Policies,
shall require such representatives to be validly insurance
licensed, registered and appointed by Insurer as a variable
contract/life insurance agent in accordance with the
jurisdictional requirements of the place where the
solicitations and sales take place as well as the solicited
person's or entity's place of residence.
Broker-Dealer shall assist Insurer in the appointment of
Representatives under the applicable insurance laws to sell
Variable Contracts and Traditional Life Insurance Policies.
Broker-Dealer shall fulfill all Insurer requirements in
conjunction with the submission of licensing/appointment
papers for all applicants as insurance agents of Insurer. All
such licensing/appointment papers shall be submitted to
Insurer or its designee by Broker-Dealer. Notwithstanding such
submission, Insurer shall have sole discretion to appoint,
refuse to appoint, discontinue, or terminate the appointment
of any Representative as an insurance agent of Insurer.
<PAGE>
(c) COMPLIANCE WITH NASD RULES OF FAIR PRACTICE AND FEDERAL AND
STATE SECURITIES LAWS. Broker-Dealer shall fully comply with
the requirements of the National Association of Securities
Dealers, Inc., the Securities Exchange Act of 1934 and all
other applicable federal and state laws. In addition,
Broker-Dealer will establish and maintain such rules and
procedures as may be necessary to cause diligent supervision
of the securities activities of the Representatives as
required by applicable law or regulation. Upon request by
General Distributor, Broker-Dealer shall furnish such records
as may be necessary to establish such diligent supervision.
(d) NOTICE OF REPRESENTATIVE'S NONCOMPLIANCE. In the event a
Representative fails or refuses to submit to supervision of
Broker-Dealer or otherwise fails to meet the rules and
standards imposed by Broker-Dealer on its Representatives,
Broker-Dealer shall advise General Distributor of this fact
and shall immediately notify such Representative that he or
she is no longer authorized to sell the Variable Contracts or
Traditional Life Insurance Policies and Broker-Dealer shall
take whatever additional action may be necessary to terminate
the sales activities of such Representative relating to such
contracts and policies.
(e) PROSPECTUSES, SALES PROMOTION MATERIAL AND ADVERTISING.
Broker-Dealer shall be provided, without any expense to
Broker-Dealer, with prospectuses relating to the Variable
Contracts and such other supplementary sales material as
General Distributor determines is necessary or desirable for
use in connection with sales of the Variable Contracts and
Traditional Life Insurance Policies.
NO SALES PROMOTION MATERIALS OR ANY ADVERTISING RELATING TO
THE VARIABLE CONTRACTS AND TRADITIONAL LIFE INSURANCE
POLICIES, INCLUDING WITHOUT LIMITATION GENERIC ADVERTISING
MATERIAL WHICH DOES NOT REFER TO INSURER BY NAME, SHALL BE
USED BY BROKER-DEALER UNLESS THE SPECIFIC ITEM HAS BEEN
APPROVED IN WRITING BY GENERAL DISTRIBUTOR PRIOR TO SUCH USE.
In addition, Broker-Dealer shall not print, publish or
distribute any advertisement, circular or any document
relating to Insurer unless such advertisement, circular or
document shall have been approved in writing by Insurer prior
to such use.
<PAGE>
Upon termination of this Agreement, all prospectuses, sales
promotion material, advertising, circulars, documents and
software relating to the sales of Insurer's contracts shall be
promptly turned over to Insurer free from any claim or
retention of rights by the Broker-Dealer.
Insurer represents that the prospectus and registration
statement relating to the Variable Contracts contain no untrue
statements of material fact or omission to state material
fact, the omission of which makes any statement contained in
the prospectus and registration statement misleading. Insurer
agrees to indemnify Broker-Dealer from and against any claims,
liabilities and expenses which may be incurred under the
Securities Act of 1933, the Investment Company Act of 1940,
common law or otherwise arising out of a breach of the
agreement in this paragraph.
Broker-Dealer agrees to hold harmless and indemnify Insurer
and General Distributor against any and all claims,
liabilities and expenses which Insurer or General Distributor
may incur from liabilities arising out of or based upon any
alleged or untrue statement other than statements contained in
the registration statement, prospectus or approved sales
material of any Variable Contract.
In accordance with the requirements of the laws of the several
states, Broker-Dealer shall maintain complete records
indicating the manner and extent of distribution of any such
solicitation material, shall make such records and files
available to staff of Insurer or its designated agent in field
inspections and shall make such material available to
personnel of state insurance departments, the NASD or other
regulatory agencies, including the SEC, which have regulatory
authority over Insurer or General Distributor. Broker-Dealer
holds Insurer, General Distributor and their affiliates
harmless from any liability arising from the use of any
material which either (a) has not been specifically approved
by Insurer in writing, or (b) although previously approved,
has been disapproved, in writing, for further use.
(f) SECURING APPLICATIONS. All applications for Variable Contracts
and Traditional Life Insurance Policies shall be made on
application forms supplied by Insurer and all payments
collected by Broker-Dealer or any Representative thereof shall
be remitted promptly in full, together with such application
forms and any other required documentation, directly to
Insurer at the address indicated on such application or to
such other address as Insurer may, from time-to-time,
designate in writing. Broker-Dealer shall review all such
applications for accuracy and completeness. Checks or money
<PAGE>
orders in payment on any such Variable Contract or Traditional
Life Insurance Policy shall be drawn to the order of
"ReliaStar Bankers Security Life Insurance Company." All
applications are subject to acceptance or rejection by Insurer
at its sole discretion. All records or information obtained
hereunder by Broker-Dealer shall not be disclosed or used
except as expressly authorized herein, and Broker-Dealer will
keep such records and information confidential, to be
disclosed only as authorized or if expressly required by
federal or state regulatory authorities.
(g) COLLECTION OF PURCHASE PAYMENTS. Broker-Dealer agrees that all
money or other consideration tendered with or in respect of
any application for a Variable Contract or Traditional Life
Insurance Policy and the Variable Contract or Traditional Life
Insurance Policy when issued is the property of Insurer and
shall be promptly remitted in full to Insurer without
deduction or offset for any reason, including by way of
example but not limitation, any deduction or offset for
compensation claimed by Broker-Dealer.
(h) POLICY DELIVERY. Insurer will transmit Variable Contracts and
Traditional Life Insurance Policies to Broker-Dealer for
delivery to Policyowners. Broker-Dealer hereby agrees to
deliver all such Variable Contracts to Policyowners within ten
(10) days of their receipt by Broker-Dealer from Insurer.
Broker-Dealer agrees to indemnify and hold harmless Insurer
for any and all losses caused by Broker-Dealer's failure to
perform the undertakings described in this paragraph.
Broker-Dealer hereby authorizes Insurer to set off any amount
it owes Insurer under this paragraph against any and all
amounts otherwise payable to Broker-Dealer by Insurer.
(i) FIDELITY BOND. Broker-Dealer represents that all directors,
officers, employees and Representatives of Broker-Dealer who
are licensed pursuant to this Agreement as Insurer's agents
for state insurance law purposes or who have access to funds
of Insurer, including but not limited to funds submitted with
applications for the Variable Contracts and Traditional Life
Insurance Policies, or funds being returned to owners, are and
shall be covered by a blanket fidelity bond, including
coverage for larceny and embezzlement, issued by a reputable
bonding company. This bond shall be maintained by
Broker-Dealer at Broker-Dealer's expense. Such bond shall be,
at least, of the form, type and amount required under the NASD
Rules of Fair Practice. Insurer may require evidence,
satisfactory to it, that such coverage is in force and
Broker-Dealer shall give prompt written notice to Insurer of
any notice of cancellation or change of coverage.
<PAGE>
Broker-Dealer assigns any proceeds received from the fidelity
bonding company to Insurer to the extent of Insurer's loss due
to activities covered by the bond. If there is any deficiency
amount, whether due to a deductible or otherwise,
Broker-Dealer shall promptly pay Insurer such amount on demand
and Broker-Dealer hereby indemnifies and holds harmless
Insurer from any such deficiency and from the costs of
collection thereof (including reasonable attorneys' fees).
4. COMPENSATION
(a) VARIABLE CONTRACTS. Insurer, on behalf of General Distributor,
shall pay a dealer concession to Broker-Dealer on all sales of
Variable Contracts through its Representatives, in accordance
with the form of Compensation Schedule A attached hereto,
which is in effect when purchase payment on such Variable
Contracts are received by Insurer. Dealer concessions will be
paid as a percentage of premiums received in cash or other
legal tender and accepted by Insurer on applications obtained
by Broker-Dealer's Representatives unless otherwise indicated
in Compensation Schedule A. Upon termination of this
Agreement, all compensation payable hereunder shall cease;
however, Broker-Dealer shall continue to be liable for any
chargebacks or for any other amounts advanced by or otherwise
due Insurer hereunder.
Insurer will pay all such Compensation to the Broker-Dealer.
Broker-Dealer agrees to hold Insurer and General Distributor
harmless from all claims of its Representatives for
compensation in respect of Representative's sales of Variable
Contracts.
(b) TRADITIONAL LIFE INSURANCE POLICIES. Insurer shall pay
commissions to Broker-Dealer on all sales of Traditional Life
Insurance Policies through its Representatives in accordance
with the form of Compensation Schedule A attached hereto,
which is in effect when purchase payments on such Traditional
Life Insurance Policies are received by Insurer. Commissions
will be paid as a percentage of premiums received in cash or
other legal tender and accepted by insurer on applications
obtained by Broker-Dealer's Representatives unless otherwise
indicated in Compensation Schedule A. Upon termination of this
Agreement, all compensation payable hereunder shall cease;
however, Broker-Dealer shall continue to be liable for any
chargebacks or for any other amounts advanced by or otherwise
due Insurer hereunder.
<PAGE>
Insurer will pay all such compensation to the Broker-Dealer.
Broker-Dealer agrees to hold Insurer harmless from all claims
of its Representatives for compensation in respect of
Representative's sales of Traditional Life Insurance Policies.
(c) COMMISSION STATEMENTS. Broker-Dealer will be provided with
copies of its Representatives' commission statements together
with Broker-Dealer's own commission statement for each
commission payment period in which commissions are payable.
Broker-Dealer agrees that, except as to clerical errors and
material undisclosed facts, if any, such statements
constitutes a complete and accurate statement of the
commission account unless written notice is provided to
Insurer within 120 days after the date of the statement, which
notice specifically sets forth the objections or exceptions
thereto.
(d) COMPENSATION SCHEDULES. The initial Compensation Schedule A is
attached.
Insurer and General Distributor reserve the right to change,
amend, or cancel any Compensation Schedule as to business
produced after such change by mailing notice of such change in
the form of a new Compensation Schedule to Broker-Dealer. Such
change shall be effective, unless otherwise specified, ten
(10) days after the notice is mailed.
(e) RIGHTS OF REJECTION AND SETTLEMENT. Insurer reserves the right
to reject any and all applications and collections submitted,
to discontinue writing any form of policy, to take possession
of and cancel any policy and return the premium or any part of
it, and to make any compromise settlement in respect of a
policy. Broker-Dealer will not be entitled to receive or
retain any compensation on premiums or parts of premiums
Insurer does not receive and retain because of such rejection,
discontinuance, cancellation, or compromise settlement. If
compensation has been paid to which Broker-Dealer is not
entitled, any amount credited will be charged back, and if the
account balance is insufficient to cover the credited amount,
Broker-Dealer as applicable agrees to promptly repay the
credited amount.
<PAGE>
5. TERMINATION
This Agreement may be terminated, without cause, by any party upon
thirty (30) days prior written notice; and may be terminated, for
failure to perform satisfactorily or other cause, by any party
immediately; and shall be terminated if Broker-Dealer ceases to be
registered as a Broker-Dealer under the Securities Exchange Act of 1934
and a member of the NASD or, if Broker-Dealer ceases to maintain its
insurance agent license(s) in good standing in the jurisdictions in
which it conducts business.
6. ARBITRATION
Any dispute, claim or controversy arising out of or in connection with
this Agreement shall be submitted to arbitration pursuant to the NASD's
arbitration facilities. If the subject matter of the dispute, claim or
controversy is not within the scope of matters which may arbitrated
through the NASD arbitration facilities, then such dispute, claim or
controversy shall, upon the written request of any party, be submitted
to three arbitrators, one to be chosen by each party, and the third by
the two so chosen. If either party refuses or neglects to appoint an
arbitrator within thirty (30) days after the receipt of the written
notice from the other party requesting it to do so, the requesting
party may appoint two arbitrators. If the two arbitrators fail to agree
in the selection of a third arbitrator within thirty (30) days of their
appointment, each of them shall name two, of whom the other shall
decline one and the decision shall be made by drawing lots. All
arbitrators shall be active or retired executive officers of insurance
companies not under the control of any party to this Agreement. Each
party shall submit its case to the arbitrators within thirty (30) days
of the appointment of the third arbitrator. The arbitration shall be
held in Minneapolis, Minnesota at the times agreed upon by the
arbitrators. The decision in writing of any two arbitrators, when filed
with the parties hereto shall be final and binding on both parties.
Judgment may be entered upon the final decision of the arbitrators in
any court having jurisdiction. Each party shall bear the expense of its
own arbitrator and shall jointly and equally bear with the other party
the expense of the third arbitrator and of the arbitration.
7. GENERAL PROVISIONS
(a) ADDITIONS, AMENDMENTS, MODIFICATIONS & WAIVERS. This Agreement
shall not be effective until approved by Insurer and General
Distributor. Insurer and General Distributor reserve the right
to amend this Agreement at any time, and the submission of an
application by Broker-Dealer after notice of any such
amendment has been sent shall constitute Broker-Dealer's
agreement to any such
<PAGE>
amendment. No additions, amendments or modifications of this
Agreement or any waiver of any provision will be valid unless
approved, in writing, by one of Insurer's duly authorized
officers. In addition, no approved waiver of any default, or
failure of performance by Broker-Dealer will affect Insurer's
or General Distributor's rights with respect to any later
default or failure of performance.
(b) INDEPENDENT CONTRACTOR RELATIONSHIP. This Agreement does not
create the relationship of employer and employee between the
parties to this Agreement. Insurer and General Distributor are
independent contractors with respect to Broker-Dealer and its
Representatives.
(c) ASSIGNMENTS. Broker-Dealer will not assign or transfer, either
wholly or partially, this Agreement or any of the benefits
accrued or to accrue under it, without the written prior
consent of a duly authorized officer of the Insurer and
General Distributor.
(d) SERVICE OF PROCESS. If Broker-Dealer receives or is served
with any notice or other paper concerning any legal action
against Insurer or General Distributor, Broker-Dealer agrees
to notify Insurer immediately (in any event not later than the
first business day after receipt) by telephone and further
agrees to transmit any papers that are served or received by
facsimile to (612) 342-7531 and by overnight mail to Insurer's
Office of General Counsel.
(e) SEVERABILITY. It is understood and agreed by the parties to
this Agreement that if any part, term or provision of this
Agreement is held to be invalid or in conflict with any law or
regulation, the validity of the remaining portions or
provisions will not be affected, and the parties' rights and
obligations will be construed and enforced as if this
Agreement did not contain the particular part, term or
provision held to be invalid.
(f) GOVERNING LAW. It is agreed by the parties to this Agreement
that the Agreement and all of its provisions will be governed
by the laws of the State of Minnesota.
(g) LIMITATIONS. No party other than Insurer shall have the
authority on behalf of Insurer to make, alter, or discharge
any policy, contract, or certificate issued by Insurer, to
waive any forfeiture or to grant, permit, nor extend the time
for making any payments nor to guarantee earnings or rates,
nor to alter the forms which Insurer may prescribe or
substitute other forms in place of those prescribed by
Insurer, nor to enter into any proceeding in a court of law or
before a regulatory
<PAGE>
agency in the name of or on behalf of Insurer, nor to open any
bank account in the full legal name of Insurer, any derivation
thereof or any tradename thereof.
8. TERRITORY
Broker-Dealer's territory is limited geographically to those
jurisdictions in which the Variable Contracts and Traditional Life
Insurance Policies may lawfully be offered, provided that
Broker-Dealer's right to solicit sales of and to sell the Variable
Contracts and Traditional Life Insurance Policies in such jurisdictions
is not exclusive.
9. EFFECTIVE DATE
This Agreement shall be effective ________________, 199__.
IN WITNESS WHEREOF, we set our hands this ____ day of
_________________, 199__.
INSURER:
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
By: _____________________________
Title: _____________________________
GENERAL DISTRIBUTOR:
WASHINGTON SQUARE SECURITIES, INC.
By: _____________________________
Title: _____________________________
BROKER-DEALER:
By: _____________________________
Title: _____________________________
<PAGE>
"B"
BROKER-DEALER AGENCY
SELLING AGREEMENT
This Agreement is made among the following four parties:
1. RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
Woodbury, New York 11797
a New York domiciled stock life insurance company
(hereinafter "INSURER"); and,
2. WASHINGTON SQUARE SECURITIES, INC.
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
an affiliate of Insurer, registered as a broker-dealer with
the Securities and Exchange Commission ("SEC") and a member of
the National Association of Securities Dealers, Inc. ("NASD")
(hereinafter "GENERAL DISTRIBUTOR"); and,
3. ______________________________________
______________________________________
Street
______________________________________
City State ZIP
registered as a broker-dealer with the SEC and a Member
of the NASD (hereinafter "BROKER-DEALER"); and,
4. ______________________________________
______________________________________
Street
______________________________________
City State ZIP
an affiliate of Broker-Dealer and a licensed insurance agency
(hereinafter "AGENCY").
RECITALS:
WHEREAS, Broker-Dealer has become affiliated with Agency in order to
satisfy state insurance law requirements with respect to the sale of variable
insurance products which are registered securities with the SEC.
<PAGE>
WHEREAS, the parties wish to enter into an agreement for the
distribution of Variable Contracts and Traditional Life Insurance Policies by
Broker-Dealer and Agency; and
WHEREAS, Insurer has appointed General Distributor as principal
underwriter and distributor (as those terms are defined by the Investment
Company Act of 1940) of the Variable Contracts and has authorized General
Distributor to enter into selling agreements with registered broker-dealers for
the solicitation and sale of Variable Contracts; and,
WHEREAS, Insurer and General Distributor propose to have
Broker-Dealer's registered representatives who are affiliated with Agency and
who are licensed as life insurance/variable contract agents in appropriate
jurisdictions ("Representatives") solicit and sell Variable Contracts and
Traditional Life Insurance Policies; and,
WHEREAS, Insurer proposes to authorize Agency's employees who are not
registered representatives of Broker-Dealer but who are licensed as life
insurance agents in appropriate jurisdictions ("Agents") to solicit and sell
Traditional Life Insurance Policies; and,
WHEREAS, Insurer and General Distributor propose to have Broker-Dealer
provide certain supervisory and administrative services as hereinafter described
with respect to the solicitation and sales of Variable Contracts; and,
WHEREAS, Insurer proposes to have Agency provide certain supervisory
and administrative services as hereinafter described with respect to the
solicitation and sales of Traditional Life Insurance Policies by its Agents and
by Representatives who are affiliated with Agency.
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties now agree as follows:
1. DEFINITIONS
In this Agreement,
(a) The words "Variable Contract" shall mean those variable life
insurance policies and variable annuity contracts identified
in Section 1 of Compensation Schedule A attached hereto, and
as may hereafter be amended.
Insurer may in its sole discretion and without notice to
Broker-Dealer, suspend sales of any Variable Contracts or
amend any policies or contracts evidencing such Variable
Contracts if, in Insurer's opinion,
<PAGE>
such suspension or amendment is: (1) necessary for compliance
with federal, state, or local laws, regulations, or
administrative order(s); or, (2) necessary to prevent
administrative or financial hardship to Insurer. In all other
situations, Insurer shall provide 30 days notice to
Broker-Dealer prior to suspending sales of any Variable
Contracts or amending any policies or contracts evidencing
such Variable Contracts.
Insurer may issue and propose additional or successor
products, in which event Broker-Dealer will be informed of the
product and its related Commission Schedule. If Broker-Dealer
does not agree to distribute such product(s), it must notify
Insurer in writing within 30 days of receipt of the Commission
Schedule for such product(s). If Broker-Dealer does not
indicate disapproval of the new product(s) or the terms
contained in the related Commission Schedule, Broker-Dealer
will be deemed to have thereby agreed to distribute such
product(s) and agreed to the related Commission Schedule which
shall be attached to and made a part of this Agreement.
(b) The words "Traditional Life Insurance Policy" shall mean those
life insurance policies and annuity contracts identified in
Section 2 of Compensation Schedule A attached hereto, and as
may hereafter be amended.
Insurer may in its sole discretion and without notice to
Broker-Dealer, suspend sales of any Traditional Life Insurance
Policies or amend any policies or contracts evidencing such
Traditional Life Insurance Policies if, in Insurer's opinion,
such suspension or amendment is: (1) necessary for compliance
with federal, state, or local laws, regulations, or
administrative order(s); or, (2) necessary to prevent
administrative or financial hardship to Insurer. In all other
situations, Insurer shall provide 30 days notice to
Broker-Dealer prior to suspending sales of any Traditional
Life Insurance Policies or amending any policies or contracts
evidencing such Traditional Life Insurance Policies.
Insurer may issue and propose additional or successor
products, in which event Broker-Dealer will be informed of the
product and its related Compensation Schedule. If
Broker-Dealer does not agree to distribute such product(s), it
must notify Insurer in writing within 30 days of receipt of
the Compensation Schedule for such product(s). If
Broker-Dealer does not indicate disapproval of the new
product(s) or the terms contained in the related Compensation
Schedule, Broker-Dealer will be deemed to have thereby agreed
to distribute such
<PAGE>
product(s) and agreed to the related Compensation Schedule
which shall be attached to and made a part of this Agreement.
2. AGENCY APPOINTMENTS
On the effective date,
(a) Insurer and General Distributor appoint Broker-Dealer and
Broker-Dealer accepts the appointment to solicit sales of and
to sell Variable Contracts only, pursuant to the terms of this
Agreement.
(b) Insurer appoints Agency, and Agency accepts the appointment to
solicit sales of and to sell Traditional Life Insurance
Policies only, pursuant to the terms of this Agreement.
3. DUTIES OF BROKER-DEALER
(a) SUPERVISION OF REPRESENTATIVES. Broker-Dealer shall have full
responsibility for the training and supervision of all
Representatives who are engaged directly or indirectly in the
offer or sale of the Variable Contracts, and all such persons
shall be subject to the control of Broker-Dealer with respect
to such persons' securities regulated activities in connection
with the Variable Contracts. Broker-Dealer will cause the
Representatives to be trained in the sale of the Variable
Contracts, will cause such Representatives to qualify under
applicable federal and state laws to engage in the sale of the
Variable Contracts; will cause such Representatives to be
registered representatives of Broker-Dealer before such
Representatives engage in the solicitation of applications for
the Variable Contracts; and will cause such Representatives to
limit solicitation of applications for the Variable Contracts
to jurisdictions where Insurer has authorized such
solicitation. Broker-Dealer shall cause such Representatives'
qualifications to be certified to the satisfaction of General
Distributor and shall notify General Distributor if any
Representative ceases to be a registered representative of
Broker-Dealer or ceases to maintain the proper licensing
required for the sale of the Variable Contracts. All parties
shall be liable for their own negligence and misconduct under
this paragraph.
(b) REPRESENTATIVES INSURANCE COMPLIANCE. Broker-Dealer, prior to
allowing its Representatives to solicit for sales or sell the
Variable Contracts, shall require such representatives to be
validly insurance licensed, registered and appointed by
Insurer as a variable contract agent in accordance with the
jurisdictional requirements of
<PAGE>
the place where the solicitations and sales take place as well
as the solicited person's or entity's place of residence.
Broker-Dealer shall assist Insurer in the appointment of
Representatives under the applicable insurance laws to sell
the Variable Contracts. Broker-Dealer shall fulfill all
Insurer requirements in conjunction with the submission of
licensing/appointment papers for all applicants as insurance
agents of Insurer. All such licensing/appointment papers shall
be submitted to Insurer or its designee by Broker-Dealer.
Notwithstanding such submission, Insurer shall have sole
discretion to appoint, refuse to appoint, discontinue, or
terminate the appointment of any Representative as an
insurance agent of Insurer.
(c) COMPLIANCE WITH NASD RULES OF FAIR PRACTICE AND FEDERAL AND
STATE SECURITIES LAWS. Broker-Dealer shall fully comply with
the requirements of the National Association of Securities
Dealers, Inc., the Securities Exchange Act of 1934 and all
other applicable federal and state laws. In addition,
Broker-Dealer will establish and maintain such rules and
procedures as may be necessary to cause diligent supervision
of the securities activities of the Representatives as
required by applicable law or regulation. Upon request by
General Distributor, Broker-Dealer shall furnish such records
as may be necessary to establish such diligent supervision.
(d) NOTICE OF REPRESENTATIVE'S NONCOMPLIANCE. In the event a
Representative fails or refuses to submit to supervision of
Broker-Dealer or otherwise fails to meet the rules and
standards imposed by Broker-Dealer on its Representatives,
Broker-Dealer shall advise General Distributor of this fact
and shall immediately notify such Representative that he or
she is no longer authorized to sell the Variable Contracts and
Broker-Dealer shall take whatever additional action may be
necessary to terminate the sales activities of such
Representative relating to the Variable Contracts.
(e) PROSPECTUSES, SALES PROMOTION MATERIAL AND ADVERTISING.
Broker-Dealer shall be provided, without any expense to
Broker-Dealer, with prospectuses relating to the Variable
Contracts and such other supplementary sales material as
General Distributor determines is necessary or desirable for
use in connection with sales of the Variable Contracts.
NO SALES PROMOTION MATERIALS OR ANY ADVERTISING RELATING TO
THE VARIABLE CONTRACTS, INCLUDING WITHOUT LIMITATION GENERIC
ADVERTISING MATERIAL
<PAGE>
WHICH DOES NOT REFER TO INSURER BY NAME, SHALL BE USED BY
BROKER-DEALER UNLESS THE SPECIFIC ITEM HAS BEEN APPROVED IN
WRITING BY GENERAL DISTRIBUTOR PRIOR TO SUCH USE.
In addition, Broker-Dealer shall not print, publish or
distribute any advertisement, circular or any document
relating to Insurer unless such advertisement, circular or
document shall have been approved in writing by Insurer prior
to such use.
Upon termination of this Agreement, all prospectuses, sales
promotion material, advertising, circulars, documents and
software relating to the sales of the Variable Contracts shall
be promptly turned over to Insurer free from any claim or
retention of rights by the Broker-Dealer.
Insurer represents that the prospectus and registration
statement relating to the Variable Contracts contain no untrue
statements of material fact or omission to state material
fact, the omission of which makes any statement contained in
the prospectus and registration statement misleading. Insurer
agrees to indemnify Broker-Dealer from and against any claims,
liabilities and expenses which may be incurred under the
Securities Act of 1933, the Investment Company Act of 1940,
common law or otherwise arising out of a breach of the
agreement in this paragraph.
Broker-Dealer agrees to hold harmless and indemnify Insurer
and General Distributor against any and all claims,
liabilities and expenses which Insurer or General Distributor
may incur from liabilities arising out of or based upon any
alleged or untrue statement other than statements contained in
the registration statement, prospectus or approved sales
material of any Variable Contract.
In accordance with the requirements of the laws of the several
states, Broker-Dealer shall maintain complete records
indicating the manner and extent of distribution of any such
solicitation material, shall make such records and files
available to staff of Insurer or its designated agent in field
inspections and shall make such material available to
personnel of state insurance departments, the NASD or other
regulatory agencies, including the SEC, which have regulatory
authority over Insurer or General Distributor. Broker-Dealer
holds Insurer, General Distributor and their affiliates
harmless from any liability arising from the use of any
material which either (a) has not been specifically approved
in writing, or (b) although previously approved, has been
disapproved, in writing, for further use.
<PAGE>
(f) SECURING APPLICATIONS. All applications for Variable Contracts
shall be made on application forms supplied by Insurer and all
payments collected by Broker-Dealer or any Representative
thereof shall be remitted promptly in full, together with such
application forms and any other required documentation,
directly to Insurer at the address indicated on such
application or to such other address as Insurer may, from
time-to-time, designate in writing. Broker-Dealer shall review
all such applications for accuracy and completeness. Checks or
money orders in payment on any such Variable Contract shall be
drawn to the order of "ReliaStar Bankers Security Life
Insurance Company." All applications are subject to acceptance
or rejection by Insurer at its sole discretion. All records or
information obtained hereunder by Broker-Dealer shall not be
disclosed or used except as expressly authorized herein, and
Broker-Dealer will keep such records and information
confidential, to be disclosed only as authorized or if
expressly required by federal or state regulatory authorities.
(g) COLLECTION OF PURCHASE PAYMENTS. Broker-Dealer agrees that all
money or other consideration tendered with or in respect of
any application for a Variable Contract and the Variable
Contract when issued is the property of Insurer and shall be
promptly remitted in full to Insurer without deduction or
offset for any reason, including by way of example but not
limitation, any deduction or offset for compensation claimed
by Broker-Dealer.
(h) POLICY DELIVERY. Insurer will transmit Variable Contracts to
Broker-Dealer for delivery to Policyowners. Broker-Dealer
hereby agrees to deliver all such Variable Contracts to
Policyowners within ten (10) days of their receipt by
Broker-Dealer from Insurer. Broker-Dealer agrees to indemnify
and hold harmless Insurer for any and all losses caused by
Broker-Dealer's failure to perform the undertakings described
in this paragraph. Broker-Dealer hereby authorizes Insurer to
set off any amount it owes Insurer under this paragraph
against any and all amounts otherwise payable to Broker-Dealer
by Insurer.
(i) FIDELITY BOND. Broker-Dealer represents that all directors,
officers, employees and Representatives of Broker-Dealer who
are licensed pursuant to this Agreement as Insurer's agents
for state insurance law purposes or who have access to funds
of Insurer, including but not limited to funds submitted with
applications for the Variable Contracts or funds being
returned to owners, are and shall be covered by a blanket
fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond
<PAGE>
shall be maintained by Broker-Dealer at Broker-Dealer's
expense. Such bond shall be, at least, of the form, type and
amount required under the NASD Rules of Fair Practice. Insurer
may require evidence, satisfactory to it, that such coverage
is in force and Broker-Dealer shall give prompt written notice
to Insurer of any notice of cancellation or change of
coverage.
Broker-Dealer assigns any proceeds received from the fidelity
bonding company to Insurer to the extent of Insurer's loss due
to activities covered by the bond. If there is any deficiency
amount, whether due to a deductible or otherwise,
Broker-Dealer shall promptly pay Insurer such amount on demand
and Broker-Dealer hereby indemnifies and holds harmless
Insurer from any such deficiency and from the costs of
collection thereof (including reasonable attorneys' fees).
4. DUTIES OF AGENCY
(a) SUPERVISION OF AGENTS AND REPRESENTATIVES. Agency shall have
full responsibility for the training and supervision of all
Agents and Representatives who are engaged directly or
indirectly in the offer or sale of Traditional Life Insurance
Policies. Agency will cause the Agents and Representatives to
be trained in the sale of Traditional Life Insurance Policies,
will cause such Agents and Representatives to qualify under
applicable state insurance laws to engage in the sale of life
insurance before such Agents and Representatives engage in the
solicitation of applications for Traditional Life Insurance
Policies; and will cause such Agents and Representatives to
limit solicitation of applications for Traditional Life
Insurance Policies to jurisdictions where Insurer has
authorized such solicitation. Agency shall cause such Agents'
and Representatives' qualifications to be certified to the
satisfaction of Insurer and shall notify Insurer if any Agent
or Representative ceases to be an employee of Agency or ceases
to maintain the proper licensing required for the sale of
Traditional Life Insurance Policies. All parties shall be
liable for their own negligence and misconduct under this
paragraph.
(b) AGENT INSURANCE COMPLIANCE. Agency, prior to allowing Agents
or Representatives to solicit for sales or sell Traditional
Life Insurance Policies, shall require such agents to be
validly insurance licensed, registered and appointed by
Insurer as a life insurance agent in accordance with the
jurisdictional requirements of the place where the
solicitations and sales take place as well as the solicited
person's or entity's place of residence.
<PAGE>
Agency shall assist Insurer in the appointment of Agents and
Representatives under the applicable insurance laws to sell
Traditional Life Insurance Policies. Agency shall fulfill all
Insurer requirements in conjunction with the submission of
licensing/appointment papers for all applicants as insurance
agents of Insurer. All such licensing/appointment papers shall
be submitted to Insurer or its duly appointed agent by Agency.
Notwithstanding such submission, Insurer shall have sole
discretion to appoint, refuse to appoint, discontinue, or
terminate the appointment of any Agent or Representative as an
insurance agent of Insurer.
(c) SALES PROMOTION MATERIAL AND ADVERTISING. Agency shall be
provided, without any expense to Agency, such sales promotion
and advertising materials as Insurer determines is necessary
or desirable for use in connection with sales of Traditional
Life Insurance Policies.
NO SALES PROMOTION MATERIALS OR ANY ADVERTISING RELATING TO
TRADITIONAL LIFE INSURANCE POLICIES, INCLUDING WITHOUT
LIMITATION GENERIC ADVERTISING MATERIAL WHICH DOES NOT REFER
TO INSURER BY NAME, SHALL BE USED BY AGENCY UNLESS THE
SPECIFIC ITEM HAS BEEN APPROVED IN WRITING BY INSURER PRIOR TO
SUCH USE.
In addition, Agency shall not print, publish or distribute any
advertisement, circular or any document relating to Insurer
unless such advertisement, circular or document shall have
been approved in writing by Insurer prior to such use.
Upon termination of this Agreement, all sales promotion
material, advertising, circulars, documents and software
relating to the sales of Traditional Life Insurance Policies
shall be promptly turned over to Insurer free from any claim
or retention of rights by the Agency.
In accordance with the requirements of the laws of the several
states, Agency shall maintain complete records indicating the
manner and extent of distribution of any such solicitation
material, shall make such records and files available to staff
of Insurer or its designated agent in field inspections and
shall make such material available to personnel of state
insurance departments other regulatory agencies which have
regulatory authority over Insurer. Agency holds Insurer and
its affiliates harmless from any liability arising from the
use of any material which either (a) has not been specifically
approved in writing,
<PAGE>
or (b) although previously approved, has been disapproved, in
writing, for further use.
(d) SECURING APPLICATIONS. All applications for Traditional Life
Insurance Policies shall be made on application forms supplied
by Insurer and all payments collected by Agency or any Agent,
Broker-Dealer or any Representative thereof shall be remitted
promptly in full, together with such application forms and any
other required documentation, directly to Insurer at the
address indicated on such application or to such other address
as Insurer may, from time-to-time, designate in writing.
Agency shall review all such applications for accuracy and
completeness. Checks or money orders in payment on any such
Traditional Life Insurance Policy shall be drawn to the order
of ReliaStar Bankers Security Life Insurance Company." All
applications are subject to acceptance or rejection by Insurer
at its sole discretion. All records or information obtained
hereunder by Agency shall not be disclosed or used except as
expressly authorized herein, and Agency will keep such records
and information confidential, to be disclosed only as
authorized or if expressly required by federal or state
regulatory authorities.
(e) COLLECTION OF PURCHASE PAYMENTS. Agency agrees that all money
or other consideration tendered with or in respect of any
application for a Traditional Life Insurance Policy and the
Traditional Life Insurance Policy when issued is the property
of Insurer and shall be promptly remitted in full to Insurer
without deduction or offset for any reason, including by way
of example but not limitation, any deduction or offset for
compensation claimed by Agency.
(f) POLICY DELIVERY. Insurer may, upon written request of Agency,
transmit Traditional Life Insurance Policies to Agency or
Broker-Dealer for delivery to Policyowners. Agency and
Broker-Dealer hereby agree to deliver all such Traditional
Life Insurance Policies to Policyowners within ten (10) days
of their receipt by Agency or Broker-Dealer from Insurer.
Agency and Broker-Dealer agree to indemnify and hold harmless
Insurer for any and all losses caused by Agency's or
Broker-Dealer's failure to perform the undertakings described
in this paragraph. Agency and Broker-Dealer hereby authorize
Insurer to set off any amount it owes Insurer under this
paragraph against any and all amounts otherwise payable to
Agency or Broker-Dealer by Insurer.
<PAGE>
5. COMPENSATION
(a) VARIABLE CONTRACTS. Insurer, on behalf of General Distributor,
shall pay a dealer concession to Broker-Dealer on all sales of
Variable Contracts through such Representatives, in accordance
with the form of Compensation Schedule A attached hereto,
which is in effect when purchase payment on such Variable
Contracts are received by Insurer. Dealer concessions will be
paid as a percentage of premiums received in cash or other
legal tender and accepted by Insurer on applications obtained
by Broker-Dealer's Representatives unless otherwise indicated
in Compensation Schedule A. Upon termination of this
Agreement, all compensation payable hereunder shall cease;
however, Broker-Dealer shall continue to be liable for any
chargebacks or for any other amounts advanced by or otherwise
due Insurer hereunder.
Insurer will pay all such Compensation to and in the name of
Broker-Dealer. Broker-Dealer agrees to hold Insurer and
General Distributor harmless from all claims of its
Representatives for compensation in respect of such
Representative's sales of Variable Contracts.
(b) TRADITIONAL LIFE INSURANCE POLICIES. Insurer shall pay
commissions to Broker-Dealer on all sales of Traditional Life
Insurance Policies through Agents and Representatives in
accordance with the form of Compensation Schedule A attached
hereto, which is in effect when purchase payments on such
Traditional Life Insurance Policies are received by Insurer.
Commissions will be paid as a percentage of premiums received
in cash or other legal tender and accepted by insurer on
applications obtained by Agency's Agents or Broker-Dealer's
Representatives unless otherwise indicated in Compensation
Schedule A. Upon termination of this Agreement, all
compensation payable hereunder shall cease; however,
Broker-Dealer shall continue to be liable for any chargebacks
or for any other amounts advanced by or otherwise due Insurer
hereunder.
Insurer will pay all such Compensation to and in the name of
Broker-Dealer. Agency hereby assigns to Broker-Dealer all
compensation which would otherwise be paid to Agency in
respect of Representative's and Agent's sales of Traditional
Life Insurance Policies. Agency agrees to hold Insurer
harmless from all claims Agents or Representatives have for
compensation in respect of Agent's or Representative's sales
of Traditional Life Insurance Policies.
<PAGE>
(c) COMMISSION STATEMENTS. Broker-Dealer will be provided with
copies of its Representatives' commission statements together
with Broker-Dealer's own commission statements for each
commission payment period in which commissions are payable.
Broker-Dealer agrees that, except as to clerical errors and
material undisclosed facts, if any, such statements
constitutes a complete and accurate statement of the
commission account unless written notice is provided to
Insurer within 120 days after the date of the statement, which
notice specifically sets forth the objections or exceptions
thereto.
(d) COMPENSATION SCHEDULES. The initial Compensation Schedule A is
attached.
Insurer and General Distributor reserve the right to change,
amend, or cancel any Compensation Schedule as to business
produced after such change by mailing notice of such change in
the form of a new Compensation Schedule to Broker-Dealer. Such
change shall be effective, unless otherwise specified, ten
(10) days after the notice is mailed.
(e) RIGHTS OF REJECTION AND SETTLEMENT. Insurer reserves the right
to reject any and all applications and collections submitted,
to discontinue writing any form of policy, to take possession
of and cancel any policy and return the premium or any part of
it, and to make any compromise settlement in respect of a
policy. Broker-Dealer will not be entitled to receive or
retain any compensation on premiums or parts of premiums
Insurer does not receive and retain because of such rejection,
discontinuance, cancellation, or compromise settlement. If
compensation has been paid to which Broker-Dealer is not
entitled, any amount credited will be charged back, and if the
account balance is insufficient to cover the credited amount,
Broker-Dealer as applicable agrees to promptly repay the
credited amount.
6. TERMINATION
This Agreement may be terminated, without cause, by any party upon
thirty (30) days prior written notice; and may be terminated, for
failure to perform satisfactorily or other cause, by any party
immediately; and shall be terminated if Broker-Dealer ceases to be
registered as a Broker-Dealer under the Securities Exchange Act of 1934
and a member of the NASD or, if Agency ceases to maintain its insurance
agent license(s) in good standing in the jurisdictions in which it
conducts business.
<PAGE>
7. ARBITRATION
Any dispute, claim or controversy arising out of or in connection with
this Agreement shall be submitted to arbitration pursuant to the NASD's
arbitration facilities. If the subject matter of the dispute, claim or
controversy is not within the scope of matters which may arbitrated
through the NASD arbitration facilities, then such dispute, claim or
controversy shall, upon the written request of any party, be submitted
to three arbitrators, one to be chosen by each party, and the third by
the two so chosen. If either party refuses or neglects to appoint an
arbitrator within thirty (30) days after the receipt of the written
notice from the other party requesting it to do so, the requesting
party may appoint two arbitrators. If the two arbitrators fail to agree
in the selection of a third arbitrator within thirty (30) days of their
appointment, each of them shall name two, of whom the other shall
decline one and the decision shall be made by drawing lots. All
arbitrators shall be active or retired executive officers of insurance
companies not under the control of any party to this Agreement. Each
party shall submit its case to the arbitrators within thirty (30) days
of the appointment of the third arbitrator. The arbitration shall be
held in Minneapolis, Minnesota at the times agreed upon by the
arbitrators. The decision in writing of any two arbitrators, when filed
with the parties hereto shall be final and binding on both parties.
Judgment may be entered upon the final decision of the arbitrators in
any court having jurisdiction. Each party shall bear the expense of its
own arbitrator and shall jointly and equally bear with the other party
the expense of the third arbitrator and of the arbitration.
8. GENERAL PROVISIONS
(a) ADDITIONS, AMENDMENTS, MODIFICATIONS & WAIVERS. This Agreement
shall not be effective until approved by Insurer and General
Distributor. Insurer and General Distributor reserve the right
to amend this Agreement at any time, and the submission of an
application by either Broker-Dealer or Agency after notice of
any such amendment has been sent shall constitute
Broker-Dealer's or Agency's, as applicable, agreement to any
such amendment. No additions, amendments or modifications of
this Agreement or any waiver of any provision will be valid
unless approved, in writing, by one of Insurer's duly
authorized officers. In addition, no approved waiver of any
default, or failure of performance by Broker-Dealer or Agency
will affect Insurer's or General Distributor's rights with
respect to any later default or failure of performance.
<PAGE>
(b) INDEPENDENT CONTRACTOR RELATIONSHIP. This Agreement does not
create the relationship of employer and employee between the
parties to this Agreement. Insurer and General Distributor are
independent contractors with respect to Broker-Dealer, its
Representatives, Agency and its Agents.
(c) ASSIGNMENTS. Neither Broker-Dealer nor Agency will assign or
transfer, either wholly or partially, this Agreement or any of
the benefits accrued or to accrue under it, without the
written prior consent of a duly authorized officer of the
Insurer and General Distributor.
(d) SERVICE OF PROCESS. If Broker-Dealer or Agency receives or is
served with any notice or other paper concerning any legal
action against Insurer or General Distributor, Broker-Dealer
or Agency agrees to notify Insurer immediately (in any event
not later than the first business day after receipt) by
telephone and transmit any papers that are served or received
by facsimile to (612) 342-7531 and by overnight mail to
Insurer's Office of General Counsel.
(e) SEVERABILITY. It is understood and agreed by the parties to
this Agreement that if any part, term or provision of this
Agreement is held to be invalid or in conflict with any law or
regulation, the validity of the remaining portions or
provisions will not be affected, and the parties' rights and
obligations will be construed and enforced as if this
Agreement did not contain the particular part, term or
provision held to be invalid.
(f) GOVERNING LAW. It is agreed by the parties to this Agreement
that the Agreement and all of its provisions will be governed
by the laws of the State of Minnesota.
(g) LIMITATIONS. No party other than Insurer shall have the
authority on behalf of Insurer to make, alter, or discharge
any policy, contract, or certificate issued by insurer, to
waive any forfeiture or to grant, permit, nor extend the time
for making any payments nor to guarantee earnings or rates,
nor to alter the forms which Insurer may prescribe or
substitute other forms in place of those prescribed by
Insurer, nor to enter into any proceeding in a court of law or
before a regulatory agency in the name of or on behalf of
Insurer, nor to open any bank account in the full legal name
of Insurer, any derivation thereof or any tradename thereof.
<PAGE>
9. TERRITORY
Broker-Dealer's territory is limited geographically to those
jurisdictions in which the Variable Contracts may lawfully be offered,
provided that Broker-Dealer's right to solicit sales of and to sell the
Variable Contracts in such jurisdictions is not exclusive.
Agency's territory is limited geographically to those jurisdictions in
which the Traditional Life Insurance policies may be lawfully be
offered, provided that Agency's and Broker-Dealer's right to solicit
sales of and to sell the Traditional Life Insurance Policies in such
territory is not exclusive.
10. EFFECTIVE DATE
This Agreement shall be effective ________________, 199__.
IN WITNESS WHEREOF, we set our hands this ____ day of
_________________, 199__.
INSURER:
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
By: _____________________________
Title: _____________________________
GENERAL DISTRIBUTOR:
WASHINGTON SQUARE SECURITIES, INC.
By: _____________________________
Title: _____________________________
<PAGE>
BROKER-DEALER:
____________________________________
By: _____________________________
Title: _____________________________
AGENCY:
____________________________________
By: _____________________________
Title: _____________________________
<PAGE>
"C"
BROKER-DEALER AGENCY SELLING AGREEMENT
FOR VARIABLE CONTRACTS
This Agreement is made among the following three parties:
1. RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
Woodbury, New York 11797
a New York domiciled stock life insurance company
(hereinafter "INSURER"); and,
2. WASHINGTON SQUARE SECURITIES, INC.
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
an affiliate of Insurer, registered as a broker-dealer with
the Securities and Exchange Commission ("SEC") and a member of
the National Association of Securities Dealers, Inc. ("NASD")
(hereinafter "GENERAL DISTRIBUTOR"); and,
3. ______________________________
______________________________
Street
______________________________
City State ZIP
registered as a broker-dealer with the SEC and a member of the
NASD and licensed as an insurance agency (hereinafter
"BROKER-DEALER").
RECITALS:
WHEREAS, Broker-Dealer is licensed as an insurance agency in order to
satisfy state insurance law requirements with respect to the sale of variable
insurance products which are registered securities with the SEC.
WHEREAS, the parties wish to enter into an agreement for the
distribution of Variable Contracts by Broker-Dealer; and
WHEREAS, Insurer has appointed General Distributor as principal
underwriter and distributor (as those terms are defined by the Investment
Company Act of 1940) of the Variable Contracts and has authorized General
Distributor to enter into selling agreements with registered broker-dealers for
the solicitation and sale of Variable Contracts; and,
<PAGE>
WHEREAS, Insurer and General Distributor propose to have
Broker-Dealer's registered representatives who are licensed as life
insurance/variable contract agents in appropriate jurisdictions
("Representatives") solicit and sell Variable Contracts and,
WHEREAS, Insurer and General Distributor propose to have Broker-Dealer
provide certain supervisory and administrative services as hereinafter described
with respect to the solicitation and sales of Variable Contracts.
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties now agree as follows:
1. VARIABLE CONTRACTS
In this Agreement, the words "Variable Contract" shall mean those variable life
insurance policies and variable annuity contracts identified in Section 1 of the
Compensation Schedule attached hereto, and as may hereafter be amended.
Insurer may in its sole discretion and without notice to Broker-Dealer, suspend
sales of any Variable Contracts or amend any policies or contracts evidencing
such Variable Contracts if, in Insurer's opinion, such suspension or amendment
is: (1) necessary for compliance with federal, state, or local laws,
regulations, or administrative order(s); or, (2) necessary to prevent
administrative or financial hardship to Insurer. In all other situations,
Insurer shall provide 30 days notice to Broker-Dealer prior to suspending sales
of any Variable Contracts or amending any policies or contracts evidencing such
Variable Contracts.
Insurer may issue and propose additional or successor products, in which event
Broker-Dealer will be informed of the product and its related Commission
Schedule. If Broker-Dealer does not agree to distribute such product(s), it must
notify Insurer in writing within 30 days of receipt of the Commission Schedule
for such product(s). If Broker-Dealer does not indicate disapproval of the new
product(s) or the terms contained in the related Commission Schedule,
Broker-Dealer will be deemed to have thereby agreed to distribute such
product(s) and agreed to the related Commission Schedule which shall be attached
to and made a part of this Agreement.
2. AGENCY APPOINTMENT
On the effective date, Insurer and General Distributor appoint
Broker-Dealer and Broker-Dealer accepts the appointment to solicit sales of and
to sell Variable Contracts, pursuant to the terms of this Agreement.
<PAGE>
3. DUTIES OF BROKER-DEALER
(a) SUPERVISION OF REPRESENTATIVES. Broker-Dealer shall have full
responsibility for the training and supervision of all
Representatives who are engaged directly or indirectly in the
offer or sale of the Variable Contracts, and all such persons
shall be subject to the control of Broker-Dealer with respect
to such persons' securities regulated activities in connection
with the Variable Contracts. Broker-Dealer will cause the
Representatives to be trained in the sale of the Variable
Contracts, will cause such Representatives to qualify under
applicable federal and state laws to engage in the sale of the
Variable Contracts; will cause such Representatives to be
registered representatives of Broker-Dealer before such
Representatives engage in the solicitation of applications for
the Variable Contracts; and will cause such Representatives to
limit solicitation of applications for the Variable Contracts
to jurisdictions where Insurer has authorized such
solicitation. Broker-Dealer shall cause such Representatives'
qualifications to be certified to the satisfaction of General
Distributor and shall notify General Distributor if any
Representative ceases to be a registered representative of
Broker-Dealer or ceases to maintain the proper licensing
required for the sale of the Variable Contracts. All parties
shall be liable for their own negligence and misconduct under
this paragraph.
(b) REPRESENTATIVES INSURANCE COMPLIANCE. Broker-Dealer, prior to
allowing its Representatives to solicit for sales or sell the
Variable Contracts, shall require such representatives to be
validly insurance licensed, registered and appointed by
Insurer as a variable contract/life insurance agent in
accordance with the jurisdictional requirements of the place
where the solicitations and sales take place as well as the
solicited person's or entity's place of residence.
Broker-Dealer shall assist Insurer in the appointment of
Representatives under the applicable insurance laws to sell
Variable Contracts. Broker-Dealer shall fulfill all Insurer
requirements in conjunction with the submission of
licensing/appointment papers for all applicants as insurance
agents of Insurer. All such licensing/appointment papers shall
be submitted to Insurer or its designee by Broker-Dealer.
Notwithstanding such submission, Insurer shall have sole
discretion to appoint, refuse to appoint, discontinue, or
terminate the appointment of any Representative as an
insurance agent of Insurer.
<PAGE>
(c) COMPLIANCE WITH NASD RULES OF FAIR PRACTICE AND FEDERAL AND
STATE SECURITIES LAWS. Broker-Dealer shall fully comply with
the requirements of the National Association of Securities
Dealers, Inc., the Securities Exchange Act of 1934 and all
other applicable federal and state laws. In addition,
Broker-Dealer will establish and maintain such rules and
procedures as may be necessary to cause diligent supervision
of the securities activities of the Representatives as
required by applicable law or regulation. Upon request by
General Distributor, Broker-Dealer shall furnish such records
as may be necessary to establish such diligent supervision.
(d) NOTICE OF REPRESENTATIVE'S NONCOMPLIANCE. In the event a
Representative fails or refuses to submit to supervision of
Broker-Dealer or otherwise fails to meet the rules and
standards imposed by Broker-Dealer on its Representatives,
Broker-Dealer shall advise General Distributor of this fact
and shall immediately notify such Representative that he or
she is no longer authorized to sell the Variable Contracts and
Broker-Dealer shall take whatever additional action may be
necessary to terminate the sales activities of such
Representative relating to such contracts and policies.
(e) PROSPECTUSES, SALES PROMOTION MATERIAL AND ADVERTISING.
Broker-Dealer shall be provided, without any expense to
Broker-Dealer, with prospectuses relating to the Variable
Contracts and such other supplementary sales material as
General Distributor determines is necessary or desirable for
use in connection with sales of the Variable Contracts.
NO SALES PROMOTION MATERIALS OR ANY ADVERTISING RELATING TO
THE VARIABLE CONTRACTS, INCLUDING WITHOUT LIMITATION GENERIC
ADVERTISING MATERIAL WHICH DOES NOT REFER TO INSURER BY NAME,
SHALL BE USED BY BROKER-DEALER UNLESS THE SPECIFIC ITEM HAS
BEEN APPROVED IN WRITING BY GENERAL DISTRIBUTOR PRIOR TO SUCH
USE.
In addition, Broker-Dealer shall not print, publish or
distribute any advertisement, circular or any document
relating to Insurer unless such advertisement, circular or
document shall have been approved in writing by Insurer prior
to such use.
<PAGE>
Upon termination of this Agreement, all prospectuses, sales
promotion material, advertising, circulars, documents and
software relating to the sales of Insurer's contracts shall be
promptly turned over to Insurer free from any claim or
retention of rights by the Broker-Dealer.
Insurer represents that the prospectus and registration
statement relating to the Variable Contracts contain no untrue
statements of material fact or omission to state material
fact, the omission of which makes any statement contained in
the prospectus and registration statement misleading. Insurer
agrees to indemnify Broker-Dealer from and against any claims,
liabilities and expenses which may be incurred under the
Securities Act of 1933, the Investment Company Act of 1940,
common law or otherwise arising out of a breach of the
agreement in this paragraph.
Broker-Dealer agrees to hold harmless and indemnify Insurer
and General Distributor against any and all claims,
liabilities and expenses which Insurer or General Distributor
may incur from liabilities arising out of or based upon any
alleged or untrue statement other than statements contained in
the registration statement, prospectus or approved sales
material of any Variable Contract.
In accordance with the requirements of the laws of the several
states, Broker-Dealer shall maintain complete records
indicating the manner and extent of distribution of any such
solicitation material, shall make such records and files
available to staff of Insurer or its designated agent in field
inspections and shall make such material available to
personnel of state insurance departments, the NASD or other
regulatory agencies, including the SEC, which have regulatory
authority over Insurer or General Distributor. Broker-Dealer
holds Insurer, General Distributor and their affiliates
harmless from any liability arising from the use of any
material which either (a) has not been specifically approved
by Insurer in writing, or (b) although previously approved,
has been disapproved, in writing, for further use.
(f) SECURING APPLICATIONS. All applications for Variable Contracts
shall be made on application forms supplied by Insurer and all
payments collected by Broker-Dealer or any Representative
thereof shall be remitted promptly in full, together with such
application forms and any other required documentation,
directly to Insurer at the address indicated on such
application or to such other address as Insurer may, from
time-to-time, designate in writing. Broker-Dealer shall review
all such applications for accuracy and completeness. Checks or
money orders in payment on any such Variable Contract
<PAGE>
shall be drawn to the order of "ReliaStar Bankers Security
Life Insurance Company." All applications are subject to
acceptance or rejection by Insurer at its sole discretion. All
records or information obtained hereunder by Broker-Dealer
shall not be disclosed or used except as expressly authorized
herein, and Broker-Dealer will keep such records and
information confidential, to be disclosed only as authorized
or if expressly required by federal or state regulatory
authorities.
(g) COLLECTION OF PURCHASE PAYMENTS. Broker-Dealer agrees that all
money or other consideration tendered with or in respect of
any application for a Variable Contract and the Variable
Contract when issued is the property of Insurer and shall be
promptly remitted in full to Insurer without deduction or
offset for any reason, including by way of example but not
limitation, any deduction or offset for compensation claimed
by Broker-Dealer.
(h) POLICY DELIVERY. Insurer will transmit Variable Contracts to
Broker-Dealer for delivery to Policyowners. Broker-Dealer
hereby agrees to deliver all such Variable Contracts to
Policyowners within ten (10) days of their receipt by
Broker-Dealer from Insurer. Broker-Dealer agrees to indemnify
and hold harmless Insurer for any and all losses caused by
Broker-Dealer's failure to perform the undertakings described
in this paragraph. Broker-Dealer hereby authorizes Insurer to
set off any amount it owes Insurer under this paragraph
against any and all amounts otherwise payable to Broker-Dealer
by Insurer.
(i) FIDELITY BOND. Broker-Dealer represents that all directors,
officers, employees and Representatives of Broker-Dealer who
are licensed pursuant to this Agreement as Insurer's agents
for state insurance law purposes or who have access to funds
of Insurer, including but not limited to funds submitted with
applications for the Variable Contracts, or funds being
returned to owners, are and shall be covered by a blanket
fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond
shall be maintained by Broker-Dealer at Broker-Dealer's
expense. Such bond shall be, at least, of the form, type and
amount required under the NASD Rules of Fair Practice. Insurer
may require evidence, satisfactory to it, that such coverage
is in force and Broker-Dealer shall give prompt written notice
to Insurer of any notice of cancellation or change of
coverage.
Broker-Dealer assigns any proceeds received from the fidelity
bonding company to Insurer to the extent of Insurer's loss due
to activities covered by the bond. If there is any deficiency
amount,
<PAGE>
whether due to a deductible or otherwise, Broker-Dealer shall
promptly pay Insurer such amount on demand and Broker-Dealer
hereby indemnifies and holds harmless Insurer from any such
deficiency and from the costs of collection thereof (including
reasonable attorneys' fees).
4. COMPENSATION
(a) VARIABLE CONTRACTS. Insurer, on behalf of General Distributor,
shall pay a dealer concession to Broker-Dealer on all sales of
Variable Contracts through its Representatives, in accordance
with the form of the Compensation Schedule attached hereto,
which is in effect when purchase payment on such Variable
Contracts are received by Insurer. Dealer concessions will be
paid as a percentage of premiums received in cash or other
legal tender and accepted by Insurer on applications obtained
by Broker-Dealer's Representatives unless otherwise indicated
in Compensation Schedule A. Upon termination of this
Agreement, all compensation payable hereunder shall cease;
however, Broker-Dealer shall continue to be liable for any
chargebacks or for any other amounts advanced by or otherwise
due Insurer hereunder.
Insurer will pay all such Compensation to the Broker-Dealer.
Broker-Dealer agrees to hold Insurer and General Distributor
harmless from all claims of its Representatives for
compensation in respect of Representative's sales of Variable
Contracts.
(b) COMMISSION STATEMENTS. Broker-Dealer will be provided with
copies of its Representatives' commission statements together
with Broker-Dealer's own commission statement for each
commission payment period in which commissions are payable.
Broker-Dealer agrees that, except as to clerical errors and
material undisclosed facts, if any, such statements
constitutes a complete and accurate statement of the
commission account unless written notice is provided to
Insurer within 120 days after the date of the statement, which
notice specifically sets forth the objections or exceptions
thereto.
(c) COMPENSATION SCHEDULES. The initial Compensation Schedule is
attached. Insurer and General Distributor reserve the right to
change, amend, or cancel any Compensation Schedule as to
business produced after such change by mailing notice of such
change in the form of a new Compensation Schedule to
Broker-Dealer. Such change shall be effective, unless
otherwise specified, ten (10) days after the notice is mailed.
<PAGE>
(d) RIGHTS OF REJECTION AND SETTLEMENT. Insurer reserves the right
to reject any and all applications and collections submitted,
to discontinue writing any form of policy, to take possession
of and cancel any policy and return the premium or any part of
it, and to make any compromise settlement in respect of a
policy. Broker-Dealer will not be entitled to receive or
retain any compensation on premiums or parts of premiums
Insurer does not receive and retain because of such rejection,
discontinuance, cancellation, or compromise settlement. If
compensation has been paid to which Broker-Dealer is not
entitled, any amount credited will be charged back, and if the
account balance is insufficient to cover the credited amount,
Broker-Dealer as applicable agrees to promptly repay the
credited amount.
5. TERMINATION
This Agreement may be terminated, without cause, by any party upon thirty (30)
days prior written notice; and may be terminated, for failure to perform
satisfactorily or other cause, by any party immediately; and shall be terminated
if Broker-Dealer ceases to be registered as a Broker-Dealer under the Securities
Exchange Act of 1934 and a member of the NASD or, if Broker-Dealer ceases to
maintain its insurance agent license(s) in good standing in the jurisdictions in
which it conducts business.
6. ARBITRATION
Any dispute, claim or controversy arising out of or in connection with this
Agreement shall be submitted to arbitration pursuant to the NASD's arbitration
facilities. If the subject matter of the dispute, claim or controversy is not
within the scope of matters which may arbitrated through the NASD arbitration
facilities, then such dispute, claim or controversy shall, upon the written
request of any party, be submitted to three arbitrators, one to be chosen by
each party, and the third by the two so chosen. If either party refuses or
neglects to appoint an arbitrator within thirty (30) days after the receipt of
the written notice from the other party requesting it to do so, the requesting
party may appoint two arbitrators. If the two arbitrators fail to agree in the
selection of a third arbitrator within thirty (30) days of their appointment,
each of them shall name two, of whom the other shall decline one and the
decision shall be made by drawing lots. All arbitrators shall be active or
retired executive officers of insurance companies not under the control of any
party to this Agreement. Each party shall submit its case to the arbitrators
within thirty (30) days of the appointment of the third arbitrator. The
arbitration shall be held in Minneapolis, Minnesota at the times agreed upon by
the arbitrators. The decision in writing of any two arbitrators, when filed with
the parties hereto shall be final and binding on both parties. Judgment may be
entered upon the final decision of the arbitrators in
<PAGE>
any court having jurisdiction. Each party shall bear the expense of its own
arbitrator and shall jointly and equally bear with the other party the expense
of the third arbitrator and of the arbitration.
7. GENERAL PROVISIONS
(a) ADDITIONS, AMENDMENTS, MODIFICATIONS & WAIVERS. This Agreement
shall not be effective until approved by Insurer and General
Distributor. Insurer and General Distributor reserve the right
to amend this Agreement at any time, and the submission of an
application for the purchase of a Variable Contract by
Broker-Dealer after notice of any such amendment has been sent
shall constitute Broker-Dealer's agreement to any such
amendment. No additions, amendments or modifications of this
Agreement or any waiver of any provision will be valid unless
approved, in writing, by one of Insurer's duly authorized
officers. In addition, no approved waiver of any default, or
failure of performance by Broker-Dealer will affect Insurer's
or General Distributor's rights with respect to any later
default or failure of performance.
(b) INDEPENDENT CONTRACTOR RELATIONSHIP. This Agreement does not
create the relationship of employer and employee between the
parties to this Agreement. Insurer and General Distributor are
independent contractors with respect to Broker-Dealer and its
Representatives.
(c) ASSIGNMENTS. Broker-Dealer will not assign or transfer, either
wholly or partially, this Agreement or any of the benefits
accrued or to accrue under it, without the written prior
consent of a duly authorized officer of the Insurer and
General Distributor.
(d) SERVICE OF PROCESS. If Broker-Dealer receives or is served
with any notice or other paper concerning any legal action
against Insurer or General Distributor, Broker-Dealer agrees
to notify Insurer immediately (in any event not later than the
first business day after receipt) by telephone and further
agrees to transmit any papers that are served or received by
facsimile to (612) 342-7531 and by overnight mail to Insurer's
Office of General Counsel.
(e) SEVERABILITY. It is understood and agreed by the parties to
this Agreement that if any part, term or provision of this
Agreement is held to be invalid or in conflict with any law or
regulation, the validity of the remaining portions or
provisions will not be affected, and the parties' rights and
obligations will be construed and enforced as if this
<PAGE>
Agreement did not contain the particular part, term or
provision held to be invalid.
(f) GOVERNING LAW. It is agreed by the parties to this Agreement
that the Agreement and all of its provisions will be governed
by the laws of the State of Minnesota.
(g) LIMITATIONS. No party other than Insurer shall have the
authority on behalf of Insurer to make, alter, or discharge
any policy, contract, or certificate issued by Insurer, to
waive any forfeiture or to grant, permit, nor extend the time
for making any payments nor to guarantee earnings or rates,
nor to alter the forms which Insurer may prescribe or
substitute other forms in place of those prescribed by
Insurer, nor to enter into any proceeding in a court of law or
before a regulatory agency in the name of or on behalf of
Insurer, nor to open any bank account in the full legal name
of Insurer, any derivation thereof or any tradename thereof.
8. TERRITORY
Broker-Dealer's territory is limited geographically to those jurisdictions in
which the Variable Contracts may lawfully be offered, provided that
Broker-Dealer's right to solicit sales of and to sell the Variable Contracts in
such jurisdictions is not exclusive.
9. EFFECTIVE DATE
This Agreement shall be effective ________________, 199__.
IN WITNESS WHEREOF, we set our hands this ____ day of
_________________, 199__.
INSURER:
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
By: _____________________________
Title: _____________________________
<PAGE>
GENERAL DISTRIBUTOR:
WASHINGTON SQUARE SECURITIES, INC.
By: _____________________________
Title: _____________________________
BROKER-DEALER:
______________________________
By: _____________________________
Title: _____________________________
<PAGE>
"D"
BROKER-DEALER AGENCY SELLING AGREEMENT
FOR VARIABLE CONTRACTS
This Agreement is made among the following four parties:
1. RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
Woodbury, New York 11797
a New York domiciled stock life insurance company
(hereinafter "INSURER"); and,
2. WASHINGTON SQUARE SECURITIES, INC.
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
an affiliate of Insurer, registered as a broker-dealer with
the Securities and Exchange Commission ("SEC") and a
member of the National Association of Securities Dealers, Inc.
("NASD") (hereinafter "GENERAL DISTRIBUTOR"); and,
3. ______________________________________
______________________________________
Street
______________________________________
City State ZIP
registered as a broker-dealer with the SEC and a member
of the NASD (hereinafter "BROKER-DEALER"); and,
4. ______________________________________
______________________________________
Street
______________________________________
City State ZIP
an affiliate of Broker-Dealer and a licensed insurance agency
(hereinafter "AGENCY").
RECITALS:
WHEREAS, Broker-Dealer has become affiliated with Agency in order to
satisfy state insurance law requirements with respect to the sale of variable
insurance products which are registered securities with the SEC.
<PAGE>
WHEREAS, the parties wish to enter into an agreement for the
distribution of Variable Contracts by Broker-Dealer and Agency; and
WHEREAS, Insurer has appointed General Distributor as principal
underwriter and distributor (as those terms are defined by the Investment
Company Act of 1940) of the Variable Contracts and has authorized General
Distributor to enter into selling agreements with registered broker-dealers for
the solicitation and sale of Variable Contracts; and,
WHEREAS, Insurer and General Distributor propose to have
Broker-Dealer's registered representatives who are affiliated with Agency and
who are licensed as life insurance/variable contract agents in appropriate
jurisdictions ("Representatives") solicit and sell Variable Contracts; and,
WHEREAS, Insurer and General Distributor propose to have Broker-Dealer
provide certain supervisory and administrative services as hereinafter described
with respect to the solicitation and sales of Variable Contracts; and,
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties now agree as follows:
1. VARIABLE CONTRACTS
In this Agreement, The words "Variable Contract" shall mean those variable life
insurance policies and variable annuity contracts identified in Section 1 of the
Compensation Schedule attached hereto, and as may hereafter be amended.
Insurer may in its sole discretion and without notice to Broker-Dealer, suspend
sales of any Variable Contracts or amend any policies or contracts evidencing
such Variable Contracts if, in Insurer's opinion, such suspension or amendment
is: (1) necessary for compliance with federal, state, or local laws,
regulations, or administrative order(s); or, (2) necessary to prevent
administrative or financial hardship to Insurer. In all other situations,
Insurer shall provide 30 days notice to Broker-Dealer prior to suspending sales
of any Variable Contracts or amending any policies or contracts evidencing such
Variable Contracts.
Insurer may issue and propose additional or successor products, in which event
Broker-Dealer will be informed of the product and its related Commission
Schedule. If Broker-Dealer does not agree to distribute such product (s), it
must notify Insurer in writing within 30 days of receipt of the Commission
Schedule for such product(s). If Broker-Dealer does not indicate disapproval of
the new product(s) or the terms contained in the related Commission Schedule,
Broker-Dealer will be deemed to have thereby agreed to distribute such
product(s) and
<PAGE>
agreed to the related Commission Schedule which shall be attached to and made a
part of this Agreement.
2. AGENCY APPOINTMENTS
On the effective date, Insurer and General Distributor appoint Broker-Dealer and
its affiliated Agency and Broker-Dealer and Agency accept the appointment to
solicit sales of and to sell Variable Contracts only, pursuant to the terms of
this Agreement.
3. DUTIES OF BROKER-DEALER
(a) SUPERVISION OF REPRESENTATIVES. Broker-Dealer shall have full
responsibility for the training and supervision of all
Representatives who are engaged directly or indirectly in the
offer or sale of the Variable Contracts, and all such persons
shall be subject to the control of Broker-Dealer with respect
to such persons' securities regulated activities in connection
with the Variable Contracts. Broker-Dealer will cause the
Representatives to be trained in the sale of the Variable
Contracts, will cause such Representatives to qualify under
applicable federal and state laws to engage in the sale of the
Variable Contracts; will cause such Representatives to be
registered representatives of Broker-Dealer before such
Representatives engage in the solicitation of applications for
the Variable Contracts; and will cause such Representatives to
limit solicitation of applications for the Variable Contracts
to jurisdictions where Insurer has authorized such
solicitation. Broker-Dealer shall cause such Representatives'
qualifications to be certified to the satisfaction of General
Distributor and shall notify General Distributor if any
Representative ceases to be a registered representative of
Broker-Dealer or ceases to maintain the proper licensing
required for the sale of the Variable Contracts. All parties
shall be liable for their own negligence and misconduct under
this paragraph.
(b) REPRESENTATIVES INSURANCE COMPLIANCE. Broker-Dealer, prior to
allowing its Representatives to solicit for sales or sell the
Variable Contracts, shall require such representatives to be
validly insurance licensed, registered and appointed by
Insurer as a variable contract agent in accordance with the
jurisdictional requirements of the place where the
solicitations and sales take place as well as the solicited
person's or entity's place of residence.
Broker-Dealer and Agency shall assist Insurer in the
appointment of Representatives under the applicable insurance
laws to sell the Variable Contracts. Broker-Dealer shall
fulfill all Insurer requirements
<PAGE>
in conjunction with the submission of licensing/appointment
papers for all applicants as insurance agents of Insurer. All
such licensing/appointment papers shall be submitted to
Insurer or its designee by Broker-Dealer. Notwithstanding such
submission, Insurer shall have sole discretion to appoint,
refuse to appoint, discontinue, or terminate the appointment
of any Representative as an insurance agent of Insurer.
(c) COMPLIANCE WITH NASD RULES OF FAIR PRACTICE AND FEDERAL AND
STATE SECURITIES LAWS. Broker-Dealer shall fully comply with
the requirements of the National Association of Securities
Dealers, Inc., the Securities Exchange Act of 1934 and all
other applicable federal and state laws. In addition,
Broker-Dealer will establish and maintain such rules and
procedures as may be necessary to cause diligent supervision
of the securities activities of the Representatives as
required by applicable law or regulation. Upon request by
General Distributor, Broker-Dealer shall furnish such records
as may be necessary to establish such diligent supervision.
(d) NOTICE OF REPRESENTATIVE'S NONCOMPLIANCE. In the event a
Representative fails or refuses to submit to supervision of
Broker-Dealer or otherwise fails to meet the rules and
standards imposed by Broker-Dealer on its Representatives,
Broker-Dealer shall advise General Distributor of this fact
and shall immediately notify such Representative that he or
she is no longer authorized to sell the Variable Contracts and
Broker-Dealer shall take whatever additional action may be
necessary to terminate the sales activities of such
Representative relating to the Variable Contracts.
(e) PROSPECTUSES, SALES PROMOTION MATERIAL AND ADVERTISING.
Broker-Dealer shall be provided, without any expense to
Broker-Dealer, with prospectuses relating to the Variable
Contracts and such other supplementary sales material as
General Distributor determines is necessary or desirable for
use in connection with sales of the Variable Contracts.
NO SALES PROMOTION MATERIALS OR ANY ADVERTISING RELATING TO
THE VARIABLE CONTRACTS, INCLUDING WITHOUT LIMITATION GENERIC
ADVERTISING MATERIAL WHICH DOES NOT REFER TO INSURER BY NAME,
SHALL BE USED BY BROKER-DEALER OR AGENCY UNLESS THE SPECIFIC
ITEM HAS BEEN APPROVED IN WRITING BY GENERAL DISTRIBUTOR PRIOR
TO SUCH USE.
<PAGE>
In addition, neither Broker-Dealer nor Agency shall print,
publish or distribute any advertisement, circular or any
document relating to Insurer unless such advertisement,
circular or document shall have been approved in writing by
Insurer prior to such use.
Upon termination of this Agreement, all prospectuses, sales
promotion material, advertising, circulars, documents and
software relating to the sales of the Variable Contracts shall
be promptly turned over to Insurer free from any claim or
retention of rights by the Broker-Dealer or Agency.
Insurer represents that the prospectus and registration
statement relating to the Variable Contracts contain no untrue
statements of material fact or omission to state material
fact, the omission of which makes any statement contained in
the prospectus and registration statement misleading. Insurer
agrees to indemnify Broker-Dealer from and against any claims,
liabilities and expenses which may be incurred under the
Securities Act of 1933, the Investment Company Act of 1940,
common law or otherwise arising out of a breach of the
agreement in this paragraph.
Broker-Dealer and Agency agree to hold harmless and indemnify
Insurer and General Distributor against any and all claims,
liabilities and expenses which Insurer or General Distributor
may incur from liabilities arising out of or based upon any
alleged or untrue statement other than statements contained in
the registration statement, prospectus or approved sales
material of any Variable Contract.
In accordance with the requirements of the laws of the several
states, Broker-Dealer and Agency shall maintain complete
records indicating the manner and extent of distribution of
any such solicitation material, shall make such records and
files available to staff of Insurer or its designated agent in
field inspections and shall make such material available to
personnel of state insurance departments, the NASD or other
regulatory agencies, including the SEC, which have regulatory
authority over Insurer or General Distributor. Broker-Dealer
and Agency, jointly and severally hold Insurer, General
Distributor and their affiliates harmless from any liability
arising from the use of any material which either (a) has not
been specifically approved in writing, or (b) although
previously approved, has been disapproved, in writing, for
further use.
<PAGE>
(f) SECURING APPLICATIONS. All applications for Variable Contracts
shall be made on application forms supplied by Insurer and all
payments collected by Broker-Dealer or any Representative
thereof shall be remitted promptly in full, together with such
application forms and any other required documentation,
directly to Insurer at the address indicated on such
application or to such other address as Insurer may, from
time-to-time, designate in writing. Broker-Dealer shall review
all such applications for accuracy and completeness. Checks or
money orders in payment on any such Variable Contract shall be
drawn to the order of "ReliaStar Bankers Security Life
Insurance Company." All applications are subject to acceptance
or rejection by Insurer at its sole discretion. All records or
information obtained hereunder by Broker-Dealer shall not be
disclosed or used except as expressly authorized herein, and
Broker-Dealer will keep such records and information
confidential, to be disclosed only as authorized or if
expressly required by federal or state regulatory authorities.
(g) COLLECTION OF PURCHASE PAYMENTS. Broker-Dealer agrees that all
money or other consideration tendered with or in respect of
any application for a Variable Contract and the Variable
Contract when issued is the property of Insurer and shall be
promptly remitted in full to Insurer without deduction or
offset for any reason, including by way of example but not
limitation, any deduction or offset for compensation claimed
by Broker-Dealer.
(h) POLICY DELIVERY. Insurer will transmit Variable Contracts to
Broker-Dealer for delivery to Policyowners. Broker-Dealer
hereby agrees to deliver all such Variable Contracts to
Policyowners within ten (10) days of their receipt by
Broker-Dealer from Insurer. Broker-Dealer agrees to indemnify
and hold harmless Insurer for any and all losses caused by
Broker-Dealer's failure to perform the undertakings described
in this paragraph. Broker-Dealer hereby authorizes Insurer to
set off any amount it owes Insurer under this paragraph
against any and all amounts otherwise payable to Broker-Dealer
by Insurer.
(i) FIDELITY BOND. Broker-Dealer represents that all directors,
officers, employees and Representatives of Broker-Dealer who
are licensed pursuant to this Agreement as Insurer's agents
for state insurance law purposes or who have access to funds
of Insurer, including but not limited to funds submitted with
applications for the Variable Contracts or funds being
returned to owners, are and shall be covered by a blanket
fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond
shall be maintained by Broker-Dealer at Broker-Dealer's
expense.
<PAGE>
Such bond shall be, at least, of the form, type and amount
required under the NASD Rules of Fair Practice. Insurer may
require evidence, satisfactory to it, that such coverage is in
force and Broker-Dealer shall give prompt written notice to
Insurer of any notice of cancellation or change of coverage.
Broker-Dealer assigns any proceeds received from the fidelity
bonding company to Insurer to the extent of Insurer's loss due
to activities covered by the bond. If there is any deficiency
amount, whether due to a deductible or otherwise,
Broker-Dealer shall promptly pay Insurer such amount on demand
and Broker-Dealer hereby indemnifies and holds harmless
Insurer from any such deficiency and from the costs of
collection thereof (including reasonable attorneys' fees).
4. COMPENSATION
(a) VARIABLE CONTRACTS. Insurer, on behalf of General Distributor,
shall pay a dealer concession to Broker-Dealer on all sales of
Variable Contracts through such Representatives, in accordance
with the form of the Compensation Schedule attached hereto,
which is in effect when purchase payment on such Variable
Contracts are received by Insurer. Dealer concessions will be
paid as a percentage of premiums received in cash or other
legal tender and accepted by Insurer on applications obtained
by Broker-Dealer's Representatives unless otherwise indicated
in Compensation Schedule A. Upon termination of this
Agreement, all compensation payable hereunder shall cease;
however, Broker-Dealer shall continue to be liable for any
chargebacks or for any other amounts advanced by or otherwise
due Insurer hereunder.
Insurer will pay all such Compensation to and in the name of
Broker-Dealer or its affiliated Agency. Broker-Dealer agrees
to hold Insurer and General Distributor harmless from all
claims of its Representatives for compensation in respect of
such Representative's sales of Variable Contracts.
(b) COMMISSION STATEMENTS. Broker-Dealer will be provided with
copies of its Representatives' commission statements together
with Broker-Dealer's own commission statements for each
commission payment period in which commissions are payable.
Broker-Dealer agrees that, except as to clerical errors and
material undisclosed facts, if any, such statements
constitutes a complete and accurate statement of the
commission account unless written notice is provided
<PAGE>
to Insurer within 120 days after the date of the statement,
which notice specifically sets forth the objections or
exceptions thereto.
(c) COMPENSATION SCHEDULES. The initial Compensation Schedule is
attached.
Insurer and General Distributor reserve the right to change,
amend, or cancel any Compensation Schedule as to business
produced after such change by mailing notice of such change in
the form of a new Compensation Schedule to Broker-Dealer. Such
change shall be effective, unless otherwise specified, ten
(10) days after the notice is mailed.
(d) RIGHTS OF REJECTION AND SETTLEMENT. Insurer reserves the right
to reject any and all applications and collections submitted,
to discontinue writing any form of policy, to take possession
of and cancel any policy and return the premium or any part of
it, and to make any compromise settlement in respect of a
policy. Broker-Dealer will not be entitled to receive or
retain any compensation on premiums or parts of premiums
Insurer does not receive and retain because of such rejection,
discontinuance, cancellation, or compromise settlement. If
compensation has been paid to which Broker-Dealer is not
entitled, any amount credited will be charged back, and if the
account balance is insufficient to cover the credited amount,
Broker-Dealer as applicable agrees to promptly repay the
credited amount.
5. TERMINATION
This Agreement may be terminated, without cause, by any party upon thirty (30)
days prior written notice; and may be terminated, for failure to perform
satisfactorily or other cause, by any party immediately; and shall be terminated
if Broker-Dealer ceases to be registered as a Broker-Dealer under the Securities
Exchange Act of 1934 and a member of the NASD or, if Agency ceases to maintain
its insurance agent license(s) in good standing in the jurisdictions in which it
conducts business.
6. ARBITRATION
Any dispute, claim or controversy arising out of or in connection with this
Agreement shall be submitted to arbitration pursuant to the NASD's arbitration
facilities. If the subject matter of the dispute, claim or controversy is not
within the scope of matters which may arbitrated through the NASD arbitration
facilities, then such dispute, claim or controversy shall, upon the written
request of any party, be submitted to three arbitrators, one to be chosen by
each party, and the
<PAGE>
third by the two so chosen. If either party refuses or neglects to appoint an
arbitrator within thirty (30) days after the receipt of the written notice from
the other party requesting it to do so, the requesting party may appoint two
arbitrators. If the two arbitrators fail to agree in the selection of a third
arbitrator within thirty (30) days of their appointment, each of them shall name
two, of whom the other shall decline one and the decision shall be made by
drawing lots. All arbitrators shall be active or retired executive officers of
insurance companies not under the control of any party to this Agreement. Each
party shall submit its case to the arbitrators within thirty (30) days of the
appointment of the third arbitrator. The arbitration shall be held in
Minneapolis, Minnesota at the times agreed upon by the arbitrators. The decision
in writing of any two arbitrators, when filed with the parties hereto shall be
final and binding on both parties. Judgment may be entered upon the final
decision of the arbitrators in any court having jurisdiction. Each party shall
bear the expense of its own arbitrator and shall jointly and equally bear with
the other party the expense of the third arbitrator and of the arbitration.
7. GENERAL PROVISIONS
(a) ADDITIONS, AMENDMENTS, MODIFICATIONS & WAIVERS. This Agreement
shall not be effective until approved by Insurer and General
Distributor. Insurer and General Distributor reserve the right
to amend this Agreement at any time, and the submission of an
application for the purchase of a Variable Contract by either
Broker-Dealer or Agency after notice of any such amendment has
been sent shall constitute Broker-Dealer's or Agency's, as
applicable, agreement to any such amendment. No additions,
amendments or modifications of this Agreement or any waiver of
any provision will be valid unless approved, in writing, by
one of Insurer's duly authorized officers. In addition, no
approved waiver of any default, or failure of performance by
Broker-Dealer or Agency will affect Insurer's or General
Distributor's rights with respect to any later default or
failure of performance.
(b) INDEPENDENT CONTRACTOR RELATIONSHIP. This Agreement does not
create the relationship of employer and employee between the
parties to this Agreement. Insurer and General Distributor are
independent contractors with respect to Broker-Dealer, its
Representatives, Agency and its Agents.
(c) ASSIGNMENTS. Neither Broker-Dealer nor Agency will assign or
transfer, either wholly or partially, this Agreement or any of
the benefits accrued or to accrue under it, without the
written prior consent of a duly authorized officer of the
Insurer and General Distributor.
<PAGE>
(d) SERVICE OF PROCESS. If Broker-Dealer or Agency receives or is
served with any notice or other paper concerning any legal
action against Insurer or General Distributor, Broker-Dealer
or Agency agrees to notify Insurer immediately (in any event
not later than the first business day after receipt) by
telephone and transmit any papers that are served or received
by facsimile to (612) 342-7531 and by overnight mail to
Insurer's Office of General Counsel.
(e) SEVERABILITY. It is understood and agreed by the parties to
this Agreement that if any part, term or provision of this
Agreement is held to be invalid or in conflict with any law or
regulation, the validity of the remaining portions or
provisions will not be affected, and the parties' rights and
obligations will be construed and enforced as if this
Agreement did not contain the particular part, term or
provision held to be invalid.
(f) GOVERNING LAW. It is agreed by the parties to this Agreement
that the Agreement and all of its provisions will be governed
by the laws of the State of Minnesota.
(g) LIMITATIONS. No party other than Insurer shall have the
authority on behalf of Insurer to make, alter, or discharge
any policy, contract, or certificate issued by insurer, to
waive any forfeiture or to grant, permit, nor extend the time
for making any payments nor to guarantee earnings or rates,
nor to alter the forms which Insurer may prescribe or
substitute other forms in place of those prescribed by
Insurer, nor to enter into any proceeding in a court of law or
before a regulatory agency in the name of or on behalf of
Insurer, nor to open any bank account in the full legal name
of Insurer, any derivation thereof or any tradename thereof.
8. TERRITORY
Broker-Dealer's territory is limited geographically to those jurisdictions in
which the Variable Contracts may lawfully be offered, provided that
Broker-Dealer's right to solicit sales of and to sell the Variable Contracts in
such jurisdictions is not exclusive.
9. EFFECTIVE DATE
This Agreement shall be effective ________________, 199__.
<PAGE>
IN WITNESS WHEREOF, we set our hands this ____ day of
_________________, 199__.
INSURER:
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
By: _____________________________
Title: _____________________________
GENERAL DISTRIBUTOR:
WASHINGTON SQUARE SECURITIES, INC.
By: _____________________________
Title: _____________________________
BROKER-DEALER:
________________________________________
By: _____________________________
Title: _____________________________
AGENCY:
________________________________________
By: ______________________________
Title: ______________________________
<PAGE>
SCHEDULE A
BROKER/DEALER AGENCY COMPENSATION SCHEDULE
FOR RELIASTAR BANKERS SECURITY VARIABLE CONTRACTS
EFFECTIVE_________________
I
This Compensation Schedule shall be used to determine compensation payable to
the Broker/Dealer under the Broker-Dealer Agency Selling Agreement for Variable
Contracts through Broker-Dealer from the Effective Date of this Schedule until
it is suspended, canceled, changed or replaced.
This Schedule is applicable to the following Variable Contracts:
1. FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY 85-251 AND STATE
EXCEPTIONS
Broker-Dealer shall be paid a total dealer concession according to the following
schedule:
Issue Ages 0 - 75
1st Year 96.00%
Excess Premium (1st Year) 5.00%
Basic Renewal and Lifetime Renewal
Commissions 5.00%
II
GENERAL RULES PERTAINING TO VARIABLE CONTRACTS
1. CHANGE OF DEALER AUTHORIZATION. No compensation of any kind shall be
payable in respect of Variable Contracts following Insurer's or General
Distributor's receipt of a change of dealer authorization applicable to
such Variable contract.
2. CHANGE IN REPRESENTATIVE'S STATUS. Broker-Dealer agrees that in the
event a Representative ceases to be an associated person of
Broker-Dealer or ceases to be validly licensed or registered, Broker-
Dealer
<PAGE>
shall not receive any compensation based on any Variable Contract, its
values or on premiums or purchase payments thereafter received by
ReliaStar Bankers Security Life Insurance Company and/or WSSI from such
former Representative's customers. Provided, however, if within 60 days
after such Representative ceases to be a representative of
Broker-Dealer, Broker-Dealer designates another registered
representative of Broker-Dealer to service the former Representative's
business, the compensation not paid shall be payable to Broker-Dealer.
If an assigned Representative's replacement is not designated within
such 60 day period, Broker-Dealer may not thereafter designate a
replacement Representative for such Variable contracts and shall not be
entitled to such compensation.
3. EXCLUSIVE COMPENSATION. Broker-Dealer agrees that no compensation of
any kind other than as described herein is payable by Insurer or
General Distributor in respect of Broker-Dealer's sales of Variable
Contracts.
4. VESTING. First year commissions and Basic Renewal commissions in
respect of Variable Contracts issued after the effective date and prior
to the termination date of Broker-Dealer's appointment are vested in
Broker-Dealer and will be paid to Broker-Dealer as and when the related
premium is received by the issuer and applied to the Variable Contract
issued, and provided, however, that no First Year commissions or Basic
Renewal Commissions (Policy years 2 through 10), including those on
cost of living or any other policy increases, will be paid after
Broker-Dealer's appointment has been terminated for more than ten
years.
5. REPLACEMENT BUSINESS. If any policy is issued to replace a policy
previously issued by Insurer or an affiliate, commissions will accrue
only if and to the extent that Insurer's established practices provide
for commissions on such replacements.
6. COMMISSIONS. Commissions shall accrue on Variable Contracts Issued as
and when premiums are received by Insurer and applied as premiums due
or payable on such policies, except as Insurer's practices may
otherwise provide.
7. CHARGE-BACKS. In any case, where Insurer has credited a commission to
Broker-Dealer on the basis of a premium on a Variable Contract issued
and the premium is returned to the purchaser Insurer will charge back
such commissions.
8. ADDITIONAL BENEFITS AND RIDERS. Commissions will be credited based on
premiums for additional benefits (for example, waiver of premium
<PAGE>
and term riders) added at issue of a policy at the same rate as applied
to the base policy premium.
FLEXIBLE PREMIUM
VARIABLE LIFE
INSURANCE POLICY
- -------------------------------------------------
Variable and/or Fixed
Accumulation Values
Flexible Premiums Payable to the
Insured's Age 95
Adjustable Face Amount
Death Benefit Guarantee
Death Benefit Options
Nonparticipating
- --------------------------------------------------
NOTICE
Right to Return Policy
Please read this policy carefully. If for any reason you do not want it, you may
return it for a refund of all premiums paid.
You must return this policy to us or your agent by midnight of the 20th day
after you receive it.
We will then consider this policy void from the start and refund to you all
premiums paid.
We will pay the proceeds according to the Death Benefits portion of the Summary
of Benefits on page 3, if we receive written proof that the insured died while
this policy was in force. This policy also provides other benefits and rights.
We issue this policy in consideration of the application and payment of the
initial premium.
THE AMOUNT OF THE PROCEEDS PAYABLE AT THE INSURED'S DEATH WILL BE AT LEAST EQUAL
TO THE FACE AMOUNT OF THE POLICY AS LONG AS THIS POLICY IS IN FORCE AND THERE IS
NO LOAN AMOUNT OR UNPAID MONTHLY DEDUCTIONS.
<PAGE>
THE PERIOD OF TIME THIS LIFE INSURANCE STAYS IN FORCE WILL VARY DEPENDING ON THE
INVESTMENT PERFORMANCE OF THE VARIABLE ACCOUNT, INTEREST CREDITED TO THE NET
PREMIUMS ALLOCATED TO THE FIXED ACCOUNT, THE AMOUNT OF PREMIUMS YOU PAY, ANY
PARTIAL WITHDRAWALS, LOANS, AND CHARGES MADE AGAINST THIS POLICY. IF YOU PAY
PREMIUMS SUFFICIENT TO MAINTAIN THE DEATH BENEFIT GUARANTEE, WE GUARANTEE THIS
POLICY WILL STAY IN FORCE DURING THE DEATH BENEFIT GUARANTEE PERIOD SHOWN ON THE
POLICY DATA PAGE.
THE VARIABLE ACCUMULATION VALUE WILL INCREASE OR DECREASE REFLECTING THE
INVESTMENT PERFORMANCE OF THE VARIABLE ACCOUNT.
[GRAPHICS OMITTED]
RELIASTAR BANKERS SECURITY
LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
P.O. Box 9004
Woodbury, New York 11797
Executed at our Home Office
- ----------------------------------------------------------
John H. Flittie President
- ----------------------------------------------------------
/s/ John H. Flittie
- ----------------------------------------------------------
Susan M. Bergen
- ----------------------------------------------------------
/s/ Susan M. Bergen
Page 1 85-251
INDEX PAGE
Accumulation Value............................................10
Age and Sex...................................................26
Allocation of Premiums........................................ 7
Amendment.....................................................28
Annual Statement..............................................27
Beneficiary...................................................20
Cash Surrender Value..........................................17
Cash Value....................................................17
Changes in Face Amount........................................ 6
Changes in Death Benefit Option............................... 7
<PAGE>
Claims........................................................29
Control of Policy.............................................20
Conversion Right..............................................26
Death Benefit................................................. 5
Definitions................................................... 3
Death Benefit Guarantee....................................... 8
Fixed Accumulation Value......................................10
General Provisions............................................24
Grace Period.................................................. 9
Incontestability..............................................26
Insured....................................................... 1
Monthly Deduction.............................................12
Net Premium................................................... 7
Nonforfeiture Provisions......................................14
Ownership.....................................................20
Partial Withdrawal............................................18
Payment of Proceeds...........................................25
Policy Data Page.............................................. A
Policy Loans..................................................18
Premiums...................................................... 7
Right to Return Policy........................................ 1
Reinstatement................................................. 9
Settlement Options............................................21
Suicide.......................................................26
Summary of Benefits........................................... 3
Termination...................................................26
Transfers.....................................................15
Variable Accumulation Value...................................10
Voting of Mutual Fund Shares..................................24
Additional benefits and restrictions, if any, are listed on the Policy
Data Page.
Page 2 5245
<TABLE>
<CAPTION>
POLICY DATA PAGE DATE PRINTED
POLICY NUMBER: S9-999-999 JANUARY 1, 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
POLICY INFORMATION OWNER John Doe
POLICY DATE January 1, 1997
ISSUE DATE January 1, 1997
EFFECTIVE DATE January 1, 1997
INSURED James Doe
SEX, ISSUE AGE Male, 40
RATE CLASS Nonsmoker
- -----------------------------------------------------------------------------------------------
DEATH BENEFITS INITIAL FACE AMOUNT $100,000
CURRENT FACE AMOUNT $100,000
<PAGE>
MINIMUM FACE AMOUNT $100,000
DEATH BENEFIT OPTION Level Amount Option
CORRIDOR PERCENTAGE TABLE
Attained Age Corridor Percent
0-40 250%
45 215
50 185
55 150
60 130
65 120
70 115
75-90 105
95+ 100
- -----------------------------------------------------------------------------------------------
PREMIUMS INITIAL PREMIUM $1,600.00
PLANNED PREMIUM
AMOUNT $1,600.00
FREQUENCY Annual
DEATH BENEFIT GUARANTEE PERIOD 25 Years
MINIMUM MONTHLY PREMIUM $129.55
PREMIUM ALLOCATION
Fixed Account xx% Neuberger&Berman AMT Limited
Alger American Growth Portfolio xx% Maturity Bond Portfolio xx%
Alger American MidCap Growth Portfolio xx% Neuberger&Berman AMT Partners
Alger American Small Capitalization Portfolio xx%
Portfolio xx% Northstar Growth Fund xx%
Fidelity VIP Equity-Income Portfolio xx% Northstar High Yield Bond Fund xx%
Fidelity VIP Growth Portfolio xx% Northstar Income and Growth Fund xx%
Fidelity VIP High Income Portfolio xx% Northstar International Value Fund xx%
Fidelity VIP Money Market Portfolio xx% Northstar Multi-Sector Bond Fund xx%
Fidelity VIP II Contrafund Portfolio xx% OCC Equity Portfolio xx%
Fidelity VIP II Index 500 Portfolio xx% OCC Global Equity Portfolio xx%
Fidelity VIP II Investment Grade Bond Portfolio xx% OCC Managed Portfolio xx%
Janus Aggressive Growth Portfolio xx% OCC Small Cap Portfolio xx%
Janus International Growth Portfolio xx% Putnam VT Diversified Income
Fund xx%
Janus Worldwide Growth Portfolio xx% Putnam VT Growth & Income Fund xx%
Putnam VT Voyager Fund xx%
Form Numbers:
A
POLICY DATA PAGE.. DATE PRINTED
POLICY NUMBER: S9-999-999 JANUARY 1, 1997
- -------------------------------------------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------------------------------------------
FIXED ACCOUNT INTEREST MINIMUM ANNUAL INTEREST RATE 4.00%
RATES LOAN INTEREST RATE 5.66% payable in advance
PREFERRED LOAN INTEREST RATE 3.85% payable in advance
- -------------------------------------------------------------------------------------------------------------------
DEDUCTIONS AND PREMIUM EXPENSE CHARGE
CHARGES PERCENT PREMIUM CHARGE 5.00%
MAXIMUM PREMIUM
PROCESSING CHARGE None
- -------------------------------------------------------------------------------------------------------------------
MONTHLY EXPENSE CHARGE
MAXIMUM MONTHLY
ADMINISTRATIVE CHARGE $10.00 per month
MONTHLY POLICY CHARGE None
MONTHLY AMOUNT CHARGE None
MAXIMUM MORTALITY AND
EXPENSE RISK CHARGE 0.90%
- -------------------------------------------------------------------------------------------------------------------
SERVICE FEES
MAXIMUM PER TRANSFER $25.00
MAXIMUM PER PARTIAL WITHDRAWAL $25.00
MAXIMUM PER ADDITIONAL STATEMENT $50.00
MAXIMUM PER PROJECTION REPORT $50.00
- -------------------------------------------------------------------------------------------------------------------
TABLE OF SURRENDER CHARGES
0 $1,830.00
1 $1,830.00 6 $1,647.00 11 $732.00
2 $1,830.00 7 $1,464.00 12 $549.00
3 $1,830.00 8 $1,281.00 13 $366.00
4 $1,830.00 9 $1,098.00 14 $183.00
5 $1,830.00 10 $915.00 15 $0.00
Surrender Charges grade uniformly by policy
month between the consecutive years shown
above.
- ------------------------------------------------------------------------------------------------------------------
NONFORFEITURE ITEMS MORTALITY 1980 Commissioner's Standard
Ordinary Mortality Table for
Nonsmokers, Age Last Birthday
GUARANTEED INTEREST RATE ON THE
FIXED ACCOUNT 4.00%
--------------------------------------------------------------------------
PERCENT OF PARTIAL WITHDRAWAL 0% in policy year 1;
20% per policy year in policy years
2-15;
100% thereafter
</TABLE>
IMPORTANT NOTICE: THE CASH VALUE WILL BE USED TO PURCHASE PAID-UP INSURANCE AT
THE INSURED'S AGE 95. ANY PAID-UP LIFE INSURANCE PURCHASED UNDER THE TERMS OF
THIS POLICY WILL NOT BE LARGER THAN THE SUM OF THE CASH VALUE OF THE PAID-UP
LIFE INSURANCE, PLUS THE DEATH BENEFIT OF THE POLICY, MINUS THE ACCUMULATION
VALUE OF THE POLICY. HOWEVER, IT IS POSSIBLE THAT COVERAGE WILL EXPIRE WHERE
EITHER NO PREMIUMS ARE PAID FOLLOWING THE INITIAL PREMIUM, OR SUBSEQUENT
PREMIUMS ARE INSUFFICIENT TO CONTINUE COVERAGE. THE PERIOD FOR WHICH THE POLICY
AND COVERAGE WILL CONTINUE IN FORCE WILL DEPEND ON: (1) THE AMOUNT,
<PAGE>
TIMING, AND FREQUENCY OF PREMIUM PAYMENTS; (2) CHANGES IN THE FACE AMOUNT AND
THE DEATH BENEFIT OPTION; (3) CHANGE IN INTEREST RATES CREDITED TO THE FIXED
ACCOUNT AND IN THE INVESTMENT PERFORMANCE OF THE SUB-ACCOUNTS; (4) CHANGES IN
THE MONTHLY COST OF INSURANCE DEDUCTIONS FROM THE ACCUMULATION VALUE OF THIS
POLICY AND ANY BENEFITS PROVIDED BY RIDERS TO THIS POLICY; AND (5) LOAN AND
PARTIAL WITHDRAWAL ACTIVITY.
B
<TABLE>
<CAPTION>
POLICY DATA PAGE DATE PRINTED
POLICY NUMBER: S9-999-999 JANUARY 1, 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
ADDITIONAL AMOUNTS ARE NOT GUARANTEED AND WE
HAVE THE RIGHT TO CHANGE THE AMOUNT OF
INTEREST CREDITED TO THE POLICY AND THE
AMOUNT OF COST OF INSURANCE OR OTHER EXPENSE
CHARGES DEDUCTED UNDER THE POLICY WHICH MAY
REQUIRE MORE PREMIUM TO BE PAID THAN WAS
ILLUSTRATED OR THE CASH VALUES MAY BE LESS
THAN THOSE ILLUSTRATED.
C
POLICY DATA PAGE DATE PRINTED
POLICY NUMBER: S9-999-999 JANUARY 1, 1997
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
ADDITIONAL BENEFITS The cost of the Rider Benefits is included in the
Monthly Deduction of the Policy
---------------------------------------- ------------------------------------------
ACCELERATED BENEFIT RIDER
---------------------------------------- ------------------------------------------
ACCIDENTAL DEATH BENEFIT RIDER
Rate Class Standard
Rating Factor 100%
Current ADB amount $5,000
Initial ADB amount $5,000
Cost of Rider's Benefits See Table of ADB Rates/$1,000.
Rider Effective Date January 1, 1997
Rider Issue Date January 1, 1997
Rider Expiry Date January 1, 2027
-----------------------------------------------------------------------------------
WAIVER OF MONTHLY DEDUCTION RIDER
Rate Class Standard
Rating Factor 100%
Cost of Rider's Benefits See Table of Waiver Rates.
Rider Effective Date January 1, 1997
Rider Issue Date January 1, 1997
Rider Expiry Date January 1, 2027
-----------------------------------------------------------------------------------
INSURED'S COST OF LIVING INCREASE RIDER
Rider Issue Date January 1, 1997
Insured's CPI Increase Base $100,000
<PAGE>
Rate Class Standard
Maximum Increase
Amount for the Insured $20,000
---------------------------------------- ------------------------------------------
ADDITIONAL INSURED RIDER
Additional Insured James Doe
Issue Age and Sex 40 Male
Rate Class Nonsmoker
Rating Factor 100%
AIR Face Amount $50,000
Monthly Guaranteed Cost
of Insurance Rate Per $1000
for Policy years 1-10 $0.23083
Rider Effective Date January 1, 1997
Rider Issue Date January 1, 1997
Rider Expiry Date January 1, 2007
---------------------------------------- ------------------------------------------
ADDITIONAL INSURED RIDER
Additional Insured Jane Doe
Issue Age and Sex 35 Female
Rate Class Nonsmoker
Rating Factor 100%
AIR Face Amount $50,000
Monthly Guaranteed Cost
of Insurance Rate Per $1000
for Policy years 1-10 $0.15750
Rider Effective Date January 1, 1997
Rider Issue Date January 1, 1997
Rider Expiry Date January 1, 2007
D
POLICY DATA PAGE DATE PRINTED
POLICY NUMBER: S9-999-999 JANUARY 1, 1997
- -------------------------------------------------------------------------------------------------------------------
---------------------------------------- ------------------------------------------
CHILDREN'S INSURANCE RIDER
CIR Face Amount $5,000 per child
Cost of Rider's Benefits $7.44 per $1,000 of Face Amount
Rider Effective Date January 1, 1997
Rider Issue Date January 1, 1997
Rider Expiry Date January 1, 2022
---------------------------------------- ------------------------------------------
E
</TABLE>
SUMMARY OF BENEFITS
LIVING BENEFITS
<PAGE>
While the insured is alive, subject to this policy's provisions, you may:
1.
Change the amount and frequency of your premium payments;
2.
Change the allocation of your premiums;
3.
Change the Face Amount;
4.
Change the Death Benefit Option;
5.
Make transfers between accounts;
6.
Surrender this policy for its Cash Surrender Value;
7.
Make a Partial Withdrawal;
8.
Take a Policy Loan;
9.
Assign this policy as collateral;
10.
Change the beneficiary;
11.
Transfer ownership; and
12.
Exercise any other rights this policy allows.
DEATH BENEFITS
At the insured's death, the proceeds payable include the Death Benefit then in
force:
Plus any additional amounts provided by rider;
<PAGE>
Plus a refund of any policy loan interest we have charged but not earned;
Minus any Loan Amount; and
Minus any unpaid Monthly Deductions.
THE CONTRACT
This policy is a legal contract. Read your policy carefully! You rely on us to
provide its benefits; we rely on you to pay its premiums. The entire contract is
this policy and all applications, Policy Data Pages, riders, and amendments
attached at time of issue or agreed upon later.
All statements made by or on behalf of anyone covered by this policy are
representations and not warranties. No statement can be used to cancel this
policy or can be used in our defense if we refuse to pay a claim, unless it is
found in an application, rider, or amendment.
CHANGES
Policy changes must be in writing and signed by our President or Secretary, or
one of our Vice Presidents or Assistant Secretaries. No agent or any other
person may alter or change the terms and conditions of this policy.
GENERAL DEFINITIONS
IN FORCE
This policy is in effect.
THE INSURED
The person upon whose life this policy is issued. The Policy Data Page lists the
insured.
PROCEEDS
The amount we pay when the insured dies or when this policy is surrendered.
WE, US, OUR
ReliaStar Bankers Security Life Insurance Company at our Home Office in
Woodbury, New York.
85-252 3
<PAGE>
WRITTEN, IN WRITING
A written request or notice, signed and dated, and received at our Home Office.
The form and content of the request or notice must be acceptable to us.
YOU, YOUR
The owner of this policy, as shown on the Policy Data Page, unless changed as
allowed in this policy. The insured owns this policy unless another owner is
named.
POLICY DEFINITIONS
ACCUMULATION UNIT
A unit of measure used to determine the Variable Accumulation Value.
ACCUMULATION VALUE
The total amount that this policy provides for investment at any time. The
Accumulation Value is the total of the Fixed Accumulation Value and the Variable
Accumulation Value.
AGE 65, 75, AND 95
The policy anniversary on or next following the insured's 65th, 75th, and 95th
birthdays, respectively.
CASH VALUE
The Accumulation Value minus any Surrender Charge.
CASH SURRENDER VALUE
The amount payable to you if you surrender this policy. It is the Cash Value
minus any Loan Amount and unpaid Monthly Deductions.
THE CODE
The Internal Revenue Code of 1986, as amended.
FACE AMOUNT
<PAGE>
The minimum Death Benefit payable as long as this policy is in force. The
initial Face Amount is shown on the Policy Data Page. You may change the Face
Amount as described in this policy.
FIXED ACCOUNT
All our assets other than those allocated to the Variable Account or any other
separate account. We have complete ownership and control of the assets in the
Fixed Account.
LOAN AMOUNT
The sum of all unpaid policy loans, including preferred loans.
MONTHLY ANNIVERSARY
Whenever your Monthly Anniversary falls on a date other than a Valuation Date,
the Monthly Anniversary will be the next Valuation Date. The first Monthly
Anniversary is on the Policy Date.
POLICY DATE
The Policy Date is shown on the Policy Data Page. We use the Policy Date to
determine policy years, policy months, Monthly Anniversaries, and policy
anniversaries.
5246 4
SUB-ACCOUNT
A subdivision of the Variable Account. Each Sub-account invests exclusively in
the shares of one of the mutual funds shown on the Policy Data Page, or added
later.
VALUATION DATE
The close of business each day that the New York Stock Exchange is open for
trading and valuations have not been suspended by the Securities and Exchange
Commission. We may also declare a Valuation Date on any other day on which there
is sufficient trading in the mutual funds' portfolio to materially affect the
Accumulation Unit Value in the corresponding Sub-account.
VALUATION PERIOD
The period of time between a Valuation Date and the next Valuation Date.
<PAGE>
VARIABLE ACCOUNT
ReliaStar Bankers Security Variable Life Separate Account I, a separate
investment account of ours. The Variable Account is used only to receive and
invest Net Premiums paid under our variable life insurance policies. The assets
of the Variable Account will be valued on each Valuation Date. We have complete
ownership and control of the assets in the Variable Account.
Assets of the Variable Account equal to its liabilities will not be charged with
liabilities arising out of any other business we conduct. However, we may
transfer any assets which exceed the liabilities of the Variable Account to our
Fixed Account.
The Variable Account is treated as a unit investment trust under federal
securities laws. It is registered with the Securities and Exchange Commission
according to the Investment Company Act of 1940. It was established under the
insurance laws of the State of New York. Any change in the investment policy of
the Variable Account must be approved by the Department of Insurance of the
State of New York according to the approval process on file with the State.
DEATH BENEFIT
This policy has two Death Benefit Options. The Death Benefit Option in effect on
the Policy Date is shown on the Policy Data Page. All values are determined as
of the Valuation Date on or next following the date of the insured's death. The
two Death Benefit Options are:
OPTION A (LEVEL AMOUNT OPTION) - The Death Benefit is the greater of:
1.
The Face Amount; or
2.
The Accumulation Value multiplied by the Corridor Percentage, according to the
insured's attained age, as shown on the Policy Data Page.
85-253 5
OPTION B (VARIABLE AMOUNT OPTION) - The Death Benefit is the greater of:
1.
The Face Amount plus the Accumulation Value; or
2.
<PAGE>
The Accumulation Value multiplied by the Corridor Percentage, according to the
insured's attained age, as shown on the Policy Data Page.
REQUESTED CHANGES IN FACE AMOUNT
After the first policy year, you may request an increase or decrease in your
Face Amount by notifying us in writing. Changes in Death Benefit Option also
change the Face Amount. (See Changes in Death Benefit Option.)
INCREASES
Increases in Face Amount must be at least $5,000. You cannot increase the Face
amount after the insured's Age 75.
We may require written proof that the insured is still insurable before making
an increase. An approved increase goes into effect on the Monthly Anniversary on
or next following the date of the approval.
DECREASES
You cannot decrease the Face Amount below the Minimum Face Amount shown on the
Policy Data Page. If, following a requested decrease in Face Amount, this Policy
would no longer qualify as life insurance under federal tax law, we will limit
the decrease to an amount that would maintain that qualification.
Changes go into effect on the Monthly Anniversary on or next following the date
we receive your request.
For the purpose of determining the cost of insurance when more than one Rate
Class applies to the current Face Amount, the Face Amount will be reduced in the
following order:
1.
The Face Amount provided by the most recent increase;
2.
The next most recent increases successively; and
3.
The initial Face Amount.
EFFECT OF REQUESTED CHANGES IN FACE AMOUNT
<PAGE>
A change in Face Amount will affect the Monthly Deduction because the cost of
insurance and the Monthly Expense Charge are based on the Face Amount. The cost
of certain rider benefits may also be affected.
If the Death Benefit Guarantee is in effect, we will calculate a new Minimum
Monthly Premium for the Death Benefit Guarantee from the effective date of the
change in Face Amount. Additional premium payments may be required to maintain
the Death Benefit Guarantee. A decrease in Face Amount will reduce the Minimum
Monthly Premium. We will send you a new Policy Data Page with the new Minimum
Monthly Premium.
An increase in Face Amount will increase Surrender Charges. We will send you a
new Policy Data Page showing the amount and duration of the new Surrender
Charges. Decreases in Face Amount do not reduce the Surrender Charge.
5247 6
CHANGES IN DEATH BENEFIT OPTION
You may request in writing to change the Death Benefit Option. A change in Death
Benefit Option will also change the Face Amount. If you change from Option A
(Level Amount Option) to Option B (Variable Amount Option), the Face Amount is
decreased by an amount equal to the Accumulation Value on the effective date of
the change. The change is effective on the Monthly Anniversary on or next
following the date we receive your request. You cannot change the Death Benefit
Option if the resulting Face Amount would fall below the Minimum Face Amount
shown on the Policy Data Page.
If you change from Option B (Variable Amount Option) to Option A (Level Amount
Option), the Face Amount is increased by an amount equal to the Accumulation
Value on the effective date of the change. The change is effective on the
Monthly Anniversary on or next following the date we receive your request. We do
not require proof of insurability for this increase.
A change in Face Amount due to a change in Death Benefit Option will affect the
Monthly Deduction because the cost of insurance and the Monthly Expense Charge
depend on the Face Amount. The cost of certain rider benefits may also be
affected.
The Surrender Charges will not be affected by a change in the Death Benefit
Option.
PREMIUMS
There is no insurance under this policy until the initial premium is paid. The
initial premium is shown on the Policy Data Page. All premiums are payable in
advance of the period to which they apply.
NET PREMIUM
<PAGE>
When you pay a premium, we deduct the Premium Expense Charge. The Premium
Expense Charge is equal to 1 plus 2 (1 + 2), where:
1.
Is the premium multiplied by the Percent of Premium Charge shown on the Policy
Data Page; and
2.
Is the Premium Processing Charge. The Premium Processing Charge is subject to
change, but will not exceed the Maximum Premium Processing Charge shown on the
Policy Data Page.
The amount remaining after we have deducted the Premium Expense Charge from a
premium is the Net Premium. The Net Premium is credited to the Fixed Account and
the Sub-accounts of the Variable Account according to your allocation.
The portion of the Net Premium allocated to the Fixed Account earns interest as
described in the Fixed Accumulation Value provision of the policy.
The portion of the Net Premium allocated to a Sub-account is invested at net
asset value in shares of a specified mutual fund. As of the Policy Date, the
mutual funds in which the Sub-accounts invest are listed on the Policy Data
Page. A Sub-account may be added later or deleted according to the "Substitution
of Mutual Fund Shares" provision of this policy.
ALLOCATION OF PREMIUMS
The initial allocation of premiums to the Fixed Account and the Sub-accounts of
the Variable Account is specified on the application for this policy, and is
shown on the Policy Data Page. You may change the allocation at any time by
notifying us in writing. Changes will not be effective until the date we receive
your notice, and will only affect premiums we receive on or after that date. You
may allocate 100% to any account or divide your allocation in whole percentage
points totaling 100%.
85-254 7
AMOUNT AND TIMING OF PREMIUM PAYMENTS
The amount and frequency of premium payments will affect the Accumulation Value,
the Cash Surrender Value, and how long the life insurance provided by this
policy will remain in force.
<PAGE>
After the initial premium you may determine the amount and timing of premium
payments, within the following restrictions
1.
We may require proof which satisfies us that the insured is still insurable if
any premium, planned or unscheduled, would increase the difference between the
Death Benefit and the Accumulation Value
2.
We reserve the right to refuse to accept any premium which would disqualify your
policy for favorable tax treatment under the Code. If premiums paid during any
Policy Year exceed the maximum permitted under the Code, we will return the
excess premiums with interest to you within 60 days after the end of the policy
year. However, you have the right to pay the premium required to keep this
policy in force to the end of the policy year;
3.
We may refuse to accept any premium less than $25; and
4.
We reserve the right to refuse any premium after the insured's Age 95.
You may pay premiums by sending them to the address shown below. Please include
your policy number. The current address for payment is:
ReliaStar Bankers Security Life Insurance Company
P.O. Box 802511
Chicago, Illinois 60680-2511
Upon request, we will send you a receipt signed by one of our officers.
PLANNED PERIODIC PREMIUMS
You may pay planned periodic premiums annually, semi-annually, quarterly, or, if
you choose, we can also deduct planned periodic premiums from your bank account
monthly. We will notify you of your planned periodic premium at least once a
year.
The amount and frequency of the initial planned periodic premiums are shown on
the Policy Data Page. You may change the frequency and amount of planned
periodic premiums by notifying us in writing of the change. We reserve the right
to limit the amount of any increase in planned periodic premiums if such
increase would result in planned periodic premiums that are larger than either
of 1 or 2, where:
1.
<PAGE>
Is the maximum premium we would accept under the terms of the Amount and Timing
or Premium Payments provision; and
2.
Is a planned periodic premium which would total more than $50,000 per year.
We may send you periodic premium notices depending on the frequency and method
of premium payment you have chosen.
UNSCHEDULED ADDITIONAL PREMIUMS
Premiums, other than planned periodic premiums, may be paid at any time except
while this policy is in force as paid-up life insurance. We may limit the number
and amount of these additional payments. (See "Amount and Timing of Premium
Payments" above.)
DEATH BENEFIT GUARANTEE
The Death Benefit Guarantee Period is shown on the Policy Data Page and begins
on the Policy Date. The Death Benefit Guarantee is in effect during the Death
Benefit Guarantee Period if, on each Monthly Anniversary since the Policy Date,
1 is equal to or greater than 2, where:
1.
Is the sum of all premiums paid minus any partial withdrawals and any Loan
Amount; and
2.
Is the sum of Minimum Monthly Premiums since the Policy Date, including the
Minimum Monthly Premium for the current Monthly Anniversary.
5248 8
DEATH BENEFIT GUARANTEE
If the Death Benefit Guarantee is in effect, we guarantee that we will not lapse
your policy, even if the Cash Surrender Value is not sufficient to pay the
Monthly Deduction that is due. Although we determine each month whether or not
you have made sufficient premium payments to maintain the Death Benefit
Guarantee, you do not have to pay premiums monthly.
If, on any Monthly Anniversary you have not made sufficient premium payments to
maintain the Death Benefit Guarantee, we will send you notice of the required
payment. If we do not receive the required payment within 61 days following the
date we mail you written notice, the Death Benefit Guarantee is no longer in
effect and cannot be reinstated.
<PAGE>
POLICY CHANGES AFFECTING THE MINIMUM MONTHLY PREMIUM
The Minimum Monthly Premium may be affected by requested changes in Face Amount,
changes in the Death Benefit Option, and may also be changed when a rider is
added or terminated. The new Minimum Monthly Premium will be shown on a new
Policy Data Page and applies from the date of the change.
GRACE PERIOD AND POLICY LAPSE
If on any Monthly Anniversary the Death Benefit Guarantee is not in effect and
the Cash Surrender Value is less than the Monthly Deduction due, within 30 days
we will send you written notice of the payment required to keep this policy in
force.
If we do not receive sufficient premium from you within 61 days from the date we
send written notice to you, this policy will lapse. Sufficient premium is any
premium such that the Net Premium is larger than the sum of 1 + 2, where:
1.
Is the amount by which the Accumulation Value is less than the Surrender Charge
as of the beginning of the grace period; and
2.
Is the sum of past due Monthly Deductions.
The grace period begins on the date we send you written notice of the required
payment.
If the insured dies during the grace period, we deduct any Loan Amount and any
unpaid Monthly Deductions from the proceeds.
If the Death Benefit Guarantee is in effect, we will not lapse the policy.
REINSTATEMENT
Reinstatement means putting a lapsed policy back in force. You may reinstate
this policy by written request any time within five years after it has lapsed,
unless you surrendered this policy for its Cash Surrender Value.
This policy will be reinstated only as of a Monthly Anniversary. To reinstate
this policy and any riders you must:
1.
Submit proof which satisfies us that all insureds are still insurable; and
<PAGE>
2.
Pay a premium large enough such that the Net Premium is as large as the sum of
the Surrender Charge after reinstatement, plus the Monthly Deductions for the
date of reinstatement and the following Monthly Anniversary.
The Surrender Charges after reinstatement will be those in effect on the date of
termination, reduced in the same proportion as the Accumulation Value on the
date of termination to the Surrender Charge on that date. The Surrender Charge
will not be less than zero.
The Accumulation Value on the date of reinstatement will be the amount provided
by the Net Premium paid to reinstate this policy. Subsequent Accumulation Values
will be calculated as shown in the Accumulation Value provision of this policy.
If you have met the above conditions and the insured dies before the Monthly
Anniversary on which the policy would be reinstated, we will pay the Death
Benefit as of that Monthly Anniversary.
The Death Benefit Guarantee cannot be reinstated.
85-255 9
ACCUMULATION VALUE
The Accumulation Value of this policy is equal to the sum of the Fixed
Accumulation Value plus the Variable Accumulation Value.
FiXED ACCUMULATION VALUE
The Fixed Accumulation Value on the Policy Date is your Net Premium credited to
the Fixed Account on that date minus the Monthly Deduction applicable to the
Fixed Accumulation Value for the first policy month.
After the Policy Date, the Fixed Accumulation Value is calculated as 1 + 2 + 3 +
4 - 5 - 6, where:
1.
Is the Fixed Accumulation Value on the preceding Monthly Anniversary, plus
interest from the Monthly Anniversary to the date of the calculation;
2.
Is the total of your Net Premiums credited to the Fixed Account since the
preceding Monthly Anniversary, plus interest from the date premiums are credited
to the date of the calculation;
<PAGE>
3.
Is the total of your transfers from the Variable Account to the Fixed Account
since the preceding Monthly Anniversary, plus interest from the date of transfer
to the date of the calculation;
4.
Is the total of your Loan Amount transferred from the Variable Account since the
preceding Monthly Anniversary;
5.
Is the total of your transfers to the Variable Account from the Fixed Account
since the preceding Monthly Anniversary, plus interest from the date of transfer
to the date of the calculation; and
6.
Is the total of your partial withdrawals from the Fixed Account since the
preceding Monthly Anniversary, plus interest from the date of withdrawal to the
date of the calculation.
If the date of the calculation is a Monthly Anniversary, we also reduce the
Fixed Accumulation Value by the applicable Monthly Deduction for the policy
month following the Monthly Anniversary.
INTEREST ON THE FIXED ACCUMULATION VALUE
The interest rate applied in the calculation of the Fixed Accumulation Value
will not be less than the Minimum Annual Interest Rate shown on the Policy Data
Page. This rate is an effective annual interest rate compounded yearly. Interest
in excess of the Minimum Annual Interest Rate may be applied in the calculation
of your Fixed Accumulation Value in a manner which our Board of Directors
determines. We will credit interest no less frequently than annually.
The interest rate applied to any portion of the Accumulation Value which
represents the Loan Amount may be less than the interest rate applied to the
rest of the Accumulation Value, but not less than the Minimum Annual Interest
Rate. Any interest is nonforfeitable, except as it is subject to the deductions
and charges, including surrender charges, stated elsewhere in this policy.
Interest credited on the loaned Accumulation Value is credited annually on the
Policy Anniversary to the Fixed Account and the Variable Account according to
your premium allocation.
VARIABLE ACCUMULATION VALUE
The Variable Accumulation Value is the total of your values in each Sub-account.
The value for each Sub-account is equal to 1 multiplied by 2, where:
<PAGE>
1.
Is your current number of Accumulation Units; and
2.
Is the current Unit Value.
The Variable Accumulation Value will vary from Valuation Date to Valuation Date
reflecting changes in 1 and 2 above.
5249 10
ACCUMULATION UNITS
When transactions are made which affect the Variable Accumulation Value, dollar
amounts are converted to Accumulation Units. The number of Accumulation Units
for a transaction is found by dividing the dollar amount of the transaction by
the current Unit Value.
The number of Accumulation Units for a Sub-account increases when:
1.
Net Premiums are credited to that Sub-account; or
2.
Transfers from the Fixed Account or other Sub-accounts are credited to that
Sub-account.
The number of Accumulation Units for a Sub-account decreases when:
1.
You take out a Policy Loan from that Sub-account;
2.
You take a partial withdrawal from that Sub-account;
3.
We take a portion of the Monthly Deduction from that sub-account; or
4.
Transfers are made from that Sub-account to the Fixed Account or other
Sub-accounts.
UNIT VALUE
<PAGE>
The Unit Value for a Sub-account on any Valuation Date is equal to the previous
Unit Value multiplied by the Net Investment Factor for that Sub-account for the
Valuation Period ending on that Valuation Date.
NET INVESTMENT FACTOR
The Net Investment Factor is a number that reflects charges to this policy and
the investment performance during a Valuation Period of the mutual fund in which
a Sub-account is invested. If the Net Investment Factor is greater than one, the
Unit Value is increased. If the Net Investment Factor is less than one, the Unit
Value is decreased. The Net Investment Factor for a Sub-account is determined by
dividing 1 by 2, ( 1 / 2 ), where:
1.
Is the result of:
a.
The net asset value per share of the mutual fund shares in which the Sub-account
invests, determined at the end of the current Valuation Period;
b.
Plus the per share amount of any dividend or capital gain distributions made on
the mutual fund shares in which the Sub-account invests during the current
Valuation Period; and
c.
Plus or minus a per share charge or credit for any taxes reserved for which we
determine to have resulted from the investment operations of the Sub-account and
to be applicable to this policy.
2.
Is the result of:
a.
The net asset value per share of the mutual fund shares held in the Sub-account,
determined at the end of the last prior Valuation Period; and
b.
Plus or minus a per share charge or credit for any taxes reserved for the last
prior Valuation Period which we determine to have resulted from the investment
operations of the Sub-account and to be applicable to this policy.
85-256 11
MONTHLY DEDUCTION
<PAGE>
The Monthly Deduction is a charge made monthly against the Accumulation Value.
The Monthly Deduction for a policy month will be calculated as 1, plus 2, plus
3, plus 4, plus 5 (1 + 2 + 3 + 4 + 5), where:
1.
Is the cost of any rider benefits, other than any Waiver of Monthly Deduction
rider, for the policy month;
2.
Is the cost of insurance for this policy for the policy month;
3.
Is the Monthly Expense Charge for the policy month;
4.
Is the Monthly Mortality and Expense Risk Charge for the policy month; and
5.
Is the cost of any Waiver of Monthly Deduction rider for the policy month.
The Monthly Deduction is deducted from the Fixed Accumulation Value and the
Variable Accumulation Value as of the Monthly Anniversary. The amount of the
Monthly Deduction we deduct from the Fixed Accumulation Value is 1 multiplied by
2 divided by 3,[((1 x 2) / ]3)), where:
1.
Is the cost of any rider benefits plus the cost of insurance for this policy
plus the Monthly Expense Charge, for the policy month;
2.
Is the Fixed Accumulation Value minus the Loan Amount; and
3.
Is the Accumulation Value minus the Loan Amount.
The remainder of the Monthly Deduction is deducted from the Variable
Accumulation Value. The portion of the Monthly Deduction we deduct from each
Sub-account of the Variable Accumulation Value is the amount of Monthly
Deduction deducted from the Variable Accumulation Value times the ratio of the
value of each Sub-account to the Variable Accumulation Value.
COST OF INSURANCE
<PAGE>
We determine the cost of insurance on a monthly basis. The cost of insurance for
a policy month is calculated as 1 multiplied by the result of 2 minus 3 (1 x (2
- - 3)), where:
1.
Is the cost of insurance rate as described in the Cost of Insurance Rates
provision of this policy;
2.
Is the Death Benefit at the beginning of the policy month, divided by 1.004074;
and
3.
Is the Accumulation Value immediately before the Monthly Deduction, minus the
cost of any rider benefits other than any Waiver of Monthly Deduction rider, for
the month.
The cost of insurance is determined separately for the Initial Face Amount and
any increases made later. If the Rate Class for the initial Face Amount is
different from that of an increase, the Accumulation Value used in 3 above will
be first considered a part of the initial Face Amount. If the Accumulation Value
on the Monthly Anniversary exceeds the initial Face Amount, it will be
considered to be part of any increase in the Face Amount in order of the
increases.
5250 12
COST OF INSURANCE RATES
The monthly cost of insurance rate for this policy is based on the insured's
sex, Issue Age, and Rate Class as shown on the Policy Data Page, and the policy
year. If your Death Benefit is a percentage of the accumulation value as
described under the definition of "Death Benefit" in Level Amount Option, item
2, or Variable Amount Option, item 2, the Rate Class with the most recent
effective date will apply. Issue Age means age last birthday on the effective
date of the coverage.
Except for Face Amounts in a rated Rate Class, the cost of insurance rates can
never be greater than those shown in the Table of Monthly Guaranteed Cost of
Insurance Rates. This table is based on the Commissioners Standard Ordinary
Mortality (CSO) Table shown on the Policy Data Page. For Face Amounts in a rated
Rate Class, the guaranteed cost of insurance rates are calculated by multiplying
the rates shown in the Table of Guaranteed Cost of Insurance Rates by the Rate
Class Rating Factor shown on the Policy Data Page. The rates may also be
increased by any extra cost of insurance shown on the Policy Data Page.
MONTHLY EXPENSE CHARGE
<PAGE>
The Monthly Expense Charge for a policy month will be calculated as 1, plus 2,
plus 3, plus 4 (1 + 2 + 3 + 4), where:
1.
Is the Monthly Administrative Charge. The Monthly Administrative Charge is
subject to change, but will not exceed the Maximum Monthly Administrative Charge
shown on the Policy Data Page. The Monthly Administrative Charge will not exceed
the product of $5.00 and the ratio (not to exceed 2.00) of a to b, where:
a.
Is the Consumer Price Index (for all urban households) for the preceding
September; and
b.
Is the Consumer Price Index for September 1985.
2.
Is the Death Benefit Guarantee Charge shown on the Policy Data Page;
3.
Is the Monthly Policy Charge. This charge and the Term during which it is
applied are shown on the Policy Data Page; and
4.
Is the Monthly Amount Charge. This charge is equal to the Monthly Amount Charge
per $1,000, as shown on the Policy Data Page, multiplied by the Face Amount
divided by $1,000. This charge applies to the Initial Face Amount and any
increases in Face Amount during the Term shown on the Policy Data Page. The Term
applies to the Initial Face Amount from the Policy Date and to any increases in
Face Amount from the Effective Date of that increase. Any change in Face Amount
due solely to a change of Death Benefit Option does not affect the charge.
85-257 13
MONTHLY MORTALITY AND EXPENSE RISK CHARGE
The Monthly Mortality and Expense Risk Charge for a policy month will be
calculated as 1 multiplied by 2, ( 1 x 2 ), where:
1.
Is the Mortality and Expense Risk Charge, which will not exceed the Maximum
Mortality and Expense Risk Charge shown on the Policy Data Page, divided by 12;
and
<PAGE>
2.
Is the Variable Accumulation Value before the Monthly Deduction, minus the
portion of the cost of any rider benefits other than any Waiver of Monthly
Deduction rider taken from the Variable Accumulation Value, minus the portion of
the Cost of Insurance taken from the Variable Accumulation Value, minus the
portion of the Monthly Expense Charge taken from the Variable Accumulation
Value.
ADJUSTMENTS TO POLICY COST FACTORS
Adjustments to the monthly cost of insurance rate and Monthly Administrative
Charge will be by Rate Class and based upon changes in future expectations for
mortality, persistency, interest, taxes, and expenses. Any changes to the
monthly cost of insurance rate or Monthly Administrative Charge will be made
only prospectively, based on future expectations, in accordance with procedures
and standards on file with the New York Insurance Department. Changes will not
be used to recoup past losses or distribute past gains. The experience
underlying the monthly cost of insurance rate will be reviewed at regular
intervals, no less often than every five years.
BASIS OF COMPUTATIONS
Where required, a detailed statement of the method of computation of cash values
under this policy has been filed with the insurance department of the state in
which this policy was delivered. Cash values under this policy are not less than
the minimums required by the state in which this policy was delivered.
NONFORFEITURE PROVISIONS
CONTINUATION OF INSURANCE
Even if you do not make additional premium payments your insurance coverage
under this policy, and any benefits provided by rider, will stay in force as
long as the Cash Surrender Value is large enough to cover the Monthly Deduction.
If the Cash Surrender Value is less than the Monthly Deduction due, we will use
the Cash Surrender Value to continue the insurance during the grace period.
PAID-UP LIFE INSURANCE
Any time before the insured's Age 95, you may use the Cash Surrender Value to
purchase single premium paid-up life insurance.
If the insured is living at Age 95, the Cash Surrender Value of the policy will
automatically be used to purchase single premium paid-up life insurance.
Any paid-up life insurance purchased under the terms of this policy will not be
larger than the sum of the Cash Value of the paid-up life insurance, plus the
Death Benefit of
<PAGE>
the policy, minus the Accumulation Value of the policy. Any Cash Surrender Value
not used to purchase paid-up life insurance will be paid to you in cash.
5251 14
We base the single premium for paid-up insurance on the insured's sex, age, and
rate class(es) at the time this option is exercised, and the single premium life
insurance rates in effect at that time. These rates may not exceed the net
single premium rates based on the Commissioners Standard Ordinary Mortality
(CSO) Table and the Nonforfeiture Interest Rate, both of which are shown on the
Policy Data Page. The Cash Value of the paid-up life insurance is also
calculated based on the CSO Table and Nonforfeiture Interest Rate.
To purchase paid-up life insurance, we transfer the Cash Surrender Value of this
policy to the Fixed Account. If this policy is in force as paid-up life
insurance:
1.
The Accumulation Value provision of this policy no longer applies;
2.
You cannot pay additional premiums;
3.
You cannot make partial withdrawals; and
4.
We do not make any further Monthly Deductions.
TRANSFERS
You may request in writing the transfer of all or part of your Accumulation
Value between the Fixed Account and the Sub-accounts of the Variable Account. We
only allow 12 transfers in a policy year without any charge. We consider all
transfers received in the same request and made on the same Valuation Date as
one transfer. We make a transfer on the first Valuation Date after we receive
your written request.
We do not make a charge for the first 12 transfers in a policy year. However, we
may make a charge for each transfer in excess of the first 12 transfers in a
policy year, but the charge may not exceed $25.00. All transfers are also
subject to any charges and conditions imposed by the mutual fund whose shares
are involved.
TRANSFERS FROM THE FIXED ACCOUNT
<PAGE>
To transfer all or part of your Fixed Accumulation Value, you must meet the
following conditions:
1.
The request to transfer must be postmarked no more than 30 days before the
policy anniversary, and no later than 30 days after the policy anniversary. Only
one transfer is allowed during this period;
2.
The Fixed Accumulation Value after the transfer must be at least equal to the
Loan Amount;
3.
No more than 50% of the Fixed Accumulation Value (minus any Loan Amount) may be
transferred unless the balance, after the transfer, would be less than $1,000.
If the balance would fall below $1,000, the full Fixed Accumulation Value (minus
any Loan Amount) may be transferred; and
4.
You must transfer at least $500, or the total Fixed Accumulation Value (minus
any Loan Amount) if less than $500.
85-264 15
TRANSFERS FROM A SUB-ACCOUNT
To transfer from a Sub-account, Accumulation Units are redeemed on the next
Valuation Date after we receive your request and their value is reinvested in
other Sub-accounts, or the Fixed Account, as directed in your request. We will
effect transfers and determine all values in connection with transfers at the
end of the Valuation Period during which we receive your request, except as
otherwise specified for the Dollar Cost Averaging or Portfolio Rebalancing
services. With respect to future Net Premium payments, however, your current
premium allocation will remain in effect unless you have requested the Portfolio
Rebalancing Service, or you are transferring all of the Variable Accumulation
Value from the Variable Account to the Fixed Account in exercise of conversion
rights.
DOLLAR COST AVERAGING SERVICE
You may request this service if your Face Amount is at least $100,000 and either
your Accumulation Value, less any Loan Amount, is at least $5,000 or your
initial premium is at least $5,000. If you request this service in writing, we
will make specific periodic transfers of a fixed dollar amount from any of the
<PAGE>
Sub-accounts to one or more of the Sub-accounts or to the Fixed Account. No
transfers from the Fixed Account are permitted under this service. Transfers of
this type may be made on a monthly, quarterly, semi-annual, or annual basis. We
make no guarantees that Dollar Cost Averaging will result in a profit or protect
against loss.
The Dollar Cost Averaging service will be discontinued immediately:
1.
If you make a written request to discontinue this service;
2.
On receipt of any request to begin a Portfolio Rebalancing service;
3.
If the policy is in the grace period on any date when Dollar Cost Averaging
transfers are scheduled;
4.
If the specified transfer amount from any Sub-account is more than the
Accumulation Value in that Sub-account; or
5.
Thirty-six months after the Dollar Cost Averaging start date.
We reserve the right to discontinue, modify, or suspend this service. Any such
modification or discontinuation would not affect any Dollar Cost Averaging
service requests already commenced.
PORTFOLIO REBALANCING SERVICE
You may request this service if your Face Amount is at least $200,000 and your
Accumulation Value, less any Loan Amount, is at least $10,000. If you request
this service in writing, we will make periodic transfers to maintain your
specified percentage allocation of Accumulation Value, less any loan Amount,
among the Sub-accounts of the Variable Account and the Fixed Account. Your
allocation of future Net Premium payments will also be changed to be equal to
this specified percentage allocation. Transfers made under this service may be
made on a quarterly, semi-annual, or annual basis.
The Portfolio Rebalancing service will be discontinued immediately:
1.
If you make a written requst to discontinue this service;
2.
<PAGE>
On receipt of any request to change the allocation of premiums to the Fixed
Account and Sub-account of the Variable Account;
5258 16
3.
On receipt of any request to begin a Dollar Cost Averaging service;
4.
On receipt of any request to transfer Accumulation Value among the Fixed Account
or Sub-accounts;
5.
If the policy is in the grace period; or
6.
The Accumulation Value, less any Loan Amount, is less than $7,500 on any
Valuation Date when Portfolio Rebalancing transfers are scheduled.
We reserve the right to discontinue, modify, or suspend this service. Any such
modification or discontinuation could affect Portfolio Rebalancing services
currently in effect, but only after 30 days notice to you.
CASH VALUE, CASH SURRENDER VALUE, TOTAL SURRENDER, AND PARTIAL WITHDRAWAL
BENEFITS
CASH VALUE
The Cash Value of this policy is the Accumulation Value minus any Surrender
Charge.
The Cash Value is never less than zero.
CASH SURRENDER VALUE
The Cash Surrender Value of this policy is the Cash Value minus the Loan Amount
and any unpaid Monthly Deductions.
SURRENDER CHARGE
We make a Surrender Charge if you surrender this policy or it lapses. The
Surrender Charge is the Maximum Surrender Charge minus the Premium Related
Surrender Charge Reduction. The Surrender Charge is not less than zero.
<PAGE>
INITIAL FACE AMOUNT
The Maximum Surrender Charge applicable to the Initial Fact Amount depends on
the Initial Face Amount and the insured's sex, Issue Age, and Rate Class. The
amount and duration of the Unadjusted Surrender Charge applicable to the Initial
Face Amount is shown on the Policy Data Page.
Whenever the total premiums paid are less than the Surrender Charge Whole Life
Premium shown on the Policy Data Page, the Surrender Charge applicable to the
Initial Face Amount will be reduced by the Premium Related Surrender Charge
Reduction. The Premium Related Surrender Charge Reduction is calculated as 1
multiplied by the result of 2 minus 3 (1 x (2 - 3)), where:
1.
Is the Surrender Charge Reduction Factor shown on the Policy Data Page;
2.
Is the Surrender Charge Whole Life Premium shown on the Policy Data Page; and
3.
Is the total premiums paid.
REQUESTED CHANGES IN FACE AMOUNT
Additional Surrender Charges will apply to any approved increase in Face Amount,
including Face Amount increases resulting from the Insured's Cost of Living
Rider, if included with the policy. The additional Surrender Charge depends on
the amount of the increase in Face Amount and the insured's sex, age, and Rate
Class on the effective date of the increase. We will send you written notice of
the amount and duration of the additional Surrender Charge. No Premium Related
Surrender Charge Reductions are made for additional Surrender Charges applicable
to increases in Face Amount.
If Surrender Charges are shown on an annual basis, they grade uniformly by
policy month between the consecutive years shown.
Any increases or decreases in Face Amount resulting from changes in the Death
Benefit Option, and any requested decreases in Face Amount, do not affect the
Surrender Charges.
85-258 17
<PAGE>
TOTAL SURRENDER
You may surrender this policy for its Cash Surrender Value by sending us a
written request.
PARTIAL WITHDRAWAL
After the first policy year, you may withdraw part of your Cash Surrender Value
by sending us a written request. The amount of any partial withdrawal must be at
least equal to $500.00. The maximum partial withdrawal equals the Cash Surrender
Value multiplied by the Percent of Partial Withdrawal shown on the Policy Data
Page. Only one partial withdrawal is allowed in any policy year. We may make a
charge for each partial withdrawal, but the charge will not exceed $25.00.
Unless you specify, we make partial withdrawals from the Fixed Accumulation
Value and the Variable Accumulation Value on a proportionate basis. For the
purpose of calculating the proportion, the Loan Amount is subtracted from the
Fixed Accumulation Value. We make partial withdrawals from a Sub-account by the
automatic surrender of Accumulation Units.
THE EFFECT OF PARTIAL WITHDRAWALS
The Accumulation Value will be reduced by the amount of any partial withdrawal.
The Death Benefit will also be reduced by the amount of the withdrawal, or, if
the Death Benefit is based on the corridor percentage of Accumulation Value, by
an amount equal to the corridor percentage times the amount of the withdrawal.
The Face Amount will be reduced by the amount of the partial withdrawal if
Option A (Level Amount Option) is in effect. We do not allow a withdrawal if the
Face Amount after a partial withdrawal would be less than the Minimum Face
Amount shown on the Policy Data Page. If more than one Premium Class applies to
the current Face Amount, for the purpose of determining the cost of insurance,
the Face Amount will be reduced in the following order:
1.
The Face Amount provided by the most recent increase;
2.
The next most recent increases successively; and
3.
The initial Face Amount.
If Death Benefit Option B (Variable Amount Option) is in effect, a partial
withdrawal does not affect the Face Amount.
<PAGE>
A partial withdrawal may cause the Death Benefit Guarantee to terminate. The
amount of the partial withdrawal is deducted from the total premium paid in
calculating whether sufficient premiums have been paid to maintain the Death
Benefit Guarantee.
POLICY LOANS
After the first policy year, if this policy has a Loan Value, you may take out a
loan from us by written request. We use this policy as security for the loan.
Each loan must be at least $500.
We will not lend you more than the Loan Value. The Loan Value is 1, minus 2, (1
- - 2), where:
1.
Is the Cash Value; and
2.
Is the existing Loan Amount.
When we make a policy loan, the amount of the policy loan will be segregated
within the Fixed Accumulation Value of your policy as security for the loan.
Unless you specify, amounts held as security for the loan will come from the
Fixed Accumulation Value and the Variable Accumulation Value on a proportionate
basis. For the purpose of determining the proportion, we subtract any existing
Loan Amount from the Fixed Accumulation Value.
Amounts equal to the portion of the policy loans coming from the Sub-accounts of
the Variable Account are transferred to the Fixed Account, reducing the Variable
Accumulation Value. These transfers are not treated as transfers for the purpose
of the transfer charge or the limit on the number of transfers in a policy year.
5252 18
EFFECT OF THE POLICY LOANS
If not repaid, we deduct any unpaid policy loans before paying the proceeds. If,
at any time, the Loan Amount exceeds the Cash Value the grace period goes into
effect and we may lapse this policy. A loan may cause the Death Benefit
Guarantee to terminate. The Loan Amount is deducted from the total premiums paid
in calculating whether you have paid premiums sufficient to maintain the Death
Benefit Guarantee.
LOAN INTEREST
<PAGE>
We charge interest on the Loan Amount at the Loan Interest Rate shown on the
Policy Data Page. After the tenth policy year, we charge interest at the
Preferred Loan Interest Rate shown on the Policy Data Page on the portion of
your Loan Amount that is not greater than the result of ( 1 - 2 + 3 ), where:
1.
Is the Accumulation Value;
2.
Is the sum of all premiums paid; and
3.
Is the sum of all partial withdrawals.
This result is called the Preferred Loan Amount.
The Preferred Loan Amount is calculated on the date of any loan and on each
policy anniversary thereafter. Policy loan repayments received will be applied
first to reduce the portion of your policy loan that is not the Preferred Loan
Amount, and then to reduce the Preferred Loan Amount.
On the date of any policy loan, interest is due in advance for the remainder of
the policy year. On each policy anniversary thereafter, interest is due in
advance for the next full policy year. Any unpaid interest is added to the Loan
Amount, and we charge interest on it. If, on any Monthly Anniversary, the Loan
Amount exceeds the Cash Value, we will notify you within 30 days. If we do not
receive sufficient payment within 61 days from the date we send notice to you,
the policy will lapse.
REPAYMENT
You may repay all or part of any policy loan during the insured's lifetime. If
not repaid during the insured's lifetime, we deduct the Loan Amount from the
proceeds. We generally consider any payment we receive, planned or unscheduled,
as a premium payment subject to a Premium Expense Charge. Therefore, when you
make a payment on a policy loan, to avoid a Premium Expense Charge, you must
tell us that you are making a loan repayment. We reserve the right to treat a
loan payment as a premium payment if doing so will:
1.
Prevent this policy from lapsing; or
2.
Prevent borrowing from this policy to pay premiums.
<PAGE>
Loan repayments reduce the Loan Amount. We will transfer from the Fixed Account
to each Sub-account of the Variable Account, 1 multplied by 2 ( 1 x 2 ), where:
1.
Is the amount of the loan repayment; and
2.
Is the current proportion used to allocate premiums to that Sub-account.
These transfers are not treated as transfers for the purpose of the transfer
charge or the limit on the number of transfers in a policy year.
DELAY OF PAYMENT ON SURRENDER, PARTIAL WITHDRAWALS AND LOANS
The amount surrendered, withdrawn, or loaned will normally be paid to you within
7 days of:
1.
Receipt of your written request; and
2.
Receipt of your policy, if required.
85-259 19
We may delay making the payment when we are not able to determine the Variable
Accumulation Value because:
1.
The New York Stock Exchange is closed for trading; or
2.
The Securities and Exchange Commission determines that a state of emergency
exists.
We have the right to delay making a surrender, partial withdrawal, or loan from
the Fixed Account for up to six months from the date we receive your request. If
we delay payment for 10 working days or more, we pay interest at the same rate
we are currently paying on proceeds at death from the date of the surrender,
partial withdrawal, or loan request to the date of payment.
BENEFICIARY
<PAGE>
The beneficiary is named to receive the proceeds to be paid at the insured's
death. You may name one or more beneficiaries on the application. Later, you may
name, add, or change beneficiaries by written request as described below. You
may also choose to name a beneficiary whom you cannot change without his or her
consent. This is an irrevocable beneficiary.
NAMING, ADDING, OR CHANGING BENEFICIARIES
You can name, add, or change beneficiaries by written request if all of these
are true:
1.
This policy is in force;
2.
The insured is alive; and
3.
We have the written consent of all irrevocable beneficiaries.
A change will take effect as of the date it is signed but will not affect any
payment we make or action we take before receiving your request.
PAYING PROCEEDS
We pay death proceeds in the following order:
1.
Collateral assignees, if any, have first priority;
2.
The beneficiary, if any, receives any proceeds that remain. If there is more
than one beneficiary, each receives an equal share, unless you have requested
another method in writing. Unless otherwise proviced, to receive proceeds, a
beneficiary must be living on the 10th day after the insured's death; then
3.
If there are no beneficiaries, you receive any proceeds that remain.
CONTROL OF POLICY
OWNERSHIP
As owner, you have the rights and duties outlined in this policy. However, we
need the written consent of all irrevocable beneficiaries and collateral
assignees, if you wish to:
<PAGE>
1.
Surrender this policy or make a partial withdrawal;
2.
Take out a policy loan;
3.
Change the policy to paid-up life insurance;
4.
Change the owner;
5.
Name or change a contingent owner;
6.
Add a Children's Insurance Rider;
7.
Add an Additional Insured Rider;
8.
Add a Term Insurance Rider;
9.
Change the Face Amount; or
10.
Change the Death Benefit Option.
5253 20
CONTROL OF POLICY
We need the written consent of all irrevocable beneficiaries, if you wish to:
1.
Change a beneficiary;
2.
Choose or change a Settlement Option; or
3.
Assign this policy or any of its benefits as collateral.
<PAGE>
Your rights, as outlined in this policy, end at the insured's death.
COLLATERAL ASSIGNMENT
You may assign the benefits of this policy as collateral for a debt. This limits
your rights to the Cash Surrender Value and the beneficiary's rights to the
proceeds. A collateral assignment does not change the owner.
A collateral assignee does not have ownership rights.
An assignment is not binding on us until we receive written notice of it. We
assume no responsibility as to the validity of any assignment. When we pay
proceeds, we may rely on what the collateral assignee states as the debt due.
CHANGING OWNERSHIP
You can change the owner of this policy by sending us a written request. This is
called an "absolute assignment." You transfer all your rights and duties as
owner to a new owner. The new owner can then make any change the policy allows.
You can also name a contingent owner who will own this policy at your death. You
may name, change, or withdraw a contingent owner by sending us a written
request.
An absolute assignment or contingent owner request:
1.
Does not change the coverage or the beneficiary;
2.
Applies only if we receive your request;
3.
Takes effect from the date signed;
4.
Does not affect any payment we make or action we take before receiving your
request; and
5.
Is not a collateral assignment.
SETTLEMENT OPTIONS
Settlement Options are ways of paying the proceeds of this policy. These options
apply to:
1.
<PAGE>
Payment of proceeds at death; and
2.
Proceeds payable upon full surrender of this policy for its Cash Surrender
Value.
Proceeds applied under a settlement option no longer earn interest at the rate
applied to the Fixed Account or participate in the investment experience of the
Variable Account.
CHOOSING OPTIONS
Settlement Options are chosen or withdrawn by making a written agreement with us
or by sending us written notice. Our approval is needed for an option to be
chosen or withdrawn. Before the insured's death, only you can choose or withdraw
an option. After the insured's death, a beneficiary may choose an option
depending on prior restrictions made by you or a collateral assignee. A change
of beneficiary or owner withdraws all chosen options; you must choose again any
options you want.
We issue a supplemental contract for proceeds applied under any option. We need
not accept an option where less than $2,500 will be applied for each payee. In
this case, we may pay a payee's proceeds in one sum. Under an installment
option, each payment must be at least $25. If needed, we may increase the time
between payments to three months, six months, or a year to make each payment at
least $25.
85-260 21
SETTLEMENT OPTIONS
PAYING PROCEEDS
We pay proceeds to a payee. A payee is one to whom we may pay part or all of the
proceeds or interest. The primary payee is the first person to whom benefits are
payable. If the primary payee dies before we have made all payments under
Options 2, 3, or 4, we pay the remaining payments to any contingent payee. We
pay the proceeds in one sum, unless one or more of the following options are
requested and we agree to it. We will also use any other method of payment that
is acceptable to you and to us.
Under Options 2, 3, 4, and 5, we pay the first installment as of the date we
issue a supplemental contract to pay the proceeds.
Under Option 6, we pay the first installment at the end of the interval it
applies to.
OPTION 1
<PAGE>
The proceeds are left with us to earn interest. The withdrawal rights, the
length of time we will hold the proceeds, and any future change of option are
subject to our approval. Interest is guaranteed to be at least 3.5% per year.
OPTION 2
We pay the proceeds with interest in equal installments for the amount you
choose at equal intervals until the proceeds and interest are all paid. The
interval you choose may be a month, 3 months, 6 months, or a year. The amount
chosen for each installment must be such that the total installments payable in
any 12 months is at least 7% of the total amount of the proceeds. The last
installment will be for the remaining proceeds and interest, and might not be
equal to the other installments. Interest is guaranteed to be at least 3.5% per
year.
OPTION 3
We pay the proceeds in equal installments at equal intervals for the number of
years you choose. The interval may be a month, three months, six months, or a
year. Use the Option 3 Table to determine the amount of each installment. If you
ask, we will tell you the payment amounts for numbers of years or intervals not
shown. The Option 3 Table is computed assuming 3.5% interest per year. Interest
is guaranteed to be at least 3.5% per year.
OPTION 3 TABLE
Number of Monthly Payments
Years Per $1000
of Proceeds
5 $18.12
10 $ 9.83
15 $ 7.10
20 $ 5.75
25 $ 4.96
OPTION 4
The proceeds are used to provide an annuity with 60, 120, 180, or 240 months
"certain". This means that we continue paying the primary payee, the first
person to whom benefits are payable, in equal monthly installments for as long
as the primary payee lives with a number of months "certain". "Certain" means
that we make payments for at least as long as the period you choose (either 60,
120, 180, or 240 months), no matter when the primary payee dies. If the primary
payee dies before the "certain" period ends, the remaining payments are payable
to the contingent payee.
<PAGE>
We compute the installments using the calendar year in which the proceeds are
applied and the payee's sex and age at that time. We require written proof of
the payee's sex and age. If you ask, we will tell you payment amounts for this
option. The amounts of the installments are computed using the 1983 Table a with
Projection Scale G and interest at 3.5% per year.
5254 22
OPTION 5
The proceeds are used to provide a "joint and two-thirds to survivor" life
income for two payees. We make monthly payments jointly to the two payees as
long as they both live. When one payee dies, the other receives two-thirds of
the amount of the joint monthly payment for life. Payments stop when both payees
have died. We compute the payment amounts using the calendar year in which the
proceeds are applied and the payees' sexes and ages when the proceeds are
applied. We require written proof of the payee's ages. If you ask, we will tell
you any of these amounts. The amounts of the monthly payments are computed using
the 1983 Table a with Projection Scale G and interest at 3.5% per year.
OPTION 6 (ANNUITY OPTION)
The proceeds are used to provide an annuity. Each annuity installment is 103% of
the payment that we would make if the payee had used the proceeds to buy a
similar, nonparticipating, single premium immediate annuity at our rates on the
date the proceeds are applied. We pay these installments at the end of the
interval to which they apply. We will not apply this option if a similar option
would be more favorable to the payee when proceeds are applied.
DEATH OF PAYEE
Unless we have agreed otherwise, if a payee dies after we have paid or credited
proceeds under Option 1, we will pay the proceeds and any unpaid interest in one
sum to the payee's estate. Unless we have agreed otherwise, if a payee dies
after we have paid or credited proceeds under Options 2, 3, or 4, we will pay
the remaining payments to any contingent payees. If there are no contingent
payees, we pay the following amounts to the primary payee's estate.
1.
Under Option 2, we will pay any unpaid sum left with us plus any unpaid interest
on that sum.
2.
<PAGE>
Under Option 3, we will pay the commuted value (based on interest at an
effective annual rate of 3-1/2%) of any unpaid installments.
3.
Under Option 4, we will pay the commuted value (based on interest at an
effective annual rate of 3-1/2%) of any unpaid installments remaining in the
"certain" period.
PROTECTION OF PROCEEDS
Unless we agree to it, a payee may not do any of the following:
1.
Withdraw any part of the proceeds or interest;
2.
Change the fixed payment intervals or the length of the payment period;
3.
Change the settlement option;
4.
Change the amount of payment;
5.
Surrender the supplemental contract for cash;
6.
Borrow against the supplemental contract; or
7.
Assign the supplemental contract.
If the payee chooses Options 1, 2, or 3, the payee may change the option and
transfer the funds that remain to a new option. This applies unless prevented by
a written agreement with us.
A payee's creditors may not claim any of the proceeds or interest. This
provision applies unless altered by federal or state law.
INTEREST ON SETTLEMENT OPTIONS
We base the interest rate for proceeds applied under Options 1 and 2 on the
interest rate we declare on funds that we consider to be in the same
classification based on the
<PAGE>
option, restrictions on withdrawal, and other factors. The interest rate will
never be less than an effective annual rate of 3-1/2%.
In determining amounts to be paid under Options 3 and 4, we assume interest at
an effective annual rate of 3-1/2%. Also, for Option 3 and "certain" periods
under Option 4, we credit any excess interest we may declare on funds that we
consider to be in the same classification based on the option, restrictions on
withdrawal, and other factors.
GENERAL PROVISIONS
VOTING OF MUTUAL FUND SHARES
While this policy is in force, you have the right to instruct us how to vote the
mutual fund shares attributable to this policy. All fund proxy material and
forms used to give voting instructions will be sent to persons having voting
interests.
We will vote the mutual fund shares held in Sub-accounts according to the
instructions received, as long as:
1.
The Variable Account is registered as a unit investment trust under the
Investment Company Act of 1940; and
2.
The assets of the Variable Account are allocated to Sub-accounts that are
invested in mutual funds shares.
We may vote the mutual fund shares held in the Sub-accounts at our discretion if
we determine that, because of applicable law or regulation, we do not have to
vote the mutual fund shares according to the voting instructions received.
If we do not receive timely voting instructions from you, we will vote the
applicable mutual fund shares in proportion to the instructions which are
received with respect to the other policies providing benefits related to the
applicable Sub-account.
The persons entitled to give voting instructions and the number of votes
affected by their instructions will be determined as of a record date selected
by us, not more than 90 days before the meeting of the applicable mutual fund.
This policy does not give you the right to vote at meetings of our stockholders
and/or policyholders.
5255 24
<PAGE>
SUBSTITUTION OF MUTUAL FUND SHARES
We reserve the right, if permitted by law and subject to the approval of the
Superintendent, to:
1.
Create new variable accounts;
2.
Combine variable accounts, including the ReliaStar Bankers Security Variable
Life Separate Account I;
3.
Remove, add, or combine Sub-accounts and make the new Sub-accounts available to
you at our discretion;
4.
Substitute shares of other investment funds or series thereof for those of the
investment funds and series made available under the policy;
5.
Transfer assets of the ReliaStar Bankers Security Variable Life Separate Account
I, which we determine to be associated with the class of contracts to which this
policy belongs, to another variable account. (If this type of transfer is made,
the term "ReliaStar Bankers Security Variable Life Separate Account I" as used
in this poicy will then mean the variable account to which the assets were
transferred.);
6.
Deregister the ReliaStar Bankers Security Variable Life Separate Account I under
the Investment Company Act of 1940 if registration is no longer required;
7.
Make any changes required by the Investment Company Act of 1940;
8.
Operate the ReliaStar Bankers Security Variable Life Separate Account I as a
managed company under the Investment Company Act of 1940 or any other form
permitted by law; and
9.
Restrict or eliminate any voting privileges you or other persons may have as to
the ReliaStar Bankers Security Variable Life Separate Account I.
<PAGE>
PAYMENT OF PROCEEDS
We pay all proceeds of this policy when we receive the policy and proof of
death. We make payments under Settlement Options 4, 5, and 6 only to a natural
person in that person's own right. We adjust the proceeds payable on the death
of the insured as follows:
1.
We refund any policy loan interest charged but not earned;
2.
We deduct any Loan Amount; and
3.
We deduct any unpaid Monthly Deductions due on or before the insured's death.
As of the date of death, the proceeds no longer earn interest at the rate
applied to the Fixed Account or participate in the investment experience of the
Variable Account. If payment is delayed more than 30 days, we pay interest on
the proceeds at death for the time between the insured's death and the earlier
of the following:
1.
The date we pay proceeds; or
2.
The date we issue a supplemental contract.
Interest on these funds will be the current interest rate being credited on the
interest only settlement option (Option 1), but it will never be less than an
effective annual rate of 3.5%.
BENEFITS AT AGE 95
If the insured is living at Age 95, the Cash Surrender Value will automatically
be used to purchase single premium paid-up insurance. Any paid-up life insurance
purchased under the terms of this policy will not be larger than the sum of the
Cash Value of the paid-up life insurance, plus the Death Beneift of the policy,
minus the Accumulation Value of the policy.
85-262 25
INCONTESTABILITY
<PAGE>
This policy has a two-year contestable period running from the Issue Date shown
on the Policy Data Page. During this period we could ask for information that
could lead us to contesting this policy or refusing to pay its benefits. After
this policy has been in force during the insured's lifetime for two years from
the Issue Date, we cannot claim your policy is void or refuse to pay any
proceeds unless the policy has lapsed.
If you make a Face Amount increase or premium payment which requires proof of
insurability, the corresponding Death Benefit increase has its own two-year
contestable period measured from the date of the increase in Death Benefit.
If this policy is reinstated, this provision will be measured from the date of
reinstatement.
AGE AND SEX
If the insured's age or sex is misstated, the Death Benefit will be the amount
that the most recent cost of insurance would purchase using the current cost of
insurance rate for the correct age and sex.
SUICIDE
If the insured commits suicide within two years of the Issue Date, we do not pay
the Death Benefit. Instead, we refund all premiums paid on this policy and any
attached riders, minus any Loan Amounts and partial withdrawals.
If you make a Face Amount increase or premium payment which requires proof of
insurability, the corresponding Death Benefit increase has its own two-year
suicide limitation for the proceeds associated with that increase. If the
insured commits suicide within two years of the effective date of the increase,
we pay the Death Benefit prior to the increase and refund the cost of insurance
for that increase.
TERMINATION
This policy terminates when any of the following occur:
1.
The required payment is not paid by the end of the grace period;
2.
The insured dies;
3.
The policy is surrendered for its full Cash Surrender Value; or
4.
<PAGE>
The policy is amended according to the Amendment provision of this policy and
you do not accept the amendment.
If we make a Monthly Deduction from the Accumulation Value after this policy
terminates, the deduction is not considered a reinstatement of the policy or a
waiver of the termination.
CONVERSION RIGHT
During the first two policy years and the first 24 months following the
effective date of an increase in Face Amount, you may, by written request,
convert this policy without evidence of insurability to a policy in which the
benefits do not vary with the investment performance of the Variable Account.
This conversion is done by transferring all or part of your Variable
Accumulation Value to your Fixed Accumulation Value. You must tell us you are
exercising your conversion rights when requesting the transfer. We will then
waive the transfer charge and that transfer is not counted against the limit on
the number of transfers in a policy year. You are allowed only one such transfer
in each of these 24-month periods.
5256 26
Also, in the event of a material change in the investment policy of any
Sub-account of the Variable Account, you may, by written request convert this
policy to a policy in which the benefits do not vary with the investment
performance of the Variable Account. This conversion is done by transferring all
or part of your Variable Accumulation Value to your Fixed Accumulation Value.
You must tell us you are exercising your conversion rights when requesting the
transfer. We will then waive the transfer charge and that transfer is not
counted against the limit on the number of transfers in a policy year. The
option to convert is exercisable within 60 days after the effective date of such
change in the investment policy or your receipt of the notice of the change in
investment policy, whichever is later.
If you exercise this conversion right, we will automatically credit all future
premium payments to the Fixed Account, until you specify a change in allocation.
At the time of the transfer, there is no effect on the policy's Death Benefit,
Accumulation Value, Face Amount, net amount at risk, Rate Class, or Issue Age.
ANNUAL STATEMENT
Each year we will send you an annual statement, free of charge, showing the
following:
1.
Face Amount;
<PAGE>
2.
Cash Surrender Values;
3.
Accumulation Values;
4.
Premiums paid;
5.
Planned periodic premiums;
6.
Interest credits;
7.
Death Benefit;
8.
Loan Amounts;
9.
Partial withdrawals;
10.
Transfers; and
11.
Charges since the last statement.
We will make a charge not to exceed $50 for any additional statements you
request.
PROJECTION REPORT
If you ask, we will provide a report projecting future results. The report will
be based on the following:
1.
The Death Benefit Option you specify;
2.
Planned periodic premiums you specify;
3.
<PAGE>
The Accumulation Value at the end of the prior policy year; and
4.
Any other assumptions specified by you or us, subject to any limitations imposed
by the Securities and Exchange Commission.
We will make a charge not to exceed $50 for each Projection Report you request.
NONPARTICIPATING
This contract does not entitle you to participate in our surplus.
85-263 27
AMENDMENT
We reserve the right to amend this policy, subject to the approval of the
Insurance Department, to include any future changes relating to the following:
1.
Any Securities and Exchange Commission rulings and regulations;
2.
This policy's qualification for treatment as a Life Insurance policy under the
following:
- - The Code;
- - Internal Revenue Service rulings and regulations; and
- - Any requirements imposed by the Internal Revenue Service.
We will send you a copy of any amendments promptly.
DISCLAIMER
We are not liable for any tax or tax penalty you owe resulting from failure to
comply with the requirements of the Code, regulations and rulings imposed on
this policy.
5257 28
<PAGE>
ADDITIONAL INSURED RIDER (AIR)
This rider is a part of the base policy whose number is shown below. If not
shown below, the Base Policy Number is shown on the Policy Data Page.
RIDER DATA
BASE POLICY NUMBER
DEFINITIONS
THE ADDITIONAL INSURED
The person insured under this rider. The Additional Insured is shown on the
Policy Data Page.
THE INSURED
The person insured under the base policy.
YOU, YOUR
The current owner of the base policy.
WE, US, OUR
ReliaStar Bankers Security Life Insurance Company at our Home Office in
Woodbury, New York.
WRITTEN, IN WRITING
A written request or notice, signed and dated, and received at our Home Office,
in a form we accept. You may get forms for this purpose from us.
BENEFITS
When we have written proof that the Additional Insured died while this rider was
in force, we will pay the AIR Face Amount then in force.
<PAGE>
While the Additional Insured is living, you may choose to have the proceeds
applied under any base policy settlement option. After the Additional Insured's
death, a beneficiary may choose to have the proceeds applied under any base
policy settlement option, depending on any prior restrictions made by you and
agreed to by us.
BENEFICIARY
The beneficiary is named to receive the proceeds to be paid at the Additional
Insured's death. You may name one or more beneficiaries on the application.
Later, you may name, add or change beneficiaries by written request if all of
these are true:
1.
The base policy is in force;
2.
This rider is in force;
3.
The Additional Insured is alive; and
4.
We have the written consent of all irrevocable beneficiaries of this rider.
A change of beneficiary will take effect as of the date it is signed but will
not affect any payment we make or action we take before receiving your notice.
When you name, add, or change a beneficiary, we will assume that this applies to
the base policy unless you tell us that it applies to the Additional Insured
Rider. If you assign the benefits of this rider as collateral for a debt, this
limits the beneficiary's rights to the proceeds.
[GRAPHICS OMITTED]
RELIASTAR BANKERS SECURITY
LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
P.O. Box 9004
Woodbury, New York 11797
Executed at our Home Office
- ----------------------------------------------------------
John H. Flittie... President
- ----------------------------------------------------------
<PAGE>
/s/ John H. Flittie
- ----------------------------------------------------------
Susan M. Bergen... Secretary
- ----------------------------------------------------------
/s/ Susan M. Bergen
85-269 1
COST OF INSURANCE AND MONTHLY AMOUNT CHARGES
The total monthly deduction for this rider includes the sum of 1 plus 2, where:
1.
Is the Monthly Amount Charge per $1,000 (shown on the Policy Data Page)
multiplied by the AIR Face Amount divided by $1,000.
This charge applies to the Initial AIR Face Amount and to any increases in AIR
Face Amount during the Term shown on the Policy Data Page. The Term applies to
the Initial Face Amount from the Policy Date of the policy and to any increases
in Face Amount from the Effective Date of that increase.
2.
Is the AIR Face Amount times the monthly cost of insurance rate described below.
COST OF INSURANCE RATES
The monthly cost of insurance rate is based on the Additional Insured's sex,
issue age, and Rate Class as shown on the Policy Data Page, and the policy year
of the rider. Issue age means age last birthday on the Rider Effective Date.
Policy years of the rider are measured from the Rider Effective Date.
Adjustments to the monthly cost of insurance rate will be by Rate Class and
based upon changes in future expectations for mortality, persistency, interest,
taxes, and expenses. Any changes to the monthly cost of insurance rate will be
made only prospectively, based on future expectations, in accordance with
procedures and standards on file with the New York Insurance Department. Changes
will not be used to recoup past losses or distribute past gains. The experience
underlying the monthly cost of insurance rate will be reviewed at regular
intervals, no less often than every five years.
Except for Face Amounts in a rated Rate Class the cost of insurance rates can
never be greater than the rates shown in the Table of Monthly Guaranteed Cost of
Insurance Rates shown on the Policy Data Page. For those in a rated Rate Class,
the cost of insurance rates are calculated by multiplying the rates shown in the
Table of Monthly
<PAGE>
Guaranteed Cost of Insurance Rates by the Rate Class Rating Factor shown on the
Policy Data Page. The rates may also be increased by any extra cost of insurance
rates shown on the Policy Data Page.
PAYING PROCEEDS
We pay proceeds in the following order:
1.
Collateral assignees, if any, have first priority;
2.
The beneficiary, if any, receives any proceeds that remain. If there is more
than one beneficiary, each receives an equal share, unless you have requested
another method in writing. Unless otherwise provided, to receive proceeds, a
beneficiary must be living on the 10th day after the Additional Insured's death;
then
3.
If there are no beneficiaries, you receive any proceeds that remain.
5263 2
CONVERSION
The insurance on the life of the Additional Insured may be converted to a new
individual life insurance policy without proof of insurability. This rider may
be converted only:
1.
While the Additional Insured is alive;
2.
While this rider is in force;
3.
Before the Additional Insured reaches age 75; and
4.
While the base policy is in force or within 31 days of the insured's death.
Application for conversion must be in writing. Only you may apply. But if the
insured has died, only the Additional Insured may apply. We may require that you
send us the base policy and this rider so that we can endorse them.
THE NEW POLICY
<PAGE>
The amount of the new policy may be for an amount up to the AIR Face Amount in
force at the time of the conversion. The date of the new policy will be the date
of the conversion. The new policy, which will be in the same Rate Class as this
rider, can be on any of our plans in use at the time of the conversion that:
1.
We would normally issue;
2.
Provide for a level amount of insurance with level premiums;
3.
Have level premiums that are at least equal to those of the whole life plan we
offer that has the lowest level premiums;
4.
Do not participate in our surplus; and
5.
Do not contain any benefits or rights involving a greater aggregate risk,
relative to premium, than is insured under this policy. However, the new policy
may contain a disability waiver benefit provision on the Additional Insured if
you give us written proof of the Additional Insured's insurability.
TERMINATION
This rider ends:
1.
On the Rider Expiry Date shown on the Policy Data Page;
2.
If this rider is converted;
3.
If the base policy is surrendered or ends, other than at the insured's death;
4.
31 days after the insured's death. During this 31 days we do not charge you for
the continued coverage;
5.
If you ask us in writing to end this rider. In this case, we may ask that you
return the policy and this rider so that we can endorse them. This rider will
end on the first Monthly Anniversary Date after we receive your written request
to end this rider; or
<PAGE>
6.
If the Cash Surrender Value of the base policy is used to purchase paid-up
insurance.
After this rider ends, we are not liable for its benefits, even if we have
included the cost of insurance and monthly amount charges for this rider in the
total monthly deduction for the base policy. We will refund any such amounts
that we deduct after this rider ends.
85-270 3
REINSTATEMENT
If this rider and the base policy lapse, you can reinstate this rider if:
1.
This rider was in effect when the base policy lapsed;
2.
This rider would otherwise not have expired during the time it was lapsed; and
3.
You reinstate the base policy.
To reinstate this rider, you must do both of the following:
1.
Give us proof of insurability for the Additional Insured; and
2.
Pay a premium large enough such that the Net Premium is as large as the sum of
the Surrender Charge after reinstatement, plus the Monthly Deductions for the
date of reinstatement and the following Monthly Anniversary.
The base policy may be reinstated without this rider, in which case proof and
payment for this rider are not needed.
AGE AND SEX
If the Additional Insured's age or sex is misstated, the Death Benefit will be
the amount that the most recent cost of insurance would purchase using the
current cost of insurance rates for the correct age and sex.
SUICIDE
<PAGE>
The Suicide provision of the base policy is changed to also apply to the
Additional Insured from the Rider Issue Date in the same way that it applies to
the insured from the policy's Issue Date. The Suicide provision of the base
policy also applies in this way to any increases in the AIR Face Amount for
which we require evidence of insurability from the effective date of each
increase.
INCONTESTABILITY
This rider has a 2-year contestable period running from the Rider Issue Date.
During this period, we may ask for information that could lead to our contesting
this rider or refusing to pay its benefits. After this rider has been in force
during the Additional Insured's lifetime for 2 years from the Rider Issue Date,
we cannot claim this rider is void or refuse to pay any benefits with respect to
the initial AIR Face Amount unless this rider has lapsed.
If you make an increase in the AIR Face Amount that requires proof of
insurability, that increase has its own 2 year contestable period running from
the effective date of the increase.
If this rider lapses and is then reinstated, this provision will be measured
from the date of reinstatement.
GENERAL PROVISIONS
This rider does not increase any cash or loan values of the base policy. The
monthly deductions for this rider decrease the cash value of the base policy.
All base policy provisions apply to this rider, unless changed by this rider.
5264 4
INSURED'S COST OF LIVING RIDER
This rider is a part of the base policy whose number is shown below. If not
shown below, the Base Policy Number is shown on the Policy Data Page.
RIDER DATA
BASE POLICY NUMBER
DEFINITIONS
THE INSURED
<PAGE>
The person upon whose life the base policy is issued. The insured is shown on
the Policy Data Page.
YOU, YOUR
The current owner of the base policy.
WE, US, OUR
ReliaStar Bankers Security Life Insurance Company at our Home Office in
Woodbury, New York.
WRITTEN, IN WRITING
A written request or notice, signed and dated, and received at our Home Office
in a form we accept. You may get forms for this purpose from us.
INCREASE DATE
A date on which we make a cost of living increase according to the terms of this
rider.
CPI
The U.S. Consumer Price Index for All Urban Consumers as published by the U.S.
Department of Labor. We will substitute what we believe is an appropriate index
for the CPI if:
1.
The composition of, base of, or method of calculating the CPI changes so that,
in our opinion, it is not appropriate for use with this rider; or
2.
The publication of the CPI is delayed or ceases.
If required, we will file a detailed description of any alternate price index
with the Insurance Department of the state where this rider is delivered.
BENEFITS AND MONTHLY DEDUCTIONS
We will increase the Face Amount of the base policy on the Increase Dates under
the terms of this rider. Cost of living increases are Requested Changes in Face
Amount under the terms of the base policy and will increase the Surrender
Charge. We will make these cost of living increases without requiring proof of
insurability.
[GRAPHICS OMITTED]
<PAGE>
RELIASTAR BANKERS SECURITY
LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
P.O. Box 9004
Woodbury, New York 11797
Executed at our Home Office
- ----------------------------------------------------------
John H. Flittie President
- ----------------------------------------------------------
/s/ John H. Flittie
- ----------------------------------------------------------
Susan M. Bergen
- ----------------------------------------------------------
/s/ Susan M. Bergen
85-271 1
On each Increase Date, the Monthly Deduction will be increased to account for
the following:
1.
The larger cost of insurance;
2.
The Monthly Expense Charge;
3.
The Death Benefit Guarantee Charge, if the Death Benefit Guarantee is in effect;
and
4.
The Cost of Waiver Benefits, if a Waiver of Monthly Deduction Rider is part of
the base policy.
DETERMINING INCREASE DATES
Increase Dates normally occur every two years, beginning with the first Monthly
Anniversary two years after the Rider Issue Date. But, if you increase the Face
Amount of the base policy 10% or more, then the next Increase Date is the first
Monthly Anniversary two years after the increase. If this rider terminates and
is then reinstated,
<PAGE>
the next Increase Date after reinstatement is the first Monthly Anniversary two
years after the reinstatement date.
CALCULATING A COST OF LIVING INCREASE
The Increase Factor is (A divided by B) - 1, where:
A
Is the CPI five months before an Increase Date; and
B
Is the CPI 29 months before an Increase Date.
If the Increase Factor is zero or less, we make no change. If the Increase
Factor is greater than zero, we multiply it by the insured's CPI Increase Base
shown on the Policy Data Page. We round the result to the next higher $500. We
will not permit an increase higher than the Maximum Increase Amount for the
Insured, which is shown on the Policy Data Page. The Maximum Increase Amount for
the insured is 20% of the insured's CPI Increase Base, or $50,000, whichever is
less.
ACCEPTING OR REFUSING AN INCREASE
We will notify you of the amount of each cost of living increase at least 30
days before its effective date. If you wish to accept the increase, you must
notify us in writing.
If you do not accept the full amount of any cost of living increase before the
insured's Age 21, we will not offer you any further increases until the policy
anniversary on or next following the insured's 21st birthday. If you do not
accept the full amount of an increase at that time, this rider terminates.
However, you can reinstate this rider with proof of insurability for the
insured.
BENEFITS WHEN MONTHLY DEDUCTIONS ARE WAIVED
If the insured becomes eligible for benefits under a waiver of monthly deduction
rider, cost of living increases are not available. If the insured recovers from
the disability and we are notified in writing, the next Increase Date is the
next Monthly Anniversary two years after we receive the notice, unless the rider
has otherwise terminated. Future Increase Dates then follow as shown above in
"Determining Increase Dates."
TERMINATION
This rider terminates:
1.
On the Policy Anniversary on or next following the insured's 55th birthday;
<PAGE>
2.
On the first Increase Date for which you do not accept the full amount of any
cost of living increase on or after the insured's 21st birthday;
3.
On the Monthly Anniversary on or after we receive your written request to
terminate this rider. We may ask you to return the policy and this rider so that
we can endorse them;
4.
When the policy terminates; or
5.
When the base policy is in force as paid-up life insurance.
After this rider terminates, we will make no further cost of living increases.
GENERAL PROVISIONS
All base policy provisions apply to this rider, unless changed by this rider.
5265 2
ACCIDENTAL DEATH BENEFIT RIDER (ADB)
This rider is a part of the base policy whose number is shown below. f not shown
below, the Base Policy Number is shown on the Policy Data Page.
BASE POLICY NUMBER
DEFINITIONS
THE INSURED
The person upon whose life the base policy is issued.
YOU, YOUR
The current owner of the base policy.
WE, US, OUR
ReliaStar Bankers Security Life Insurance Company at our Home Office in
Woodbury, New York.
<PAGE>
WRITTEN, IN WRITING
A written request or notice, signed and dated, and received at our Home Office.
The form and content of the request or notice must be acceptable to us.
ACCIDENTAL DEATH
Death that is directly caused by accidental bodily injury. Death must occur
within 365 days after the date of this injury.
BENEFITS
We pay the ADB Amount shown on the Policy Data Page to the beneficiary, subject
to the terms of this rider, when we receive written proof that the insured's
death:
1.
Was an Accidental Death as defined above; and
2.
Occurred while the base policy and this rider were in force.
Any benefit we pay under this rider is in addition to the amount payable under
the base policy.
REQUESTED CHANGES IN ADB AMOUNT
After the second policy year, you may request an increase or decrease in your
ADB Amount by notifying us in writing.
INCREASES
Increases in the ADB Amount must be at least $5,000. You cannot increase the
Face Amount after the policy anniversary on or next following the insured's 60th
birthday.
We may require written proof that the insured is still insurable before making
an increase. An approved increase goes into effect on the Monthly Anniversary on
or next following the date of the approval.
DECREASES
You cannot decrease the ADB Amount below $5,000.
Changes go into effect on the Monthly Anniversary on or next following the date
we receive you request. At least six months must elapse between decreases.
<PAGE>
[GRAPHICS OMITTED]
RELIASTAR BANKERS SECURITY
LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
P.O. Box 9004
Woodbury, New York 11797
Executed at our Home Office
- ----------------------------------------------------------
John H. Flittie President
- ----------------------------------------------------------
/s/ John H. Flittie
- ----------------------------------------------------------
Susan M. Bergen
- ----------------------------------------------------------
/s/ Susan M. Bergen
85-273 1
BENEFITS NOT PROVIDED
We will not pay benefits under this rider when one or more of the following
caused or contributed to death:
1.
Disease, illness, mental illness, or medical or surgical treatment of them;
2.
Any poison (except for food poisoning), including carbon monoxide, was
voluntarily taken by the insured;
3.
Any drug, medication, or sedative not prescribed by a physician was voluntarily
taken by the insured;
4.
Suicide;
5.
A felony that the insured committed or tried to commit;
6.
<PAGE>
Travel in or descent from any type of aircraft where the insured:
a.
Was a pilot or a crew member;
b.
Was giving or receiving aviation training; or
c.
Had any duties on the aircraft whether or not they were related to operating it.
7.
An act of war or service in the military of any country at war.
WAR is defined as an armed conflict, whether declared or not, that any country
resists. COUNTRY includes any government or group of governments.
COST OF RIDER BENEFITS
The cost of this rider's benefits is in addition to the cost of the base policy
and is included in the Monthly Deduction. The cost of this rider's benefits is 1
multiplied by 2, divided by 1,000, (1 x 2) / 1,000, where:
1.
Is the ADB Rate as described below; and
2.
Is the ADB Amount at the beginning of the policy month.
ADB RATES
The ADB Rates are based on the insured's sex, attained age, and Rate Class for
this rider shown on the Policy Data Page. Attained age means the insured's age
on the prior policy anniversary. The ADB Rates are shown on the Policy Data
Page. For insureds in a Rated Rate Class for this rider, the ADB Rates will be
increased appropriately.
TERMINATION
This rider terminates:
1.
On the Rider Expiry Date;
2.
<PAGE>
On the first Monthly Anniversary Date after we receive your written request to
terminate this rider. We may ask that you return the policy and this rider so
that we can endorse them;
3.
When the base policy is surrendered or terminates; or
4.
When the base policy is in force as paid-up life insurance.
After this rider terminates, we are not liable for its benefits. If we deduct
the cost of this rider's benefits after it terminates, it is not considered a
reinstatement of the rider. The deduction will be added back to the Accumulation
Value of the policy as of the date of the deduction.
GENERAL PROVISIONS
This rider does not increase the Accumulation Value, Cash Surrender Value, or
Loan Value of the base policy. All base policy provisions apply to this rider,
unless changed by the rider. The Incontestability provision of the base policy
applies to this rider from the Rider Issue Date, and any increases in ADB Amount
from the date of the increase.
5266 2
<PAGE>
WAIVER OF MONTHLY DEDUCTION RIDER
This rider is a part of the base policy whose number is shown below. If not
shown below, the Base Policy Number is shown on the Policy Data Page.
BASE POLICY NUMBER
DEFINITIONS
THE INSURED
<PAGE>
The person insured under the base policy.
YOU, YOUR
The current owner of the base policy.
WE, US, OUR
ReliaStar Bankers Security Life Insurance Company at our Home Office in
Woodbury, New York.
WRITTEN, IN WRITING
A written request or notice, signed and dated, and received at our Home Office
in a form we accept. The form and content of the request or notice must be
acceptable to us.
AGE
The insured's age as of the prior policy anniversary; however, if the insured's
birthday is a policy anniversary, the insured's age on that birthday.
TOTAL DISABILITY
For the first 24 months of the insured's disability, we consider the insured
totally disabled if:
1.
Due to the disability resulting from injury or disease, the insured is unable to
work at his or her regular occupation for remuneration or profit; or
2.
The insured has a Specific Loss.
After the first 24 months of the insured's disability, we consider the insured
totally disabled if:
1.
Due to the disability resulting from injury or disease, the insured is unable to
work at any job suited to his or her education, training, and experience for
remuneration or profit; or
2.
The insured has a Specific Loss.
<PAGE>
Specific Loss means the total and permanent loss of any of the following
resulting from injury or disease:
1.
The sight in both eyes;
2.
The use of both hands;
3.
The use of both feet; or
4.
The use of one hand and one foot.
We consider the insured totally disabled for as long as the Specific Loss lasts.
[GRAPHICS OMITTED]
RELIASTAR BANKERS SECURITY
LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
P.O. Box 9004
Woodbury, New York 11797
Executed at our Home Office
- ----------------------------------------------------------
John H. Flittie President
- ----------------------------------------------------------
/s/ John H. Flittie
- ----------------------------------------------------------
Susan M. Bergen
- ----------------------------------------------------------
/s/ Susan M. Bergen
85-278 1
WAIVER BENEFITS
We will pay the Monthly Deduction for you if the insured becomes totally
disabled and meets the Conditions for Waiver Benefits. We do not apply the
Minimum Premium Requirement for the Death Benefit Guarantee during the period of
total disability.
<PAGE>
The length of time we continue the Waiver Benefits depends on when total
disability begins. If the insured becomes totally disabled before Age 60, we
will pay the Monthly Deduction for as long as the insured remains totally
disabled. If the insured becomes totally disabled after Age 60, we will continue
to pay the Monthly Deduction if the insured remains totally disabled until the
later of:
1.
The insured's Age 65; or
2.
Two years from the date of disability.
When the insured is no longer totally disabled, we will stop paying the Monthly
Deduction for you. If the Death Benefit Guarantee was in effect when total
disability began, we apply the Minimum Premium Requirement for the Death Benefit
Guarantee as of the Monthly Anniversary on or next following the date the
insured is no longer totally disabled.
If the insured becomes totally disabled again, we consider it a new period of
total disability. The terms of this rider apply to the new period separately
from any earlier period.
CONDITIONS FOR WAIVER BENEFITS
To pay Waiver Benefits, we need timely written Notice of Claim and Proof of
Total Disability. All of the following conditions must also be met:
1.
The policy and this rider must be in force when the sickness or injury causing
the total disability occurs;
2.
The policy and this rider must be in force when total disability begins;
3.
Total disability must begin on or after the insured's Age five and before the
insured's Age 65;
4.
The insured must be continuously totally disabled for at least six months; and
5.
You must pay all the required premiums until the end of this six month period.
<PAGE>
If we approve your claim, the Waiver Benefit begins with the Monthly Deduction
due on or after the date the total disability began. Any Monthly Deductions that
were deducted from the Accumulation Value of the base policy after the
disability began will be added back to the Accumulation Value as of the date we
approve your claim. We credit those Monthly Deductions as Net Premiums without
Premium Expense Charges.
If this rider and the base policy lapse, you may still qualify for Waiver
Benefits if:
1.
We receive timely written Notice of Claim as defined below in the Notice of
Claim provision;
2.
The total disability for which claim is made began before the date of lapse; and
3.
All other terms of this rider are met.
NOTICE OF CLAIM
We require timely written Notice of Claim before we will pay any future Monthly
Deductions. You must give us timely written Notice:
1.
While the insured is living; and
2.
During the period of total disability.
However, your claim may not be invalidated nor your benefits reduced if you can
show that you provided the written Notice as soon as was reasonably possible.
5269 2
PROOF OF TOTAL DISABILITY
We may require written proof of the insured's total disability before we provide
Waiver Benefits. This proof may include physical exams at our expense by doctors
we choose. However, for each period of total disability, we can only require one
exam a year after we have paid the Monthly Deductions for two consecutive years.
We cannot require any exam after the insured's Age 65. We will stop paying the
Monthly Deductions if you do not give us the required proof. However, your claim
may not be invalidated nor your
<PAGE>
benefits reduced if you can show that you provided the required proof as soon as
was reasonably possible.
COST OF RIDER BENEFITS
The cost of this rider's benefits is in addition to the cost for the base policy
and is included in the Monthly Deduction. This cost is based on a Percent of the
Monthly Deduction which is shown on the Policy Data Page.
FACE AMOUNT CHANGES DURING TOTAL DISABILITY
While the insured is totally disabled and we are paying the Monthly Deduction
for you, you are limited to making increases in the Face Amount of the base
policy under the terms of a future purchase option rider, if any, attached to
the base policy. You may not make any adjustments in Face Amount while we are
paying the Monthly Deduction.
DEATH BENEFIT OPTION
If the Death Benefit Option in effect at the end of the first six months of
total disability is Option A (Level Amount Option), it will be changed to Option
B (Variable Amount Option) on the first Monthly Anniversary Date after we
approve your claim. In this case, the Face Amount of the base policy is
decreased on that date so that it equals the Death Benefit under Option A minus
the Accumulation Value on the Monthly Anniversary on or next following the date
we approve your claim. If the Death Benefit Option in effect at the end of the
first six months of the total disability is Option B, we make no change. You
cannot make changes in Death Benefit Option while the insured is totally
disabled.
BENEFITS NOT PROVIDED
This rider does not cover total disability that results from service in the
military of any country at war. WAR is defined as an armed conflict, whether
declared or not, that any country resists. COUNTRY includes any government or
group of governments.
TERMINATION
This rider terminates:
1.
If we are not paying Waiver Benefits, at the insured's Age 65;
2.
If we are paying Waiver Benefits due to total disability which began after the
insured's Age 60, the later of:
<PAGE>
a.
The insured's Age 65, or
b.
Two years after the date of disability;
3.
On the Monthly Anniversary on or next following the date we receive your written
request to terminate this rider. We may ask that you return the policy and this
rider so that we can endorse them;
4.
If the base policy is surrendered or terminates; or
5.
When the base policy is in force as paid-up life insurance.
After this rider terminates, we are not liable for its benefits. If we deduct
the cost of this rider's benefits after it terminates, it is not considered a
reinstatement of this rider. The deduction will be added back to the
Accumulation Value of the base policy as of the date of the deduction.
Termination will not invalidate or diminish any benefit for which the insured
has qualified.
85-279 3
REINSTATEMENT
If this rider and the base policy lapse, you can reinstate this rider if:
1.
You reinstate the base policy;
2.
This rider was in effect when the base policy lapsed; and
3.
This rider would otherwise not have terminated during the time it was lapsed.
To reinstate the base policy and this rider you must do all of the following:
1.
Give us proof of insurability for the insured; and
2.
<PAGE>
Pay a premium large enough such that the Net Premium is as large as the sum of
the Surrender Charge after reinstatement, plus the Monthly Deductions for the
date of reinstatement and the following Monthly Anniversary.
The base policy may be reinstated without this rider, in which case proof and
payment for this rider are not needed.
GENERAL PROVISIONS
All base policy provisions apply to this rider, unless changed by this rider.
The Incontestability Provision of the base policy applies to this rider from the
Rider Issue Date.
5270 4
<PAGE>
MODIFICATION RIDER
This rider is part of the base policy whose number is shown below. If not shown
below, the Base Policy Number is shown on the Policy Data Page. This rider is
effective on the Effective Date of your policy, whichever is later.
RIDER DATA
BASE POLICY NUMBER
<PAGE>
IT IS HEREBY AGREED THAT THIS POLICY IS AMENDED AS FOLLOWS. ALL OTHER POLICY
PROVISIONS REMAIN UNCHANGED.
1. THE COST OF INSURANCE RATES SECTION OF THE MONTHLY DEDUCTION PROVISION OF
YOUR POLICY IS CHANGED TO READ AS FOLLOWS:
MONTHLY DEDUCTION PROVISION
COST OF INSURANCE RATES
The monthly cost of insurance rate for this policy is based on the insured's
Issue Age and Rate Class as shown on the Policy Data Page, and the policy year.
If your Death Benefit is a percentage of the accumulation value as described
under the definition of "Death Benefit" in Level Amount Option, item 2, or
Variable Amount Option, item 2, the Rate Class with the most recent effective
date will apply. Issue Age means age last birthday on the effective date of the
coverage.
Except for Face Amounts in a rated Rate Class, the cost of insurance rates can
never be greater than those shown in the Table of Monthly Guaranteed Cost of
Insurance Rates. This table is based on the Commissioners Standard Ordinary
Mortality (CSO) Table shown on the Policy Data Page. For Face Amounts in a rated
Rate Class, the guaranteed cost of insurance rates are calculated by multiplying
the rates shown in the Table of Guaranteed Cost of Insurance Rates by the Rate
Class Rating Factor shown on the Policy Data Page. The rates may also be
increased by any extra cost of insurance shown on the Policy Data Page.
2. THE PAID-UP LIFE INSURANCE OPTION UNDER THE NONFORFEITURE PROVISIONS
PROVISION OF THIS POLICY IS CHANGED TO READ AS FOLLOWS:
NONFORFEITURE PROVISIONS
PAID-UP LIFE INSURANCE
Any time before the insured's Age 95, you may use the Cash Surrender Value to
purchase single premium paid-up life insurance.
If the insured is living at Age 95, the Cash Surrender Value of the policy will
automatically be used to purchase single premium paid-up life insurance.
Any paid-up life insurance purchased under the terms of this policy will not be
larger than the sum of the Cash Value of the paid-up life insurance, plus the
Death Benefit of the policy, minus the Accumulation Value of the policy. Any
Cash Surrender Value not used to purchase paid-up life insurance will be paid to
you in cash.
<PAGE>
We base the single premium for paid-up insurance on the insured's age and rate
class(es) at the time this option is exercised, and the single premium life
insurance rates in effect at that time. These rates may not exceed the net
single premium rates based on the Commissioners Standard Ordinary Mortality
(CSO) Table and the Nonforfeiture Interest Rate, both of which are shown on the
Policy Data Page. The Cash Value of the paid-up life insurance is also
calculated based on the CSO Table and Nonforfeiture Interest Rate.
[GRAPHICS OMITTED]
RELIASTAR BANKERS SECURITY
LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
P.O. Box 9004
Woodbury, New York 11797
Executed at our Home Office
- ----------------------------------------------------------
John H. Flittie President
- ----------------------------------------------------------
/s/ John H. Flittie
- ----------------------------------------------------------
Susan M. Bergen
- ----------------------------------------------------------
/s/ Susan M. Bergen
85-308 1
To purchase paid-up life insurance, we transfer the Cash Surrender Value of this
policy to the Fixed Account.
If this policy is in force as paid-up life insurance:
1.
The Accumulation Value provision of this policy no longer applies;
2.
You cannot pay additional premiums;
3.
You cannot make partial withdrawals; and
<PAGE>
4.
We do not make any further Monthly Deductions.
We will put this policy back in force as flexible premium variable life
insurance at any time before the insured's Age 95 if:
1.
You submit proof which satisfies us that all insureds are still insurable;
2.
You pay a premium that, when added to the cash value of the paid-up life
insurance, keeps the policy in force for at least 2 months.
On the Monthly Anniversary on or following the date when you meet the above
requirements, we credit any premiums you pay and the cash value of the paid-up
life insurance in the form of Net Premiums without a Premium Expense Charge. Net
Premiums are credited to the Fixed Account and the Variable Account on the basis
of your allocation in effect when you purchased paid-up life insurance.
After the policy is back in force as flexible premium variable life insurance:
1.
The Face Amount and the Death Benefit Option will be those in effect when you
purchased paid-up life insurance; 2.
You may resume premium payments;
3.
The Accumulation Value provision of this policy applies; and
4.
We resume making Monthly Deductions.
3. THE SURRENDER CHARGE SECTION OF THE CASH VALUE, CASH SURRENDER VALUE, TOTAL
SURRENDER, AND PARTIAL WITHDRAWAL BENEFITS PROVISION IS CHANGED TO READ AS
FOLLOWS:
CASH VALUE, CASH SURRENDER VALUE, TOTAL SURRENDER, AND PARTIAL WITHDRAWAL
BENEFITS
SURRENDER CHARGE
<PAGE>
We make a Surrender Charge if you surrender this policy or it lapses. The
Surrender Charge is the Maximum Surrender Charge minus the Premium Related
Surrender Charge Reduction. The Surrender Charge is not less than zero.
INITIAL FACE AMOUNT
The Maximum Surrender Charge applicable to the Initial Fact Amount depends on
the Initial Face Amount and the insureds Issue Age and Rate Class. The amount
and duration of the Unadjusted Surrender Charge applicable to the Initial Face
Amount is shown on the Policy Data Page.
Whenever the total premiums paid are less than the Surrender Charge Whole Life
Premium shown on the Policy Data Page, the Surrender Charge applicable to the
Initial Face Amount will be reduced by the Premium Related Surrender Charge
Reduction. The Premium Related Surrender Charge Reduction is calculated as 1
multiplied by the result of 2 minus 3 (1 x (2 - 3)), where:
1.
Is the Surrender Charge Reduction Factor shown on the Policy Data Page;
2.
Is the Surrender Charge Whole Life Premium shown on the Policy Data Page; and
3.
Is the total premiums paid.
5290 2
REQUESTED CHANGES IN FACE AMOUNT
Additional Surrender Charges will apply to any approved increase in Face Amount,
including Face Amount increases resulting from the Insured's Cost of Living
Rider, if included with the policy. The additional Surrender Charge depends on
the amount of the increase in Face Amount and the insured's age and Rate Class
on the effective date of the increase. We will send you written notice of the
amount and duration of the additional Surrender Charge. No Premium Related
Surrender Charge Reductions are made for additional Surrender Charges applicable
to increases in Face Amount.
If Surrender Charges are shown on an annual basis, they grade uniformly by
policy month between the consecutive years shown.
<PAGE>
Any increases or decreases in Face Amount resulting from changes in the Death
Benefit Option, and any requested decreases in Face Amount, do not affect the
Surrender Charges.
4. OPTIONS 4 AND 5 OF THE SETTLEMENT OPTIONS PROVISION OF YOUR POLICY ARE
CHANGED CHANGED TO READ AS FOLLOWS:
SETTLEMENT OPTIONS
OPTION 4
The proceeds are used to provide an annuity with 60, 120, 180, or 240 months
"certain". This means that we continue paying the primary payee, the first
person to whom benefits are payable, in equal monthly installments for as long
as the primary payee lives with a number of months "certain". "Certain" means
that we make payments for at least as long as the period you choose (either 60,
120, 180, or 240 months), no matter when the primary payee dies. If the primary
payee dies before the "certain" period ends, the remaining payments are payable
to the contingent payee.
We compute the installments using the calendar year in which the proceeds are
applied and the payee's age at that time. We require written proof of the
payee's age. If you ask, we will tell you payments amounts for this option. The
amounts of the installments are computed using the 1983 Table a with Projection
Scale G and interest at 3.5% per year.
OPTION 5
The proceeds are used to provide a "joint and two-thirds to survivor" life
income for two payees. We make monthly payments jointly to the two payees as
long as they both live. When one payee dies, the other receives two-thirds of
the amount of the joint monthly payment for life. Payments stop when both payees
have died. We compute the payment amounts using the calendar year in which the
proceeds are applied and the payees' ages when the proceeds are applied. We
require written proof of the payee's ages. If you ask, we will tell you any of
these amounts. The amounts of the monthly payments are computed using the 1983
Table a with Projection Scale G and interest at 3.5% per year.
5. THE AGE AND SEX PROVISION(S) OF THE GENERAL PROVISION(S) PORTION OF YOUR
POLICY AND ANY RIDER(S) IS(ARE) REPLACED BY THE FOLLOWING:
GENERAL PROVISION
AGE
<PAGE>
If the insured's age is misstated, the Death Benefit will be the amount that the
most recent cost of insurance would purchase using the current cost of insurance
rate for the correct age.
85-309 3
LIMITATION ON AMOUNT OF INSURANCE RIDER (As required by New York Insurance Law)
This rider is a part of the base policy whose number is shown below. If not
shown below, the Base Policy Number is shown on the Policy Data Page.
RIDER DATA
BASE POLICY NUMBER
The total amount of life insurance proceeds payable under this and any other
policy because of an insured child's death which occurs before that child is 14
years and 6 months old will be limited to the amount as determined in 1 or 2
below:
1.
If death occurs before the child is 4 years and 6 months old, the total amount
payable may not be more than the greater of:
a.
$5,000; or
b.
25% of the amount of life insurance in force on the date of issue on the life of
the applicant for this policy.
2.
If death occurs when that child is at least 4 years and 6 months old, but before
the child is 14 years and 6 months old, the total amount payable may not be more
than the greater of:
a.
$10,000; or
b.
50% of the amount of life insurance in force on the date of issue on the life of
the applicant for this policy.
<PAGE>
The limitation does not apply to any Accidental Death Benefit or any refund of
premiums. Any amount payable on more than one policy will be paid in order of
Issue Date.
Any amount of life insurance which exceeds this limitation under this and any
other policy will not be payable. The Company will terminate any amount of
insurance under this policy which exceeds the limitation upon receipt of this
policy and satisfactory proof that the amount is in excess of the limitation.
The termination will be made at the Owner's written request or upon the death of
the insured. The Company will refund any premiums paid for the amount which is
in excess as of the date of the request or death, together with interest at the
Minimum Annual Interest Rate shown on the Policy Data Page in the policy to
which this rider is attached. However, the Company shall not be liable for any
adjustment in premium if payment of any life insurance proceeds is made without
having proof that the amount of those proceeds was in excess of the limitation.
In no event will the amount of insurance payable under this policy be a greater
amount than if this rider was not a part of the policy.
[GRAPHICS OMITTED]
RELIASTAR BANKERS SECURITY
LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
P.O. Box 9004
Woodbury, New York 11797
Executed at our Home Office
- ----------------------------------------------------------
John H. Flittie President
- ----------------------------------------------------------
/s/ John H. Flittie
- ----------------------------------------------------------
Susan M. Bergen
- ----------------------------------------------------------
/s/ Susan M. Bergen
85-354 1
FLEXIBLE PREMIUM
VARIABLE LIFE
INSURANCE POLICY
- ----------------------------------------------------------------------------
<PAGE>
Variable and/or Fixed Accumulation Value
Flexible Premiums Payable to the Insured's Age 95
Adjustable Face Amount
Death benefit Guarantee
Death Benefit Options
Nonparticipating
- -----------------------------------------------------------------------------
NOTICE
To make a claim or exercise your rights under this policy, please write to us at
the address below and include your policy number:
RELIASTAR
RELIASTAR BANKERS SECURITY
LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
P.O. Box 9004
Woodbury, New York 11797
Writing directly to us will save time and expense. You do not need to hire any
person, firm, or corporation unless, b
because of a dispute, you wish to.
- -----------------------------------------------------------------------------
Page 29 85-251
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 8th day of August, 1997, by and among The
Alger American Fund (the "Trust"), an open-end management investment company
organized as a Massachusetts business trust, ReliaStar Bankers Security Life
Insurance Company, a life insurance company organized as a corporation under the
laws of the State of New York, (the "Company"), on its own behalf and on behalf
of each segregated asset account of the Company set forth in Schedule A, as may
be amended from time to time (the "Accounts"), and Fred Alger and Company,
Incorporated, a Delaware corporation, the Trust's distributor (the
"Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, the Trust and the Distributor desire that Trust shares be used
as an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, shares of beneficial interest in the Trust are divided into
the following series which are available for purchase b the Company for the
Accounts: Alger American Small Capitalization Portfolio, Alger American Growth
Portfolio, and Alger American MidCap Growth Portfolio,
WHEREAS, the Trust has received an order from the Commission, dated
February 17, 1989 (File No. 812-7076), granting Participating Insurance
Companies and their separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Portfolios of the Trust to be sold to and held by variable annuity and variable
life insurance separate accounts of both affiliated and unaffiliated life
insurance companies (the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies and variable annuity contracts to be
issued by the Company under which the Portfolios are to be made available as
investment vehicles (the "Contracts");
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from registration
under the 1940 Act is available and the Trust has been so advised;
WHEREAS, the Company desires to use shares of one or more Portfolios as
investment vehicles for the Accounts;
<PAGE>
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
1.1. For purposes of this Article I, the Company shall be the Trust's agent
for the receipt from each account of purchase orders and requests for
redemption pursuant to the Contracts relating to each Portfolio,
provided that the Company notifies the Trust of such purchase orders
and requests for redemption by 9:30 a.m. Eastern time on the next
following Business Day, as defined in Section 1.3.
1.2. The Trust shall make shares of the Portfolios available to the Accounts
at the net asset value next computed after receipt of a purchase order
by the Trust (or its agent), as established in accordance with the
provisions of the then current prospectus of the Trust describing
Portfolio purchase procedures. The Company will transmit orders from
time to time to the Trust for the purchase and redemption of shares of
the Portfolios. The Trustees of the Trust (the "Trustees") may refuse
to sell shares of any Portfolio to any person, or suspend or terminate
the offering of shares of any Portfolio if such action is required by
law or by regulatory authorities having jurisdiction or if, in the sole
discretion of the Trustees acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, such
action is deemed in the best interests of the shareholders of such
Portfolio.
1.3. The Company shall pay for the purchase of shares of a Portfolio on
behalf of an Account with federal funds to be transmitted by wire to
the Trust, with the reasonable expectation of receipt by the Trust by
2:00 p.m. Eastern time on the next Business Day after the Trust (or its
agent) receives the purchase order. Upon receipt by the Trust of the
federal funds so wired, such funds shall cease to be the responsibility
of the Company and shall become the responsibility of the Trust for
this purpose. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Trust calculates
its net asset value pursuant to the rules of the Commission.
1.4. The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at
the net asset value next computed after receipt by the Trust (or its
agent) of the request for redemption, as established in accordance with
the provisions of the then current prospectus of the Trust describing
Portfolio redemption procedures. The Trust shall make payment for such
shares in the manner established from time to time by the Trust.
Proceeds of redemption with respect to a Portfolio will normally be
paid to the Company for an Account in federal funds transmitted by wire
to the Company by order of the Trust with the reasonable expectation of
receipt by the Company by 2:00 p.m. Eastern time on the next Business
Day after the receipt by the Trust (or its agent) of the request for
redemption. Such payment may be delayed if, for example, the
Portfolio's cash position so requires or if extraordinary market
conditions exist, but in no event shall payment be delayed for a
greater period
<PAGE>
than is permitted by the 1940 Act. The Trust reserves the right to
suspend the right of redemption, consistent with Section 22(e) of the
1940 Act and any rules thereunder.
1.5. Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of
the Trust's Portfolios under Section 1.4 on any Business Day may be
netted against one another for the purpose of determining the amount of
any wire transfer.
1.6. Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or the
Accounts. Portfolio Shares purchased from the Trust will be recorded in
the appropriate title for each Account or the appropriate subaccount of
each Account.
1.7. The Trust shall furnish, on or before the ex-dividend date, notice to
the Company of any income dividends or capital gain distributions
payable on the shares of any Portfolio of the Trust. The Company hereby
elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional
shares of that Portfolio. The Trust shall notify the Company of the
number of shares so issued as payment of such dividends and
distributions.
1.8. The Trust shall calculate the net asset value of each Portfolio on each
Business Day, as defined in Section 1.3. The Trust shall make the net
asset value per share for each Portfolio available to the Company or
its designated agent on a daily basis as soon as reasonably practical
after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available to the
Company by 6:30 p.m. Eastern time each Business Day.
1.9. The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their segregated asset accounts,
to the Fund Sponsor or its affiliates and to such other entities as may
be permitted by Section 817(h) of the Code, the regulations hereunder,
or judicial or administrative interpretations thereof. No shares of any
Portfolio will be sold directly to the general public. The Company
agrees that it will use Trust shares only for the purposes of funding
the Contracts through the Accounts listed in Schedule A, as amended
from time to time.
1.10. The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding materially to those contained in
Section 2.9 and Article IV of this Agreement.
ARTICLE II.
OBLIGATIONS OF THE PARTIES
2.1. The Trust shall prepare and be responsible for filing with the
Commission and any state regulators requiring such filing all
shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and
<PAGE>
statements of additional information of the Trust. The Trust shall bear
the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this
Section 2.1 and all taxes to which an issuer is subject on the issuance
and transfer of its shares.
2.2. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Trust to the Contract owners as required to be
distributed to such Contract owners under applicable federal or state
law.
2.3. The Trust shall provide such documentation (including a final copy of
the Trust's prospectus as set in type, computer disk or in camera-ready
copy) and other assistance as is reasonably necessary in order for the
Company to print together in one document the current prospectus for
the Contracts issued by the Company and the current prospectus for the
Trust. The Trust shall bear the expense of printing copies of its
current prospectus that will be distributed to existing Contract
owners, and the Company shall bear the expense of printing copies of
the Trust's prospectus that are used in connection with offering the
Contracts issued by the Company.
2.4. The Trust and the Distributor shall provide (1) at the Trust's expense,
one copy of the Trust's current Statement of Additional Information
("SAI") to the Company and to any Contract owner who requests such SAI,
(2) at the Company's expense, such additional copies of the Trust's
current SAI as the Company shall reasonably request and that the
Company shall require in accordance with applicable law in connection
with offering the Contracts issued by the Company.
2.5. The Trust, at its expense, shall provide the Company with copies of its
proxy material, periodic reports to shareholders and other
communications to shareholders in such quantity as the Company shall
reasonably require for purposes of distributing to Contract owners. The
Trust, at the Company's expense, shall provide the Company with copies
of its periodic reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably request
for use in connection with offering the Contracts issued by the
Company. If requested by the Company in lieu thereof, the Trust shall
provide such documentation (including a final copy of the Trust's proxy
materials, periodic reports to shareholders and other communications to
shareholders, as set in type, computer disk or in camera-ready copy)
and other assistance as reasonably necessary in order for the Company
to print such shareholder communications for distribution to Contract
owners.
2.6. The Company agrees and acknowledges that the Distributor is the sole
owner of the name and mark "Alger" and that all use of any designation
comprised in whole or part of such name or mark under this Agreement
shall inure to the benefit of the Distributor. Except as provided in
Section 2.5, the Company shall not use any such name or mark on its own
behalf or on behalf of the Accounts or Contracts in any registration
statement, advertisement, sales literature or other materials relating
to the Accounts or Contracts without the prior written consent of the
Distributor. Upon termination of this Agreement
<PAGE>
for any reason, the Company shall cease all use of any such name or
mark as soon as reasonably practicable.
2.7. The Company shall furnish, or cause to be furnished, to the Trust or
its designee a copy of each Contract prospectus and/or statement of
additional information describing the Contracts, each report to
Contract owners, proxy statement, application for exemption or request
for no-action letter in which the Trust or the Distributor is named
contemporaneously with the filing of such document with the Commission.
The Company shall furnish, or shall cause to be furnished, to the Trust
or its designee each piece of sales literature or other promotional
material in which the Trust or the Distributor is named, at least five
Business Days prior to its use. No such material shall be used if the
Trust or its designee reasonably objects to such use within three
Business Days after receipt of such material.
2.8. The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust or the
Distributor in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from
the registration statement or prospectus for the Trust shares (as such
registration statement and prospectus may be amended or supplemented
from time to time), annual and semi-annual reports of the Trust,
Trust-sponsored proxy statements, or in sales literature or other
promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the prior
written permission of the Trust, the Distributor or their respective
designees. The Trust and the Distributor agree to respond to any
request for approval on a prompt and timely basis. The Company shall
adopt and implement procedures reasonably designed to ensure that
"broker only" materials including information therein about the Trust
or the Distributor are not distributed to existing or prospective
Contract owners.
2.9. The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and
the Distributor, in such form as the Company may reasonably require, as
the Company shall reasonably request in connection with the preparation
of registration statements, prospectuses and annual and semi-annual
reports pertaining to the Contracts.
2.10. The Trust and the Distributor shall not give, and agree that no
affiliate of either of them shall give, any information or make any
representations or statements on behalf of the Company or concerning
the Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the
registration statement or prospectus for the Contracts (as such
registration statement and prospectus may be amended or supplemented
from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional materials,
except as required by legal process or regulatory authorities or with
the prior written permission of the Company. The Company agrees to
respond to any request for approval on a prompt and timely basis.
<PAGE>
2.11. So long as, and to the extent that, the Commission interprets the 1940
Act to require pass-through voting privileges for Contract owners, the
Company will provide pass-through voting privileges to Contract owners
whose cash values are invested, through the registered Accounts, in
shares of one or more Portfolios of the Trust. The Trust shall require
all Participating Insurance Companies to calculate voting privileges in
the same manner and the Company shall be responsible for assuring that
the Accounts calculate voting privileges in the manner established by
the Trust. With respect to each registered Account, the Company will
vote shares of each Portfolio of the Trust held by a registered Account
and for which no timely voting instructions from Contract owners are
received in the same proportion as those shares for which voting
instructions are received. The Company and its agents will in no way
recommend or oppose or interfere with the solicitation of proxies for
Portfolio shares held to fund the Contacts without the prior written
consent of the Trust, which consent may be withheld in the Trust's sole
discretion. The Company reserves the right, to the extent permitted by
law, to vote shares held in any Account in its sole discretion.
2.12. The Company and the Trust will each provide to the other information
about any material issues resulting from any regulatory examination
relating to the Contracts or the Trust, including relevant portions of
any "deficiency letter" and any response thereto.
2.13. No compensation shall be paid by the Trust to the Company, or by the
Company to the Trust, under this Agreement (except for specified
expense reimbursements). However, nothing herein shall prevent the
parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust, the
Accounts or both.
2.14 The Trust will provide to the Company its prospectus in electronic
format in order that the Company may add the Trust's prospectus to its
web site. The Company agrees to: (1) maintain only the most recent
version of the Trust's prospectus on its web site at all times; (2)
maintain a complete version of the Trust's prospectus on its web site;
(3) provide to the Trust a copy of the NASD'S letter(s) approving the
web site or, alternatively, provide to the Trust hard copies of its web
site pages for Trust approval prior to the use of the Trust's
prospectus.
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
Minnesota and that it has legally and validly established each Account
as a segregated asset account under such law as of the date set forth
in Schedule A, and that Washington Square Securities, Inc., the
principal underwriter for the Contracts, is registered as a
broker-dealer under the Securities Exchange Act of 1934 and is a member
in good standing of the National Association of Securities Dealers,
Inc.
<PAGE>
3.2. The Company represents and warrants that it has registered or, prior to
any issuance or sale of the Contracts, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act
and cause each Account to remain so registered to serve as a segregated
asset account for the Contracts, unless an exemption from registration
is available.
3.3. The Company represents and warrants that the Contracts will be
registered under the 1933 Act unless an exemption from registration is
available prior to any issuance or sale of the Contracts; the Contracts
will be issued and sold in compliance in all material respects with all
applicable federal and state laws; and the sale of the Contracts shall
comply in all material respects with state insurance law suitability
requirements.
3.4. The Trust represents and warrants that it is duly organized and validly
existing under the laws of the Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act and
the rules and regulations thereunder.
3.5. The Trust and the Distributor represent and warrant that the Portfolio
shares offered and sold pursuant to this Agreement will be registered
under the 1933 Act and sold in accordance with all applicable federal
and state laws, and the Trust shall be registered under the 1940 Act
prior to and at the time of any issuance or sale of such shares. The
Trust shall amend its registration statement under the 1933 Act and the
1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Trust shall register and qualify
its shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Trust.
3.6. The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements for
variable annuity, endowment or life insurance contracts set forth in
Section 817(h) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the rules and regulations thereunder, including without
limitation Treasury Regulation 1.817-5, and will notify the Company
immediately upon having a reasonable basis for believing any Portfolio
has ceased to comply or might not so comply and will immediately take
all reasonable steps to adequately diversify the Portfolio to achieve
compliance within the grace period afforded by Regulation 1.817-5.
3.7. The Trust represents and warrants that it is currently qualified as a
"regulated investment company" under Subchapter M of the Code, that it
will make every effort to maintain such qualification and will notify
the Company immediately upon having a reasonable basis for believing it
has ceased to so qualify or might not so qualify in the future.
3.8. The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of
a Portfolio shall at all times be covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount not less
than the minimum coverage required by Rule 17g-1 or other applicable
regulations under the 1940 Act. Such bond shall include coverage for
larceny and embezzlement and be issued by a reputable bonding company.
<PAGE>
3.9. The Distributor represents that it is duly organized and validly
existing under the laws of the State of Delaware and that it is
registered, and will remain registered, during the term of this
Agreement, as a broker-dealer under the Securities Exchange Act of 1934
and is a member in good standing of the National Association of
Securities Dealers, Inc.
ARTICLE IV.
POTENTIAL CONFLICTS
4.1. The parties acknowledge that a Portfolio's shares may be made available
for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any
material irreconcilable conflict between the interests of the contract
owners of all Participating Insurance Companies. A material
irreconcilable conflict may arise for a variety of reasons, including:
(a) an action by any state insurance regulatory authority; (b) a change
in applicable federal or state insurance, tax or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in
voting instructions given by variable annuity contract and variable
life insurance contract owners; or (f) a decision by an insurer to
disregard the voting instructions of contract owners. The Trust shall
promptly inform the Company of any determination by the Trustees that a
material irreconcilable conflict exists and of the implications
thereof.
4.2. The Company agrees to report promptly any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist
the Trustees in carrying out their responsibilities under the Shared
Funding Exemptive Order by providing the Trustees with all information
reasonably necessary for and requested by the Trustees to consider any
issues raised including, but not limited to, information as to a
decision by the Company to disregard Contract owner voting
instructions. All communications from the Company to the Trustees may
be made in care of the Trust.
4.3. If it is determined by a majority of the Trustees, or a majority of the
disinterested Trustees, that a material irreconcilable conflict exists
that affects the interests of contract owners, the Company shall, in
cooperation with other Participating Insurance Companies whose contract
owners are also affected, at its own expense and to the extent
reasonably practicable (as determined by the Trustees) take whatever
steps are necessary to remedy or eliminate the material irreconcilable
conflict, which steps could include: (a) withdrawing the assets
allocable to some or all of the Accounts from the Trust or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Trust, or
submitting the question of whether or not such segregation should be
implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e.,
annuity contract owners,
<PAGE>
life insurance contract owners, or variable contract owners of one or
more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contract owners the option of
making such a change; and (b) establishing a new registered management
investment company or managed separate account.
4.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority
vote, the Company may be required, at the Trust's election, to withdraw
the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account; provided, however that such
withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives
written notice that this provision is being implemented. Until the end
of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of
shares of the Trust.
4.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw
the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account within six (6) months after the
Trustees inform the Company in writing that the Trust has determined
that such decision has created a material irreconcilable conflict;
provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees.
Until the end of such six (6) month period, the Trust shall continue to
accept and implement orders by the Company for the purchase and
redemption of shares of the Trust.
4.6. For purposes of Section 4.3 through 4.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed
action adequately remedies any material irreconcilable conflict, but in
no event will the Trust be required to establish a new funding medium
for any Contract. The Company shall not be required to establish a new
funding medium for the Contracts if an offer to do so has been declined
by vote of a majority of Contract owners materially adversely affected
by the material irreconcilable conflict. In the event that the Trustees
determine that any proposed action does not adequately remedy any
material irreconcilable conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within
six (6) months after the Trustees inform the Company in writing of the
foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested Trustees.
4.7. The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so
that the Trustees may fully carry out the duties imposed upon them by
the Shared Funding Exemptive Order, and said reports, materials
<PAGE>
and data shall be submitted more frequently if reasonably deemed
appropriate by the Trustees.
4.8. If and to the extent that Rule 6e-3(T) is amended, or Rule 6e-3 is
adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared
Funding Exemptive Order, then the Trust and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be
necessary to comply with Rule 6e-3(T), as amended, or Rule 6e-3, as
adopted, to the extent such rules are applicable.
ARTICLE V.
INDEMNIFICATION
5.1. Indemnification By the Company. The Company agrees to indemnify and
hold harmless the Distributor, the Trust and each of its Trustees,
officers, employees and agents and each person, if any, who controls
the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section
5.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal
counsel fees incurred in connection therewith) (collectively,
"Losses"), to which the Indemnified Parties may become subject under
any statute or regulation, or at common law or otherwise, insofar as
such Losses are related to the sale or acquisition of the Contracts or
Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in
the Contracts themselves or in sales literature generated or
approved by the Company on behalf of the Contracts or Accounts
(or any amendment or supplement to any of the foregoing)
(collectively, "Company Documents" for the purposes of this
Article V), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this indemnity shall not
apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in
reliance upon and was accurately derived from written
information furnished to the Company by or on behalf of the
Trust for use in Company Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived from Trust Documents as defined in Section
5.2(a)) or wrongful conduct of the Company or persons under
its control, with respect to the sale or acquisition of the
Contracts or Trust shares; or
<PAGE>
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such statement or omission was made in
reliance upon and accurately derived from written information
furnished to the Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under
the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(f) arise out of or result from the provision by the Company
to the Trust of insufficient or incorrect information
regarding the purchase or sale of shares of any Portfolio, or
the failure of the Company to provide such information on a
timely basis.
5.2. Indemnification by the Distributor. The Distributor agrees to indemnify
and hold harmless the Company 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 the purposes of this Section 5.2) against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Distributor, which consent
shall not be unreasonably withheld) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim,
damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or regulation,
or at common law or otherwise, insofar as such Losses are related to
the sale or acquisition of the Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement or prospectus for the Trust (or any
amendment or supplement thereto) (collectively, "Trust
Documents" for the purposes of this Article V), or arise out
of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and
was accurately derived from written information furnished to
the Distributor or the Trust by or on behalf of the Company
for use in Trust Documents or otherwise for use in connection
with the sale of the Contracts or Trust shares and; or
<PAGE>
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived form Company Documents) or wrongful conduct
of the Distributor or persons under its control, with respect
to the sale or acquisition of the Contracts or Portfolio
shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in
Company Documents or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if
such statement or omission was made in reliance upon and
accurately derived from written information furnished to the
Company by or on behalf of the Trust; or
(d) arise out of or result from any failure by the Distributor
or the Trust to provide the services or furnish the materials
required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or the
Trust in this Agreement or arise out of or result from any
other material breach of this Agreement by the Distributor or
the Trust.
5.3. None of the Company, the Trust or the Distributor shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable,
with respect to any Losses incurred or assessed against an Indemnified
Party that arise from such Indemnified Party's willful misfeasance, bad
faith or negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement.
5.4. None of the Company, the Trust or the Distributor shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable,
with respect to any claim made against an Indemnified party unless such
Indemnified Party shall have notified the other party in writing within
a reasonable time after the summons, or other first written
notification, giving information of the nature of the claim shall have
been served upon or otherwise received by such Indemnified Party (or
after such Indemnified Party shall have received notice of service upon
or other notification to any designated agent), but failure to notify
the party against whom indemnification is sought of any such claim
shall not relieve that party from any liability which it may have to
the Indemnified Party in the absence of Sections 5.1 and 5.2.
5.5. In case any such action is brought against an Indemnified Party, the
indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also
shall be entitled to assume the defense thereof, with counsel
reasonably satisfactory to the party named in the action. After notice
from the indemnifying party to the Indemnified Party of an election to
assume such defense, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by
<PAGE>
it, and the indemnifying party will not be liable to the Indemnified
Party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
ARTICLE VI.
TERMINATION
6.1. This Agreement shall terminate:
(a) at the option of any party upon 60 days advance written
notice to the other parties, unless a shorter time is agreed
to by the parties;
(b) at the option of the Trust or the Distributor if the
Contracts issued by the Company cease to qualify as annuity
contracts or life insurance contracts, as applicable, under
the Code or if the Contracts are not registered, issued or
sold in accordance with applicable state and/or federal law;
or
(c) at the option of any party upon a determination by a
majority of the Trustees of the Trust, or a majority of its
disinterested Trustees, that a material irreconcilable
conflict exists; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust or the Distributor by the NASD,
the SEC, or any state securities or insurance department or
any other regulatory body regarding the Trust's or the
Distributor's duties under this Agreement or related to the
sale of Trust shares or the operation of the Trust; or
(e) at the option of the Company if the Trust or a Portfolio
fails to meet the diversification requirements specified in
Section 3.6 hereof; or.
(f) at the option of the Company if shares of the Series are
not reasonably available to meet the requirements of the
Variable Contracts issued by the Company, as determined by the
Company, and upon prompt notice by the Company to the other
parties; or
(g) at the option of the Company in the event any of the
shares of the Portfolio are not registered, issued or sold in
accordance with applicable state and/or federal law, or such
law precludes the use of such shares as the underlying
investment media of the Variable Contracts issued or to be
issued by the Company; or
(h) at the option of the Company, if the Portfolio fails to
qualify as a Regulated Investment Company under Subchapter M
of the Code; or
<PAGE>
(i) at the option of the Distributor if it shall determine in
its sole judgment exercised in good faith, that the Company
and/or its affiliated companies has suffered a material
adverse change in its business, operations, financial
condition or prospects since the date of this Agreement or is
the subject of material adverse publicity.
6.2. Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional shares
of any Portfolio and redeem shares of any Portfolio pursuant to the
terms and conditions of this Agreement for all Contracts in effect on
the effective date of termination of this Agreement.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.9 shall
survive the termination of this Agreement as long as shares of the
Trust are held on behalf of Contract owners in accordance withSection
6.2.
ARTICLE VII.
NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust or its Distributor:
Fred Alger Management, Inc.
30 Montgomery Street
Jersey City, NJ 07302
Attn: Gregory S. Duch
If to the Company:
ReliaStar Bankers Security Life Insurance Company
c/o ReliaStar Life Insurance Company
20 Washington Avenue South
Minneapolis, MN 55401
Attn: Stewart Gregg, Esq.
ARTICLE VIII.
MISCELLANEOUS
8.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
<PAGE>
8.2. This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
8.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York. It
shall also be subject to the provisions of the federal securities laws
and the rules and regulations thereunder and to any orders of the
Commission granting exemptive relief therefrom and the conditions of
such orders. Copies of any such orders shall be promptly forwarded by
the Trust to the Company.
8.5. All liabilities of the Trust arising, directly or indirectly, under
this Agreement, of any and every nature whatsoever, shall be satisfied
solely out of the assets of the Trust and no Trustee, officer, agent or
holder of shares of beneficial interest of the Trust shall be
personally liable for any such liabilities.
8.6. Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Commission,
the National Association of Securities Dealers, Inc. and state
insurance regulators) and shall permit such authorities reasonable
access to its books and records in connection with any investigation or
inquiry relating to this Agreement or the transactions contemplated
hereby.
8.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
8.8. This Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the
other party.
8.10. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by both parties.
8.11 A computer disk of this and all other signed agreements between the
parties shall be provided by the Distributor to the Company.
8.12. Each party hereto shall, except as required by law or otherwise
permitted by this Agreement, treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto, and
shall not disclose such confidential information without the written
consent of the affected party unless such information has become
publicly available. Nothing in this
<PAGE>
provision shall prevent the Company from disseminating information
regarding its Contract owners to its affiliates.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
Fred Alger and Company, Incorporated
By:________________________________
Name:
Title:
The Alger American Fund
By:_________________________________
Name:
Title:
ReliaStar Bankers Security Life Insurance Company
By:___________________________________
Name:
Title:
JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 8th day of August, 1997, between JANUS
ASPEN SERIES, an open-end management investment company organized as a Delaware
business trust (the "Trust"), and RELIASTAR BANKERS SECURITY LIFE INSURANCE
COMPANY, a life insurance company organized under the laws of the State of New
York (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 shares under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has received an order from the Securities and
Exchange Commission granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
to the extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the Company has registered or will register (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 (unless
registration is not required under applicable law) each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Company desires to utilize shares of one or more
Portfolios as an investment vehicle of the Accounts;
<PAGE>
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 11:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.4 Purchase orders that are transmitted to the Trust in accordance
with Section 1.3 shall be paid for no later than 12:00 noon New York time on the
same Business Day that the Trust receives notice of the order. Payments shall be
made in federal funds transmitted by wire.
1.5 Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Trust will be recorded in the appropriate title for each
Account or the appropriate subaccount of each Account.
<PAGE>
1.6 The Trust shall furnish prompt notice 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 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
Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and statements
of additional information of the Trust. The Trust shall bear the costs of
registration and qualification of its shares, preparation and filing of the
documents listed in this Section 2.1 and all taxes to which an issuer is subject
on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust shall either (a) provide
the Company (at the Company's expense) with as many copies of the Trust's
current prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
as the Company shall reasonably request; or (b) provide the Company with a
camera ready copy of such documents in a form suitable for printing. At the
Company's request, the Trust will also provide such materials on computer
diskette in such "read-only" format as mutually agreed upon by the parties. 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.
<PAGE>
2.3 The Company shall bear the costs of printing or otherwise
reproducing 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. If the Company elects to include any such materials
on its Website, 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 The Company shall furnish, or cause to be furnished, to the Trust
or its designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or its investment adviser is named prior to the
filing of such document with the Securities and Exchange Commission. The Company
shall furnish, or shall cause to be furnished, to the Trust or its designee,
each piece of sales literature or other promotional material in which the Trust
or its investment adviser is named, at least 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.
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
<PAGE>
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,
provided that the Company shall incur no liability to the Trust by reason of
this section.
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 New York 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 (1) 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 (2) has not been registered in proper reliance upon
an exclusion from registration under 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;
<PAGE>
and the sale of the Contracts shall comply in all material respects with state
insurance suitability requirements.
3.4 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Delaware.
3.5 The Trust represents and warrants that the Trust shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Trust shall be registered under the 1940 Act prior to any issuance or sale of
such shares. The Trust shall amend its registration statement under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify its shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Trust.
3.6 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in Section
817(h) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
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.
<PAGE>
4.3 If it is determined by a majority of the Trustees, or a majority of
its disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its expense and to the extent reasonably practicable (as determined by the
Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any appropriate
group (i.e., annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected Contract owners
the option of making such a change; and (b) establishing a new registered
management investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
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
<PAGE>
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 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:
(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
<PAGE>
Company by or on behalf of the Trust for use in Company Documents or
otherwise for use in connection with the sale of the Contracts or Trust
shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Trust Documents as defined in Section 5.2(a)) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately derived
from written information furnished to the Trust by or on behalf of the
Company; or
(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
<PAGE>
(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
(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
<PAGE>
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
ARTICLE VI
Termination
6.1 This Agreement may be terminated by either party for any reason by
sixty (60) days advance written notice delivered to the other party.
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
If to the Company:
ReliaStar Bankers Security Life Insurance Company
5th Floor
20 Washington Ave. South
Minneapolis, Minnesota 55401
Attention: Stewart Gregg
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.
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.
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
JANUS ASPEN SERIES
By: _______________________________
Name: _______________________________
Title: _______________________________
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
By: ________________________________
Name: ________________________________
Title: ________________________________
<PAGE>
Schedule A
Separate Accounts
Name of Separate Account
- ------------------------
ReliaStar Bankers Variable Life Separate Account I
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the 8th day of August, 1997, by and between
NEUBERGER&BERMAN ADVISERS MANAGEMENT TRUST ("TRUST"), a Delaware business trust,
ADVISERS MANAGERS TRUST ("MANAGERS TRUST"), a New York common law trust,
NEUBERGER&BERMAN MANAGEMENT INCORPORATED ("N&B MANAGEMENT"), a New York
corporation, and RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY ("LIFE
COMPANY"), a life insurance company organized under the laws of the State of New
York.
WHEREAS, TRUST and MANAGERS TRUST are registered with the Securities
and Exchange Commission ("SEC") under the Investment Company Act of 1940, as
amended ("40 Act") as open-end, diversified management investment companies; and
WHEREAS, TRUST is organized as a series fund comprised of several
portfolios ("Portfolios"), the currently available of which are listed on
Appendix A hereto; and
WHEREAS, MANAGERS TRUST is organized as a series fund, comprised of
several portfolios ("Series"), the currently operational of which are listed on
Appendix A hereto; and
WHEREAS, each Portfolio of TRUST will invest all of its net investable
assets in a corresponding Series of MANAGERS TRUST; and
WHEREAS, TRUST was organized to act as the funding vehicle for certain
variable life insurance and/or variable annuity contracts ("Variable Contracts")
offered by life insurance companies through separate accounts of such life
insurance companies ("Participating Insurance Companies") and also offers its
shares to certain qualified pension and retirement plans; and
WHEREAS, TRUST has received an order from the SEC, dated May 5,1995
(File No. 812-9164), granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the '40 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
to the extent necessary to permit shares of the Portfolios of the 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 "Order"); and
WHEREAS, LIFE COMPANY has established or will establish one or more
separate accounts ("Separate Accounts") to offer Variable Contracts and is
desirous of having TRUST as one of the underlying funding vehicles for such
Variable Contracts; and
<PAGE>
WHEREAS, N&B MANAGEMENT is registered with the SEC as an investment
adviser under the Investment Advisers Act of 1940 and as a broker-dealer under
the Securities Exchange Act of 1934, as amended; and
WHEREAS, N&B MANAGEMENT is the administrator and distributor of the
shares of each Portfolio of TRUST and investment manager of the corresponding
Series of MANAGERS TRUST; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase shares of TRUST to fund the
aforementioned Variable Contracts and TRUST is authorized to sell such shares to
LIFE COMPANY at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, LIFE
COMPANY, TRUST, MANAGERS TRUST and N&B MANAGEMENT agree as follows:
Article I. SALE OF TRUST SHARES
1.1 TRUST agrees to make available to the Separate Accounts of LIFE
COMPANY shares of the selected Portfolios as listed in Appendix B for investment
of proceeds from Variable Contracts allocated to the designated Separate
Accounts, such shares to be offered as provided in TRUST's Prospectus.
1.2 TRUST agrees to sell to LIFE COMPANY those shares of the selected
Portfolios of TRUST which LIFE COMPANY orders, executing such orders on a daily
basis at the net asset value next computed after receipt by TRUST or its
designee of the order for the shares of TRUST. For purposes of this Section 1.2,
LIFE COMPANY shall be the designee of TRUST for receipt of such orders from LIFE
COMPANY and receipt by such designee shall constitute receipt by TRUST; provided
that TRUST receives notice of such order by 8:30 a.m. New York time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which TRUST calculates its net asset
value pursuant to the rules of the SEC.
1.3 TRUST agrees to redeem for cash, on LIFE COMPANY's request, any
full or fractional shares of TRUST held by LIFE COMPANY, executing such requests
on a daily basis at the net asset value next computed after receipt by TRUST or
its designee of the request for redemption. For purposes of this Section 1.3,
LIFE COMPANY shall be the designee of TRUST for receipt of requests for
redemption from LIFE COMPANY and receipt by such designee shall constitute
receipt by TRUST; provided that TRUST receives notice of such request for
redemption by 8:30 a.m. New York time on the next following Business Day.
<PAGE>
1.4 TRUST shall furnish, on or before the ex-dividend date, notice to
LIFE COMPANY of any income dividends or capital gain distributions payable on
the shares of any Portfolio of TRUST. LIFE COMPANY hereby elects to receive all
such income dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of the Portfolio. TRUST shall notify
LIFE COMPANY of the number of shares so issued as payment of such dividends and
distributions.
1.5 TRUST shall make the net asset value per share for the selected
Portfolio(s) available to LIFE COMPANY on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated but shall use its
best efforts to make such net asset value available by 6:30 p.m. New York time.
If TRUST provides LIFE COMPANY with materially incorrect share net asset value
information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the
Separate Accounts, shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct share net asset value. Any material
error in the calculation of net asset value per share, dividend or capital gain
information shall be reported promptly upon discovery to LIFE COMPANY.
1.6 At the end of each Business Day, LIFE COMPANY shall use the
information described in Section 1.5 to calculate Separate Account unit values
for the day. Using these unit values, LIFE COMPANY shall process each such
Business Day's Separate Account transactions based on requests and premiums
received by it by the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m. New York time) to determine the net dollar amount
of TRUST shares which shall be purchased or redeemed at that day's closing net
asset value per share. The net purchase or redemption orders so determined shall
be transmitted to TRUST by LIFE COMPANY by 8:30 a.m. New York Time on the
Business Day next following LIFE COMPANY's receipt of such requests and premiums
in accordance with the terms of Sections 1.2 and 1.3 hereof.
1.7 If LIFE COMPANY's order requests the purchase of TRUST shares, LIFE
COMPANY shall pay for such purchase by wiring federal funds to TRUST or its
designated custodial account on the day the order is transmitted by LIFE
COMPANY. If LIFE COMPANY's order requests a net redemption resulting in a
payment of redemption proceeds to LIFE COMPANY, TRUST shall wire the redemption
proceeds to LIFE COMPANY by the next Business Day, unless doing so would require
TRUST to dispose of portfolio securities or otherwise incur additional costs,
but in such event, proceeds shall be wired to LIFE COMPANY within seven days and
TRUST shall notify the person designated in writing by LIFE COMPANY as the
recipient for such notice of such delay by 3:00 p.m. New York Time the same
Business Day that LIFE COMPANY transmits the redemption order to TRUST. If LIFE
COMPANY's order requests the application of redemption
<PAGE>
proceeds from the redemption of shares to the purchase of shares of another fund
administered or distributed by N&B MANAGEMENT, TRUST shall so apply such
proceeds the same Business Day that LIFE COMPANY transmits such order to TRUST.
1.8 Notwithstanding Section 1.7, TRUST reserves the right to suspend
the right of redemption or postpone the date of payment or satisfaction upon
redemption consistent with Section 22(e) of the '40 Act and any rules
thereunder.
1.9 TRUST agrees that all shares of the Portfolios of TRUST will be
sold only to Participating Insurance Companies which have agreed to participate
in TRUST to fund their Separate Accounts and/or to certain qualified pension and
other retirement plans, all in accordance with the requirements of Section
817(h) of the Internal Revenue Code of 1986, as amended ("Code") and Treasury
Regulation 1.817-5. Shares of the Portfolios of TRUST will not be sold directly
to the general public.
1.10 TRUST may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of the 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 of Trustees of TRUST, acting in good faith and
in light of its fiduciary duties under federal and any applicable state laws,
deemed necessary and in the best interests of the shareholders of such
Portfolios.
Article II. REPRESENTATIONS AND WARRANTIES
2.1 LIFE COMPANY represents and warrants that it is an insurance
company duly organized and in good standing under the laws of Minnesota and that
it has legally and validly established each Separate Account as a segregated
asset account under such laws, and that Washington Square Securities, Inc., the
principal underwriter for the Variable Contracts, is registered as a
broker-dealer under the Securities Exchange Act of 1934.
2.2 LIFE COMPANY represents and warrants that it has registered or,
prior to any issuance or sale of the Variable Contracts, will register each
Separate Account as a unit investment trust ("UIT") in accordance with the
provisions of the '40 Act and cause each Separate Account to remain so
registered to serve as a segregated asset account for the Variable Contracts,
unless an exemption from registration is available.
2.3 LIFE COMPANY represents and warrants that the Variable Contracts
will be registered under the Securities Act of 1933 (the "`33 Act") unless an
exemption from registration is available prior to any issuance or sale of the
Variable Contracts and that the
<PAGE>
Variable Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws and further that the sale of
the Variable Contracts shall comply in all material respects with state
insurance law suitability requirements.
2.4 LIFE COMPANY represents and warrants that the Variable Contracts
are currently and at the time of issuance will be treated as life insurance,
endowment or annuity contracts under applicable provisions of the Code, that it
will maintain such treatment and that it will notify TRUST immediately upon
having a reasonable basis for believing that the Variable Contracts have ceased
to be so treated or that they might not be so treated in the future.
2.5 LIFE COMPANY represents and warrants that it shall deliver such
prospectuses, statements of additional information, proxy statements and
periodic reports of the Trust as required to be delivered under applicable
federal or state law and interpretations of federal and state securities
regulators thereunder in connection with the offer, sale or acquisition of the
Variable Contracts.
2.6 LIFE COMPANY represents and warrants that no existing text or
formatting of TRUST'S prospectus as delivered to LIFE COMPANY in electronic
format will be revised or altered by LIFE COMPANY or any employee or agent of
LIFE COMPANY.
2.7 TRUST represents and warrants that the Portfolio shares offered and
sold pursuant to this Agreement will be registered under the '33 Act and sold in
accordance with all applicable federal and state laws, and TRUST shall be
registered under the '40 Act prior to and at the time of any issuance or sale of
such shares. TRUST shall amend its registration statement under the '33 Act and
the '40 Act from time to time as required in order to effect the continuous
offering of its shares. 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 TRUST.
2.8 TRUST represents and warrants that each Portfolio will comply with
the diversification requirements set forth in Section 817(h) of the Code, and
the rules and regulations thereunder, including without limitation Treasury
Regulation 1.817-5, and will notify LIFE COMPANY immediately upon having a
reasonable basis for believing any Portfolio has ceased to comply or might not
so comply and will immediately take all reasonable steps to adequately diversify
the Portfolio to achieve compliance within the grace period afforded by
Regulation 1.817-5.
2.9 TRUST represents and warrants that each Portfolio invested in by
the Separate Account is currently qualified as a
<PAGE>
"regulated investment company" under Subchapter M of the Code, that it will make
every effort to maintain such qualification and will notify LIFE COMPANY
immediately upon having a reasonable basis for believing it has ceased to so
qualify or might not so qualify in the future.
Article III. PROSPECTUS AND PROXY STATEMENTS
3.1 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 TRUST.
TRUST shall bear the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this Section 3.1
and all taxes to which an issuer is subject on the issuance and transfer of its
shares.
3.2 TRUST will bear the printing costs (or duplicating costs with
respect to the statement of additional information) and mailing costs associated
with the delivery of the following TRUST (or individual Portfolio) documents,
and any supplements thereto, to existing Variable Contract owners of LIFE
COMPANY:
(i) prospectuses and statements of additional
information;
(ii) annual and semi-annual reports; and
(iii) proxy materials.
LIFE COMPANY will submit any bills for printing, duplicating
and/or mailing costs, relating to the TRUST documents described above, to TRUST
for reimbursement by TRUST. LIFE COMPANY shall monitor such costs and shall use
its best efforts to control these costs. LIFE COMPANY will provide TRUST on a
semi-annual basis, or more frequently as reasonably requested by TRUST, with a
current tabulation of the number of existing Variable Contract owners of LIFE
COMPANY whose Variable Contract values are invested in TRUST. This tabulation
will be sent to TRUST in the form of a letter signed by a duly authorized
officer of LIFE COMPANY attesting to the accuracy of the information contained
in the letter. If requested by LIFE COMPANY, the TRUST shall provide such
documentation (including a final copy of the TRUST's prospectus as set in type
or in camera-ready copy) and other assistance as is reasonably necessary in
order for LIFE COMPANY to print together in one document the current prospectus
for the Variable Contracts issued by LIFE COMPANY and the current prospectus for
the TRUST. Should LIFE COMPANY wish to print any of these documents in a format
different from that provided by TRUST, LIFE COMPANY shall
<PAGE>
provide Trust with sixty (60) days' prior written notice and LIFE COMPANY shall
bear the cost associated with any format change.
3.3 TRUST will provide, at its expense, LIFE COMPANY with the following
TRUST (or individual Portfolio) documents, and any supplements thereto, with
respect to prospective Variable Contract owners of LIFE COMPANY:
(i) camera-ready copy of the current prospectus for
printing by the LIFE COMPANY;
(ii) a copy of the statement of additional information
suitable for duplication;
(iii) camera-ready copy of proxy material suitable for
printing; and
(iv) camera-ready copy of the annual and semi- annual
reports for printing by the LIFE COMPANY.
3.4 TRUST will provide LIFE COMPANY with at least one complete copy of
all prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications and all amendments or
supplements to any of the above that relate to the Portfolios promptly after the
filing of each such document with the SEC or other regulatory authority. TRUST,
upon request of LIFE COMPANY, will provide LIFE COMPANY with electronic copies
of TRUST'S prospectus for use by LIFE COMPANY in the delivery of the TRUST'S
prospectus on an individual basis to current and prospective Variable Contract
Owners. LIFE COMPANY will provide TRUST with at least one complete copy of all
prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications and all amendments or
supplements to any of the above that relate to a Separate Account promptly after
the filing of each such document with the SEC or other regulatory authority.
Article IV. SALES MATERIALS
4.1 LIFE COMPANY will furnish, or will cause to be furnished, to TRUST
and N&B MANAGEMENT, each piece of sales literature or other promotional material
in which TRUST, MANAGERS TRUST or N&B MANAGEMENT is named, at least fifteen (15)
Business Days prior to its intended use. No such material will be used if TRUST,
MANAGERS TRUST or N&B MANAGEMENT objects to its use in writing within ten (10)
Business Days after receipt of such material.
4.2 TRUST and N&B MANAGEMENT will furnish, or will cause to be
furnished, to LIFE COMPANY, each piece of sales literature or
<PAGE>
other promotional material in which LIFE COMPANY or its Separate Accounts are
named, at least fifteen (15) Business Days prior to its intended use. No such
material will be used if LIFE COMPANY objects to its use in writing within ten
(10) Business Days after receipt of such material.
4.3 TRUST and its affiliates and agents shall not give any information
or make any representations on behalf of LIFE COMPANY or concerning LIFE
COMPANY, the Separate Accounts, or the Variable Contracts issued by LIFE
COMPANY, other than the information or representations contained in a
registration statement or prospectus for such Variable Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in reports of the Separate Accounts or reports prepared for
distribution to owners of such Variable Contracts, or in sales literature or
other promotional material approved by LIFE COMPANY or its designee, except with
the written permission of LIFE COMPANY.
4.4 LIFE COMPANY and its affiliates and agents shall not give any
information or make any representations on behalf of TRUST or concerning TRUST
other than the information or representations contained in a registration
statement or prospectus for TRUST, as such registration statement and prospectus
may be amended or supplemented from time to time, or in sales literature or
other promotional material approved by TRUST or its designee, except with the
written permission of TRUST.
4.5 For purposes of this Agreement, the phrase "sales literature or
other promotional material" or words of similar import include, without
limitation, advertisements (such as material published, or designed for use, in
a newspaper, magazine or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures or other
public media), sales literature (such as any written communication distributed
or made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts, or
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, registration
statements, prospectuses, statements of additional information, shareholder
reports and proxy materials, and any other material constituting sales
literature or advertising under National Association of Securities Dealers, Inc.
rules, the '40 Act or the '33 Act.
Article V. POTENTIAL CONFLICTS
<PAGE>
5.1 The Board of Trustees of TRUST and MANAGERS TRUST (the "Boards")
will monitor TRUST and MANAGERS TRUST, respectively, (collectively the "Funds"),
for the existence of any material irreconcilable conflict between the interests
of the Variable Contract owners of Participating Insurance Company Separate
Accounts investing in the Funds. A material irreconcilable conflict may arise
for a variety of reasons, including: (a) state insurance regulatory authority
action; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling, or
any similar action by insurance, tax, or securities regulatory authorities; (c)
an administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of the Funds are being managed; (e) a difference
in voting instructions given by variable annuity and variable life insurance
contract owners or by contract owners of different Participating Insurance
Companies; or (f) a decision by a Participating Insurance Company to disregard
voting instructions of Variable Contract owners.
5.2 LIFE COMPANY will report any potential or existing conflicts to the
Boards. LIFE COMPANY will be responsible for assisting each appropriate Board in
carrying out its responsibilities under the Conditions set forth in the notice
issued by the SEC for the Funds on April 12, 1995 (the "Notice") (Investment
Company Act Release No. 21003), which LIFE COMPANY has reviewed, by providing
each appropriate Board with all information reasonably necessary for it to
consider any issues raised. This responsibility includes, but is not limited to,
an obligation by LIFE COMPANY to inform each appropriate Board whenever Variable
Contract owner voting instructions are disregarded by LIFE COMPANY. These
responsibilities will be carried out with a view only to the interests of the
Variable Contract owners.
5.3 If a majority of the Board of a Fund or a majority of its
disinterested trustees or directors, determines that a material irreconcilable
conflict exists, affecting the LIFE COMPANY, LIFE COMPANY, at its expense and to
the extent reasonably practicable (as determined by a majority of disinterested
trustees or directors), will take any steps necessary to remedy or eliminate the
irreconcilable material conflict, including: (a) withdrawing the assets
allocable to some or all of the Separate Accounts from the Funds or any series
thereof and reinvesting those assets in a different investment medium, which may
include another series of TRUST or MANAGERS TRUST, or another investment company
or submitting the question as to whether such segregation should be implemented
to a vote of all affected Variable Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., Variable Contract owners
of one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Variable Contract owners the option of
<PAGE>
making such a change; and (b) establishing a new registered management
investment company or managed separate account. If a material irreconcilable
conflict arises because of LIFE COMPANY's decision to disregard Variable
Contract owner voting instructions, and that decision represents a minority
position or would preclude a majority vote, LIFE COMPANY may be required, at the
election of the relevant Fund, to withdraw its Separate Account's investment in
such Fund, and no charge or penalty will be imposed as a result of such
withdrawal. The responsibility to take such remedial action shall be carried out
with a view only to the interests of the Variable Contract owners.
For the purposes of this Section 5.3, a majority of the disinterested
members of the applicable Board shall determine whether or not any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the relevant Fund or N&B MANAGEMENT (or any other investment adviser of the
Funds) be required to establish a new funding medium for any Variable Contract.
Further, LIFE COMPANY shall not be required by this Section 5.3 to establish a
new funding medium for any Variable Contract if any offer to do so has been
declined by a vote of a majority of Variable Contract owners materially affected
by the irreconcilable material conflict.
5.4 Any Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly and in
writing to LIFE COMPANY.
5.5 No less than annually, LIFE COMPANY shall submit to the Boards such
reports, materials or data as such Boards may reasonably request so that the
Boards may fully carry out the obligations imposed upon them by these
Conditions. Such reports, materials, and data shall be submitted more frequently
if deemed appropriate by the applicable Boards.
Article VI. VOTING
6.1 LIFE COMPANY will provide pass-through voting privileges to all
Variable Contract owners so long as the SEC continues to interpret the '40 Act
as requiring pass-through voting privileges for Variable Contract owners. This
condition will apply to UIT- Separate Accounts investing in TRUST and to managed
separate accounts investing in MANAGERS TRUST to the extent a vote is required
with respect to matters relating to MANAGERS TRUST. Accordingly, LIFE COMPANY,
where applicable, will vote shares of a Fund held in its Separate Accounts in a
manner consistent with voting instructions timely received from its Variable
Contract owners. LIFE COMPANY will be responsible for assuring that each of its
Separate Accounts that participates in any Fund calculates voting privileges in
a manner consistent with other participants as
<PAGE>
defined in the Conditions set forth in the Notice ("Participants"). The
obligation to calculate voting privileges in a manner consistent with all other
Separate Accounts investing in a Fund will be a contractual obligation of all
Participants under the agreements governing participation in the Funds. Each
Participant will vote shares for which it has not received timely voting
instructions, as well as shares it owns, in the same proportion as its votes
those shares for which it has received voting instructions.
6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the '40
Act or the rules thereunder with respect to mixed and shared funding on terms
and conditions materially different from any exemptions granted in the Order,
then TRUST, MANAGERS TRUST and/or the Participants, as appropriate, shall take
such steps as may be necessary to comply with Rule 6e-2 and Rule 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such Rules are applicable.
Article VII. INDEMNIFICATION
7.1 Indemnification by LIFE COMPANY. LIFE COMPANY agrees to indemnify
and hold harmless TRUST, MANAGERS TRUST, N&B MANAGEMENT and each of their
Trustees, directors, officers, employees and agents and each person, if any, who
controls TRUST or MANAGERS TRUST or N&B MANAGEMENT within the meaning of Section
15 of the '33 Act (collectively, the "Indemnified Parties" for purposes of this
Article VII) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of LIFE COMPANY, which
consent shall not be unreasonably withheld) or litigation (including 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 offer, sale or acquisition of TRUST's shares or the Variable
Contracts and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the Registration Statement or prospectus for the Variable
Contracts or contained in the Variable Contracts (or any
amendment or 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
<PAGE>
or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to
LIFE COMPANY by or on behalf of TRUST for use in the
registration statement or prospectus for the Variable
Contracts or in the Variable Contracts or sales literature (or
any amendment or supplement) or otherwise for use in
connection with the sale of the Variable Contracts or TRUST
shares; or
(b) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature of TRUST not supplied by LIFE COMPANY, or persons
under its control) or wrongful conduct of LIFE COMPANY or
persons under its control, with respect to the sale or
distribution of the Variable Contracts or TRUST shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of TRUST or any
amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to TRUST by or on behalf
of LIFE COMPANY; or
(d) arise as a result of any failure by LIFE COMPANY to
substantially provide the services and furnish the materials
under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by LIFE COMPANY in this
Agreement or arise out of or result from any other material
breach of this Agreement by LIFE COMPANY.
7.2 LIFE COMPANY shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
<PAGE>
Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to TRUST, whichever is applicable.
7.3 LIFE COMPANY shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified LIFE COMPANY in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify LIFE COMPANY of any
such claim shall not relieve LIFE COMPANY from any liability which it may have
to the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, LIFE COMPANY shall be entitled to participate at
its own expense in the defense of such action. LIFE COMPANY also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from LIFE COMPANY to such party of LIFE
COMPANY's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and LIFE
COMPANY will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
7.4 Indemnification by N&B MANAGEMENT. N&B MANAGEMENT agrees to
indemnify and hold harmless LIFE COMPANY and each of its directors, officers,
employees, and agents and each person, if any, who controls LIFE COMPANY within
the meaning of Section 15 of the '33 Act (collectively, the "Indemnified
Parties" for the purposes of this Article VII) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of N&B MANAGEMENT which consent shall not be unreasonably
withheld) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the
offer, sale or acquisition of TRUST's shares or the Variable Contracts and:
(a) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement or prospectus
or sales literature of TRUST (or any amendment or
supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged
omission to state therein a material fact required to
be stated therein or necessary to
<PAGE>
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 N&B MANAGEMENT or TRUST by
or on behalf of LIFE COMPANY for use in the
registration statement or prospectus for TRUST or in
sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Variable Contracts or TRUST shares; or
(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus or sales literature for the
Variable Contracts not supplied by N&B MANAGEMENT or
persons under its control) or wrongful conduct of
TRUST or N&B MANAGEMENT or persons under their
control, with respect to the sale or distribution of
the Variable Contracts or TRUST shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, or sales
literature covering the Variable Contracts, or any
amendment thereof or supplement thereto or the
omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, if such statement or omission or such
alleged statement or omission was made in reliance
upon and in conformity with information furnished to
LIFE COMPANY for inclusion therein by or on behalf of
TRUST; or
(d) arise as a result of (i) a failure by TRUST to
substantially provide the services and furnish the
materials under the terms of this Agreement; or
(ii) a failure by a Portfolio(s) invested in by
the Separate Account to comply with the
diversification requirements of Section 817(h) of
the Code; or (iii) a failure by a Portfolio(s)
invested in by the Separate Account to qualify as
a "regulated investment company" under Subchapter M
of the Code; or
(e) arise out of or result from any material breach of
any representation and/or warranty made by N&B
<PAGE>
MANAGEMENT in this Agreement or arise out of or
result from any other material breach of this
Agreement by N&B MANAGEMENT.
7.5 N&B MANAGEMENT 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
LIFE COMPANY.
7.6 N&B MANAGEMENT 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 N&B MANAGEMENT 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 N&B MANAGEMENT of
any such claim shall not relieve N&B MANAGEMENT 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, N&B MANAGEMENT shall be entitled to participate
at its own expense in the defense thereof. N&B MANAGEMENT also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from N&B MANAGEMENT to such party of N&B MANAGEMENT's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and N&B MANAGEMENT
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
Article VIII. TERM; TERMINATION
8.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions herein.
8.2 This Agreement shall terminate in accordance with the following
provisions:
(a) At the option of LIFE COMPANY or TRUST at any time
from the date hereof upon 60 days' notice, unless a
shorter time is agreed to by the parties;
<PAGE>
(b) At the option of LIFE COMPANY, if TRUST shares are
not reasonably available to meet the requirements of
the Variable Contracts as determined by LIFE COMPANY.
Prompt notice of election to terminate shall be
furnished by LIFE COMPANY, said termination to be
effective ten days after receipt of notice unless
TRUST makes available a sufficient number of shares
to reasonably meet the requirements of the Variable
Contracts within said ten-day period;
(c) At the option of LIFE COMPANY, upon the institution
of formal proceedings against TRUST by the SEC, or
any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which
would, in LIFE COMPANY's reasonable judgment,
materially impair TRUST's ability to meet and perform
Trust's obligations and duties hereunder. Prompt
notice of election to terminate shall be furnished by
LIFE COMPANY with said termination to be effective
upon receipt of notice;
(d) At the option of TRUST, upon the institution of
formal proceedings against LIFE COMPANY by the SEC,
the National Association of Securities Dealers, Inc.,
or any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which
would, in TRUST's reasonable judgment, materially
impair LIFE COMPANY's ability to meet and perform its
obligations and duties hereunder. Prompt notice of
election to terminate shall be furnished by TRUST
with said termination to be effective upon receipt of
notice;
(e) In the event TRUST's shares are not registered,
issued or sold in accordance with applicable state or
federal law, or such law precludes the use of such
shares as the underlying investment medium of
Variable Contracts issued or to be issued by LIFE
COMPANY. Termination shall be effective upon such
occurrence without notice;
(f) At the option of TRUST if the Variable Contracts
cease to qualify as annuity contracts or life
insurance contracts, as applicable, under the Code,
or if TRUST reasonably believes that the Variable
Contracts may fail to so qualify. Termination shall
be effective upon receipt of notice by LIFE COMPANY;
<PAGE>
(g) At the option of LIFE COMPANY, upon TRUST's breach of
any material provision of this Agreement, which
breach has not been cured to the satisfaction of LIFE
COMPANY within ten days after written notice of such
breach is delivered to TRUST;
(h) At the option of TRUST, upon LIFE COMPANY's breach of
any material provision of this Agreement, which
breach has not been cured to the satisfaction of
TRUST within ten days after written notice of such
breach is delivered to LIFE COMPANY;
(i) At the option of TRUST, if the Variable Contracts are
not registered, issued or sold in accordance with
applicable federal and/or state law. Termination
shall be effective immediately upon such occurrence
without notice;
(j) In the event this Agreement is assigned without the
prior written consent of LIFE COMPANY, TRUST,
MANAGERS TRUST and N&B MANAGEMENT, termination shall
be effective immediately upon such occurrence without
notice.
8.3 Notwithstanding any termination of this Agreement pursuant to
Section 8.2 hereof, TRUST at its option may elect to continue to make available
additional TRUST shares, as provided below, for so long as TRUST desires
pursuant to the terms and conditions of this Agreement, for all Variable
Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, if TRUST so elects to make additional TRUST shares available, the
owners of the Existing Contracts or LIFE COMPANY, whichever shall have legal
authority to do so, shall be permitted to reallocate investments in TRUST,
redeem investments in TRUST and/or invest in TRUST upon the payment of
additional premiums under the Existing Contracts. In the event of a termination
of this Agreement pursuant to Section 8.2 hereof, TRUST and N&B MANAGEMENT, as
promptly as is practicable under the circumstances, shall notify LIFE COMPANY
whether TRUST elects to continue to make TRUST shares available after such
termination. If TRUST shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect and
thereafter either TRUST or LIFE COMPANY may terminate the Agreement, as so
continued pursuant to this Section 8.3, upon sixty (60) days prior written
notice to the other party.
8.4 Except as necessary to implement Variable Contract owner initiated
transactions, or as required by state insurance laws or regulations, LIFE
COMPANY shall not redeem the shares attributable
<PAGE>
to the Variable Contracts (as opposed to the shares attributable to LIFE
COMPANY's assets held in the Separate Accounts), and LIFE COMPANY shall not
prevent Variable Contract owners from allocating payments to a Portfolio that
was otherwise available under the Variable Contracts, until thirty (30) days
after the LIFE COMPANY shall have notified TRUST of its intention to do so.
Article IX. NOTICES
Any notice hereunder shall be given by registered or certified mail
return receipt requested to the other party at the address of such party set
forth below or at such other address as such party may from time to time specify
in writing to the other party.
If to TRUST, MANAGERS TRUST or N&B MANAGEMENT:
Neuberger&Berman Management Incorporated
605 Third Avenue
New York, NY 10158-0006
Attention: Ellen Metzger, General Counsel
If to LIFE COMPANY:
ReliaStar Bankers Security Life Insurance
Company
20 Washington Avenue South
5th Floor
Minneapolis, MN 55401
Attention: Stewart Gregg, Esq.
Notice shall be deemed given on the date of receipt by the addressee as
evidenced by the return receipt.
Article X. MISCELLANEOUS
10.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
10.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.3 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
<PAGE>
10.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York. It
shall also be subject to the provisions of the federal securities laws and the
rules and regulations thereunder and to any orders of the SEC granting exemptive
relief therefrom and the conditions of such orders.
10.5 The parties agree that the assets and liabilities of each Series
are separate and distinct from the assets and liabilities of each other Series.
No Series shall be liable or shall be charged for any debt, obligation or
liability of any other Series. No Trustee, officer or agent shall be personally
liable for such debt, obligation or liability of any Series or Portfolio and no
Portfolio or other investor, other than the Portfolio or other investors
investing in the Series which incurs a debt, obligation or liability, shall be
liable therefor.
10.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, 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.
10.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
10.8 No provision of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by TRUST,
MANAGERS TRUST, N&B MANAGEMENT and the LIFE COMPANY.
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Fund Participation Agreement as of the date and year
first above written.
NEUBERGER&BERMAN
ADVISERS MANAGEMENT TRUST
By:________________________________
Name:
Title:
ADVISERS MANAGERS TRUST
By:________________________________
Name:
Title:
NEUBERGER&BERMAN
MANAGEMENT INCORPORATED
By:________________________________
Name:
Title:
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
By:________________________________
Name:
Title:
<PAGE>
APPENDIX A
<TABLE>
<CAPTION>
Neuberger&Berman Advisers Corresponding Series of
Management Trust and its Series (Portfolios) Advisers Managers Trust (Series)
- -------------------------------------------- --------------------------------
<S> <C>
Balanced Portfolio AMT Balanced Investments
Government Income Portfolio AMT Government Income Investments
Growth Portfolio AMT Growth Investments
Limited Maturity Bond Portfolio AMT Limited Maturity Bond Investments
Liquid Asset Portfolio AMT Liquid Asset Investments
Partners Portfolio AMT Partners Investments
International Portfolio AMT International Investments
</TABLE>
<PAGE>
APPENDIX B
<TABLE>
<CAPTION>
Separate Accounts Selected Portfolios
- ----------------- -------------------
<S> <C>
ReliaStar Bankers Security Variable Partners Portfolio
Life Separate Account I
Limited Maturity Bond Portfolio
</TABLE>
PARTICIPATION AGREEMENT
By and Among
OCC ACCUMULATION TRUST
And
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
And
OCC DISTRIBUTORS
THIS AGREEMENT, made and entered into this 8th day of August
1997 by and among ReliaStar Bankers Security Life Insurance Company, a New York
corporation (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 (each account referred to as the "Account"), OCC
ACCUMULATION TRUST, an open-end diversified management investment company
organized under the laws of the State of Massachusetts (hereinafter the "Fund")
and OCC DISTRIBUTORS, a Delaware general partnership (hereinafter the
"Underwriter").
WHEREAS, the Fund engages in business as an open-end
diversified, management investment company and was established for the purpose
of serving as the investment vehicle for separate accounts established for
variable life insurance contracts and variable annuity contracts to be offered
by insurance companies which have entered into participation agreements
substantially identical to this Agreement (hereinafter "Participating Insurance
Companies"); and
<PAGE>
WHEREAS, beneficial interests in the Fund are divided into
several series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has obtained an order from the Securities &
Exchange Commission (alternatively referred to as the "SEC" or the
"Commission"), dated February 22, 1995 (File No. 812-9290), granting
Participating Insurance Companies and variable annuity separate accounts and
variable life insurance separate accounts relief from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(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 separate accounts and variable life insurance
separate accounts of both affiliated and unaffiliated Participating Insurance
Companies and qualified pension and retirement plans (hereinafter the "Mixed and
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, the Company has registered or will register certain
variable annuity and variable life contracts (the "Contracts") under the 1933
Act; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors of
the Company under the insurance laws of the State of New York, to set aside and
invest assets attributable to the Contracts; and
<PAGE>
WHEREAS, the Company has registered the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with
the SEC under the Securities Exchange Act of 1934, as amended (hereinafter the
"1934 Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Portfolios named
in Schedule 2 on behalf of the Account to fund the Contracts and the Underwriter
is authorized to sell such shares to unit investment trusts such as the Account
at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund 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 the Company orders on behalf of the Account, executing
such orders on a daily basis at the net asset value next computed after receipt
and acceptance by the Fund or its agent of the order for the shares of the Fund.
For purposes of this Section 1.1, the Company shall be the designee of the Fund
for receipt of such orders from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
order by 10:00 a.m. Eastern Time on the next following Business Day. "Business
Day" shall mean any day on which
<PAGE>
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 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.
1.3. The Fund agrees to make its shares available indefinitely
for purchase at the applicable net asset value per share by Participating
Insurance Companies and their separate accounts on those days on which the Fund
calculates its net asset value pursuant to rules of the SEC; provided, however,
that the Board of Trustees of the Fund (hereinafter the "Directors") 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
Directors, 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 any Portfolio.
1.4. The Fund and the Underwriter agree that shares of the
Fund will be sold only to Participating Insurance Companies and their separate
accounts, qualified pension and retirement plans or such other persons as are
permitted under applicable provisions of the Internal Revenue Code of 1986, as
amended, (the "Internal Revenue Code"), and regulations promulgated thereunder,
the sale to which will not impair the tax treatment currently afforded the
contracts. No shares of any Portfolio will be sold to the general public.
1.5. 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
<PAGE>
Articles I, III, V, and VII of this Agreement are in effect to govern such
sales. The Fund shall make available upon written request from the Company (i) a
list of all other Participating Insurance Companies and (ii) a copy of the
Participation Agreement executed by any other Participating Insurance Company.
1.6. The Fund agrees to redeem for cash, upon the Company's
request, any full or fractional shares of the Fund held by the Company,
executing such requests on a daily basis at the net asset value next computed
after receipt and acceptance by the Fund or its agent of the request for
redemption. For purposes of this Section 1.6, 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 the Fund
receives notice of request for redemption by 10:00 a.m. Eastern Time on the next
following Business Day. Payment shall be in federal funds transmitted by wire to
the Company's account as designated by the Company in writing from time to time,
on the same Business Day the Fund receives notice of the redemption order from
the Company except that the Fund reserves the right to delay payment of
redemption proceeds, but in no event may such payment be delayed longer than the
period permitted under Section 22(e) of the 1940 Act. Neither the Fund nor the
Underwriter shall bear any responsibility whatsoever for the proper disbursement
or crediting of redemption proceeds; the Company alone shall be responsible for
such action. If notification of redemption is received after 10:00 a.m. Eastern
Time, payment for redeemed shares will be made on the next following Business
Day.
1.7. The Company agrees to purchase and redeem the shares of
the Portfolios named in Schedule 2 offered by the then current prospectus of the
Fund in accordance with the provisions of such prospectus. The Company agrees
that all net amounts available under the
<PAGE>
Contracts shall be invested in the Fund, 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 the Portfolios of the Fund named in
Schedule 2; 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 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; or (d) the Fund or Underwriter consents in writing to
the use of such other investment company.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock certificates will not be issued to the Company or any
Account. Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each Account or the appropriate subaccount of each
Account.
1.9. The Fund shall furnish notice as soon as reasonably
practicable 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 dividends and distributions as are payable on the Portfolio shares in
the form of additional shares of that Portfolio. The Company reserves the right
to revoke this election and to receive all such dividends and distributions in
cash. The Fund shall notify the Company of the number of shares so issued as
payment of such dividends and distributions.
<PAGE>
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 and shall use its
best efforts to make such net asset value per share available by 5:30 p.m.,
Eastern Time, each business day.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts
are or will be registered under the 1933 Act and that the Contracts will be
issued and sold in compliance with all applicable federal and state laws. The
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established each Account as a segregated asset account under applicable
state law and has registered each Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as segregated investment
accounts for the Contracts, and that it will maintain such registration for so
long as any Contracts are outstanding or will comply with applicable no-action
positions of the Securities and Exchange Commission staff. The Company shall
amend the registration statement under the 1933 Act for the Contracts and the
registration statement under the 1940 Act for the Account from time to time as
required in order to effect the continuous offering of the Contracts or as may
otherwise be required by applicable law. The Company shall register and qualify
the Contracts for sale in accordance with the securities laws of the various
states only if and to the extent deemed necessary by the Company.
2.2. The Company represents that it believes that the
Contracts are currently and at the time of issuance will be treated as annuity
contracts or life insurance contracts under
<PAGE>
applicable provisions of the Internal Revenue Code and that it will make every
effort to maintain such treatment and that it will notify the Fund and the
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.
2.3. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act and duly
authorized for issuance in accordance with applicable law and that the Fund is
and shall remain registered under the 1940 Act for as long as the Fund shares
are sold. 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.
2.4. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue 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.
2.5. The Fund represents that its investment objectives,
policies and restrictions comply with applicable state investment laws as they
may apply to the Fund. 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 and regulations of any
state. The Company alone shall be responsible for informing the Fund of any
insurance restrictions
<PAGE>
imposed by state insurance laws which are applicable to the Fund; however,
neither the Company nor the Fund shall have any liability to each other in
connection with the provision of notice of or compliance with any such
restrictions. To the extent feasible and consistent with market conditions, the
Fund will adjust its investments to comply with the aforementioned state
insurance laws upon written notice from the Company of such requirements and
proposed adjustments, it being agreed and understood that in any such case the
Fund shall be allowed a reasonable period of time under the circumstances after
receipt of such notice to make any such adjustment.
2.6. 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. To the extent that
it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund
undertakes to have its 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.
2.7. The Underwriter represents and warrants that it is a
member in good standing of the National Association of Securities Dealers, Inc.,
("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 all applicable federal and state 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 Massachusetts and that it does and will
comply with applicable provisions of the 1940 Act.
<PAGE>
2.9. The Underwriter represents and warrants that the Fund's
Adviser, OpCap Advisors, is and shall remain duly registered under all
applicable federal and state securities laws and that the Adviser will perform
its obligations to the Fund in accordance with the laws of Massachusetts 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 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.
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, in an amount not less
than $5 million. The aforesaid includes coverage for larceny and embezzlement
and is issued by a reputable bonding company. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company, at the
Company's expense, with as many copies of the Fund's current prospectus as the
Company may reasonably request for use
<PAGE>
with prospective contractowners and applicants. The Underwriter shall print and
distribute, at the Fund's or Underwriter's expense, as many copies of said
prospectus as necessary for distribution to existing contractowners or
participants. If requested by the Company in lieu thereof, the Fund shall
provide such documentation including a final copy of a current prospectus set in
type (or in computer format) at the Fund's expense and other assistance as is
reasonably necessary in order for the Company at least annually (or more
frequently if the Fund prospectus is amended more frequently) to have the new
prospectus for the Contracts and the Fund's new prospectus printed together in
one document. In such case the Fund shall bear its share of expenses as
described above.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or
alternatively from the Company (or, in the Fund's discretion, the Prospectus
shall state that such Statement is available from the Fund), and the Underwriter
(or the Fund) shall provide such Statement, at its expense, to the Company and
to any owner of or participant under a Contract who requests such Statement or,
at the Company's expense, to any prospective contractowner and applicant who
requests such statement.
3.3. The Fund, at its expense, shall provide the Company with
copies of its proxy material, if any, reports to shareholders and other
communications to shareholders in such quantity as the Company shall reasonably
require and shall bear the costs of distributing them to existing contractowners
or participants.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from
contractowners or participants;
<PAGE>
(ii) vote the Fund shares held in the Account in
accordance with instructions received from
contractowners or participants; and
(iii) vote Fund shares held in the Account for
which no timely instructions have been
received, in the same proportion as Fund
shares of such Portfolio for which
instructions have been received from the
Company's contractowners or participants;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass through voting privileges for variable contractowners. 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 other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular as required, 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 SEC interpretation of the requirements
of Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be
furnished, to the Fund or the Underwriter, each piece of sales literature or
other promotional material in which the Fund or the Fund's adviser or the
Underwriter is named, at least fifteen business days prior to its use. No
<PAGE>
such material shall be used if the Fund or the Underwriter reasonably objects in
writing 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 by
the Underwriter, except with the permission of the Fund or the Underwriter. The
Fund and the Underwriter agree to respond to any request for approval on a
prompt and timely basis.
4.3. The Fund or the Underwriter 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 separate account is
named, at least fifteen business days prior to its use. No such material shall
be used if the Company reasonably objects in writing 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
contractowners or participants, or in sales literature or other promotional
material approved by the Company, except with the permission of
<PAGE>
the Company. The Company agrees to respond to any request for approval on a
prompt and timely basis.
4.5. The Fund will provide to the Company at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Fund or its
shares, contemporaneously with the filing of such document with the SEC or other
regulatory authorities. The Fund will provide to the Company annual and
semi-annual reports to shareholders in computer format, if requested by the
Company.
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,
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
<PAGE>
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 NASD rules, the 1940 Act or the 1933 Act.
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, subject to obtaining any required exemptive orders
or other regulatory approvals, 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. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund of this
Agreement shall be paid by the Fund to the extent permitted by law. All Fund
shares will be duly authorized for issuance and registered in accordance with
applicable federal law and to the extent deemed advisable by the Fund, in
accordance with applicable state law, prior to 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, Fund
proxy materials and reports, setting in type, printing and distributing the
prospectuses, the proxy materials and reports to existing shareholders and
contractowners, the preparation of all statements and notices required by any
federal or state law, all taxes on the issuance or transfer of the Fund's
shares, and any
<PAGE>
expenses permitted to be paid or assumed by the Fund pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act.
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 Internal Revenue Code and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Fund will comply
with Section 817(h) of the Internal Revenue Code and Treasury Regulation
1.817-5, 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 accordance with guidelines provided by the
Company prior to the execution of this Agreement and as necessary thereafter. In
the event of a breach of this Article VI by the Fund, it will take all
reasonable steps (a) to notify the Company of such breach and (b) to adequately
diversify the Fund so as to achieve compliance with the grace period afforded by
Treasury Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board of Trustees of the Fund (the "Fund Board") will
monitor the Fund for the existence of any material irreconcilable conflict among
the interests of the contractowners of all separate accounts investing in the
Fund. An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance,
<PAGE>
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by Participating Insurance Companies or by variable annuity contract and
variable life insurance contractowners; or (f) a decision by an insurer to
disregard the voting instructions of contractowners. The Board shall promptly
inform the Company if it determines that an irreconcilable material conflict
exists and the implications thereof. A majority of the Fund Board shall consist
of persons who are not "interested" persons of the Fund.
7.2. 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. As set forth in the Mixed and Shared Funding
Exemptive Order, the Company will report any potential or existing conflicts of
which it is aware to the Fund Board. The Company agrees to assist the Fund Board
in carrying out its responsibilities under the Mixed and Shared Funding
Exemptive Order, by providing the Fund Board with all information reasonably
necessary for the Fund Board to consider any issues raised. This includes, but
is not limited to, an obligation by the Company to inform the Fund Board
whenever contractowner voting instructions are disregarded. The Fund Board shall
record in its minutes or other appropriate records, all reports received by it
and all action with regard to a conflict.
7.3. If it is determined by a majority of the Fund Board, or a
majority of its disinterested Directors, that an irreconcilable material
conflict exists, the Company and other Participating Insurance Companies shall,
at their expense and to the extent reasonably practicable (as determined by a
majority of the disinterested Directors), take whatever steps are necessary to
<PAGE>
remedy or eliminate the irreconcilable material conflict, up to and including:
(1) withdrawing the assets allocable to some or all of the separate accounts
from the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the Fund,
or submitting the question whether such segregation should be implemented to a
vote of all affected contractowners and, as appropriate, segregating the assets
of any appropriate group (i.e., variable annuity contractowners or variable life
insurance contractowners, of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected contractowners
the option of making such a change; and (2) establishing a new registered
management investment company or managed separate account.
7.4. If the Company's disregard of voting instructions could
conflict with the majority of contractowner voting instructions, and the
Company's judgment represents a minority position or would preclude a majority
vote, the Company may be required, at the Fund's election, to withdraw the
Account's investment in the Fund and terminate this Agreement with respect to
such Account. Any such withdrawal and termination must take place within 60 days
after the Fund gives written notice to the Company that this provision is being
implemented. Until the end of such 60 day 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 particular state insurance regulator's decision
applicable to the Company conflicts with the majority of other state insurance
regulators, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement with respect to such Account. Any such withdrawal
and termination must take place within 60 days after the Fund gives written
notice to the Company that this provision is being implemented. Until the end of
such 60 day
<PAGE>
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 Fund Board shall
determine whether any proposed action adequately remedies any irreconcilable
material conflict, but in no event will the Fund or OpCap Advisors 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 contractowners
materially adversely affected by the irreconcilable material conflict.
7.7. The Company shall at least annually submit to the Fund
Board such reports, materials or data as the Fund Board may reasonably request
so that the Fund Board may fully carry out the duties imposed upon it as
delineated in the Mixed and Shared Funding Exemptive Order, and said reports,
materials and data shall be submitted more frequently if deemed appropriate by
the Fund Board.
7.8. If and to the extent that Rule 6e-2 and Rule 6e-3 (T)
are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Mixed and Shared Funding Exemptive Order)
on terms and conditions materially different from those contained in the Mixed
and Shared Funding Exemptive Order, (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
<PAGE>
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the
Fund, the Underwriter, and each of the Fund's or the Underwriter's directors,
officers, employees or agents and each person, if any, who controls or is
associated with the Fund or the Underwriter within the meaning of such terms
under the federal securities laws (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 reasonable legal and other expenses), to
which the indemnified parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of
any material fact contained in the
registration statement, prospectus or
statement of additional information for the
Contracts or contained in the Contracts or
sales literature or other promotional
material for the Contracts (or any amendment
or supplement to any of the foregoing), 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 in light of the circumstances
in which they were made; provided that this
agreement to indemnify shall not apply as to
any indemnified party if such statement or
omission or such alleged statement or
omission was made in reliance upon and in
conformity with information furnished to the
Company by or on behalf of the Fund for use
in the registration statement, prospectus or
statement of additional information for the
Contracts or in the Contracts or sales
literature or other
<PAGE>
promotional material for the Contracts (or
any amendment or supplement) or otherwise
for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the
Company (other than statements or
representations contained in the Fund
registration statement, Fund prospectus,
Fund statement of additional information or
sales literature or other promotional
material 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 the Fund registration
statement, Fund prospectus, statement of
additional information or sales literature
or other promotional material of the Fund or
any amendment thereof or supplement thereto
or the omission or alleged omission to state
therein a material fact required to be
stated therein or necessary to make the
statements therein not misleading in light
of the circumstances in which they were
made, if such a statement or omission was
made in reliance upon and in conformity with
information furnished to the Fund by or on
behalf of the Company or persons under its
control; or
(iv) arise as a result of any failure by the
Company to provide the services and furnish
the materials or to make any payments under
the terms of this Agreement; or
(v) arise out of any material breach of any
representation and/or warranty made by the
Company in this Agreement or arise out of or
result from any other material breach by the
Company of this Agreement;
except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
(b) No party shall be entitled to indemnification if such
loss, claim, damage, liability or litigation is due to the willful misfeasance,
bad faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
<PAGE>
(c) 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
(a) The Underwriter, on its own behalf and on behalf of the
Fund, agrees to indemnify and hold harmless the Company and each of its
directors, officers, employees or agents and each person, if any, who controls
or is associated with the Company within the meaning of such terms under the
federal securities laws (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 reasonable legal and other expenses) to
which the indemnified parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any
material fact contained in the registration
statement, prospectus or statement of
additional information for the Fund or sales
literature or other promotional material of
the Fund (or any amendment or supplement to
any of the foregoing), or arise out of or
are based upon the omission or the alleged
omission to state therein a material fact
required to be stated therein or necessary
to make the statements therein not
misleading in light of the circumstances in
which they were made; provided that this
agreement to indemnify shall not apply as to
any indemnified party if such statement or
omission or such alleged statement or
omission was made in reliance upon and in
conformity with information furnished to the
Underwriter or Fund by or on behalf of the
Company for use in the registration
statement, prospectus or statement of
additional information for the Fund or in
sales literature or other promotional
material of the Fund (or any amendment or
supplement thereto) or otherwise for use in
connection with the sale of the Contracts or
Fund shares; or
<PAGE>
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Contracts
or in the Contract or Fund registration
statement, the Contract or Fund prospectus,
statement of additional information, or
sales literature or other promotional
material for the Contracts or of the Fund
not supplied by the Underwriter or the Fund
or persons under the control of the
Underwriter or the Fund respectively) or
wrongful conduct of the Underwriter or the
Fund or persons under the control of the
Underwriter or the Fund respectively, 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, statement of additional
information or sales literature or other
promotional material covering the Contracts
(or any amendment thereof or supplement
thereto), or the omission or alleged
omission to state therein a material fact
required to be stated therein or necessary
to make the statement or statements therein
not misleading in light of the circumstances
in which they were made, if such statement
or omission was made in reliance upon and in
conformity with information furnished to the
Company by or on behalf of the Underwriter
or the Fund or persons under the control of
the Underwriter or 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 and
procedures related thereto specified in
Article VI of this Agreement except if such
failure is a result of the Company's failure
to comply with the notification procedures
specified in Article VI); or
(v) arise out of or result from any material
breach of any representation and/or warranty
made by the Underwriter or the Fund in this
Agreement or arise out of or result from any
other material breach of this Agreement by
the Underwriter or the Fund;
except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Underwriter may
otherwise have.
<PAGE>
(b) No party shall be entitled to indemnification if such
loss, claim, damage, liability or litigation is due to the willful misfeasance,
bad faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the
Underwriter of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Contracts or the operation of the
Account.
8.3. Indemnification Procedure
Any person obligated to provide indemnification under this
Article VIII ("indemnifying party" for the purpose of this Section 8.3) shall
not be liable under the indemnification provisions of this Article VIII with
respect to any claim made against a party entitled to indemnification under this
Article VIII ("indemnified party" for the purpose of this Section 8.3) unless
such indemnified party shall have notified the indemnifying party in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
indemnified party (or after such party shall have received notice of such
service on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve the indemnifying party from any liability
which it may have to the indemnified party against whom such action is brought
under the indemnification provision of this Article VIII, except to the extent
that the failure to notify results in the failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result of
failure to give such notice. In case any such action is brought against the
indemnified party, the indemnifying party will be entitled to participate, at
its own expense, in the defense thereof. The indemnifying party also shall be
entitled to assume the defense thereof, with
<PAGE>
counsel satisfactory to the party named in the action. After notice from the
indemnifying party to the indemnified party of the indemnifying party's election
to assume the defense thereof, the indemnified party shall bear the fees and
expenses of any additional counsel retained by it, and the indemnifying party
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation, unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this Article VIII.
The indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
8.4. Contribution
In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Article VIII is
due in accordance with its terms but for any reason is held to be unenforceable
with respect to a party entitled to indemnification ("indemnified party" for
purposes of this Section 8.4) pursuant to the terms of this Article VIII, then
each party
<PAGE>
obligated to indemnify pursuant to the terms of this Article VIII shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and litigations in such proportion
as is appropriate to reflect the relative benefits received by the parties to
this Agreement in connection with the offering of Fund shares to the Account and
the acquisition, holding or sale of Fund shares by the Account, or if such
allocation is not permitted by applicable law, in such proportions as is
appropriate to reflect the relative net benefits referred to above but also the
relative fault of the parties to this Agreement in connection with any actions
that lead to such losses, claims, damages, liabilities or litigations, as well
as any other relevant equitable considerations.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the State of New
York.
9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon sixty days
advance written notice to the other parties unless otherwise agreed in a
separate written agreement among the parties; or
<PAGE>
(b) at the option of the Company if shares of the
Portfolios delineated in Schedule 2 are not reasonably available to meet the
requirements of the Contracts as determined by the Company; or
(c) at the option of the Fund upon institution of
formal proceedings against the Company by the NASD, the SEC, the insurance
commission of any state or any other regulatory body regarding the Company's
duties under this Agreement or related to the sale of the Contracts, the
administration of the Contracts, the operation of the Account, or the purchase
of the Fund shares, which would have a material adverse effect on the Company's
ability to perform its obligations under this Agreement; or
(d) at the option of the Company upon institution of
formal proceedings against the Fund or the Underwriter by the NASD, the SEC, or
any state securities or insurance department or any other regulatory body, which
would have a material adverse effect on the Fund's or the Underwriter's ability
to perform its obligations under this Agreement; or
(e) at the option of the Company or the Fund upon
receipt of any necessary regulatory approvals and/or the vote of the
contractowners having an interest in the Account (or any subaccount) to
substitute the shares of another investment company for the corresponding
Portfolio shares of the Fund in accordance with the terms of the Contracts for
which those Portfolio shares had been selected to serve as the underlying
investment media. The Company will give 30 days prior written notice to the Fund
of the date of any proposed vote or other action taken to replace the Fund's
shares; or
(f) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a majority of the
disinterested Fund Board members, that an
<PAGE>
irreconcilable material conflict exists among the interests of (i) all
contractowners of variable insurance products of all separate accounts or (ii)
the interests of the Participating Insurance Companies investing in the Fund as
delineated in Article VII of this Agreement; or
(g) at the option of the Company if the Fund ceases
to qualify as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code, or under any successor or similar provision, or if the Company
reasonably believes that the Fund may fail to so qualify; or
(h) at the option of the Company if the Fund fails to
meet the diversification requirements specified in Article VI hereof; or
(i) at the option of any party to this Agreement,
upon another party's material breach of any provision of this Agreement; or
(j) at the option of the Company, if the Company
determines in its sole judgment exercised in good faith, that either the Fund or
the Underwriter has suffered a material adverse change in its business,
operations or financial condition since the date of this Agreement or is the
subject of material adverse publicity which is likely to have a material adverse
impact upon the business and operations of the Company; or
(k) at the option of the Fund or Underwriter, if the
Fund or Underwriter respectively, shall determine in its sole judgment exercised
in good faith, that the Company has suffered a material adverse change in its
business, operations or financial condition since the date of this Agreement or
is the subject of material adverse publicity which is likely to have a material
adverse impact upon the business and operations of the Fund or Underwriter; or
<PAGE>
(l) at the option of the Fund in the event any of the
Contracts are not issued or sold in accordance with applicable federal and/or
state law. Termination shall be effective immediately upon such occurrence
without notice.
10.2. Notice Requirement
(a) In the event that any termination of this
Agreement is based upon the provisions of Article VII, such prior written notice
shall be given in advance of the effective date of termination as required by
such provisions.
(b) In the event that any termination of this
Agreement is based upon the provisions of Sections 10.1(b) - (d) or 10.1(g) -
(i), prompt written notice of the election to terminate this Agreement for cause
shall be furnished by the party terminating the Agreement to the non-terminating
parties, with said termination to be effective upon receipt of such notice by
the non-terminating parties.
(c) In the event that any termination of this
Agreement is based upon the provisions of Sections 10.1(j) or 10.1(k), prior
written notice of the election to terminate this Agreement for cause shall be
furnished by the party terminating this Agreement to the non-terminating
parties. Such prior written notice shall be given by the party terminating this
Agreement to the non-terminating parties at least 30 days before the effective
date of termination.
10.3. It is understood and agreed that the right to terminate
this Agreement pursuant to Section 10.1(a) may be exercised for any reason or
for no reason.
10.4. Effect of Termination
(a) Notwithstanding any termination of this Agreement
pursuant to Section 10.1 of this Agreement, and subject to Section 1.3 of this
Agreement, the Company may
<PAGE>
require the Fund and the Underwriter to, continue to make available additional
shares of the Fund for so long after the termination of this Agreement as the
Company desires pursuant to the terms and conditions of this Agreement as
provided in paragraph (b) below, 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 10.4 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.
(b) If shares of the Fund continue to be made
available after termination of this Agreement pursuant to this Section 10.4, the
provisions of this Agreement shall remain in effect except for Section 10.1(a)
and thereafter the Fund, the Underwriter, or the Company may terminate the
Agreement, as so continued pursuant to this Section 10.4, upon written notice to
the other party, such notice to be for a period that is reasonable under the
circumstances but, if given by the Fund or Underwriter, need not be for more
than 60 days.
10.5. Except as necessary to implement contractowner initiated
or approved transactions, or as required by state insurance laws or regulations,
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), and the Company shall not prevent contractowners from allocating
payments to a Portfolio that was otherwise available under the Contracts, until
60 days after the Company shall have notified the Fund or Underwriter of its
intention to do so.
<PAGE>
ARTICLE XI. NOTICES
Any notice shall be deemed duly given only if sent by hand, evidenced
by written receipt or by certified mail, return receipt requested, to the other
party at the address of such party set forth below or at such other address as
such party may from time to time specify in writing to the other party. All
notices shall be deemed given three business days after the date received or
rejected by the addressee.
If to the Fund:
Mr. Bernard H. Garil
President
OpCap Advisors
200 Liberty Street
New York, NY 10281
If to the Company:
Stewart Gregg, Esq.
Counsel
ReliaStar Financial Corporation
20 Washington Avenue South
5th floor
Minneapolis, MN 55401
If to the Underwriter:
Mr. Thomas E. Duggan
Secretary
OCC Distributors
200 Liberty Street
New York, NY 10281
<PAGE>
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 Directors, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party
hereto shall treat as confidential all information reasonably identified as such
in writing by any other party hereto (including without limitation the names and
addresses of the owners of the Contracts) and, except as contemplated by this
Agreement, shall not disclose, disseminate or utilize such confidential
information until such time as it may come into the public domain without the
express prior written consent of the affected party; provided that each party
hereto may disclose such information to an affiliated company of the party if
the affiliated company agrees to treat such information as confidential.
12.3. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and the
same instrument.
12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6. This Agreement shall not be assigned by any party hereto
without the prior written consent of all the parties.
<PAGE>
12.7. 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 each other and
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.8. Each party represents that the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein have
been duly authorized by all necessary corporate or trust action, as applicable,
by such party and when so executed and delivered this Agreement will be the
valid and binding obligation of such party enforceable in accordance with its
terms.
12.9. The parties to this Agreement may amend the schedules to
this Agreement from time to time to reflect changes in or relating to the
Contracts, the Accounts or the Portfolios of the Fund.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed in its name and behalf by its duly authorized
representative as of the date and year first written above.
Company:
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
SEAL By: (SIGNATURE ILLEGIBLE)
Fund:
OCC ACCUMULATION TRUST
SEAL By: (SIGNATURE ILLEGIBLE)
Underwriter:
OCC DISTRIBUTORS
By: (SIGNATURE ILLEGIBLE)
<PAGE>
SCHEDULE 1
Participation Agreement
Among
OCC Accumulation Trust, ReliaStar Bankers Security Life Insurance Company
and
OCC Distributors
The following separate accounts of ReliaStar Bankers Security Life
Insurance Company are permitted in accordance with the provisions of this
Agreement to invest in Portfolios of the Fund shown in Schedule 2:
ReliaStar Bankers Security Variable Life
Separate Account I
<PAGE>
SCHEDULE 2
Participation Agreement
Among
OCC Accumulation Trust, ReliaStar Bankers Security Life Insurance Company
and
OCC Distributors
The Separate Account(s) shown on Schedule 1 may invest in the following
Portfolios of the OCC Accumulation Trust:
Equity Portfolio
Global Equity Portfolio
Managed Portfolio
Small Cap Portfolio
SERVICE AGREEMENT
AGREEMENT dated as of August 8, 1997, between Fred Alger Management,
Inc. ("Alger"), a New York Corporation with its principal offices at 75 Maiden
Lane, New York, NY 10038, as Investment Adviser for The Alger American Fund (the
"Fund"), and ReliaStar Bankers Security Life Insurance Company ("ReliaStar"), a
New York corporation having its principal office and place of business at 1000
Woodbury Road, Woodbury, NY 11797.
In consideration of the promises and mutual covenants set forth in this
Agreement, the Parties agree as follows:
1. SERVICES PROVIDED
ReliaStar agrees to provide services to the Fund including the
following:
a) responding to inquiries from ReliaStar Contract owners using
one or more Portfolios of the Fund as an investment vehicle
regarding the services performed by ReliaStar as they relate
to the Fund;
b) providing information to Alger and to Contract owners with
respect to shares attributable to Contract owner accounts;
c) printing and mailing of shareholder communications from the
Fund (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution
and tax notices) as may be required;
d) communication directly with Contract owners concerning the
Fund's operations;
e) providing such other similar services as Alger may reasonably
request pursuant to the extent permitted or required under
applicable statutes, rules and regulations.
2. EXPENSE ALLOCATION
Subject to Paragraph 3 hereof, ReliaStar or its affiliates shall
initially bear the costs of the following:
a) printing and distributing the Fund's prospectus, statement of
additional information and any amendments or supplements
thereto, periodic reports to shareholders, Fund proxy material
and other shareholder communications (collectively, the "Fund
Materials") to be distributed to prospective Contract owners;
<PAGE>
b) printing and distributing all sales literature or promotional
material developed by ReliaStar or its affiliates and relating
to the contracts;
c) servicing Contract owners who have allocated Contract value to
a Portfolio, which servicing shall include, but is not limited
to, the items listed in Paragraph 1 of this Agreement.
3. PAYMENT OF EXPENSES
a) Alger will pay ReliaStar, within 30 days of quarter-end, a
quarterly fee equal to a percentage of the average daily net
assets of the Portfolio attributable to Contracts, at the
annual rate set fourth in the following schedule ("Portfolio
Servicing Fee"), in connection with those administrative
expenses incurred by ReliaStar under Paragraph 2 hereof: .10%
of all assets in Portfolio of the Fund.
b) From time to time, the Parties hereto shall review the
Portfolio Servicing Fee to determine whether it reasonably
approximates the incurred and anticipated costs, over time of
ReliaStar in connection with its duties hereunder. The Parties
agree to negotiate in good faith any change to the Portfolio
Servicing Fee proposed by a Party in good faith.
4. TERM OF AGREEMENT
Either Party may terminate this Agreement, without penalty, on 60 days'
written notice to the other Party. Unless so terminated, this Agreement
shall continue in effect for so long as Alger or its successor(s) in
interest, or any affiliate thereof, continues to perform in a similar
capacity for the Fund, and for so long as any Contract value or any
monies attributable to ReliaStar is allocated to a Portfolio.
5. INDEMNIFICATION
a) ReliaStar agrees to indemnify and hold harmless Alger and its
officers, directors and affiliates from any and all loss,
liability and expense resulting from the gross negligence or
willful wrongful act of ReliaStar under this Agreement, except
to the extent such loss, liability or expense is the result of
the willful misfeasance, bad faith or gross negligence of
Alger in the performance of its duties, or by reason of the
reckless disregard of its obligations and duties under this
Agreement.
b) Alger agrees to indemnify and hold harmless ReliaStar and its
officers, directors and affiliates from any and all loss,
liability and expense resulting from the gross negligence or
willful wrongful act of Alger under this Agreement, except to
the extent such loss, liability or expense is the result of
the willful misfeasance, bad faith or gross negligence of
ReliaStar in the performance of its duties, or by
<PAGE>
reason of the reckless disregard of its obligations and duties
under this Agreement.
6. NOTICE
Notices and communications required or permitted hereby will be given
to the following persons at the following addresses and facsimile
numbers, or such other persons, addresses or facsimile numbers as the
Party receiving such notices or communications may subsequently direct
in writing:
Fred Alger Management, Inc.
75 Maiden Lane
New York, NY 10038
Attn: Gregory S. Duch
Fax: (201) 434-1459
ReliaStar Bankers Security Life Insurance Company
c/o ReliaStar Life Insurance Company
20 Washington Avenue South
Minneapolis, MN 55401
Attn: Stewart Gregg, Esq.
Fax: (612) 342-7531
7. APPLICABLE LAW
Except insofar as the Investment Company Act of 1940 or other federal
laws and regulations may be controlling, this Agreement will be
construed and the provisions hereof interpreted under and in accordance
with New York law, without regard for that state's principles of
conflict of laws.
8. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement
will not be affected thereby.
9. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, that the Parties are entitled to
under federal and state laws.
10. ASSIGNMENT
Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written consent of the other
party thereto.
<PAGE>
11. AMENDMENT
This Agreement may be amended or modified in whole or in part only by a
written agreement executed by both parties.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized officers signing below.
FRED ALGER MANAGEMENT, INC.
By:____________________________
Name:__________________________
Title:___________________________
RELIASTAR BANKERS SECURITY
LIFE INSURANCE COMPANY
By:____________________________
Name:_________________________
Title:__________________________
August 8, 1997
ReliaStar Bankers Security Life Insurance Company
5th Floor
20 Washington Ave. South
Minneapolis, MN 55401
Dear Sirs or Madams:
This letter sets forth the agreement between ReliaStar Bankers Security
Life Insurance Company (the "Company"), and Janus Capital Corporation (the
"Adviser"), concerning certain administrative services.
1. Administrative Services and Expenses. Administrative services for the
separate accounts of the Company (the "Accounts") which invests in one
or more portfolios (collectively, the "Portfolios") of Janus Aspen
Series (the "Trust") pursuant to the Participation Agreement between
the Company and the Trust dated August 8, 1997 (the "Participation
Agreement"), and for purchasers of variable annuity or life insurance
contracts (the "Contracts") issued through the Accounts are the
responsibility of the Company. Administrative services for the
Portfolios, in which the Accounts invest, and for purchasers of shares
of the Portfolios, are the responsibility of the Trust. The
administrative services the Company intends to provide to the Trust and
its Portfolios are set forth in Schedule A attached to this letter
agreement, which may be amended from time to time.
2. Service Fee. In consideration of the anticipated administrative expense
savings resulting to the Trust from the Company's services, the Adviser
agrees to pay the Company a fee ("Service Fee"), computed daily and
paid monthly in arrears, at an annual rate equal to fifteen (15) basis
points (0.15%) of the average monthly value of the shares of the
Portfolios held in the Accounts, such payments to commence following
the month in which the average monthly value of investments by the
Accounts, together with investments in the Portfolios by separate
accounts of ReliaStar Life Insurance Company and Northern Life
Insurance Company, reaches $50 million. The Service Fee will be
correspondingly suspended if the average monthly value of such
investments drops below $50 million in any month.
For purposes of this Paragraph 2, the average monthly value of the
shares of the Portfolios will be based on the sum of the daily net
asset values (as calculated by the Portfolios) for each calendar day in
a month divided by the number of calendar days in the month.
<PAGE>
3. Nature of Payments. The parties to this letter agreement recognize and
agree that the Adviser's payments to the Company relate to
administrative services to the Trust only and do not constitute payment
in any manner for administrative services provided by the Company to
the Account or to the Contracts, for investment advisory services or
for costs of distribution of Contracts or of shares of the Portfolios,
and that these payments are not otherwise related to investment
advisory or distribution services or expenses.
4. Representations and Warranties.
a. The Adviser represents and warrants that in the event the
Trustees of the Trust approve the payment of all or any
portion of the Service Fee by the Trust, the Trust will
calculate in the same manner the Service Fee to all insurance
companies that have entered into Service Fee arrangements with
the Adviser and/or the Trust (the "Participating Insurance
Companies").
b. The Company represents and warrants that: (1) it and its
employees and agents meet the requirements of applicable law,
including but not limited to federal and state securities law
and state insurance law, for the performance of services
contemplated herein; and (2) it will not purchase Trust shares
of the Portfolios with Account assets derived from
tax-qualified retirement plans except indirectly, through
Contracts purchased in connection with such plans, and the
Company is not a fiduciary with respect to the Contracts for
purposes of the Employee Retirement Income Securities Act of
1974 ("ERISA").
c. The Company represents, warrants and agrees that: (1) the
Company's receipt of the Service Fee is in compliance with
Section 26 of the Investment Company Act of 1940 ("1940 Act")
to the extent Section 26 is applicable to the Contracts; (2)
no portion of the Service Fee will be rebated by the Company
to any Contract owner; and (3) if required by applicable law,
the Company will disclose to each Contract owner the existence
of the Service Fee received by the Company pursuant to this
letter agreement in a form consistent with the requirements of
applicable law and will disclose the amount of the Service
Fee, if any, that is paid by the Trust.
5. Indemnification
a. The Company agrees to indemnify and hold harmless the Adviser
and its directors, officers, and employees from any and all
loss, liability and expense resulting from any gross
negligence or willful wrongful act of the Company in
performing its services under this letter agreement, from the
inaccuracy or breach of any representation made in this letter
agreement, or from a breach of a material provision of this
letter agreement, except to the extent such loss, liability or
expense is the result of the Adviser's willful misfeasance,
bad faith or gross negligence in the performance of its
duties.
<PAGE>
b. The Adviser agrees to indemnify and hold harmless the Company
and its directors, officers, agents and employees from any and
all loss, liability and expense resulting from any gross
negligence or willful wrongful act of the Adviser in
performing its services under this letter agreement, from the
inaccuracy or breach of any representation made in this letter
agreement, or from a breach of a material provision of this
letter agreement, except to the extent such loss, liability or
expense is the result of the Company's willful misfeasance,
bad faith or gross negligence in the performance if its
duties.
6. Termination.
a. Either party may terminate this letter agreement, without
penalty, on sixty (60) days' written notice to the other
party.
b. This letter agreement will terminate at the option of either
party in the event of the termination of the Participation
Agreement.
c. This letter agreement will terminate immediately upon the
determination of either party, with the advice of counsel,
that the payment of the Service Fee is in conflict with
applicable law.
7. Amendment. This letter agreement may be amended only upon mutual
agreement of the parties hereto in writing.
8. Confidentiality. The terms of this letter agreement will be treated as
confidential and will not be disclosed to the public or any outside
party (other than affiliates of the Company) except with each party's
prior written consent, as required by law or judicial process, or as
provided in paragraph 4c herein.
9. Assignment. This letter agreement may not be assigned (as that term is
defined in the 1940 Act) by either party without the prior written
approval of the other party, which approval will not be unreasonably
withheld, except that the Adviser may assign its obligations under this
letter agreement, including the payment of all or any portion of the
Service Fee, to the Trust upon thirty (30) days' written notice to the
Company.
10. Governing Law. This letter agreement will be construed and the
provisions hereof interpreted under and in accordance with the laws of
the State of Colorado.
11. Counterparts. This letter agreement may be executed in counterparts,
each of which will be deemed an original but all of which will together
constitute one and the same instrument.
<PAGE>
If this letter agreement is consistent with your understanding of the matters we
discussed concerning administrative expense payments, kindly sign below and
return a signed copy to us.
Very truly yours,
JANUS CAPITAL CORPORATION
By: _______________________________
Name: _______________________________
Title: _______________________________
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
By: _______________________________
Name: _______________________________
Title: _______________________________
Attachment: Schedule A
<PAGE>
SCHEDULE A
Pursuant to the letter agreement to which this Schedule is attached, the Company
or an affiliate will perform administrative services including, but not limited
to, the following:
1. Print and mail to Contract owners or otherwise disseminate copies of
the Portfolios' prospectuses, proxy materials, periodic fund reports to
shareholders and other materials that the Trust is required by law or otherwise
to provide to its shareholders.
2. Provide Contract owner services including, but not limited to,
financial consultants' advice with respect to inquiries related to the
Portfolios (not including information about performance or related to sales) and
communicating with Contract owners about Portfolio (and subaccount) performance.
3. Provide other administrative support for the Trust as mutually
agreed to by the Company and the Adviser and relieve the Trust of other usual or
incidental administrative services provided to individual Contract owners.
July 28, 1997
ReliaStar Bankers Security Life Insurance Company
20 Washington Avenue South
Minneapolis, MN 55401
Ladies and Gentlemen :
This letter sets forth the terms and conditions of the services agreement
between NEUBERGER&BERMAN MANAGEMENT INC. ("NBMI") and RELIASTAR BANKERS SECURITY
LIFE INSURANCE COMPANY (the "Company") effective as of the 8th day of August,
1997.
The Company, NBMI, Neuberger&Berman Advisers Management Trust (the "Trust") and
Advisers Managers Trust have entered into a FUND PARTICIPATION AGREEMENT dated
the 8th day of August, 1997, as may be amended from time to time (the
"Participation Agreement"), pursuant to which the Company, on behalf of certain
of its separate accounts (the "Separate Accounts"), purchases shares ("Shares")
of certain Portfolios of the Trust ("Portfolios") to serve as an investment
vehicle under certain variable annuity and/or variable life insurance contracts
("Variable Contracts") offered by the Company, which Portfolios may be one of
several investment options available under the Variable Contracts.
NBMI recognizes that in the course of soliciting applications for its Variable
Contracts and in servicing owners of the Variable Contracts, the Company and its
agents that are registered representatives of broker-dealers provide information
about the Trust and its Portfolios (and Series of Advisers Managers Trust) from
time to time, answer questions concerning the Trust and its Portfolios (and
Series), including questions respecting Variable Contract owners' interests in
one or more Portfolios, and provide services respecting investments in the
Portfolios.
NBMI desires that the efforts of the Company and its agents in providing written
and oral information and services regarding the Trust to current and prospective
Variable Contract owners shall continue.
Accordingly, the following represents the collective intention and understanding
of the services agreement between NBMI and the Company.
The Company and/or its affiliates agree to provide services ("Services") to
current owners of Variable Contracts including, but not limited to:
teleservicing support in connection
<PAGE>
with the Portfolios; delivery of current Trust prospectuses, reports, notices,
proxies and proxy statements and other informational materials; facilitation of
the tabulation of Variable Contract owners' votes in the event of a meeting of
Trust shareholders; maintenance of Variable Contract records reflecting Shares
purchased and redeemed and Share balances, and the conveyance of that
information to the Trust, its transfer agent, or NBMI as may be reasonably
requested; provision of support services including providing information about
the Trust and its Portfolios (and Series of Advisers Managers Trust) and
answering questions concerning the Trust and its Portfolios (and Series),
including questions respecting Variable Contract owners' interests in one or
more Portfolios; provision and administration of Variable Contract features for
the benefit of Variable Contract owners participating in the Trust including
fund transfers, dollar cost averaging, asset allocation, portfolio rebalancing,
earnings sweep, and pre-authorized deposits and withdrawals; and provision of
other services as may be agreed upon from time to time.
In consideration of the Services, NBMI agrees to pay to the Company a service
fee at an annual rate equal to fifteen (15) basis points (0.15%) of the average
daily value of the Shares held in Separate Accounts. For purposes of computing
the payment to the Company under this paragraph, the average daily value of
Shares held in Separate Accounts over a monthly period shall be computed by
totaling such Separate Accounts' aggregate investment (Share net asset value
multiplied by total number of Shares held by such Separate Accounts) on each
business day during the calendar month, and dividing by the total number of
business days during such month. The payment to the Company under this paragraph
shall be calculated by NBMI at the end of each calendar month and will be paid
to the Company within thirty (30) days thereafter.
The services agreement shall remain in full force and effect for an initial term
of one year, and shall automatically renew for successive one year periods. The
services agreement may be terminated by either the Company or NBMI upon sixty
(60) days' written notice to the other, and shall terminate automatically upon
redemption of all Shares held in Separate Accounts, upon termination of the
Participation Agreement, or upon assignment of the Participation Agreement by
either the Company or NBMI.
Notwithstanding the termination of the services agreement, NBMI will continue to
pay the service fees in accordance with the preceding paragraph so long as net
assets of the
<PAGE>
Company or a Separate Account remain in a Portfolio, provided such continued
payment is permitted in accordance with applicable law and regulation. The
services agreement may be amended only upon mutual agreement of the Company and
NBMI in writing.
Nothing in the services agreement shall amend, modify or supersede any
contractual terms, obligations or covenants among or between any of the Company,
NBMI, the Trust or Advisers Managers Trust previously or currently in effect,
including those contractual terms, obligations or covenants contained in the
Participation Agreement.
If the services agreement is consistent with your understanding of the matters
we discussed concerning the Company's provision of the Services, please sign
below.
Very truly yours,
NEUBERGER&BERMAN MANAGEMENT INC.
/s/ Peter Sundman
By: Peter Sundman
Title: Senior Vice President
ACKNOWLEDGED AND AGREED TO:
RELIASTAR BANKERS SECURITY LIFE INSURANCE
COMPANY
______________________________
By:
Title:
August 8, 1997
ReliaStar Bankers Security Life Insurance Company
20 Washington Street
Avenue South, Route 1237
Minneapolis, MN 55401
Attn: Stewart Gregg, Esq.
Gentlemen:
This letter sets forth the agreement between OpCap Advisors (the "Adviser") and
ReliaStar Bankers Security Life Insurance Company (the "Company") concerning
certain administrative services to be provided by you on a sub-administration
basis, with respect to OCC Accumulation Trust (the "Fund").
1. Administrative Services and Expenses. Administrative services for the
Company's Separate Account entitled ReliaStar Bankers Security Variable
Life Separate Account I (the "Separate Account"), which invests in Series
of the Fund pursuant to the Participation Agreement between the Company and
the Fund (the "Participation Agreement") and for purchasers of variable
annuity/life contracts issued through the Separate Account (the
"Contracts"), are the responsibility of the Company. Administrative
services of the Fund, in which the Separate Account invests, and for
purchasers of Fund shares, are the responsibility of the Fund or the
Adviser.
You have agreed to assist us, as we may request from time to time, with the
provision of administrative services ("Administrative Services") to the
Fund, on a sub-administration basis, as they may relate to the investment
in the Fund by the Separate Account. It is anticipated that Administrative
Services may include (but shall not be limited to) the mailing of Fund
reports, notices, proxies and proxy statements and other informational
materials to holders of the Contracts supported by the Separate Account
with allocations to the Fund; the preparation of various reports for
submission to the Fund's Board of Trustees; the provision of shareholder
support services with respect to the portfolios serving as funding vehicles
for the Contracts; such services listed on Schedule A attached hereto and
made a part hereof.
2. Administrative Expense Payments. In consideration of the anticipated
administrative expense savings resulting to the Adviser from the
arrangements set forth in this Agreement, the Adviser agrees to pay the
Company on a quarterly basis, from the Adviser's own resources, including
its bona fide profits, an amount set forth in Schedule B attached hereto
and made a part hereof.
For purposes of computing the payment to the Company contemplated under
this Paragraph 2, the average daily net assets invested by the Company over
a quarterly period shall be computed by totaling the Company's aggregate
investment (share net
<PAGE>
asset value multiplied by the total number of shares held by the Company)
on each calendar day during the quarterly period, and dividing by the total
number of calendar days during such quarterly period.
The payment contemplated by this Paragraph 2 shall be calculated by the
Adviser at the end of each quarter and will be paid to the Company within
30 days thereafter. Payment will be accompanied by a statement showing the
calculation of the quarterly amount payable by the Adviser and such other
supporting data as may be reasonably requested by the Company.
3. Nature of Payments. The parties to this letter agreement recognize and
agree that the Adviser's payments to the Company relate to Administrative
Services only. The amount of administrative expense payments made by the
Adviser to the Company pursuant to Paragraph 2 of this letter agreement
shall not be deemed to be conclusive with respect to actual administrative
expenses or savings of the Adviser.
4. Term. This letter agreement shall remain in full force and effect for so
long as the assets of the Fund are attributable to amounts invested by the
Company under the Participation Agreement, unless terminated in accordance
with Paragraph 5 of this letter agreement.
5. Termination. This letter agreement will be terminated by either party upon
60 days advance written notice or immediately upon the mutual agreement of
the parties hereto in writing.
6. Representation. The Company represents and agrees that it will maintain and
preserve all records as required by law to be maintained and preserved in
connection with providing the Administrative Services, and will otherwise
comply with all laws, rules and regulations applicable to the
Administrative Services.
7. Subcontractors. The Company may, with the consent of the Adviser, contract
with or establish relationships with other parties for the provision of the
Administrative Services or other activities of the Company required by this
letter agreement, provided that the Company shall be fully responsible for
the acts and omission of such other parties.
8. Authority. This letter agreement shall in no way limit the authority of the
Fund or OCC Distributors, the Fund's Distributor, to take such action as
any of such parties may deem appropriate or advisable in connection with
all matters relating to the operations of the Funds and/or sale of its
shares. The Company understands and agrees that the obligations of the
Adviser under this letter agreement are not binding upon the Fund. It is
further understood and agreed that in performing the Administrative
Services, the Company, acting in its capacity described herein, shall at no
time be acting as an agent for the Adviser.
<PAGE>
9. Miscellaneous. This letter agreement may be amended only upon mutual
agreement of the parties hereto in writing. This letter agreement may not
be assigned by a party hereto, by operation of law or otherwise, without
the prior written consent of the other party. This letter agreement,
including Schedule A and Schedule B, constitutes the entire agreement
between the parties with respect to the matters dealt with herein, and
supersedes any previous agreements and documents with respect to such
matters. This letter agreement may be executed in counterparts, each of
which shall be deemed an original but all of which shall together
constitute one and the same instrument. The Company agrees to notify the
Adviser promptly if for any reason it is unable to perform fully and
promptly any of its obligations under the letter agreement.
10. Notice. Any notices required to be sent hereunder shall be sent in
accordance with the Participation Agreement.
If this letter agreement is consistent with your understanding of the
matters we discussed concerning administrative expense payments, kindly sign
below and return a signed copy to us.
Very truly yours,
OpCap Advisors
By: /s/ (signature illegible)
Name:__________________
Title:___________________
Acknowledged and Agreed:
ReliaStar Bankers Security Life Insurance Company
By:____________________
Name:__________________
Title:___________________
Attachment: Schedule A
Schedule B
<PAGE>
SCHEDULE A
I. Fund-related contractowner services
- Printing and mailing costs associated with dissemination of
Fund prospectus to existing contractowners
- Telephonic support for contract owners with respect to
inquiries about the Fund (not including information
related to sales)
- Fund proxies (including facilitating distribution of proxy
material to contractowners, tabulation and reporting)
II. Other administrative support
- Sub-accounting services
- Relieving the Fund of other usual or incidental
administrative services provided to individual shareholders
- Providing other administrative support to the Fund as
mutually agreed between insurer and the Fund
<PAGE>
SCHEDULE B
The Adviser agrees to pay the Company a quarterly amount that is equal
on an annual basis to the following percentage of the average aggregate daily
net assets invested by the Company, ReliaStar Life Insurance Company and
Northern Life Insurance Company in the Fund:
AVERAGE DAILY NET ASSETS ANNUAL RATE
INVESTED BY THE COMPANY
First $300 million 0.15%
Next $300 million 0.20%
Over $600 million 0.25%
- --------------------------------------------------------------------------------
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 WOODBURY ROAD, WOODBURY, NEW YORK 11797
- --------------------------------------------------------------------------------
APPLICATION FOR LIFE INSURANCE
DIRECTIONS
The Agent is responsible for completing the necessary forms required to process
and underwrite this application. All forms must be completed in full and must be
legible. The directions below should be followed carefully.
<TABLE>
<CAPTION>
- ------------------------------------------------------ ------------------------------------------------------
DO DON'T
- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
Submit separate applications on each person to Don't send money on applications totaling over
be insured. (Except when applying for spouse, $1,000,000 ($25,000 for proposed insured(s) under
children or other insured with amount of age 15) including any ADB amount (remember to
insurance below $100,000, use Part III ). include all pending and in force (with ADB) with
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY,
Print application in black ink, if possible. Bankers Security Life Insurance Society or The
Get all required signatures. North Atlantic Life Insurance Company of America
All corrections must be initialed by the proposed in your calculation).
insured. Put one line through the incorrect answer and
insert the correct information. DO NOT USE WHITEOUT. Don't type or use pencil.
Complete and sign the Agent's Report, especially Don't forget to tell your client to fast a minimum
Question 5. Review the appropriate state replacement of 4 hours before any underwriting testing (Exam, HOS,
regulation for the definition of 'Replacement.' EKG and Blood Profile).
Complete Part II if Proposed insured is to be
considered for non-medical coverage.
Refer to Company Beneficiary Brochure for sample
wording.
Complete a Financial Supplement, if the application
is for more than: $ 300,000 - up to age 60
$ 250,000 - over age 60
Submit appropriate form and premium(s) for
Check-0-Matic (COM).
Give the Notification below to the applicant
- ------------------------------------------------------ ------------------------------------------------------
</TABLE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- --------------------------------------------------------------------------------
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTICE AS REQUIRED BY THE FAIR CREDIT REPORTING ACT
ABBREVIATED NOTICE REGARDING INSURANCE INFORMATION PRACTICES
A consumer report about you and any other person proposed for insurance may be
made; this is in connection with and is a normal part of our processing of your
application. The people making the report will talk to your friends, neighbors,
family members, co-workers and others having knowledge of you; they will ask
about your business and personal life. You have a right to ask us in writing
whether such a report was prepared; we must give you the name and address of the
Agency which made the report, if any. The Agency will give you a copy of the
report if you ask them for it. All information collected by us either from you
or other sources may in certain circumstances be disclosed to third parties
without authorization more specific than as set forth in this application. You
have a right of access and correction with respect to the data, except that
which relates to a claim or civil or criminal proceeding or to medical record
information. Medical record information may be accessed by a medical
professional you designate. Our Underwriting Department will provide a more
detailed review of our information practices if you request it.
(PLEASE SEE REVERSE SIDE FOR IMPORTANT NOTICE)
FCRA/93
<PAGE>
NOTICE REGARDING MEDICAL INFORMATION BUREAU
PLEASE READ CAREFULLY
Information regarding your insurability will be treated as confidential.
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY, 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 company 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.
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY, or its reinsurers, may also
release information in its file to other life insurance companies to whom you
may apply for life or health insurance, or to whom a claim for life benefits may
be submitted.
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 02112, telephone number
(617) 426-3660.
(PLEASE SEE REVERSE SIDE FOR IMPORTANT NOTICE)
MIB/93
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- -
- --------------------------------------------------------------------------------
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 WOODBURY ROAD, WOODBURY, NEW YORK 11797
- --------------------------------------------------------------------------------
CONDITIONAL PREMIUM RECEIPT
(Not Valid Unless Signed by Agent and Applicant)
THIS CONDITIONAL PREMIUM RECEIPT DOES NOT PROVIDE TEMPORARY OR IMMEDIATE
INSURANCE COVERAGE, IT IS HEREBY UNDERSTOOD AND AGREED THAT UNLESS EACH AND
EVERY CONDITION SPECIFIED IN PARAGRAPH "FIRST' IS FULFILLED EXACTLY, NO
INSURANCE WILL BECOME EFFECTIVE PRIOR TO POLICY DELIVERY. NEITHER THE AGENT
WHOSE SIGNATURE APPEARS BELOW, NOR ANY OTHER AGENT OF THE COMPANY OR BROKER IS
AUTHORIZED TO ALTER OR WAIVE ANY OF SUCH CONDITIONS.
Received from ______________________________________________ (Payor) the sum of
$________________________________________ as premium deposit which is tendered,
subject to the conditions of this Conditional Premium Receipt, as payment toward
the first premium of the life insurance policy applied for in the written
application to RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY, bearing the
same date and number as this Conditional Premium Receipt.
FIRST. CONDITIONS UNDER WHICH INSURANCE MAY BECOME EFFECTIVE PRIOR TO POLICY
DELIVERY. IF EACH AND EVERY ONE OF THE FOLLOWING CONDITIONS SHALL HAVE BEEN
FULFILLED EXACTLY:
(a) the amount of money taken with the application is at least equal to
1/12 of an annual premium for the amount and plan of insurance
applied for and is $20 or more;
(b) the completion of all parts of the initial application;
(c) the first and second medical examination, (if required by the Company's
published rules for the age of the person and amount of insurance applied
for) must be completed, within 60 days from the date of the application;
(d) completion of all investigations required by the Company;
(e) On the Effective Date, as defined below, all persons proposed for insurance
as named in this application were risks acceptable for insurance exactly as
applied for under the Company's rules, limits and standards, without
modification for the Plan and amount of insurance.
then insurance, as provided by the terms and conditions of the policy applied
for and in use by the Company on the Effective Date, but for an amount not
exceeding that specified in paragraph "SECOND", will become effective as of the
Effective Date.
Date: ____________________________________________________
DO NOT DETACH THIS CONDITIONAL PREMIUM RECEIPT UNLESS A PREMIUM DEPOSIT IS MADE
AT THE TIME OF APPLICATION.
"Effective Date", as used herein, means the latest of: (a) the date of the
application, or lb) the date of the first medical examination, (or if required
by the Company ' s published rules for the age of the person and amount of
insurance applied for, the second medical examination).
SECOND. LIMITS PROVISION: MAXIMUM AMOUNT OF INSURANCE WHICH MAY BECOME
EFFECTIVE PRIOR TO POLICY DELIVERY.
The total amount of insurance which may become effective on the life of each
person proposed for insurance prior to policy delivery is limited to the lesser
of: (a) $1,000,000, ($25,000 for proposed insureds under age 15), reduced by any
life insurance (life insurance plus Accidental Death Benefit) on the life of the
individual currently pending issue or additionally applied for with the Company,
or (b) the amount applied for under this application.
THIRD. RETURN OF PREMIUM DEPOSIT TAKEN.
If one or more of the conditions in paragraph "FIRST' have not been fulfilled
exactly, this Conditional Premium Receipt shall be considered null and void and
there shall be no liability on the part of the Company except to return the
Premium Deposit. Any delay in the Return of the Premium Deposit will not be
construed as approval of the application.
Agent:___________________________________________________
I ACKNOWLEDGE THAT I HAVE READ THE CONDITIONAL PREMIUM RECEIPT AND THE AGREEMENT
IN THE APPLICATION. THE TERMS, CONDITIONS AND LIMITS PROVISION, TO WHICH I
AGREE, AND THE AGREEMENT IN THE APPLICATION HAVE BEEN EXPLAINED TO ME FULLY BY
THE AGENT AND I UNDERSTAND THEM.
Applicant:________________________________________________
CR-93
<PAGE>
-------------------------------------------------
APPLICATION FOR RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
LIFE INSURANCE 1000 Woodbury Road, Woodbury, New York 11797
-------------------------------------------------
PART I
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
1 a. Name of Proposed / / Male / / Female b. Are you known, or have you ever been known by
First Middle Last any other name? / / Yes / / No
List name(s):
-----------------------------------------------------------------------------------------------------------
c. Date of Birth d. Birthplace e. Social Security No.: f. Are you a citizen of the
Month Day Year (state/country) U.S.?
__ __ __ - __ __ - __ __ __ / / Yes / / No
-----------------------------------------------------------------------------------------------------------
g. / / Single / / Married / / Divorced / / Widowed / / Separated
-----------------------------------------------------------------------------------------------------------
h. Residence (Street, City, State, Zip) How Long i. Former Residence (within 5 years) How Long
Phone #( )
-----------------------------------------------------------------------------------------------------------
j. Employer's Name and Address
-----------------------------------------------------------------------------------------------------------
k. Occupation Describe Duties How Long l. Send premium notice to:
- ------------------------------------------------------------------------------------------------------------------
2 a. Name and Address of Policy Owner b. Relationship to Proposed c. Soc. Sec. No. or
(if other than Proposed Insured) Insured: Tax. I.D. No.:
-------------------------------------------------
d. Owner is: / / Individual / / Partnership
/ / Corporation / / Trustee
- ------------------------------------------------------------------------------------------------------------------
3 a. Face Amount of Basic Policy b. Policy Plan c. Death Benefit Option (if applicable)
/ / Option A - level
/ / Option B - additional/increasing
-----------------------------------------------------------------------------------------------------------
d. Have you used tobacco in any form in the past 12 e. If "No," check whichever is appropriate:
months? / / Yes / / No / / Never used / / Quit - give month and year
- ------------------------------------------------------------------------------------------------------------------
4 COMPLETE FOR UNIVERSAL LIFE ONLY
a. First year planned periodic b. Subsequent planned periodic c. Other Insured Rider (OIR) / / Yes
premium based on Mode premium based on Mode Name:
$ $ Amount: $
- ------------------------------------------------------------------------------------------------------------------
5 a. Premiums Payable: b. Additional Benefits (check if desired)
/ / Annual / / Semi-annual / / Waiver of Premium/Waiver Monthly Deduction
/ / Quarterly / / Check-O-Matic Monthly / / Accidental Death Benefit $________________
Automatic Premium Loan.............../ / Yes / / No / / Spouse Protection Rider (SPR)________units
List Billing (minimum 5 lives) / / Children's Protection Rider (CPR)____units
Bulk Billing / / New / / BB# _____________ / / ACT Rider $_______________________________
Pension Trust / / New / / PT# _____________ / / Other $
- ------------------------------------------------------------------------------------------------------------------
6 FOR INDETERMINATE PREMIUM POLICY ONLY: I understand that:
(a) the current premium for the policy applied for may change after the initial guarantee period:
(b) the current premium then charged is not guaranteed and the Company may charge the full maximum
guaranteed premium / / YES
- ------------------------------------------------------------------------------------------------------------------
7 a. Beneficiary(ies) (Give full legal Name and Date of Birth) Relationship to Proposed Insured
-----------------------------------------------------------------------------------------------------------
b. Contingent Beneficiary(ies) (Give full legal Name and Date of Birth) Relationship to Proposed Insured
- ------------------------------------------------------------------------------------------------------------------
8 INSURANCE NOW IN FORCE (IF NONE, STATE NONE) AMOUNT AMOUNT ADB YEAR OF ISSUE
COMPANY NAME
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Is the insurance applied for intended to replace, change or borrow against any insurance or annuity in this
or any other company? / / YES (If, "Yes," give company, policy number and amount)
- ------------------------------------------------------------------------------------------------------------------
10 HOME OFFICE ENDORSEMENT SPECIAL REQUESTS:
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Form 1092
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
11 a. Does any person proposed for insurance have any applications for life insurance now pending? Yes No
If "Yes," give Company, kind, amount and Owner/Beneficiary / / / /
b. Has any person proposed for insurance ever had an application for life or health insurance
or reinstatement declined, rated, modified, postponed, withdrawn or canceled? / / / /
- ------------------------------------------------------------------------------------------------------------------
12 Has any person proposed for insurance, in the past 3 years engaged in, or do they expect to
engage in any hazardous or dangerous activities such as: hang gliding, flying ultra lights,
mountain climbing, ballooning, racing (automobile, go-karts, midgets, cycle, boat, snowmobile),
white water rafting or diving (skin, scuba, sky)? If "Yes," complete Avocation Questionnaire. / / / /
- ------------------------------------------------------------------------------------------------------------------
13 Has any person proposed for insurance ever flown or do they intend to fly as a pilot or crew
member? If, "Yes," complete Aviation Questionnaire. / / / /
- ------------------------------------------------------------------------------------------------------------------
14 Does any person proposed for insurance intend to travel or reside outside the country except
for vacation? If, "Yes," answer where, why and duration in Remarks. / / / /
- ------------------------------------------------------------------------------------------------------------------
FOR QUESTIONS 15 AND 16, If "Yes," give details plus driver's license number and state in REMARKS Section.
- ------------------------------------------------------------------------------------------------------------------
15 In the past 3 years, has any person proposed for insurance been charged with:
a. any motor vehicle violations other than parking violations? / / / /
b. driving under the influence of alcohol and/or drugs? / / / /
- ------------------------------------------------------------------------------------------------------------------
16 Has any person proposed for insurance ever had their driver's license restricted, revoked
or suspended? / / / /
- ------------------------------------------------------------------------------------------------------------------
17 Has any person proposed for insurance ever been convicted of a felony or misdemeanor? If "Yes,"
provide details. / / / /
- ------------------------------------------------------------------------------------------------------------------
18 Is any person proposed for insurance in the Reserves, National Guard or on active duty in the
military? If, "Yes," provide details. / / / /
- ------------------------------------------------------------------------------------------------------------------
REMARKS - USE WHERE MORE SPACE IS NEEDED.
- ------------------------------------------------------------------------------------------------------------------
Question No. Details
- ------------ ---------------------------------------------------------------------------------------------
- ------------ ---------------------------------------------------------------------------------------------
- ------------ ---------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
19 AMOUNT PAID WITH THIS APPLICATION: $ _______________ IN EXCHANGE FOR CONDITIONAL PREMIUM RECEIPT
/ / NONE BEARING THE SAME NUMBER AS THIS APPLICATION.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
AGREEMENT. The Proposed Insured and the Applicant, if other than the Proposed
Insured, represent, each to the best of his/her knowledge and belief, that all
statements and answers contained in this application and any amendments thereto,
are true and correctly recorded and expressly agree as follows: (1) This
application (Part 1, and any other required part(s), shall be the basis for and
a part of any policy issued; (2) No information acquired by. any representative
of the Company shall bind the Company unless set out in writing in this
application; (3) No contract of the Company can be made, modified or discharged,
nor may any of its rights or requirements be waived, except in writing signed by
its President, Vice President, Secretary or Assistant Secretary; (4) Except as
otherwise provided in the Conditional Premium Receipt bearing the same number as
this Part 1, no insurance shall take effect until a policy is issued and
delivered to the Owner and the full first premium paid, all while the health and
other conditions affecting the insurability of each person on whom insurance is
requested remain as described in this application; (5) The Company may indicate
changes for administrative purposes only in the space for Home Office
Endorsement in the application. The acceptance of any policy issued on this
application shall constitute acceptance and ratification of any such changes. No
changes shall be made in the amount of insurance, classification of risk, plan
of insurance, benefits, beneficiaries or ownership without written consent of
the Proposed Insured and Owner.
The Applicant, if other than the Proposed Insured, otherwise the Proposed
Insured, shall be the Owner of any policy issued hereon.
ACKNOWLEDGMENT. If a premium deposit is tendered with the application, the
Proposed insured and the Applicant, if other than the Proposed insured represent
that he/she has carefully read the Conditional Premium Receipt and understands
and agrees to the terms thereof including the conditions under which a limited
amount of insurance may become effective prior to policy delivery.
AUTHORIZATION. I hereby authorize any licensed physician, medical practitioner,
hospital, clinic, or other medical or medically related facility, insurance
company, the Medical Information Bureau or other organization, institution or
person, that has any records or knowledge of me or my children for whom
insurance application is made, or my health, or their health, to give to
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY, or its reinsurers any such
information. I further authorize RELIASTAR BANKERS SECURITY LIFE INSURANCE
COMPANY to request that an investigative consumer report be prepared as
described in the notice given to me. If a consumer report is prepared, I elect
to be interviewed. / / No.
I acknowledge receipt of, and have read, the Notifications given to me. This
Authorization is valid for 30 months from the date this form was signed. A
photographic copy of this authorization shall be as valid as the original.
<TABLE>
<CAPTION>
<S> <C>
Signature of
Signed at: ______________________ Date:______________ Proposed Insured:____________________________________________
(If age 15 or over - Parent if under age 15)
Signature of Spouse
_____________________________________________________ or Other Insured: ___________________________________________
Signature of Agent as Witness
Signature of
Applicant (Owner): __________________________________________
_____________________________________________________________
(If a Firm or Corporation or Trust insert name and title)
</TABLE>
<PAGE>
-------------------------------------------------
APPLICATION RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
NON-MEDICAL 1000 Woodbury Road, Woodbury, NY 11797
-------------------------------------------------
PART II
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
1 a. Name of Proposed b. Date of Birth c.Sex d. Height _____ ft.
First Middle Last Month Day Year / / M _____ in.
/ / F Weight _____ lbs.
- ------------------------------------------------------------------------------------------------------------------
2 Who is your doctor (if none, so state). How Long ? Address
-----------------------------------------------------------------------------------------------------------
Date of last visit Reason What did he tell you about his findings?
- ------------------------------------------------------------------------------------------------------------------
3 Have you ever had or do you now have any disease, disorder, or injury of the following or any sickness
listed below: (Circle item(s) and give details under question number 4.) Use Additional Remarks section
if needed.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Yes No Yes No Yes No
Stroke or dizziness / / / / Heart murmur, rheumatic fever / / / / Diabetes or sugar in urine / / / /
Paralysis or epilepsy / / / / High blood pressure / / / / Cancer, tumor, cyst or polyp / / / /
Convulsions or fainting / / / / Liver, gallbladder, hepatitis / / / / Lymph gland, thyroid or other / / / /
Brain, nervous system / / / / Stomach, ulcers, hernia / / / / endocrine disorder / / / /
Nervous or mental disorder / / / / Pancreas, Intestines / / / / Anemia or other blood disorder / / / /
Lungs, bronchitis, asthma / / / / Colitis, diverticulitis / / / / Eyes or skin disorder / / / /
Shortness of breath / / / / Rectum, rectal bleeding / / / / Arthritis, neuritis, gout / / / /
Tuberculosis, pneumonia / / / / Kidney, bladder, kidney stone / / / / Bone, joint or muscle disorder / / / /
Heart or blood vessels / / / / Prostate, reproductive organ / / / / Sexually transmitted or venereal / / / /
Chest pains or palpitations / / / / Blood, pus or albumin in urine / / / / disease, except for AIDS / / / /
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
4 Give diagnosis, date of each occurrence, duration, current status and names and addresses of doctors and
medical facilities
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Give details in Additional Remarks Section.
(dates, results, doctors consulted and addresses, etc.) Yes No Additional Remarks
- ------------------------------------------------------------------------------------------------------------------
5 a. Are you at the present time taking any medication? / / / /
b. Are you presently under a doctor's care for any condition? / / / /
- ------------------------------------------------------------------------------------------------------------------
6 Has your weight changed more than 10 pounds in the past year? / / / /
- ------------------------------------------------------------------------------------------------------------------
7 Have you ever had or do you now have chronic or unexplained fatigue,
malaise, lass of appetite, diarrhea, fever of unknown origin, severe
night sweats, unexplained or unusual infections or skin lesions,
unexplained swelling of the lymph glands, Kapposi's Sarcoma or Pneumocystis
Carinii Pneumonia? / / / /
- ------------------------------------------------------------------------------------------------------------------
8 Have you been diagnosed or treated by a member of the medical profession
for Acquired Immune Deficiency Syndrome (AIDS) or AIDS-Related Complex
(ARC)? / / / /
- ------------------------------------------------------------------------------------------------------------------
9 Other than above, have you in the past 5 years:
a. Had any mental or physical disorder not listed above? / / / /
b. Had a check-up, consultation, EKG, X-ray, or other diagnostic
procedures, except for AIDS, illness, injury or surgery? / / / /
c. Been a patient in a hospital, clinic or other health care facility? / / / /
d. Been advised to have any diagnostic test, treatment, hospitalization
or surgery that was not completed other than an HIV test? / / / /
- ------------------------------------------------------------------------------------------------------------------
10 Have you ever requested or received a pension, benefits, or payment
because of an injury sickness or disability? / / / /
- ------------------------------------------------------------------------------------------------------------------
11 Have you ever used cocaine, heroin, barbiturates or any illegal, restricted or
controlled substance or any other drugs except as prescribed by a
doctor or other licensed practitioner; or received treatment or advice
from a doctor or other practitioner regarding the use of drugs except
for medical purposes; or received treatment, counseling or advice from
an organization which assists those who have a drug problem? / / / /
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
NM 2092
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
Give details in Additional Remarks Section.
(dates, results, doctors consulted and addresses, etc.) Yes No Additional Remarks
- ------------------------------------------------------------------------------------------------------------------
12 Have you ever:
a. Used alcoholic beverages? If "Yes," how often, how many ounces, and
for how many years? / / / /
b. Been advised to reduce or discontinue the use of alcoholic beverages? / / / /
c. Been counseled, sought help or treatment, or been advised to go for
treatment or counseling for alcoholism or drug use? / / / /
d. Attended or joined any organization such as Alcoholics Anonymous (AA)
or Narcotics Anonymous (NA) for alcohol and/or drug related problems? / / / /
- ------------------------------------------------------------------------------------------------------------------
13 Family History:
Is there history of diabetes, heart disease, high blood pressure, cancer,
kidney disease, mental illness, suicide, or any hereditary disease? / / / /
- ------------------------------------------------------------------------------------------------------------------
14 a. Age if Living Age at Death Cause of Death b. Brothers and Sisters:
Father: ________________________________________________________________ No. Living: ____
Mother: _______________________________________________________________ No. Dead ____ Cause ______
- ------------------------------------------------------------------------------------------------------------------
ADDITIONAL REMARKS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------
Question No. Details
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
I represent that all statements and answers to the foregoing questions are, to
the best of my knowledge and belief, complete and true. I agree: (a) that they
shall form a part of my application; (b) that they shall be subject to the terms
of the agreement found in Part I; and, (c) that they shall become a part of any
policy based on this application.
<TABLE>
<CAPTION>
<S> <C>
Signed at: _______________________ Date: ____________ Signature of
City and State Proposed Insured:_______________________________________
_____________________________________________________
Signature of Agent as Witness
</TABLE>
<PAGE>
-------------------------------------------------
PART III RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
LIFE APPLICATION 1000 Woodbury Road, Woodbury, NY 11797
MULTIPLE INSURED SUPPLEMENT -------------------------------------------------
(Use on Riders: Spouse, Dependent Children,
Other Insured below $100,000)
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
1. Name of Spouse (or Other Insured) Soc. Sec. No. Date of Birth Sex Birthplace Hgt. Wt.
First Middle Last Month Day Year
- ------------------------------------------------------------------------------------------------------------------
2. Dependent children proposed for Relationship
insurance.
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
HEALTH STATEMENTS (The following questions must be answered on all the above Proposed Insured) - Give details
of all YES answers in Remarks Section.
- ------------------------------------------------------------------------------------------------------------------
3. Has any person named above used tobacco in any form
in the past twelve months? / / Yes / / No
- ------------------------------------------------------------------------------------------------------------------
4. Has any person named above lost more than 10 pounds
in the past year? / / Yes / / No
How much? Reason?
- ------------------------------------------------------------------------------------------------------------------
5. Has any person named above ever received treatment
or counseling for alcohol or other drug usage, or been
a member of any self-help group, such as Alcoholics
anonymous or Narcotics Anonymous? / / Yes / / No
- ------------------------------------------------------------------------------------------------------------------
6. Does any person named above, to the best of your
knowledge, have any mental or physical impairment or
disease? / / Yes / / No
- ------------------------------------------------------------------------------------------------------------------
7. Who is the family doctor? (If none, state none)
Name: _______________________________________________
Address: ____________________________________________
_____________________________________________________
Phone No.: __________________________________________
Date last seen: ___________ Why? ____________________
For which proposed insured? _________________________
What tests were made? _______________________________
With what results? __________________________________
- ------------------------------------------------------------------------------------------------------------------
8. Has any person named above ever had, currently have
or been treated for:
a. High blood pressure? / / Yes / / No
b. A heart condition? / / Yes / / No
c. Chest pain / / Yes / / No
d. Stroke? / / Yes / / No
e. Diabetes? / / Yes / / No
f. Cancer? / / Yes / / No
g. Respiratory Condition? / / Yes / / No
- ------------------------------------------------------------------------------------------------------------------
9. Has any person named above:
a. Consulted a doctor or other medical practitioner in
the last five years? / / Yes / / No
b. Had any electrocardiograms, blood studies,
(excluding any study or test for HIV), or other
medical tests or studies within the last five
years? / / Yes / / No
c. Been diagnosed or treated by a member of the
medical profession for Acquired Immune Deficiency
Syndrome (AIDS) or AIDS-Related Complex (ARC)?
/ / Yes / / No
d. Been under observation or received treatment in
any hospital or other institution in the last five
years? / / Yes / / No
- ------------------------------------------------------------------------------------------------------------------
10. Is any person named above currently taking, or been advised to take, any medication? / / Yes / / No
- ------------------------------------------------------------------------------------------------------------------
11. REMARKS - DETAILS OF ITEMS 3 THROUGH 10. Give complete information including where applicable, name
of person, dates, number of attacks, duration, results, and names and addresses of doctors, medical
facilities, etc.
QUESTION NO. | DETAILS
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
I represent that all statements and answers to the foregoing questions are,
to the best of my knowledge an belief, complete and true. I agree: (a) that
they shall form a part of my application; (b) that they shall be subject to the
terms of the agreement found in Part I; and,(c) that they shall become a part
of any policy based on this application.
AUTHORIZATION: I hereby authorize any licensed physician, medical practitioner,
hospital, clinic or other medical or medically related facility, insurance
company, the Medical Information Bureau or other organization, institution or
person, that has any records or knowledge of me or my children for whom
insurance application is made, or my health, or their health, to give to
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY, or its reinsurers any such
information. I further authorize RELIASTAR BANKERS SECURITY LIFE INSURANCE
COMPANY to request that an investigative consumer report be prepared as
described in the notice given to me. If a consumer report is prepared, I elect
to be interviewed. / / No
I acknowledge receipt of, and have read, the Notifications given to me. This
Authorization is valid for 30 months from the date this form was signed. A
photographic copy of this authorization shall be as valid as the original.
<TABLE>
<CAPTION>
<S> <C>
Signed at: ____________________ Date: _____________ __________________________________________________________
City and State Signature of Spouse or Other Insured, if any otherwise
Signature of Proposed Insured Who Signed Part I.
____________________________________________________
Signature of Agent as Witness
</TABLE>
Form 3092
<PAGE>
AGENT'S REPORT
(WRITING AGENT MUST COMPLETE THIS FORM IN ALL CASES)
- ------------------------------------------------------------------------
1. How long have you known the Proposed Insured?
____________ How well? _____________________________
2. a. Did you personally see all persons proposed for insurance?
/ / Yes / / No
b. Was the application signed by the persons proposed for
insurance after all questions concerning health and habits
were answered?
/ / Yes / / No
Explain if "No":
_________________________________________________________
_________________________________________________________
3. If Proposed Insured is a juvenile:
a. Does he/she live with his/her parents? / / Yes / / No
b. Are all brothers and sisters insured for
like amounts? / / Yes / / No
If no, explain: _________________________________________
c. How much insurance is in force on the life of the person
responsible for the child's support $___________
4. a. This application is being submitted:
/ / Non-Medically / / Super Non-Med / / Medically
b. Have you arranged for the medical requirements;
/ / Yes / / No
c. Name and telephone number of Examining Service the
requirements were scheduled with: _______________________
_________________________________________________________
5. Is the Insurance applied for intended to replace change or
borrow against any insurance or annuity in this or any other
company?
/ / Yes / / No
If "Yes," submit all required forms.
6. Has an application of any person proposed for insurance been
submitted to other Companies in the past year?
/ / Yes / / No
Explain if "Yes."
____________________________________________________________
____________________________________________________________
7. What is the Proposed Insured's:
a. Annual Earned Income? $_____________________
b. Unearned Income? $_____________________
c. Financial Net Worth? $_____________________
8. Do you know anything, not stated in the application that
might affect our decision to offer insurance?
/ / Yes / / No
Explain if "Yes"
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
- ------------------------------------------------------------------------
I represent that the above information is true and complete to the best of my
knowledge and belief, and that the application has been completed in accordance
with RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY'S rules, guidelines and
instructions. I certify that I have given the Proposed Insured the notification
about the Federal Fair Credit Reporting Act/Abbreviated Notice Regarding
Insurance Information Practices and the Medical Information Bureau. If I become
aware of a change in the health or habits of any person proposed for insurance,
occurring after the date of the application but before I deliver the policy, I
promise to inform RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY of the
changes and I agree to withhold delivery of the policy until instructed by
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY.
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------- -------------------------------- --------------------------------
Print Agent's Name Agent's Signature Code No.
- -------------------------------- -------------------------------- --------------------------------
Print Agent's Name Agent's Signature Code No.
- -------------------------------- -------------------------------- --------------------------------
Print General Agent's Name General Agent's Signature Code No.
</TABLE>
- ------------------------------------------------------------------------
MARKETING INFORMATION:
- ------------------------------------------------------------------------
1. List the ages of Proposed Insured's children:
____________________________________________________
____________________________________________________
2. How was the prosect developed: (Circle One)
1) Canvass 2) Direct Mail 3) Applicant Inquiry
4) Referral 5) Other ___________________________
3. The Proposed Insured: (Circle One)
1) Owns a home 2) Rents a home 3) Neither
4. The sale of this insurance is part of a plan for:
(Circle One)
1) Retirement or pension 5) Cash accumulation
2) Family Income 6) Final expenses
3) Payroll deduction 7) Estate planning
4) Mortgage insurance 8) Other (specify)
__________________
5. Annual household income is: (Circle One)
1) Under $25,000 4) $75,001 - $100,000
2) $25,000 - $50,000 5) $100,001 - $150,000
3) $50,001 - $75,000 6) Over $150,000
- ------------------------------------------------------------------------
[LOGO]
ReliaStar Life
Insurance Company
20 Washington Avenue South
Minneapolis, MN 55401
August 1, 1997
ReliaStar Bankers Security Life Insurance Company
1000 Woodbury Road, Suite 102
Woodbury, NY 11797
Dear Madam/Sir:
In connection with the proposed registration under the Securities Act of 1933,
as amended, of a flexible premium variable life insurance policy (the "Policy")
and interests in ReliaStar Bankers Security Variable Life Separate Account I
(the "Variable Account"), I have examined documents relating to the
establishment of the Variable Account by the Board of Directors of our
affiliated company, ReliaStar Bankers Security Life Insurance Company (the
"Company"), as a separate account for assets applicable to variable contracts,
pursuant to New York Insurance Law Section 4240, as amended, and the
Registration Statement, on Form S-6 (the "Registration Statement") and I have
examined such other documents and have reviewed such matters as I deemed
necessary for this opinion, and I advise you that in my opinion:
1. The Variable Account is a separate account of the Company duly
created and validly existing pursuant to the laws of the State
of New York.
2. The Policy, when issued in accordance with the Prospectus
constituting a part of the Registration Statement and upon
compliance with applicable local law, will be legal and
binding obligations of the Company in accordance with their
respective terms.
3. The portion of the assets held in the Variable Account equal
to reserves and other contract liabilities with respect to the
Variable Accounts are 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 and to the
references to me wherever appearing therein.
Very truly yours,
/s/ Robert B. Saginaw
Robert B. Saginaw
Counsel
INDEPENDENT AUDITORS' CONSENT
Board of Directors and Policy Holders
ReliaStar Bankers Security Variable Life Separate Account I:
We consent to the use in the Post-Effective Amendment No. 2 to Registration
Statement on Form S-6 (File No. 333-19123) of ReliaStar Bankers Security
Variable Life Separate Account I filed under the Securities Act of 1933 of our
report dated January 31, 1997 on the audit of the financial statements of
ReliaStar Bankers Security Variable Life Separate Account I as of December 31,
1996 and for each of the two years in the period then ended and our report dated
March 31, 1997 on the audit of the financial statements of ReliaStar Bankers
Security Life Insurance Company as of and for the years ended December 31, 1996
and 1995 appearing in the Prospectus, which is a part of such Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
July 30, 1997
INDEPENDENT AUDITORS' CONSENT
Board of Directors and Policyowners
ReliaStar Bankers Security Variable Life Separate Account I:
We consent to the use in the Pre-Effective Amendment No. 2 to Registration
Statement on Form S-6 (File No. 333-19123) of the ReliaStar Bankers Security
Variable Life Separate Account I (formerly Bankers Security Variable Life
Separate Account I) filed under the Securities Act of 1933, and of our report
dated February 2, 1995 on the audit of the statement of operations and changes
in net assets of ReliaStar Bankers Security Variable Life Separate Account I for
the year ended December 31, 1994, appearing in the Prospectus, which is part of
such Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.
/s/ KPMG Peat Marwick LLP
July 31, 1997
[LOGO]
ReliaStar Life
Insurance Company
20 Washington Avenue South
Minneapolis, MN 55401
August 1, 1997
ReliaStar Bankers Security Life Insurance Company
1000 Woodbury Road, Suite 102
Woodbury, NY 11797
Madam/Sir:
This opinion is furnished in connection with the registration by our affiliated
company, ReliaStar Bankers Security Life Insurance Company, of a flexible
premium variable life insurance policy (the "Contract") under the Securities Act
of 1933, as amended. The Contract, including, if applicable, variations thereof
used in various states, is described in the Prospectus constituting a part of
the Registration Statement on Form S-6, as amended.
The form of Contract was reviewed by me, and I am familiar with the Registration
Statement and Exhibits thereto.
In my opinion:
The illustrations of Accumulation Values, Surrender Charges, Cash
Surrender Values, and Death Benefits, included in the section entitled,
"Illustration of Accumulation Values, Surrender Charges, Cash Surrender
Values, and Death Benefits" in Appendix C of the Prospectus
constituting part of the Registration Statement, based on the
assumptions stated in the illustrations, are consistent with the
provision of the Contract (including, as appropriate, any state
variation thereof). The rate structure of the Contract 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 Contract for a male age 40 than to prospective
purchasers of the Contract for other ages or for females. In any state
where charges cannot be based upon the insured's sex, the rate
structure of the Contract has not been designed so as to make the
relationship between premium and benefits, as shown in the
illustrations, appear more favorable to a prospective purchaser of the
Contract for an insured age 40 than to prospective purchasers of the
Contract for other ages.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
Prospectus constituting a part of the Registration Statement.
Sincerely,
/s/ Steven P. West, FSA, MAAA
- -----------------------------
Steven P. West, FSA, MAAA
Actuary
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
RELIASTAR BANKERS SECURITY VARIABLE LIFE SEPERATE ACCOUNT I UNAUDITED STUB
PERIOD FINANCIALS FOR THE THREE MONTHS ENDED 3-31-97, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000701383
<NAME> BSL-VARIABLE LIFE
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 20,198
<INVESTMENTS-AT-VALUE> 22,341
<RECEIVABLES> 0
<ASSETS-OTHER> 2,083
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24,424
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,798
<TOTAL-LIABILITIES> 2,798
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 21,626
<DIVIDEND-INCOME> 132
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 29
<NET-INVESTMENT-INCOME> 103
<REALIZED-GAINS-CURRENT> 98
<APPREC-INCREASE-CURRENT> (57)
<NET-CHANGE-FROM-OPS> 144
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (176)
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (32)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 29
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
