<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1998
Registration No. 33-47786
Registration No. 811-5803
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 10 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 33 /X/
___________
VA-I SEPARATE ACCOUNT
of
UNUM LIFE INSURANCE COMPANY OF AMERICA
(Exact Name of Registrant)
UNUM LIFE INSURANCE COMPANY OF AMERICA
(Name of Depositor)
2211 Congress Street
Portland, Maine 04122
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: 800-341-0441
ROSEMARY A. MOORE, ESQUIRE
UNUM Life Insurance Company of America
2211 Congress Street
Portland, Maine 04122
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on May 1, 1998, pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / on , pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of securities being registered:
Interests in a separate account under group variable annuity contracts.
<PAGE>
CROSS REFERENCE SHEET
SHOWING LOCATION OF INFORMATION IN PROSPECTUS
<TABLE>
<CAPTION>
FORM N-4 PROSPECTUS CAPTION
- --------- ------------------
<S> <C> <C>
1. Cover Page........................... Cover Page
2. Definitions.......................... Definitions
3. Synopsis or Highlights............... Summary
4. Condensed Financial Information...... Condensed Financial Information
5. General Description of Registrant,
Depositor and Portfolio Companies.... UNUM/America, Lincoln Life, The Variable Investment Division and the Funds
6. Deductions and Expenses.............. Deductions and Charges
7. General Description of
Variable Annuity Contracts........... Contract Provisions; Other Contract Provisions
8. Annuity Period....................... Annuity Period
9. Death Benefit........................ Contract Provisions, Death Benefits
10. Purchases and Contract Values........ Contract Provisions
11. Redemptions.......................... Contract Provisions, Withdrawals
12. Taxes................................ Federal Income Tax Considerations
13. Legal Proceedings.................... Not Applicable
14. Table of Contents of the Statement
of Additional Information............ Contents of Statement of Additional Information
</TABLE>
CROSS REFERENCE SHEET
SHOWING LOCATION OF INFORMATION IN STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
INFORMATION CAPTION
FORM N-4 -------------------
<S> <C> <C>
15. Cover Page.......................... Cover Page
16. Table of Contents................... Table of Contents
17. General Information and History..... Prospectus - UNUM/America, Lincoln Life, The
Variable Investment Division and the Funds
18. Services............................ Not Applicable
19. Purchase of Securities being
Offered............................. Not Applicable
20. Underwriters........................ Distribution of the Contracts
21. Calculation of Yield Quotations of
Money Market Sub Accounts........... Not Applicable
22. Annuity Payments.................... Determination of Variable Annuity Payment
23. Financial Statements................ Financial Statements
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
SHOWING LOCATION OF INFORMATION IN PART C-OTHER INFORMATION
<TABLE>
<S> <C> <C>
24(a) Financial Statements and Exhibits................ Not Applicable
24(b) Exhibits......................................... Exhibits
25. Directors and Officers of the Director........... Directors and Officers of the Depositor
26. Persons Controlled by or Under
Common Control with the Depositor
or Registrant.................................... Organizational Chart
27. Number of Contract Owners........................ Number of Contract Owners
28. Indemnification.................................. Indemnification
29. Principal Underwriters........................... Principal Underwriters
30. Location of Accounts and Records................. Location of Accounts and Records
31. Management Services.............................. Management Services
32. Undertakings..................................... Undertakings
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
UNUMLIFE INSURANCE COMPANY OF AMERICA
Group Variable Annuity Contracts
VA-I Separate Account
2211 Congress Street
Portland, Maine 04122
(800) 341-0441
VARIABLE ANNUITY I
[LOGO OF UNUM APPEARS HERE]
- --------------------------------------------------------------------------------
PROSPECTUS
- --------------------------------------------------------------------------------
MAY 1, 1998
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS OF THE
APPLICABLE UNDERLYING FUNDS WHICH SHOULD BE RETAINED FOR FUTURE REFERENCE.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISK, INCLUDING MARKET FLUC-
TUATION AND POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
80010
This prospectus describes group annuity contracts ("Contracts") offered by UNUM
Life Insurance Company of America ("UNUM/America"), a subsidiary of UNUM Hold-
ing Company and its wholly-owned parent company, UNUM Corporation. The Con-
tracts are designed to enable Participants and Employers to accumulate funds
for retirement programs meeting the requirements of the following Sections of
the Internal Revenue Code of 1986, as amended (the "Code"): 401(a), 403(b), 408
and 457 and other related Sections as well as for programs offering non-quali-
fied annuities. A Participant is an employee or other person affiliated with
the Contractholder on whose behalf a Participant Account is maintained under
the terms of the Contract.
The Contracts permit Contributions to be deposited in the Guaranteed Interest
Division, which is part of UNUM/America's General Account, and in certain Sub-
Accounts in UNUM/America's VA-I Separate Account ("Variable Investment Divi-
sion"). Contributions to the Guaranteed Interest Division earn interest at a
guaranteed rate declared by UNUM/America. Contributions to the Variable Invest-
ment Division will increase or decrease in dollar value depending on the in-
vestment performance of the underlying funds in which the Sub-Accounts invest.
Special limits apply to withdrawals and transfers from the Guaranteed Interest
Division.
Currently, the Variable Investment Division consists of the nine Sub-Accounts
listed below: Next to each listed Sub-Account is the name of the fund (the
"Fund") in which the Sub-Account invests. For more information about the in-
vestment objectives, policies and risks of the Funds please refer to the pro-
spectus for each of the Funds.
<TABLE>
<S> <C>
Index Account.......................................... Dreyfus Stock Index Fund
Growth I Account....................................... Fidelity's Variable
Insurance Products Fund:
Growth Portfolio
Asset Manager Account.................................. Fidelity's Variable
Insurance Products Fund
II: Asset Manager
Portfolio
Growth II Account...................................... American Century
Variable Portfolios,
Inc.: VP Capital
Appreciation
Balanced Account....................................... American Century
Variable Portfolios,
Inc.: VP Balanced
International Stock Account............................ T. Rowe Price
International Series,
Inc.
Socially Responsible Account........................... Calvert Social Balanced
Portfolio
Equity-Income Account.................................. Fidelity's Variable
Insurance Products Fund:
Equity-Income Portfolio
Small Cap Account...................................... Dreyfus Variable
Investment Fund: Small
Cap Portfolio
</TABLE>
This prospectus is intended to provide information regarding the Contracts of-
fered by UNUM/America that you should know before investing. Please read and
retain this prospectus for future reference. A Statement of Additional Informa-
tion, dated May 1, 1998, has been filed with the Securities and Exchange Com-
mission and is available at no charge by writing or calling P.O. Box 9740,
Portland, Maine 04104, (800) 341-0441, Attention: Tax Deferred Annuities.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS.............................................................. 3
SUMMARY (Including Fee Table and Performance Information)................ 6
CONDENSED FINANCIAL INFORMATION.......................................... 11
FINANCIAL STATEMENTS..................................................... 12
UNUM/AMERICA, LINCOLN LIFE, THE VARIABLE INVESTMENT DIVISION
AND THE FUNDS........................................................... 12
CONTRACT PROVISIONS...................................................... 17
DEDUCTIONS AND CHARGES................................................... 24
ANNUITY PERIOD........................................................... 26
FEDERAL INCOME TAX CONSIDERATIONS........................................ 28
VOTING RIGHTS............................................................ 31
OTHER CONTRACT PROVISIONS................................................ 32
GUARANTEED INTEREST DIVISION............................................. 33
OTHER INFORMATION........................................................ 34
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION................ 36
</TABLE>
2
<PAGE>
DEFINITIONS
ACCUMULATION UNIT: An accounting unit of measure used to record amounts of
increases to, decreases from and accumulations in each Sub-Account during the
Accumulation Period.
ACCUMULATION UNIT VALUE: The dollar value of an Accumulation Unit in each Sub-
Account on any Valuation Date.
ACCUMULATION PERIOD: The period commencing on a Participant's Participation
Date and terminating when the Participant's Account balance is reduced to zero,
either through withdrawal(s), conversion to an annuity, imposition of charges,
payment of a Death Benefit or a combination thereof.
ACQUISITION AGREEMENT: The Asset Transfer and Acquisition Agreement between
UNUM/America and Lincoln Life which provides for the sale of UNUM/America's tax
sheltered annuity business to Lincoln Life, the assumption of UNUM/America's
obligations under the Contracts (other than the New York Contracts) by Lincoln
Life, and the assumption of UNUM/America's obligations under the New York
Contracts by Lincoln-NY.
ANNUITANT: The person receiving annuity payments under the terms of the
Contract.
ANNUITY COMMENCEMENT DATE: The date on which UNUM/America makes the first
annuity payment to the Annuitant as required by the Retired Life Certificate.
ANNUITY CONVERSION AMOUNT: The amount applied toward the purchase of an
annuity.
ANNUITY PERIOD: The period concurrent with or following the Accumulation
Period, during which an Annuitant's annuity payments are made.
BENEFICIARY: The person(s) designated to receive a Participant's Account
balance in the event of the Participant's death during the Accumulation Period
or the person(s) designated to receive any applicable remainder of an annuity
in the event of the Annuitant's death during the Annuity Period.
BUSINESS DAY: A day on which the New York Stock Exchange is customarily open
for business.
CLOSING DATE: The date of closing as provided in the Acquisition Agreement.
CONTRIBUTIONS: All amounts deposited under a Contract, including any amount
transferred from another Contract or Trustee.
CONTRACT: A Group Variable Annuity Contract issued by UNUM/America to the
Contractholder.
CONTRACTHOLDER: The party named as the Contractholder on the group annuity
Contract issued by UNUM/America. The Contractholder may be an Employer, a
retirement plan trust, an association or any other entity allowed under the
law.
DIVISION(S): The Guaranteed Interest Division and/or the Variable Investment
Division.
EMPLOYER: The organization specified in the Contract which offers the Plan to
its employees.
FUNDS: The underlying funds in which the Sub-Accounts invest. Funds are
investment vehicles which offer their shares only to insurance companies'
separate accounts and other qualifying investors.
3
<PAGE>
GENERAL ACCOUNT: All assets of UNUM/America other than those in the Variable
Investment Division or any other separate account.
GROSS WITHDRAWAL AMOUNT: The amount by which a Participant's Account is reduced
when a withdrawal occurs, including any applicable contingent deferred sales
charge and Annual Administration Charge.
GUARANTEED ANNUITY: An annuity for which UNUM/America guarantees the amount of
each payment for as long as the annuity is payable.
GUARANTEED INTEREST DIVISION: The Division maintained by UNUM/America for the
Contracts and other contracts for which UNUM/America guarantees the principal
amount and interest credited thereto subject to any fees and charges as set
forth in the Contract. Amounts allocated to the Guaranteed Interest Division
are part of the General Account.
LINCOLN LIFE: The Lincoln National Life Insurance Company.
LINCOLN-NY: Lincoln Life & Annuity Company of New York, a New York domestic
life insurance company established by Lincoln Life as a subsidiary.
LNC: Lincoln National Corporation.
NET CONTRIBUTIONS: The sum of all Contributions credited to a Participant
Account less any Net Withdrawal Amounts, outstanding loan (including principal
and due and accrued interest) and amounts converted to a Payout Annuity.
NET WITHDRAWAL AMOUNT: The amount paid when a withdrawal occurs.
NEW YORK CONTRACTS: Contracts originally issued in New York by UNUM Life
Insurance Company and subsequently through UNUM/America.
PARTICIPANT: An employee or other person affiliated with the Contractholder on
whose behalf an Account is maintained under the terms of the Contract.
PARTICIPANT ACCOUNT: An account maintained for a Participant during the
Accumulation Period the total balance of which equals the Participant's Account
balance in the Variable Investment Division plus the Participant's Account
balance in the Guaranteed Interest Division.
PARTICIPATION ANNIVERSARY: For each Participant, a date at one year intervals
from the Participant's Participation Date. If an anniversary occurs on a non-
Business Day, it is treated as occurring on the next Business Day.
PARTICIPATION DATE: A date assigned to each Participant corresponding to the
date on which the first Contribution on behalf of that Participant is received
by UNUM/America. A Participant will receive a new Participation Date if such
Participant makes a Total Withdrawal, as defined in this prospectus, and
Contributions on behalf of the Participant are resumed under any Contract.
PARTICIPATION YEAR: A period beginning with one Participation Anniversary and
ending the day before the next Participation Anniversary, except for the first
Participation Year which begins with the Participation Date.
PAYOUT ANNUITY: A series of payments paid to a person. A Payout Annuity may be
either a Guaranteed Annuity or a Variable Annuity. See "Annuity Period."
PLAN: The retirement program offered by an Employer to its employees for which
a Contract is used to accumulate funds.
4
<PAGE>
SUB-ACCOUNT: An account established in the Variable Investment Division which
invests in shares of a corresponding Fund.
UNUM/AMERICA: UNUM Life Insurance Company of America, at its home office in
Portland, Maine.
VALUATION DATE: A Business Day. Accumulation Units and Annuity Units are
computed as of the close of trading on the New York Stock Exchange.
VALUATION PERIOD: A period used in measuring the investment experience of each
Sub-Account. The Valuation Period begins at the close of trading on the New
York Stock Exchange on one Valuation Date and ends at the corresponding time on
the next Valuation Date.
VARIABLE ANNUITY: An annuity with payments that increase or decrease in
accordance with the investment results of the selected sub-accounts. See
"Annuity Period."
VARIABLE INVESTMENT DIVISION: The Division which is maintained by UNUM/America
for these Contracts and certain other UNUM/America Contracts for which
UNUM/America does not guarantee the principal amount or investment results. The
Variable Investment Division is the VA-I Separate Account which is a group of
assets segregated from the General Account whose income, gains and losses,
realized or unrealized, are credited to or charged against the Variable
Investment Division without regard to other income, gains or losses of
UNUM/America. The Variable Investment Division currently consists of nine Sub-
Accounts. Additional Sub-Accounts may be added in the future.
5
<PAGE>
SUMMARY
UNUM LIFE INSURANCE COMPANY OF AMERICA
UNUM/America is a life insurance company founded in Maine in 1966.
UNUM/America is a subsidiary of UNUM Holding Company and its wholly-owned
parent company, UNUM Corporation whose stock is traded on the New York Stock
Exchange.
LINCOLN LIFE
On October 1, 1996 (the "Closing Date"), UNUM/America completed the sale of
its tax-sheltered annuity business to The Lincoln National Life Insurance
Company ("Lincoln Life"), pursuant to an acquisition agreement with Lincoln
Life (the "Acquisition Agreement"). Under the Acquisition Agreement, Lincoln
Life assumed UNUM/America's obligations under the Contracts and Lincoln Life &
Annuity Company of New York ("Lincoln-NY") assumed UNUM/America's obligations
under Contracts originally issued in New York by UNUM Life Insurance Company
(the "New York Contracts") other than those obligations to Contractholders
and/or Participants who neither consented nor were deemed to have consented to
the assumption.
Lincoln Life is a subsidiary of LNC, which is a publicly-owned company whose
stock is traded on the New York Stock Exchange. See "Acquisition Agreement with
The Lincoln National Life Insurance Company."
CONTRACTS OFFERED
The Group Variable Annuity Contracts offered by this prospectus were made
available to Employers and other entities to provide a way to accumulate funds
for retirement and to provide Payout Annuities.
HOW CONTRIBUTIONS ARE MADE
Contributions under the Contract are deposited by the Contractholder.
Depending upon the type of Plan offered, Contributions may consist of salary
reduction Contributions, Employer Contributions or Participant post-tax
Contributions. Contributions are forwarded by the Contractholder to
UNUM/America and allocated among the two Divisions in accordance with
information provided by the Contractholder. See "Contract Provisions,
Contributions under the Contract".
DIVISIONS OFFERED
Contributions may be allocated to the Guaranteed Interest Division or to the
Variable Investment Division or to both Divisions. The Variable Investment
Division currently consists of nine Sub-Accounts. A Contractholder may choose
to offer between zero and nine of the Sub-Accounts to its Participants under a
Contract. The Sub-Accounts invest their assets in shares of a corresponding
Fund. For a full description of the Funds, see the prospectuses for the Funds.
TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
During the Accumulation Period, a Participant or a Contractholder under
certain Plans may make transfers between and among Divisions and Sub-Accounts.
Certain Plans may limit the transfers in dollar amount, type of Contribution,
or frequency. Certain Plans may require Contractholder approval for a transfer.
See "Transfers between Divisions and Sub-Accounts".
WITHDRAWALS
During the Accumulation Period, a Participant may withdraw any part of their
account balance subject to the restrictions imposed by the Code and regulations
thereof and by the applicable Plan. With respect to Plans subject to Title I of
the Employee Retirement Income Security Act of 1974
6
<PAGE>
(ERISA), the Contractholder must authorize UNUM/America to process a withdrawal
request by a Participant. Withdrawal requests under Section 457 Plans must also
be authorized by the Contractholder. With respect to withdrawal requests by
Participants under Plans not subject to Title I of ERISA, certain Contracts may
require that the Participants must certify to UNUM/America that an eligible
event under the Code has occurred. Withdrawal requests must be in writing and
in a form acceptable to UNUM/America.
Certain Plans are also subject to distribution requirements under Section
401(a)(9) of the Code including the incidental death benefit requirements of
Section 401(a)(9)(G). Certain transfers from one Qualified Plan contract to
another Qualified Plan contract are not subject to withdrawal restrictions
under the Code. Certain withdrawals are subject to a 10% Federal Excise Tax for
premature distributions. See "Federal Income Tax Considerations."
Certain types of withdrawals are subject to a contingent deferred sales
charge ("CDSC") if taken within the first ten years of participation. See
"Contract Provisions, Deductions and Charges."
DEATH BENEFITS
The Contracts provide for a Death Benefit for a Participant who dies during
the Accumulation Period. See "Contract Provisions, Death Benefits."
PAYOUT ANNUITIES
As permitted by the applicable Plan, a Participant or a Beneficiary of a
deceased Participant may elect to convert all or part of the Participant's
Account balance or the Death Benefit, as appropriate, to a Payout Annuity.
UNUM/America offers both Guaranteed and Variable Annuities. The range of
annuity options available include life annuities and annuities for a specific
time period as well as others described more fully in this prospectus. See
"Annuity Period."
FREE-LOOK PROVISION
A Participant under a Section 403(b) or 408 Plan and certain Non-Qualified
Plans has ten days, in most cases, from the date the Participant receives an
Active Life Certificate to notify UNUM/America in writing that the Participant
does not choose to participate under the Contract and to receive a return of
funds. See "Free-Look Period."
FEE TABLE
The following table and examples, prescribed by the SEC, are included to
assist Contractholders and Participants in understanding the transaction and
operating expenses imposed directly or indirectly under the Contracts. The
standardized tables and examples assume the highest deductions possible under
the Contracts, whether or not such deductions actually would be made from a
Participant's Account. A CDSC is deducted from a Participant's Account balance
only if a total or partial withdrawal is made, and then only if one of the
exceptions does not apply.
<TABLE>
<S> <C>
Contract Related Transaction Expenses/1//
Sales Load Imposed on Purchases: 0%
Maximum CDSC
(as a percentage of the Gross Withdrawal Amount): 5%
</TABLE>
<TABLE>
<CAPTION>
PARTICIPATION YEAR CDSC
------------------ ----
<S> <C>
1-6 5%
7 4%
8 3%
9 2%
10 1%
11 and later 0%
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Annual Administration Charge/2// $ 25
Separate Account Annual Expenses
(as a percentage of average daily net assets)
Mortality and Expense Risk Charge: 1.20%
Other Charges: 0.00%
Total Separate Account
Annual Expenses: 1.20%
</TABLE>
Fund Expenses/3//
as a percentage of average daily net assets)
<TABLE>
<CAPTION>
G-
INDEX I/4// AMGR/4// G-II BAL INT'L SOC RES/5// EQI/4// SMCAP
----- ----- -------- ---- ---- ----- ----------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees: 0.25 0.60 0.55 1.00 1.00 1.05 0.69 0.50 0.75
Other Expenses: 0.03 0.09 0.10 0 0 0 0.12 0.08 0.03
Total Fund Expenses: 0.28 0.69 0.65 1.00 1.00 1.05 0.81 0.58 0.78
</TABLE>
Example #1: Assuming total withdrawal of the Participant's Account balance at
the end of the period shown.
A $1,000 investment would be subject to the expenses shown, assuming 5%
annual return on assets.
<TABLE>
<CAPTION>
INDEX G-I AMGR G-II BAL INT'L SOC RES EQI SMCAP
------ ------ ------ ------ ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year 67.15 71.07 70.69 74.03 74.03 74.50 72.22 70.02 72.03
3 Years 103.25 115.16 114.01 124.07 124.07 125.50 118.62 111.98 118.05
5 Years 141.88 161.98 160.03 176.89 176.89 179.28 167.78 156.63 166.81
10 Years 194.59 238.08 233.92 269.72 269.72 274.73 250.45 226.60 248.40
</TABLE>
Example #2: Assuming annuitization of the Contract at the end of the period
shown.
A $1,000 investment would be subject to the expenses shown, assuming 5%
annual return on assets.
<TABLE>
<CAPTION>
INDEX G-I AMGR G-II BAL INT'L SOC RES EQI SMCAP
------ ------ ------ ------ ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year 15.42 19.55 19.15 22.66 22.66 23.16 20.76 18.44 20.55
3 Years 47.88 60.45 59.23 69.86 69.86 71.37 64.10 57.09 63.50
5 Years 82.62 103.89 101.83 119.67 119.67 122.20 110.03 98.22 109.01
10 Years 180.54 224.58 220.37 256.62 256.62 261.69 237.11 212.95 235.03
</TABLE>
Example #3: Assuming persistency of the Contracts through the periods shown.
A $1,000 investment would be subject to the expenses shown, assuming 5%
annual return on assets.
<TABLE>
<CAPTION>
INDEX G-I AMGR G-II BAL INT'L SOC RES EQI SMCAP
------ ------ ------ ------ ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year 15.42 19.55 19.15 22.66 22.66 23.16 20.76 18.44 20.55
3 Years 47.88 60.45 59.23 69.86 69.86 71.37 64.10 57.09 63.50
5 Years 82.62 103.89 101.83 119.67 119.67 122.20 110.03 98.22 109.01
10 Years 180.54 224.58 220.37 256.62 256.62 261.69 237.11 212.95 235.03
</TABLE>
The effect of the Annual Administration Charge for a period is determined by
dividing the total amount of such charges collected in the previous year by the
total average net assets of the accounts for the previous year, as of the
previous month ended; accounts include accounts available under Variable
Annuity I of UNUM/America and under corresponding accounts of Lincoln Life.
8
<PAGE>
- --------
/1/Premium taxes are not shown. UNUM/America deducts the amount of premium tax-
es, if any, when paid. Loans taken by a Participant with respect to the Par-
ticipant's Account balance in the Guaranteed Interest Division may be sub-
ject to a charge for establishing the loan.
/2/The Employer has the option of paying the Annual Administration Charge on
behalf of the Participants under a Contract. In such a situation, the pro-
jected expenses would be lower than those indicated in the examples. This
charge is not imposed during the Annuity Period. In certain situations the
Annual Administration Charge may be reduced or eliminated. See "Deductions &
Charges--Annual Administration Charge."
/3/Until complete order instructions are received, initial Contributions may be
allocated temporarily to Fidelity's Variable Insurance Products Fund: Money
Market Portfolio. Management fees for this fund are 0.21%. Other expenses
are 0.10%. Total Fund Expenses are 0.31%. See "Initial Contributions."
/4/A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds have entered into arrange-
ments with their custodian whereby credits realized as a result of
uninvested cash balances were used to reduce custodian expenses. Including
these reductions, the total operating expenses presented in the table would
have been 0.57% for VIP Equity-Income Portfolio, 0.67% for VIP Growth Port-
folio, and 0.64% for VIP II Asset Manager Portfolio.
/5/The figures above are based on expenses for fiscal year 1997, and have been
restated to reflect an increase in transfer agency expenses of 0.01% ex-
pected to be incurred in 1998. "Management Fees" includes a performance ad-
justment which, depending on performance, could cause the fee to be as high
as 0.85% or as low as 0.55%. "Other Expenses" reflects an indirect fee. Net
fund operating expenses after reductions for fees paid indirectly (again,
restated) would be 0.78%.
The Contracts are designed for retirement planning. Withdrawals prior to
retirement or the Annuity Commencement Date are not consistent with the long-
term purposes of the Contracts and the applicable tax laws. Withdrawals may
also be subject to federal income tax and a 10% Federal tax penalty.
The fee table and examples reflect expenses and charges of the Sub-Accounts
and the expenses of the applicable Fund for the year ended December 31, 1997.
HOWEVER, THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES AND CHARGES OF THE SUB-ACCOUNTS OR THE FUNDS. SIMILARLY, THE
ASSUMED 5% ANNUAL RATE OF RETURN IS NOT AN ESTIMATE OR A GUARANTEE OF FUTURE
INVESTMENT PERFORMANCE. See "Deductions and Charges" in this prospectus and the
discussion of Fund Management in the prospectus for each of the Funds for
further information.
PERFORMANCE INFORMATION
From time-to-time the Variable Investment Division may advertise or use in
sales literature information concerning the investment performance of the
various Sub-Accounts. No performance presentation should be considered as
representative of future investment results. Actual performance is a function
not only of the investment management of the underlying Funds and market
forces, but of the time and frequency of Contributions, the charges and fees
imposed under the Contract, the fees and expenses of the Funds, and transfers
made by a Participant, among other factors.
The investment performance of the Sub-Accounts may be advertised in
comparison with the performances of other variable annuities, other investment
companies (such as mutual funds), and recognized indices (such as the Dow Jones
Industrial Average, Standard & Poor's 500 Composite
9
<PAGE>
Stock Price Index, NASDAQ Index, Consumer Price Index), and data published by
Lipper Analytical Services, Inc., Morningstar, and Variable Annuity Research
and Data Service or comparable services. Performance of the Sub-Accounts may
also be compared with performance of other types of investments. Some
advertisements may also include published editorial comments and performance
rankings by independent organizations and publications that monitor the
performance of separate accounts and mutual funds.
The Sub-Accounts may advertise average annual total return performance
information according to the SEC standardized formula. Average annual total
return shows the average annual percentage increase, or decrease, in the value
of a hypothetical $1,000 contribution allocated to a Sub-Account from the
beginning to the end of each specified period of time. The SEC standardized
formula gives effect to all applicable charges under the Contracts. This method
of calculating performance further assumes that (i) a $1,000 contribution was
allocated to a Sub-Account, (ii) no transfers or additional payments were made
and (iii) the withdrawal of the investment occurs at the end of the period.
Premium taxes are not included in the term "charges" for purposes of this
calculation. The Sub-Accounts may also advertise this total return performance
as described above on a cumulative basis.
The Sub-Accounts may also present non-standard performance information based
on the history of a Fund and adjusted to reflect the fees and charges imposed
under a Contract. The Sub-Accounts may present total return information
computed on a calendar year basis. The Sub-Accounts may also present total
return information over specified periods of time (computed on an average
annual or cumulative basis) either assuming that no CDSC will be deducted or
assuming that no CDSC or administrative charge will be deducted. The Sub-
Accounts may present hypothetical examples that apply the total return to a
hypothetical initial investment. The Sub-Accounts may also present total return
information based on different amounts of periodic investments. For additional
performance information, please refer to the Statement of Additional
Information.
PUBLISHED RATINGS
From time to time, in advertisements or in reports to Contractholders,
UNUM/America may reflect endorsements. Endorsements are often in the form of a
list of organizations, individuals or other parties which recommend
UNUM/America or the Contracts. The endorser's name will be used only with the
endorser's consent. It should be noted that the list of endorsements may change
from time to time.
Also, from time to time, the rating of UNUM/America as an insurance company
by A.M. Best may be referred to in advertisements or in reports to
Contractholders. Each year the A.M. Best Company reviews the financial status
of thousands of insurers, culminating in the assignment of Best's Ratings.
These ratings reflect Best's opinion of the relative financial strength and
operating performance of an insurance company in comparison to the norms of the
life/health insurance Industry. Best's ratings range from A++ to F.
In addition, the claims-paying ability of UNUM/America as measured by the
Standard and Poor's Rating Group may be referred to in advertisements or in
reports to Contractholders. A Standard and Poor's insurance claims-paying
ability rating is an assessment of an operating insurance company's financial
capacity to meet the obligations of its insurance policies in accordance with
their terms. Standard and Poor's ratings range from AAA to CCC.
From time to time UNUM/America may refer to Moody's Investors Service rating
of UNUM/America. Moody's Investors Service financial strength ratings indicate
an insurance company's ability to discharge policyholder obligations and claims
and are based on an analysis of the insurance company and its relationship to
its parent, subsidiaries, and affiliates. Moody's Investors Service ratings
range from Aaa to C.
10
<PAGE>
CONDENSED FINANCIAL INFORMATION
The financial data included below should be read in conjunction with the
financial statements and the related data included in the Statement of
Additional Information.
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
SUB-ACCOUNT 1989 1990 1991 1992 1993 1994 1995 1996 1997
- ----------- ------- ------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Index Account
December 12
Commencement $9.9060
Beginning of Period $9.9629 $ 9.4953 $12.1814 $12.8906 $13.9245 $13.8792 $18.7565 $22.7054
End of Period $9.9629 $9.4953 $12.1814 $12.8906 $13.9245 $13.8792 $18.7565 $22.7054 $29.8265
Growth I Account
May 1 Commencement $ 10.00
Beginning of Period $12.1759 $13.1505 $15.5094 $15.3208 $20.4909 $23.2198
End of Period $12.1759 $13.1505 $15.5094 $15.3208 $20.4909 $23.2198 $28.3281
Growth II Account
May 1 Commencement $ 10.00
Beginning of Period $11.5975 $11.3049 $12.3212 $12.0313 $15.5840 $14.7133
End of Period $11.5975 $11.3049 $12.3212 $12.0313 $15.5840 $14.7133 $14.0633
Asset Manager Account
May 1 Commencement $ 10.00
Beginning of Period $10.7598 $11.8933 $14.2241 $13.1979 $15.2510 $17.2668
End of Period $10.7598 $11.8933 $14.2241 $13.1979 $15.2510 $17.2668 $20.5827
Balanced Account
May 1 Commencement $ 10.00
Beginning of Period $12.4515 $11.5582 $12.2957 $12.2225 $14.6286 $16.2128
End of Period $12.4515 $11.5582 $12.2957 $12.2225 $14.6286 $16.2128 $18.5504
International Stock
Account
May 1 Commencement $ 10.00
Beginning of Period $ 9.8622 $10.8333 $12.2756
End of Period $ 9.8622 $10.8333 $12.2756 $12.5034
Socially Responsible
Account
May 1 Commencement $ 10.00
Beginning of Period $ 9.9692 $12.7827 $14.2222
End of Period $ 9.9692 $12.7827 $14.2222 $16.8728
Equity-Income Account
May 1 Commencement $ 10.00
Beginning of Period $10.4780 $13.9856 $15.7898
End of Period $10.4780 $13.9856 $15.7898 $19.9854
Small Cap Account
May 1 Commencement $ 10.00
Beginning of Period $10.3818 $13.2713 $15.2861
End of Period $10.3818 $13.2713 $15.2861 $17.6322
Pending Allocation
Account
October 15 Commencement $ 10.00
Beginning of Period $10.1054 $10.6938 $11.2772
End of Period $10.1054 $10.6938 $11.2772 $11.8940
</TABLE>
NUMBER OF ACCUMULATION UNITS OUTSTANDING AT END OF PERIOD
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997
---- ------ ------- ------- --------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Index Account 0 72,405 296,075 836,187 1,526,878 1,929,447 2,395,545 3,057,792 138,498
Growth I Account 5,166 317,275 1,340,146 3,071,862 4,459,417 5,843,047 244,513
Growth II Account 53,904 566,562 1,242,216 1,733,360 2,191,475 2,541,938 97,067
Asset Manager Account 36,645 462,405 2,232,731 4,369,937 4,882,920 5,447,414 205,657
Balanced Account 13,453 282,439 673,424 1,041,814 1,294,883 1,545,581 58,259
Socially Responsible
Account 26,073 133,871 328,168 8,750
Equity-Income Account 320,659 1,529,172 2,997,007 133,230
International Stock
Account 354,936 803,485 1,588,914 80,413
Small Cap Account 400,376 1,461,575 3,032,803 166,025
Pending Allocation
Account 11,980 21,372 35,465 485
</TABLE>
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<PAGE>
Number of Fund Shares held by each of the corresponding Sub-Accounts as of
December 31st of each year
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997
---- ------ ------- ------- --------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dreyfus Stock Index Fund 0 58,271 241,984 703,885 1,611,415 2,070,026 2,613,187 3,424,850 160,423
Fidelity's Variable
Insurance Products
Fund:
Growth Portfolio 0 0 3,399 211,238 900,965 2,170,399 3,130,382 4,358,634 186,701
American Century
Variable Portfolios,
Inc.:
VP Capital Appreciation 0 0 72,384 756,506 1,642,987 2,264,937 2,832,766 3,653,828 141,021
Fidelity's Variable
Insurance Products Fund II:
Asset Manager's
Portfolio 0 0 31,429 412,427 2,060,497 4,183,403 4,717,794 5,557,982 235,035
American Century
Variable Portfolios,
Inc.:
VP Balanced 0 0 27,075 568,960 1,364,740 2,137,066 2,691,551 3,324,693 131,157
Calvert Social Balanced
Portfolio 0 0 0 0 0 180,421 1,005,155 2,631,922 74,492
Fidelity's Variable
Insurance Products
Fund:
Equity-Income Portfolio 0 0 0 0 0 218,939 1,110,190 2,251,100 109,665
T. Rowe Price
International Stock
Portfolio 0 0 0 0 0 343,942 773,288 1,543,703 78,920
Dreyfus Variable
Investment Fund:
Small Cap Portfolio 0 0 0 0 0 113,847 420,623 890,516 51,232
Fidelity's Variable
Insurance Products
Fund:
Money Market Portfolio 0 0 0 0 0 121,067 228,610 399,944 5,765
</TABLE>
FINANCIAL STATEMENTS
The financial statements of the Variable Investment Division and of
UNUM/America may be found in the Statement of Additional Information.
UNUM/AMERICA, LINCOLN LIFE,
THE VARIABLE INVESTMENT DIVISION AND THE FUNDS
UNUM LIFE INSURANCE COMPANY OF AMERICA
UNUM/America is a life insurance company originally chartered under Maine law
in 1966 as Unionmutual Stock Life Insurance Company of America. On November 18,
1986, its name was changed to UNUM Life Insurance Company of America. On
December 31, 1991, it was merged with UNUM Life Insurance Company and UNUM
Pension and Insurance Company, with the surviving company being UNUM Life
Insurance Company of America ("UNUM/America"). UNUM/America's principal
executive offices are located at 2211 Congress Street, Portland, Maine 04122.
UNUM/America's telephone number is (207)770-2211. UNUM/America provides a broad
line of disability, health and life insurance products, in addition to group
retirement products. UNUM/America is currently licensed to issue variable
contracts in 49 states and the District of Columbia. Administrative services
necessary for the operation of the Variable Investment Division and the
Contracts are provided by The Lincoln National Life Insurance Company. See
"Deductions and Charges--Annual Administration Charge."
UNUM/America is a subsidiary of UNUM Holding Company and its wholly-owned
parent company, UNUM Corporation. UNUM Corporation was organized under Delaware
law on January 11, 1985. UNUM Corporation is a publicly-owned company whose
stock is traded on the New York Stock Exchange.
12
<PAGE>
ACQUISITION AGREEMENT WITH THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
On October 1, 1996 (the "Closing Date"), UNUM/America completed the sale of
its tax-sheltered annuity business to The Lincoln National Life Insurance
Company ("Lincoln Life"), pursuant to an acquisition agreement with Lincoln
Life (the "Acquisition Agreement"). Under the Acquisition Agreement, Lincoln
Life assumed UNUM/America's obligations under the Contracts and Lincoln Life &
Annuity Company of New York ("Lincoln-NY") assumed UNUM/America's obligations
under the New York Contracts (other than those obligations to Contractholders
and/or Participants who neither consented nor were deemed to have consented to
the assumption).
Lincoln Life is a stock life insurance company incorporated under the laws of
Indiana on June 12, 1905. Lincoln Life is principally engaged in offering life
insurance policies and annuity policies, and ranks among the largest United
States stock life insurance companies in terms of assets and life insurance in
force. Lincoln Life is also one of the leading life reinsurers in the United
States. Lincoln Life is licensed in all states (except New York) and the
District of Columbia, Guam, and the Virgin Islands.
Lincoln Life is wholly owned by Lincoln National Corporation ("LNC"), a
publicly held insurance holding company incorporated under Indiana law on
January 5, 1968. The principal office of Lincoln Life is located at 1300 South
Clinton Street, Fort Wayne, Indiana 46801. The principal office of LNC is
located at 200 East Berry Street, Fort Wayne, Indiana 46802. Through
subsidiaries, LNC engages primarily in the issuance of life insurance and
annuities, property-casualty insurance, and other financial services.
UNUM/America and Lincoln Life have notified Contractholders and/or
Participants regarding the assumption of their Contracts (other than New York
Contracts) by Lincoln Life or, in the case of the New York Contracts, by
Lincoln-NY. If the Contractholder opted out of the assumption (or refused to
consent where affirmative consent was required), UNUM/America will remain as
the insurer of the Contract and Participants under that Contract will not be
given the opportunity to have their certificates assumed by Lincoln Life.
Whether or not a Contract was assumed by Lincoln Life, it is administered by
Lincoln Life. If, under a Contract some Participants did opt out and some did
not, the Contract was bifurcated--one Contract has UNUM/America as the insurer
and the other has Lincoln Life as the insurer (or, for the New York Contracts,
Lincoln-NY). Both Contracts, however, are administered by Lincoln Life.
Currently, the Lincoln Life and Lincoln-NY separate accounts invest in the
underlying Funds that are available through the Sub-Accounts of UNUM/America's
Variable Investment Division, but there can be no assurance that such Funds
will always be made available through the Lincoln Life and Lincoln-NY separate
accounts.
LINCOLN FINANCIAL ADVISORS CORPORATION
Lincoln Financial Advisors Corporation ("LFA"), a registered broker-dealer,
is the principal underwriter of the Contracts. As such, LFA will be offering
the Contracts and performing all duties and functions that are necessary and
proper for distribution of the Contracts. LFA also may enter into sales
agreements with independent broker-dealers for the sale of the Contracts. LFA
may pay sales commissions to broker-dealers up to an amount equivalent to 3.5%
of Contributions under a Contract. LFA's principal business address is 1300
South Clinton Street, Fort Wayne, Indiana 46802. LFA, as a broker-dealer, will
do business in the state of Texas under the name LNC Equity Sales Corporation.
THE VARIABLE INVESTMENT DIVISION
On December 31, 1991, pursuant to the merger of UNUM Life Insurance Company
and UNUM Pension and Insurance Company into UNUM/America, the Variable
Investment Division was
13
<PAGE>
transferred intact to UNUM/America. Prior to that, on July 8, 1988, the Board
of Directors of UNUM Life Insurance Company authorized the establishment of the
Variable Investment Division called the TSAVA Separate Account in accordance
with the Maine Insurance Code. On February 7, 1991, the Board of Directors of
UNUM Life Insurance Company expanded the scope of the Variable Investment
Division and changed its name to the VA-I Separate Account. Under Maine law,
the funds in the Variable Investment Division are owned by UNUM/America and
UNUM/America is not, nor can UNUM/America be, a trustee with respect to those
funds. The Variable Investment Division is registered with the Securities and
Exchange Commission ("SEC") as a unit investment trust under the Investment
Company Act of 1940 ("1940 Act"). Registration with the SEC does not involve
supervision of the management or investment practices or policies of either the
Variable Investment Division or UNUM/America by the SEC.
The Variable Investment Division currently consists of nine Sub-Accounts. The
Sub-Accounts invest in shares of the Funds. Therefore, the investment
experience of the Sub-Accounts depends on the performance of the Funds.
The income, gains and losses, realized or unrealized, from assets allocated
to the Variable Investment Division are credited to or charged against the
Variable Investment Division, without regard to other income, gains or losses
in UNUM/America's general account or any other separate account. The Contract
provides that the assets of the Variable Investment Division may not be charged
with liabilities arising out of any other business of UNUM/America.
UNUM/America may accumulate in the Variable Investment Division proceeds from
charges under the Contract and other amounts in excess of the Variable
Investment Division assets representing Contract reserves and liabilities.
UNUM/America is the issuer of the Contracts and the obligations set forth
therein, other than those of the Contractholder or the Participant, are
UNUM/America's. As noted previously, however, UNUM/America has entered into an
agreement providing for the assumption of UNUM/America's obligations under the
Contracts by Lincoln Life. See "Acquisition Agreement With The Lincoln National
Life Insurance Company."
14
<PAGE>
THE FUNDS
The nine Sub-Accounts invest directly in nine corresponding Funds. Each of
these Funds was formed as an investment vehicle for insurance company separate
accounts. The investment objectives and policies of certain Funds are similar
to the investment objectives and policies of other portfolios that may be
managed by the same investment adviser or manager. The investment results of
the Funds, however, may be higher or lower than the results of such other
portfolios. There can be no assurance, and no representation is made, that the
investment results of any of the Funds will be comparable to the investment
results of any other portfolio, even if the other portfolio has the same
investment adviser or manager.
Information about each of the Funds, including their investment objectives
and investment management, is contained below. Additional information about the
Funds, their investment policies, risks, fees and expenses and all other
aspects of their operations, can be found in the prospectuses for the Funds,
which should be read carefully before investing. THERE IS NO ASSURANCE THAT ANY
FUND WILL ACHIEVE ITS STATED OBJECTIVE. Additional copies of the Funds'
prospectuses, as well as their Statements of Additional Information, can be
obtained directly from each of the Funds without charge by writing to the
particular Funds at the addresses noted on the front of the Fund prospectus.
Shares of the Funds are sold not only to the Sub-Accounts but also to variable
annuity and variable life separate accounts of other insurance companies. For a
disclosure of possible conflicts involved in the Sub-Accounts investing in
Funds that are so offered, see the applicable Fund prospectus.
On the effective date of a Participant's transfer to Lincoln Life, the
Participant's Account balance in the Variable Investment Division will be
transferred to a Lincoln Life separate account. For Participants under the New
York Contracts, the Account balances will be transferred to a Lincoln-NY
separate account. UNUM/America and Lincoln Life intend that the Lincoln Life
separate account and the Lincoln-NY separate account will each have nine Sub-
Accounts which will invest in the same nine Funds currently offered by
UNUM/America's Variable Investment Division. Any deletion of Funds or
substitution of different Funds would require regulatory approval. Additional
Funds may nevertheless be added or deleted in the future.
All dividend and capital gain distributions of the Funds are automatically
reinvested in shares of the distributing Funds at their net asset value on the
date of distribution.
DREYFUS STOCK INDEX FUND
Dreyfus Stock Index Fund is an open-end, non-diversified management
investment company known as an index fund. Its goal is to provide investment
results that correspond to the price and yield performance of publicly traded
common stocks in the aggregate, as represented by the Standard & Poor's 500
Composite Stock Price Index. The Fund is neither sponsored by nor affiliated
with Standard & Poor's Corporation.
The Dreyfus Corporation, located at 200 Park Avenue, New York, New York
10166, acts as the Fund manager and Mellon Equity Associates, an affiliate of
Dreyfus located at 500 Grant Street, Pittsburgh, Pennsylvania 15258, is the
Fund index manager.
CALVERT SOCIAL BALANCED PORTFOLIO OF CALVERT VARIABLE SERIES
CALVERT SOCIAL BALANCED PORTFOLIO: The Calvert Social Balanced Portfolio seeks
total return above the rate of inflation through an actively managed,
nondiversified portfolio of common and preferred stocks, bonds, and money
market instruments which offer income and growth opportunity and which satisfy
the social concern criteria established for the Portfolio. Shares of the
Portfolio are offered only to insurance companies for allocation to certain of
their variable accounts.
The Calvert Asset Management Company, Inc., located at 4550 Montgomery
Avenue, Suite 1000N, Bethesda, Maryland 20814 serves as the Portfolio's
investment advisor.
15
<PAGE>
THE SMALL CAP PORTFOLIO OF DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is an open-end, diversified management
investment company.
THE SMALL CAP PORTFOLIO: The Portfolio seeks to maximize capital appreciation.
The Small Cap Portfolio seeks out companies that The Dreyfus Corporation
believes have the potential for significant growth. Under normal market
conditions, the Portfolio will invest at least 65% of its total assets in
companies with market capitalization of less than $1.5 billion, at the time of
purchase, both domestic and foreign , which the Portfolio believes to be
characterized by new or innovative products or services which should enhance
prospects for growth in future earnings. The Portfolio may also invest in
special situations such as corporate restructurings, mergers or acquisitions.
The Dreyfus Corporation, located at 200 Park Avenue, New York, New York
10166, serves as the Fund's investment adviser.
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND (VIP): VIP EQUITY-INCOME PORTFOLIO,
VIP GROWTH PORTFOLIO, AND VIP MONEY MARKET PORTFOLIO
VIP EQUITY-INCOME PORTFOLIO: The Portfolio seeks reasonable income by investing
at least 65% of its total assets in income-producing securities. The Portfolio
has the flexibility, however, to invest the balance in all types of domestic
and foreign securities, including bonds.
VIP GROWTH PORTFOLIO: The 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.
VIP MONEY MARKET PORTFOLIO: The Portfolio seeks to obtain as high a level of
current income as is consistent with preserving capital and providing
liquidity. For more information regarding the Portfolio, into which initial
Contributions are invested pending UNUM/America's receipt of a complete order,
please see the "Initial Contributions" section.
Fidelity Management & Research Company ("FMR") is the manager of the VIP
Equity-Income Portfolio, the VIP Growth Portfolio and the VIP Money Market
Portfolio and is located at 82 Devonshire Street, Boston, Massachusetts 02109.
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II (VIP II): VIP II ASSET MANAGER
PORTFOLIO
VIP II ASSET MANAGER PORTFOLIO: The Portfolio seeks high total return with
reduced risk over the long term by allocating its assets among domestic and
foreign stocks, bonds and short-term money market instruments.
FMR is the manager of the Portfolio and is located at 82 Devonshire Street,
Boston, Massachusetts 02109. FMR or its affiliate may compensate Lincoln Life
or its affiliate for administrative, distribution, or other services. That
compensation would be based on assets of the Fidelity Funds attributable to the
Contracts and to certain other contracts issued or administered by Lincoln Life
and its affiliates.
AMERICAN CENTURY VP CAPITAL APPRECIATION AND AMERICAN CENTURY VP BALANCED OF
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
AMERICAN CENTURY VP CAPITAL APPRECIATION: The Portfolio seeks capital growth by
investing primarily in common stocks that are considered by management to have
better-than-average prospects for appreciation.
16
<PAGE>
AMERICAN CENTURY VP BALANCED: The Portfolio seeks capital growth and current
income. Its investment team intends to maintain approximately 60% of the
portfolio's assets in common stocks that are considered by its manager to have
better than average prospects for appreciation and the balance in bonds and
other fixed income securities.
American Century Variable Portfolios, Inc. is managed by American Century
Investment Management, Inc. which also manages the American Century family of
mutual funds. American Century Investment Management, Inc. has its principal
place of business at 4500 Main Street, Kansas City, Missouri 64111.
Lincoln Life or its affiliate may perform certain administrative or other
services that would otherwise be performed by American Century Services
Corporation, and American Century Investment Management, Inc. may pay Lincoln
Life or its affiliate for such services. Such compensation would be based on
assets of the American Century Funds attributable to the Contracts and certain
other contracts issued by Lincoln Life and its affiliates.
INTERNATIONAL STOCK PORTFOLIO OF T. ROWE PRICE INTERNATIONAL SERIES, INC.
INTERNATIONAL STOCK PORTFOLIO: The International Stock Portfolio seeks long-
term growth of capital through investments primarily in common stocks of
established, non-U.S. companies.
The Series is managed by Rowe Price-Fleming International, Inc., one of
America's largest international no load mutual fund managers with approximately
$30 billion under management as of December 31, 1997, from its offices in
Baltimore, London, Tokyo, Hong Kong, Singapore, and Buenos Aires.
CONTRACT PROVISIONS
GENERAL
UNUM/America has designed these Contracts for Employers and other entities to
enable Participants and Employers to accumulate funds for retirement programs
meeting the requirements of the following Sections of the Internal Revenue Code
of 1986, as amended (the "Code"): 401(a), 403(b), 408, 457 and other related
Sections as well as for programs offering non-qualified annuities. For Plans
that have allocated rights to the Participant, UNUM/America will issue to each
Participant a separate Active Life Certificate that describes the basic
provisions of the Contract to each Participant.
CONTRIBUTIONS UNDER THE CONTRACT
Generally, under the Contracts, Contractholders forward Contributions to
UNUM/America for investment. Depending on the Plan, the Contributions may
consist of salary reduction Contributions, Employer Contributions or post-tax
Contributions. Lincoln Life administers the Contracts including, among other
services, processing Contributions (which may be temporarily maintained in
Lincoln Life's general account) and withdrawals.
Contributions may accumulate on either a guaranteed or variable basis
depending upon the Divisions available under the Contract and/or the Division
in which the Contributions are deposited. Contributions to the Guaranteed
Interest Division become part of UNUM/America's General Account and are
guaranteed a minimum rate of interest.
UNUM/America will also declare in advance a guaranteed interest rate which
will be effective for all amounts in the Participant's Account balance in the
Guaranteed Interest Division during the
17
<PAGE>
designated year. This rate will never be less than the minimum rate of
interest. UNUM/America may also declare in advance separate interest rate
guarantees which are in excess of the guaranteed interest rate for some or all
of the Participant's Account balance in the Guaranteed Interest Division for
specific period(s) during the designated year. UNUM/America assumes the risk of
investment gain or loss on contributions to the Guaranteed Interest Division.
See "Guaranteed Interest Division." Contributions to the Variable Investment
Division are credited with a rate of return dependent upon the investment
experience of the Sub-Accounts in which the Contributions are invested.
Contributions by Participants may be in any amount unless there is a minimum
amount set by the Contractholder or Plan. A Contract may require the
Contractholder to contribute a minimum annual amount on behalf of all
Participants. Annual Contributions under Qualified Plans may be subject to
maximum limits imposed by the Code. Annual Contributions under non-qualified
plans may be limited by the terms of the Contract. In the Statement of
Additional Information see "Tax Law Considerations" for a discussion of these
limits. Subject to any restrictions imposed by the Plan or the Code, transfers
from other Contracts and qualified rollover Contributions will be accepted.
Section 830.205 of the Texas Education Code provides that Employer or state
Contributions (other than salary reduction Contributions) on behalf of
Participants in the Texas Optional Retirement Program ("ORP") vest after one
year of participation in the program. UNUM/America will return Employer
Contributions to the Contractholder for those employees who terminate
employment in all Texas institutions of higher education before becoming
vested. During this first participation year in the ORP, ORP Participants may
only direct Employer and state Contributions to the Guaranteed Interest
Division.
Contributions must be in United States funds unless UNUM/America agrees in
writing to accept other currencies. Any non-US funds will be converted to U.S.
funds. All withdrawals and distributions under this Contract will be in U.S.
funds. If a bank or other financial institution does not honor the check or
other payment method constituting a Contribution, UNUM/America will treat the
Contribution as invalid. All allocation and subsequent transfers resulting from
the invalid Contributions shall be reversed and the party responsible for the
invalid Contribution shall reimburse UNUM/America for any losses or expenses
resulting from the invalid Contribution.
INITIAL CONTRIBUTIONS
The initial Contribution for a Participant will be credited to the
Participant's Account no later than two Business Days after it is received by
UNUM/America if it is preceded or accompanied by a completed enrollment form
containing all the information necessary for processing the Participant's
Contribution. If UNUM/America does not receive a complete enrollment form,
UNUM/America will notify the Contractholder or the Participant that
UNUM/America does not have the necessary information to process the
Contribution. If the necessary information is not provided to UNUM/America
within five (5) Business Days after UNUM/America first receives the initial
Contribution, UNUM/America will return the initial Contribution less any
withdrawal(s) by the Participant or by the Contractholder, unless the
Participant or the Contractholder specifically consents to UNUM/America
retaining the Contribution until the enrollment form is made complete.
Notwithstanding the above, when the Contract includes language regarding the
"Pending Allocation Account", the following shall apply: Where state approval
has been obtained, if UNUM/America receives Contributions which are not
accompanied by a properly completed Enrollment Form, UNUM/America will notify
the Contractholder of that fact and deposit the Contributions to the Pending
Allocation Account, unless such Contributions are designated to another Account
in accordance with the Plan. Within two business days of receipt of a properly
completed Enrollment Form, the Participant's Account balance in the Pending
Allocation Account will be transferred in accordance with the allocation
percentages elected on the Enrollment Form. All future Contributions will also
be allocated in accordance with these percentages until such time as the
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<PAGE>
Participant may notify UNUM/America of a change. If a properly completed
Enrollment Form is not received after three monthly notices have been sent, the
Participant's Account balance in the Pending Allocation Account will be
refunded to the Contractholder within 105 days of the date of the initial
Contribution. The Pending Allocation Account invests in Fidelity's Variable
Insurance Products Fund: Money Market Portfolio and is not available as an
investment option under the group annuity Contract. Mortality & Expense Risk
Charges and the Annual Administration Charge do not apply to this Account.
These charges will be applicable upon receipt of a properly completed
Enrollment Form and the Participant's Contract Participation Date will be the
date money was deposited in the Pending Allocation Account.
ALLOCATION OF CONTRIBUTIONS
A Participant must designate in writing, subject to the Plan, the percent of
their Contribution which will be allocated to each Division and to each Sub-
Account available under their Contract. The Contributions allocation percentage
to the Guaranteed Investment Division or any Sub-Account can be in any whole
percent. A Participant whose Employer offers two or more UNUM/America Contracts
for the same type of Qualified or Non-Qualified Plans may allocate
Contributions to a maximum of ten Sub-Accounts and the Guaranteed Interest
Division. Participants, subject to the terms of the Plan, may change the
allocation of Contributions by notifying UNUM/America in writing or by
telephone in accordance with procedures published by UNUM/America. Telephone
requests for allocation changes follow the same verification of identity rules
as for Transfers. (See "Telephone Transfers.") When UNUM/America receives a
notice in writing, the form must be acceptable to UNUM/America. Upon receipt by
UNUM/America, the change will be effective for all Contributions received
concurrently with the allocation change form and for all future Contributions,
unless a later date is requested. Changes in the allocation of future
Contributions have no effect on amounts a Participant may have already
contributed. Such amounts, however, may be transferred between Divisions and
Sub-Accounts pursuant to the requirements described in "Transfers between
Divisions and Sub-Accounts." Allocations of employer contributions may be
restricted by the applicable plan.
SUBSEQUENT CONTRIBUTIONS
The Contractholder will forward Contributions to UNUM/America specifying the
amount being contributed on behalf of each Participant. The Contractholder must
send Contributions and provide such allocation information in accordance with
procedures established by UNUM/America. The Contributions shall be allocated
among the Guaranteed Interest Division and the Variable Investment Division in
accordance with the Contractholder's or the Participant's written instructions
as described above in "Allocation of Contributions."
INVESTMENT OF CONTRIBUTIONS
Contributions are invested as of the date of receipt at UNUM/America,
provided that they are received on a Business Day and allocation information is
provided in a form acceptable to UNUM/America in accordance with procedures
established by UNUM/America. Contributions on behalf of a Participant which are
allocated to the Variable Investment Division will be credited with
Accumulation Units as of that date. A Participant's interest in the Variable
Investment Division during the Accumulation Period is the value of the
Participant's Accumulation Units in the Variable Investment Division. Upon
payment of a Contribution, the number of Accumulation Units credited to a
Participant's Account in a Sub-Account is calculated by dividing the
Contribution allocated to the Sub-Account by the dollar value of an
Accumulation Unit next determined after receipt of the Contribution. The number
of Accumulation Units purchased will not vary as a result of any subsequent
fluctuations in the Accumulation Unit Value. The Accumulation Unit Value, of
course, fluctuates with the investment performance of the underlying Fund and
also reflects deductions and charges made against the Variable Investment
Division.
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<PAGE>
DETERMINATION OF ACCUMULATION UNIT VALUE
Contributions allocated to the Variable Investment Division are converted
into Accumulation Units. This is done by dividing each Contribution by the
value of an Accumulation Unit for the Valuation Period during which the
Contribution is allocated to the Variable Investment Division. The
Accumulation Unit Value for each Sub-Account was or will be established at the
inception of the Sub-Account. It may increase or decrease from Valuation
Period to Valuation Period. The Accumulation Unit Value for a Sub-Account for
a later Valuation Period is determined as follows:
(a) The total value of Fund shares held in the Sub-Account is calculated
by multiplying the number of shares by the net asset value at end of the
Valuation Period, and adding any dividend or other distribution of the Fund
if an ex-dividend date occurs during the Valuation Period; minus
(b) The liabilities of the Sub-Account at the end of the Valuation Peri-
od; these liabilities include daily charges imposed on the Sub-Account, and
may include a charge or credit with respect to any taxes paid or reserved
for by UNUM/America that it determines result from the operations of the
Variable Investment Division; and
(c) The result of (b) is divided by the number of Accumulation Units out-
standing at the beginning of the Valuation Period.
The daily charges imposed on a Sub-Account for any Valuation Period are equal
to the mortality and expense risk charge for the number of calendar days in
the Valuation Period.
The Participant's Account balance is equal to the sum of the Participant's
Account balances in both the Variable Investment Division and the Guaranteed
Interest Division.
TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
During the Accumulation Period and subject to the terms of the Plan,
transfers may be made of all or part of a Participant's Account balance in any
Division or Sub-Account to another Sub-Account or Division. Transfers will not
change the allocation of future Contributions to the Divisions and Sub-
Accounts. UNUM/America does not require that any minimum amount be
transferred. To effect a transfer, UNUM/America must receive a written
transfer request in a form acceptable to UNUM/America.
Transfers to or from the Variable Investment Division are made using the
Accumulation Unit Value next computed following UNUM/America's receipt of the
written transfer request.
TELEPHONE TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
UNUM/America may accept telephone transfers from Participants when this is
allowed by the Contractholder. In order to prevent unauthorized or fraudulent
transfers, UNUM/America will require a Participant to provide certain
identifying information before UNUM/America will act upon their instructions.
UNUM/America may also assign the Participant a Personal Identification Number
(PIN) to serve as identification. UNUM/America will not be liable for
following telephone instructions it reasonably believes are genuine. Telephone
transfer requests may be recorded and written confirmation of all transfer
requests will be mailed to the Participant or Contractholder on the next
Business Day. Telephone transfers will be processed on the Business Day that
they are received when they are received at the UNUM/America Home Office
before 4:00 p.m. Eastern Time. If the Participant or Contractholder determines
that a transfer has been made in error, the Participant or Contractholder must
notify UNUM/America within 30 days of the confirmation notice date. See
"Contract Provisions, Transfers between Divisions and Sub-Accounts."
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<PAGE>
WITHDRAWALS
During the Accumulation Period and subject to the terms of the Plan,
withdrawals may be made from either or both Divisions of all or part of the
Participant's Account balance in a Division or Sub-Account remaining after
deductions for any applicable (1) CDSC; (2) Annual Administration Charge
(imposed on Total Withdrawals), (3) premium taxes, and (4) outstanding loan
including loan security. Annuity Conversion Amounts are not considered
withdrawals. See "Annuity Period, Annuities: General."
All withdrawal requests must indicate the amount to be withdrawn and be
submitted in a form acceptable to UNUM/America. If the request does not specify
the Sub-Accounts and/or the Divisions from which the withdrawal is to be made,
the withdrawal will be made pro rata based on balances in the Sub-Accounts and
the Guaranteed Interest Division. UNUM/America does not require that any
minimum amount be withdrawn. Telephone withdrawal requests are not available.
Withdrawals from the Variable Investment Division are made by reducing the
Participant's number of Accumulation Units in the applicable Sub-Account. In
determining the number of Accumulation Units to be reduced, UNUM/America uses
the Accumulation Unit Value next computed after UNUM/America's receipt of the
written withdrawal request.
Payment of all Variable Investment Division withdrawal amounts will be made,
within the time period allowed under current Federal law but in no case later
than seven days, after receipt by UNUM/America of the withdrawal request in a
form acceptable to UNUM/America. See "Market Emergencies."
TOTAL WITHDRAWALS
A Total Withdrawal can only be made by a Participant who has no outstanding
loans under the Contract. A Total Withdrawal of a Participant's Account will
occur when (a) the Participant or Contractholder requests the liquidation of
the Participant's entire Account balance, or (b) the amount requested plus any
CDSC results in a remaining Participant's Account balance of less than or equal
to the Annual Administration Charge, in which case the request is treated as if
it were a request for liquidation of the Participant's entire account balance.
Any Active Life Certificate must be surrendered to UNUM/America when a Total
Withdrawal occurs. If a Contractholder resumes Contributions on behalf of a
Participant after a Total Withdrawal, the Participant will receive a new
Participation Date and Active Life Certificate.
A Participant refund under the free-look provisions is not considered a Total
Withdrawal.
PARTIAL WITHDRAWALS
A Partial Withdrawal of a Participant's Account will occur when less than a
Total Withdrawal is made from a Participant's Account.
SYSTEMATIC WITHDRAWAL OPTION
Participants who are at least age 59 1/2, are separated from service from
their employer or are disabled and certain spousal beneficiaries and alternate
payees who are former spouses may be eligible for a Systematic Withdrawal
Option ("SWO") under the Contract. Under the SWO a Participant may elect to
withdraw either a monthly amount which is an approximation of the interest
earned between each payment period based upon the interest rate in effect at
the beginning of each respective payment period or a flat dollar amount
withdrawn on a periodic basis. Payments are made only from the Guaranteed
Interest Account. A Participant must have a vested pre-tax account
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<PAGE>
balance of at least $10,000 in order to select the SWO. A Participant may
transfer amounts from the Variable Investment Division to the Guaranteed
Interest Division in order to support SWO payments. These transfers, however,
are subject to the transfer restrictions described in this Prospectus and/or
imposed by any applicable Plan. A one-time fee of up to $30 may be charged to
set up the SWO. This charge is waived for total vested pre-tax account balances
of $25,000 or more. More information about SWO, including applicable fees and
charges, is available in the Contracts and Active Life Certificates as well as
from UNUM/America.
MAXIMUM CONSERVATION OPTION
Under certain Contracts participants who are at least age 70 1/2 may request
that UNUM/America calculate and pay to them the minimum annual distribution
required by Sections 401(a)(9), 403(b)(10), 408(a) or 457(d) of the Code. The
Participant must complete forms as required by UNUM/America in order to elect
this option. UNUM/America will base its calculation solely on the Participant's
Account Value with UNUM/America. Participants who select this option are
responsible for determining the minimum distributions amount applicable to
their non-UNUM/America Contract.
WITHDRAWAL RESTRICTIONS
Withdrawals under Section 403(b) Contracts are subject to the limitations
under Section 403(b)(11) of the Code and regulations thereof and in any
applicable Plan document. That section provides that salary reduction
Contributions deposited and earnings credited on any salary reduction
Contributions after December 31, 1988 may only be withdrawn if the Participant
has (1) died; (2) become disabled; (3) attained age 59 1/2; (4) separated from
service; or (5) incurred a hardship. Amounts accumulated in one Section
403(b)(1) Contract may be transferred to another Section 403(b)(1) Contract or
Section 403(b)(7) custodial account without a penalty under the Code. If
amounts accumulated in a Section 403(b)(7) custodial account are deposited in a
Contract, such amounts will be subject to the same withdrawal restrictions as
are applicable to post-1988 salary reduction Contributions under the Contracts.
For more information on these provisions see "Federal Income Tax
Considerations."
Withdrawal requests for a Participant under Section 457(b) Plans and Plans
subject to Title I of ERISA must be authorized by the Contractholder on behalf
of a Participant. All withdrawal requests will require the Contractholder's
written authorization and written documentation specifying the portion of the
Participant's Account balance which is available for distribution to the
Participant. Withdrawal requests for Section 457(f) Plans must be requested by
the Contractholder.
As required by Section 830.105 of the Texas Education Code, withdrawal
requests by Participants in the Texas Optional Retirement Program ("ORP") are
only permitted in the event of (1) death; (2) retirement; (3) termination of
employment in all Texas institutions of higher education; or (4) attainment of
age 70 1/2. A Participant in an ORP Contract is required to obtain a
certificate of termination from the Participant's Employer before a withdrawal
request can be granted.
For withdrawal requests (other than transfers to other investment vehicles),
by Participants under Plans not subject to Title I of ERISA and non-457 Plans,
the Participant must certify to UNUM/ America that one of the events listed in
the Code has occurred (and provide supporting information, if requested) and
that UNUM/America may rely on such representation in granting such withdrawal
request. See "Federal Income Tax Considerations." A Participant should consult
their tax adviser as well as review the provisions of their Plan before
requesting a withdrawal.
In addition to the restrictions noted above, a Plan may contain additional
withdrawal or transfer restrictions.
Early withdrawals, as defined under Section 72(q) and 72(t) of the Code, may
be subject to a ten percent excise tax.
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<PAGE>
DEATH BENEFITS
The payment of death benefits will be governed by the provisions of the
applicable Plan and the Code. In the event of the death of a Participant during
the Accumulation Period, UNUM/America will pay the Beneficiary, if one is
living, or the Plan the greater of the following amounts:
(1) The Net Contributions, or
(2) The Participant's Account balance less any outstanding loan (includ-
ing principal and due and accrued interest), as of the date of notifica-
tion.
If UNUM/America is not notified of the Participant's death within six months
of such death, the Beneficiary will receive the Death Benefit amount described
in paragraph (2).
A Beneficiary may elect to have the Death Benefit (1) paid as a lump sum, (2)
converted to a Payout Annuity or (3) as a combination of a lump sum payment and
a Payout Annuity.
UNUM/America will calculate the Death Benefit as of the end of the Valuation
Period during which it receives both satisfactory notification of the
Participant's death and an election of a form of Death Benefit (as described
below). Payment of a lump sum election will be made within the time period
prescribed by Federal law but in no case later than seven days following such
calculation. Payment of an annuity option will be paid in accordance with the
provisions regarding annuities. See "Annuity Period." If no election is made
within sixty days following UNUM/America's receipt of satisfactory notice of
the Participant's death, the Death Benefit will be paid in the form of a lump
sum payment and will be calculated as of the end of the Valuation Period during
which that sixtieth day occurs (and payment will be made within the time period
prescribed by Federal law but in no case later than seven days after such
calculation date).
Satisfactory proof of death may consist of: a copy of a certified death
certificate; a copy of a certified decree of a court of competent jurisdiction
as to the finding of death; a written statement by a medical doctor who
attended the deceased at the time of death; or any other proof satisfactory to
UNUM/America.
Notwithstanding the above, if the Beneficiary is someone other than the
spouse of the deceased Participant, the Code provides that the Beneficiary may
not elect an annuity which would commence later than December 31st of the
calendar year following the calendar year of the Participant's death. If a non-
spousal Beneficiary elects to receive payment in a single lump sum, the Code
provides that such payment must be received no later than December 31st of the
fourth calendar year following the calendar year of the Participant's death.
If the Beneficiary is the surviving spouse of the deceased Participant,
distributions are not required under the Code to begin earlier than December
31st of the calendar year in which the Participant would have attained age 70
1/2. If the surviving spouse dies before the date distributions commence, then,
for purposes of determining the date distributions to the Beneficiary must
commence, the date of death of the surviving spouse is substituted for the date
of death of the Participant.
If there is no living named Beneficiary on file with UNUM/America at the time
of a Participant's death and unless the Plan directs otherwise, UNUM/America
will pay the Death Benefit to the Participant's estate in the form of a lump
sum payment, upon receipt of satisfactory proof of the Participant's death, but
only if such proof of death is received by UNUM/America no later than the end
of the fourth calendar year following the year of the Participant's death. In
such case, valuation of the Death Benefit will occur as of the end of the
Valuation Period during which due proof of death is received by UNUM/America,
and the lump sum Death Benefit will be paid within the time period prescribed
by Federal law but in no case later than seven days of that date.
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<PAGE>
DEDUCTIONS AND CHARGES
UNUM/America will deduct the charges described below to cover costs and
expenses, services provided and risks assumed under the Contracts. UNUM/America
incurs certain costs and expenses for the distribution and administration of
the Contracts and for providing the benefits payable thereunder. The amount of
a charge may not necessarily correspond to the costs associated with providing
the services or benefits indicated by the designation of the charge. For
example, the CDSC may not fully cover all of the sales and distribution
expenses actually incurred by UNUM/America, and proceeds from other charges,
including the mortality and expense risk charge, may be used in part to cover
such expenses.
CHARGES AGAINST THE VARIABLE INVESTMENT DIVISION
MORTALITY AND EXPENSE RISK CHARGES
Certain charges will be assessed as a percentage of the value of the net
assets of the Variable Investment Division to compensate UNUM/America for risks
assumed in connection with the Contracts.
UNUM/America deducts from the net assets of the Variable Investment Division
a daily charge of 1.20% on an annual basis.
This charge is assessed both during the Accumulation Period and the Annuity
Period although, during the Annuity Period, UNUM/America will bear no mortality
risk with respect to the Annuity Options that do not involve life
contingencies. This amount is intended to compensate UNUM/America for certain
Mortality and Expense Risks UNUM/America assumes in operating the Variable
Investment Division and for providing services to the Participant. The total
charge may not be altered.
The Expense Risk is the risk that UNUM/America's actual expenses in issuing
and administering the Contract will be more than UNUM/America estimated. The
Mortality Risk borne by UNUM/America arises from the chance that UNUM/America's
actuarial estimate of mortality rates during the Annuity Period, as guaranteed
in the Contract, may prove erroneous and that an Annuitant may live longer than
expected. This contractual guarantee assures that neither an Annuitant's own
longevity nor an improvement in life expectancy generally will have any adverse
effect under the Contracts. In addition, UNUM/America bears the Mortality Risk
that it guarantees to pay a Death Benefit that may be higher than the
Participant's Account balance upon the death of the Participant prior to the
Annuity Period.
CHARGES AGAINST THE CONTRACTS
The charges that UNUM/America assesses in connection with the Contracts are
described below.
ANNUAL ADMINISTRATION CHARGE
UNUM/America provides many administrative functions in connection with the
Contracts, including receiving and allocating Contributions in accordance with
the Contracts, making annuity payments when they become due, and preparing and
filing all reports required to be filed by the Variable Investment Division. In
addition, UNUM/America provides Participants with Account statements and
accounting services that keep track of pre-tax monies, employee and Employer
monies, vested Account balances and rollover or transferred monies.
In consideration for these administrative services, UNUM/America currently
deducts $25 (or the balance of the Participant's Account if less) per year from
each Participant's Account balance on the last Business Day of the month in
which a Participation Anniversary occurs. This charge is deducted only during
the Accumulation Period. This Annual Administration Charge is also withdrawn
from a Participant's Account balance if and when a Participant's Account is
totally withdrawn on any date other than the last Business Day of the month in
which the Participation Anniversary occurs.
The Annual Administration Charge may be reduced or waived for those
Participants who are participating under another UNUM/America Contract which
imposes an Annual Administration Charge or where UNUM/America's interest costs
or expenses are reduced due to the terms of the Contract,
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<PAGE>
economies of scale or administrative assistance provided by the Contractholder.
In addition, the Employer has the option of paying the Annual Administration
charge on behalf of the Participants under a Contract.
Under certain Contracts, the Contractholder may also choose to have the
Annual Administration Charge paid only by those Participants in the Variable
Investment Division. Contracts offering this provision will typically have a
declared interest rate in the Guaranteed Interest Division which is lower than
under Contracts not offering this provision. For Contracts offering this
provision, the Annual Administration Charge will be withdrawn as described in
this section.
Since the Closing Date, Lincoln Life has administered the Contracts on behalf
of UNUM/America pursuant to an administrative services agreement. See
"Acquisition Agreement with The Lincoln National Life Insurance Company."
PREMIUM TAXES
Certain states require that a premium tax be paid on contributions to a
variable annuity Contract. Others assess a premium tax at the time of
annuitization. UNUM/America will deduct any applicable premium tax from the
Participant's Account balance at the time required by state law.
CONTINGENT DEFERRED SALES CHARGE
UNUM/America does not impose a sales charge at the time a Contribution is
made to a Participant's Account under the Contract. During the Accumulation
Period and prior to the 11th Participation Year, UNUM/America charges a CDSC on
all Withdrawals of a Participant's Account balance unless UNUM/America receives
at the time of the withdrawal request reasonable proof necessary to verify
that: (a) the Participant has attained age 59 1/2; (b) the Participant has
died; (c) the Participant has incurred a disability as defined under the
Contract; or (d) the Participant has terminated employment with the Employer.
The CDSC reimburses UNUM/America for part or all of its expenses related to
distributing the Contracts. If the revenues generated by the CDSC are not
sufficient to cover UNUM/America's actual costs of distribution, such costs
will be paid from UNUM/America's General Account assets, which may include any
ultimate profit derived from the mortality and expense risk charge.
Amounts subject to a CDSC are charged in accordance with the following
schedule:
<TABLE>
<CAPTION>
DURING PARTICIPATION YEAR CDSC
------------------------- ----
<S> <C>
1-6 5%
7 4%
8 3%
9 2%
10 1%
11 and later 0%
</TABLE>
Under certain Contracts, the Contractholder may choose to require that the
Participant be age 55 or older and have terminated employment in order to be
entitled to a withdrawal without a CDSC. Contracts containing this additional
restriction may receive a higher declared interest rate in the Guaranteed
Interest Division than the Contracts not containing this restriction. A
Contractholder has the option of adding financial hardship as an event
entitling the Participant to a withdrawal from the Contract without the
imposition of a CDSC. A Contractholder can also choose a provision under the
Contract permitting Participants to make a withdrawal, once in each calendar
year, of up to 20% of their Account balance without the imposition of a CDSC.
Contractholders choosing these additional benefits may receive a lower declared
interest rate under the Guaranteed Interest Division of their Contract than
under Contracts not offering these benefits.
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<PAGE>
The CDSC on any withdrawal may be reduced or eliminated but only to the
extent that UNUM/America anticipates that it will incur lower sales expenses or
perform fewer sales services due to economies arising from (a) the size of the
particular group, (b) an existing relationship with the Contractholder or
Employer, (c) the utilization of mass enrollment procedures, or (d) the
performance of sales functions by the Contractholder or an Employer which
UNUM/America would otherwise be required to perform.
The CDSC is imposed on the Gross Withdrawal Amount. A Participant may request
to receive a specific Net Withdrawal Amount. If the Participant requests a
specific Net Withdrawal Amount, the CDSC will be imposed on a Gross Withdrawal
Amount, which after deducting the CDSC, gives the Participant the Net
Withdrawal Amount requested. The following example illustrates the formula:
Participant requests a Net Withdrawal Amount of $100 in their tenth
Participation Year. UNUM/America will impose the 1% CDSC on a Gross Withdrawal
Amount of $101.01 and the Participant will receive $100. This is the standard
procedure for withdrawals.
The CDSC will be deducted from the Divisions and Sub-Accounts in proportion
to amounts withdrawn therefrom. Death Benefit payments and amounts converted to
an annuity are not subject to a CDSC. In no event will the CDSC, when added to
any CDSC previously imposed due to a Participant withdrawal, exceed 8.5% of the
cumulative Contributions to a Participant's Account.
MISCELLANEOUS
The Variable Investment Division purchases shares from the Funds at net asset
value. The net asset value reflects investment management fees and other
expenses that have already been deducted from the assets of the Funds. The
Funds' investment management fees, expenses and expense limitations, if
applicable, are more fully described in each prospectus for the Funds.
ANNUITY PERIOD
PAYOUT ANNUITIES: GENERAL
To the extent permitted by the Plan, the Participant, or the Beneficiary of a
deceased Participant, may elect to convert all or part of the Participant's
Account balance or the Death Benefit to a Payout Annuity. Payout Annuities are
available as either a Guaranteed or Variable Annuity or a combination of both.
Annuity payments from a Guaranteed Annuity remain constant throughout the
annuity period. Payout Annuities may be maintained in the Variable Investment
Division, or, if the Participant so agrees, in a separate account of Lincoln
Life ("Variable Payout Division"). No charge will be imposed at the time that
the Annuity Conversion Amount is applied to a Variable Payout Division in
implementing any Payout Annuity option. The Contract benefits and charges for a
Payout Annuity, whether maintained in the Variable Investment Division or in a
Variable Payout Division, are as described in this prospectus. The selection of
funds available through a Variable Payout Division may, however, differ from
the selection of Funds available through the Variable Investment Division. If a
Participant's Payout Annuity will be maintained in a Variable Payout Division,
a prospectus for the Variable Payout Division will be provided prior to the
Annuity Commencement Date. Annuity payments from a Variable Annuity fluctuate
depending upon the investment experience of the applicable sub-accounts.
Variable Annuity payments are based upon Annuity Unit Values. See "Annuity
Payments" below and "Determination of Variable Annuity Payments" in the
Statement of Additional Information for more information.
The Annuity Commencement Date marks the date on which the first annuity
payment is made to an Annuitant. For Plans subject to Section 401(a)(9)(B) of
the Code, a Beneficiary must select an Annuity Commencement Date that is not
later than one year after the date of the Participant's death. A Participant or
Contractholder may select any Annuity Commencement Date for the Annuitant which
is then reflected in the Retired Life Certificate. However, since an annuity
payment is considered a distribution under the Code, selection of an Annuity
Commencement Date may be affected by the distribution restrictions under the
Code and the minimum distribution requirements under Section 401(a)(9) of the
Code. See "Federal Income Tax Considerations." The selection of an Annuity
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<PAGE>
Commencement Date, the annuity option, the amount of the Payout Annuity and
whether the amount is to be paid as a Guaranteed or a Variable Annuity must be
made by the Participant in writing, in a satisfactory form, and received at
least 30 days in advance of the Annuity Commencement Date. After the Annuity
Commencement Date an Annuitant may not change either the annuity option or the
type (i.e., variable or guaranteed) of Payout Annuity for any amount applied
toward the purchase of an annuity.
The Annuity Conversion Amount is either the Participant's Account balance, or
a portion thereof, or the Death Benefit plus interest, as of the Annuity
Payment Calculation Date. For a Guaranteed Annuity, the Annuity Commencement
Date is typically one month after the Annuity Payment Calculation Date;
subsequent payments are at one month intervals from the Annuity Commencement
Date. For a Variable Annuity, the Annuity Commencement Date is 10 Business Days
after the initial Annuity Payment Calculation Date; subsequent monthly payments
have Annuity Payment Calculation Dates which are 10 business days prior. The 10
Business Days are necessary to calculate the amount of the Payout Annuity
payments and to mail the checks in advance of their monthly due dates.
If the Participant's Account balance or the Beneficiary's Death Benefit is
less than $2,000 or if the amount of the first scheduled payment is less than
$20, the annuity may be cancelled and the Participant or Beneficiary required
to accept payment of the entire amount in a lump sum.
PAYOUT ANNUITY PAYMENTS
The amount of each annuity payment will depend upon the Annuity Conversion
Amount, the annuity option, the age of the Participant(s) on the initial
Annuity Payment Calculation Date, and the length of time from the initial
Annuity Payment Calculation Date to the Annuity Commencement Date. Unless
otherwise notified, the Participant's Account balance in the Guaranteed
Interest Division will be applied toward a Guaranteed Annuity and the
Participant's Account balance in the Variable Investment Division toward a
Variable Annuity.
The payment amount for a Guaranteed Annuity is determined by dividing the
Participant's Annuity Conversion Amount in the Guaranteed Interest Division as
of the initial Annuity Payment Calculation Date by the applicable Annuity
Conversion Factor.
The initial payment amount for a Variable Annuity is determined by dividing
the Participant's Annuity Conversion Amount(s) in the applicable Sub-Account(s)
as of the initial Annuity Payment Calculation Date by the applicable Annuity
Conversion Factor as defined in the Contract. The amounts of subsequent
payments vary depending on the investment experience of the sub-account(s) of
the Variable Investment Division or of a Variable Payout Division, as
applicable, and the interest rate option selected by the Participant. The
payment amounts will not be affected by mortality or expense experience and
will not be reduced by an Annual Administration Charge. For additional
information on the determination of subsequent payment amounts, refer to the
Statement of Additional Information, "Determination of Variable Annuity
Payments."
PAYOUT ANNUITY OPTIONS
Participants are offered a range of annuity options including, but not
limited to, the following:
SINGLE LIFE ANNUITY
Payments are made monthly during the lifetime of the Annuitant, and the
annuity terminates with the last payment preceding death.
LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10, 15 OR 20 YEARS
Payments are made monthly during the lifetime of the Annuitant with a monthly
payment guaranteed to the Beneficiary for the remainder of the selected number
of years, if the Annuitant dies before the end of the period selected. Payments
under this annuity option are smaller than a Single Life Annuity without a
guaranteed payment period.
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JOINT LIFE ANNUITIES
Payments are made monthly during the joint lifetime of the Annuitant and a
designated second person.
NON-LIFE ANNUITIES
Annuity payments are guaranteed monthly for the selected number of years.
While there is no right to make any total or partial withdrawals during the
Annuity Period, an Annuitant who has selected this annuity option as a Variable
Annuity or a surviving Beneficiary may request at any time during the payment
period that the present value of any remaining installments be paid in one lump
sum. Such lump sum payment will be treated as a Total Withdrawal during the
Accumulation Period and may be subject to a CDSC. See, "Deductions and Charges"
and "Federal Income Tax Considerations."
Under Qualified Plans, any annuity selected must be payable over a period
that does not extend beyond the life expectancy of the Participant and the
Participant's designated Beneficiary. If the Beneficiary is someone other than
the Participant's spouse, the present value of payments to be made to the
Participant must be more than 50% of the present value of the total payments to
be made to the Participant and the Beneficiary.
In the event that an Annuitant dies before the end of a designated Annuity
period, the Beneficiary, if any, or the Annuitant's estate will receive any
remaining payments due under the annuity option in effect.
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion assumes that the Contracts will qualify as annuity
Contracts for Federal income tax purposes. The description of the Federal
income tax status of amounts received under the Contracts is not exhaustive and
is not intended to cover all situations. Contractholders and Participants
should seek advice from their tax advisers on a regular basis as to the
application of Federal (and, where applicable, state and local) tax laws to
amounts received by them or their Beneficiaries under the Contracts. All dollar
amounts and percentages stated below are subject to change according to Federal
law. With respect to the transfer of Contracts from UNUM/America to Lincoln
Life or Lincoln-NY, there will be no adverse tax consequences to
Contractholders or participants as a result of the transfer. For additional
Federal Income Tax Considerations, please refer to the Statement of Additional
Information.
NON-QUALIFIED PLANS
Under a Non-Qualified Plan, an individual may make Contributions to the
Contract which are neither tax-deductible or tax deferred. The earnings on the
Contributions accumulate on a tax-deferred basis until withdrawn. Non-Qualified
Plans investing in annuity Contracts are subject to the Federal taxation rules
of Section 72 of the Code.
The Code does not limit the Participant's contributions to a Section 72 plan.
There are no Code restrictions on withdrawals or minimum age when the
Participant must begin withdrawals.
Section 401(a) Plans. Section 401(a) of the Code provides special tax
treatment for pension, profit sharing and stock bonus Plans established by
employers for their employees. Contributions to a Section 401(a) Plan and any
earnings attributable to such Contributions are currently excluded from the
Participant's income. Section 401(a) Plans are subject to, among other things,
limitations on: maximum contributions, minimum coverage and participation,
minimum funding, minimum vesting
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<PAGE>
requirements and distribution requirements. The specific limitations are
outlined in the plan document adopted by the employer.
A Participant who makes a withdrawal from a Section 401(a) program must
include that amount in current income. In addition, Section 401(k)(2) of the
Code requires that salary reduction Contributions made and/or earnings credited
on any salary reduction Contributions may not be withdrawn from the
Participant's Section 401(k) program prior to the Participant having (1)
attained age 59 1/2, (2) separated from service, (3) become disabled, (4) died
or (5) incurred a hardship. Hardship withdrawals may not include any income
credited after December 31, 1988 that is attributable to any salary reduction
Contributions. In addition, Section 402 of the Code permits tax-free rollovers
from Section 401(a) programs to individual retirement annuities or certain
other Section 401(a) programs under certain circumstances.
Section 403(b) Plans. A Participant who is an employee of a hospital or other
tax-exempt organization described in Section 501(c)(3) or 501(e) of the Code
may exclude from current earnings amounts contributed to a Section 403(b)
program. Under the terms of a Section 403(b) program, an Employer may make
Contributions directly to the program on behalf of the Participant, the
Participant may enter into a salary reduction agreement with the Participant's
Employer authorizing the Employer to contribute a percentage of the
Participant's salary to the program and/or the Participant may authorize the
Employer to make after tax Contributions to the program. Currently, the Code
permits employees to defer up to $10,000 of their income through salary
agreements. All Contributions made to the Section 403(b) program are subject to
the limitations described in Code Sections 402(g) regarding elective deferral
amounts, 403(b)(2) regarding the maximum exclusion allowance, and 415(a)(2) and
415(c) regarding the limitations on annual additions.
A Participant who makes a withdrawal from their Section 403(b) program must
include that amount in current income. In addition, Section 403(b)(11) of the
Code requires that salary reduction Contributions made and/or earnings credited
on any salary reduction Contributions after December 31, 1988 may not be
withdrawn from the Participant's Section 403(b) program prior to the
Participant having (1) attained age 59 1/2, (2) separated from service, (3)
become disabled, (4) died or (5) incurred a hardship. Hardship withdrawals may
not include any income credited after December 31, 1988 that is attributable to
any salary reduction Contributions. The Internal Revenue Service has ruled
(Revenue Ruling 90-24) that amounts may be transferred between Section 403(b)
investment vehicles as long as the transferred funds retain withdrawal
restrictions at least as restrictive as that of the transferring investment
vehicle. Such transferred amounts are considered withdrawals under the Contract
and will be subject to a CDSC, if applicable. See "Deductions and Charges--
Contingent Deferred Sales Charges." In addition, Section 403(b)(8) of the Code
permits tax-free rollovers from Section 403(b) programs to individual
retirement annuities or other Section 403(b) programs under certain
circumstances. Qualified distributions eligible for rollover treatment may be
subject to a 20% federal tax withholding depending on whether or not the
distribution is paid directly to an eligible retirement plan.
Section 408 Plans (IRAS). Under current law, individuals may contribute and
deduct the lesser of $2,000 or 100% of their compensation to an IRA. The $2,000
is increased to $4,000 when the IRA covers the taxpayer and a non-working
spouse. The deduction for Contributions is phased out for individuals who are
considered active participants under qualified Plans and whose Adjusted Gross
Income attains a certain level. In 1998, for a single person the $2,000
deduction is available when the taxpayers Adjusted Gross Income is $30,000 or
less. For each $50 that the taxpayer's Adjusted Gross Income rises above
$30,000, the taxpayer's deductible IRA is reduced by $10. When the single
taxpayer's Adjusted Gross Income is $40,000 or greater, a tax deduction for an
IRA is no longer available. In 1998, for a married couple filing jointly, the
threshold level is $50,000 rather than $30,000. For a married person filing
separately, the threshold is $0.
In addition, certain amounts distributed from Section 401(a) and 403(b) Plans
may be rolled over to an IRA on a tax-free basis if done in a timely manner
(within 60 days of the Participant's receipt of the distribution). The
limitations on contributions discussed above do not apply to amounts rolled
over to an IRA.
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All Participants in an IRA receive an IRA Disclosure. This document explains
the tax rules that apply to IRAs in greater detail.
Eligible Section 457 Plans. Eligible Section 457 Plans may be established by
state and local governments as well as private tax-exempt organizations (other
than churches). Participants may contribute on a before tax basis to a deferred
compensation Plan of their employer in accordance with the employer's Plan and
Section 457 of the Code. Section 457 places limitations on the amount of
Contributions to these Plans. Generally, the limitation is one-third of
includable compensation or $7,500, as indexed, whichever is less. In the
Participant's final year of employment the $7,500 limit is increased to
$15,000.
An employee electing to participate in an Eligible Section 457 Plan should
understand that their rights and benefits are governed strictly by the terms of
the Plan. Plans of state or local governments established on August 20, 1996,
or later, must hold all assets and income in trust (or custodial accounts or an
annuity contract) for the exclusive benefit of participants and their
beneficiaries. State or local government plans that were in existence before
August 20, 1996 are allowed until January 1, 1999 to meet this requirement.
Non-governmental plans are not subject to this requirement and employees of
these plans are general creditors of the Employer. Participants under Eligible
Section 457 Plans should look to the terms of their Plan for any changes in
regard to participation other than those disclosed in this Prospectus.
An employee electing to participate in an Eligible Section 457 Plan should
understand that their rights and benefits are governed strictly by the terms of
the Plan, that they are in fact a general creditor of the Employer under the
terms of the Plan, that the Employer is legal owner of any Contract issued with
respect to the Plan and that the Employer retains all rights under the Contract
issued with respect to the Plan. Participants under Eligible Section 457 Plans
should look to the terms of their Plan for any charges in regard to
participation other than those disclosed in this Prospectus.
Section 457(f) Plans. Section 457(f) Plans may be established by state and
local governments as well as private tax-exempt organizations. Employers and
Participants may contribute on a before-tax basis to a deferred compensation
Plan of their employer in accordance with the employer's Plan. Section 457(f)
does not place limitations on the amount of Contributions to these Plans;
however, the Internal Revenue Service may review these plans to determine if
the deferral amount is acceptable to the IRS based on the nature of the 457(f)
Plan.
Participants in 457(f) Plans may not receive a withdrawal or other
distribution from their 457(f) Plans until a distributable event occurs. The
Plan will define such events.
An employee electing to participate in a Section 457(f) Plan should
understand that their rights and benefits are governed strictly by the terms of
the Plan, that they are in fact a general creditor of the Employer under the
terms of the Plan, that the Employer is legal owner of any Contract issued with
respect to the Plan and that the Employer retains all rights under the Contract
issued with respect to the Plan. Participants under Section 457(f) Plans should
look to the terms of their Plan for any charges in regard to participating
other than those disclosed in this Prospectus.
Taxation of Annuities: General. In Qualified Plans such as 401(a), 403(b),
408 and Eligible 457 Plans, the Participant is not taxed on the value in their
accounts until they receive payments from the account. In some situations,
default or forgiveness of a loan will result in taxable income. Distributions
from all these Plans are taxed under the rules of Sections 72 and 402 of the
Code.
Taxation Prior to the Annuity Commencement Date. Section 72 of the Code
provides that a total or partial withdrawal prior to the Annuity Commencement
Date will be taxable to the extent the amount of the income in the
Participant's account exceeds the Participant's investment in the Participant's
account. In general, distributions from a Participant's account under Sections
401(a), 403(b) and 408 Plans under which the Participant made after-tax
contributions will be taxable according to a formula based on the ratio of the
Participant's investment in the Contract to the total
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value of the Participant's Account balance as of the date of the distribution.
Under an Eligible 457 Plan the Participant is taxed on the value when it is
made available to the Participant. In a 457(f) Plan the Participant is taxed
when their right to a distribution is no longer subject to a substantial risk
of forfeiture.
Penalty Tax for Premature Distributions. Sections 72(q) and 72(t) impose a
10% excise tax on certain premature distributions for non-qualified and Section
401(a), 403(b) and 408 Plans. The penalty tax will not apply to distributions
made on account of the Participant having (i) attained age 59 1/2; (ii) become
disabled; or (iii) died. The penalty tax will also not apply under 401(a) and
403(b) retirement plans where a Participant separates from service after age
55. In addition, the penalty does not apply if the distribution is received as
a series of substantially equal periodic payments made for the life (or life
expectancy) of the Participant or the joint lives (or life expectancies) of the
Participant and a designated Beneficiary. The 10% excise tax is an additional
tax; it does not apply to any money that the Participant receives as a return
of their cost basis. The 10% excise tax does not apply to Section 457 Plans.
Minimum Distributions. Participants in Plans subject to Code Sections 401(a),
403(b), 408 and Eligible 457 Plans are subject to Minimum Distribution Rules.
For a Participant who attains age 70 1/2 after December 31, 1987, distributions
must begin by April 1 of the calendar year following the calendar year in which
the Participant attains age 70 1/2. For a Participant who attains age 70 1/2
before January 1, 1988, distributions must begin on the April 1 of the calendar
year following the later of (1) the calendar year in which the Participant
attains age 70 1/2 or (2) the calendar year in which the Participant retires.
VOTING RIGHTS
UNUM/America is the legal owner of the shares of the Funds held by the
Variable Investment Division. As such, UNUM/America is entitled to vote those
Fund shares with respect to issues such as the election of a Fund's directors,
ratification of a Fund's choice of independent auditors and other matters
required by the 1940 Act to be voted on by shareholders.
In those years in which the Funds hold a shareholder meeting, UNUM/America
will solicit from Contractholders voting instructions with respect to Fund
shares held by the Variable Investment Division. Each Contractholder will
receive a number of votes in proportion to the Contractholder's investment in
the corresponding Sub-Account as of the record date established by the Fund.
During the Accumulation Period, a Participant has the right to instruct
Contractholders as to the votes attributable to their Participant Account
balance in the Sub-Accounts. Annuitants have similar rights with respect to the
annuity amount attributable to the Sub-Accounts.
UNUM/America will furnish Contractholders with sufficient Fund proxy material
and voting instruction forms for all Participants who have voting rights under
the Contract. UNUM/America will vote those Fund shares attributable to the
Contract for which UNUM/America receives no voting instructions in the same
proportion as UNUM/America will vote shares for which UNUM/America has received
instructions. UNUM/America will vote shares attributable to amounts
UNUM/America may have in the Variable Investment Division in the same
proportion as votes that UNUM/America receives from Contractholders. If the
federal securities laws or regulations or any interpretation of them changes so
that UNUM/America is permitted to vote shares of the Fund in UNUM/America's own
right or to restrict Participant voting, UNUM/America may do so.
Fund shares may be held by separate accounts of insurance companies
unaffiliated with UNUM/America. Fund shares held by those separate accounts
will be voted, in most cases, according to the instruction of owners of
insurance policies and Contracts issued by those other
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<PAGE>
unaffiliated insurance companies. This will dilute the effect of the voting
instructions of the Contractholders in the Variable Investment Division.
UNUM/America does not foresee any disadvantage to this. Pursuant to conditions
imposed in connection with regulatory relief, the Fund's Board of Directors has
an obligation to monitor events to identify conflicts that may arise and to
determine what action, if any, should be taken. For further information, see
the prospectuses for the Funds.
OTHER CONTRACT PROVISIONS
RIGHTS RESERVED BY UNUM/AMERICA
UNUM/America reserves the right, subject to compliance with applicable law,
including approval by the Contractholder or the Participants if required by
law, (1) to create additional Sub-Accounts in the Variable Investment Division,
(2) to combine or eliminate Sub-Accounts in the Variable Investment Division,
(3) to transfer assets from one Sub-Account in the Variable Investment Division
to another, (4) to transfer assets to the General Account and other separate
accounts, (5) to cause the deregistration and subsequent re-registration of the
Variable Investment Division under the Investment Company Act of 1940, (6) to
operate the Variable Investment Division under a committee and to discharge
such committee at any time, and (7) to eliminate any voting rights which the
Contractholder or the Participants may have with respect to the Variable
Investment Division, (8) to amend the Contract to meet the requirements of the
Investment Company Act of 1940 or other federal securities laws and
regulations, (9) to operate the Variable Investment Division in any form
permitted by law, (10) to substitute shares of another fund for the shares held
by a Sub-Account, and (11) to make any change required by the Internal Revenue
Code, ERISA or the Securities Act of 1933. Participants will be notified if any
changes are made that result in a material change in the underlying investments
of the Variable Investment Division.
ASSIGNABILITY
The Contracts are not assignable without UNUM/America's prior written
consent. In addition, a Participant, a Beneficiary or an Annuitant may not,
unless permitted by law, assign or encumber any payment due under the Contract.
MARKET EMERGENCIES
While UNUM/America may not suspend the right of redemption or delay payment
from the Variable Investment Division for more than the time period allowed
under Federal law but in no case longer than seven days, the following events
may delay payment for more than seven days: (1) any period when the New York
Stock Exchange is closed (other than customary weekend and holiday closings);
(2) any period when trading in the markets normally utilized is restricted, or
an emergency exists as determined by the Securities and Exchange Commission, so
that disposal of investments or determination of the Accumulation Unit Value or
Variable Annuity payment value is not reasonably practicable; or (3) for such
other periods as the Securities and Exchange Commission by order may permit for
the protection of the Participants.
CONTRACT DEACTIVATION
Under certain Contracts, UNUM/America may deactivate a Contract by
prohibiting new contributions and/or new Participants after the date of
deactivation. UNUM/America will give the Contractholder and the Participants
not less than 90 days notice of the date of deactivation.
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FREE-LOOK PERIOD
Participants under Sections 403(b), 408 and certain Non-Qualified Plans will
receive an Active Life Certificate upon UNUM/America's receipt of a duly
completed participation enrollment form. If the Participant chooses not to
participate under the Contract, the Participant may exercise the free-look
right by sending a written notice to UNUM/America that the Participant does not
wish to participate under the Contract, within 10 days after the date the
Active Life Certificate is received by the Participant. For purposes of
determining the date on which the Participant has sent written notice, the
postmark date will be used.
If a Participant exercises the free-look right in accordance with the
foregoing procedure, UNUM/America will refund in full the Participant's
aggregate Contributions less aggregate withdrawals made on behalf of the
Participant or, if greater, with respect to Contributions to the Variable
Investment Division, the Participant's Account balance in the Variable
Investment Division on the date the Participant's written notice is received by
UNUM/America.
OTHER CONTRACTS
UNUM/America and the Variable Investment Division offer group variable
annuity contracts which invest in the same Funds. These contracts may impose
different charges that could affect Sub-Account performance, and may offer
different benefits.
GUARANTEED INTEREST DIVISION
GENERAL
Contributions to the Guaranteed Interest Division become part of
UNUM/America's General Account. The General Account is subject to regulation
and supervision by the Maine Insurance Department as well as the insurance laws
and regulations of the jurisdictions in which the Contracts are distributed. In
reliance on certain exemptions, exclusions and rules, UNUM/America has not
registered the interests in the General Account as a security under the
Securities Act of 1933 and has not registered the General Account as an
investment company under the 1940 Act.
Accordingly, neither the General Account nor any interests therein are
subject to regulation under the 1933 Act or the 1940 Act. UNUM/America has been
advised that the staff of the SEC has not made a review of the disclosures
which are included in this prospectus which relate to the General Account and
the Guaranteed Interest Division. These disclosures, however, may be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of statements made in prospectuses. This
prospectus is generally intended to serve as a disclosure document only for
aspects of the Contract involving the Variable Investment Division and contains
only selected information regarding the Guaranteed Interest Division. Complete
details regarding the Guaranteed Interest Division are in the Contract.
Amounts contributed to the Guaranteed Interest Division are guaranteed a
minimum interest rate according to contract minimums of at least 3.0%.
UNUM/America will also declare in advance a guaranteed interest rate which will
be effective for all amounts in the Participant's Account balance in the
Guaranteed Interest Division during the designated year. This rate will never
be less than the minimum rate of interest. UNUM/America may also declare in
advance separate interest rate guarantees which are in excess of the guaranteed
interest rate for some or all of the Participant's Account balance in the
Guaranteed Interest Division for specific period(s) during the designated year.
A Participant who makes a Contribution to the Guaranteed Interest Division is
credited with interest beginning on the next calendar day following the date of
receipt if all Participant data is complete.
33
<PAGE>
PARTICIPANT'S ACCOUNT BALANCE IN THE GUARANTEED INTEREST DIVISION
The Participant's Account balance in the Guaranteed Interest Division on any
Valuation Date will reflect the amount and frequency of any Contributions
allocated to the Guaranteed Interest Division, plus any transfers from the
Variable Investment Division and interest credited to the Guaranteed Interest
Division, less any withdrawals, CDSC, Annual Administration Charges and loan-
related charges allocated to the Guaranteed Interest Division and any transfers
to the Variable Investment Division.
TRANSFERS, TOTAL AND PARTIAL WITHDRAWALS
Amounts in the Guaranteed Interest Division are generally subject to the same
rights and limitations and will be subject to the same charges as are amounts
allocated to the Variable Investment Division with respect to Total or Partial
Withdrawals. See "Deferral Periods."
LOANS
During a Participant's Accumulation Period, a Participant, whose Plan permits
loans, may apply for a loan under the Contract by completing a loan application
available from UNUM/America. Loans are secured by the Participant's Account
balance in the Guaranteed Interest Division. The amounts and terms of a
Participant loan may be subject to the restrictions imposed under Section 72(p)
of the Code, Title I of ERISA, and any applicable Plans. With respect to Plans
subject to Title I of ERISA, the initial amount of a Participant loan may not
exceed the lesser of 50% of the Participant's vested Account balance in the
Guaranteed Interest Division or $50,000 and must be at least $1,000. A
Participant in a Plan that is not subject to ERISA may borrow up to $10,000 of
their vested Account balance without regard to the 50% limitation stated above.
A Participant may have only one loan outstanding at any time and may not
establish more than one loan in any six month period. Amounts serving as
collateral for the loan are not subject to the minimum interest rate under the
Contract and will accrue interest at a rate which is below the loan interest
rate as provided in the Contract. Under certain Contracts, a one-time fee of up
to $50 may be charged to set up a loan. More information about loans, including
interest rates and applicable fees and charges, is available in the Contracts,
Active Life Certificates, and the Annuity Loan Agreement as well as from
UNUM/America.
DEFERRAL PERIODS
If a payment is to be made from the Guaranteed Interest Division,
UNUM/America may defer the payment for the period permitted by the law of the
jurisdiction in which the Contract is distributed, but in no event, for more
than 6 months after a written election is received by UNUM/America. During the
period of deferral, interest at the then current interest rate will continue to
be credited to a Participant's Account in the Guaranteed Interest Division.
OTHER INFORMATION
PREPARING FOR YEAR 2000
Lincoln Life is, as noted at page 13 above, responsible for administering the
Contracts and the Variable Investment Division on behalf of UNUM/America.
Lincoln Life's responsibilities include the operation of the computer systems
related to the Variable Investment Division, which are distinct from those used
by UNUM/America in its other operations. Many existing computer programs use
only two digits to identify a year in the date field. These programs were
designed and developed without considering the impact of the upcoming change in
the century. If not corrected, many computer applications could fail or create
erroneous results by or at the year 2000. The year 2000 issue affects virtually
all companies and organizations. Since Lincoln Life operates and is responsible
34
<PAGE>
for the updating of the Variable Investment Division-related computer programs,
and the computer systems used by UNUM/America in other businesses are not
integrated with these systems, this prospectus describes the year 2000 updating
efforts of Lincoln Life for these systems, rather than those of UNUM/America
with respect to computer systems used in its other businesses. An affiliate of
Lincoln Life, Delaware Service Company (Delaware), provides substantially all
of the necessary accounting and valuation services for the Variable Investment
Division. Delaware, for its part, is responsible for updating all of its
computer systems, including those which service the Variable Investment
Division, to accommodate the year 2000. Lincoln Life and Delaware have begun
formal discussions with each other to assets the requirements for their
respective systems to interface properly in order to facilitate the accurate
and orderly operation of the Variable Investment Division beginning in the year
2000.
The year 2000 issue is pervasive and complex and affects virtually every
aspect of the businesses of both Lincoln Life and Delaware (the Companies). The
computer systems of the Companies and their interfaces with the computer
systems of vendors, suppliers, customers and other business partners are
particularly vulnerable. The inability to properly recognize date-sensitive
electronic information and to transfer data between systems could cause errors
or even complete failure of systems, which would result in a temporary
inability to process transactions correctly and engage in normal business
activities for the Variable Investment Division. The Companies respectively are
redirecting significant portions of their internal information technology
efforts and are contracting, as needed, with outside consultants to help update
their systems to accommodate the year 2000. Also, in addition to the
discussions with each other noted above, the Companies have respectively
initiated formal discussions with other critical parties that interface with
their systems to gain an understanding of the progress by those parties in
addressing year 2000 issues. While the Companies are making substantial efforts
to address their own systems and the systems with which they interface, it is
not possible to provide assurance that operational problems will not occur. The
Companies presently believe that, assuming the modification of existing
computer systems, updates by vendors and conversion to new software and
hardware, the year 2000 issue will not pose significant operations problems for
their respective computer systems. In addition, the Companies are incorporating
potential issues surrounding year 2000 into their contingency planning process,
in the event that, despite these substantial efforts, there are unresolved year
2000 problems. If the remediation efforts noted above are not completed timely
or properly, the year 2000 issue could have a material adverse impact on the
operation of the businesses of Lincoln Life or Delaware, or both, and/or the
processing of transactions involving the Variable Investment Division.
The cost of addressing year 2000 issues and the timeliness of completion will
be closely monitored by management of the respective Companies. Nevertheless,
there can be no guarantee that estimated costs will be achieved, and actual
results could differ significantly from those anticipated. Specific factors
that might cause such differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer problems, and other uncertainties.
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TABLE OF CONTENTS FOR
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS................................................................ 2
DETERMINATION OF VARIABLE ANNUITY PAYMENTS................................. 3
PERFORMANCE CALCULATIONS................................................... 4
TAX LAW CONSIDERATIONS..................................................... 11
DISTRIBUTION OF CONTRACTS.................................................. 13
CUSTODIAN.................................................................. 13
INDEPENDENT AUDITORS/ACCOUNTANTS........................................... 13
FINANCIAL STATEMENTS....................................................... 13
Financial Statements of Variable Investment Division
Financial Statements of UNUM/America
</TABLE>
36
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
GROUP ANNUITY CONTRACTS
FUNDED THROUGH THE INVESTMENT DIVISIONS OF
VA-I SEPARATE ACCOUNT
OF
UNUM LIFE INSURANCE COMPANY OF AMERICA
VARIABLE ANNUITY I
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Definitions............................................................... 2
Determination of Variable Annuity Payments................................ 3
Performance Calculations.................................................. 4
Tax Law Considerations.................................................... 11
Distribution of Contracts................................................. 13
Custodian................................................................. 13
Independent Accountants................................................... 13
Financial Statements...................................................... 13
Financial Statements of Variable Investment Division
Financial Statements of UNUM/America
</TABLE>
This Statement of Additional Information (SAI) is not a prospectus. It should
be read in conjunction with the prospectus for the Group Annuity Contracts
(the "Contracts"), dated May 1, 1998.
A copy of the prospectus to which this SAI relates is available at no charge
by writing to P.O. Box 9740, Portland, Maine 04104 Attention: Tax Deferred
Annuities; or by calling (800) 341-0441.
80020
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DEFINITIONS
ANNUITANT: The person receiving annuity payments under the terms of this
Contract.
ANNUITY COMMENCEMENT DATE: The date on which UNUM/America makes the first
annuity payment to the Annuitant as required by the Retired Life Certificate.
This date, as well as the date each subsequent annuity payment is made, will
be the first day of a calendar month.
ANNUITY CONVERSION AMOUNT: The amount applied toward the purchase of an
Annuity.
ANNUITY CONVERSION FACTOR: The factor applied to the Annuity Conversion Amount
in determining the dollar amount of an Annuitant's annuity payments for
Guaranteed Annuities or the initial payment for Variable Annuities.
ANNUITY PAYMENT CALCULATION DATE: For Guaranteed Annuities, this is the first
day of a calendar month. For Variable Annuities, this is the Valuation Date
ten (10) business days prior to the first day of a calendar month.
ANNUITY PERIOD: The period concurrent with or following the Accumulation
Period, during which an Annuitant's annuity payments are made.
ANNUITY UNIT: An accounting unit of measure that is used in calculating the
amounts of annuity payments to be made from a Sub-Account during the Annuity
Period.
ANNUITY UNIT VALUE: The dollar value of an Annuity Unit in a Sub-Account on
any Valuation Date.
CODE: The Internal Revenue Code of 1986, as amended.
PAYOUT ANNUITY: A series of payments paid out under the terms of the Contract
as either a Guaranteed Annuity or as a Variable Annuity.
PLAN: The retirement program offered by an Employer to its employees to
accumulate funds for retirement.
VARIABLE ANNUITY: An annuity with payments that increase or decrease in
accordance with the investment results of the selected Sub-Accounts.
2
<PAGE>
DETERMINATION OF VARIABLE ANNUITY PAYMENTS
As stated in the prospectus, the amount of each Variable Annuity payment will
vary depending on investment experience.
The initial payment amount of the Annuitant's Variable Annuity for each Sub-
Account is determined by dividing his Annuity Conversion Amount in each Sub-
Account as of the initial Annuity Payment Calculation Date by the Applicable
Annuity Conversion Factor as defined as follows:
The Annuity Conversion Factors which are used to determine the initial
payments are based on the 1983 Individual Annuity Mortality Table, set back
four (4) years, and an interest rate in an integral percentage ranging from
zero to six percent (0 to 6.00%) as selected by the Annuitant.
The amount of the Annuitant's subsequent Variable Annuity payment for each
Sub-Account is determined by:
(a) Dividing the Annuitant's initial Variable Annuity payment amount by the
Annuity Unit Value for that Sub-Account selected for his interest rate
option as described above as of his initial annuity Payment Calculation
Date; and
(b) Multiplying the resultant number of annuity units by the Annuity Unit
Values for the Sub-Account selected for his interest rate option for his
respective subsequent Annuity Payment Calculation Dates.
The Annuity Unit Value for all Sub-Accounts for all interest rate options will
initially be set at ten dollars ($10). Each subsequent Annuity Unit Value for
a Sub-Account for an interest rate option is determined by:
Dividing the Accumulation Unit Value for the Sub-Account as of subsequent
Annuity Payment Calculation Date (APCD) by the Accumulation Unit Value for
the Sub-Account as of the immediately preceding APCD;
Dividing the resultant factor by one (1.00) plus the interest rate option
to the n/365 power where n is the number of days from the immediately
preceding APCD to the subsequent APCD; and
Multiplying this factor times the Annuity Unit Value as of the immediately
preceding APCD.
3
<PAGE>
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
<TABLE>
<C> <S>
1. Annuity Unit Value as of immediately preceding Annuity Payment
Calculation Date................................................$11.0000
2. Accumulation Unit Value as of Annuity Payment Calculation Date...$20.0000
3. Accumulation Unit Value as of immediately preceding Annuity Payment
Calculation Date................................................$19.0000
4. Interest Rate.......................................................6.00%
5. Interest Rate Factor (30 days).....................................1.0048
6. Annuity Unit Value as of Annuity Payment Calculation Date = 1 times 2
divided by 3 divided by 5.......................................$11.5236
</TABLE>
ILLUSTRATION OF ANNUITY PAYMENTS
<TABLE>
<C> <S>
1. Annuity Conversion Amount as of Participant's initial Annuity Payment
Calculation Date.............................................$100,000.00
2. Assumed Annuity Conversion Factor per $1 of Monthly Income for an
individual age 65
selecting a Single Life Annuity with Assumed Interest Rate of
6%...............................................................$138.63
3. Participant's initial Annuity Payment 1 divided by 2..............$721.34
4. Assumed Annuity Unit Value as of Participant's initial Annuity Payment
Calculation Date................................................$11.5236
5. Number of Annuity Units = 3 divided by 4..........................62.5968
6. Assumed Annuity Unit Value as of Participant's second Annuity Payment
Calculation Date................................................$11.9000
7. Participant's second Annuity Payment = 5 times 6..................$744.90
</TABLE>
PERFORMANCE CALCULATIONS
STANDARD TOTAL RETURN CALCULATION
The Variable Investment Division may advertise average annual total return
information calculated according to a formula prescribed by the Securities and
Exchange Commission ("SEC"). Average annual total return shows the average
annual percentage increase, or decrease, in the value of a hypothetical
Contribution allocated to a Sub-Account from the beginning to the end of each
specified period of time. The SEC standardized version of this performance
information is based on an assumed Contribution of $1,000 allocated to a Sub-
Account at the beginning of each period and surrender or withdrawal of the
value of that amount at the end of each specified period, giving effect to any
CDSC and all other charges and fees applicable under the Contract. The effect
of the Annual Administration Charge for a period is determined by dividing the
total amount of such charges collected in the previous year by the total
average net assets of the accounts for the previous year, as of the previous
month ended; accounts include accounts available under Variable Annuity I of
UNUM/America and under corresponding accounts of Lincoln Life, pending
assumption reinsurance by Lincoln Life of Variable Annuity I contracts issued
through such UNUM/America accounts. This method of calculating performance
further assumes that (i) a $1,000 Contribution was allocated to a Sub-Account
and (ii) no transfers or additional payments were made. Premium taxes are not
included in the terms "charges" for purposes of this calculation. Average
annual total return is calculated by finding the average annual compounded
rates of return of a hypothetical Contribution that would compare the
Accumulation Unit value on the first day of the specified period to the ending
redeemable value at the end of the period according to the following formula:
T = (ERV/C) 1/n - 1
Where T equals average annual total return, where ERV (the ending redeemable
value) is the value at the end of the applicable period of a hypothetical
Contribution of $1,000 made at the beginning of the applicable period, where C
equals a hypothetical Contribution of $1,000, and where n equals the number of
years.
For Sub-Account average annual total return information calculated according
to the formula prescribed by the SEC, see "Sub-Account Performance."
NON-STANDARDIZED CALCULATION OF TOTAL RETURN PERFORMANCE
In addition to the standardized average annual total return information
described above, we may present total return information computed on bases
different from that standardized method. Such non-standard performance
information may be based on the historical performance of a Fund and adjusted
to reflect some or all of the fees and charges imposed under a Contract.
4
<PAGE>
The Variable Investment Division may also present total return information
computed on the same basis as the standardized method except that charges
deducted from the hypothetical Contribution will not include any CDSC.
Consistent with the long-term investment and retirement objectives of the
Contract, this total return presentation assumes either (i) investment in the
Contract continues beyond the Accumulation Period and/or (ii) one or more of
the conditions for Total or Partial Withdrawal without incurring a CDSC are
met. The Variable Investment Division may also present total return
information computed on the same basis as the standardized method except that
charges deducted from the hypothetical Contribution will not include either
the CDSC or the Annual Administration Charge. The total return percentage
under both of these non-standardized methods will be higher than that
resulting from the standardized method.
The Sub-Accounts also may present total return information calculated by
subtracting a Sub-Account's Accumulation Unit Value at the beginning of a
period from the Accumulation Unit Value of that Sub-Account at the end of the
period and dividing that difference (in that Sub-Account's Accumulation Unit
Value) by the Accumulation Unit Value of that Sub-Account at the beginning of
the period. This computation results in a total growth rate for the specified
period which we annualize in order to obtain the average annual percentage
change in the Accumulation Unit Value for the period used. This method of
calculating performance does not take into account CDSC, the Contract Annual
Administration Charge or premium taxes, and assumes no transfers. Such
percentages would be lower if these charges were included in the calculation.
In addition, the Variable Investment Division may present actual aggregate
total return figures for various periods, reflecting the cumulative change in
value of an investment in the Variable Investment Division for the specified
period.
For information regarding the historical performance of the Funds adjusted for
the fees and charges imposed under a Contract, see "Historical Fund
Performance Adjusted for Variable Investment Division and Contract Fees and
Charges."
PERFORMANCE INFORMATION
The tables below provide performance information for each Sub-Account for
specified periods ending December 31, 1997. The performance information is
based on historical performance of the underlying Funds adjusted for charges
applicable to the Variable Annuity I Separate Account. THIS INFORMATION DOES
NOT INDICATE OR REPRESENT FUTURE PERFORMANCE.
TOTAL RETURN
Total returns quoted in sales literature or advertisements reflect all aspects
of a Sub-Account's return. Average annual returns are calculated by
determining the growth or decline in value of a hypothetical historical
investment in the Sub-Account over a stated period of time, and then
calculating the annually compounded percentage rate that would have produced
the same result if the rate of growth or decline had been constant over the
period. Contractholders and participants should recognize that average annual
returns represent averaged returns rather than actual year-to-year
performance.
5
<PAGE>
SUB-ACCOUNT PERFORMANCE
The tables below assume a hypothetical investment of $1,000 at the beginning
of the period in the Sub-Account investing in the applicable Fund and
withdrawal of the investment on 12/31/97. The rates thus reflect the mortality
and expense risk charge, the withdrawal charge and a pro rata portion of the
Annual Administration Charge. The first table shows Sub-Account average annual
total return information calculated according to the formula prescribed by the
SEC. The second table shows Sub-Account cumulative total return information.
THIS INFORMATION DOES NOT INDICATE OR REPRESENT FUTURE PERFORMANCE.
SUB-ACCOUNT STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
LIFE OF
SUB- SUB-
ACCOUNT 1 YEAR 3 YEARS 5 YEARS ACCOUNT
INCEPTION ENDING ENDING ENDING ENDING
DATE 12/31/97 12/31/97 12/31/97 12/31/97
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Asset Manager 05/01/91 13.20 13.95 10.40 10.66
(Fidelity VIP II: Asset Manager)
Socially Responsible 05/02/94 12.66 17.10 N/A 13.46
(Calvert Social Balanced
Portfolio)
Balanced 05/01/91 8.66 12.92 8.75 8.98
(American Century VP Balanced)
Equity-Income 05/02/94 20.20 21.86 N/A 18.82
(VIP Equity-Income)
Index Account 12/12/89 24.75 26.81 17.01 14.30
(Dreyfus Stock Index)
Growth I 05/01/91 15.86 20.61 15.34 16.03
(Fidelity VIP Growth)
Growth II 05/01/91 -9.23 3.51 3.35 4.49
(American Century VP Capital
Appreciation)
International Stock 05/02/94 -3.28 6.35 N/A 4.76
(T. Rowe Price International
Stock Portfolio)
Small Cap 05/02/94 9.54 17.24 N/A 14.90
(Dreyfus Small Cap)
</TABLE>
SUB-ACCOUNT CUMULATIVE TOTAL RETURN (NONSTANDARD)
<TABLE>
<CAPTION>
LIFE OF
SUB- SUB-
ACCOUNT YEAR TO 1 YEAR 3 YEARS 5 YEARS ACCOUNT
INCEPTION QUARTER DATE ENDING ENDING ENDING ENDING
DATE 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
--------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset Manager 05/01/91 -3.29 13.20 13.20 47.97 64.01 96.60
(Fidelity VIP
II: Asset
Manager)
Socially
Responsible 05/02/94 -4.65 12.66 12.66 60.59 N/A 58.94
(Calvert
Social
Balanced
Portfolio)
Balanced 05/01/91 -5.78 8.66 8.66 44.00 52.10 77.47
(American
Century VP
Balanced)
Equity-Income 05/02/94 -3.42 20.20 20.20 80.98 N/A 88.23
(VIP Equity-
Income)
Index Account 12/12/89 -2.69 24.75 24.75 103.91 119.29 193.61
(Dreyfus Stock
Index)
Growth I 05/01/91 -6.09 15.86 15.86 75.44 104.16 169.71
(Fidelity VIP
Growth)
</TABLE>
6
<PAGE>
SUB-ACCOUNT CUMULATIVE TOTAL RETURN (NONSTANDARD) (CONTINUED)
<TABLE>
<CAPTION>
LIFE OF
SUB- SUB-
ACCOUNT YEAR TO 1 YEAR 3 YEARS 5 YEARS ACCOUNT
INCEPTION QUARTER DATE ENDING ENDING ENDING ENDING
DATE 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
--------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Growth II 05/01/91 -17.59 -9.23 -9.23 10.90 17.89 34.04
(American
Century VP
Capital
Appreciation)
International
Stock 05/02/94 -12.07 -3.28 -3.28 20.29 N/A 18.58
(T. Rowe Price
International
Stock
Portfolio)
Small Cap 05/02/94 -10.53 9.54 9.54 61.14 N/A 66.46
(Dreyfus Small
Cap)
</TABLE>
HISTORICAL FUND PERFORMANCE ADJUSTED FOR VARIABLE INVESTMENT DIVISION AND
CONTRACT FEES AND CHARGES
Performance information for the periods prior to the date the Sub-Accounts
commenced operations will be calculated based on the performance of the Funds
and the assumption that the Sub-Accounts were in existence for the same
periods as those indicated for the Funds, with the Contract charges that were
in effect during the time periods shown. This performance information is
referred to as "adjusted" performance information. THIS INFORMATION DOES NOT
INDICATE OR REPRESENT FUTURE PERFORMANCE.
Table 1A below assumes a hypothetical investment of $1,000 at the beginning of
the period in the Sub-Account investing in the applicable fund and withdrawal
of the investment on 12/31/97. The rates thus reflect the mortality and
expense risk charge, the withdrawal charge and a pro rata portion of the
Annual Administration Charge. Table 1B shows the cumulative total return on
the same basis.
TABLE 1A -- ADJUSTED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
LIFE
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS OF FUND
INCEPTION ENDING ENDING ENDING ENDING ENDING
DATE 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Asset Manager 09/06/89 13.20 13.95 10.40 N/A 10.99
(Fidelity VIP II: Asset
Manager)
Socially Responsible 09/02/86 12.66 17.10 10.35 10.99 9.79
(Calvert Social Balanced
Portfolio)
Balanced 05/01/91 8.66 12.92 8.75 N/A 8.98
(American Century VP
Balanced)
Equity-Income 10/09/86 20.20 21.86 17.45 15.25 13.20
(VIP Equity-Income)
Index Account 09/29/89 24.75 26.81 17.01 N/A 14.05
(Dreyfus Stock Index)
Growth I 10/09/86 15.86 20.61 15.34 15.70 14.09
(Fidelity VIP Growth)
Growth II 11/20/87 -9.23 3.51 3.35 7.29 7.93
(American Century VP
Capital Appreciation)
International Stock 03/31/94 -3.28 6.35 N/A N/A 5.28
(T. Rowe Price
International Stock
Portfolio)
Small Cap 08/31/90 9.54 17.24 23.28 N/A 41.58
(Dreyfus Small Cap)
</TABLE>
7
<PAGE>
TABLE 1B -- ADJUSTED CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
LIFE
FUND YEAR TO 1 YEAR 3 YEARS 5 YEARS 10 YEARS OF FUND
INCEPTION QUARTER DATE ENDING ENDING ENDING ENDING ENDING
DATE 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
--------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager 09/06/89 -3.29 13.20 13.20 47.97 64.01 N/A 138.17
(Fidelity VIP
II: Asset
Manager)
Socially
Responsible 09/02/86 -4.65 12.66 12.66 60.59 63.63 183.81 188.37
(Calvert
Social
Balanced
Portfolio)
Balanced 05/01/91 -5.78 8.66 8.66 44.00 52.10 N/A 77.47
(American
Century VP
Balanced)
Equity-Income 10/09/86 -3.42 20.20 20.20 80.98 123.50 313.34 302.82
(VIP Equity-
Income)
Index Account 09/29/89 -2.69 24.75 24.75 103.91 119.29 N/A 196.01
(Dreyfus
Stock Index)
Growth I 10/09/86 -6.09 15.86 15.86 75.44 104.16 330.04 339.87
(Fidelity VIP
Growth)
Growth II 11/20/87 -17.59 -9.23 -9.23 10.90 17.89 102.04 116.49
(American
Century VP
Capital
Appreciation)
International
Stock 03/31/94 -12.07 -3.28 -3.28 20.29 N/A N/A 21.30
(T. Rowe
Price
International
Stock
Portfolio)
Small Cap 08/31/90 -10.53 9.54 9.54 61.14 184.74 N/A 1,183.03
(Dreyfus
Small Cap)
</TABLE>
Table 2A below shows annual average total return on the same assumptions as
Table 1A except that the value in the Sub-Account is not withdrawn at the end
of the period or is withdrawn to affect an annuity. Table 2B shows the
cumulative total return on the same basis. The rates of return shown below
reflect the mortality and expense risk charge and a pro rata portion of the
Annual Administration Charge.
TABLE 2A -- ADJUSTED AVERAGE TOTAL RETURN ASSUMING NO WITHDRAWAL
<TABLE>
<CAPTION>
LIFE
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS OF FUND
INCEPTION ENDING ENDING ENDING ENDING ENDING
DATE 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Asset Manager 09/06/89 19.16 15.92 11.54 N/A 11.26
(Fidelity VIP II: Asset
Manager)
Socially Responsible 09/02/86 18.59 19.12 11.49 11.00 9.79
(Calvert Social Balanced
Portfolio)
Balanced 05/01/91 14.38 14.87 9.87 N/A 9.64
(American Century VP
Balanced)
Equity-Income 10/09/86 26.53 23.97 18.66 15.25 13.20
(VIP Equity-Income)
Index Account 09/29/89 31.32 28.99 18.21 N/A 14.33
(Dreyfus Stock Index)
Growth I 10/09/86 21.96 22.69 16.53 15.71 14.09
(Fidelity VIP Growth)
Growth II 11/20/87 -4.46 5.29 4.41 7.29 7.93
(American Century VP
Capital Appreciation)
International Stock 03/31/94 1.82 8.18 N/A N/A 6.72
(T. Rowe Price
International Stock
Portfolio)
Small Cap 08/31/90 15.30 19.26 24.55 N/A 42.17
(Dreyfus Small Cap)
</TABLE>
8
<PAGE>
TABLE 2B -- ADJUSTED CUMULATIVE TOTAL RETURN ASSUMING NO WITHDRAWAL
<TABLE>
<CAPTION>
LIFE
FUND YEAR TO 1 YEAR 3 YEARS 5 YEARS 10 YEARS OF FUND
INCEPTION QUARTER DATE ENDING ENDING ENDING ENDING ENDING
DATE 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
--------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager 09/06/89 1.81 19.16 19.16 55.76 72.64 N/A 143.03
(Fidelity VIP
II: Asset
Manager)
Socially
Responsible 09/02/86 0.37 18.59 18.59 69.04 72.25 183.81 188.37
(Calvert
Social
Balanced
Portfolio)
Balanced 05/01/91 -0.83 14.38 14.38 51.58 60.11 N/A 84.87
(American
Century VP
Balanced)
Equity-Income 10/09/86 1.67 26.53 26.53 90.50 135.26 313.34 302.82
(VIP Equity-
Income)
Index Account 09/29/89 2.43 31.32 31.32 114.64 130.84 N/A 202.05
(Dreyfus
Stock Index)
Growth I 10/09/86 -1.14 21.96 21.96 84.67 114.91 330.04 339.87
(Fidelity VIP
Growth)
Growth II 11/20/87 -13.25 -4.46 -4.46 16.73 24.09 102.04 116.49
(American
Century VP
Capital
Appreciation)
International
Stock 03/31/94 -7.44 1.82 1.82 26.62 N/A N/A 27.69
(T. Rowe
Price
International
Stock
Portfolio)
Small Cap 08/31/90 -5.82 15.30 15.30 69.63 199.73 N/A 1,222.71
(Dreyfus
Small Cap)
</TABLE>
Tables 3A and 3B show performance information on the same assumptions as
Tables 2A and 2B except that Tables 3A and 3B do not reflect deductions of the
pro rata portion of the Annual Administration Charge because certain Contracts
and Participants are not assessed such a charge.
TABLE 3A -- ADJUSTED AVERAGE ANNUAL TOTAL RETURN ASSUMING NO WITHDRAWAL AND NO
ANNUAL ADMINISTRATION CHARGE
<TABLE>
<CAPTION>
LIFE
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS OF FUND
INCEPTION ENDING ENDING ENDING ENDING ENDING
DATE 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Asset Manager 09/06/89 19.20 15.97 11.59 N/A 11.33
(Fidelity VIP II: Asset
Manager)
Socially Responsible 09/02/86 18.64 19.17 11.54 11.07 9.87
(Calvert Social Balanced
Portfolio)
Balanced 05/01/91 14.42 14.92 9.92 N/A 9.70
(American Century VP
Balanced)
Equity-Income 10/09/86 26.57 24.02 18.72 15.32 13.28
(VIP Equity-Income)
Index Account 09/29/89 31.36 29.05 18.27 N/A 14.40
(Dreyfus Stock Index)
Growth I 10/09/86 22.00 22.74 16.59 15.78 14.17
(Fidelity VIP Growth)
Growth II 11/20/87 -4.42 5.34 4.46 7.36 8.00
(American Century VP
Capital Appreciation)
International Stock 03/31/94 1.86 8.23 N/A N/A 6.77
(T. Rowe Price
International Stock
Portfolio)
Small Cap 08/31/90 15.35 19.31 24.61 N/A 42.24
(Dreyfus Small Cap)
</TABLE>
9
<PAGE>
TABLE 3B -- ADJUSTED CUMULATIVE TOTAL RETURN ASSUMING NO WITHDRAWAL AND NO
ANNUAL ADMINISTRATION CHARGE
<TABLE>
<CAPTION>
LIFE
FUND YEAR TO 1 YEAR 3 YEARS 5 YEARS 10 YEARS OF FUND
INCEPTION QUARTER DATE ENDING ENDING ENDING ENDING ENDING
DATE 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
--------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager 09/06/89 1.85 19.20 19.20 55.95 73.06 N/A 144.24
(Fidelity VIP
II: Asset
Manager)
Socially
Responsible 09/02/86 0.41 18.64 18.64 69.25 72.66 185.66 190.70
(Calvert
Social
Balanced
Portfolio)
Balanced 05/01/91 -0.78 14.42 14.42 51.77 60.50 N/A 85.51
(American
Century VP
Balanced)
Equity-Income 10/09/86 1.71 26.57 26.57 90.74 135.82 316.01 306.06
(VIP Equity-
Income)
Index Account 09/29/89 2.47 31.36 31.36 114.90 131.38 N/A 203.56
(Dreyfus
Stock Index)
Growth I 10/09/86 -1.10 22.00 22.00 84.90 115.42 332.80 343.39
(Fidelity VIP
Growth)
Growth II 11/20/87 -13.21 -4.42 -4.42 16.89 24.40 103.38 118.00
(American
Century VP
Capital
Appreciation)
International
Stock 03/31/94 -7.40 1.86 1.86 26.78 N/A N/A 27.90
(T. Rowe
Price
International
Stock
Portfolio)
Small Cap 08/31/90 -5.78 15.35 15.35 69.84 200.41 N/A 1,227.73
(Dreyfus
Small Cap)
</TABLE>
Table 4 below shows total return information on a calendar year basis using
the same assumptions as Tables 3A and 3B. The rates of return shown reflect
the mortality and expense risk charge. Similar to Tables 3A and 3B, Table 4
does not reflect deduction of the pro rata portion of the Annual
Administration Charge because certain Contracts and Participants are not
assessed such a charge.
TABLE 4 -- ADJUSTED CALENDAR YEAR ANNUAL RETURN ASSUMING NO WITHDRAWAL AND NO
ANNUAL ADMINISTRATION CHARGE*
<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
----- ----- ----- ------ ------ ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager N/A N/A N/A 5.45 21.11 10.53 19.60 -7.20 15.57 13.24 19.20
Socially Responsible 5.51 10.42 19.53 2.94 15.02 6.33 6.72 -4.39 28.24 11.28 18.64
Balanced N/A N/A N/A N/A N/A -7.17 6.38 -0.58 19.68 10.81 14.42
Equity-Income -2.30 21.25 15.95 -16.29 29.88 15.50 16.89 5.80 33.49 12.92 26.57
Index N/A N/A N/A -4.69 28.29 5.82 8.02 -0.32 35.16 21.09 31.36
Growth I 2.43 14.21 29.95 -12.78 43.78 8.00 17.94 -1.21 33.75 13.35 22.00
Growth II N/A -3.41 27.17 -2.40 40.18 -2.52 8.99 -2.34 29.55 -5.43 -4.42
International Stock N/A N/A N/A N/A N/A N/A N/A N/A 9.86 13.34 1.86
Small Cap N/A N/A N/A N/A 156.65 69.25 66.31 6.47 27.85 15.22 15.35
</TABLE>
- --------
*The above calendar-year returns assume a hypothetical investment of $1,000 on
January 1 of the first full calendar year that the underlying fund was in
existence. The returns assume that the money will be left on account until
retirement and thus no CDSC will be deducted. Returns are provided for years
before the fund was an available investment option under the Contract. Returns
for those periods reflect a hypothetical return as if those funds were
available under the Contract, and reflect the deduction of the mortality and
expense risk charge. The returns do not reflect deductions for the pro rata
portion of the Annual Administration Charge or the CDSC.
10
<PAGE>
TAX LAW CONSIDERATIONS
RETIREMENT PROGRAMS:
Participants are urged to discuss the income tax considerations of their
retirement plan with their tax advisors. In many situations special rules may
apply to the plans and/or to the participants.
Contributions to retirement programs subject to Sections 401(a), 403(a),
403(b), 408 and 457(b) may be excludable from a Participant's reportable gross
income if the Contributions do not exceed the limitations imposed under the
Code. Certain plans allow employees to make Elective Salary Deferral
Contributions. Certain Plans allow Employers to make Contributions. The
information below is a brief summary of some of the important federal tax
considerations that apply to retirement plans. The Code requires that 401(a)
Plans and certain 403(b) Plans be in writing and that the Employer communicate
the provisions of the Plans to employees. When there is a written Plan, often
the Contribution limits, withdrawal rights and other provisions of the Plan
may be more restrictive than those allowed by the Code.
Elective Salary Deferral Contributions:
For calendar year 1998 the maximum elective salary deferral contributions to a
401(k) Plan which is a type of 401(a) Plan is limited to $10,000; for a 403(b)
plan the limit is $10,000 unless the employee is a qualified employee; for an
Eligible 457 Plan the limit is $8,000.
Total Salary Deferral & Employer Contributions:
QUALIFIED RETIREMENT PLAN -- 401(a) PLAN
The Code limits the Contributions to a defined contribution 401(a) plan to the
lesser of $30,000 or 25% of compensation.
TAX SHELTERED ANNUITY PLAN -- 403(b) PLAN
Total contributions which include both salary deferral contributions and
employer contributions are also limited.
The combined limit is:
(a) the amount determined by multiplying 20 percent of the employee's
includable compensation by the number of years of service, over
(b) the aggregate of the amount contributed by the employer for annuity
Contracts and excludable from the gross income of the employee for the
prior taxable year.
Therefore, if the maximum exclusion allowance is less than $10,000 a year, the
employee's elective deferrals plus any other Employer Contributions cannot
exceed this lesser amount.
Section 415 of the Code imposes limitations with respect to annual
contributions to all Section 403(b) programs, qualified plans and simplified
employee pensions maintained by the Employer. A Participant's annual
contributions to these programs and defined contribution plans cannot exceed
the lesser of $30,000 or 25 percent of the employee's compensation. This
amount is subject to the maximum exclusion allowance and the salary deferral
amount limitations.
ELIGIBLE 457 PLAN -- 457(b) PLAN
For a 457(b) plan the contribution is the lesser of $7,500, as indexed, or 33%
of the employee's compensation.
SECTION 457(f) PLANS
These are non-qualified deferred compensation arrangements between an Employer
and its employees. There are no stated limits in the Code regarding this type
of Plan.
11
<PAGE>
INDIVIDUAL RETIREMENT ACCOUNT -- IRA OR 408 PLAN
For IRA's the maximum deductible contribution is the lesser of $2,000 or 100%
of taxable income. The $2,000 is increased to $4,000 when the IRA covers the
taxpayer and a non-working spouse.
TRANSFERS AND ROLLOVERS:
Participants who receive distributions from their 401(a) or 403(b) Contract
may transfer the amount not representing employee contributions to an
Individual Retirement Account or Annuity (IRA) or another Section 401(a) or
403(b) program without including that amount in gross income for the taxable
year in which paid. Note 401(a) distributions may not be transferred to a
403(b) plan or vice versa. If the rollover amount is paid directly to the
Participant, the amount distributed may be subject to a 20% federal tax
withholding. If the amount is paid directly to an acceptable rollover account,
UNUM/America is not required to withhold any amount.
In order for the distribution to qualify for rollover, the distribution must
be made on account of the employee's death, after the employee attains age 59
1/2, on account of the employee's separation from service, or after the
employee has become disabled. The distribution cannot be part of a series of
substantially equal payments made over the life expectancy of the employee or
the joint life expectancies of the employee and his or her spouse or made for
a specified period of 10 years or more. The rollover must be made within sixty
days of the distribution.
Pursuant to Revenue Ruling 90-24, a Participant, to the extent permitted by
any applicable Contract or Plan, may transfer funds between Section 403(b)
investment vehicles, including both Section 403(b)(1) annuity Contracts and
Section 403(b)(7) custodial accounts. Any amount transferred must continue to
be subject to withdrawal restrictions at least as restrictive as that of the
transferring investment vehicle. UNUM/America considers any total or partial
transfer from a UNUM/America investment vehicle to a non-UNUM/America
investment vehicle to be a withdrawal.
Once every twelve months a participant in an IRA may roll the money from one
IRA to another IRA.
In Eligible 457 Plans and in Section 457(f) Plans, the Employer controls the
movement of assets from one funding vehicle to another.
EXCISE TAX ON EARLY DISTRIBUTIONS:
Section 72(t) of the Code provides that any distribution made to a Participant
in a 401(a), 403(b) or 408 plan other than on account of the following events
will be subject to a 10 percent excise tax on the taxable amount distributed:
a) the employee has attained age 59 1/2;
b) the employee has died;
c) the employee is disabled;
d) the employee is 55 and has separated from service (Does not apply to
IRA's).
Distributions which are received as a life annuity where payment is made at
least annually will not be subject to an excise tax. Certain amounts paid for
medical care may also not be subject to an excise tax. Distributions from 408
Plans may qualify for additional exceptions.
MINIMUM DISTRIBUTION RULES:
The value in a Contract under Sections 401(a), 403(b) and 408 are subject to
the distribution rules provided in Section 401(a)(9) of the Code. Generally,
that section requires that an employee must begin receiving distributions of
his post-1986 balance by April 1 of the calendar year following the calendar
year in which the employee attains age 70 1/2. Such distributions must not
exceed the life expectancy of the employee or the life expectancy of such
employee and the designated beneficiary (as defined under the plan). An
employee who attained age 70 1/2 before January 1, 1988 must begin receiving
distributions by April 1 of the calendar year following the later of (a) the
calendar year in which the employee attains age 70 1/2 or (b) the calendar
year in which the employee retires. There
12
<PAGE>
are special rules for Section 403(b) Plans. Amounts contributed to an Eligible
457 Contract must be distributed not earlier than the earliest of: 1) calendar
year in which the Participant attains age 70 1/2, 2) the Participant separates
from service with the Employer, or 3) when the Participant has an unforeseen
emergency. However, in no event may the distribution begin any later than
described in Sections 401(a)(9) and 457(d) of the Code.
Additionally, distribution of an employee's entire account balance (including
pre-1987 funds) must satisfy the minimum distribution incidental benefit
requirement. In general, this requires that death and other non-retirement
benefits payable under the above plans be incidental to the primary purpose of
the program which is to provide deferred compensation to the employee. A payee
is subject to a penalty for failing to receive the required minimum annual
distribution. Section 4974(a) of the Code provides that a payee will be
subject to a penalty equal to 50 percent of the amount by which the required
minimum distribution exceeds the actual amount distributed during the taxable
year.
Additional information on federal income taxation is included in the
prospectus.
DISTRIBUTION OF CONTRACTS
Lincoln Financial Advisors Corporation ("LFA"), an indirect subsidiary of
Lincoln National Corporation, is registered with the Securities and Exchange
Commission as a broker-dealer under the Securities Exchange Act of 1934 and is
a member of the National Association of Securities Dealers, Inc. LFA is the
Variable Investment Division's principal underwriter and also enters into
selling agreements with other unaffiliated broker-dealers authorizing them to
offer the Contracts. LFA will pay these unaffiliated broker-dealers a
distribution allowance which will be used to pay commissions to their
registered representatives. This distribution allowance will not be deducted
from Participant Contributions or Account balances but will be paid from
UNUM/America's General Account assets (including any charges collected).
UNUM Sales Corporation, which served as the principal underwriter to the
Variable Investment Division prior to October 1, 1996, received underwriting
commissions from UNUM/America of $4,223,000 and $6,130,700 in 1996 and 1995,
respectively. LFA, which became principal underwriter on October 1, 1996,
received no underwriting commissions from UNUM/America prior to December 31,
1997.
CUSTODIAN
UNUM/America is the custodian for the Fund's shares owned by the Variable
Investment Division. The Fund's shares are held in uncertificated form
separate and apart from UNUM/America's other assets.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., independent accountants, performs certain accounting
services for UNUM/America and has performed the same services for the Variable
Investment Division. The financial statements included in this SAI have been
audited to the extent and for the periods indicated in their reports thereon.
Those financial statements have been included herein in reliance on such
reports given on the authority of such firm as experts in auditing and
accounting.
FINANCIAL STATEMENTS
This SAI contains financial statements for the Variable Investment Division,
as of December 31, 1997 and for the two years then ended.
The financial statements of UNUM/America which are included in this SAI,
should be considered only as bearing on the ability of UNUM/America to meet
its obligations under the Contracts. The financial statements of UNUM/America
are presented in accordance with generally accepted accounting principles.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
UNUM Life Insurance Company of America and
Contract owners of UNUM Life Insurance
Company of America VA-1 Separate Account
We have audited the accompanying statement of assets and liabilities of UNUM
Life Insurance Company of America VA-1 Separate Account as of December 31,
1997, and the related statements of operations and changes in net assets for
each of the two years in the period then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of investments held by the custodian as of
December 31, 1997. 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 UNUM Life Insurance Company
of America VA-1 Separate Account at December 31, 1997, and the results of its
operations and changes in net assets for each of the two years in the period
then ended in conformity with generally accepted accounting principles.
Coopers & Lybrand, LLP
Portland, Maine
April 10, 1998
S-1
<PAGE>
This page was intentionally left blank.
S-2
<PAGE>
VA-1 SEPARATE ACCOUNT OF UNUM LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
AMERICAN
CENTURY AMERICAN
DREYFUS DREYFUS VP CAPITAL CENTURY VP
STOCK SMALL CAP APPRECIATION BALANCED
COMBINED INDEX FUND PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Assets
Investments at market.. $24,486,042 $4,131,046 $2,927,496 $1,365,128 $1,080,767
Liabilities
Contract charges
payable to
UNUM Life Insurance
Company of America.... 832 145 102 45 37
----------- ---------- ---------- ---------- ----------
Net assets.............. $24,485,210 $4,130,901 $2,927,394 $1,365,083 $1,080,730
=========== ========== ========== ========== ==========
Percent of net assets... 100.0% 16.9% 11.9% 5.6% 4.4%
=========== ========== ========== ========== ==========
</TABLE>
See notes to financial statements.
S-3
<PAGE>
<TABLE>
<CAPTION>
CALVERT
VIPF II VIPF RESPONSIBLY VIPF
VIPF ASSET EQUITY- INVESTED T. ROWE PRICE MONEY
GROWTH MANAGER INCOME BALANCED INTERNATIONAL MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO SERIES PORTFOLIO
---------- ---------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
$6,926,836 $4,233,129 $2,662,756 $147,647 $1,005,475 $5,762
233 142 89 5 34 --
---------- ---------- ---------- -------- ---------- ------
$6,926,603 $4,232,987 $2,662,667 $147,642 $1,005,441 $5,762
========== ========== ========== ======== ========== ======
28.3% 17.3% 10.9% 0.6% 4.1% --%
========== ========== ========== ======== ========== ======
</TABLE>
S-4
<PAGE>
VA-1 SEPARATE ACCOUNT OF UNUM LIFE INSURANCE COMPANY OF AMERICA
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
COMBINED
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996
------------- ------------
<S> <C> <C>
Net investment income
Dividends from investment income................. $ 11,609,334 $ 22,369,654
Less contract charges--mortality and expense fees
to UNUM Life
Insurance Company of America..................... 1,460,336 4,927,857
------------- ------------
Net investment income.......................... 10,148,998 17,441,797
Net realized and unrealized gains (losses) on in-
vestments
Net realized gains............................... 84,288,163 1,584,234
Net change in unrealized gains (losses).......... (72,388,590) 27,245,960
------------- ------------
11,899,573 28,830,194
------------- ------------
Net increase (decrease) in net assets resulting
from operations.................................. 22,048,571 46,271,991
Net increase (decrease) in net assets from princi-
pal transactions................................. (477,437,974) 118,301,806
------------- ------------
Net increase (decrease) in net assets.......... (455,389,403) 164,573,797
Net assets at beginning of year................... 479,874,613 315,300,816
------------- ------------
Net assets at end of year......................... $ 24,485,210 $479,874,613
============= ============
</TABLE>
See notes to financial statements.
S-5
<PAGE>
<TABLE>
<CAPTION>
AMERICAN CENTURY VP
DREYFUS STOCK DREYFUS SMALL CAP CAPITAL APPRECIATION
INDEX FUND PORTFOLIO PORTFOLIO
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
- -------------------------- ------------------------- -------------------------
1997 1996 1997 1996 1997 1996
- ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
$ 400,268 $ 2,312,264 $ 172,089 $ 1,409,239 $ 298,444 $ 4,132,202
244,439 689,522 149,081 396,340 106,495 492,841
- ------------ ----------- ------------ ----------- ------------ -----------
155,829 1,622,742 23,008 1,012,899 191,949 3,639,361
21,005,485 310,151 5,584,265 102,971 961,039 195,252
(14,602,042) 8,880,241 (5,348,017) 3,324,631 (1,947,468) (5,940,416)
- ------------ ----------- ------------ ----------- ------------ -----------
6,403,443 9,190,392 236,248 3,427,602 (986,429) (5,745,164)
- ------------ ----------- ------------ ----------- ------------ -----------
6,559,272 10,813,134 259,256 4,440,501 (794,480) (2,105,803)
(71,856,754) 13,683,201 (43,691,589) 22,522,224 (35,240,733) 5,354,160
- ------------ ----------- ------------ ----------- ------------ -----------
(65,297,482) 24,496,335 (43,432,333) 26,962,725 (36,035,213) 3,248,357
69,428,383 44,932,048 46,359,727 19,397,002 37,400,296 34,151,939
- ------------ ----------- ------------ ----------- ------------ -----------
$ 4,130,901 $69,428,383 $ 2,927,394 $46,359,727 $ 1,365,083 $37,400,296
============ =========== ============ =========== ============ ===========
</TABLE>
S-6
<PAGE>
VA-1 SEPARATE ACCOUNT OF UNUM LIFE INSURANCE COMPANY OF AMERICA
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
AMERICAN CENTURY VP
BALANCED PORTFOLIO
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996
------------ -----------
<S> <C> <C>
Net investment income
Dividends from investment income................... $ 532,348 $ 976,670
Less contract charges--mortality and expense fees to
UNUM Life Insurance Company of America............. 65,726 274,016
------------ -----------
Net investment income............................ 466,622 702,654
Net realized and unrealized gains (losses) on in-
vestments
Net realized gains................................. 4,334,554 178,468
Net change in unrealized gains (losses)............ (3,828,054) 1,418,087
------------ -----------
506,500 1,596,555
------------ -----------
Net increase (decrease) in net assets resulting from
operations......................................... 973,122 2,299,209
Net increase (decrease) in net assets from principal
transactions....................................... (24,950,585) 3,816,661
------------ -----------
Net increase (decrease) in net assets............ (23,977,463) 6,115,870
Net assets at beginning of year..................... 25,058,193 18,942,323
------------ -----------
Net assets at end of year........................... $ 1,080,730 $25,058,193
============ ===========
</TABLE>
See notes to financial statements.
S-7
<PAGE>
<TABLE>
<CAPTION>
VIPF VIPF II ASSET VIPF EQUITY-
GROWTH PORTFOLIO MANAGER PORTFOLIO INCOME PORTFOLIO
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
- ---------------------------- ------------------------- -------------------------
1997 1996 1997 1996 1997 1996
- ------------- ------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
$ 2,199,358 $ 6,781,982 $ 5,413,065 $ 4,987,786 $ 2,554,416 $ 1,084,893
387,877 1,418,576 272,946 1,023,895 158,087 422,194
- ------------- ------------ ------------ ----------- ------------ -----------
1,811,481 5,363,406 5,140,119 3,963,891 2,396,329 662,699
31,805,007 376,660 11,950,401 350,985 6,413,527 38,616
(25,720,364) 8,126,147 (12,947,511) 6,245,079 (5,861,037) 3,590,870
- ------------- ------------ ------------ ----------- ------------ -----------
6,084,643 8,502,807 (997,110) 6,596,064 552,490 3,629,486
- ------------- ------------ ------------ ----------- ------------ -----------
7,896,124 13,866,213 4,143,009 10,559,955 2,948,819 4,292,185
(136,643,911) 30,430,707 (93,969,435) 9,030,051 (47,608,285) 21,643,563
- ------------- ------------ ------------ ----------- ------------ -----------
(128,747,787) 44,296,920 (89,826,426) 19,590,006 (44,659,466) 25,935,748
135,674,390 91,377,470 94,059,413 74,469,407 47,322,133 21,386,385
- ------------- ------------ ------------ ----------- ------------ -----------
$ 6,926,603 $135,674,390 $ 4,232,987 $94,059,413 $ 2,662,667 $47,322,133
============= ============ ============ =========== ============ ===========
</TABLE>
S-8
<PAGE>
VA-1 SEPARATE ACCOUNT OF UNUM LIFE INSURANCE COMPANY OF AMERICA
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO
------------------------------
YEAR ENDED DECEMBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
Net investment income
Dividends from investment income............... $ 10,786 $ 348,555
Less contract charges--mortality and expense
fees to UNUM Life Insurance Company of
America........................................ 13,776 38,017
-------------- -------------
Net investment income........................ (2,990) 310,538
Net realized and unrealized gains (losses) on
investments
Net realized gains............................. 168,338 5,529
Net change in unrealized gains (losses)........ (38,059) 35,140
-------------- -------------
130,279 40,669
-------------- -------------
Net increase (decrease) in net assets resulting
from operations................................ 127,289 351,207
Net increase (decrease) in net assets from prin-
cipal transactions............................. (4,646,914) 2,604,832
-------------- -------------
Net increase (decrease) in net assets........ (4,519,625) 2,956,039
Net assets at beginning of year................. 4,667,267 1,711,228
-------------- -------------
Net assets at end of year....................... $ 147,642 $ 4,667,267
============== =============
</TABLE>
See notes to financial statements.
S-9
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE VIPF MONEY
INTERNATIONAL SERIES MARKET PORTFOLIO
- ---------------------------------- ------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1997 1996 1997 1996
- ------------ ----------- ----------- -----------
<S> <C> <C> <C>
$ 23,140 $ 324,206 $ 5,420 $ 11,857
61,909 172,456 -- --
- ------------ ----------- ----------- -----------
(38,769) 151,750 5,420 11,857
2,065,547 25,602 -- --
(2,096,038) 1,566,181 -- --
- ------------ ----------- ----------- -----------
(30,491) 1,591,783 -- --
- ------------ ----------- ----------- -----------
(69,260) 1,743,533 5,420 11,857
(18,430,166) 9,056,936 (399,602) 159,471
- ------------ ----------- ----------- -----------
(18,499,426) 10,800,469 (394,182) 171,328
19,504,867 8,704,398 399,944 228,616
- ------------ ----------- ----------- -----------
$ 1,005,441 $19,504,867 $ 5,762 $ 399,944
============ =========== =========== ===========
</TABLE>
S-10
<PAGE>
VA-1 SEPARATE ACCOUNT OF UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
Organization:
VA-1 Separate Account of UNUM Life Insurance Company of America ("UNUM
America") is registered under the Investment Company Act of 1940. The Separate
Account was established in accordance with the laws of the State of Maine. Its
registration statement became effective in December 1989. The assets are held
for the exclusive benefit of the variable annuity contract owners and may not
be used to satisfy any obligations that may arise from any other business
conducted by UNUM America. Any excess of assets over reserves and other
contract liabilities may be transferred to UNUM America's General Account.
Principal markets are hospitals and non-profit organizations located
throughout the United States of America, with specific concentrations in the
states of New York and California.
On October 1, 1996, UNUM America completed the sale of its group tax-sheltered
annuity ("TSA") business to The Lincoln National Life Insurance Company
("Lincoln Life") and Lincoln Life & Annuity Company of New York ("Lincoln New
York"), a wholly owned subsidiary of Lincoln Life. At the time of the sale,
the fair value of Separate Account assets was approximately $436,590,000. The
contracts were initially reinsured on an indemnity basis. Upon consent of the
TSA contractholders and/or participants, the contracts are considered
reinsured on an assumption basis, legally releasing UNUM America from future
contractual obligation to the respective contractholders and/or participants.
Assets attributable to such participants' contracts are then transferred to
separate accounts of Lincoln Life and Lincoln New York. Assets attributable to
contracts of participants with respect to which such consent is not obtained
will remain in the Separate Account. During 1997, the net assets of the
Separate Account decreased by approximately $502,568,000 from novations of
assets to the separate accounts of Lincoln Life and Lincoln New York.
Investments:
In accordance with the terms of the variable annuity contracts, all payments
transferred to the Separate Account by the contract owners are allocated to
purchase shares of either Dreyfus Stock Index Fund, Dreyfus Variable
Investment Fund: Small Cap Portfolio ("Dreyfus Small Cap Portfolio"), the
American Century Variable Portfolios: American Century VP Capital Appreciation
("American Century VP Capital Appreciation Portfolio") and American Century VP
Balanced ("American Century VP Balanced Portfolio"), Fidelity's Variable
Insurance Products Fund: Growth Portfolio ("VIPF Growth Portfolio"),
Fidelity's Variable Insurance Products Fund II: Asset Manager Portfolio ("VIPF
II Asset Manager Portfolio"), Fidelity's Variable Insurance Products Fund:
Equity-Income Portfolio ("VIPF Equity-Income Portfolio"), Calvert Responsibly
Invested Balanced Portfolio or T. Rowe Price International Series, Inc. ("T.
Rowe Price International Series"). Fidelity's Variable Insurance Products
Funds: Money Market Portfolio ("VIPF Money Market Portfolio") is used only for
investment of initial contributions for which UNUM America has not received
complete order instructions. Upon receipt of complete order instructions, the
payments transferred to VIPF Money Market Portfolio are allocated to purchase
shares of one of the above funds.
The Separate Account is fully invested in shares of Dreyfus Stock Index Fund,
Dreyfus Small Cap Portfolio, American Century VP Capital Appreciation
Portfolio, American Century VP Balanced Portfolio, VIPF Growth Portfolio, VIPF
II Asset Manager Portfolio, VIPF Equity-Income Portfolio, Calvert Responsibly
Invested Balanced Portfolio, T. Rowe Price International Series and VIPF Money
Market Portfolio, which are carried at market value. Security transactions are
recorded on the trade date. All contracts participating in the Separate
Account are in the accumulation phase. Dividends are fully reinvested and
immediately credited to participant accounts with the exception of VIPF Money
Market Portfolio which is invested monthly. Unrealized gain and loss represent
the difference between the cost and market value of invested assets. Realized
gain and loss are reported on an average cost basis. Gross unrealized gains
for all investments were $4,936,088 as of December 31, 1997 and $77,317,207 as
of December 31, 1996. Gross unrealized losses for all investments were $7,471
as of December 31, 1997 and $0 as of December 31, 1996.
S-11
<PAGE>
VA-1 SEPARATE ACCOUNT OF UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The market value and cost of investments at December 31, 1997, was distributed
as follows:
<TABLE>
<CAPTION>
MARKET VALUE
-------------------
SHARE
SHARES PRICE COST
------------ ------ ----------
<S> <C> <C> <C>
Dreyfus Stock Index Fund....................... 160,428.9775 $25.75 $2,998,795
Dreyfus Small Cap Portfolio.................... 51,233.7531 57.14 2,562,196
American Century VP Capital Appreciation
Portfolio..................................... 141,025.6612 9.68 1,372,599
American Century VP Balanced Portfolio......... 131,161.0316 8.24 869,267
VIPF Growth Portfolio.......................... 186,707.1817 37.10 4,973,559
VIPF II Asset Manager Portfolio................ 235,043.2621 18.01 3,488,806
VIPF Equity-Income Portfolio................... 109,668.7026 24.28 2,206,007
Calvert Responsibly Invested Balanced
Portfolio..................................... 74,494.3189 1.982 139,471
T. Rowe Price International Series............. 78,922.6703 12.74 940,965
VIPF Money Market Portfolio.................... 5,761.5400 1.00 5,762
</TABLE>
Contract Charges:
UNUM America is the depositor for the Separate Account. Administrative services
necessary for the operation of the Separate Account and the variable annuity
contracts are provided by UNUM America. Although UNUM America deducts for sales
and administrative expenses under the contracts, UNUM America assumes an
expense risk that these deductions may prove insufficient to cover the cost of
those expenses.
In addition, UNUM America assumes a mortality risk under the contracts in that
it agrees to make annuity payments regardless of how long a particular
annuitant or their payee lives and how long all annuitants or other payees in a
class live, if payment options involving life contingencies are chosen. Those
annuity payments are determined in accordance with annuity purchase rate
provisions established at the time the contracts are issued. UNUM America also
assumes a mortality risk in providing a death benefit under the contracts.
To compensate UNUM America for assuming these mortality and expense risks, an
effective annual mortality and expense risk charge of 1.20% of each portfolio's
average daily net assets is imposed on each portfolio within the Separate
Account with the exception of VIPF Money Market Portfolio. For 1997 and 1996,
the mortality and expense risk charges totaled $1,460,336 and $4,927,857,
respectively.
Federal Income Taxes:
For purposes of federal income taxes, the Separate Account is considered to
be part of UNUM America for the years ended December 31, 1997 and 1996, and its
operations are not taxed separately. The liability for any federal income taxes
generated by the Separate Account is attributable to UNUM America. UNUM America
is taxed as a property and casualty insurance company under the applicable
provisions of the Internal Revenue Code.
NOTE 2. CAPITAL SHARE TRANSACTIONS
During 1997 and 1996, the total amount of units sold was $36,716,146 and
$131,045,285, respectively, and the total amount of units redeemed was
$514,154,120 and $12,743,479, respectively. The following transactions in
capital stock by fund occurred:
S-12
<PAGE>
VA-1 SEPARATE ACCOUNT OF UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Separate Account funds that invest in Dreyfus Stock Index Fund held
138,497.5977 units at a net asset value of $29.8265 and 3,057,791.6697 units at
a net asset value of $22.7054 at December 31, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
1997 1996
----------------------------- ------------------------
UNITS AMOUNT UNITS AMOUNT
--------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Units sold.............. 306,229.6989 $ 8,293,413 729,318.8159 $15,112,646
Units redeemed.......... 3,225,523.7709 80,150,167 67,072.5868 1,429,445
--------------- ------------ ------------ -----------
Net increase (de-
crease).............. (2,919,294.0720) $(71,856,754) 662,246.2291 $13,683,201
=============== ============ ============ ===========
</TABLE>
The Separate Account funds that invest in Dreyfus Small Cap Portfolio held
166,025.1987 units at a net asset value of $17.6322 and 3,032,802.7702 units at
a net asset value of $15.2861 at December 31, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
1997 1996
----------------------------- --------------------------
UNITS AMOUNT UNITS AMOUNT
--------------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
Units sold.............. 387,818.0304 $ 6,473,568 1,630,716.9673 $23,438,013
Units redeemed.......... 3,254,595.6019 50,165,157 59,489.0961 915,789
--------------- ------------ -------------- -----------
Net increase (de-
crease).............. (2,866,777.5715) $(43,691,589) 1,571,227.8712 $22,522,224
=============== ============ ============== ===========
</TABLE>
The Separate Account funds that invest in American Century VP Capital
Appreciation Portfolio held 97,066.9806 units at a net asset value of $14.0633
and 2,541,937.9972 units at a net asset value of $14.7133 at December 31, 1997
and 1996, respectively.
<TABLE>
<CAPTION>
1997 1996
----------------------------- -----------------------
UNITS AMOUNT UNITS AMOUNT
--------------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Units sold.............. 63,187.4055 $ 992,285 444,571.1658 $6,869,563
Units redeemed.......... 2,508,058.4221 36,233,018 94,107.6964 1,515,403
--------------- ------------ ------------ ----------
Net increase (de-
crease).............. (2,444,871.0166) $(35,240,733) 350,463.4694 $5,354,160
=============== ============ ============ ==========
</TABLE>
The Separate Account funds that invest in American Century VP Balanced
Portfolio held 58,258.8611 units at a net asset value of $18.5505 and
1,545,580.8344 units at a net asset value of $16.2128 at December 31, 1997 and
1996, respectively.
<TABLE>
<CAPTION>
1997 1996
----------------------------- -----------------------
UNITS AMOUNT UNITS AMOUNT
--------------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Units sold.............. 75,086.4366 $ 1,300,063 329,338.1231 $5,034,023
Units redeemed.......... 1,562,408.4099 26,250,648 78,640.1899 1,217,362
--------------- ------------ ------------ ----------
Net increase (de-
crease).............. (1,487,321.9733) $(24,950,585) 250,697.9332 $3,816,661
=============== ============ ============ ==========
</TABLE>
The Separate Account funds that invest in VIPF Growth Portfolio held
244,512.6893 units at a net asset value of $28.3282 and 5,843,047.2941 units at
a net asset value of $23.2198 at December 31, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
1997 1996
------------------------------ --------------------------
UNITS AMOUNT UNITS AMOUNT
--------------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
Units sold.............. 227,035.7944 $ 6,391,522 1,448,572.4268 $31,961,921
Units redeemed.......... 5,825,570.3992 143,035,433 64,942.2104 1,531,214
--------------- ------------- -------------- -----------
Net increase (de-
crease).............. (5,598,534.6048) $(136,643,911) 1,383,630.2164 $30,430,707
=============== ============= ============== ===========
</TABLE>
S-13
<PAGE>
VA-1 SEPARATE ACCOUNT OF UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Separate Account funds that invest in VIPF II Asset Manager Portfolio held
205,657.4591 units at a net asset value of $20.5827 and 5,447,414.3329 units at
a net asset value of $17.2668 at December 31, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
1997 1996
----------------------------- ------------------------
UNITS AMOUNT UNITS AMOUNT
--------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Units sold.............. 150,312.5514 $ 2,958,712 776,904.8813 $12,476,352
Units redeemed.......... 5,392,069.4252 96,928,147 212,410.2068 3,446,301
--------------- ------------ ------------ -----------
Net increase (de-
crease).............. (5,241,756.8738) $(93,969,435) 564,494.6745 $ 9,030,051
=============== ============ ============ ===========
</TABLE>
The Separate Account funds that invest in VIPF Equity-Income Portfolio held
133,230.4861 units at a net asset value of $19.9854 and 2,997,006.5180 units at
a net asset value of $15.7898 at December 31, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
1997 1996
----------------------------- --------------------------
UNITS AMOUNT UNITS AMOUNT
--------------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
Units sold.............. 343,776.9440 $ 6,533,006 1,505,157.0265 $22,213,213
Units redeemed.......... 3,207,552.9759 54,141,291 37,322.2757 569,650
--------------- ------------ -------------- -----------
Net increase (de-
crease).............. (2,863,776.0319) $(47,608,285) 1,467,834.7508 $21,643,563
=============== ============ ============== ===========
</TABLE>
The Separate Account funds that invest in Calvert Responsibly Invested Balanced
Portfolio held 8,750.3198 units at a net asset value of $16.8728 and
328,167.7828 units at a net asset value of $14.2222 at December 31, 1997 and
1996, respectively.
<TABLE>
<CAPTION>
1997 1996
-------------------------- -----------------------
UNITS AMOUNT UNITS AMOUNT
------------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Units sold.................. 42,602.0963 $ 690,446 207,778.4639 $2,784,761
Units redeemed.............. 362,019.5593 5,337,360 13,481.2612 179,929
------------- ----------- ------------ ----------
Net increase (decrease)... (319,417.4630) $(4,646,914) 194,297.2027 $2,604,832
============= =========== ============ ==========
</TABLE>
The Separate Account funds that invest in T. Rowe Price International Series
held 80,412.8368 units at a net asset value of $12.5035 and 1,588,913.5294
units at a net asset value of $12.2756 at December 31, 1997 and 1996,
respectively.
<TABLE>
<CAPTION>
1997 1996
----------------------------- -----------------------
UNITS AMOUNT UNITS AMOUNT
--------------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Units sold.............. 213,162.8383 $ 2,766,405 804,268.0124 $9,291,422
Units redeemed.......... 1,721,663.5309 21,196,571 18,839.2107 234,486
--------------- ------------ ------------ ----------
Net increase (de-
crease).............. (1,508,500.6926) $(18,430,166) 785,428.8017 $9,056,936
=============== ============ ============ ==========
</TABLE>
The Separate Account funds that invest in VIPF Money Market Portfolio held
484.7800 units at a net asset value of $11.8940 and 35,464.9671 units at a net
asset value of $11.2772 at December 31, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
UNITS AMOUNT UNITS AMOUNT
------------ --------- ------------ ----------
<S> <C> <C> <C> <C>
Units sold..................... 27,201.2618 $ 316,726 169,399.3668 $1,863,371
Units redeemed................. 62,181.4489 716,328 155,306.3050 1,703,900
------------ --------- ------------ ----------
Net increase (decrease)...... (34,980.1871) $(399,602) 14,093.0618 $ 159,471
============ ========= ============ ==========
</TABLE>
S-14
<PAGE>
VA-1 SEPARATE ACCOUNT OF UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. RELATED PARTY TRANSACTIONS
UNUM Sales Corporation, an affiliate, acted as the distributor and principal
underwriter of the Separate Account prior to October 1, 1996. Effective October
1, 1996, Lincoln Financial Advisors Corporation, a non-affiliate, acted as a
distributor and principal underwriter of the Separate Account.
NOTE 4. SUBSEQUENT EVENT
Through April 1, 1998, the net assets of the Separate Account have decreased by
approximately $1,427,000 from novations of assets to the separate accounts of
Lincoln Life and Lincoln New York.
S-15
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
FINANCIAL STATEMENT INDEX
<TABLE>
<CAPTION>
COMPANY FINANCIAL STATEMENTS PAGE
- ---------------------------- ----
<S> <C>
Report of Independent Accountants................................. F-1
Statements of Income for the Years Ended December 31, 1997, 1996,
and 1995......................................................... F-2
Balance Sheets as of December 31, 1997 and 1996................... F-3
Statements of Stockholders' Equity for the Years Ended December
31, 1997, 1996, and 1995......................................... F-4
Statements of Cash Flows for the Years Ended December 31, 1997,
1996, and 1995................................................... F-5
Notes to Financial Statements..................................... F-6 to F-25
Separate Account Financial Statements............................. Attached
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
UNUM Life Insurance Company of America
We have audited the accompanying balance sheets of UNUM Life Insurance
Company of America as of December 31, 1997 and 1996, and the related
statements of income, stockholder's equity, and cash flows for each of the
three years in the period ended December 31, 1997. 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 incudes 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 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 UNUM Life Insurance
Company of America as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
Portland, Maine
February 4, 1998
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Premiums......................................... $2,304.9 $2,293.3 $2,208.8
Investment income................................ 486.8 638.5 657.5
Net realized investment gains (losses)........... (1.5) 5.9 184.7
Fees and other income............................ 184.9 90.4 33.4
-------- -------- --------
Total revenues................................. 2,975.1 3,028.1 3,084.4
BENEFITS AND EXPENSES
Benefits to policyholders........................ 1,831.8 1,803.9 1,931.1
Interest credited................................ 70.0 189.8 217.9
Operating expenses............................... 507.8 597.4 483.9
Commissions...................................... 225.1 229.2 230.9
Increase in deferred policy acquisition costs.... (103.4) (63.6) (78.4)
Interest expense (income)........................ (1.2) 0.6 5.5
-------- -------- --------
Total benefits and expenses.................... 2,530.1 2,757.3 2,790.9
-------- -------- --------
INCOME BEFORE INCOME TAXES....................... 445.0 270.8 293.5
INCOME TAXES
Current.......................................... 35.4 92.1 65.8
Deferred......................................... 98.4 (13.8) 4.6
-------- -------- --------
Total income taxes............................. 133.8 78.3 70.4
-------- -------- --------
NET INCOME....................................... $ 311.2 $ 192.5 $ 223.1
======== ======== ========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
ASSETS
Investments
Fixed maturities available for sale--at fair value (am-
ortized cost: 1997--$4,898.2; 1996--$4,822.0)......... $ 5,174.1 $ 5,024.3
Equity securities available for sale--at fair value
(cost: 1997--$7.2; 1996--$8.5)........................ 8.7 10.4
Mortgage loans......................................... 1,023.4 1,042.7
Real estate, net....................................... 219.0 233.1
Policy loans........................................... 111.8 215.6
Other long-term investments............................ 1.2 12.2
Short-term investments................................. 63.1 82.0
--------- ---------
Total investments.................................. 6,601.3 6,620.3
Cash..................................................... 21.1 34.0
Accrued investment income................................ 107.7 116.2
Premiums due............................................. 232.7 205.1
Deferred policy acquisition costs........................ 616.8 515.9
Property and equipment, net.............................. 97.4 89.6
Reinsurance receivables.................................. 1,313.3 1,017.6
Deposit assets........................................... 670.4 2,797.4
Amounts receivable from affiliates, net.................. 17.3 9.6
Current income taxes..................................... 3.6 --
Other assets............................................. 160.8 199.2
Separate account assets.................................. 24.5 699.1
--------- ---------
Total assets....................................... $ 9,866.9 $12,304.0
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Future policy benefits................................. $ 1,636.1 $ 1,559.2
Unpaid claims and claim expenses....................... 4,514.8 4,056.6
Other policyholder funds............................... 714.3 3,302.1
Income taxes
Current.............................................. -- 27.0
Deferred............................................. 350.0 201.8
Other liabilities...................................... 615.7 683.2
Separate account liabilities........................... 24.5 699.1
--------- ---------
Total liabilities.................................. 7,855.4 10,529.0
Stockholders' equity
Common stock, par value $10 per share, authorized
1,000,000 shares, issued 500,000 shares 5.0 5.0
Additional paid-in capital............................. 359.9 350.7
Unrealized gains on available for sales securities,
net................................................... 156.2 55.9
Unrealized foreign currency translation adjustment..... (12.4) (8.3)
Retained earnings...................................... 1,502.8 1,371.7
--------- ---------
Total stockholders' equity......................... 2,011.5 1,775.0
========= =========
Total liabilities and stockholders' equity......... $ 9,866.9 $12,304.0
========= =========
</TABLE>
See notes to financial statements
F-3
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
COMMON GAINS (LOSSES) UNREALIZED
STOCK ON AVAILABLE FOREIGN
$0.10 ADDITIONAL FOR SALE CURRENCY
PAR PAID-IN SECURITIES, TRANSLATION RETAINED
VALUE CAPITAL NET ADJUSTMENT EARNINGS TOTAL
------ ---------- -------------- ----------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1,
1995................... $5.0 $343.7 $ 46.5 $ (8.7) $1,135.2 $1,521.7
1995 Transactions:
Net income............. 223.1 223.1
Unrealized gains on
available for sale se-
curities, net......... 97.7 97.7
Unrealized foreign cur-
rency translation ad-
justment.............. 1.0 1.0
Other transactions..... 3.7 3.7
---- ------ ------ ------ -------- --------
BALANCE AT DECEMBER 31,
1995................... 5.0 347.4 144.2 (7.7) 1,358.3 1,847.2
1996 Transactions:
Net income............. 192.5 192.5
Unrealized gains on
available for sale se-
curities, net......... (88.3) (88.3)
Unrealized foreign cur-
rency translation ad-
justment.............. (0.6) (0.6)
Dividends to stockhold-
ers................... (179.1) (179.1)
Other transactions..... 3.3 3.3
---- ------ ------ ------ -------- --------
BALANCE AT DECEMBER 31,
1996................... 5.0 350.7 55.9 (8.3) 1,371.7 1,775.0
1997 Transactions:
Net income............. 311.2 311.2
Unrealized gains on
available for sale se-
curities, net......... 100.3 100.3
Unrealized foreign cur-
rency translation ad-
justment.............. (4.1) (4.1)
Dividends to stockhold-
ers................... (180.1) (180.1)
Other transactions..... 9.2 9.2
---- ------ ------ ------ -------- --------
BALANCE AT DECEMBER 31,
1997................... $5.0 $359.9 $156.2 $(12.4) $1,502.8 $2,011.5
==== ====== ====== ====== ======== ========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income..................................... $ 311.2 $ 192.5 $ 223.1
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in future policy benefits and unpaid
claims and claim expenses.................... 485.4 542.8 757.2
Increase in amounts receivable under reinsur-
ance agreements.............................. (277.4) (640.4) (61.4)
Increase in income tax liability.............. 67.0 26.0 5.7
(Increase) decrease in deferred policy acqui-
sition costs................................. (100.9) 293.4 (78.6)
Increase in deposit assets.................... (45.7) (382.9) --
Deferral (recognition) of gain on sale of
tax-sheltered annuities...................... (69.6) 77.2 --
Charge for individual disability reinsurance
fees......................................... -- 49.7 --
Realized investment (gains) losses............ 4.4 1.8 (199.3)
Other......................................... (40.0) 44.1 (25.8)
------- --------- ---------
Net cash provided by operating activities... 334.4 204.2 620.9
------- --------- ---------
INVESTING ACTIVITIES:
Maturities of fixed maturities available for
sale.......................................... 392.7 684.4 61.0
Maturities of fixed maturities held to maturi-
ty............................................ -- -- 741.0
Sales of fixed maturities available for sale... 489.7 2,124.4 453.2
Sales of fixed maturities held to maturity..... -- -- 2.8
Sales of equity securities available for sale.. 1.9 -- 682.0
Sales and maturities of other investments...... 214.0 256.3 293.6
Purchases of fixed maturities available for
sale.......................................... (947.0) (1,431.2) (1,487.4)
Purchases of fixed maturities held to maturi-
ty............................................ -- -- (169.2)
Purchases of equity securities available for
sale ......................................... -- -- (104.4)
Purchases of other investments................. (181.3) (218.1) (310.0)
Net increase (decrease) in short-term invest-
ments......................................... 18.9 (1,042.1) (607.0)
Net additions to property and equipment........ (12.0) (37.0) (15.2)
Repayment of note receivable from affiliate.... -- -- 50.0
------- --------- ---------
Net cash provided by (used in) investing ac-
tivities................................... (23.1) 336.7 (409.6)
------- --------- ---------
FINANCING ACTIVITIES:
Deposits and interest credited to investment
contracts..................................... 165.1 536.9 601.1
Maturities and withdrawals from investment con-
tracts........................................ (305.1) (877.0) (864.0)
Dividends to stockholders...................... (180.1) (179.1) --
Proceeds from notes payable to affiliate....... -- -- 100.0
Repayment of notes payable to affiliate........ -- -- (50.0)
Other.......................................... -- -- 0.8
------- --------- ---------
Net cash used in financing activities....... (320.1) (519.2) (212.1)
------- --------- ---------
Effect of exchange rate changes on cash........ (4.1) (0.5) --
------- --------- ---------
Net increase (decrease) in cash................ (12.9) 21.2 (0.8)
Cash at beginning of year...................... 34.0 12.8 13.6
------- --------- ---------
Cash at end of year............................ $ 21.1 $ 34.0 $ 12.8
======= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMA-
TION:
Cash paid during the year for:
Income taxes.................................. $ 56.5 $ 47.4 $ 64.3
Interest...................................... $ -- -- 5.5
======= ========= =========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH OPERATING AND INVESTING ACTIVITIES:
As discussed in Note 5, "Sale of Tax-Sheltered Annuity Business," consent for
assumption reinsurance has been given by contractholders and participants
owning approximately 92% of assets under management related to the tax-
sheltered annuity business UNUM America sold in 1996. In connection with the
consents received during 1997, UNUM America reduced its deposit assets by
$2,282 million, policy loan assets by $103.5 million, other policyholder fund
liabilities by $2,447.8 million and separate account assets and liabilities by
$502.6 million.
In conjunction with the sale of UNUM America's tax sheltered annuity business
during 1996, fixed maturities available for sale of $588.6 million and short-
term investments of $1,825.9 million were transferred to the buyer on October
1, 1996. Upon transfer, there was a corresponding increase in UNUM America's
deposit assets.
See notes to financial statements.
F-5
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements of UNUM Life Insurance Company of
America ("UNUM America") have been prepared on the basis of generally accepted
accounting principles. UNUM America is jointly owned by UNUM Holding Company
and UNUM Corporation. UNUM Holding Company is wholly-owned by UNUM
Corporation. The 1995 financial statements have been restated to include the
accounts of Commercial Life Insurance Company ("Commercial Life") which was
merged with UNUM America effective December 31, 1996. 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 and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassification
Certain 1996 and 1995 amounts have been reclassified in 1997 for comparative
purposes.
Investments
Investments are reported as follows:
. Fixed maturities available for sale (certain bonds and redeemable
preferred stocks)--at fair value.
. Equity securities available for sale (common stocks and non-redeemable
preferred stocks)--at fair value.
. Mortgage loans--at amortized cost less an allowance for probable losses.
. Real estate--at cost less accumulated depreciation.
. Policy loans--at unpaid principal balance.
. Other long-term investments--at cost plus UNUM America's equity in
undistributed net earnings since acquisition.
. Short-term investments--are considered available for sale and are carried
at cost which approximates fair value.
Fixed maturities and equity securities are classified as available for sale as
they may be sold in response to changes in interest rates, resultant
prepayment risk, liquidity and capital needs or other similar economic
factors. Unrealized gains and losses related to securities classified as
available for sale are excluded from net income and reported in a separate
component of stockholders' equity, net of applicable deferred taxes and
related adjustments to unpaid claims and claim expenses. The unrealized gains
and losses are determined based on estimated market values at the balance
sheet date and are not necessarily the amounts which would be realized upon
sale of the securities or representative of future market values. Changing
interest rates affect the level of unrealized gains and losses related to
securities classified as available for sale. While rising interest rates are
beneficial when investing current cash flows, they can also reduce the fair
value of existing fixed rate long-term investments. In addition, lower
interest rates can lead to early payoffs and refinancing of some of UNUM
America's fixed rate investments. Management generally invests in fixed rate
instruments that are structured to limit the exposure to such reinvestment
risk.
Realized investment gains and losses, which are determined on the basis of
specific identification and include adjustments for allowances for probable
losses, are reported separately in the Statements of Income.
If a decline in fair value of an invested asset is considered to be other than
temporary or if a long-lived asset is deemed to be permanently impaired, the
investment is reduced to its net realizable value and the reduction is
accounted for as a realized investment loss.
UNUM America discontinues the accrual of investment income on invested assets
when it is determined that collectability is doubtful. UNUM America recognizes
investment income on impaired loans when the income is received.
F-6
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Real estate held for sale is included in other assets in the Balance Sheets
and is valued net of a valuation allowance which reduces the carrying value to
the lower of fair value less estimated costs to sell or cost. This valuation
allowance is periodically adjusted based on subsequent changes in UNUM
America's estimate of fair value less costs to sell.
Purchases and sales of short-term financial instruments are part of investing
activities and not necessarily a part of the cash management program.
Therefore, short-term financial instruments are classified as investments in
the Balance Sheets and are included as investing activities in the Statements
of Cash Flows.
Deferred Policy Acquisition Costs
The costs of acquiring new business that vary with and are related primarily
to the production of new business have been deferred to the extent such costs
are deemed recoverable from future profits. Such costs include commissions,
certain costs of policy issue and underwriting and certain variable field
office expenses.
For individual disability, group disability, and group life and health
business, the costs are amortized in proportion to expected future premiums.
For universal life products, the costs are amortized in proportion to
estimated gross profits from interest margins, mortality and other elements of
performance under the contracts. Amortization is adjusted periodically to
reflect differences between actual experience and original assumptions, with
any resulting changes reflected in current operating results. The amounts
deferred and amortized were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
1997 1996 1995
------ ------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Deferred................................................. $211.9 $194.7 $196.1
Less amortized........................................... (108.5) (131.1) (117.7)
------ ------ ------
Increase in deferred policy acquisition costs.......... $103.4 $ 63.6 $ 78.4
====== ====== ======
</TABLE>
Separate Accounts
Certain assets from tax-sheltered annuity ("TSA") contracts are in separate
accounts that are pooled investment funds of securities. Prior to January 1,
1997, the assets of UNUM America's defined benefit plan were held in the
separate accounts (see Note 8 "Employee Benefit and Incentive Plans").
Investment income and realized gains and losses on these accounts accrue
directly to the contractholders. Assets, carried at market value, and
liabilities of the separate accounts are shown separately in the Balance
Sheets. The assets of the separate accounts are legally segregated and are not
subject to claims that arise out of any other business of UNUM America.
On October 1, 1996, UNUM America closed the sale of its TSA business to The
Lincoln National Life Insurance Company, a subsidiary of Lincoln National
Corporation (see Note 5 "Sale of Tax-Sheltered Annuity Business"). For legal
considerations, the separate account's TSA related assets were not transferred
on October 1, 1996. TSA related assets are transferred only upon receipt of a
contractholder and participant's consent for assumption reinsurance.
Accounting for Participating Individual Life Insurance
Participating policies issued by the former Union Mutual Life Insurance
Company ("Union Mutual") prior to UNUM America's conversion to a stock life
insurance company on November 14, 1986, will remain participating as long as
they remain in force. A Participation Fund Account ("PFA") was established for
the benefit of all of Union Mutual's individual participating life and annuity
policies and contracts.
The assets of the PFA provide for the benefit, dividend and certain expense
obligations of the participating individual life insurance policies and
annuity contracts. This line of business participates in the experience of the
F-7
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
PFA and its operations have been excluded from the Statements of Income. The
PFA represented approximately 3.7% and 2.9% of total assets and 4.6% and 3.4%
of total liabilities at December 31, 1997, and 1996, respectively.
Other Policyholder Funds
Other policyholder funds are liabilities for investment-type contracts and
represent customer deposits plus interest credited to those deposits at
various rates.
Liabilities for Restructuring Activities
Liabilities for restructuring activities are recorded when management, prior
to the balance sheet date, commits to execute an exit plan that will result in
the incurral of costs that have no future economic benefit or approves a plan
of termination and communicates sufficient detail of the plan to employees.
Liabilities for restructuring activities are included in other liabilities in
the Balance Sheets.
Income Taxes
The provision for income taxes includes amounts currently payable and deferred
income taxes, which result from differences between financial reporting and
tax bases of assets and liabilities and are measured using enacted tax rates
and laws. A valuation allowance is established for deferred tax assets when it
is more likely than not that an amount will not be realized.
Foreign Currency Translation
UNUM America has several branch operations located in foreign countries, the
largest being in Canada. These branches generally maintain their balance sheet
and income statement accounts in local functional currencies. These currencies
are translated to U.S. dollars using ending and quarterly average exchange
rates, respectively. The resulting translation adjustments are reported in a
separate component of stockholders' equity.
Recognition of Premium Revenues and Related Expenses
Group insurance premiums are recognized as income over the period to which the
premiums relate. Individual disability premiums are recognized as income when
due. Benefits and expenses are matched with earned premiums to result in
recognition of profits over the life of the contracts. This association is
accomplished by recording a provision for future policy benefits and unpaid
claims and claim expenses and by amortizing deferred policy acquisition costs.
For retirement and universal life products, premium and other policy fee
revenue consist of charges for the cost of insurance, policy administration
and surrenders assessed during the period. Charges related to services to be
performed in the future are deferred until earned. The amounts received in
excess of premium and fees are recorded as deposits and included in other
policyholder funds in the Balance Sheets. Benefits and expenses include
benefit claims in excess of related account balances, interest credited at
various rates and amortization of deferred policy acquisition costs.
Reinsurance
UNUM America is involved in both the cession and assumption of reinsurance
with other companies. Risks are reinsured with other companies to reduce UNUM
America's exposure to large losses and permit recovery of a portion of direct
losses. UNUM America remains liable to the insured for the payment of policy
benefits if the reinsurers cannot meet their obligations under the reinsurance
agreements. Deferred policy acquisition costs, premiums, benefits and expenses
are stated net of reinsurance ceded to other companies. UNUM America
F-8
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
evaluates the financial condition of its reinsurers and monitors
concentrations of credit risk to minimize exposure to significant losses from
reinsurer insolvencies.
Changes in Accounting Estimates
During fourth quarter 1997, certain reinsurance pools managed by UNUM
Corporation's wholly-owned subsidiary, Duncanson & Holt Inc., received new
claim information from ceding insurance enterprises about certain older pool
years and completed an analysis of recent claims experience deterioration. As
a result of these factors, certain pools have strengthened claim reserves. The
impact to UNUM America in fourth quarter 1997 from these pool claim reserve
increases was a $6.7 million increase in benefits to policyholders reported in
the Special Risk Insurance segment, reducing net income by $4.4 million in the
Statement of Income.
During 1995, UNUM America sold virtually all of its common stock portfolio.
The sale of the common stock portfolio, which partially supported certain
disability reserves, and the reinvestment of the proceeds primarily in
investment grade fixed income assets at yields below the average portfolio
yield, resulted in lower reserve discount rates for certain disability
products reported in the Disability Insurance segment. This change in
accounting estimate to lower certain discount rates resulted in an increase of
$114.1 million to benefits to policyholders in the Statement of Income, and a
decrease to net income of $74.2 million.
During 1995, UNUM America increased group long term disability reserves for
incurred but not reported ("IBNR") claims, as reported in the Disability
Insurance segment. The increased IBNR reserves were based on management's
judgment that claims incurred but not yet reported would reflect increased
levels of claims incidence and severity. This change in accounting estimate
resulted in an increase to benefits to policyholders in the Statement of
Income of $34.3 million, and a decrease to net income of $22.3 million.
During 1995, UNUM America increased reserves for unpaid claims related to the
association group disability business by $15.0 million to reflect management's
expectations of slower than expected claim recoveries. This change in
accounting estimate, which was reported in the Disability Insurance segment,
decreased net income by $9.8 million.
Accounting Pronouncements Adopted
Effective December 31, 1997, UNUM America adopted Financial Accounting
Standards ("FAS") No. 129, "Disclosures of Information About Capital
Structure," which consolidates disclosure requirements related to the type and
nature of securities contained in an entity's capital structure. FAS 129 does
not add to or change any of UNUM America's disclosures.
Effective January 1, 1997, UNUM America adopted FAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," which established accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of
liabilities. The statement provides guidance for recognition or derecognition
of assets and liabilities, focusing on the concepts of control and
extinguishment. The adoption of FAS 125 did not have a material effect on UNUM
America's results of operations or financial position.
Effective January 1, 1996, UNUM America adopted FAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," which established 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. The adoption of FAS 121 did not have a material
effect on UNUM America's results of operations or financial position.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued FAS No.
130, "Reporting Comprehensive Income," which establishes standards for
reporting and display of comprehensive income and its
F-9
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
components in a financial statement with the same prominence as other
financial statements. Comprehensive income is defined as net income adjusted
for changes in stockholders' equity resulting from events other than net
income or transactions related to an entity's capital instruments. UNUM
America is required to adopt FAS 130 effective January 1, 1998, with
reclassification of financial statements for earlier years required.
In June 1997, the FASB issued FAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes standards for reporting
information about operating segments. Generally, FAS 131 requires that
financial information be reported on the basis that is used internally for
evaluating performance. UNUM America is required to adopt FAS 131 effective
January 1, 1998, and comparative information for earlier years must be
restated. This statement does not need to be applied to interim financial
statements in the initial year of application. UNUM America is currently
considering what impact, if any, FAS 131 will have on its current segment
reporting structure.
In February 1998, the FASB issued FAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," which revises current disclosure
requirements for employers' pension and other retiree benefits. FAS 132 does
not change the measurement or recognition of pension or other postretirement
benefit plans. UNUM America is required to adopt FAS 132 effective January 1,
1998, with restatement of disclosures for earlier years required.
In December 1997, the Accounting Standards Executive Committee issued
Statement of Position ("SOP") 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments," which provides guidance on
accounting for insurance-related assessments. UNUM America is required to
adopt SOP 97-3 effective January 1, 1999. Previously issued financial
statements should not be restated unless the SOP is adopted prior to the
effective date and during an interim period. The adoption of SOP 97-3 is not
expected to have a material impact on UNUM America's results of operations,
liquidity or financial position.
NOTE 2. INVESTMENTS
The following tables summarize the components of investment income, net
realized investment gains (losses) and changes in unrealized gains, net:
INVESTMENT INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1997 1996 1995
------ ------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Fixed maturities:
Available for sale................................... $386.2 $496.1 $390.3
Held to maturity..................................... -- -- 145.9
Equity securities available for sale................... -- -- 4.3
Mortgage loans......................................... 101.5 104.6 113.4
Real estate............................................ 21.7 19.0 13.8
Policy loans........................................... 5.2 9.0 7.6
Other long-term investments............................ 2.4 6.5 1.6
Short-term investments................................. 6.4 42.5 20.3
------ ------ ------
Gross investment income............................ 523.4 677.7 697.2
Less investment expenses............................... (12.2) (14.7) (15.1)
Less investment income on participating
individual life insurance policies and annuity con-
tracts................................................ (24.4) (24.5) (24.6)
------ ------ ------
Investment income.................................. $486.8 $638.5 $657.5
====== ====== ======
</TABLE>
F-10
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NET REALIZED INVESTMENT GAINS (LOSSES)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1997 1996 1995
------ ------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Gross realized investment gains:
Fixed maturities:
Available for sale.................................... $ 15.1 $ 19.1 $ 9.7
Held to maturity...................................... -- -- 0.1
Equity securities available for sale.................... 0.6 -- 210.8
Mortgage loans, real estate and other................... 6.1 17.2 17.9
------ ------ ------
Gross realized investment gains..................... 21.8 36.3 238.5
------ ------ ------
Gross realized investment losses:
Fixed maturities:
Available for sale.................................... (11.2) (23.5) (10.0)
Held to maturity...................................... -- -- (0.8)
Equity securities available for sale.................... -- -- (14.8)
Mortgage loans, real estate and other................... (12.1) (6.9) (28.2)
------ ------ ------
Gross realized investment losses.................... (23.3) (30.4) (53.8)
------ ------ ------
Net realized investment gains (losses)............ $ (1.5) $ 5.9 $184.7
====== ====== ======
</TABLE>
CHANGE IN UNREALIZED GAINS, NET
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------
1997 1996
------ -------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Fixed maturities available for sale.......................... $ 73.6 $(217.6)
Equity securities available for sale......................... (0.3) 3.0
Marketable securities held in trust.......................... 127.7 --
Unpaid claims adjustment..................................... (49.7) 84.1
Deferred taxes............................................... (51.0) 42.2
------ -------
Total change in unrealized gains, net, as included in stock-
holders' equity............................................. $100.3 $ (88.3)
====== =======
</TABLE>
UNUM America's fixed maturities are reported at fair value as a result of
being classified as available for sale. Accordingly, the related liability for
unpaid claims and claims expenses is adjusted to reflect the changes that
would have been necessary if the related fixed maturities were sold at their
fair value and the proceeds were reinvested at current yields. At December 31,
1997, and 1996, the unrealized gain on available for sale fixed maturities was
$275.9 million and $202.3 million, respectively, and the related unpaid claims
adjustment was $169.1 million and $119.4 million, respectively.
The marketable securities held in trust relate to the individual disability
reinsurance agreement (see Note 6 "Reinsurance"). Changes in fair value of the
assets and the related adjustment to unpaid claims are reflected in the equity
section of UNUM America's Balance Sheet.
F-11
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FIXED MATURITIES
The amortized cost and fair values of fixed maturities available for sale at
December 31, 1997, were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED COST UNREALIZED GAINS UNREALIZED LOSSES FAIR VALUE
-------------- ---------------- ----------------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. Government......... $ 25.3 $ 0.4 $ -- $ 25.7
States and municipali-
ties................... 707.5 25.7 -- 733.2
Foreign governments..... 142.2 13.7 -- 155.9
Public utilities........ 981.6 65.2 (0.1) 1,046.7
Corporate bonds......... 2,870.7 170.1 (0.9) 3,039.9
Redeemable preferred
stocks................. 2.0 -- (0.1) 1.9
Mortgage-backed securi-
ties................... 168.9 1.9 -- 170.8
-------- ------ ----- --------
Total................. $4,898.2 $277.0 $(1.1) $5,174.1
======== ====== ===== ========
</TABLE>
The amortized cost and fair values of fixed maturities available for sale at
December 31, 1996, were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED COST UNREALIZED GAINS UNREALIZED LOSSES FAIR VALUE
-------------- ---------------- ----------------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. Government......... $ 25.8 $ 1.8 $ -- $ 27.6
States and municipali-
ties................... 402.4 9.2 (0.7) 410.9
Foreign governments..... 137.9 10.5 (0.2) 148.2
Public utilities........ 983.3 47.7 (1.4) 1,029.6
Corporate bonds......... 3,267.2 147.6 (12.0) 3,402.8
Redeemable preferred
stocks................. 2.0 -- (0.4) 1.6
Mortgage-backed securi-
ties................... 3.4 0.2 -- 3.6
-------- ------ ------ --------
Total................. $4,822.0 $217.0 $(14.7) $5,024.3
======== ====== ====== ========
</TABLE>
The amortized cost and fair value of fixed maturities available for sale at
December 31, 1997, by contractual maturity date, are shown below. Expected
maturities will differ from contractual maturities since certain borrowers
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED COST FAIR VALUE
-------------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Due in one year or less.............................. $ 151.2 $ 153.2
Due after one year through five years................ 1,727.3 1,815.4
Due after five years through ten years............... 2,472.2 2,629.6
Due after ten years.................................. 378.6 405.0
-------- --------
4,729.3 5,003.2
Mortgage-backed securities (primarily due after 10
years)............................................ 168.9 170.9
-------- --------
Total............................................ $4,898.2 $5,174.1
======== ========
</TABLE>
EQUITY SECURITIES
The fair values, which also represent carrying amounts, and the cost of equity
securities available for sale were as follows at December 31, 1997:
<TABLE>
<CAPTION>
COST FAIR VALUE
---- ----------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Common stocks:
Industrial, miscellaneous and all other....................... $7.2 $8.7
==== ====
</TABLE>
F-12
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Gross unrealized investment gains on equity securities available for sale
totaled $1.5 million and $1.9 million, at December 31, 1997, and 1996,
respectively. Gross unrealized investment losses were immaterial at December
31, 1997, and 1996.
MORTGAGES
At December 31, 1997, and 1996, impaired loans totaled $40.7 million and $48.9
million, respectively. Included in the $40.7 million were $20.8 million of
loans which had a related allowance for probable losses of $3.5 million, and
loans of $19.9 million which had no related allowance for probable losses.
Included in the $48.9 million of impaired loans at December 31, 1996, were
$37.4 million of loans which had a related allowance for probable losses of
$5.5 million, and a loan of $11.5 million which had no related allowance for
probable losses.
Restructured mortgage loans amounted to $36.5 million and $50.1 million at
December 31, 1997, and 1996, respectively. Troubled debt restructurings
represent loans that are refinanced with terms more favorable to the borrower.
Interest lost on restructured loans was not material for the years ended
December 31, 1997, 1996 or 1995.
REAL ESTATE AND OTHER
Real estate acquired in satisfaction of debt cumulatively amounted to $76.1
million at December 31, 1997. Real estate held for sale amounted to $22.4
million at December 31, 1997, and $9.8 million at December 31, 1996.
Real estate with a depreciated cost of $3.5 million and no bonds or mortgages
were non-income producing for the twelve months ended December 31, 1997.
Interest lost on these investments was not material in 1997, 1996 or 1995.
UNUM America was committed at December 31, 1997, to purchase fixed maturities
and other invested assets in the amount of $39.5 million.
NOTE 3. ALLOWANCE FOR PROBABLE LOSSES ON INVESTED ASSETS AND
REAL ESTATE HELD FOR SALE
Changes in the allowance for probable losses on mortgage loans and real estate
held for sale were as follows:
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF YEAR ADDITIONS DEDUCTIONS END OF YEAR
----------------- --------- ---------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Year Ended December 31, 1997
Mortgage loans............ $36.0 $ 3.1 $ (7.1) $32.0
Real estate held for
sale..................... 14.3 2.7 -- 17.0
----- ----- ------ -----
Total................... $50.3 $ 5.8 $ (7.1) $49.0
===== ===== ====== =====
Year Ended December 31, 1996
Mortgage loans............ $37.3 $ 1.0 $ (2.3) $36.0
Real estate held for
sale..................... 18.0 (0.4) (3.3) 14.3
----- ----- ------ -----
Total................... $55.3 $ 0.6 $ (5.6) $50.3
===== ===== ====== =====
Year Ended December 31, 1995
Mortgage loans............ $41.7 $ 8.9 $(13.3) $37.3
Real estate held for
sale..................... 12.7 5.7 (0.4) 18.0
----- ----- ------ -----
Total................... $54.4 $14.6 $(13.7) $55.3
===== ===== ====== =====
</TABLE>
Additions represent charges to net realized investment gains (losses) less
recoveries and deductions represent reserves released upon disposal or
restructuring of the related asset.
F-13
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. RESERVES
Reserves for Future Policy Benefits
Reserves for future policy benefits are calculated by the net-level premium
method and are based on UNUM America's expected morbidity, mortality and
interest rate assumptions at the time a policy is issued. These reserves
represent the portion of premiums received, accumulated with interest and held
to provide for claims that have not yet been incurred. The reserve assumptions
are periodically reviewed and compared with actual experience and may be
revised if it is determined that future expected experience is different from
the reserve assumptions. Reserves for group insurance policies consist
primarily of unearned premiums. The interest rates used in the calculation of
reserves for future policy benefits at December 31, 1997, and 1996,
principally ranged from 5.0% to 9.5%. Certain reserve calculations are based
on variable interest rates within these ranges.
Reserves for Unpaid Claims and Claim Expenses
Unpaid claims and claim expense reserves represent the amount estimated to
fund claims that have been reported but not settled and claims incurred but
not reported. Reserves for unpaid claims are estimated based on UNUM America's
historical experience and other actuarial assumptions that consider the
effects of current developments, anticipated trends, risk management programs
and renewal actions. Many factors affect actuarial calculations of claim
reserves, including but not limited to interest rates and current and
anticipated incidence rates, recovery rates, and economic and societal
conditions. Management periodically performs a review of reserve estimates and
assumptions. If management determines reserve assumptions need to be updated,
any resulting adjustment to reserves are reflected in current results. Given
that insurance products contain inherent risks and uncertainties, the ultimate
liability may be more or less than such estimates indicate.
The interest rates used in the calculation of disability claims reserves at
December 31, 1997, and 1996, were principally as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Group long term disability.......................... 7.84% 7.88%
Individual disability............................... 7.0% to 9.50% 7.0% to 9.50%
</TABLE>
The interest rate used to discount the disability reserves is a composite of
the yields on assets specifically identified with each block of business. The
discount rate may decline further depending on the interest rate environment.
UNUM America periodically adjusts prices on both existing and new business in
an effort to mitigate the impact of the current interest rate environment.
For other accident and health business, reserves are based on projections of
historical claims run-out patterns.
F-14
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Activity in the liability for unpaid claims and claim expenses is summarized
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Balance at January 1.............................. $4,056.6 $3,774.0 $2,939.0
Less reinsurance receivables.................... (254.3) (87.3) (53.9)
Effect of unrealized gains........................ (119.4) (203.4) --
-------- -------- --------
Net balance at January 1.......................... 3,682.9 3,483.3 2,885.1
Incurred related to:
Current year.................................... 1,373.1 1,260.0 1,403.0
Prior years..................................... 314.3 262.1 410.4
-------- -------- --------
Total incurred.................................... 1,687.4 1,522.1 1,813.4
Paid related to:
Current year.................................... 441.3 380.6 366.5
Prior years..................................... 1,039.4 941.8 848.7
-------- -------- --------
Total paid........................................ 1,480.7 1,322.4 1,215.2
Net balance at December 31........................ 3,889.6 3,682.9 3,483.3
Plus reinsurance receivables.................... 456.1 254.3 87.3
Effect of unrealized gains........................ 169.1 119.4 203.4
-------- -------- --------
Balance at December 31............................ $4,514.8 $4,056.6 $3,774.0
======== ======== ========
</TABLE>
The components of the unpaid claims and claims expenses incurred and related
to prior years were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Interest accrued on reserves.............................. $230.1 $228.0 $214.2
Changes in reserve estimates and assumptions.............. 84.2 34.1 196.2
------ ------ ------
Incurred related to prior years......................... $314.3 $262.1 $410.4
====== ====== ======
</TABLE>
The additional reserves for amounts incurred related to prior years were
primarily the result of interest accrued on reserves, changes in reserve
estimates and assumptions of interest rates, morbidity, mortality and expense
costs. Due to the long term claims payment pattern of some of UNUM America's
businesses, certain reserves, particularly disability, are discounted for
interest.
The effects of changes in reserve estimates and assumptions were more
significant in 1995, primarily as a result of increased reserves from lower
discount rates for certain disability products following the sale of the
common stock portfolio, and adjustments to strengthen certain disability
reserves in 1995.
Beginning in 1995, as explained in Note 2 "Investments," unpaid claims are
adjusted to reflect changes that would have been necessary if the unrealized
gains and losses had been realized. Where applicable, UNUM America has
reflected those adjustments in the liability balances with corresponding
credits or charges, net of related deferred taxes, reported as a component of
unrealized gains in stockholders' equity.
NOTE 5. SALE OF TAX-SHELTERED ANNUITY BUSINESS
On October 1, 1996, UNUM America closed the sale of its group tax-sheltered
annuity ("TSA") businesses to The Lincoln National Life Insurance Company
("Lincoln"), a subsidiary of Lincoln National Corporation. The sale involved
approximately 1,650 group contractholders and assets under management of
approximately $3.2 billion. The contracts were initially reinsured on an
indemnity basis. Upon consent of the TSA contractholders and participants, the
contracts are considered reinsured on an assumption basis, legally releasing
UNUM America from future contractual obligation to the respective
contractholders and participants.
F-15
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
To effect the sale of the TSA business, UNUM America transferred into a trust
account held for the benefit of Lincoln approximately $2,641 million of
assets. UNUM America has recorded a deposit asset in its Balance Sheet
representing the assets which support the TSA contracts of those
contractholders and participants that have not given consent for assumption
reinsurance. At December 31, 1997, the deposit asset related to the TSA
transaction was approximately $252 million.
The sale resulted in a deferred pretax gain of $77.2 million, which is being
recognized in income in proportion to contractholder and participant consents
for assumption reinsurance. Through December 31, 1997, consent for assumption
reinsurance has been provided by TSA contractholders and participants owning
approximately 92% of assets under management.
Historical results of the TSA business included in UNUM America's Statements
of Income were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1997 1996 1995
------ ------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Revenues................................................... $121.9 $203.1 $244.4
Net income................................................. $ 46.5 $ 12.2 $ 30.1
====== ====== ======
</TABLE>
The results shown above for the year ended December 31, 1997, include $69.6
million of revenues, reported as fees and other income, and $45.2 million of
net income, related to the recognition of the deferred pretax gain for those
contractholders and participants that have given consent for assumption
reinsurance.
NOTE 6. REINSURANCE
UNUM America is involved in both the cession and assumption of reinsurance
with other companies.
On October 23, 1996, UNUM America announced the execution of a definitive
reinsurance agreement between UNUM America and Centre Life Reinsurance Limited
("Centre Re"), a Bermuda-based reinsurance specialist, for reinsurance
coverage of the active life reserves of UNUM America's existing United States
non-cancelable individual disability ("ID") block of business. This agreement
does not reinsure any claims incurred prior to January 1, 1996. The agreement
follows UNUM America's announcement in late 1994 that it would no longer
market the non-cancelable form of ID coverage in the United States.
The agreement is a finite reinsurance arrangement that transfers liabilities
to Centre Re based on the level of statutory reserves. Centre Re has an
obligation to absorb losses within a defined risk layer, while UNUM America
must fund an experience layer representing the difference between reserves
related to the reinsured block, based on generally accepted accounting
principles ("GAAP"), and the bottom of Centre Re's defined risk layer. Within
this experience layer, UNUM America retains the earnings risk related to
potential adverse experience from the reinsured block. Under the agreement,
UNUM America funds a trust account, initially established in late 1996, with
assets equal to the amount of GAAP reserves related to the reinsured block
plus the amount of its experience layer. The value of UNUM America's
experience layer increases or decreases in conjunction with the underlying
operating results of the reinsured block. Additionally, realized gains or
losses on assets sold, and unrealized gains or losses on marketable securities
held in the trust and the related claim reserves, affect the valuation of the
experience layer. UNUM America reflects the carrying value of the experience
layer in its Balance Sheet as a deposit asset, which at December 31, 1997,
totaled approximately $347 million. Changes in the experience layer derived
from the underlying operating results of the reinsured block are reflected in
fees and other income and realized gains or losses from sales of trust assets
are reflected as realized investment gains (losses) in UNUM America's
Statement of Income. Changes in the experience layer resulting from unrealized
gains or losses on marketable securities held in the trust and the related
claim reserves are reflected as unrealized gains or losses in the equity
section of UNUM America's Balance Sheet.
F-16
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In fourth quarter 1996, UNUM America recognized a pretax charge of $49.7
million, which represents the present value of the anticipated minimum amount
of fees to be paid to Centre Re under the agreement. UNUM has the right, but
no obligation, to recapture the business after five years, with certain
penalties.
The effect of all reinsurance on premiums earned and written for the years
ended December 31, 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Premiums earned:
Direct.......................................... $2,366.7 $2,112.2 $2,024.3
Assumed......................................... 294.4 251.2 239.5
Ceded........................................... (356.2) (70.1) (55.0)
-------- -------- --------
Premiums earned............................... $2,304.9 $2,293.3 $2,208.8
======== ======== ========
Premiums written:
Direct.......................................... $2,365.6 $2,114.9 $2,025.0
Assumed......................................... 315.9 285.8 248.4
Ceded........................................... (367.1) (95.6) (56.1)
-------- -------- --------
Premiums written.............................. $2,314.4 $2,305.1 $2,217.3
======== ======== ========
</TABLE>
For the years ended December 31, 1997, 1996 and 1995, recoveries recognized
under reinsurance agreements offset benefits to policyholders by $270.9
million, $65.7 million and $50.7 million, respectively.
NOTE 7. BUSINESS RESTRUCTURING AND OTHER CHARGES
Business Restructuring
Charges of $7.2 million and $8.4 million were recorded in 1996 and 1995,
respectively. The charge in 1996 was related to the merger of Commercial Life
into UNUM America. The charge in 1995 related to the acceleration of
organizational changes within UNUM America and the decision to discontinue the
individual disability non-cancelable product. Partially offsetting the charge
recorded in 1995 was a curtailment gain, related to workforce reductions in
UNUM Corporation's noncontributory defined benefit pension plan, which
includes UNUM America.
Intangible Asset Write-offs and Future Loss Reserves
In connection with the merger of Commercial Life into UNUM America, the sale
of the tax-sheltered annuity business (see Note 5 "Sale of Tax-Sheltered
Annuity Business"), as well as UNUM America's continued efforts to strengthen
its focus on its core products, the company initiated a review of certain
products, which resulted in the recognition of pretax charges totaling $37.5
million during 1996. These charges reduced income before income taxes by $13.1
million in the Disability Insurance segment, $9.4 million in the Special Risk
Insurance segment, and $15.0 million in the Retirement Products segment. On an
after-tax basis the charges reduced net income by $25.1 million.
The total charges of $37.5 million included the write-off of certain
intangible assets, primarily deferred acquisition costs, totaling $12.7
million. These intangible assets were deemed unrecoverable primarily due to
the expectation of continued losses in the association group disability
business. Additionally, in conjunction with the completion of a review of UNUM
America's discontinued product portfolio, a $22.4 million charge was taken to
establish a reserve for the present value of expected future losses on certain
discontinued products. Losses for these products are charged to the reserve at
the time realized. The products incorporated in the charge consist of certain
discontinued special risk, retirement and medical products.
F-17
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8. EMPLOYEE BENEFIT AND INCENTIVE PLANS
Pension Plans
At December 31, 1997, UNUM Corporation had a noncontributory defined benefit
pension plan ("Lifecycle Plan") covering substantially all domestic employees,
including employees of UNUM America. The Lifecycle Plan provides benefits
based on the employee's age at retirement, years of service and earnings
during the highest five of the last ten years of employment. UNUM America
funds its pension plan in accordance with the requirements of the Employee
Retirement Income Security Act of 1974, as amended. Beginning in 1997, plan
assets were transferred from UNUM America's separate accounts into a trust for
the exclusive benefit of plan participants, and includes 448,784 shares of
UNUM Corporation common stock.
In 1997, UNUM Corporation changed the measurement date for the valuation of
its pension plan and postretirement benefit plan assets and actuarially
determined obligations from December 31, to September 30. The change in
measurement date had no effect on 1997 or prior years' net pension and
periodic postretirement benefit costs.
Postretirement Health Care and Life Insurance Benefits
UNUM America provides certain health care and life insurance benefits for
retired employees and covered dependents. Substantially all domestic employees
of UNUM America may become eligible for these benefits if they meet minimum
age and service requirements, if they are eligible for retirement benefits and
if they agree to contribute a portion of the cost. UNUM America has the right
to modify or terminate these benefits. The underlying plans are not currently
funded. The cost of these plans was $3.0 million, $8.0 million and $8.5
million for the years ended December 31, 1997, 1996 and 1995, respectively. At
December 31, 1997, and 1996 the liability associated with these plans was
$71.3 million and $64.8 million, respectively.
Retirement Savings Plans
UNUM America participates in UNUM Corporation's Retirement Savings Plan.
Effective January 1, 1997, UNUM Corporation introduced a single retirement
savings plan for all domestic employees who meet the eligibility requirement
of one year of service. Dependent upon the employee's annual earnings,
eligible employees may contribute up to 15% of their annual compensation,
including incentive payouts. UNUM America matches 100% of the employee's
contribution up to 3% of the employee's compensation, plus 50% of the
employee's contribution on the next 2% of the employee's compensation, to a
maximum of 4%. Employees become 100% vested immediately upon becoming eligible
to participate. Expense for this plan and the former plans amounted to $7.3
million, $5.6 million and $6.3 million in 1997, 1996 and 1995, respectively.
Annual Incentive Plans
UNUM America has several annual incentive plans for certain employees and
executive officers that provide additional compensation based on achievement
of predetermined annual corporate and affiliate financial and non-financial
goals. In 1997, 1996 and 1995, expense for these plans was $26.1 million,
$31.1 million and $14.7 million, respectively.
Stock Options
The 1996 Long-Term Stock Incentive Plan ("1996 Incentive Plan") provides for
granting options to officers, nonemployee directors of UNUM America, and key
employees to purchase UNUM Corporation common stock over ten years. The 1996
Incentive Plan also provides for granting to key officers restricted stock
awards whose vesting is contingent upon achieving prescribed financial
performance objectives or upon the grantee remaining in UNUM's employ for a
specified period of time. Options and restricted stock may be granted annually
at the discretion of the Committee.
F-18
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The 1998 Goals Stock Option Plan provides for granting to all eligible
employees up to 300 options to purchase UNUM Corporation common stock. The
options will vest to the employee nine years from the date of grant. Vesting
may be accelerated to an earlier date at the discretion of the plan
administrator.
NOTE 9. DIVIDEND RESTRICTIONS
UNUM America is subject to various state insurance regulatory restrictions
that limit the maximum amount of dividends available from its United States
domiciled insurance subsidiaries without prior approval. The amount available
under current law for payment of dividends during 1998 to UNUM Corporation
from UNUM America without state insurance regulatory approval is approximately
$182 million. Dividends in excess of this amount may only be paid with state
insurance regulatory approval. The statutory capital and surplus of UNUM
America was approximately $946 million and $961 million, at December 31, 1997,
and 1996, respectively. The statutory net operating income, which excludes
realized investment gains and losses net of tax, of UNUM America was
approximately $182 million, $113 million and $227 million for 1997, 1996 and
1995, respectively. State insurance regulatory authorities prescribe statutory
accounting practices that differ in certain respects from generally accepted
accounting principles. The significant differences relate to deferred
acquisition costs, deferred income taxes, non-admitted asset balances,
required investment risk reserves and reserve calculation assumptions.
NOTE 10. INCOME TAXES
A reconciliation of income taxes computed by applying the federal income tax
rate to income before income taxes and the consolidated income tax expense
charged to operations follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1997 1996 1995
------ ------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Tax at federal statutory rate of 35%.................... $155.8 $ 94.8 $102.7
Tax-exempt income....................................... (15.7) (15.4) (24.6)
Other................................................... (6.3) (1.1) (7.7)
------ ------ ------
Income taxes.......................................... $133.8 $ 78.3 $ 70.4
====== ====== ======
</TABLE>
Deferred income tax liabilities and assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1997 1996
------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Deferred tax liabilities:
Deferred policy acquisition costs.............................. $171.4 $146.6
Policy reserve adjustments..................................... 117.7 89.1
Net unrealized gains........................................... 94.5 70.7
Value of business acquired..................................... 1.0 1.2
Invested assets................................................ 0.6 --
Other.......................................................... 2.9 --
------ ------
Gross deferred tax liabilities............................... 388.1 307.6
------ ------
Deferred tax assets:
Net realized losses............................................ 6.0 16.8
Postretirement benefits........................................ 25.4 24.4
Deferred gains................................................. 2.0 27.0
Accrued liabilities............................................ 3.7 26.6
Other.......................................................... 1.0 11.0
------ ------
Gross deferred tax assets.................................... 38.1 105.8
------ ------
Net deferred tax liability....................................... $350.0 $201.8
====== ======
</TABLE>
F-19
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
UNUM America's operations are included with those of UNUM Corporation and
subsidiaries in a consolidated income tax return. Under provisions of a tax-
sharing agreement among the members of the consolidated tax return group, tax
is allocated based on the separate return taxable income of each company with
companies being reimbursed currently for their capital and ordinary losses.
UNUM America's Statements of Income for 1997, 1996 and 1995, included the
following amounts of foreign income and related income tax expense:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1997 1996 1995
----- ----- ----
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Foreign income............................................... $10.4 $11.5 --
===== ===== ====
Income tax expense (credit):
Current.................................................... $ 0.6 $(1.5) --
----- ----- ----
Deferred................................................... 3.1 5.6 --
----- ----- ----
Total.................................................... $ 3.7 $ 4.1 --
===== ===== ====
</TABLE>
NOTE 11. FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values are based on quoted market prices, when available. In cases where
quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. These valuation techniques
require management to develop a significant number of assumptions, including
discount rates and estimates of future cash flow. Derived fair value estimates
cannot be substantiated by comparison to independent markets or to disclosures
by other companies with similar financial instruments. These fair value
disclosures do not purport to be the amount that could be realized in
immediate settlement of the financial instrument.
The following table summarizes the carrying amounts and fair values of UNUM
America's financial instruments at December 31, 1997, and 1996:
<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Financial assets:
Fixed maturities available for sale....... $5,174.1 $5,174.1 $5,024.3 $5,024.3
Equity securities available for sale...... 8.7 8.7 10.4 10.4
Mortgage loans............................ 1,023.4 1,127.4 1,042.7 1,119.7
Policy loans.............................. 111.8 111.8 215.6 215.6
Short-term investments.................... 63.1 63.1 82.0 82.0
Cash...................................... 21.1 21.1 34.0 34.0
Accrued investment income................. 107.7 107.7 116.2 116.2
Deposit assets............................ 670.4 670.4 2,797.4 2,797.4
Financial liabilities:
Other policyholder funds:
Investment-type insurance contracts:
With defined maturities............... $ 141.6 $ 159.3 $ 191.0 $ 216.0
With no defined maturities............ 319.2 315.4 2,848.0 2,787.0
Individual annuities and
supplementary contracts not
involving life contingencies......... 63.5 63.5 69.1 69.1
======== ======== ======== ========
</TABLE>
F-20
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following methods and assumptions were used in estimating fair value
disclosures for financial instruments:
Fixed Maturities Available for Sale: Fair values for fixed maturities are
based on quoted market prices, where available. If quoted market prices are
not available, fair values are estimated using values obtained from
independent pricing services or, in the case of private placements, are
estimated by discounting expected future cash flows using a current market
rate applicable to the yield, credit quality and maturity of the investments.
Equity Securities Available for Sale: Fair values for equity securities
available for sale are based on quoted market prices and are reported in the
Balance Sheets at these values.
Mortgage Loans: Fair values for mortgage loans are estimated based on
discounted cash flow analyses using interest rates currently being offered for
similar mortgage loans to borrowers with similar credit ratings and
maturities. Mortgage loans with similar characteristics are aggregated for
purposes of the calculations.
Policy Loans, Short-term Investments, Cash, Accrued Investment Income and
Deposit Assets: Fair values for these instruments approximate the carrying
amounts reported in the Balance Sheets.
Investment-type Insurance Contracts: Fair values for liabilities under
investment-type insurance contracts with defined maturities are estimated
using discounted cash flow calculations based on interest rates that would be
offered currently for similar contracts with maturities consistent with those
remaining for the contracts being valued. Fair values for liabilities under
investment-type insurance contracts with no defined maturities are the amounts
payable on demand after surrender charges at the balance sheet date.
The estimated fair values of liabilities under all insurance contracts
(investment-type and other than investment-type) are taken into consideration
in UNUM America's overall management of interest rate risk, which minimizes
exposure to changing interest rates through the matching of investment
maturities with amounts due under insurance contracts.
Individual Annuities and Supplementary Contracts not Involving Life
Contingencies: Fair values approximate the carrying amounts reported in other
policyholder funds in the Balance Sheets.
F-21
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12. DERIVATIVE FINANCIAL INSTRUMENTS
UNUM America periodically uses options, futures, and forward exchange
contracts which are common derivative financial instruments, to hedge certain
risks associated with anticipated purchases and sales of investments,
anticipated debt issuance and certain payments denominated in foreign
currencies, primarily Canadian dollars. These derivative financial instruments
are used to protect UNUM America from the effect of market fluctuations in
interest and exchange rates between the contract date and the date on which
the hedged transaction occurs.
In using these instruments, UNUM America is subject to the off-balance-sheet
credit risk that the counterparties of the transactions will fail to perform
as contracted. UNUM America manages this risk by only entering into contracts
with highly rated institutions and listed exchanges. UNUM America does not
hold or issue derivative financial instruments for the purpose of trading.
Historically, all positions UNUM America has taken in derivative contracts
have qualified for hedge accounting in accordance with the criteria
established by FAS 52, "Foreign Currency Translation," and FAS 80, "Accounting
for Futures Contracts." Upon entering a derivative contract, UNUM America uses
this criteria to evaluate the correlation of risk protection provided by a
derivative contract to the risk created by market fluctuations to ensure hedge
accounting is appropriate for the contract. Accordingly, gains or losses
related to qualifying hedges of firm commitments or anticipated transactions
involving investment purchases and debt issuance are deferred and recognized
as an adjustment to the carrying amount of the underlying asset or liability
when the hedged transaction occurs. Gains or losses related to qualifying
hedges of anticipated transactions involving the sale of investments are
deferred and recognized in income when the hedged transaction occurs. No gains
or losses related to qualifying hedges of anticipated transactions involving
payments denominated in foreign currencies are recorded if the hedged
transaction is likely to occur.
The amount of any deferred gains or losses on outstanding interest rate
futures contracts, which require daily cash settlement, are included in fixed
maturities in UNUM America's Balance Sheet. The fair values of any outstanding
forward exchange rate contracts and options which do not require daily cash
settlement, are not recognized in UNUM America's Balance Sheet.
Any resulting gains or losses from early termination of a derivative
designated as a hedge are deferred and recognized in income or as an
adjustment of the carrying amount of the underlying asset or liability when
the hedged transaction occurs. Any gains or losses that result when the
designated item is extinguished, such as maturity, sale, or termination, or
when the hedged transaction is no longer likely to occur, are included in
income in the period in which the extinguishment takes place or it is known
that the hedged anticipated transaction will not occur.
UNUM America had no open derivative financial instruments at December 31,
1997. UNUM America had open interest rate futures contracts at December 31,
1996, with notional amounts of $159.7 million to hedge anticipated sales of
investments in 1997. These futures contracts had a related net unrealized gain
of $1.3 million.
NOTE 13. LITIGATION
In the normal course of its business operations, UNUM America is involved in
litigation from time to time with claimants, beneficiaries and others, and a
number of lawsuits were pending at December 31, 1997. In some instances, these
proceedings include claims for punitive damages and similar types of relief in
unspecified or substantial amounts, in addition to amounts for alleged
contractual liability or other compensatory damages. In the opinion of
management, the ultimate liability, if any, arising from this litigation is
not expected to have a material adverse effect on the financial position,
operating results or liquidity of UNUM America.
On December 29, 1993, UNUM America filed a suit in the United States District
Court for the District of Maine, seeking a federal income tax refund. The suit
was based on a claim for a deduction in certain prior tax years for
F-22
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
$652 million in cash and stock distributed to policyholders in connection with
the 1986 conversion of Union Mutual Life Insurance Company to a stock company.
UNUM America has fully paid, and provided for in prior years' financial
statements, the tax at issue in this litigation. On May 23, 1996, the District
Court issued its decision that the distribution in question was not a
deductible expenditure. On December 2, 1997, the United States Court of
Appeals affirmed the decision of the District Court denying UNUM America's
claim for refund. UNUM America is currently considering whether to request
that the United States Supreme Court review the decision of the United States
Court of Appeals.
NOTE 14. AFFILIATED COMPANIES AND RELATED PARTY TRANSACTIONS
UNUM America provides management and administrative services to affiliates,
which are wholly-owned by UNUM Corporation. UNUM America allocates,
principally at cost, the related expenses based on direct association whenever
possible. If the expenses cannot be readily associated, the costs are
allocated based on ratios of the relative time spent, extent of usage or
varying volume of work performed.
On December 31, 1997, UNUM America entered into a 100% indemnity coinsurance
agreement with UNUM International Limited ("UNUM International"), an
affiliated company organized under the laws of the Islands of Bermuda. Under
the agreement, UNUM America transferred group long term disability ("group
LTD") claim reserves to UNUM International with respect to disabilities which
occurred prior to December 31, 1992. UNUM America will continue to transfer
group LTD claim reserves to UNUM International each quarter with respect to
disabilities which occurred during the quarter ending nineteen quarters prior
to the ceding date. Either party may terminate this agreement as to risks not
yet ceded upon ninety days notice in writing to the other party. At December
31, 1997, $56.5 million of the claim liabilities were ceded to UNUM
International under this agreement.
On February 28, 1995, UNUM Corporation borrowed $100 million under its
revolving credit facility, which was infused into UNUM America in exchange for
surplus debentures which matured on August 31, 1996, and accrued interest at
5.66% annually. Repayment of principal and interest on the surplus debentures
was subject to state insurance regulatory approval. On December 31, 1995, UNUM
America repaid $50 million of the surplus debentures, plus accrued interest of
$5.5 million to UNUM Corporation. In April, 1996, UNUM America received
approval from the Maine Bureau of Insurance to repay the remaining $50 million
in surplus debentures. The company repaid the principal and interest in April
1996.
During December 1993, UNUM America loaned $60 million to UNUM Corporation.
These notes matured on December 20, 1996, and accrued interest at 5.66%
annually. On December 31, 1995, UNUM Corporation repaid $50 million of these
notes to UNUM America. UNUM Corporation repaid the $10 million outstanding
note to UNUM America in April 1996.
NOTE 15. SEGMENT INFORMATION
UNUM America's principal markets for its insurance products are the United
States and Canada. UNUM America and First UNUM Life Insurance Company combined
are the leading provider of group long term disability insurance, their
principal product, in the United States. Products are marketed through sales
personnel, independent contractors and brokers, and specialty agents. UNUM
America targets sales of its disability products to executive, administrative
and management personnel, and other professionals such as educators,
consultants, health care providers, accountants and engineers.
The Disability Insurance segment includes disability products offered in North
America, including group long term disability, group short term disability,
individual disability, disability reinsurance operations and long term care
insurance. The Special Risk Insurance segment includes group life, special
risk accident insurance, non-disability reinsurance operations, reinsurance
underwriting management operations and other special risk insurance products.
The Retirement Products segment includes products no longer actively marketed
by UNUM America including: tax-sheltered annuities, guaranteed investment
contracts, deposit administration accounts, 401(k) plans, individual life and
group medical products. Corporate includes transactions that are generally
non-insurance related.
Investment income and net realized investment gains and losses are allocated
to the segments based on designation of ownership of assets identified to the
products in each segment. Operating expenses are allocated to the segments
F-23
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
based on direct association with a product whenever possible. If the expense
cannot be readily associated with a particular product, the costs are
allocated based on ratios of the relative time spent, extent of usage or
varying volume of work performed for each segment.
Summarized financial information for the three business segments and Corporate
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Revenues:
Disability Insurance............................ $1,951.5 $2,008.2 $2,056.7
Special Risk Insurance.......................... 840.9 732.3 671.8
Retirement Products............................. 179.5 277.8 353.0
Corporate....................................... 3.2 9.8 2.9
-------- -------- --------
Total revenues................................ $2,975.1 $3,028.1 $3,084.4
======== ======== ========
Income (loss) before income taxes:
Disability Insurance............................ $ 257.5 $ 195.7 $ 192.5
Special Risk Insurance.......................... 116.1 77.9 55.9
Retirement Products............................. 72.8 1.3 45.0
Corporate....................................... (1.4) (4.1) 0.1
-------- -------- --------
Income before income taxes.................... 445.0 270.8 293.5
Income taxes...................................... 133.8 78.3 70.4
-------- -------- --------
Net income.................................... $ 311.2 $ 192.5 $ 223.1
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1997 1996
-------- ---------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Identifiable Assets:
Disability Insurance...................................... $6,927.5 $ 6,164.6
Special Risk Insurance.................................... 1,332.3 1,082.6
Retirement Products....................................... 1,070.7 4,427.4
Corporate................................................. 169.1 275.4
Individual Participating Life Annuity..................... 367.3 354.0
-------- ---------
Total assets............................................ $9,866.9 $12,304.0
======== =========
</TABLE>
F-24
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16. SUPPLEMENTARY INSURANCE INFORMATION
<TABLE>
<CAPTION>
(1) (2) FUTURE
POLICY AMORTIZATION
DEFERRED BENEFITS (4) (5) BENEFITS TO OF DEFERRED (5)
POLICY AND UNPAID (3) NET POLICYHOLDERS POLICY OTHER (6)
ACQUISITION CLAIMS AND PREMIUM INVESTMENT AND INTEREST ACQUISITION OPERATING PREMIUMS
SEGMENT COSTS CLAIM EXPENSES REVENUE INCOME CREDITED COSTS EXPENSES WRITTEN
------- ----------- -------------- -------- ---------- ------------- ------------ --------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1997
Disability Insurance... $469.0 $4,834.4 $1,583.2 $368.3 $1,248.7 $ 44.2 $401.0 $1,525.6
Special Risk
Insurance............. 147.8 706.9 780.5 60.4 552.0 64.2 108.6 782.7
Retirement Products.... 0.0 609.6 126.1 53.4 101.1 0.1 5.6 6.1
Corporate.............. 0.0 0.0 0.0 3.2 0.0 0.0 5.7 0.0
------ -------- -------- ------ -------- ------ ------ --------
Total................ $616.8 $6,150.9 $2,489.8 $485.3 $1,901.8 $108.5 $520.9 $2,314.4
====== ======== ======== ====== ======== ====== ====== ========
Year Ended December 31, 1996
Disability Insurance... $396.0 $4,414.1 $1,637.4 $370.8 $1,257.4 $ 90.2 $465.1 $1,596.1
Special Risk
Insurance............. 119.0 588.7 682.3 50.0 484.6 40.9 129.0 214.0
Retirement Products.... 0.9 613.0 64.0 213.8 251.7 0.0 24.6 14.9
Corporate.............. 0.0 0.0 0.0 9.8 0.0 0.0 13.8 0.0
------ -------- -------- ------ -------- ------ ------ --------
Total................ $515.9 $5,615.8 $2,383.7 $644.4 $1,993.7 $131.1 $632.5 $1,825.0
====== ======== ======== ====== ======== ====== ====== ========
Year Ended December 31, 1995
Disability Insurance... $681.7 $4,114.8 $1,580.5 $476.1 $1,412.4 $ 83.0 $368.7 $1,554.3
Special Risk
Insurance............. 94.0 451.8 628.6 44.2 465.6 33.9 115.5 231.7
Retirement Products.... 33.6 590.5 33.3 319.7 271.0 0.8 36.3 23.3
Corporate.............. 0.0 0.0 (0.2) 2.2 0.0 0.0 3.7 0.0
------ -------- -------- ------ -------- ------ ------ --------
Total................ $809.3 $5,157.1 $2,242.2 $842.2 $2,149.0 $117.7 $524.2 $1,809.3
====== ======== ======== ====== ======== ====== ====== ========
</TABLE>
- --------
(1) Excludes other policyholder funds, as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Segment:
Disability Insurance.............................. $ 2.0 $ 5.7 $ 2.8
Special Risk Insurance............................ 12.0 10.9 13.3
Retirement Products............................... 700.3 3,285.5 3,626.1
------ -------- --------
Total........................................... $714.3 $3,302.1 $3,642.2
====== ======== ========
</TABLE>
(2) Includes unearned premiums, other policy claims and benefits payable.
(3) Includes fees and other income (expenses).
(4) Includes investment income (expense) and net realized investment gains
(losses).
(5) Investment income and net realized investment gains are allocated to the
segments based on designation of ownership of assets identified to the
segments. Operating expenses are allocated to segments based on direct
association with a product whenever possible. If, however, the expense
cannot be readily associated with a particular product, the costs are
allocated based on ratios of the relative time spent, extent of usage or
varying volume of work performed for each segment.
(6) Premiums written for health and disability income policies.
F-25
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial statements and Exhibits
(a) The following financial statements are included in Part B:
Financial Statements of Registrant - VA-I Separate Account of UNUM
Life Insurance Company of America.
Audited statement of assets and liabilities as of December
31, 1997 and statement of operations and changes in net
assets for the two years ended December 31, 1997.
Financial Statements of Depositor - UNUM Life Insurance Company of
America.
Audited balance sheets as of December 31, 1997 and 1996 and
audited statements of income, stockholder's equity and cash
flows for each of the three years in the period ended
December 31, 1997.
(b) Exhibits
1(a) Resolution adopted by the Board of Directors of UNUM Life
Insurance Company on July 8, 1988 establishing the TSAVA
Separate Account of UNUM Life Insurance Company.
1(b) Resolution adopted by the Board of Directors of UNUM Life
Insurance Company on February 7, 1991 changing the name and
broadening the scope of the VA-I Separate Account.
2. Not applicable.
3(a) Principal underwriting agreement between UNUM Life Insurance
Company of America and LNC Equity Sales Corporation is
incorporated herein by reference to Amendment No. 30 to the
registration statement of the VA-I Separate Account of UNUM
Life Insurance Company on Form N-4 (33-47786), filed on
April 30, 1997.
3(b) Form of broker-dealer sales agreement is incorporated herein
by reference to Amendment No. 30 to the registration
statement of the VA-I Separate Account of UNUM Life
Insurance Company on Form N-4 (33-47786), filed on April 30,
1997.
4(a) Form of Group Annuity Contract for UNUM Life Insurance
Company of America.
4(b) Form of Contract Rider providing for automatic assumption of
certain contracts by The Lincoln National Life Insurance
Company is incorporated herein by reference to Amendment No.
27 to the registration statement of the VA-I Separate
Account of UNUM Life Insurance Company on Form N-4
(33-47786), filed on May 1, 1996.
5(a) Form of application for Group Annuity Contract.
-1-
<PAGE>
5(b) Form of Participant enrollment form (including
acknowledgement of restrictions on redemption imposed by
I.R.C. Section 403(b)).
6(a) Articles of incorporation of UNUM Life Insurance Company of
America (including Articles of Merger filed December 30,
1991, for merger of UNUM Life Insurance Company and UNUM
Pension and Insurance Company into UNUM Life Insurance
Company of America; and Articles of Merger filed November 4,
1996, for merger of Commercial Life Insurance Company into
UNUM Life Insurance Company of America).
6(b) Bylaws of UNUM Life Insurance Company of America.
6(c) Plan and Agreement of Merger of UNUM Life Insurance Company
and UNUM Pension and Insurance Company into UNUM Life
Insurance Company dated September 13, 1991, and certain
supporting resolutions and consents of directors and
stockholders of UNUM Life Insurance Company and UNUM Life
Insurance Company of America.
7(a) Assumption Reinsurance Agreement by and between UNUM Life
Insurance Company of America and The Lincoln National Life
Insurance Company is incorporated herein by reference to
Amendment No. 30 to the registration statement of the VA-I
Separate Account of UNUM Life Insurance Company on Form N-4
(33-47786), filed on April 30, 1997.
7(b) Assumption Reinsurance Agreement by and between UNUM Life
Insurance Company of America and Lincoln Life & Annuity
Company of New York is incorporated herein by reference to
Amendment No. 30 to the registration statement of the VA-I
Separate Account of UNUM Life Insurance Company on Form N-4
(33-47786), filed on April 30, 1997.
7(c) Coinsurance and Assumption Agreement by and between UNUM
Life Insurance Company of America and The Lincoln National
Life Insurance Company is incorporated herein by reference
to Amendment No. 30 to the registration statement of the
VA-I Separate Account of UNUM Life Insurance Company on Form
N-4 (33-47786), filed on April 30, 1997.
7(d) Indemnity Reinsurance Agreement by and between UNUM Life
Insurance Company of America and The Lincoln National Life
Insurance Company is incorporated herein by reference to
Amendment No. 30 to the registration statement of the VA-I
Separate Account of UNUM Life Insurance Company on Form N-4
(33-47786), filed on April 30, 1997.
7(e) Indemnity Reinsurance Agreement by and between UNUM Life
Insurance Company of America and Lincoln Life & Annuity
Company of New York is incorporated herein by reference to
Amendment No. 30 to the registration statement of the VA-I
Separate Account of UNUM Life Insurance Company on Form N-4
(33-47786), filed on April 30, 1997.
8(a) Participation Agreement between UNUM Life Insurance Company
and Dreyfus Life & Annuity Index Fund, Inc.
8(b) Participation Agreement by and among UNUM Life Insurance
Company and Variable Insurance Products Fund I and Fidelity
Distributors Corporation.
8(c) Participation Agreement by and among UNUM Life Insurance
Company and Variable Insurance Products Fund II and Fidelity
Distributors Corporation.
8(d) Participation Agreement by and among UNUM Life Insurance
Company and TCI Portfolios, Inc. and Investors Reasearch
Corporation.
8(e) Participation Agreement between UNUM Life Insurance Company
of America and Dreyfus Variable Investment Fund.
8(f) Participation Agreement between UNUM Life Insurance Company
of America and Acacia Capital Corporation.
8(g) Participation Agreement by and among UNUM Life Insurance
Company of America and T. Rowe Price International Series,
Inc. and T. Rowe Price Investment Services, Inc.
8(h) Administrative Services Agreement by and between UNUM Life
Insurance Company of America and The Lincoln National Life
Insurance Company is incorporated herein by reference to
Amendment No. 30 to the registration statement of the VA-I
Separate Account of UNUM Life Insurance Company on Form N-4
(33-47786), filed on April 30, 1997.
9. Consent and opinion of Kevin J. Tierney, General Counsel of
UNUM Life Insurance Company of America, as to the legality
of the securities being registered is incorporated herein by
reference to Amendment No. 27 to the registration statement
of the VA-I Separate Account of UNUM Life Insurance Company
on Form N-4 (33-47786), filed on May 1, 1996.
10(a) Consent of Coopers & Lybrand L.L.P., Independent
Accountants.
-2-
<PAGE>
10(b) Powers of Attorney for Kevin P. O'Connell and Robert W.
Crispin are incorporated herein by reference to Amendment
No. 27 to the registration statement of the VA-I Separate
Account of UNUM Life Insurance Company on Form N-4 (33-
47786), filed on May 1, 1996.
10(c) Powers of Attorney for Thomas G. Brown, Diane M. Garofalo,
Peter J. Moynihan, James F. Orr III, Elaine D. Rosen, and
Eileen C. Farrar.
11. No financial statements are omitted from Item 23.
12. Not Applicable.
13(a) Schedule for computation of Performance Quotations is
incorporated herein by reference to Amendment No. 6
filed by Lincoln National Variable Annuity Account L of the
Lincoln National Life Insurance Company on April 30, 1997
(File No. 333-04999).
13(b) Supplement to Schedule for Computation of Performance
Quotations.
14. Not Applicable.
-3-
<PAGE>
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following list contains the officers and directors of UNUM Life Insurance
Company of America who are engaged directly or indirectly in activities relating
to the VA-I Separate Account as well as the Contracts. The list also shows UNUM
Life Insurance Company of America's executive officers.
<TABLE>
<CAPTION>
Name and Address Positions and Offices with UNUM/America
<S> <C>
James F. Orr III* Chairman of the Board of Directors, Chief
Executive Officer
Elaine D. Rosen* Director and President
Robert W. Crispin* Director and Executive Vice President
Kevin P. O'Connell* Director and Executive Vice President
Eileen C. Farrar* Director and Senior Vice President
Peter J. Moynihan* Director and Senior Vice President
Thomas G. Brown* Executive Vice President
Diane M. Garofalo* Vice President
Nicholas J. Desiderio* Vice President and Chief Financial Officer
Kevin J. Tierney* Director, Senior Vice President, General Counsel
and Secretary
</TABLE>
* Principal business address of each person is 2211 Congress Street,
Portland, Maine 04122.
Item 26. Persons Controlled by or Under Common Control with UNUM Life Insurance
Company of America ("UNUM/America") or the VA-I Separate Account
The VA-I Separate Account is a separate account of UNUM/America and may be
deemed to be controlled by UNUM/America although UNUM/America will follow voting
instructions of Contractholders with respect to voting on certain important
matters requiring a vote of Contractholders.
The following chart indicates the persons controlled by or under common control
with UNUM/America and the VA-I Separate Account:
<TABLE>
<CAPTION>
Federal I.D.# Company NAIC#
<C> <S> <C>
01-0405657 UNUM Corporation
01-0285069 UNUM Holding Company
01-0278678 UNUM Life Insurance Company of America, ME 62235
01-0490889 UA Holdings 1994-1
01-0490891 UA Holdings 1994-3
95-4526249 SP Administrator, LLC
13-1898173 First UNUM Life Insurance Company, NY 64297
01-0495196 NY Holdings 1994-1
01-0495197 NY Holdings 1994-2
01-0495198 NY Holdings 1994-3
01-0495199 NY Holdings 1994-4
01-0285776 UNUM Sales Corporation
01-0284946 Claims Service International, Inc.
01-0285617 UNUM Development Corporation
UNUM International Underwriters Inc.
UNUM European Holding Company Limited
UNUM General Insurance Company Limited
UNUM Management Company Limited
UNUM Limited
AA-1120014 Open Door VAC Limited
Claims Services International Limited
Mindtask Limited
13-2588770 Duncanson & Holt, Inc.
01-0358803 Duncanson & Holt Services, Inc.
91-1306242 Group Management Services, Inc.
Duncanson & Holt Administrative Services, Inc.
Duncanson & Holt Europe Ltd.
Duncanson & Holt Underwriters Ltd.
Duncanson & Holt Agencies, Ltd.
Duncanson & Holt Syndicate Management Ltd.
Trafalgar Underwriting Agencies Ltd.
Duncanson & Holt Canada Ltd.
TRI-CAN Reinsurance Inc.
Duncanson & Holt Asia PTE Ltd.
01-0477936 Colonial Companies, Inc.
57-0144607 Colonial Life & Accident Insurance Company, SC 62049
01-0491221 CLA Holdings 1994-1
01-0491220 CLA Holdings 1994-2
57-0856575 BenefitAmerica, Inc.
UNUM Japan Accident Insurance Company Limited
UNUM (Bermuda) Holdings Ltd.
Duncanson & Holt (Bermuda) Ltd.
UNUM International Ltd.
13-3178143 Continental National Life Insurance Company, DE 61026
13-3178146 Continental International Life Insurance Company, DE 61000
Boston Compania Argentina de Seguros S.A.
52-2060453 UNUM Partners, L.P.
52-2060461 UNUM Finance Company
52-2060454 UNUM Finance Company L.L.C.
52-2060465 UNUM Delaware Company
Options and Choices, Inc.
</TABLE>
-4-
<PAGE>
Item 27. Number of Contractholders
As of March 31, 1998, Registrant had 183 Contractholders.
Item 28. Indemnification
Under the Participation Agreements entered into between UNUM/America and the
Dreyfus Life & Annuity Index Fund, Inc., Dreyfus Variable Investment Fund and
Dreyfus Corporation, Variable Insurance Products Funds I and II and Fidelity
Distributors Corporation, Twentieth Century Management Company, Acacia Capital
Corporation, and T. Rowe Price (the "Funds"), UNUM/America and its directors,
officers, employees, agents and control persons have been indemnified by the
Fund against any losses, claims or liabilities that arise out of any untrue
statement or alleged untrue statement or omission of a material fact in the
Funds' registration statements, prospectuses or sales literature. In addition,
the Funds will indemnify UNUM/America against any liability, loss, damages,
costs or expenses which UNUM/America may incur as a result of the Funds'
incorrect calculations, incorrect reporting and/or untimely reporting of the
Funds' net asset values, dividend rates or capital gain distribution rates.
UNUM/America's by-laws provide that UNUM/America "may indemnify any person made
or threatened to be made a party of any action or proceeding, including an
action by or in the right of any other corporation of any type or kind, domestic
or foreign, which any director, officer or employee of the Corporation served in
any capacity at the request of the Corporation, by reason of the fact that he,
his testator or intestate, was a director, officer or employee of the
Corporation or served such other corporation in any capacity, against judgments,
fines, amounts paid in settlement and reasonable expenses, including attorneys'
fees, actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director, officer, or employee acted,
in good faith, for a purpose which he or she reasonably believed to be in the
best interests of the corporation."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
Item 29. Principal Underwriter
(a) Lincoln Financial Advisors Corporation also acts as the
principal underwriter for the VA-I Separate Account of First
UNUM Life Insurance Company, Lincoln National Variable Annuity
Account L, and Lincoln Life & Annuity Variable Annuity
Account L.
(b)(1) The following table sets forth certain information regarding
the officers and directors of Lincoln Financial Advisors
Corporation.
-5-
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND ADDRESS WITH LINCOLN FINANCIAL ADVISORS CORPORATION
<S> <C>
J. Michael Hemp* President and Director
Priscilla S. Brown* Chief Operating Officer, Sales and Marketing, and
Director
John M. Behrendt* Vice President and Director
Richard C. Boyles*** Chief Financial Officer and Administrative Officer
Kenneth Ehinger*** Chief Operating Officer and Director
Gary D. Giller**** Director
Janet C. Whitney** Vice President and Treasurer
C. Suzanne Womack** Secretary
</TABLE>
* Principal business address of each person is 1300 S. Clinton Street, Fort
Wayne, Indiana 46802.
** Principal business address of each person is 200 East Berry Street, Fort
Wayne, Indiana 46802-2706.
*** Principal business address of each person is 3811 Illinois Road, Suite
205, Fort Wayne, Indiana 46804-1202.
**** 7650 Rivers Edge Dr., Suite 250, Columbus, OH 43235.
c)
<TABLE>
<CAPTION>
Net Underwriting
Name of Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
- ----------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Lincoln Financial Advisors $0 N/A N/A N/A
Corporation
</TABLE>
Item 30. Location of Accounts and Records
The records required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and Rules 31a-1 to 31a-3 thereunder are maintained by UNUM/America
at 2211 Congress Street, Portland, Maine 04122, and by Lincoln Life at One City
Center, Portland, Maine 04101.
Item 31. Management Services
None
Item 32. Undertakings and Representations
The Registrant hereby undertakes:
-6-
<PAGE>
(a) to file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial statements
in this registration statement are never more than 16 months old for so long
as payments under the variable annuity contracts may be accepted, unless
otherwise permitted.
(b) to include either (1) as part of any application to purchase a Contract
offered by the prospectus, a space that an applicant can check to request a
Statement of Additional Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that the applicant
can remove to send for a Statement of Additional Information.
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form promptly upon
written or oral request.
(d) The Registrant intends to rely on the no-action response dated November 28,
1988, from Ms. Angela C. Goelzer of the Commission staff to the American
Council of Life Insurance concerning the redeemability of Section 403(b)
annuity contracts and the Registrant has complied with the provisions of
paragraphs (1)-(4) thereof.
(e) The Registrant intends to offer Contracts to Participants in the Texas
Optional Retirement Program. In connection with that offering, Rule 6c-7 of
the Investment Company Act of 1940 is being relied upon and paragraphs (a)-
(d) of that Section will be complied with.
(f) UNUM Life Insurance Company of America hereby represents that the fees and
charges deducted under the Contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and
the risks assumed by UNUM Life Insurance Company of America.
-7-
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant and the Depositor have caused this Post-effective Amendment
to the Registration Statement to be signed on their behalf, in the City of
Portland and State of Maine on this 27th day of April, 1998, and the Registrant
certifies that this Amendment is filed solely for one or more of the purposes
specified in Rule 485(b)(1) under the Securities Act of 1933 and that no
material event requiring disclosure in the prospectus, other than one listed in
Rule 485(b)(1), has occurred since the effective date of the most recent Post-
Effective Amendment to the Registration Statement which included a
prospectus.
VA-I Separate Account of
UNUM Life Insurance Company of America
(Registrant)
By:
/s/ Elaine D. Rosen
-------------------
Elaine D. Rosen
President
UNUM Life Insurance Company of America
UNUM Life Insurance Company of America
(Depositor)
By:
/s/ Elaine D. Rosen
-------------------
Elaine D. Rosen
President
As required by the Securities Act of 1933 this Post-effective Amendment to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/Elaine D. Rosen President April 27, 1998
- --------------------
Elaine D. Rosen (Principal Executive Officer)
</TABLE>
-8-
<PAGE>
<TABLE>
<S> <C> <C>
/s/Nicholas J. Desiderio April 27, 1998
- ------------------------
Nicholas J. Desiderio Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/Charles W. Tarbell April 27, 1998
- ----------------------
Charles W. Tarbell Vice President, Treasurer
and Controller
(Principal Accounting Officer)
*
- -------------------- April 27, 1998
James F. Orr III Director
*
- -------------------- April 27, 1998
Elaine D. Rosen Director
*
- --------------------- April 27, 1998
Robert W. Crispin Director
*
- --------------------- April 27, 1998
Eileen C. Farrar Director
*
- -------------------- April 27, 1998
Peter J. Moynihan Director
*
- ----------------- April 27, 1998
Kevin P. O'Connell Director
* April 27, 1998
- -------------------
Kevin J. Tierney Director
*By: /s/Kevin J. Tierney April 27, 1998
-----------------------
Kevin J. Tierney
Attorney-in-fact
</TABLE>
-9-
<PAGE>
1
UNUM Life Insurance Company
Excerpt of Meeting of the Board of Directors, July 8, 1988 at 9:00 a.m.
Group Pensions New Equity-Based Products
- ----------------------------------------
The Officers discussed the two new equity-based products being developed by the
Group Pension Division, and the need for the Board to adopt several Resolutions
at this time.
WHEREAS, It is deemed to be in the best interest of UNUM Life Insurance
Company (the "Company") to have the capability to offer and sell variable
annuity contracts in connection with tax deferred plans under Section 403(b) of
the Internal Revenue Code of 1986; and
WHEREAS, the laws of Maine and other states in which the Company does
business require that a separate account be established to serve as a funding
vehicle for such variable annuity contracts; and
WHEREAS, Section 2537 of the Maine Insurance Code (Title 24-A, M.R.S.A.)
permits the establishment of one or more separate accounts to receive amounts
paid under variable annuity contracts for use in connection with tax deferred
plans under Section 403(b) of the Internal Revenue Code of 1986;
NOW, THEREFORE, the following are duly adopted actions taken by the Board
of Directors of the Company:
RESOLVED, that the Board of Directors of the Company hereby authorizes and
directs the establishment of a separate account to be used as a funding
vehicle for variable annuity contracts offered by the Company in connection
with tax deferred plans under Sections 403(b) of the Internal Revenue Code
of 1986; and
RESOLVED, FURTHER, that such separate account be established pursuant to
Section 2537 of the Maine Insurance Code (Title 24-A, M.R.S.A.) and
designated "TSAVA Separate Account" ("Separate Account"); and
RESOLVED, FURTHER, that the income, gains and losses, realized or
unrealized, from assets allocated to the Separate Account shall be credited
to or charged against the Separate Account, without regard to other income,
gains or losses of the Company; and
RESOLVED, FURTHER, that within the Separate Account there may be a number
of divisions or subdivisions with different investment policies and
objectives into which a plan participant may direct his or her interests in
the Separate Account; and
RESOLVED, FURTHER, that the President and any Senior Vice President of the
Company is authorized, empowered and directed to take whatever action may
be necessary to establish and maintain such Separate Account, including,
but not limited to:
Registering with the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933 (the "1933 Act") and the Investment
Company Act of 1940 (the "1940 Act") as may be necessary or
appropriate to permit any contracts or other funding arrangements from
time to time issued by the Company to provide for allocations of
amounts to the Separate Account, including the registration of units
of interest in the Separate Account under the 1933 Act and the
registration of the Separate Account as a unit investment trust under
the 1940 Act;
<PAGE>
2
Preparing, executing and filing with the SEC a Notification of
Registration on Form N-8A and a Registration Statement or Statements
on Form N-4 or on such other form or forms as may be appropriate,
including prospectuses, financial statements, supplements, exhibits
and other documents relating thereto, and any amendments to the
foregoing;
Preparing, executing and filing from time to time with the SEC
applications, and any amendments thereto, for exemptions from or
orders under, and requests for non-action or interpretive letters with
respect to, and any other relief from the 1933 Act, the 1940 Act, the
Securities Exchange Act of 1934 (the "1934 Act"), the Trust Indenture
Act of 1939 or the Investment Advisers Act of 1940, or any rules or
regulations thereunder;
Preparing, executing and filing with the SEC periodic reports and
documents as may be required of the Separate Account by the 1940 Act
or by the 1934 Act;
Preparing, executing and filing sales materials, as well as any other
required materials, with the National Association of Securities
Dealers;
Preparing, executing and filing state securities and insurance law
registrations, filings, notifications and qualifications as may be
necessary or appropriate, and in connection therewith, preparing,
executing, acknowledging and filing applications for exemptions,
certificates, affidavits, covenants, consents to service of process
and other instruments and taking all such action as the Officers of
the Company may deem necessary or appropriate;
Establishing such rules and regulations as may be necessary and
appropriate with respect to the management and operation of the
Separate Account;
Providing for the sale of contracts or other funding arrangements
issued by the Company as may be necessary and appropriate, to the
extent such contracts or arrangements provide for allocation of
amounts to the Separate Account;
Providing for custodial or depository arrangements for assets
allocated to the Separate Account;
Providing for accounting, recordkeeping and reporting arrangements for
assets allocated to the Separate Account;
Investing and reinvesting the assets allocated to the Separate Account
in accordance with investment policies specified in the respective
variable annuity contracts;
Providing for investment management arrangements to implement the
Separate Account's investment policies; and
Transferring funds from time to time between the Company's general
investment account and the Separate Account as deemed necessary or
appropriate and consistent with the terms of the contracts; and
RESOLVED, FURTHER, that the President of the Company is appointed agent for
service under registration statements filed with the SEC, and that he is
duly authorized to receive communications and notices from the SEC and to
exercise such powers given him as agent by the 1933 Act and any rules
thereunder, and any other necessary acts; and
RESOLVED, FURTHER, that if any resolutions are required to be adopted in
connection with any application, registration statement or other document
to be submitted to the SEC or any state or other regulatory agency, such
resolutions be, and they hereby are, deemed adopted in haec verba with the
same
<PAGE>
3
force and effect as if set forth herein at length and that copies thereof
be filed with the minutes of this meeting; and
RESOLVED, FURTHER, that the President and any Senior Vice President of the
Company is authorized, empowered and directed to take such further action
and execute such further documents as they may deem necessary to effect the
actions contemplated by the foregoing resolutions.
WHEREAS, It is deemed to be in the best interest of UNUM Life Insurance
Company (the "Company") to offer and sell variable contracts in connection with
corporate pension and profit-sharing plans which qualify for federal tax
benefits under Section 401(a) of the Internal Revenue Code of 1986; and
WHEREAS, the laws of Maine and other states in which the Company does
business require that a separate account be established to serve as a funding
vehicle for such variable contracts; and
WHEREAS, Section 2537 of the Maine Insurance Code (Title 24-A, M.R.S.A.)
permits the establishment of one or more separate accounts to receive amounts
paid under variable contracts for use in connection with qualified pension and
profit-sharing plans; and
WHEREAS, a contract issued by an insurance company in connection with a
pension or profit sharing plan which meets the requirements of Section 401 of
the Internal Revenue Code of 1986 is exempted from the provisions of the
Securities Act of 1933 ("1933 Act") under Section 3(a)(2) of the 1933 Act; and
WHEREAS, a separate account with assets derived solely from contributions
under pension and profit sharing plans which meet the requirements of Section
401 of the Internal Revenue Code of 1986 is exempted from the provisions of the
Investment Company Act of 1940 ("1940 Act") under Section 3(c)(11) of the 1940
Act;
NOW THEREFORE, the following are duly adopted actions taken by the Board of
Directors of the Company:
RESOLVED, that the Board of Directors of the Company hereby authorizes and
directs the establishment of a separate account for the issuance by the
Company of variable contracts in connection with corporate pension and
profit-sharing plans that are qualified for federal tax benefits under
Sections 401(a) of the Internal Revenue Code of 1986; and
RESOLVED, FURTHER, that such separate account be established pursuant to
Section 2537 of the Maine Insurance Code (Title 24-A, M.R.S.A.), and
designated "Corporate Market Separate Account I" ("Separate Account"); and
RESOLVED, FURTHER, that the income, gains and losses, unrealized or
realized, from assets allocated to the Separate Account shall be credited
to or charged against the Separate Account, without regard to other income,
gains or losses of the Company; and
RESOLVED, FURTHER, that within the Separate Account there may be a number
of divisions or subdivisions with different investment policies and
objectives from which employers can select certain divisions or
subdivisions as investment options for employees under qualified corporate
pension or profit-sharing plans; and
RESOLVED, FURTHER, that the President and any Senior Vice President of the
Company is authorized, empowered and directed to take whatever action may
be necessary to establish and maintain such Separate Account, including,
but not limited to:
Making any required filings to include applications, certificates,
affidavits, covenants, consents to service of process, notifications,
registrations and qualifications with any regulatory authority having
jurisdiction over the activities of the Company;
<PAGE>
4
Establishing such rules and regulations as may be necessary and
appropriate with respect to the management and operation of the
Separate Account;
Providing for the sale of contracts or other funding arrangements
issued by the Company as may be necessary and appropriate, to the
extent such contracts or arrangements provide for allocation of
amounts to the Separate Account;
Providing for custodial or depository arrangements for assets
allocated to the Separate Account;
Providing for accounting, recordkeeping and reporting arrangements for
assets allocated to the Separate Account;
Investing and reinvesting the assets allocated to the Separate Account
in accordance with investment policies specified in the respective
variable contracts;
Providing for investment management arrangements to implement the
Separate Account's investment policies; and
Transferring funds from time to time between the Company's general
investment account and the Separate Account as deemed necessary or
appropriate and consistent with the terms of the contracts; and
RESOLVED, FURTHER, that if any resolutions are required to be adopted in
connection with any application or other document to be submitted to any
state or other regulatory agency, such resolutions be, and they hereby are,
deemed adopted in haec verba with the same force and effect as if set forth
herein at length and that copies thereof be filed with the minutes of this
meeting; and
RESOLVED, FURTHER, that the President and any Senior Vice President of the
Company is authorized, empowered and directed to take such further action
and execute such further documents as they may deem necessary to effect the
actions contemplated by the foregoing resolutions.
WHEREAS, the assets held in the TSAVA Separate Account created pursuant to
the foregoing resolutions must be invested in an investment company ("mutual
fund") registered with the SEC under the 1940 Act; pursuant to the Internal
Revenue Code of 1986 the shares of that mutual fund must not be available to the
general public; and
WHEREAS, certain of the investment objectives of the Company for its
general account, and of the other UNUM insurance companies for their general
accounts, are similar to those envisioned for the TSAVA Separate Account and the
Corporate Market Separate Account I, and it would benefit both the separate
accounts and the general accounts to pool assets in such a mutual fund;
NOW, THEREFORE, the following are duly adopted actions taken by the Board
of Directors of the Company:
RESOLVED, that the Board of Directors of the Company hereby authorizes and
empowers the President and any Senior Vice President to establish a
corporation or other entity to be registered as an investment company under
the 1940 Act, for the purpose of registering shares under the 1933 Act and
offering them to the Company's separate accounts and its general account,
as well as to the other UNUM insurance companies; and
RESOLVED, FURTHER, that if any resolutions are required to be adopted in
connection with any application, registration statement or other document
to be submitted to the SEC or any state or other regulatory agency, such
resolutions be, and they hereby are, deemed adopted in haec verba with the
same force and effect as if set forth herein at length and that copies
thereof be filed with the minutes of this meeting; and
<PAGE>
5
RESOLVED, FURTHER, that the President and any Senior Vice President of the
Company are authorized and empowered to take whatever actions and execute
whatever documents they may deem necessary in order to effect the actions
contemplated by the foregoing resolutions.
<PAGE>
UNUM Life Insurance Company
Excerpt of Meeting of the Board of Directors February 7, 1991 at 9:00 a.m.
Variable Annuity Separate Account
- ---------------------------------
WHEREAS, on July 8, 1988, the Board of Directors of the Company established
a separate account to serve as a funding vehicle for variable annuity contracts
offered in connection with tax deferred plans under Section 403(b) of the
Internal Revenue Code of 1986; and
WHEREAS, it is now deemed to be in the best interest of the Company to
expand the purpose of that separate account so that such variable annuity
contracts may be offered in connection with group plans qualifying for tax
benefits under Sections 401(a), 408 and 457 of the Internal Revenue Code of 1986
as well as with group plans offering non-qualified annuities;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors of the company
hereby authorize the TSAVA Separate Account to be used as a funding vehicle with
group plans qualifying for tax benefits under Sections 401(a), 403(b), 408 and
457 of the Internal Revenue Code of 1986 as well as with group plans offering
non-qualified annuities; and it was further
RESOLVED, that the name of such separate account shall be changed from
TSAVA Separate Account to VA-I Separate Account.
All other resolutions adopted by the Board of Directors on July 8, 1988, with
respect to the TSAVA Separate Account, (now the VA-I Separate Account), remain
in full force and effect.
<PAGE>
GROUP VARIABLE
ANNUITY CONTRACT NO.: EFFECTIVE DATE:
CONTRACTHOLDER:
(Herein referred to as "You" or "Your")
THIS CONTRACT WAS DELIVERED IN THE State/Commonwealth of
_______________________
and is subject to the laws of that jurisdiction.
UNUM by this Contract agrees to provide benefits for Participants in accordance
with the terms and conditions of the Contract. The entire Contract consists of
the provisions on the following pages, and the Application, including any
amendments, schedules, or endorsements.
IN WITNESS HEREOF, UNUM has issued this Contract at Portland, Maine on this
_______________________ day of _____________________, 19__ , and caused this
Contract to be in full force as of its Effective Date as set forth above.
Corporate Secretary President
Registrar
Non-Participating
PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT.
<PAGE>
TABLE OF CONTENTS
I. CONTRACT SPECIFICATIONS
II. DEFINITIONS
III. CONTRIBUTIONS
IV. GUARANTEED INTEREST DIVISION
V. VARIABLE INVESTMENT DIVISION
VI. TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
VII. WITHDRAWALS AND DISTRIBUTIONS
VIII. DEATH BENEFITS
IX. PAYOUT ANNUITIES
X. LOANS
XI. DISCONTINUANCE AND TERMINATION OF CONTRACT
XII. GENERAL PROVISIONS
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ARTICLE I - CONTRACT SPECIFICATIONS
1.1 MINIMUM CONTRIBUTION AMOUNT: Your minimum annual Contribution on behalf of
all Participants under this Contract shall be twenty thousand dollars
($20,000). This minimum figure is for aggregate annual Contributions, not
for each Participant.
1.2 SEPARATE ACCOUNT: VA-I
1.3 DIVISIONS AVAILABLE UNDER THIS CONTRACT:
A. Guaranteed Interest Division
B. Variable Investment Division
1.4 LIMITATIONS ON TRANSFERS AND WITHDRAWALS DURING THE ACCUMULATION PERIOD:
Unlimited transfer requests may be made by a Participant each calendar
year.
1.5 ANNUAL ADMINISTRATION CHARGE:
Twenty-five dollars ($25) per Participant
Twenty-five dollars ($25) per Participant who allocates a contribution,
during the year ending on a Participation Anniversary, to any one (1) or
more of the Sub-Accounts established in the Variable Investment Division.
1.6 ANNUAL MORTALITY AND EXPENSE RISK CHARGE APPLICABLE TO VARIABLE INVESTMENT
DIVISION SUB-ACCOUNTS: Annual rate of one and two-tenths percent (1.20%).
1.7 LOAN SET-UP CHARGE: Fifty dollars ($50) per loan
1.8 PLAN NAME:
1.9 EMPLOYER:
1.10 SYSTEMATIC WITHDRAWAL SET-UP CHARGE: Thirty dollars ($30.00). If the total
Account balance is twenty-five thousand dollars ($25,000), or greater, such
amount will be waived.
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ARTICLE II - DEFINITIONS
2.1 ACCUMULATION UNIT: An accounting unit of measure used to record amounts
of increases to, decreases from and accumulations in each Sub-Account
during the Accumulation Period.
2.2 ACCUMULATION UNIT VALUE: The dollar value of an Accumulation Unit in each
Sub-Account on any Valuation Date.
2.3 ACCUMULATION PERIOD: The period commencing on a Participant's
Participation Date and terminating when the Participant's Account balance
is reduced to zero, either through withdrawal(s), conversion to an
annuity, imposition of charges, payment of a Death Benefit or a
combination thereof.
2.4 ANNUITANT: The person receiving annuity payments under the terms of this
Contract.
2.5 ANNUITY COMMENCEMENT DATE: The date on which UNUM makes the first annuity
payment to the Annuitant as required by the Retired Life Certificate.
This date, as well as the date each subsequent annuity payment is made,
will be the first day of a calendar month.
2.6 ANNUITY CONVERSION AMOUNT: The amount of a Participant's Account applied
toward the purchase of an Annuity.
2.7 ANNUITY CONVERSION FACTOR: The factor applied to the Annuity Conversion
Amount in determining the dollar amount of an annuitant's annuity
payments for Guaranteed Annuities or the initial payment for Variable
Annuities.
2.8 ANNUITY PAYMENT CALCULATION DATE: For Guaranteed Annuities, this is the
first day of a calendar month. For Variable Annuities, this is the
Valuation Date ten (10) business days prior to the first day of a
calendar month.
2.9 ANNUITY PERIOD: The period concurrent with or following the Accumulation
Period, during which an Annuitant's annuity payments are made.
2.10 ANNUITY UNIT: An accounting unit of measure that is used in calculating
the amounts of annuity payments to be made from each Sub-Account during
the Annuity Period.
2.11 ANNUITY UNIT VALUE: The dollar value of an Annuity Unit in each Sub-
Account on any Valuation Date.
2.12 BENEFICIARY: The person(s) designated to receive a Participant's Account
balance in the event of the Participant's death during the Accumulation
Period or the person(s) designated to receive any applicable remainder of
an annuity in the event of the Annuitant's death during the Annuity
Period.
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2.13 BUSINESS DAY: A day on which UNUM and the New York Stock Exchange are
customarily open for business.
2.14 CERTIFICATE: An Active Life Certificate is issued to each Participant
outlining the basic provisions of the Contract. A Retired Life
Certificate is issued to each Annuitant outlining the basic provisions of
his Annuity.
2.15 CONTRIBUTIONS: All amounts deposited by You or the Participant under this
Contract including any amount transferred from another contract.
2.16 DIVISION(S): The Guaranteed Interest Division and/or the Variable
Investment Division named in Section 1.3.
2.17 GENERAL ACCOUNT: All assets of UNUM other than those in the Separate
Account specified in Section 1.2 or any other separate account.
2.18 GROSS WITHDRAWAL AMOUNT: The amount by which a Participant's Account is
reduced when a withdrawal occurs, including any applicable Contingent
Deferred Sales Charge and Annual Administration Charge.
2.19 GUARANTEED ANNUITY: An annuity for which UNUM guarantees the amount of
each payment as long as the annuity is payable.
2.20 GUARANTEED INTEREST DIVISION: The Division maintained by UNUM for these
and other contracts for which UNUM guarantees the principal amount and
interest credited thereto, subject to any fees and charges as set forth
in this Contract. Amounts allocated to the Guaranteed Interest Division
are part of the General Account.
2.21 NET CONTRIBUTIONS: The sum of all Contributions credited to a Participant
Account less any net Withdrawal Amounts, outstanding loan (including
principal and due and accrued interest) and amounts converted to a Payout
Annuity.
2.22 NET WITHDRAWAL AMOUNT: The amount paid to a Participant when a withdrawal
occurs.
2.23 PARTICIPANT: A person who has enrolled under this Contract and maintains
a Participant's Account.
2.24 PARTICIPANT'S ACCOUNT: An account maintained for a Participant during the
Accumulation Period, the total balance of which equals the Participant's
Account balance in the Variable Investment Division plus the
Participant's Account balance in the Guaranteed Interest Division.
2.25 PARTICIPATION ANNIVERSARY: For each Participant, a date at one year
intervals from that Participant's Participation Date. If an anniversary
occurs on a non-Business Day, it is treated as occurring on the next
Business Day.
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2.26 PARTICIPATION DATE: A date assigned to each Participant corresponding to
the date on which the first Contribution on behalf of that Participant
under this Contract is received by UNUM. A Participant will receive a new
Participation Date if such Participant makes a Total Withdrawal as
defined in Section 7.2 and Contributions on behalf of the Participant are
resumed under any Contract.
2.27 PARTICIPATION YEAR: A period beginning with one Participation Anniversary
and ending the day before the next Participation Anniversary, except for
the first Participation Year that begins with the Participation Date.
2.28 PAYOUT ANNUITY: A series of payments paid under the terms of this
Contract to a person. A Payout Annuity may be either a Guaranteed Annuity
or a Variable Annuity.
2.29 PENDING ALLOCATION ACCOUNT: An account established under the Variable
Investment Division that invests unallocated contributions in shares of a
money market mutual fund. UNUM does not guarantee the principal amount or
investment results.
2.30 PLAN: The Plan named in Section 1.8 that qualifies for federal tax
benefits under Section 403(b) of the Internal Revenue Code of 1986 and
under which this Contract is authorized.
2.31 SEPARATE ACCOUNT: The VA-I Separate Account is a group of assets
segregated from UNUM's General Account whose income, gains and losses,
realized or unrealized, are credited to or charged against the Separate
Account without regard to other income, gains or losses of UNUM.
Additional information is provided in Section 12.15.
2.32 SUB-ACCOUNT(S): An account established in the Variable Investment
Division that invests in shares of a corresponding mutual fund.
2.33 UNUM: UNUM Life Insurance Company of America, at it's home office in
Portland, Maine.
2.34 VALUATION DATE: A Business Day. Accumulation and Annuity Units are
computed on each Valuation Date as of the close of trading on the New
York Stock Exchange.
2.35 VALUATION PERIOD: A period used in measuring the investment experience of
each Sub-Account. The Valuation Period begins at the close of trading on
the New York Stock Exchange on one Valuation Date and ends at the
corresponding time on the next Valuation Date.
2.36 VARIABLE ANNUITY: An annuity with payments that increase or decrease in
accordance with the investment results of the selected Sub-Account(s).
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2.37 VARIABLE INVESTMENT DIVISION: The Division specified in Section 1.3 that
is maintained by UNUM for this and other Section 403(b) UNUM contracts
for which UNUM does not guarantee the principal amount or investment
results. Amounts allocated to the Variable Investment Division are part
of the Separate Account.
2.38 YOU or YOUR: The Contractholder named on the face page of this Contract.
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ARTICLE III - CONTRIBUTIONS
3.1 INITIAL CONTRIBUTION: The initial Contribution for a Participant will be
credited to the Participant's Account no later than two (2) Business Days
after it is received by UNUM if it is preceded or accompanied by a
completed enrollment form containing all the information necessary for
processing the Participant's Contribution.
3.2 ALLOCATION OF CONTRIBUTIONS: Participant Contributions will be allocated
to the Divisions and Sub-Accounts according to the percentages requested
by the Participant. The allocation percentage can be any whole percent
and may be changed on an unlimited basis per year. You or the Participant
shall notify UNUM in writing in a form acceptable to UNUM or by telephone
in accordance with procedures published by UNUM of such changes.
3.3 PAYMENT OF SUBSEQUENT CONTRIBUTIONS: You shall forward Contributions to
UNUM specifying the amount being contributed on behalf of each
Participant. You shall forward such Contributions and provide such
allocation information in accordance with procedures established by UNUM.
The Contributions shall be allocated among the Guaranteed Interest
Division and each Sub-Account in accordance with the percentage
information provided by the Participant subject to the terms of the Plan.
3.4 CHARACTERIZATION OF TRANSFER CONTRIBUTIONS: For all Contributions
transferred from another Contract, UNUM must be provided with the
following information in a form acceptable to UNUM:
(a) The source of the Contributions transferred (e.g., salary reduction,
employer match or post-tax Contributions). UNUM will record all such
transferred amounts where no source information is provided as
salary reduction Contributions.
(b) Identification of Contributions transferred as Contributions made or
earnings credited:
(i) prior to January 1, 1987;
(ii) during 1987 and 1988; or
(iii) subsequent to December 31, 1988.
Amounts not so identified will be treated as attributable to period
(iii) for purposes of Sections 7.4 and 7.5.
3.5 MAXIMUM CONTRIBUTION: Total and overall limitations on Contributions in a
calendar year for a Participant are subject to the limits imposed under
Sections 402(g), 403(b) and 415 of the Internal Revenue Code of 1986 (the
Code), as it may be amended from time to time. UNUM assumes no
responsibility for monitoring these limits for a Participant.
3.6 VALUATION: A Guaranteed Interest Division Contribution will be allocated
as of the Business Day that UNUM receives the Contribution and UNUM will
credit interest beginning with the next calendar day following the
Business Day that UNUM receives the Contribution.
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For a Variable Investment Division Sub-Account Contribution, UNUM will
credit a Participant's Account with the number of Accumulation Units for
each Sub-Account selected by the Participant with the number of
Accumulation Units equal to the Contribution Amount divided by the
Accumulation Unit Value which is next computed following UNUM's receipt
of the Contribution.
3.7 ANNUAL ADMINISTRATION CHARGE: UNUM will deduct the amount stated in
Section 1.5 from each Participant's Account each year on the last
Business Day of the month in which his Participation Anniversary occurs
unless the Contractholder pays the charge in a single payment. If the
Participant's Account balance is less than this amount on that day, UNUM
will deduct the entire balance from his Account.
When a Total Withdrawal of a Participant's Account, as defined in Section
7.2, occurs on a date other than the last Business Day of the month in
which his Participation Anniversary occurs, UNUM will first deduct the
amount stated in Section 1.5 from his Participant's Account.
ANNUAL ADMINISTRATION CHARGE: UNUM will deduct the amount stated in
Section 1.5 on a pro-rata basis from the Participant's Variable
Investment Division Account balance each year on the last Business Day of
the month in which his Participation Anniversary occurs unless the
Contractholder pays the charge in a single payment. If the Participant's
Variable Investment Division Account balance is less than this amount on
that day, UNUM will deduct the entire balance from his Variable
Investment Division Account.
When a Participant requests, on a date other than the last Business Day
of the month in which his Participation Anniversary occurs,
(a) a withdrawal, or
(b) a transfer,
from the Variable Investment Division, which would leave a remaining
balance of less than the Annual Administration Charge defined in Section
1.5, UNUM will first deduct the amount stated in Section 1.5 from the
Participant's Variable Investment Division Account balance prior to the
Withdrawal or Transfer.
3.8 UNALLOCATED CONTRIBUTION: If a properly completed enrollment form has not
been received for a Participant, UNUM will deposit such Contributions to
the Pending Allocation Account as described in ARTICLE II- DEFINITIONS,
unless such Contributions are designated to another Account in accordance
with the Plan.
UNUM will follow up with the Contractholder monthly for a period of
ninety (90) days for enrollment information for Participants with
deposits in the Pending Allocation Account.
Within two (2) business days of receipt of a completed enrollment form,
the Participant's Account balance in the Pending Allocation Account will
be transferred to the Divisions and/or Sub-Accounts according to the
percentages requested by the Participant. When the
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completed enrollment form is received, the Participation Date will be the
date on which the first Contribution on behalf of the Participant was
deposited into the Pending Allocation Account.
If an enrollment form is not received after the ninety (90) day notice, a
Participant's Account balance in the Pending Allocation Account will be
refunded to the Contractholder within one hundred five (105) days of the
date of the initial Contribution. Contributions received after a refund
while there is still no allocation information, will be deposited to the
Pending Allocation Account.
The Pending Allocation Account will only be used for the purpose
mentioned above; Participants may not direct a portion of their
Contributions to this Account. Contributions deposited in the Pending
Allocation Account will not be afforded the same rights as Contributions
under this Contract. The following Articles and/or Sections under this
Contract will not be applicable: (i) Section 3.7 ANNUAL ADMINISTRATION
CHARGE, (ii) ARTICLE VI - TRANSFERS BETWEEN DIVISION AND SUB-ACCOUNTS,
(iii) ARTICLE VII -WITHDRAWALS AND DISTRIBUTIONS, (iv) ARTICLE IX -PAYOUT
ANNUITIES, and (v) ARTICLE X - LOANS.
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ARTICLE IV - GUARANTEED INTEREST DIVISION
4.1 PARTICIPANT'S ACCOUNT BALANCE IN GUARANTEED INTEREST DIVISION: The
dollar value of a Participant's Account balance in the Guaranteed
Interest Division as of a date will be equal to the sum of:
(a) Contributions allocated, on behalf of the Participant, to the
Guaranteed Interest Division on or prior to that date, and
(b) Amounts transferred, on behalf of the Participant, to the Guaranteed
Interest Division from the Variable Investment Division on or prior
to that date, less any;
(c) Gross Withdrawal Amounts from the Guaranteed Interest Division, on
behalf of the Participant, on or prior to that date; and
(d) Amounts transferred, on behalf of the Participant, to the Variable
Investment Division on or prior to that date; and
(e) Applicable charges to the Participant's Account on or prior to that
date; and
(f) Annuity Conversion Amounts, on behalf of the Participant, on or
prior to that date, plus any;
(g) Interest credited to the Participant's Account balance in the
Guaranteed Interest Division on or prior to that date.
4.2 INTEREST: UNUM will credit interest each day to the portion of the
Participant's Account balance in the Guaranteed Interest Division, using
the previous day's ending balance. The rate of interest credited each
day, if compounded for three hundred sixty-five (365) days, yields the
annual interest rate in effect for the day.
UNUM will declare in advance a guaranteed interest rate which will be
effective for all amounts in the Participant's Account balance in the
Guaranteed Interest Division during the designated year. This rate will
never be less than three percent (3%). However, this minimum rate will
not be considered for purposes of Section 10.6 (EFFECT OF LOAN ON
PARTICIPANT'S ACCOUNT) under this Contract.
UNUM may also declare in advance separate interest rate guarantees which
are in excess of the guaranteed interest rate for some or all of the
Participant's Account balance in the Guaranteed Interest Division for
specific period(s) during the designated year.
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ARTICLE V - VARIABLE INVESTMENT DIVISION
5.1 PARTICIPANT'S ACCOUNT BALANCE IN THE VARIABLE INVESTMENT DIVISION:
The Participant's Account balance in the Variable Investment Division is
equal to the sum of the dollar value of a Participant's Account balance
in each Sub-Account as of the end of a Valuation Period which will be
equal to the product of:
(a) The Participant's number of Accumulation Units as of the end of that
Valuation Period; times
(b) The Accumulation Unit Value as of the end of that Valuation Period.
5.2 ACCUMULATION UNITS: The number of Accumulation Units a Participant has
in a Sub-Account as of the end of any Valuation Period is the number of
Accumulation Units the Participant had in that Sub-Account as of the end
of the preceding Valuation Period; plus
(a) The number of Accumulation Units attributable to amounts deposited
to or transferred to that Sub-Account during the current Valuation
Period; minus
(b) The number of Accumulation Units attributable to amounts transferred
from, converted to an annuity, removed as a charge, paid as a death
benefit, or withdrawn from that Sub-Account during the current
Valuation Period.
5.3 ACCUMULATION UNIT VALUE: The Accumulation Unit Value for each Sub-
Account was set initially at ten dollars ($10), except for the Index
Account which was set at nine and nine hundred six one thousands
($9.9060) of a dollar. Subsequent Accumulation Unit Values are determined
by multiplying;
(a) The Net Investment Factor for the current Valuation Period by;
(b) The Accumulation Unit Value as of the end of the immediately
preceding Valuation Period.
5.4 NET INVESTMENT FACTOR: The Net Investment Factor is used to measure the
investment experience of a Sub-Account net of the Mortality and Expense
Risk Charge as defined in Section 5.5. The Net Investment Factor for a
Valuation Period is equal to (a) divided by (b) with the result
multiplied by (c) and adjusted by the amount per share of any taxes which
are incurred by UNUM because of the existence of the Sub-Account;
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where (a) is;
the net asset value per share of the underlying mutual fund held by
the Sub-Account as of the end of the Valuation Period, plus;
the amount per share of any dividend or capital gain distribution
from the underlying mutual fund held by the Sub-Account during the
Valuation Period,
where (b) is;
the net asset value per share of the underlying mutual fund held by
the Sub-Account as of the end of the immediately preceding Valuation
Period,
where (c) is;
one (1.00) minus the Annual Mortality and Expense Risk Charge shown
in Section 1.6 to the n/365th power where n equals the number of
calendar days since the immediately preceding Valuation Date.
5.5 MORTALITY AND EXPENSE RISK CHARGE: This charge is imposed to compensate
UNUM for its assumption of mortality and expense risks under this
Contract. This charge is shown on an annualized basis in Section 1.6 and
is deducted on a daily basis as described in Section 5.4. This charge may
not be increased without the approval of a majority of all affected UNUM
contractholders.
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ARTICLE VI - TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
6.1 TRANSFERS DURING ACCUMULATION PERIOD: Subject to the limitations stated
in Section 1.4, Participants may transfer all or part of their Account
balance in any Division or Sub-Account to another Division or Sub-
Account.
You or the Participant may make a transfer request by notifying UNUM in
writing in a form acceptable to UNUM or by telephone in accordance with
procedures published by UNUM.
6.2 TRANSFERS DURING ANNUITY PERIOD: An Annuitant may not transfer any part
of the Annuitant's Annuity Conversion Amount.
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ARTICLE VII - WITHDRAWALS AND DISTRIBUTIONS
7.1 WITHDRAWALS DURING THE ACCUMULATION PERIOD: During the Accumulation
Period, a Participant may withdraw from any or all Divisions, subject to
the restrictions stated in Section 7.4, all or part of the Participant's
Account balance in the Division or Sub-Accounts remaining after
reductions for any applicable Annual Administration Charge (imposed on
Total Withdrawals), Contingent Deferred Sales Charge (CDSC), premium
taxes and outstanding loan, including the loan security thereon. Annuity
Conversion Amounts are not considered withdrawals.
All withdrawal requests must be submitted in a form acceptable to UNUM
and must indicate the amount and the Division(s) from which the
withdrawal is to be made.
UNUM reserves the right to delay payment of Guaranteed Interest Division
withdrawal amounts per Section 12.8.
7.2 TOTAL WITHDRAWALS: A Total Withdrawal of a Participant's Account will
occur when a Participant who has no outstanding loans
(a) requests the liquidation of his entire Account balance, or
(b) requests an amount such that the amount requested plus any CDSC as
defined in Section 7.6 results in a remaining Participant's Account
balance being less than the applicable Annual Administration Charge
as defined in Section 1.5, in which case, the request is treated as
if it were a request for liquidation of the Participant's entire
Account balance.
The Participant's Active Life Certificate must be surrendered to UNUM
when a Total Withdrawal of a Participant's Account occurs.
A Participant refund under the Free-look provisions of Section 12.17 is
not considered a Total Withdrawal under this Article.
7.3 PARTIAL WITHDRAWALS: A Partial Withdrawal of a Participant's Account will
occur when:
(a) A Participant who has an outstanding loan makes a withdrawal; or
(b) A Participant who has no outstanding loans, requests an amount less
than a total withdrawal.
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7.4 WITHDRAWAL REQUIREMENTS FOR SECTION 403(b) PLANS: Withdrawals are subject
to the requirements set forth in Section 403(b) of the Code and
regulations thereof.
(a) Withdrawal Requests for Participants under Section 403(b) Plans
Subject to Title I of ERISA: You must make withdrawal requests on
behalf of Participants. All withdrawal requests will require Your
written authorization and written documentation specifying the
portion of the Participant's Account balance which is available for
distribution to the Participant.
(b) Withdrawal Requests for Participants under Section 403(b) Plans not
Subject to Title I of ERISA: Any portion of the Participant's
Account balance that has been recorded by UNUM as a salary reduction
contribution made and/or earnings credited prior to January 1, 1989,
(including transferred amounts recorded as such pursuant to Section
3.4), may be withdrawn for any reason. Any portion of the
Participant's Account balance that has been recorded by UNUM as a
salary reduction Contribution made and/or earnings credited after
December 31, 1988, (including transferred amounts recorded as such
pursuant to Section 3.4), are subject to the withdrawal restrictions
stated in Section 403(b) of the Code. Participants must certify to
UNUM (and provide supporting information, if requested), that an
event permitting withdrawal has occurred and that UNUM may rely on
such representation in granting the withdrawal request.
7.5 MINIMUM DISTRIBUTION REQUIREMENTS FOR SECTION 403(b) PLANS: Section
403(b)(10) of the Code and regulations thereunder require that
distributions be made from this Contract in a manner which satisfies
requirements similar to the requirements of Section 401(a)(9) including
the incidental death benefit requirements of Section 401(a)(9)(G).
(1) Section 401(a)(9) requires that:
(a) the Participant's Account be distributed not later than the
required beginning date; or
(b) the Participant's Account be distributed not later than the
required beginning date, over the life of the Participant or
over the lives of the Participant and a designated Beneficiary.
(2) A Participant may choose to have the Participant's Account
distributed in one of the following manners:
(a) As a lump sum payment;
(b) As an annuity meeting the requirements of Section 401(a)(9) of
the Code;
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(c) As an annual distribution where the amount distributed each
calendar year is at least an amount equal to the quotient
obtained by dividing: (a) the amount of the Participant's
Account required to be distributed as of December 31 of the
calendar year immediately preceding the calendar year for which
the distribution is being made; by (b) the life expectancy of
the Participant, or the life expectancy of the Participant and
the Beneficiary; or
(d) A combination of the above.
With respect to (c) and (d) above, the life expectancy of the Participant
and a surviving spouse Beneficiary may be recalculated, but not more
frequently than annually. A non-spouse Beneficiary's life expectancy may
not be recalculated.
7.6 CONTINGENT DEFERRED SALES CHARGE (CDSC): The following schedule of CDSC
shall apply to all Withdrawal Amounts.
(a) WHEN A WITHDRAWAL IS REQUESTED THE CDSC WILL
AND ONE OR MORE OF THE EQUAL:
FOLLOWING CONDITIONS IS MET:
The Participant has died 0%
The Participant has incurred a disability for 0%
which he is receiving Social Security
payments
The Participant has attained age fifty-nine 0%
and one-half (59 1/2)
The Participant has separated from service 0%
with the Contractholder
(b) For all other amounts subject to a CDSC, the CDSC will be in
accordance with the schedule below.
During Participation Year CDSC Percent
1 - 6 5%
7 4%
8 3%
9 2%
10 1%
11 and later 0%
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UNUM requires reasonable proof necessary to verify that the withdrawal
meets the conditions described above in Section 7.6(a) and such proof
must be submitted with the withdrawal request. If You or the Participant
do not furnish the proof requested by UNUM, the CDSC stated in Section
7.6(b) shall apply.
The CDSC on any withdrawal may be reduced or eliminated but only to the
extent that UNUM anticipates that it will incur lower sales expenses or
perform fewer sales services due to economies arising from (i) the size
of the particular group, (ii) an existing relationship with the
Contractholder, (iii) the utilization of mass enrollment procedures, or
(iv) the performance of sales functions by the Contractholder or an
employee organization which UNUM would otherwise be required to perform.
In no event will the CDSC, when added to any CDSC previously imposed due
to a Participant withdrawal, exceed eight and one-half percent (8.5%) of
the cumulative Contributions to a Participant's Account.
7.7 SYSTEMATIC WITHDRAWAL OPTION: Any Participant who: (a) is at least age
fifty-nine and one-half (59 1/2), or (b) is disabled and receiving Social
Security disability benefits, or (c) is separated from service with the
Contractholder may elect this option. A Participant must also have a
vested Participant Account balance of at least ten thousand dollars
$10,000) of pre-tax Contributions under this Contract at the date of the
election.
Amounts held for a spousal payee under a Qualified Domestic Relations
Order (QDRO) shall be recognized as eligible for the Systematic
Withdrawal Option. Any spousal payee who wishes to elect this
distribution option must also meet the minimum ten thousand dollars
($10,000). Account balance requirement and either the age or disability
requirement as discussed above.
A Participant may elect to receive monthly, quarterly, semi-annual, or
annual payments in a flat amount or payments on a monthly basis for an
interest equivalency amount. An interest equivalency amount is an
approximation of the interest earned between each payment period based
upon the interest rate in effect at the beginning of each respective
payment period. This amount will be determined by UNUM. (See Attachment I
for illustration.) A Participant may change the frequency, payment type,
or payment amount of his Systematic Withdrawal Option by submitting a
request in writing on a form acceptable to UNUM. A Participant may make
such a change only once during each calendar year.
A Participant may at any time direct UNUM to cease payments under this
option provided the request is made in writing. A Participant who chooses
to stop receiving systematic withdrawals may not request that any
systematic withdrawal payments begin again until the next calendar year.
Systematic withdrawals shall be withdrawn from amounts allocated to the
Guaranteed Interest Division of the Participant's Account balance. If the
balance of the Guaranteed Interest Division is not sufficient to meet the
payment amount requested, the Participant, in
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writing, may direct UNUM on a form acceptable to UNUM to transfer the
appropriate amount to the Guaranteed Interest Division; otherwise, such
payment will cease.
UNUM will deduct the Systematic Withdrawal Set-Up Charge indicated in
Section 1.10 from the Participant's Account balance each time a
Systematic Withdrawal Option is established. The applicable CDSC, if any,
will be assessed on each systematic withdrawal payment.
Payments under this option shall stop upon the earliest of the following
events.
(a) On the date of the Participant's death. A Beneficiary who is a
spouse may elect this option by requesting it in writing on a form
acceptable to UNUM, unless election of this form of benefit would
violate any other requirements of this contract. The spousal
Beneficiary must meet the ten thousand dollar ($10,000) minimum
Account balance requirement prior to electing the Systematic
Withdrawal Option; or
(b) When there is an insufficient Participant Account balance after
deducting the applicable CDSC and Annual Administration Charge, if
any, to pay the amount requested; or
(c) The Participant fails to meet the requirements of the Systematic
Withdrawal Option as outlined above in the first (1st) paragraph of
this Section.
If a disabled or terminated Participant, who is currently receiving a
Systematic Withdrawal Option payment, returns to service with the
Contractholder, the Contractholder or Participant must notify UNUM in
writing within thirty (30) days from the date of return to service. UNUM
reserves the right to discontinue the Systematic Withdrawal Option
payment under these circumstances.
If a Participant wishes to exercise this option under another UNUM
Annuity Contract, such request shall be considered separate from this
Contract and shall follow the Systematic Withdrawal Option rules under
that Annuity Contract, if permitted.
UNUM may, at its option, discontinue the Systematic Withdrawal Option
under this Contract at any time provided You are given at least thirty
(30) days advance written notice.
7.8 DIRECT ROLLOVER OPTION: Beginning January 1, 1993, a Participant or
Beneficiary may elect this option for any distribution that qualifies as
an Eligible Rollover Distribution as defined by Section 402(c) of the
Internal Revenue Code and that meets all the following requirements:
(1) The distribution must be paid directly to either a single Individual
Retirement Account or to a single Tax Deferred Annuity. The check,
wire, or other form of remittance shall be made payable to the
trustee, custodian, or financial institution sponsoring the
Individual Retirement Account or Tax Deferred Annuity. The form of
remittance will not be an instrument that can be negotiated by the
Participant.
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(2) The Participant must provide, in a form acceptable to UNUM, all
information necessary to make the payment to an Individual
Retirement Account or Tax Deferred Annuity.
(3) The Participant or Beneficiary may not revoke a request for payment
under this option for any payment after UNUM has received a written
request for a direct rollover.
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ARTICLE VIII - DEATH BENEFITS
8.1 DEATH BENEFIT DURING THE ACCUMULATION PERIOD: If death of the Participant
occurs during the Accumulation Period, UNUM will pay the Beneficiary, if
one is living, the greater of the following amounts:
(a) The Net Contributions, or
(b) The Participant's Account balance less any outstanding loan
(including principal and due and accrued interest).
UNUM will calculate the Death Benefit as of the end of the Valuation
Period during which it receives both satisfactory notification of the
Participant's death, pursuant to Section 8.2, and the election of a form
of benefit pursuant to Section 8.3. If no election is made pursuant to
Section 8.3 within sixty (60) days following UNUM's receipt of
satisfactory notice of death, the Death Benefit will be calculated as of
the end of the Valuation Period during which that sixtieth (60th) day
occurs.
If UNUM makes a withdrawal payment pursuant to a Participant request
prior to receiving notice that the Participant has died, but subsequent
to the Participant's death, UNUM will deduct that payment from each of
(a) and (b) above in calculating the Death Benefit.
8.2 NOTIFICATION OF DEATH: UNUM must be notified of a Participant's death no
later than six (6) months from the Participant's date of death in order
for the Beneficiary to receive the Death Benefit amount described in
Section 8.1(a) above. Such notification must be in a form satisfactory to
UNUM. Beneficiaries for whom notification of a Participant's death is
received more than six (6) months after the Participant's date of death
shall receive the Death Benefit amount described in Section 8.1(b) above.
8.3 PAYMENT OF DEATH BENEFIT: Within sixty (60) calendar days after UNUM
receives satisfactory notification of the Participant's death, the
Beneficiary must make an election to have the Death Benefit applied in
one of the following ways:
(a) As a lump sum payment to the Beneficiary; or
(b) Towards an annuity to be distributed in substantially equal
installments over the life expectancy of the Beneficiary or a period
certain not exceeding the life expectancy of the Beneficiary; or
(c) A combination of the above.
A Beneficiary who does not make an election pursuant to this section
within sixty (60) days after UNUM receives notification of the
Participant's death will receive a lump sum payment calculated in
accordance with Section 8.1(b) above.
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If the Beneficiary is someone other than the spouse of the deceased
Participant, the Code provides that the Beneficiary may not elect an
annuity which would commence later than December 31 of the calendar year
following the calendar year of the Participant's death. If a non-spousal
Beneficiary elects to receive payment in a single lump sum, such payment
must be received no later than December 31 of the fourth (4th) calendar
year following the calendar year of the Participant's death.
If the Beneficiary is the surviving spouse of the deceased Participant,
under the Code, distributions are not required to begin earlier than
December 31 of the calendar year in which the Participant would have
attained age seventy and one-half (70-1/2). If the surviving spouse dies
before the date on which annuity distributions commence, then, for
purposes of the Death Benefit, the surviving spouse shall be deemed to be
the Participant.
If there is no living named Beneficiary on file with UNUM at the time of
a Participant's death, UNUM will pay the Death Benefit to the
Participant's estate in a single lump sum upon receipt of satisfactory
proof of the Participant's death, but not later than December 31 of the
fourth (4th) calendar year following the calendar year of the
Participant's death. Valuation of the Death Benefit shall occur as of the
end of the Valuation Period during which due proof of the Participant's
death is received by UNUM.
8.4 DEATH DURING THE ANNUITY PERIOD: If the Annuitant dies during the Annuity
Period, the Beneficiary, if any, or the Annuitant's estate will receive
the amount payable, if any, according to the in-force annuity options.
Any remaining Participant's Account balance will be paid in accordance
with the provisions of this Article.
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ARTICLE IX - PAYOUT ANNUITIES
9.1 ELECTION OF PAYOUT ANNUITY OPTION: A Participant eligible to receive a
distribution under the Code or a Beneficiary of a deceased Participant
may notify UNUM in writing in a form acceptable to UNUM that the
Participant or the Beneficiary is electing to convert all or part of the
Participant's Account balance or Death Benefit to a Payout Annuity option
available under this Contract. Upon being notified of such an election,
UNUM shall calculate the amount to be converted to a Payout Annuity as
either the Participant's Account balance, or a portion thereof, or the
Death Benefit as of the initial Annuity Payment Calculation Date, as
appropriate, less the charge for premium taxes, if any.
If the Participant's Account balance or the Beneficiary's Death Benefit
is less than two thousand dollars ($2,000) or if the amount of the first
scheduled payment is less than twenty dollars ($20), UNUM may, at its
option, cancel the Payout Annuity and pay the Participant or Beneficiary
his entire Account balance or Death Benefit in a lump sum.
9.2 GUARANTEED ANNUITY: The payment amount is determined by dividing the
Annuitant's Annuity Conversion Amount in the Guaranteed Interest Division
as of the initial Annuity Payment Calculation Date by the applicable
Annuity Conversion Factor as defined in Section 9.4.
9.3 VARIABLE ANNUITY: The initial payment amount of the Annuitant's Variable
Annuity for each Sub-Account is determined by dividing his Annuity
Conversion Amount in each Sub-Account as of the initial Annuity Payment
Calculation Date by the applicable Annuity Conversion Factor as defined
in Section 9.4.
The amount of the Annuitant's subsequent Variable Annuity payment for
each Sub-Account is determined by:
(a) Dividing the Annuitant's initial Variable Annuity payment amount by
the Annuity Unit Value for that Sub-Account selected for his
interest rate option as described in Section 9.4 as of his initial
Annuity Payment Calculation Date; and
(b) Multiplying the resultant number of annuity units by the Annuity
Unit Values for the Sub-Account selected for his interest rate
option for his respective subsequent Annuity Payment Calculation
Dates.
The Annuity Unit Value for all Sub-Accounts for all interest rate options
will initially be set at ten dollars ($10). Each subsequent Annuity Unit
Value for a Sub-Account for an interest rate option is determined by:
Dividing the Accumulation Unit Value for the Sub-Account as of the
subsequent Annuity Payment Calculation Date (APCD) by the
Accumulation Unit Value for the Sub-Account as of the immediately
preceding APCD,
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Dividing the resultant factor by one (1.00) plus the interest rate
option to the n/365 power where n is the number of days from the
immediately preceding APCD to the subsequent APCD, and
Multiplying this factor times the Annuity Unit Value as of the
immediately preceding APCD.
9.4 BASIS OF ANNUITY CONVERSION FACTORS:
(a) Guaranteed Annuities - The maximum Annuity Conversion Factors that
may be used by UNUM under this Contract are based on the 1983
Individual Annuity Mortality Table, set back four (4) years, and an
interest rate of three percent (3.0%). From time to time, lower
conversion factors may be used by UNUM. (Lowering the conversion
factor will increase the amount of the annuity payment.)
(b) Variable Annuities - The Annuity Conversion Factors which are used
to determine the initial payments are based on the 1983 Individual
Annuity Mortality Table, set back four (4) years, and an interest
rate in an integral percentage ranging from zero to six percent (0
to 6.00%) as selected by the Annuitant.
9.5 PAYOUT ANNUITY OPTIONS: The following Payout Annuity options are
available:
(a) Life
(b) Life with payments guaranteed for ten (10), fifteen (15) or twenty
(20) years
(c) Joint and Survivor
(d) Payments guaranteed for ten (10), fifteen (15) or twenty (20) years
(e) Other offered by UNUM.
To the extent option (d) is elected for a Variable Annuity, the Annuitant
may request at any time during the payment period that the present value
of any remaining installments be paid in one lump sum. However, any lump
sum so elected will be treated as a withdrawal during the Accumulation
Period subject to the applicable CDSC stated in Section 7.6.
9.6 RETIRED LIFE CERTIFICATE: Once an annuity option is selected by a
Participant, or the Beneficiary of a deceased Participant, UNUM will
issue to the Annuitant an appropriate Certificate evidencing UNUM's
obligations.
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ARTICLE X - LOANS
10.1 GENERAL: During a Participant's Accumulation Period, the Participant, if
permitted by the applicable Section 403(b) Plan, may apply for a loan
under this Contract by completing a loan application available from UNUM.
Loans are secured by the Participant's Account balance in the Guaranteed
Interest Division.
10.2 RESTRICTIONS ON LOAN AMOUNT: The amount and terms of a loan are subject
to the restrictions imposed under Section 72(p) of the Code, as it may be
amended from time to time.
Additionally, the initial amount of a Participant's loan may not exceed
ninety percent (90%) of the Participant's Account balance in the
Guaranteed Interest Division.
10.3 MINIMUM LOAN AMOUNT: The initial amount of a loan must be at least one
thousand dollars ($1,000).
10.4 NUMBER OF LOANS OUTSTANDING: A Participant may have only one loan
outstanding at any time and may not establish more than one loan in any
six (6) month period. However, a Participant may renegotiate an
outstanding loan balance once during the term of the loan.
10.5 LOAN INTEREST RATE: The initial interest rate on a loan will be the
lesser of (a) the rate being credited in the Guaranteed Interest Division
as of the date of the loan and (b) the Moody's Corporate Bond Yield
Average, rounded to the nearest five basis points (0.05%) for the first
month in the calendar quarter which precedes the date of the loan. The
loan interest rate will remain fixed for the term of the loan, unless the
initial interest rate on a hypothetical new loan to the Participant would
be lower than the Participant's actual loan rate by more than fifty basis
points (0.50%). In such case, the loan interest rate will be reduced to
such lower rate as of the first day that such lower rate would
hypothetically be effective.
10.6 EFFECT OF LOAN ON PARTICIPANT'S ACCOUNT: When a Participant takes a loan,
UNUM will subdivide his Participant's Account balance in the Guaranteed
Interest Division by establishing a loan reserve account in an amount
initially equal to the initial loan amount. Funds held in the loan
reserve account are held as security for the loan and will accrue
interest at a rate which is three percent (3.0%) below the loan interest
rate. To the extent that the loan interest rate is subsequently reduced,
the rate credited to funds in the loan reserve account will also be
reduced in order to maintain the three percent (3.0%) differential.
As the Participant makes repayments to UNUM on the loan, an amount equal
to the principal component of the repayment, plus the interest accrued in
the loan reserve account, will be transferred from his loan reserve
account back to his Participant's Account balance in the Guaranteed
Interest Division.
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In addition, an amount equal to ten percent (10%) of the principal of the
loan will be held as security to cover the interest and the CDSC, should
the Participant fail to make the required quarterly payments of principal
and interest. This amount will earn interest at the interest rate in
effect in the Guaranteed Interest Division but will not be available for
withdrawals. As the principal is reduced, the amount held as security
will also be reduced.
10.7 DEFAULT IN LOAN REPAYMENT: If a Participant fails to make any quarterly
principal and interest payment within thirty (30) days of the payment due
date, his loan will be in default and UNUM will deduct from his loan
reserve account and from his Participant's Account balance in the
Guaranteed Interest Division the principal, due and accrued interest, and
any CDSC thereon, as of the default date. UNUM will also recharacterize
the principal and due and accrued interest as a withdrawal.
10.8 RESERVATION OF RIGHTS BY UNUM: UNUM reserves the right to:
(a) Delay making a loan for up to six (6) months from the date the loan
application is received; or
(b) With ninety (90) days written notice to You, amend any portion of
the loan specifications with regard to applications for new loans;
or
(c) With ninety (90) days written notice to You, discontinue making new
loans under this Contract.
10.9 LOAN SET-UP CHARGE: UNUM will charge a Participant the amount specified
in Section 1.7 each time a loan is established. The amount will be
withdrawn from the Participant's Account balance.
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ARTICLE XI - DISCONTINUANCE AND TERMINATION OF CONTRACT
11.1 CONTRACT DISCONTINUANCE BY CONTRACTHOLDER: You may discontinue this
Contract by written notice to UNUM. This contract will be deemed
discontinued on the later of the date You specify or the date the written
notice is received by UNUM.
11.2 CONTRACT DISCONTINUANCE BY UNUM: UNUM may, at its option, discontinue
this Contract in whole or in part if (a) You fail to meet the Minimum
Contribution Amount specified in Section 1.1 or (b) a modification in
this Contract is necessary in order to comply with Federal or State
requirements, including the Employee Retirement Income Security Act of
1974, and You refuse to accept a substantially similar contract offered
by UNUM that incorporates such modification. Discontinuance pursuant to
this Section shall be effective as of a date specified by UNUM, provided
You are given at least fifteen (15) days advance written notice in which
to cure any remediable defaults. Discontinuance by UNUM supersedes any
date established under Section 11.1.
11.3 EFFECT OF DISCONTINUANCE: As of the date this Contract is discontinued
under either 11.1 or 11.2 above:
(a) No further Contributions will be accepted by UNUM.
(b) Participants will be allowed to request withdrawals subject to the
restrictions set forth in Section 403(b) of the Code and regulations
thereof.
(c) Participants will be allowed to request transfers from each Sub-
Account of the Variable Investment Division to the Guaranteed
Interest Division. Transfers from the Guaranteed Interest Division
to the Variable Investment Division are not allowed. Transfers among
the Sub-Accounts of the Variable Investment Division are not
allowed.
(d) Participants will not be allowed to request loans.
(e) UNUM will send written notice to each Participant's last known
address stating that the Contract is discontinued and that the
Participant's remaining Account balance may be distributed in either
(i) a lump sum payment, (ii) a Payout Annuity conversion amount, or
(iii) some combination of (i) and (ii).
Such form of payment will be distributed at the earlier of:
(1) the Participant's attainment of age fifty-nine and one-half (59
1/2), or
(2) the Participant's separation from service and age fifty-five
(55), or
(3) the Participant has died, or
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(4) the Participant has incurred a disability for which he is
receiving Social Security payments, or
(5) the date the Participant directs UNUM to transfer the entire
value of the Participant's Account to another 403(b) funding
vehicle.
The Participant's remaining Account balance shall be the balance
remaining after (i) the repayment of any, if applicable, outstanding
loans including principal, due and accrued interest, and (ii) any
applicable CDSC or Annual Administration Charge that applies to the
Participant's Account.
11.4 CONTRACT TERMINATION: This Contract will terminate when there are no
participant Account balances under this Contract.
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ARTICLE XII - GENERAL PROVISIONS
12.1 CONTRACT: This Contract, together with Your attached Application and any
riders, constitutes the entire Contract between You and UNUM. UNUM is not
a party to any Plan document, and is not responsible for the validity of
any Plan or actions taken by You under that Plan. The terms of this
Contract shall govern with respect to the rights and obligations of UNUM,
notwithstanding any contrary provisions or conditions of any trust or
plan.
UNUM may rely on any action or information provided by You under the
terms of this Contract and shall be relieved and discharged from any
further liability to any party in acting at the direction and upon the
authority of You. All statements made by You shall be deemed
representations and not warranties.
UNUM may deactivate this Contract by prohibiting new Contributions and/or
new Participants after the date of deactivation. UNUM will give You not
less than ninety (90) days notice of the date of deactivation.
12.2 CONTRACT AMENDMENTS: UNUM may amend this Contract at any time by
amendment or replacement. Such amendments will not, without Your consent,
adversely alter (a) the minimum interest rate set forth in Section 4.2,
(b) the maximum annuity conversion factors under Section 9.4, or (c) the
amount or terms of any annuity benefit already selected under Section 9.1
prior to the effective date of the change. No change in this Contract
will adversely affect the rights of a Participant with respect to
Contributions received or annuities purchased before the effective date
of the change unless:
(a) Such amendments are made in order to comply with rulings,
regulations and laws applicable to the program provided by this
Contract; or
(b) Your consent to the Amendment is obtained.
UNUM will give You not less than ninety (90) days notice prior to the
effective date of any change made in accordance with this Section.
12.3 CONTRACT INTERPRETATION: Whenever the context so requires, the plural
includes the singular, the singular the plural and the masculine the
feminine.
12.4 INFORMATION, REPORTS AND DETERMINATIONS: You shall furnish UNUM with such
facts and information as UNUM may require for the administration of this
Contract, including, upon request, the original or photocopy of any
pertinent records You keep. All information that You furnish to UNUM
pursuant to this Contract, including the information pertaining to
Contributions described in Article III, shall be legible, accurate and
satisfactory in form to UNUM. Such information shall be sent to a
location designated by UNUM.
You shall make any determination required under this Contract pursuant to
the terms of the Contract or required under ERISA and shall report that
determination in writing to UNUM.
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Such determination shall be conclusive for the purpose of this Contract.
UNUM shall be fully protected in relying on the reports and other
information furnished by You and need not inquire as to the accuracy or
completeness of such reports and information.
12.5 MISSTATEMENTS: If UNUM provides a benefit under this Contract based upon
misstated or omitted information, including but not limited to
misstatement of age, UNUM will make adjustments to the benefit to reflect
the correct information. UNUM is relieved and discharged from any
liability and responsibility with respect to benefits provided in
reliance upon information You furnish.
12.6 ASSIGNMENT: You may not assign this Contract without UNUM's prior written
consent. A Participant or Beneficiary under this Contract may not, unless
permitted by law, assign or encumber any payment due under this Contract.
12.7 MARKET EMERGENCIES: If transactions are to be made to or from the
Variable Investment Division, UNUM may not suspend the right of
redemption or delay payment for more than seven (7) calendar days after
tender for redemption, except for (1) any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings);
(2) any period when trading in the markets normally utilized is
restricted, or an emergency exists as determined by the Securities and
Exchange Commission, so that disposal of investments or determination of
the Accumulation Unit Value is not reasonably practicable; or (3) for
such other periods as the Securities and Exchange Commission by order may
permit for the protection of the Participants.
12.8 DEFERRAL PERIODS: If a withdrawal is to be made from the Guaranteed
Interest Division, UNUM may defer the payment for the period permitted by
the law of the state in which this Contract was delivered but not more
than six (6) months after a written election is received by UNUM. During
the period of deferral, interest at the then current interest rate(s)
will continue to be credited to a Participant's Account in the Guaranteed
Interest Division.
12.9 DEDUCTIONS FOR PREMIUM TAXES: UNUM will deduct from Participant Account
balances any premium tax levied as a result of the existence of
Participant Accounts by any state or other governmental entity.
12.10 FACILITY OF PAYMENT: If any person is, in the judgment of UNUM,
physically or mentally incapable of personally receiving and giving a
valid receipt for any payment due him under this Contract, UNUM may,
unless and until claim shall have been made by a duly appointed legal
guardian or conservator of the person and property of such person, make
such payment or any part thereof to such other person or institution
which, in the judgment of UNUM, is then contributing toward or providing
for the care and maintenance of such person. In no event will any such
payment exceed the maximum allowed under the applicable law of the state
in which this Contract is delivered. Such payment shall fully discharge
UNUM of its obligations to the extent of the payment.
UNUM will make any payment which has become due to a Participant or an
Annuitant and has not been paid prior to his death, to the Participant's
Beneficiary or Beneficiaries, his
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executors or administrators. If no Beneficiary or personal representative
has been named, UNUM may make payment to any one or more of the surviving
members of the following classes of relatives; spouse, children,
grandchildren, brothers, sisters, and parents. Such payment shall fully
discharge UNUM for all liability to the extent of the payment.
12.11 EVIDENCE OF SURVIVAL: When a benefit payment is contingent upon the
survival of any person, evidence of such person's survival must be
furnished to UNUM, either by such person's endorsement of the check drawn
for such payment, or by other satisfactory means.
12.12 NON-WAIVER: The failure on UNUM's part to perform or insist upon the
strict performance of any provision or condition of this Contract shall
neither constitute a waiver of UNUM's rights to perform or require
performance of such provision or condition, nor stop UNUM from exercising
any other rights it may have in such provision, condition, or otherwise
in this Contract or any Plan.
12.13 RECEIPT OF NOTICE: Whenever UNUM receives information establishing any
right or conferring any benefit upon any Participant or Beneficiary, such
receipt shall be deemed to take place on any Business Day that such
information is received.
12.14 SEPARABILITY OF PROVISIONS: If any provision of this Contract is
determined to be invalid, the remainder of the provisions shall remain in
full force and effect.
12.15 THE SEPARATE ACCOUNT: The Separate Account is registered and operated as
a Unit Investment Trust under the Investment Company Act of 1940. As
such, the assets of each Sub-Account are invested in a registered
management investment company (mutual fund).
The Separate Account will be legally separated from UNUM's other
accounts. The Separate Account's assets will, at the time during the year
that adjustments in the reserves are made, have a value of at least equal
to the reserves and other contract liabilities with respect to the
Separate Account, and at all other times, will have a value approximately
equal to, or in excess of, such reserves and liabilities. The portion of
the assets having a value equal to, or approximately equal to, the
reserves and contract liabilities will not be chargeable with liabilities
arising out of any other business which UNUM may conduct.
UNUM reserves the right, subject to compliance with applicable law,
including approval by You or the Participants if required by law, (1) to
create additional Sub-Accounts, (2) to combine or eliminate Sub-Accounts,
(3) to transfer assets from one Sub-Account to another, (4) to transfer
assets to the General Account and other separate accounts, (5) to cause
the deregistration and subsequent re-registration of the Separate Account
under the Investment Company Act of 1940, (6) to operate the Separate
Account under a committee and to discharge such committee at any time,
and (7) to eliminate any voting rights which You or Participants may have
with respect to the Separate Account, (8) to amend the Contract to meet
the requirements of the Investment Company Act of 1940 or other federal
securities laws and regulations, (9) to operate the Separate Account in
any form permitted by law, (10) to substitute shares of another fund for
the shares held by a Sub-Account, and (11) to make
31
<PAGE>
any change required by the Internal Revenue Code, the Employee Retirement
Income Security Act of 1974, or the Securities Act of 1933, to the extent
not provided in Section 12.2.
12.16 PAYMENT OF BENEFITS: UNUM shall make payment of benefits under this
Contract directly to a Participant or Beneficiary at the last known
address on file with UNUM.
12.17 FREE-LOOK PERIOD: A Participant will receive an Active Life Certificate
upon UNUM's receipt of a duly completed participation enrollment form. If
the Participant chooses not to participate under this Contract, he may
exercise his Free-look right by sending a written notice to UNUM that he
does not wish to participate under this Contract within ten (10) days
after the date the Certificate is received by the Participant. For
purposes of determining the date on which the Participant has sent
written notice, the postmark date will be used.
If a Participant exercises his Free-look right in accordance with the
foregoing procedure, UNUM will refund in full the Participant's aggregate
Contributions less aggregate withdrawals, or if greater, with respect to
Contributions to the Variable Investment Division, the Participant's
Account balance in the Variable Investment Division on the date the
canceled Certificate is received by UNUM.
32
<PAGE>
SYSTEMATIC WITHDRAWAL OPTION
ATTACHMENT I
------------
The formula for the interest equivalency amount (IEA) is:
29.5/366
IEA = ACCT.BAL x ( (1 + I ) - 1)
WHERE:
IEA is the Interest Equivalency Amount.
ACCT. BAL. is the Participant's Account balance at the later of: the
beginning of the contract year and the most recent date on
which the credited interest rate changed.
I is the interest rate currently being credited to the contract
EXAMPLE: The Account balance at the beginning of the year is one hundred
thousand dollars ($100,000) and the interest rate credited to the contract
is six percent (6.00%). The Interest Equivalency Amount for each month of
the current year is:
29.5/366
IEA = $100,000 x (1.06 - 1)
= $470.76
Attachment I
<PAGE>
Exhibit 5(a)
UNUM LIFE INSURANCE COMPANY OF AMERICA
APPLICATION FOR GROUP ANNUITY CONTRACT
WITH
UNUM LIFE INSURANCE COMPANY OF AMERICA
PORTLAND, MAINE
____________________________________ of ________________________________
(herein termed the "Contractholder") (address)
hereby authorizes UNUM Life Insurance Company of America to issue a Group
Annuity Contract providing retirement benefits for the Contractholder's
Employees, members of an Association, or the Employees of the Company on whose
behalf the above designated Contractholder serves as Trustee.
Plan Type: ___ 403(b) ____ 401(a) ____ other _______________
It is understood that Participants under the Contract may be subject to the
restrictions on withdrawals imposed by the Internal Revenue Code of 1986, as
amended.
Contributions to the Contract and transfers of value within the Contract shall
be subject to the limitations imposed by the Plan, if any, named in the
Contract.
If a deposit is not made to the Contract within ninety (90) days after the later
of: (1) the date the Application is signed, or (2) the Effective Date of the
Contract, UNUM may, at its option, declare the Contract invalid and deem it null
and void for all purposes, notwithstanding any provision to the contrary in the
Contract. UNUM will provide the Contractholder thirty (30) days notice prior to
declaring this Contract invalid.
It is agreed that this Application together with the Contract comprise the
entire agreement between the Applicant and UNUM.
1
<PAGE>
VARIABLE ANNUITY PRODUCT
Current Crediting Rate: _____________% Guaranteed Through __________________
(Date)
100% of Account Balance available at:
____ Death
____ Disability
____ Age 59 1/2
____ Separation from Service
____ Separation from Service and age 55
____ Hardship
Other Withdrawals subject to:
____ 6% charge
____ Reducing charge based on years of participation
____ 20% annual maximum withdrawal or transfer from the Guaranteed Interest
Division
Annual Administration Fee paid by: _________Participant _________Contractholder
____ $25 per participant
____ $25 per participant contributing to one or more Sub-Accounts
____ Not applicable
Loan Set-up Fee:
____ $50 per loan
____ Not applicable
Variable Investment Division Sub-Accounts (Underlying Institutional Funds):
____ Asset Manager Account (Fidelity's VIPF II: Asset Manager Portfolio)
____ Balanced Account (TCI Portfolios, Inc.: TCI Balanced Portfolio)
____ Growth I Account (Fidelity's VIPF: Growth Portfolio)
____ Growth II Account (TCI Portfolios, Inc.: TCI Growth Portfolio)
____ Index Account (Dreyfus Stock Index Fund)
____ International Stock Account (T. Rowe Price International Series, Inc.)
____ Socially Responsible Account (Calvert Social Balanced)
____ Equity-Income Account (Fidelity's VIPF: Equity-Income Portfolio)
____ Small Cap Account (Dreyfus Variable Investment Fund: Small Cap Portfolio)
____ All nine Sub-Accounts
2
<PAGE>
By signing this Application the Contractholder designates
_____________________________ of __________________________________
(name) (address)
as Broker for said Contract, and as such to receive any commissions payable with
respect to deposits made to the Company in accordance with the terms and
provisions of the Contract.
Dated at ____________________ this ________ day of _______________
By __________________________________
Contractholder)
__________________________________
(Official Title)
By __________________________________
(Broker)
Applicable to Variable Annuity Contracts only:
It is acknowledged that the Contractholder has received a Prospectus relating to
this Group Variable Annuity Contract prior to the date of this Application.
_____ Check here to request a Statement of Additional Information.
3
<PAGE>
Exhibit 5(b)
Enrollment/Change Request
& Salary Reduction Agreement-Variable Annuity
UNUM Life Insurance Company of America
Retirement Security Division - TSA/Client Services
P.O. Box 9740
Portland, Maine 04104-5001
Tel. 1-800-341-0441
Fax 1-207-770-3460
[ ]New Enrollment
Check here to receive a Statement [ ]Change (Please indicate what type of
of Additional Information which change with a
provides financial information Address/Telephone Beneficiary Name
not included in the prospectus. Allocation Mix
I. Participant Information (please print)
Name of Employer GP/ER ID Number
Group Annuity Contract Numbers
Name of Employee: Last, First, MI Marital Status Social Security Number
Home Address (Street, City, State, Zip Code)
Telephone Number Date of Birth Sex Date of Hire
Daytime ( ) Evening
II. Salary Reduction Agreement (Annual)
Effective Date of Reduction Please check with your payroll department to
determine which option they are equipped to handle per pay period: Percentage of
pay or Specific dollar amount $
My employer and I hereby agree as follows: My employer shall reduce my salary by
the indicated amount/percentage per pay period. My employer shall forward such
amounts to an account with UNUM/America in order to fund contributions toward a
403(b) annuity. Reductions shall commence on the date indicated above.
Reductions shall only be made against sums earned by me subsequent to the date
of this agreement. Once made, this agreement cannot be changed for the rest of
the current tax year, although it may be canceled at any time. By signing below,
both my employer and I agree to be bound by the terms of this Salary Reduction
Agreement.
Participant's Signature Employer's Authorized Representative Signature
Complete the following in 1% increments
Fund Guar. Int
VA Product Assist Mgr. Social Res. Balanced Equity Inc. Index Acct.
GA ----------- ----------- --------- ---------- -----------
AM SR BL EQ IX
Growth I Growth II Int'nI. Small cap Total must
-------- --------- ------- ---------- equal 100%
GR GT IN SC
Allocation
Mix
Any change in allocation mix will be effective with the next deposit after
receipt of this form at UNUM's Home Office.
I am aware that the returns on the Variable Accounts will be based upon the
investment experience of VA-1 Separate Account. These amounts will fluctuate and
are not guaranteed as to the dollar amount.
Confirmations will bne generated once UNUM/America receives complete enrollment
information. Please review the confirmation carefully and notify UNUM/America
immediately if any changes are desired. Any changes to my name and/or
beneficiary designations must be in writing. I understand and agree that
UNUM/America may elect to send, directly to my employer, any confirmations of
transactions relating to my account.
Ill. Beneficiary Designation
If I am married or am subsequently married in the future and if my TSA Plan
provides, my spouse shall be my beneficiary unless I complete a waiver with my
spouse's written consent. I also understand that if I do not select a
beneficiary or if I am not survived by any beneficiary that all death benefits
will be paid in accordance with the Plan or contract provisions governing such
situations. Subject to the provisions of the above contract and any applicable
TSA Plan, I designate the following beneficiary(is), such designation to
supersede any prior designation(s) which I may have made with respect to my
coverage under the above contract. (Prim. - Primary Cant. - Contingent)
Beneficiary Name Address Relationship Percent
Prim. Cont.
[ ] [ ]
[ ] [ ]
[ ] [ ]
Prim. - Primary Cont. - Contingent
<PAGE>
I acknowledge receipt of the VA-1 Separate Account prospectus and prospectuses
for the underlying funds and an Active Life Certificate. By completing and
signing this form, I also acknowledge that I have read and understand the
Information on the front and back of this form.
Participant's Signature Date
I hereby certify that the above referenced Participant's beneficiary designation
Is In compliance with all provisions of the Retirement Equity Act of 1984 and
the Tax Deferred Annuity Plan referenced above.
Plan Administrator's Signature (if ERISA) Date
L1 282-94(10/96) Enrollment
White copy to address above, Canary to Payroll Department, Pink to Broker,
Yellow to Participant (See Reverse Side)
Variable Annuity - An Investment For Your Future
As an investor in the UNUM/America Variable Annuity I have read the prospectus
for the Variable Annuity. Also, I have read the fund prospectus that supports
any Variable Account that I selected. I understand that the funds supporting the
UNUM/America's Variable Annuity are not public funds and are only available
through insurance company contracts.
I understand the fund "Investment Objectives and Policies" which are stated in
the fund prospectus. Generally, the greater an investment's possible reward over
time, the greater its level of short-term price volatility or risk. Thus, If my
retirement date is approaching or if I expect to request a withdrawal soon, I
may wish to select investments that are less risky.
My investment goals may change as I near retirement or if I have a lifestyle
change. On a regular basis I should review my investment selections in the
UNUM/America Variable Annuity. As part of this review, I should read current
fund prospectuses and financial reports. I understand I may contact UNUM/America
anytime to receive up-to-date information about my UNUM/America Variable
Annuity.
Restriction of Withdrawals
I understand that withdrawals are restricted to the requirements of Section
403(b) of the Internal Revenue Code which are described in the current VA-1
Separate Account prospectus. Withdrawals must also be in accordance with any
restrictions set forth in the TSA Plan sponsored by my employer.
Pending Allocation Account
I understand that if my contributions are received at UNUM/America without the
complete and accurate information needed to allocate my contributions they will
be allocated to the Pending Allocation Account. Once the information is
received, UNUM/America will allocate my contribution as I have indicated on the
form. After the third monthly notice, if UNUM/America has not received this
information, the account value will be returned to my contractholder.
Transfer Assets
I understand that if I transfer any assets to UNUM/America without an
accompanying Transfer Form indicating my investment allocation split,
UNUM/America will deposit these transfer assets in accordance with my most
recent investment elections on file.
Beneficiary Designation Instructions
1. The full name, address, and relationship to the Participant of each
beneficiary should be shown.
2. Indicate for each beneficiary whether he/she is a primary or a contingent
beneficiary.
- A primary beneficiary will be entitled to the entire value of the account.
- Multiple surviving primary beneficiaries will be entitled to equal
portions of the account, unless otherwise specified.
- A contingent beneficiary will be entitled to the entire value of the
account if the primary beneficiary (beneficiaries) is not living.
- Multiple surviving contingent beneficiaries will be entitled to equal
portions of the account, unless otherwise specified, If the primary
beneficiary (beneficiaries) is not living.
3. If I require more space to list my beneficiary designations, I will provide
all the required information on a separate page and attach.
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
Articles of Incorporation
Be it enacted by the People of the State of Maine, as follows:
Sec. 1. Corporators; corporate name; power and privileges. Neil J. O'Leary of
Cape Elizabeth, Charles Tiedermann of Westbrook, Marjorie Gaines of Falmouth and
William H. Radford, III of Westbrook, all in the County of Cumberland and State
of Maine, or such of them as may vote to accept this charter, with their
associates, successors and assigns, are made a body corporate to be known as
"Community Life Insurance Company", or by such name as the stockholders may
determine in accordance with the requirements of the Revised Statutes of 1964,
Title 13, Section 204, and subject to the approval of the Commissioner of
Insurance, and as such shall have the power to purchase, hold and convey in this
State, or in any other state or country, all such property, real and personal,
as may be deemed necessary for the use or accommodation of the business of the
company or for the investment of its funds; to enact suitable bylaws and
regulations and elect such officers as it deems desirable to effect its
corporate purposes and to be possessed of all the powers, privileges and
immunities and subject to all duties and obligations conferred on corporations
by the general corporation law of this State.
Sec. 2. Principal office. The principal office and place of business in Maine is
to be located in the City of Portland, County of Cumberland, or as fixed by the
directors, and the corporation may establish branch offices.
Sec. 3. Purposes. The purposes for which this quasi-public corporation is formed
and the nature of the business which it may conduct are as follows: (1) To carry
on a life insurance business, including endowments and annuities; to engage in
the accident and health insurance business; and to engage in any and all other
kinds of insurance as are now or as may hereafter be permitted by the laws of
its state of incorporation, and (2) to engage in such other businesses as are
now or as may hereafter be permitted by the laws of its state of incorporation.
Policies of insurance may be participating or non participating and the company
may accept or cede reinsurance of any such risks. The corporation may purchase
or otherwise acquire the whole or any part of the franchise, business, property
or assets and assume the liabilities of any corporation, or association,
organized under the laws of this State or of any other state, carrying on any
type of insurance business similar or related to any business which this
corporation is authorized to carry on, and to pay for the same either in cash,
or by the issuance or exchange of its stock or otherwise, and when such business
or property is acquired, to operate same as a part of the business of this
corporation or separately and this corporation may sell, lease, consolidate,
merge or in any manner part with its franchise or its entire property, or any of
its property, corporate rights or privileges essential to the conduct of its
corporate business and purposes, to or with one or more corporations or
associations organized under the laws of this State or of any other state, any
such sale, lease, consolidation, merger or other such transfer to be effected in
accordance with the Revised Statutes of 1964, Title 13, Chapter 7, and also
subject to the written approval of the Insurance Commissioner for the State of
Maine in such form as the Insurance Commission may prescribe.
Sec. 4. Capital stock. The company shall have authorized capital and surplus in
an amount not less than $5,000,000. The authorized capital stock shall consist
of one million (1,000,000) shares of common stock with a par value of ten
dollars ($10.00) per share. The aggregate par value of all shares which the
Corporation shall have authority to issue is $10,000,000. Such shares shall be
non-assessable. Subject to the conditions and limitations contained in Maine Law
as the same may be amended from time to time, the company may have the right to
change the capital stock by majority vote of the holders of stock issued and
outstanding to such an amount as they deem necessary and expedient.
<PAGE>
Sec. 5. First meeting; how called. Any 3 of the corporators named in this Act
may call the first meeting of the corporation by giving such notice as shall be
approved by the Insurance Commissioner, naming the time, place and purpose of
such meeting; and at such meeting the necessary officers may be chosen, bylaws
adopted and any other corporate business transacted.
Sec. 6. Annual meeting. An annual meeting of the company shall be held. Notice
of the time, place and purpose of such meeting shall be given as provided in the
bylaws.
Sec. 7. Directors. Directors need not be stockholders and may be resident of
this State or any other state, and directors' meetings may be held within or
without the State of Maine, but stockholders' meetings must be held within the
State.
Sec. 8. Conduct business in French version of name. The company may conduct its
business, or any part thereof, under the French version of its name, to wit,
"L'UNUM Compagnie d'Assurance-Vie d'Amerique" and in lieu of the name "UNUM Life
Insurance Company of America" in such areas and under such conditions as the
directors may prescribe, and when so used the aforesaid French lawful corporate
name shall for all purposes be, and be deemed to be, its lawful corporate name
and said company shall be bound thereby as fully as if the name "UNUM Life
Insurance Company of America" had been used, and under such French version of
its name, said company may sue and be sued, acquire and dispose of property, and
generally, carry on and perform its business under the conditions stated in this
section, subject only to such additional requirements as may be imposed by any
governmental authority having jurisdiction over its business to be so
conducted."
Sec. 9. Application. Nothing herein contained shall be construed to exempt the
company from the operation of the general laws of the State and the company
shall at all times be under the insurance laws of the State and regulations of
the Insurance Commissioner.
<PAGE>
STATE OF MAINE
ARTICLES OF MERGER
OF
UNUM Life Insurance Company and
UNUM Pension and Insurance Company
_____________________________________
Each, A MAINE CORPORATION
INTO
UNUM Life Insurance Company of America
A MAINE CORPORATION
The Parties to this merger are quasi-public Corporations engaged in
the business of insurance.
Pursuant to 13-A MRSA (S)903, the board of directors of each participating
corporation approve and the under-signed corporations, adopt the following
Articles of Merger:
FIRST: The plan of merger is set forth in Exhibit ______ attached
hereto and made a part hereof.
SECOND: As to each participating corporation, the shareholders of
which voted on such plan of merger, the number of shares
outstanding and the number of shares entitled to vote on such
plan, and the number of such shares voted for and against the
plan, are as follows:
<TABLE>
<CAPTION>
Number of
Name of Shares Number of Shares
Corporation Outstanding Entitled to Vote Voted For Voted Against
- ------------ ----------- ---------------- -------- -------------
<S> <C> <C> <C> <C>
UNUM Life Insurance 6,000,000 6,000,000 6,000,000 0
Company
UNUM Pension and 1,500,000 1,500,000 1,500,000 0
Insurance Company
UNUM Life Insurance 500,000 500,000 500,000 0
Company of America
</TABLE>
THIRD: If the shares of any class were entitled to vote as a class,
the designation and number of the outstanding shares of each
such class, and the number of shares of each such class voted
for and against the plan, are as follows:
Name of Designation Number of Voted For Voted Against
Corporation of Class Shares --------- -------------
- ----------- ----------- ---------
N/A
<PAGE>
PLAN AND AGREEMENT OF MERGER
OF
UNUM LIFE INSURANCE COMPANY
AND
UNUM PENSION AND INSURANCE COMPANY
INTO
UNUM LIFE INSURANCE COMPANY OF AEIERICA
PLAN AND AGREEMENT OF MERGER, entered into as of the 13th day of September,
1991, and as amended November 25 1991, December 2, 1991 and December 13, 1991,
by and between UNUM Life Insurance Company, hereinafter sometimes referred to as
UNUM Life, UNUM Pension and Insurance Company, hereinafter sometimes referred to
as UPIC, and UNUM Life Insurance Company of America, hereinafter sometimes
referred to as UNUM America, each of which is a Maine stock insurance company;
WITNESSETH:
WHEREAS, UNUM Life is a stock insurance company duly organized and existing
under the laws of the State of Maine, having been incorporated in Maine on July
17, 1848, and is licensed to transact a life, health and life/health insurance
and variable annuity business in the State of Maine; and
WHEREAS, UPIC is a stock insurance company duly organized and existing
under the laws of the State of Maine, having been incorporated in Maine on July
9, 1980, and is licensed to transact a life insurance business in the State of
Maine; and
WHEREAS, UNUM America is a stock insurance company duly organized and
existing under the laws of the State of Maine, having been incorporated in Maine
on August 24, 1966, and is licensed to transact a life, health, life/health and
multi-line insurance business in the State of Maine; and
WHEREAS, the Boards of Directors and stockholders of UNUM Life, UPIC and
UNUM America have each determined that merger of the three corporations, with
UNUM America becoming the surviving corporation, will be in the best interests
of the corporations and their respective stockholders and policyholders; and
WHEREAS, the laws of the State of Maine permit such a merger;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements contained herein, and for the purpose of
<PAGE>
-2-
prescribing the terms and conditions of such merger, the parties hereto hereby
establish the terms and conditions of such merger and covenant and agree as
follows:
1. Merger. UNUM Life and UPIC shall, on the Effective Date as defined in
Section 6 herein, merge into UNUM America, and UNUM America shall be the
surviving corporation in the merger. UNUM Life, UPIC and UNUM America are
sometimes referred to hereinafter as the Constituent Companies.
2. Name of Surviving Corporation. The name of the surviving corporation shall,
from and after the Effective Date of the merger, be UNUM Life Insurance Company
of America (sometimes hereinafter referred to as the Surviving Corporation),
until changed as provided by law.
3. Certificate of Incorporation and Bylaws. The Articles of Incorporation of
UNUM America in effect on the Effective Date shall be the Articles of
Incorporation of the Surviving Corporation, until further altered or amended as
provided by law.
The Bylaws of UNUM America in effect on the Effective Date shall be the
Bylaws of the Surviving Corporation, until further altered or amended as
provided by law.
4. Capitalization of Constituent Companies. UNUM Life has authorized capital
stock of 10,000,000 shares having a par value of $1.00 per share, 6,000,000 of
which are issued and outstanding and are registered in the name of UNUM
Corporation, a Delaware corporation.
UPIC has authorized capital stock of 2,000,000 shares having a par value of
$1.00 per share, 1,500,000 of which are issued and outstanding and are
registered in the name of UNUM Holding Company, a Delaware corporation, wholly
owned by UNUM Corporation and hereinafter sometimes referred to as UNUM Holding.
Prior to the Effective Date, UNUM America shall have increased its
authorized capital stock to 1,000,000 shares having a par value of $10.00 per
share, 500,000 of which shall be issued and outstanding and shall be registered
in the name of UNUM Holding.
5. Treatment of Shares of Constituent Companies. The mode of carrying the Plan
and Agreement of Merger into effect, and the treatment of shares of the
Constituent Companies, shall be as follows:
(a) The number and par value of authorized shares of UNUM America shall not
be affected by the merger.
(b) On the Effective Date, all of the issued and outstanding shares of
common stock of UNUM Life, UPIC and UNUM America shall be
<PAGE>
-3-
converted into shares of the Surviving Corporation, in such proportions as
stated in Attachment A hereto. From and after the Effective Date of the
merger, and until surrendered to the Surviving Corporation, each outstanding
certificate which prior to the Effective Date represented shares of
outstanding common stock of UNUM Life, UNUM America or UPIC, shall be deemed
for all purposes to evidence only a right to receive the merger
consideration into which such shares have been converted by virtue of the
merger.
(c) After the Effective Date, UNUM Corporation may surrender all
outstanding certificates representing common shares of UNUM Life to the
Surviving Corporation and UNUM Corporation shall be entitled upon such
surrender to receive a certificate or certificates representing the number
of shares of common stock of the Surviving Corporation as stated in
Attachment A, into which the common shares of UNUM Life theretofore
represented by such certificates shall have been converted.
(d) After the Effective Date, UNUM Holding may surrender all outstanding
certificates representing common shares of UPIC to the Surviving Corporation
and UNUM Holding shall be entitled upon such surrender to receive a
certificate or certificates representing the number of shares of common
stock of the Surviving Corporation as stated in Attachment A, into which the
common shares of UPIC theretofore represented by such certificates shall
have been converted.
(e) After the Effective Date, UNUM Holding may surrender all outstanding
certificates representing common shares of UNUM America to the Surviving
Corporation and UNUM Holding shall be entitled upon such surrender to
receive a certificate or certificates representing the number of shares of
common stock of the Surviving Corporation as stated in Attachment A, into
which the common shares of UNUM America theretofore represented by such
certificates shall have been converted.
(f) From and after the Effective Date of the merger, transfers of the
shares of common stock of UNUM Life and of UPIC shall not be made on the
stock transfer books of said corporations.
6. Effective Date. The merger shall be effective (the "Effective Date") as of
11:59 p.m., Eastern Standard Time: a) on December 31, 1991, if the Articles of
Merger, in the form required by the provisions of 13-A M.R.S.A. (Section)903,
are filed with the Secretary of the State of Maine as required by (Section)903
on or before December 31, 1991; or b) on the day when the Articles of Merger, in
the form required by the provisions of 13-A M.R.S.A. (Section)903, are filed
with the Secretary of the State of Maine as required by (Section)903 if such
filing is made after December 31, 1991.
7. Conditions to Merger. Anything herein or elsewhere to the contrary
notwithstanding, the merger shall not be made effective unless prior to the
Effective Date all of the following events shall have been completed:
(a) This Plan and Agreement of Merger shall have been adopted by each of
the Boards of Directors of UNUM Life, UPIC and UNUM America;
<PAGE>
-4-
(b) This Plan and Agreement of Merger shall have been approved by UNUM
Corporation as the sole stockholder of UNUM Life and by UNUM Holding as the
sole stockholder of UPIC and UNUM America; and
(c) This Plan and Agreement of Merger shall have been filed with the
Superintendent of Insurance of the State of Maine and approved in accordance
with the applicable provisions of the Maine Statutes.
8. Effect of Merger. On the Effective Date:
(a) The separate existence of UNUM Life and of UPIC shall cease and UNUM
America shall succeed to and possess all the rights, privileges, powers,
franchises and interests of UNUM Life and UPIC respectively in and to every
species of property, real, personal and mixed, and things in action
thereunto belonging, all of which shall be deemed as transferred to and
vested in UNUM America, without any other deed or transfer.
(b) Simultaneously therewith, UNUM America shall be deemed to have assumed
all of the liabilities and obligations of UNUM Life and UPIC respectively,
which shall be preserved unimpaired by the merger. The merger will not alter
the terms of any insurance coverage provided by any insurance policies or
contracts issued by the Constituent Companies and will have no effect upon
the insurance benefits or premiums payable under such policies or contracts.
After the Effective Date, UNUM America shall administer the Participation
Fund Account, established to provide for the continued maintenance of Union
Mutual Life Insurance Company's policyholder dividend practices (relative to
certain individual life insurance policies and individual annuity contracts)
in effect at the time of said company's recapitalization and conversion, in
accordance with the Plan of Operation dated May 9, 1986.
(c) No liability or obligation due or to become due, claim or demand for
any cause existing against UNUM Life or UPIC, or any stockholder, officer or
director thereof, shall be released or impaired by such merger, and no
action or proceeding, civil or criminal, then pending by or against UNUM
Life or UPIC, or any stockholder, officer or director thereof, shall abate
or be discontinued by such merger, but may be enforced, prosecuted, settled
or compromised as if such merger had not occurred, or UNUM America may be
substituted in any such action in place of UNUM Life or UPIC, as the case
may be.
9. Notification of Policyholders and Group Annuity Contractholders. Following
the Effective Date of the merger, all existing policyholders and group annuity
contractholders of UNUM Life and UPIC shall be notified of the merger and shall
be provided with a confirmation that their coverage will continue uninterrupted
and unaffected by the merger.
10. Directors and Officers. The members of the Board of Directors and the
Officers of UNUM America on the Effective Date shall be and remain the members
of the Board of Directors and the Officers of UNUM America until the next annual
meeting of stockholders or directors, as the case may be, or until their
successors have been chosen and qualify in accordance with law.
<PAGE>
-5-
11. Employees. All employees of UNUM Life immediately prior to the Effective
Date shall be deemed transferred to UNUM America without interruption to or
impairment of their employment or any attendant rights and benefits, including
all pension and retirement plans and all other plans, agreements or arrangements
of UNUM Life relating to its employees or any of them, in force on the Effective
Date, unless and until otherwise determined by the Board of Directors of the
Surviving Corporation or its designee.
12. Compensation. No director, officer, agent or employee of any of the
Constituent Companies shall receive any fee, commission, compensation or other
valuable consideration whatsoever for in any manner aiding, promoting or
assisting in the merger, except for the remuneration such persons are entitled
to receive in exchange for their services under the terms of the Constituent
Companies' regular cash and noncash compensation programs established for their
directors, officers, agents and employees generally, or, if outside professional
advisors, in accordance with their normal billing practices.
13. Further Documents and Acts to Effectuate Merger. Upon approval of this Plan
and Agreement of Merger by the stockholders of each of the Constituent
Companies, the Boards of Directors and the proper officers thereof shall hereby
be authorized, empowered and directed to do any and all acts and things, and to
make, execute, acknowledge, deliver, file and record any and all instruments,
papers and documents and cause to be performed all other and further acts within
the State of Maine and elsewhere which shall be and become necessary, proper or
convenient to carry out or put into effect any of the provisions of this Plan
and Agreement of Merger or of the merger provided for herein.
14. Abandonment of Merger. This Plan and Agreement of Merger may be terminated
or abandoned before it becomes effective without further action or approval by
the stockholders of any of the Constituent Companies by majority vote of the
Board of Directors of any Constituent Company.
<PAGE>
-6-
IN WITNESS WHEREOF, this Plan and Agreement, as amended, of Merger
having been authorized, adopted and approved by resolutions duly adopted by
the respective Boards of Directors of UNUM Life, UPIC and UNUM America and
having been approved by resolutions duly and unanimously adopted by the
stockholders of each of the Constituent Companies, each such company has
caused this Plan and Agreement of Merger, as amended, to be signed by its
President and Secretary as of the date first written above under the
corporate seals of the respective Constituent Companies.
UNUM LIFE INSURANCE COMPANY
(CORPORATE SEAL)
By_____________________________________
James F. Orr III, President
ATTEST:
_________________________________
_______________________________________
Kevin J. Tierney, Secretary
UNUM PENSION AND INSURANCE COMPANY
(CORPORATE SEAL) By____________________________________
James F. Orr III, President
ATTEST:
________________________________
UNUM PENSION AND INSURANCE COMPANY
(CORPORATE SEAL) By____________________________________
James F. Orr III, President
ATTEST:
_______________________________
___________________________________
Kevin J. Tierney, Secretary
<PAGE>
Attachment A
The number of shares to be issued in exchange for the shares
outstanding of each of the Constituent Companies shall be as follows:
In respect of the shares of UPIC: 7,909
In respect of the shares of UNUM America: 429,453
In respect of the shares of UNUM Life: 62,638
CERTIFICATE OF APPROVAL
-----------------------
<PAGE>
STATE OF MAINE
DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
BUREAU OF INSURANCE
I have approved the foregoing Plan and Agreement of Merger, as amended,
of UNUM Life Insurance Company and UNUM Pension and Insurance Company
into UNUM Life Insurance Company of America (the "Plan and Agreement of
Merger"), pursuant to 24-A M.R.S.A. Sections 222 and 3474 by the
Decision and Order dated October 24, 1991 and the Amended Order on
Reconsideration dated December 17, 1991.
First Deputy Superintendent of Insurance Date
---------------------------------------- ------------------
<PAGE>
File No. 196600011 Pages 10
Fee Paid $80.00
DCN 1963111400010 Merg
STATE OF MAINE
(MERGER OF DOMESTIC AND
FOREIGN CORPORATIONS)
ARTICLES OF MERGER
Pursuant to l3A MRSA (S)906, the following corporations
adopt these Articles of Merger:
FIRST: The names and the States under the laws of which they are
respectively organized are as follows:
Name of Corporation State
------------------- -----
Commercial Life Insurance Company Wisconsin
UNUM Life Insurance Company of America, Maine
a quasi-public corporation engaged in
the business of insurance
SECOND: The laws of the state(s) of Wisconsin
_________ under which the foreign corporation(s) is (are)
organized, permit such merger.
THIRD: The name of the surviving corporation is UNUM Life Insurance
Company of America ________________ and it is to be governed by
the laws of the State of: Maine
FOURTH: The plan of merger is set forth in Exhibit A attached hereto
and made a part hereof.
FIFTH: For each participating domestic corporation, the number of
shares outstanding, entitled to vote and the number of such
shares voted for and against the plan are as follows:
<TABLE>
<CAPTION>
Name of Number Number Number Number
Corporation Outstanding Entitled to Vote Voted For Voted Against
----------- ----------- ---------------- --------- -------------
<S> <C> <C> <C> <C>
UNUM Life Insurance
Company of America 500,000 500,000 500,000
</TABLE>
SIXTH: If the shares of any class were entitled to vote as a class,
the designation and number of the outstanding shares of each
such class, and the number of shares of each such class voted
for and against the plan, are as follows:
<TABLE>
<CAPTION>
Name of Designation Number of Number Number
Corporation of Class Shares Voted For Voted Against
----------- ----------- --------- --------- -------------
<S> <C> <C> <C> <C>
N/A
</TABLE>
<PAGE>
EIGHTH: The address of the registered office of the surviving
corporation is*
2211 Congress Street, Portland, Maine 04122
(street, city, state and zip code)
The address of the registered office of the merged corporation
is*
350 N. Sunny Slope Road, Brookfield, WI 53005
(street, city, state and zip code)
NINTH: Effective date of the merger (if other than date of filing of
Articles) is December 31, l996.
(Not to exceed 60 days from date of filing of the Articles.)
August 23, 1996 UNUM Life Insurance Company of
America
_______________________________________
MUST BE COMPLETED FOR VOTE (Participating Domestic Corporation)
OF SHAREHOLDERS
I certify that I have custody of the minutes
By_____________________________________
showing the above action by the shareholders of Kevin J. Tierney, Clerk
UNUM Life Insurance Company of America --------------------------------
(Name of corporation) (type or print name and capacity)
By____________________________________
(signature)
______________________________________
(type or print name and capacity)
Dated:________________________________ ______________________________________
(Participating Domestic Corporation)
MUST BE COMPLETED FOR VOTE
OF SHAREHOLDERS By____________________________________
(Signature)
I certify that I have custody of the
minutes showing the above action by ______________________________________
the shareholders of (type or print name and capacity)
(Name of Corporation)
(signature of clerk, secretary or asst. secretary)
.Give address of registered office in Maine. If the corporation does not have
a registered office in Maine, the address given should be the principal or
registered office in the State of incorporation.
This document MUST be signed by (1) the Clerk OR (2) the President or Vice-
President AND the Secretary, an assistant secretary or other officer the
bylaws designate as second certifying officer OR (3) if no such officers, a
majority of the directors or such directors designated by a majority of
directors then in office OR (4) if no directors, the holders, or such of
them designated by the holders of record of a majority of all outstanding
shares entitled to vote thereon OR (5) the holders of all outstanding
shares.
FORM NO. MBCA-IOC Rev. 88 SUBMIT COMPLETED FORMS To: Secretary of State,
Station 101, Augusta, ME 04333
<PAGE>
STATE OF MAINE
DEPARTMENT OF PROFESSIONAL AND
FINANCIAL REGULATION
BUREAU OF INSURANCE 34 STATE HOUSE STATION
AUGUSTA, MAINE
04333-0034
BRIAN K. ATCHISON
Superintendent
I hereby certify that the attached is a true copy of the Agreement and
Plan of Merger of Commercial Life Insurance Company into UNUM Life
Insurance Company as filed with the Maine Bureau of Insurance
Dated: August 29, 1996 /s/ Thomas M. Record
Thomas M. Record
Senior Staff Attorney
PHONE: (207) 624-8475 (Voice) (207) 624-8~63 (TDD) FAX: (207) 624-8599
OFFICES LOCATED AT: 124 NORTHERN AVENUE, GARDINER, MAINE
<PAGE>
AGREEMENT AND PLAN OF MERGER
OF
COMMERCIAL LIFE INSURANCE COMPANY
INTO
UNUM LIFE INSURANCE COMPANY OF AMERICA
AGREEMENT AND PLAN OF MERGER, entered into as of the ___ day of
May, 1996, by and between Commercial Life Insurance Company, a
Wisconsin stock insurance company (hereinafter sometimes referred
to as "Commercial"), and UNUM Life Insurance Company of America, a
Maine stock insurance company (hereinafter sometimes referred to as
"UNUM America");
WITNESSETH:
WHEREAS, each of Commercial and UNUM America is owned directly
or indirectly by UNUM Corporation; and
WHEREAS, the Boards of Directors and stockholders of Commercial
and UNUM America have determined that merger of the corporations,
with UNUM America being the surviving corporation, will be in the
best interests of the corporations and their respective
stockholders and policyholders; and
WHEREAS, the laws of the State of Wisconsin and the State of
Maine permit such a merger;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein, and for the
purpose of prescribing the terms and conditions of such merger, the
parties hereto hereby establish the terms and conditions of such
merger and covenant and agree as follows:
1. Merger. Commercial shall, on the Effective Date as defined
in Section 6 herein, merge into UNUM America, which shall be the
surviving corporation in the merger. Commercial and UNUM America
are sometimes referred to hereinafter as the "Constituent
Companies."
2. Name of Surviving Corporation. The name of the surviving
corporation (sometimes hereinafter referred to as the "Surviving
Corporation")
<PAGE>
shall remain "UNUM Life Insurance Company of America", until
changed as provided by law.
3. Certificate of Organization and Bylaws. The Certificate of
Organization of UNUM America in effect on the Effective Date shall
be the Certificate of Organization of the Surviving Corporation,
until further altered or amended as provided by law.
The Bylaws of UNUM America in effect on the Effective Date
shall be the Bylaws of the Surviving Corporation, until further
altered or amended as provided by law.
4. Capitalization of Constituent Companies. Commercial has
authorized capital stock of 2,500,000 shares, having a par value of
$1.00 per share, all of which are issued and outstanding and are
registered in the name of UNUM Corporation, a Delaware corporation.
Prior to the Effective Date, UNUM America has authorized
capital stock of 1,000,000 shares, having a par value of $10.00
per share, 500,000 of which are issued and outstanding, 437,362 of
which are registered in the name of UNUM Holding Company and 62,638
of which are registered in the name of UNUM Corporation.
5. Treatment of Shares of Constituent Companies. The mode of
carrying the Agreement and Plan of Merger into effect, and the
treatment of shares of the Constituent Companies, shall be as
follows:
(a) The number and par value of authorized shares of UNUM
America shall not be affected by the merger.
(b) On the Effective Date, each outstanding share of common
stock of America shall be converted into .9456594 shares of
common stock of the Surviving Corporation, and each outstanding
share of common stock of Commercial shall be converted into
.0108680 shares of common stock of the Surviving Corporation. From
and after the Effective Date of the merger, and until surrendered
to the Surviving Corporation, each outstanding certificate which
prior to the Effective Date represented shares of outstanding
common stock of Commercial or UNUM America shall be deemed for all
purposes to evidence only a right to receive the merger
consideration into which such shares have been converted by virtue
of the merger.
(c) Within ninety.days after the end of the calendar year 1996,
the Surviving Corporation shall perform all of the calculations in
the formula set forth in Annex I (the "Formula"), using December
31, 1996 information for each item in the Formula, and within said
ninety days the Surviving Corporation shall
2
<PAGE>
file articles of amendment to its articles of incorporation to make
any necessary changes to the number of shares issued in the merger,
to the extent that such changes are called for to correct a variance
from the number of shares to have been received by the shareholders
of the Constituent Corporations in the merger, provided that such
variance exceeds 5% of the total number of shares to be issued in
the merger.
(d) After the Effective Date, the holders of the stock of the
Constituent Companies may surrender all outstanding certificates
representing common shares of the Constituent Companies to the
Surviving Corporation, and the holders of the stock of the
Constituent Companies shall be entitled upon such surrender to
receive a certificate or certificates representing the number of
shares of common stock of the Surviving Corporation into which the
common shares of the Constituent Companies theretofor represented by
such certificates shall have been converted.
(e) From and after the Effective Date of the merger, transfers
of the shares of common stock of Commercial shall not be made on the
stock transfer books of said corporation.
6. Effective Date. The merger shall be effective (the
"Effective Date" as of 11:59 p.m., Eastern Standard Time: (a) on
December 31, 1996, if the Articles of Merger, in the form required
by the provisions of 13-A M.R.S.A. (S) 903, are filed with the
Secretary of the State of Maine as required by (S) 903 on or before
December 31, 1996; or (b) on the day when the Articles of Merger, in
the form required by the provisions of 13-A M.R.S.A. (S) 903, are
filed with the Secretary of the State of Maine as required by (S)
903 if such filing is made after December 31,1996.
7. Conditions to Merger. Anything herein or elsewhere to the
contrary notwithstanding, the merger shall not be made effective
unless prior to the Effective Date all of the following events shall
have been completed:
(a) This Agreement and Plan of Merger shall have been adopted
by each. of the Boards of Directors of Commercial and of UNUM
America;
(b) This Agreement and Plan of Merger shall have been approved
by the stockholders of Commercial and of UNUM America;
(c) This Agreement and Plan of Merger shall have been approved
(i) by the Superintendent of Insurance of the State of Maine in
accordance with the applicable provisions of Maine law, and (ii) by
the Commissioner of Insurance of the State of Wisconsin in
accordance with the applicable provisions of Wisconsin law; and
3
<PAGE>
(d) Commercial shall have distributed to its shareholders the
shares of stock of Commercial's two subsidiaries; Continental
National Life Insurance Company and Continental International Life
Insurance Company.
8. Effect of Merger. On the Effective Date:
(a) The separate existence of Commercial shall cease and UNUM
America shall succeed to and possess all the rights, privileges,
powers, franchises and interests of Commercial in and to every
species of property, real, personal and mixed, and things in action
thereunto belonging to it, all of which shall be deemed transferred
to and vested in UNUM America, without any deed or. other
instrument of transfer.
(b) Simultaneously therewith, UNUM America shall be deemed to
have assumed all of the liabilities and obligations of Commercial,
which shall be preserved unimpaired by the merger. The merger will
not alter the terms of any insurance coverage provided by any
insurance policies or contracts issued by the Constituent Companies
and will have no effect upon the insurance benefits or premiums
payable under such policies or contracts.
(c) No liability or obligation due or to become due, claim or
demand for any cause existing against Commercial, or any
stockholder, officer or director thereof shall be released or
impaired by such merger, and no action or proceeding, civil or
criminal, then pending by or against Commercial, or any
stockholder, officer or director thereof shall abate or be
discontinued by such merger, but may be enforced, prosecuted,
settled or compromised as if such merger had not occurred, or UNUM
America may be substituted in any such action in place of
Commercial.
9. Directors and Officers. The members of the Board of
Directors and the Officers of UNUM America on the Effective Date
shall be and remain the members of the Board of Directors and the
Officers of the Surviving Corporation until the next annual
meeting of stockholders or directors, as the case may be, or until
their successors have been chosen and qualify in accordance with
law.
10. Employees. All employees of Commercial immediately prior
to the Effective Date shall be deemed transferred to UNUM America
without interruption to or impairment of their employment or any
attendant rights and benefits, including all pension and retirement
plans and all other plans, agreements or arrangements of Commercial
relating to its employees or any of them, in force on the Effective
Date, unless and until otherwise determined by the Surviving
Corporation.
11. Compensation. No director, officer, agent or employee of
any of the Constituent Companies shall receive any fee, commission,
compensation or other
4
<PAGE>
valuable consideration whatsoever for in any manner aiding,
promoting or assisting in the merger, except for the remuneration
such persons are entitled to receive in exchange for their services
under the terms of the Constituent Companies' regular cash and
noncash compensation programs established for their directors,
officers, agents and employees generally, or, if outside
professional advisors, in accordance with their
normal billing practices
12. Further Documents and Acts to Effectuate Merger. Upon
approval of this Agreement and Plan of Merger by the stockholders of
each of the Constituent Companies, the Boards of Directors and the
proper officers thereof shall hereby be authorized, empowered and
directed to do any and all acts and things, and to make, execute,
acknowledge, deliver, file and record any and all instruments,
papers and documents and cause to be performed all other and further
acts within the State of Maine and elsewhere which shall be and
become necessary, proper or convenient to carry out or put into
effect any of the provisions of this Agreement and Plan of Merger or
of the merger provided for herein.
13. Abandonment of Merger. This Agreement and Plan of Merger
may be terminated or abandoned before it becomes effective without
further action or approval by the stockholders of any of the
Constituent Companies by majority vote of the Board of Directors of
any Constituent Company.
IN WITNESS WHEREOF, this Agreement and Plan of Merger
having been authorized, adopted and approved by resolutions duly
adopted by the respective Boards of Directors of Commercial and
UNUM/America and having been approved by resolutions duly and
unanimously adopted by the stockholders of each of the Constituent
Companies, each such company has caused this Agreement and Plan of
Merger, as amended, to be signed by its President and
5
<PAGE>
Secretary as of the date first written above under the corporate
seals of the respective Constituent Companies.
COMMERCIAL LIFE INSURANCE COMPANY
(CORPORATE SEAL) By
Janet V. Whitehouse, President
ATTEST:
_______________________________________
Wendolyn C. Clarke, Assistant Secretary
UNUM LIFE INSURANCE OF AMERICA
(CORPORATE SEAL)
_______________________________
Stephen B. Center, President
ATTEST:
_______________________________________
Wendolyn C. Clarke, Assistant Secretary
CERTIFICATE OF APPROVAL
----------- -- --------
STATE OF MAINE
DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
BUREAU OF INSURANCE
I have approved the foregoing Agreement and Plan of Merger of
Commercial Life Insurance Company into UNUM Life Insurance Company
of America (the "Agreement and Plan of Merger"), pursuant to 24-A
M.R.S.A. Section 3474 pursuant to Decision and Order dated August
28, 1996.
Dated:
Superintendent of Insurance 7
COR:79374-I .Doc
6
<PAGE>
Annex I
Formula for Converting Constituent Company Shares
-------------------------------------------------
The outstanding shares of common stock of the Constituent Companies
will be converted into shares of common stock of the Surviving
Corporation in accordance with the following formula:
1. Calculate the ratio of the Capital and Surplus, including AVR
and excluding any Surplus Notes, of each of the Constituent
Companies to the sum of the Capital and Surplus of UNUM America
and Commercial as of December 31, 1995. Exclude from the
Commercial Surplus the statement value, $2,430,758, of two 100%
owned subsidiaries, Continental International Life Insurance
Company and Continental National Life Insurance Company, which
will be distributed as a dividend to UNUM Corporation prior to
December 31, 1996. These ratios represent the ownership
percentage in the Surviving Corporation of each of the
Constituent Companies.
<TABLE>
<CAPTION>
12/31/95 Capital & Surplus* AVR Total Ownership
<S> <C> <C> <C> <C>
UNUM America $800,778,141 $151,500,990 $ 952,279,131 94.56594%
Commercial $ 51,794,444 $ 2,926,589 $ 54,721,033 5.43406%
Total $852,572,585 $154,427,579 $1,007,000,164 100.00000%
*Excluding surplus notes
</TABLE>
2. The number of shares of the Surviving Corporation into which
the shares of the Constituent Companies will be converted is
calculated by multiplying 500,000 by the ownership percentages
determined in step 1. This results in 472,830 and 27,170 shares
for UNUM America and Commercial shareholders respectively.
3. The Conversion Rate for existing UNUM America and Commercial
shares is determined by dividing the number of shares determined
in step 2 for each Constituent Company by the current number of
shares outstanding for UNUM America and Commercial.
<TABLE>
<CAPTION>
Surviving Current Shares Conversion
Corporation Outstanding Rate
Shares
<S> <C> <C> <C>
UNUM America 472,830 500,000 9456594
Commercial 27,170 2,500,000 .0108680
</TABLE>
4. Within 90 days after the end of the calendar year 1996, the
Surviving Corporation shall perform all the calculations in steps
1-3 above, but using December 31, 1996 information If this
calculation results in a variance in the number of shares to be
received by the shareholders of the Constituent Companies of more
than 5% of the number of shares to be issued by the Surviving
Corporation, the Conversion Rates will be based on the December
31, 1996 information.
<PAGE>
UNUM LIFE INSURANCE COMPANY OF AMERICA
BYLAWS
ARTICLE I
NAMES AND OFFICES
Section 1.01. The name of the Corporation shall be UNUM Life Insurance Company
of America.
Section 1.02. The principal office shall be located in the City of Portland,
County of Cumberland, State of Maine.
Section 1.03. The Corporation may also have offices at such other places both
within and without the State of Maine as the Board of Directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01. All meetings of the Stockholders for the election of Directors
shall be held in the City of Portland, State of Maine, at such place as may be
fixed from time to time by the Board of Directors, or at such other place within
or without the State of Maine as shall be designated from time to time by the
Board of Directors, stated in the notice of the meeting and permitted by law.
Meetings of stockholders for any other purpose may be held at such time and
place, within the State of Maine, as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2.02. Annual meetings of Stockholders, commencing with the year 1972,
shall be held on the fourth Thursday in March, if not a legal holiday, and if a
legal holiday, then on the next secular day following, at 3:30 p.m., or at such
other date and time as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting, at which meeting they shall
elect by a plurality vote a Board of Directors, and transact such other business
as may properly be brought before the meeting.
Section 2.03. Written notice of the annual meeting stating the place, date and
hour of the meeting shall be given to each stockholder entitled to vote at such
meeting not less than ten nor more than fifty days before the date of the
meeting.
<PAGE>
Section 2.04. The officer who has charge of the stock ledger of the Corporation
shall prepare and make, at least ten days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 2.05. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by Statute or by the Certificate of
Incorporation, may be called by the President and shall be called by the
President and shall be called by the President or Secretary at the request in
writing of a majority of the Board of Directors, or at the request in writing of
stockholders owning a majority in amount of the entire capital stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting.
Section 2.06. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given not less than ten nor more than fifty days before the date of the
meeting, to each stockholder entitled to vote at such meeting.
Section 2.07. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 2.08. The holders of a majority of the stock issued and outstanding and
entitled to voted thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by Statute or by the Certificate of
Incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than an announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting, at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 2.09. When a quorum is present at any meeting, the vote of the holders
of a majority of the stock having voting power present in person or represented
by proxy shall decide any question brought before such meeting, unless the
question is one upon which by express
<PAGE>
provision of the Statutes or of the Certificate of Incorporation, a different
vote is required in which case such express provision shall govern and control
the decision of such question.
Section 2.10. Each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after one year from the date of its execution.
Section 2.11. Any action required to be taken at a meeting of the stockholders
or any other action which may be taken at a meeting of the stockholders may be
taken without a meeting if a consent in writing setting forth the action so
taken, shall be signed by all the stockholders entitled to vote with respect to
the subject matter thereof, and filed with the clerk of the corporation. Such
written consent shall have the same effect as a unanimous vote of the
stockholders.
ARTICLE III
DIRECTORS
Section 3.01. The number of Directors which shall constitute the whole Board
shall be not less than seven nor more than fifteen. The Directors shall be
elected at the annual meeting of the stockholders except as provided in Section
3.02, and each Director elected shall hold officer until his successor is
elected and qualified. Directors need not be stockholders.
Section 3.02. Vacancies and newly created Directorships resulting from any
increase in the authorized number of Directors may be filled by a majority of
the Directors then in office, though less than a quorum, or by a sole remaining
Director, and the Directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no Directors in office, then an election of
Directors may be held in the manner provided by Statute. If, at the time of
filling any vacancy or any newly created Directorship, the Directors then in
office shall constitute less than a majority of the whole Board (as constituted
immediately prior to any such increase), the President or Chairman of the Board
may, upon application of any stockholder or stockholders holding at least ten
percent (10%) of the total number of the shares at the time outstanding having
the right to vote for such Directors, summarily order an election to be held to
fill any such vacancies or newly created Directorships, or to replace the
Directors chosen by the Directors then in office.
Section 3.03. The business of the Corporation shall be managed by its Board of
Directors which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by Statute or by the Certificate of
Incorporation or by these By-laws directed or required to be exercised or done
by the stockholders.
Section 3.04. The Board of Directors of the Corporation may hold meetings, both
regular and special, either within or without the State of Maine.
<PAGE>
Section 3.05. The first meeting of each newly elected Board of Directors shall
be held immediately following the annual meeting of the stockholders and no
notice of such meeting shall be necessary to the newly elected Directors in
order legally to constitute the meeting, provided a quorum shall be present. In
the event such meeting is not held immediately following the annual meeting of
the stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the Directors.
Section 3.06. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board.
Section 3.07. Special meetings of the Board may be called by the President on
five (5) days' notice to each Director, either personally or by mail or by
telegram; special meetings shall be called by the President or Secretary in like
manner and on like notice on the written request of two (2) Directors.
Section 3.08. At all meetings of the Board, a majority of the Directors then in
office shall constitute a quorum for the transaction of business and the act of
a majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors,, except as may be otherwise
specifically provided by Statute or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
Directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 3.09. The Board of Directors may, by resolution passed by a majority of
the whole Board, designate one or more committees, each committee to consist of
three or more of the Directors of the Corporation. The Board may designate one
or more Directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. Any such
committee, to the extent provided in the resolution, shall have and may exercise
the powers of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; provided, however, that in the
absence or disqualification of any member of such committee or committees, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Such committee or committees shall have
such name or names as may be determined from time to time by resolution adopted
by the Board of Directors.
Section 3.10. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
<PAGE>
Section 3.11. The Directors may be paid their expenses, if any, of attendance
at each meeting of the Board of Directors and may be paid a fixed sum or a
stated salary for service as a Director. No such payment shall preclude and
Director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation.
Section 3.12. Unless otherwise restricted by the articles of incorporation or
by these By-laws, any action required to be taken at a meeting of the Board of
Directors of this corporation, or any action which may be taken at a meeting of
the Board of Directors or of a Committee thereof, may be taken without a meeting
if all Directors or Committee members, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of the
proceedings of the Board or Committee, such consent shall have the same effect
as a unanimous Vote.
ARTICLE IV
NOTICES
Section 4.01. Whenever, under the provisions of the Statutes or of the
Certificate of Incorporation or of these By-laws, notice is required to be given
to any Director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
Director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to Directors may also be given be telegram.
Section 4.02. Whenever any notice is required to be given under the provisions
of the Statutes or of the Certificate of Incorporation or of these By-laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 5.01. The Officers of the Corporation will be chosen by the Board of
Directors and shall be a President, a Vice President, a Clerk, a Secretary, a
Treasurer. The Board of directors may also choose additional Vice Presidents,
and one or more Assistant Clerks, Assistant Secretaries, and Assistant
Treasurers. Any number of offices may be held by the same person, unless the
Certificate of Incorporation or these Bylaws otherwise provide.
<PAGE>
Section 5.02. The Board of Directors at its first meeting after each annual
meeting of stockholders shall choose a President, one or more Vice Presidents, a
Clerk, a Secretary and a Treasurer.
Section 5.03. The Board of Directors may appoint such other Officers and agents
as it shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board.
Section 5.04. The salaries of all Officers and agents of the Corporation shall
be fixed by the Board of Directors.
Section 5.05. The Officers of the Corporation shall hold office until their
successors are chosen and qualify. Any Officer elected or appointed by the Board
of Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors. Any vacancy occurring in any office of the Corporation
shall be filled by the Board of Directors.
Section 5.06. The President shall be the chief executive Officer of the
Corporation, shall preside at all meetings of the stockholders and the Board of
Directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Section 5.07. The President shall execute bonds, mortgages, and other contracts
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other Officer or agent of the Corporation.
Section 5.08. In the absence of the President or in the event of his inability
or refusal to act, the Vice President (or in the event there be more than one
Vice President, the Vice Presidents in the order designated, or in the absence
of any designation, then in the order of their election) shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. The Vice Presidents shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 5.09. The Clerk shall be a resident of the State of Maine; if he
removes from the State, he shall be deemed thereby to have vacated his office,
and the vacancy shall be filled by the Directors. The Clerk shall attend all
meetings of the Board of Directors and all meetings of the stockholders and
record all the proceedings of the meetings of the Corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or the President, under whose supervision he shall be. He shall
have custody of the corporate seal of the Corporation and he, or an Assistant
Clerk shall have authority to affix the same to any instrument requiring it and
when so affixed,
<PAGE>
it may be attested by his signature or by the signature of such Assistant Clerk.
The Board of Directors may give general authority to any other Officer to affix
the seal of the Corporation and to attest the affixing by his signature.
Section 5.10. The Assistant Clerk, or if there be more than one, the Assistant
Clerks in the order determined by the Board of Directors (or if there be no such
determination, then in the order of their election), shall, in the absence of
the Clerk or in the event of his inability or refusal to act, perform the duties
and exercise the powers of the Clerk and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
Section 5.11. The Secretary shall, in the absence of the Clerk or in the event
of his inability or refusal to act, perform the duties and exercise the power of
the Clerk and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 5.12. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election), shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
Section 5.13. The Treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the Credit of the Corporation in
such depositories as may be designated by the Board of Directors.
Section 5.14. The Treasurer shall disburse the funds of the Corporation, taking
proper vouchers for such disbursements, and shall render to the President and
the Board of Directors, at its regular meetings, or when the Board of Directors
so requires, an account of all his transactions as Treasurer and of the
financial condition of the Corporation.
Section 5.15. The Treasurer shall give the Corporation a bond (which shall be
renewed every six (6) years) in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement, or removal from office, of all books papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 5.16. The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election), shall, in
the absence of the Treasurer or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
<PAGE>
ARTICLE VI
CAPITAL STOCK
Section 6.01. No stockholder of the Corporation as such shall be entitled as a
matter of right to subscribe or apply for or purchase or receive any part of any
unissued securities of the Corporation or of any securities issued and
thereafter acquired by the Corporation.
Section 6.02. Every holder of stock in the Corporation shall be entitled to
have a certificate, signed by, or in the name of the Corporation by, the
Chairman or Vice Chairman of the Board of Directors or the President or a Vice
President and the Treasurer or an Assistant Treasurer, or the Clerk or an
Assistant Clerk of the Corporation, certifying the number of shares owned by him
in the Corporation.
Section 6.03. Where a certificate is countersigned (1) by a transfer agent
other than the Corporation or its employee, or (2) by a registrar other than the
Corporation or its employee, any other signature on the certificate may be
facsimile. In case any Officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such Officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such Officer, transfer agent or registrar at the date of issue.
Section 6.04. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 6.05. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 6.06. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
<PAGE>
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 6.07. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Maine.
ARTICLE VII
GENERAL PROVISIONS
Section 7.01. Dividends upon the capital stock of the Corporation, subject to
the provisions of the Certificate of Incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 7.02. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Directors shall think conducive to the interest of the
Corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
Section 7.03. The Board of Directors shall present at each annual meeting, and
at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
Corporation.
Section 7.04. All checks or demands for money and notes of the Corporation
shall be signed by such Officer or Officers or such other person or persons as
the Board of Directors may from time to time designate.
Section 7.05. The fiscal year of the Corporation shall be fixed by resolution
of the Board of Directors.
Section 7.06. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal, Maine".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
<PAGE>
ARTICLE VIII
INDEMNIFICATION OF CORPORATE PERSONNEL
Section 8.01.
(a) The corporation may indemnify any person made or threatened to be made a
party to any action or proceeding, including an action by or in the right
of the corporation, whether civil or criminal, including, without
limitation, an action by or in the right of any other corporation of any
type or kind, domestic or foreign, which any director, officer or
employee of the corporation served in any capacity at the request of the
corporation, by reason of the fact that he, his testator or intestate,
was a director, officer or employee of the corporation or served such
other corporation in any capacity, against judgments, fines, amounts paid
in settlement and reasonable expenses, including attorneys' fees,
actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director, officer or employee
acted, in good faith, for a purpose which he reasonably believed to be in
the best interests of the corporation.
(b) The termination of any such civil or criminal action or proceeding by
judgment, settlement, conviction or upon a plea of nolo contendere, or
its equivalent, shall not in itself create a presumption that any such
director, officer or employee did not act, in good faith, for a purpose
which he reasonably believed to be in the best interests of the
corporation.
Section 8.02.
(a) A person who has been wholly successful, on the merits or otherwise, in
the defense of a civil or criminal action or proceeding of the character
described in Section 8.01 of this Article VIII shall be entitled as a
matter of right to indemnification as authorized in said sections.
(b) Except as provided in subsection (a) of this Section 8.02, any
indemnification under Section 8.01 of this Article VIII, unless ordered
by a court in accordance with Section 8.03 of this Article VIII, shall be
made by the corporation only if authorized in the specific case:
(i) By resolution of the Board of Directors (if the person who was a
party to such action or proceeding is not, at the time such
resolution is adopted, a director, upon a finding, made with or
without the advice of independent legal counsel as the Board sees
fit, that the director, officer or employee whose conduct is called
into question in such action or proceeding has met the standard of
conduct set forth in Section 8.01 of this Article VIII;
<PAGE>
(ii) by resolution of a majority of all of the other directors who were
not such parties (if the person who was a party to such action or
proceeding is, at the time such resolution is adopted, a director)
provided that all such other directors constitute at least a quorum
of the Board of Directors, at a meeting at which all such other
directors are present upon a finding, made with or without the
advice of independent legal counsel as such majority of such other
directors sees fit, that the director, officer or employee whose
conduct is called into question in such action or proceeding has
met the standard of conduct set forth in Section 8.01 of this
Article VIII; or
(iii) if no resolution complying with subparagraph (i) above can be had
and if no resolution complying with subparagraph (ii) next above
can be had with due diligence, or if a majority at a meeting
complying with said subparagraph (ii) so decide, by resolution of
the Board of Directors upon the opinion of an independent legal
counsel that indemnification is proper under the circumstances
because the standard of conduct set forth in Section 8.01 of this
Article VIII has been met by the director, officer or employee
whose conduct is called into question in such action or proceeding.
(c) Expenses incurred in defending a civil or criminal action or proceeding
may be paid by the corporation in advance of the final disposition of
such action or proceeding if authorized under subsection (b) of this
Section 8.02.
Section 8.03.
(a) Notwithstanding the failure of the corporation to provide indemnification
and despite any contrary resolution of the Board of Directors (or members
thereof) in a specific case under subsection 8.02(b) of this Article
VIII, indemnification shall be awarded by a court to the extent
authorized under Section 8.01 and subsection 8.02(a) of this Article
VIII.
(b) Application to a court for such indemnification shall be made either (i)
in the action or proceeding in which the expenses were incurred or other
amounts were paid, if the court has jurisdiction over the corporation and
is otherwise a court of competent jurisdiction, or (ii) in a separate
action or proceeding brought in any court of competent jurisdiction, in
which case the application for indemnification shall set forth the
disposition of any previous application made to any court for the same or
similar relief in the action or proceeding in which the expenses were
incurred or other amounts paid.
(c) Where indemnification is sought by judicial action, the court may allow
the person seeking such indemnification such reasonable expenses,
including attorneys' fees, during the pendency of the litigation in which
the expenses as to which indemnification is being sought are being
incurred as are necessary in connection
<PAGE>
with his defense therein, if the court shall find that such person has by
his pleadings or during the course of such litigation raised genuine
issues of fact or law.
Section 8.04.
(a) All expenses incurred in defending a civil or criminal action or
proceeding which are advanced by the corporation under Section 8.02(c) or
allowed by a court under Section 8.03(c) of this Article VIII, shall be
repaid (i) in case the person receiving such advancement or allowance is
ultimately found, under the procedure set forth in this Article VIII, not
to be entitled to indemnification, or (ii) where indemnification is
granted, to the extent that the expenses so advanced by the corporation
or allowed by the court exceed the indemnification to which he is
entitled.
(b) No indemnification, advancement or allowance shall be made if and to the
extent that, in case the action or proceeding is terminated by a
settlement approved by the court, such indemnification would be
inconsistent with any condition with respect to indemnification expressly
imposed by the court in approving the settlement.
(c) No indemnification shall be made if it would be inconsistent with the
provisions of the By-laws of the corporation or policies of the
corporation relative to conflict of interest in effect at the time of
accrual of the alleged cause of action asserted in the threatened or
pending action or proceeding in which the expenses were incurred or other
amounts paid which prohibited or otherwise limited indemnification.
(d) Independent legal counsel as used herein shall mean any law firm selected
by the Board of Directors and may include a law firm of which a director
is a member, provided such director is not the applicant for
indemnification.
(e) If any section, subsection, paragraph, sentence, clause, phrase or word
in this Article VIII shall be adjudicated invalid or unenforceable, such
adjudication shall not be deemed to invalidate or otherwise affect any
other section, subsection, paragraph, sentence, clause, phrase or word of
said Article VIII.
ARTICLE IX
AMENDMENTS
Section 9.01. These By-laws may be altered, amended or repealed or new By-laws
may be adopted by the stockholders or by the Board of Directors, when such power
is conferred upon the Board of Directors by the Certificate of Incorporation, at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration, amendment, repeal or adoption of new By-laws be contained in
the notice of such special meeting.
<PAGE>
UNUM Life Insurance Company
Excerpt of Meeting of the Board of Directors September 13, 1991 at 9:00 a.m.
Corporate Restructuring
Reference was made to the Plan and Agreement of Merger of UNUM Life Insurance
Company and UNUM Pension and Insurance Company into UNUM Life Insurance Company
of America and to the related material which was previously provided to the
directors. After discussion, it was, on motion, duly
RESOLVED, to approve the Plan and Agreement of Merger of UNUM Life
Insurance Company and UNUM Pension and Insurance Company into UNUM Life
Insurance Company of America (the "Plan and Agreement of Merger") attached
hereto as Attachment A, to be effective at 11:59 p.m., local time: (a) on
December 31, 1991, if the Articles of Merger, in the form required by the
provisions of 13-A M.R.S.A. (S)903 are filed with the Secretary of the
State of Maine as required by (S)903 on or before December 31, 1991; or (b)
on the day when the Articles of Merger, in the form required by the
provisions of 13-A M.R.S.A. (S)903, are filed with the Secretary of the
State of Maine as required by (S)903 if such filing is made after December
31, 1991 (the "Effective Date") as required by Section 903; and it was
further
RESOLVED, that such Plan and Agreement of Merger be submitted for approval
to the Stockholders of the Company at a special meeting of Stockholders and
that the Secretary of the Company is hereby directed to give notice of such
meeting, including a copy of the Plan and Agreement of Merger, forthwith in
the manner required by Section 902 of Title 13-A of the Maine Revised
Statutes Annotated; and it was further
RESOLVED, to authorize the Company to cease to maintain its existing
licensing status in New York by surrendering its license to transact life
insurance, accident and health insurance and annuity business as of the
Effective Date; and it was further
RESOLVED, to repay, in cash or other consideration, the outstanding
Subordinated Surplus Debentures, Series B, Numbers 4-15, between UNUM
Corporation and the Company in an aggregate principal sum of $60,000,000
plus accrued interest, upon the Effective Date, subject to approval by the
Maine Superintendent of Insurance and subject to the further restrictions
provided therein; and it was further
RESOLVED, that the proper officers of the Company be, and they hereby are,
authorized and empowered from time to time to execute or cause to be
executed all such further documents and writings and to cause to take all
such actions as such officers may deem necessary or desirable to give
effect to the foregoing resolutions.
<PAGE>
WRITTEN CONSENT UNDER MAINE BUSINESS CORPORATION ACT SECTION 620
IN LIEU OF A SPECIAL MEETING OF STOCKHOLDERS OF
UNUM LIFE INSURANCE COMPANY
WHEREAS, Section 620 of the Maine Business Corporation Act and Section 1.11
of Article I of the Bylaws of UNUM Life Insurance Company provide that whenever
the vote of stockholders at a meeting thereof is required or permitted to be
taken for, or in connection with, any corporate action, by any provision of
Maine law, the meeting and vote of the stockholders may be dispensed with if all
of the stockholders who would have been entitled to vote upon the action if such
meeting were held shall consent in writing to such corporate action being taken;
and
WHEREAS, UNUM Corporation of Portland, Maine is the holder of record of one
hundred percent (100%) of the issued and outstanding voting stock of UNUM Life
Insurance Company;
WHEREAS, Section 3 of Article IV of the By-Laws of UNUM Corporation,
confers upon the President or any Vice President of said Corporation, the power
to exercise any and all of the voting rights and privileges to which said
Corporation, as holder of record of all shares of the stock of UNUM Life
Insurance Company may be entitled to, including the right to consent in writing
to actions taken by the Company in lieu of any meeting at which the vote of
stockholders of the Company is required or permitted to be taken for or in
connection with any corporate action; and
WHEREAS, the undersigned desires by this writing, filed with the Minutes of
the proceedings of the Company to take various actions and to do so in lieu of
holding a special meeting of the stockholders of the Company;
NOW, THEREFORE, the following are adopted as actions taken by the
stockholders of UNUM Life Insurance Company:
RESOLVED, to approve the Plan and Agreement of Merger of UNUM Life
Insurance Company and UNUM Pension and Insurance Company into UNUM Life
Insurance Company of America (the "Plan and Agreement of Merger") attached
hereto as Attachment A, to be effective at 11:59 p.m., local time: (a) on
December 31, 1991, if the Articles of Merger, in the form required by the
provisions of 13-A M.R.S.A. (S)903 are filed with the Secretary of the
State of Maine as required by (S)903 on or before December 31, 1991; or (b)
on the day when the Articles of Merger, in the form required by the
provisions of 13-A M.R.S.A. (S)903, are filed with the Secretary of the
State of Maine as required by (S)903 if such filing is made after December
31, 1991 (the "Effective Date") as required by Section 903; and it was
further
RESOLVED, that the Board of Directors of the Company be, and they hereby
are, authorized and empowered to abandon, by a majority vote of the entire
Board, the Plan and Agreement of Merger prior to the Effective Date; and it
was further
RESOLVED, that the proper officers of the Company be, and they hereby are,
authorized and empowered from time to time to execute or cause to be
executed all such further documents and writings and to cause to take all
such actions as such officers may deem necessary or desirable to give
effect to the foregoing resolutions.
<PAGE>
-2-
IN WITNESS WHEREOF, the undersigned has subscribed his name as of the 13th
day of September, 1991.
James F. Orr III President
UNUM Corporation
<PAGE>
ATTACHMENT A
PLAN AND AGREEMENT OF MERGER OF
UNUM LIFE INSURANCE COMPANY
AND
UNUM PENSION AND INSURANCE COMPANY
INTO
UNUM LIFE INSURANCE COMPANY OF AMERICA
PLAN AND AGREEMENT OF MERGER, entered into as of the 13th day of September,
1991, by and between UNUM Life Insurance Company, hereinafter sometimes referred
to as UNUM Life, UNUM Pension and Insurance Company, hereinafter sometimes
referred to as UPIC, and UNUM Life Insurance Company of America, hereinafter
sometimes referred to as UNUM America, each of which is a Maine stock insurance
company;
WITNESSETH:
WHEREAS, UNUM Life is a stock insurance company duly organized and existing
under the laws of the State of Maine, having been incorporated in Maine on July
17, 1848, and is licensed to transact a life, health and life/health insurance
and variable annuity business in the State of Maine; and
WHEREAS, UPIC is a stock insurance company duly organized and existing
under the laws of the State of Maine, having been incorporated in Maine on July
9, 1980, and is licensed to transact a life insurance business in the State of
Maine; and
WHEREAS, UNUM America is a stock insurance company duly organized and
existing under the laws of the State of Maine, having been incorporated in Maine
on August 24, 1966, and is licensed to transact a life, health, life/health and
multi-line insurance business in the State of Maine; and
WHEREAS, the Boards of Directors and stockholders of UNUM Life,
- -UPIC and UNUM America have each determined that merger of the three
corporations, with UNUM America becoming the surviving corporation, will be in
the best interests of the corporations and their respective stockholders and
policyholders; and
WHEREAS, the laws of the State of Maine permit such a merger;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, and for the purpose of
<PAGE>
prescribing the terms and conditions of such merger, the parties hereto hereby
establish the terms and conditions of such merger and covenant and agree as
follows:
1. Merger. UNUM Life and UPIC shall, on the Effective Date as defined in
Section 6 herein, merge into UNUM America, and UNUM America shall be the
surviving corporation in the merger. UNUM Life, UPIC and UNUM America are
sometimes referred to hereinafter as the Constituent Companies.
2. Name of Surviving Corporation. The name of the surviving corporation shall,
from and after the Effective Date of the merger, be UNUM Life Insurance Company
of America (sometimes hereinafter referred to as the Surviving Corporation),
until changed as provided by law.
3. Certificate of Incorporation. and Bylaws. The Articles of Incorporation of
UNUM America in effect on the Effective Date shall be the Articles of
Incorporation of the Surviving Corporation, until further altered or amended as
provided by law.
The Bylaws of UNUM America in effect on the Effective Date shall be the
Bylaws of the Surviving Corporation, until further altered or amended as
provided by law.
4. Capitalization of Constituent Companies. UNUM Life has authorized capital
stock of 10.000,000 shares having a par value of $1.00 per share, 6,000,000 of
which are issued and outstanding and are registered in the name of UNUM
Corporation, a Delaware corporation.
UPIC has authorized capital stock of 2,000,000 shares having a par value of
$l.00 per share, 1,500,000 of which are issued and outstanding and are
registered in. the name of UNUM Holding Company, a Delaware corporation, wholly
owned by UNUM Corporation and hereinafter sometimes referred to as UNUM Holding.
UNUM America has authorized capital stock of 250,000 shares having a par
value of $10.00 per share, all of which are issued and outstanding and are
registered in. the name of UNUM Holding.
5. Treatment of Shares of Constituent Companies The mode of carrying the Plan
and Agreement of Merger into effect, and the treatment of shares of the
Constituent Companies, shall be as follows:
(a) The number and par value of authorized shares of UNUM America shall
not be affected by the merger.
(b) On the Effective Date, all of the issued and outstanding shares of
common stock of UNUM Life, UPIC and UNUM America shall be converted
into shares of the Surviving Corporation, in such proportions as shall
be calculated in accordance with Attachment A hereto. From and after
the Effective Date of the merger, and until surrendered to the
Surviving Corporation, each outstanding certificate which prior to the
Effective Date represented
<PAGE>
shares of outstanding common stock of UNUM Life, UNUM America or UPIC,
shall be deemed for all purposes to evidence only a right to receive the
merger consideration into which such shares have been converted by virtue
of the merger.
(c) After the Effective Date, UNUM Corporation way surrender all
outstanding certificates representing common shares of UNUM Life to the
Surviving Corporation and UNUM Corporation shall be entitled upon such
surrender to receive a certificate or certificates representing the number
of shares of common stock of the Surviving Corporation calculated in
accordance with Attachment A, into which the common shares of UNUM Life
therefore represented by such certificates shall have been converted.
(d) After the Effective Date, UNUM Holding may surrender all outstanding
certificates representing common shares of UPIC to the Surviving
Corporation. and UNUM Holding shall be entitled upon. such surrender to
receive a certificate or certificates representing the number of shares of
common stock of the Surviving Corporation calculated in accordance with
Attachment A, into which the common shares of UPIC theretofore represented
by such certificates shall have been converted.
(e) After the Effective Date, UNUM Holding may surrender all outstanding
certificates representing common shares of UNUM America to the Surviving
Corporation. and UNUM Holding shall be entitled upon such surrender to
receive a certificate or certificates representing the number of shares of
common stock of the Surviving Corporation calculated in accordance with
Attachment A, into which the common shares of UNUM America theretofore
represented by such certificates shall have been converted.
(f) From and after the Effective Date of the merger, transfers of the
shares of common stock of UNUM Life and of UPIC shall not be made on the
stock transfer books of said corporations.
6. Effective Date. The merger shall be effective (the "Effective Date") as of
11:59 p.m., Eastern Standard Time: a) on December 31, 1991, if the Articles of
Merger, in the form required by the provisions of 13-A. M.R.S.A. (S)903. are
filed with the Secretary of the State of Maine as required by (S)903 on or
before December 31, 1991; or b) on the day when the Articles of Merger, in the
form required by the provisions of 13-A M.R.S.A. (S)903, are filed with the
Secretary of the State of Maine as required by (S)903 if such filing is made
after December 31, 1991.
7. Conditions to Merger. Anything herein or elsewhere to the contrary
notwithstanding, the merger shall not be made effective unless prior to the
Effective Date all of the following events shall have been completed:
(a) This Plan and Agreement of Merger shall have been adopted by each of
the Boards of Directors of UNUM
<PAGE>
Life, UPIC and UNUM America;
(b) This Plan and Agreement of Merger shall have been approved by UNUM
Corporation as the sole stockholder of UNUM Life and by UNUM Holding as the
sole stockholder of UPIC and UNUM America; and
(c) This Plan and Agreement of Merger shall have been filed with the
Superintendent of Insurance of the State of Maine and approved in
accordance with the applicable provisions of the Maine Statutes.
8. Effect of Merger. On the Effective Date:
(a) The separate existence of UNUM Life and of UFIC shall cease and UNUM
America shall succeed to and possess all the rights, privileges, powers,
franchises and interests of UNUM Life and UPIC respectively in and to every
species of property, real, personal and mixed, and things in action
thereunto belonging, all of which shall be deemed as transferred to and
vested in UNUM America, without any other deed or transfer.
(b) Simultaneously therewith, UNUM America shall be deemed to have assumed
all of the liabilities, and obligations of UNUM Life and UPIG respectively,
which shall be preserved unimpaired by the merger. The merger will not
alter the terms of any insurance coverage provided by any insurance
policies or contracts issued by the Constituent Companies and will have no
effect upon the insurance benefits or premiums payable under such policies
or contracts. After the Effective Date, UNUM America shall administer the
Participation Fund Account, established to provide for the continued
maintenance of Union Mutual Life Insurance Company's policyholder dividend
practices (relative to. certain individual life insurance policies and
individual annuity contracts) in effect at the time, of said company's
recapitalization and conversion, in accordance with the Plan of Operation
dated May 9, 1986.
(c) No liability or obligation due or to become due, claim or demand for
any cause existing against UNUM Life or UPIC, or any stockholder, officer
or director thereof, shall be releasedeor impaired by such merger, and no
action or proceeding, civil or criminal, then pending by or against UNUM
Life or UPIC, or any stockholder. officer or director thereof, shall abate
or be discontinued by such merger, but may be enforced, prosecuted, settled
or compromised as if such merger bad not occurred, or UNUM America may be
substituted in any such action in place of UNUM Life or UPIC, as the case
may be.
9. Notification of Policyholders and Group Annuity Contractholders. Following
the Effective Date of the merger, all existing policyholders and group annuity
contractholders of UNUM Life and UPIC shall be notified of the merger and shall
be provided with a confirmation that their coverage will continue uninterrupted
and unaffected by the merger.
<PAGE>
10. Directors and Officers. The members of the Board of Directors and the
Officers of UNUM America on the Effective Date shall be and remain the members
of the Board of Directors and the Officers of UNUM America until the next annual
meeting of stockholders or directors, as the case may be, or until their
successors have been chosen. and qualify in accordance with law.
11. Employees. All employees of UNUM Life immediately prior to the Effective
Date shall be deemed transferred to UNUM America without interruption to or
impairment of their employment or any attendant rights and benefits, including
all pension and retirement plans and all other plans, agreements or arrangements
of UNUM Life relating to its employees or any of them, in force on the Effective
Date, unless and until otherwise determined by the Board of Directors of the
Surviving Corporation or its designee.
12. Compensation. No director, officer, agent or employee of any of the
Constituent Companies shall receive any fee, commission, compensation or other
valuable consideration whatsoever for in any manner aiding, promoting or
assisting in the merger, except for the remuneration such persons are entitled
to receive in exchange for their services under the terms of the Constituent
Companies' regular cash and noncash compensation programs established for their
directors, officers, agents and employees generally; or, if outside professional
advisors, in accordance with their normal billing practices.
13. Further Documents and Acts to Effectuate Merger. Upon approval of this Plan
and Agreement of Merger by the stockholders of each of the Constituent
Companies, the Boards of Directors and the proper officers thereof shall hereby
be authorized, empowered and directed to do any and all acts and things, and to
make, execute, acknowledge, deliver, file and record any and all instruments,
papers and documents and cause to be performed all other and further acts within
the State of Maine and elsewhere which shall be and become necessary, proper or
convenient to carry out or put into effect any of the provisions of this Plan
and Agreement of Merger or of the merger provided for herein.
14. Abandonment of Merger. This Plan and Agreement of Merger may be terminated
or abandoned before it becomes effective without further action or approval by
the stockholders of any of the Constituent Companies by majority vote of the
Board of Directors of any Constituent Company.
IN WITNESS WHEREOF, this Plan and Agreement of Merger having been
authorized, adopted and approved by resolutions duly adopted by the respective
Boards of Directors of UNUM Life, UPIC and UNUM America and having been approved
by resolutions duly and unanimously adopted by the stockholders of each of the
Constituent Companies each
<PAGE>
such company has caused this Plan and Agreement of Merger to be signed by its
President and Secretary as of the date first written above under the corporate
seals of the respective Constituent Companies.
UNUM FIFE INSURANCE COMPANY
(CORPORATE SEAL) By__________________________
James F. Orr III President
ATTEST:
____________________________
Kevin J. Tierney, Secretary
UNUM LIFE INSURANCE COMPANY OF AMERICA
(CORPORATE SEAL) By_________________________
James F. Orr III, President
ATTEST: ___________________________
Kevin J. Tierney, Secretary
(CORPORATE SEAL) By_________________________
James F. Orr III, President
ATTEST:
____________________________
Kevin J. Tierney, Secretary
ATTACHMENT A
<PAGE>
Exchange of Constituent Company Shares
The number of shares to be exchanged for the shares outstanding of each of the
Constituent Companies shall be calculated as follows:
1. Calculate the assumed capitalization of UNUM Corporation by adding the sum
of its equity capital and external debt as of 12/31/91 where equity capital
equals shares outstanding multiplied by the closing price of UNUM Corporation
Common Stock as reported on the NYSE on the last business day prior to the
Effective Date of the merger
2. Calculate the enterprise capitalization of the insurance subsidiaries by
subtracting the following from the assumed capitalization (calculated in step
1):
a. The assumed market capitalization of UNUM Corporation's United Kingdom
subsidiaries, calculated by subtracting from the purchase price of $120
million any purchase price paid to UNUM in respect of any of such
companies which have been sold as of the merger date;
b. $931.5 million, representing the capital, surplus and Mandatory
Securities Valuation Reserve as at 12/31/90, adjusted for outstanding
surplus notes, of each of UNUM Corporation's U.S. insurance
subsidiaries; and
c. The net value (negative or positive) of UNUM Corporation's assets (other
than the common stock of its subsidiaries and surplus notes) minus its
liabilities (other than external debt, but including amounts payable to
subsidiaries under revolving credit arrangements) as at 12/31/91.
3. Calculate a statutory earnings multiple by dividing the result of step 2 by
$85.5 million (representing the statutory earnings for the year ended December
31, 1990 of the U. S. insurance subsidiaries of UNUM Corporation adjusted for
non-recurring gains).
4. Multiply the statutory earnings multiple (calculated in step 3) by the
statutory earnings for the year ended December 31, 1990 as adjusted for non-
recurring gains of each of the respective Constituent Companies.
5. Calculate the market capitalization contribution of each Constituent
Company by adding the gain component (calculated in step 4) for such company to
the capital, surplus and MSVR of such company as at 12/31/90, as adjusted for
outstanding surplus notes.
6. Calculate the valuation ratio for each of the Constituent Companies by
dividing the capitalization contribution of such company (calculated in step 5)
by the total of the capitalization contributions of all three Constituent
Companies.
7. The number of shares to be issued in. exchange for all of the outstanding
shares of each of the constituent companies shall equal the valuation ratio for
such company (calculated in step 6) multiplied by 250,000, representing the
total number of shares to be issued by the Surviving Corporation.
<PAGE>
WRITTEN CONSENT UNDER MAINE BUSINESS CORPORATION ACT SECTION 620
IN LIEU OF A SPECIAL MEETING OF STOCKHOLDERS OF
UNUM LIFE INSURANCE COMPANY
WHEREAS, Section 620 of the Maine Business Corporation Act and Section 1.11
of Article I of the Bylaws of UNUM Life Insurance Company provide that whenever
the vote of stockholders at a meeting thereof is required or permitted to be
taken for, or in connection with, any corporate action, by any provision of
Maine law, the meeting and vote of the stockholders may be dispensed with if all
of the stockholders who would have been entitled to vote upon the action if such
meeting were held shall consent in writing to such corporate action being taken;
and
WHEREAS, UNUM Corporation of Portland, Maine is the holder of record of one
hundred percent (100%) of the issued and outstanding voting stock of UNUM Life
Insurance Company;
WHEREAS, Section 3 of Article IV of the By-Laws of UNUM Corporation,
confers upon the President or any Vice President of said Corporation, the power
to exercise any and all of the voting rights and privileges to which said
Corporation, as holder of record of all shares of the stock of UNUM Life
Insurance Company may be entitled to, including the right to consent in writing
to actions taken by the Company in lieu of any meeting at which the vote of
stockholders of the Company is required or permitted to be taken for or in
connection with any corporate action; and
WHEREAS, by written consent on September 13, 1991, the stockholders
approved the Plan and Agreement of Merger of UNUM Life Insurance Company and
UNUM Pension and Insurance Company into UNUM Life Insurance Company of America;
and
WHEREAS, the undersigned desires by this writing, filed with the Minutes of
the proceedings of the Company to take various actions and to do so in lieu of
holding a special meeting of the stockholders of the Company;
NOW, THEREFORE, the following are adopted as actions taken by the
stockholders of UNUM Life Insurance Company:
RESOLVED, to amend the Plan and Agreement of Merger of UNUM Life Insurance
Company and UNUM Pension and Insurance Company into UNUM Life Insurance
Company of America (the "Plan and Agreement of Merger") by substituting
Exhibit I, as attached, for Attachment A thereto.
RESOLVED, that the proper officers of the Company be, and they hereby are,
authorized and empowered from time to time to execute or cause to be
executed all such further documents and writings and to cause to take all
such actions as such officers may deem necessary or desirable to give
effect to the foregoing resolution.
IN WITNESS WHEREOF, the undersigned has subscribed his name as of the_____
of November , 1991.
/s/ James F. Orr III
---------------------
James F. Orr III
President
UNUM Corporation
<PAGE>
Exhibit I
Attachment A
The number of shares to be issued in exchange for the shares outstanding of each
of the Constituent Companies shall be as follows:
<TABLE>
<S> <C>
In respect of the shares of UPIC: 1,521
In respect of the shares of UNUM America: 435,663
In respect of the shares of UNUM Life: 62,816
</TABLE>
<PAGE>
WRITTEN CONSENT UNDER MAINE BUSINESS CORPORATION ACT SECTION 620
IN LIEU OF A SPECIAL MEETING OF STOCKHOLDERS OF
UNUM LIFE INSURANCE COMPANY
WHEREAS, Section 620 of the Maine Business Corporation Act and Section 1.11
of Article I of the Bylaws of UNUM Life Insurance Company provide that whenever
the vote of stockholders at a meeting thereof is required or permitted to be
taken for, or in connection with, any corporate action, by any provision of
Maine law, the meeting and vote of the stockholders may be dispensed with if all
of the stockholders who would have been entitled to vote upon the action if such
meeting were held shall consent in writing to such corporate action being taken;
and
WHEREAS, UNUM Corporation of Portland, Maine is the holder of record of one
hundred percent (100%) of the issued and outstanding voting stock of UNUM Life
Insurance Company;
WHEREAS, Section 3 of Article IV of the By-Laws of UNUM Corporation,
confers upon the President or any Vice President of said Corporation, the power
to exercise any and all of the voting rights and privileges to which said
Corporation, as holder of record of all shares of the stock of UNUM Life
Insurance Company may be entitled to, including the right to consent in writing
to actions taken by the Company in lieu of any meeting at which the vote of
stockholders of the Company is required or permitted to be taken for or in
connection with any corporate action; and
WHEREAS, by written consent on September 13, 1991, the stockholders
approved the Plan and Agreement of Merger of UNUM Life Insurance Company and
UNUM Pension and Insurance Company into UNUM Life Insurance Company of America
(the "Plan and Agreement of Merger"); and
WHEREAS, by written consent on November 25, 1991, the stockholders amended
the Plan and Agreement of Merger; and
WHEREAS, the undersigned desires by this writing, filed with the Minutes of
the proceedings of the Company to take various actions and to do so in lieu of
holding a special meeting of the stockholders of the Company;
NOW, THEREFORE, the following are adopted as actions taken by the
stockholders of UNUM Life Insurance Company:
RESOLVED, to amend the Plan and Agreement of Merger of UNUM Life Insurance
Company and UNUM Pension and Insurance Company into UNUM Life Insurance
Company of America (the "Plan and Agreement of Merger") by substituting
Exhibit I, as attached, for Attachment A thereto.
RESOLVED, that the proper officers of the Company be, and they hereby are,
authorized and empowered from time to time to execute or cause to be
executed all such further documents and writings and to cause to take all
such actions as such officers may deem necessary or desirable to give
effect to the foregoing resolution.
IN WITNESS WHEREOF, the undersigned has subscribed his name as of the 2nd
day of December, 1991.
/s/ James F. Orr III
---------------------
James F. Orr III
President
UNUM Corporation
<PAGE>
(BLANK PAGE)
<PAGE>
Exhibit I
Attachment A
The number of shares to be issued in exchange for the shares outstanding of each
of the Constituent Companies shall be as follows:
In respect of the shares of UPIC: 7,909
In respect of the shares of UNUM America: 429,453
In respect of the shares of UNUM Life: 62,638
<PAGE>
WRITTEN CONSENT UNDER MAINE BUSINESS CORPORATION ACT SECTION 620
IN LIEU OF A SPECIAL MEETING OF STOCKHOLDERS OF
UNUM LIFE INSURANCE COMPANY
WHEREAS, Section 620 of the Maine Business Corporation Act and Section 1.11
of Article I of the Bylaws of UNUM Life Insurance Company provide that whenever
the vote of stockholders at a meeting thereof is required or permitted to be
taken for, or in connection with, any corporate action, by any provision of
Maine law, the meeting and vote of the stockholders may be dispensed with if all
of the stockholders who would have been entitled to vote upon the action if such
meeting were held shall consent in writing to such corporate action being taken;
and
WHEREAS, UNUM Corporation of Portland, Maine is the holder of record of one
hundred percent (100%) of the issued and outstanding voting stock of UNUM Life
Insurance Company;
WHEREAS, Section 3 of Article IV of the By-Laws of UNUM Corporation,
confers upon the President or any Vice President of said Corporation, the power
to exercise any and all of the voting rights and privileges to which said
Corporation, as holder of record of all shares of the stock of UNUM Life
Insurance Company may be entitled to, including the right to consent in writing
to actions taken by the Company in lieu of any meeting at which the vote of
stockholders of the Company is required or permitted to be taken for or in
connection with any corporate action; and
WHEREAS, by written consent on September 13, 1991, the stockholders
approved the Plan and Agreement of Merger of UNUM Life Insurance Company and
UNUM Pension and Insurance Company into UNUM Life Insurance Company of America
(the "Plan and Agreement of Merger"); and
WHEREAS, by written consents on November 25, 1991 and December 2, 1991, the
stockholders amended the Plan and Agreement of Merger; and
WHEREAS, the undersigned desires by this writing, filed with the Minutes of
the proceedings of the Company to take various actions and to do so in lieu of
holding a special meeting of the stockholders of the Company;
NOW, THEREFORE, the following are adopted as actions taken by the
stockholders of UNUM Life Insurance Company:
RESOLVED, to amend Sections 4 and 5 of the Plan and Agreement of Merger of
UNUM Life Insurance Company and UNUM Pension and Insurance Company into
UNUM Life Insurance Company of America (the "Plan and Agreement of Merger")
in their entirety as indicated on Attachment A hereto.
RESOLVED, that the proper officers of the Company be, and they hereby are,
authorized and empowered from time to time to execute or cause to be
executed all such further documents and writings and to cause to take all
such actions as such officers may deem necessary or desirable to give
effect to the foregoing resolution.
<PAGE>
-2-
IN WITNESS WHEREOF, the undersigned has subscribed his name as of the 13th
day of December, 1991.
------------------------------
James F. Orr III
President
UNUM Corporation
<PAGE>
1
UNUM Life Insurance Company of America
Excerpt of Meeting of the Board of Directors September 13, 1991 at 9:00 a.m.
Corporate Restructuring
- -----------------------
Reference was made to the Plan and Agreement of Merger of UNUM Life Insurance
Company and UNUM Pension and Insurance Company into UNUM Life Insurance Company
of America and to the related material which was previously provided to the
directors. After discussion, it was, on motion, duly
RESOLVED, to approve the Plan and Agreement of Merger of UNUM Life
Insurance Company and UNUM Pension and Insurance Company into UNUM Life
Insurance Company of America (the "Plan and Agreement of Merger") attached
hereto as Attachment A, to be effective at 11:59 p.m., local time: (a) on
December 31, 1991, if the Articles of Merger, in the form required by the
provisions of 13-A M.R.S.A. (S)903 are filed with the Secretary of the
State of Maine as required by (S)903 on or before December 31, 1991; or (b)
on the day when the Articles of Merger, in the form required by the
provisions of 13-A M.R.S.A. (S)903, are filed with the Secretary of the
State of Maine as required by (S)903 if such filing is made after December
31, 1991 (the "Effective Date") as required by Section 903; and it was
further
RESOLVED, that such Plan and Agreement of Merger be submitted for approval
to the Stockholders of the Company at a special meeting of Stockholders and
that the Secretary of the Company is hereby directed to give notice of such
meeting, including a copy of the Plan and Agreement of Merger, forthwith in
the manner required by Section 902 of Title 13-A of the Maine Revised
Statutes Annotated; and it was further
RESOLVED, that the proper officers of the Company be, and they hereby are,
authorized and empowered from time to time to execute or cause to be
executed all such further documents and writings and to cause to take all
such actions as such officers may deem necessary or desirable to give
effect to the foregoing resolutions.
<PAGE>
WRITTEN CONSENT UNDER MAINE BUSINESS CORPORATION ACT SECTION 620
IN LIEU OF A SPECIAL MEETING OF STOCKHOLDERS OF
UNUM LIFE INSURANCE COMPANY OF AMERICA
WHEREAS, Section 620 of the Maine Business Corporation Act and Section 2.11
of Article II of the Bylaws of UNUM Life Insurance Company of America provide
that whenever the vote of stockholders at a meeting thereof is required or
permitted to be taken for, or in connection with, any corporate action, by any
provision of Maine law, the meeting and vote of the stockholders may be
dispensed with if all of the stockholders who would have been entitled to vote
upon the action if such meeting were held shall consent in writing to such
corporate action being taken; and
WHEREAS, UNUM Holding Company of record of one hundred percent (100%) stock
of UNUM Life Insurance Company
Portland, Maine is the holder of the issued and outstanding voting of America;
WHEREAS, the Board of Directors of UNUM Holding Company, pursuant to
authority conferred upon it by its Bylaws, by a vote duly taken at a meeting of
the Board of Directors on February 7, 1991, has authorized Kevin J. Tierney to
exercise any and all of the voting rights and privileges to which said Company,
as holder of record of all shares of the stock of UNUM Life Insurance Company of
America may be entitled to, including the right to consent in writing to actions
taken by the Company in lieu of any meeting at which the vote of stockholders of
the Company is required or permitted to be taken for or in connection with any
corporate action; and
WHEREAS, the undersigned desires by this writing, filed with the Minutes of
the proceedings of the Company to take various actions and to do so in lieu of
holding a special meeting of the stockholders of the Company;
NOW, THEREFORE, the following are adopted as actions taken by the
stockholders of UNUM Life Insurance Company of America:
RESOLVED, to approve the Plan and Agreement of Merger of UNUM Life
Insurance Company and UNUM Pension and Insurance Company into UNUM Life
Insurance Company of America (the "Plan and Agreement of Merger") attached
hereto as Attachment A, to be effective at 11:59 p.m., local time: (a) on
December 31, 1991, if the Articles of Merger, in the form required by the
provisions of 13-A M.R.S.A. (S)903 are filed with the Secretary of the
State of Maine as required by (S)903 on or before December 31, 1991; or (b)
on the day when the Articles of Merger, in the form required by the
provisions of 13-A M.R.S.A. (S)903, are filed with the Secretary of the
State of Maine as required by (S)903 if such filing is made after December
31, 1991 (the "Effective Date") as required by Section 903; and it was
further
RESOLVED, that the Board of Directors of the Company be, and they hereby
are, authorized and empowered to abandon, by a majority vote of the entire
Board, the Plan and Agreement of Merger prior to the Effective Date; and it
was further
RESOLVED, that the proper officers of the Company be, and they hereby are,
authorized and empowered from time to time to execute or cause to be
executed all such further documents and writings and to cause to take all
such actions as such officers may deem necessary or desirable to give
effect to the foregoing resolutions.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned has subscribed his name as of the 13th
day of September, 1991.
/s/ James F. Orr III
-------------------------
James F. Orr III
President
UNUM Holding Company
<PAGE>
ATTACHMENT A
PLAN AND AGREEMENT OF MERGER OF
UNUM LIFE INSURANCE COMPANY
AND
UNUM PENSION AND INSURANCE COMPANY
INTO
UNUM LIFE INSURANCE COMPANY OF AMERICA
PLAN AND AGREEMENT OF MERGER, entered into as of the 13th day of September,
1991, by and between UNUM Life Insurance Company, hereinafter sometimes referred
to as UNUM Life, UNUM Pension and Insurance Company, hereinafter sometimes
referred to as UPIC, and UNUM Life Insurance Company of America, hereinafter
sometimes referred to as UNUM America, each of which is a Maine stock insurance
company;
WITNESSETH:
WHEREAS, UNUM Life is a stock insurance company duly organized and existing
under the laws of the State of Maine, having been incorporated in Maine on July
17, 1848, and is licensed to transact a life, health and life/health insurance
and variable annuity business in the State of Maine; and
WHEREAS, UPIC is a stock insurance company duly organized and existing
under the laws of the State of Maine, having been incorporated in Maine on July
9, 1980, and is licensed to transact a life insurance business in the State of
Maine; and
WHEREAS, UNUM America is a stock insurance company duly organized and
existing under the laws of the State of Maine, having been incorporated in Maine
on August 24, 1966, and is licensed to transact a life, health, life/health and
multi-line insurance business in the State of Maine; and
WHEREAS, the Boards of Directors and stockholders of UNUM Life, UPIC and
UNUM America have each determined that merger of the three corporations, with
UNUM America becoming the surviving corporation, will be in the best interests
of the corporations and their respective stockholders and policyholders; and
WHEREAS, the laws of the State of Maine permit such a merger;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, and for the purpose of
<PAGE>
prescribing the terms and conditions of such merger, the parties hereto hereby
establish the terms and conditions of such merger and covenant and agree as
follows:
1. Merger. UNUM Life and UPIC shall, on the Effective Date as defined in
Section 6 herein. merge into UNUM America, and UNUM America shall be the
surviving corporation in the merger UNUM Life, UPIC and UNUM America are
sometimes referred to hereinafter as the Constituent Companies.
2. Name of Surviving Corporation. The name of the surviving corporation shall,
from and after the Effective Date of the merger. be UNUM Life Insurance Company
of America (sometimes hereinafter referred to as the Surviving Corporation),
until changed as provided by law.
3. Certificate of Incorporation and Bylaws. The Articles of Incorporation
of UNUM America in effect on the Effective Date shall be the Articles of
Incorporation of the Surviving Corporation, until further altered or amended
as provided by law.
The Bylaws of UNUM America in effect on the Effective Date shall be the
Bylaws of the Surviving Corporation, until further altered or amended as
provided by law.
4. Capitalization of Constituent Companies. UNUM Life has authorized capital
stock of 10,000,000 shares having a par value of $1.00 per share, 6,000,000 of
which are issued and outstanding and are registered in the name of UNUM
Corporation, a Delaware corporation.
UPIC has authorized capital stock of 2,000,000 shares having a par value of
$1.00 per share, 1,500,000 of which are issued and outstanding and are
registered in the name of UNUM Holding Company, a Delaware corporation, wholly
owned by UNUM Corporation and hereinafter sometimes referred to as UNUM Holding.
UNUM America has authorized capital stock of 250,000 shares having a par
value of $10.00 per share, all of which are issued and outstanding and are
registered in the name of UNUM Holding.
5. Treatment of Shares of Constituent Companies. The mode of carrying the
Plan and Agreement of Merger into effect, and the treatment of shares of the
Constituent Companies, shall be as follows:
(a) The number and par value of authorized shares of UNUM America shall
not be affected by the merger.
(b) On the Effective Date, all of the issued and outstanding shares of
common stock of UNUM Life, UPIC and UNUM America shall be converted into
shares of the Surviving Corporation, in such proportions as shall be
calculated in accordance with Attachment A hereto. From and after the
Effective Date of the merger, and until
<PAGE>
surrendered to the Surviving Corporation, each outstanding certificate
which prior to the Effective Date represented shares of outstanding common
stock of UNUM Life, UNUM America or UPIC, shall be deemed for all purposes
to evidence only a right to receive the merger consideration into which
such shares have been converted by virtue of the merger.
(c) After the Effective Date, UNUM Corporation may surrender all
outstanding certificates representing common shares of UNUM Life to the
Surviving Corporation and UNUM Corporation shall be entitled upon such
surrender to receive a certificate or certificates representing the number
of shares of common stock of the Surviving Corporation calculated in
accordance with Attachment A, into which the common shares of UNUM Life
theretofore represented by such certificates shall have been converted.
(d) After the Effective Date, UNUM Holding may surrender all outstanding
certificates representing common shares of UPIC to the Surviving
Corporation and UNUM Holding shall be entitled upon such surrender to
receive a certificate or certificates representing the number of shares of
common stock of the Surviving Corporation calculated in accordance with
Attachment A, into which the common shares of UPIC theretofore represented
by such certificates shall have been converted.
(e) After the Effective Date, UNUM Holding may surrender all outstanding
certificates representing common shares of UNUM America to the Surviving
Corporation and UNUM Holding shall be entitled upon such surrender to
receive a certificate or certificates representing the number of shares of
common stock of the Surviving Corporation calculated in accordance with
Attachment A, into which the common shares of UNUM America theretofore
represented by such certificates shall have been converted.
(f) From and after the Effective Date of the merger, transfers of the
shares of common stock of UNUM Life and of UPIC shall not be made on the
stock transfer books of said corporations.
6. Effective Date. The merger shall be effective (the "Effective Date") as of
11:59 p.m., Eastern Standard Time: a) on December 31, 1991, if the Articles of
Merger, in the form required by the provisions of 13-A M.R.S.A. (S)903, are
filed with the Secretary of the State of Maine as required by (S)903 on or
before December 31, 1991; or b) on the day when the Articles of Merger, in the
form required by the provisions of 13-A M.R.S.A. (S)903, are filed with the
Secretary of the State of Maine as required by (S)903 if such filing is made
after December 31, 1991.
7. Conditions to Merger. Anything herein or elsewhere to the contrary
notwithstanding, the merger shall not be made effective unless prior to
<PAGE>
the Effective Date all of the following events shall have been completed:
(a) This Plan and Agreement of Merger shall have been adopted by each of
the Boards of Directors of UNUM Life, UPIC and UNUM America:
(b) This Plan and Agreement of Merger shall have been approved by UNUM
Corporation as the sole stockholder of UNUM Life and by UNUM Holding as the
sole stockholder of UPIC and UNUM America; and
(c) This Plan and Agreement of Merger shall have been filed with the
Superintendent of Insurance of the State of Maine and approved in
accordance with the applicable provisions of the Maine Statutes.
8. Effect of Merger. On the Effective Date:
(a) The separate existence of UNUM Life and of UPIC shall cease and UNUM
America shall succeed to and possess all the rights, privileges, powers,
franchises and interests of UNUM Life and UPIC respectively in and to every
species of property, real, personal and mixed, and things in action
thereunto belonging, all of which shall be deemed as transferred to and
vested in UNUM America, without any other deed or transfer.
(b) Simultaneously therewith, UNUM America shall be deemed to have assumed
all of the liabilities and obligations of UNUM Life and UPIC respectively,
which shall be preserved unimpaired by the merger. The merger will not
alter the terms of any insurance coverage provided by any insurance
policies or contracts issued by the Constituent Companies and will have no
effect upon the insurance benefits or premiums payable under such policies
or contracts. After the Effective Date, UNUM America shall administer the
Participation Fund Account, established to provide for the continued
maintenance of Union Mutual Life Insurance Company's policyholder dividend
practices (relative to certain individual life insurance policies and
individual annuity contracts) in effect at the time of said company's
recapitalization and conversion, in accordance with the Plan of Operation
dated May 9, 1986.
(c) No liability or obligation due or to become due, claim or demand for
any cause existing against UNUM Life oar UPIC, or any stockholder, officer
or director thereof, shall be released or impaired by such merger, and no
action or proceeding, civil or criminal, then pending by or against UNUM
Life OraUPIC, or any stockholder, officer or director thereof, shall abate
or be discontinued by such merger, but may be enforced, prosecuted, settled
or compromised as if such merger had not occurred, or UNUM America may be
substituted in any such action in place of UNUM Life or UPIC, as the case
may be.
<PAGE>
9. Notification of Policyholders and Group Annuity Contractholders. Following
the Effective Date of the merger, all existing policyholders and group annuity
contractholders of UNUM Life and UPIC shall be notified of the merger and shall
be provided with a confirmation that their coverage will continue uninterruped
and unaffected by the merger.
10. Directors and Officers. The members of the Board of Directors and the
Officers of UNUM America on the Effective Date shall be and remain the members
of the Board of Directors and the Officers of UNUM America until the next annual
meeting of stockholders or directors, as the case may be, or until their
successors have been chosen and qualify in accordance with law.
11. Employees. All employees of UNUM Life immediately prior to the Effective
Date shall be deemed transferred to UNUM America without interruption to or
impairment of their employment or any attendant rights and benefits, including
all pension and retirement plans and all other plans, agreements or arrangements
of UNUM Life relating to its employees or any of them, in force on the Effective
Date, unless and until otherwise determined by the Board of Directors of the
Surviving Corporation or its designee.
12. Compensation. No director, officer, agent or employee of any of the
Constituent Companies shall receive any fee, commission, compensation or other
valuable consideration whatsoever for in any manner aiding, promoting or
assisting in the merger, except for the remuneration such persons are entitled
to receive in exchange for their services under the terms of the Constituent
Companies regular cash and noncash compensation programs established for their
directors, officers, agents and employees generally;, or, if outside
professional advisors, in accordance with their normal billing practices.
13. Further Documents and Acts to Effectuate Merger. Upon approval of this
Plan and Agreement of Merger by the stockholders of each of the Constituent
Companies, the Boards of Directors and the proper officers thereof shall hereby
be authorized, empowered and directed to do any and all acts and things, and to
make, execute, acknowledge, deliver, file and record any and all instruments,
papers and documents and cause to be performed all other and further acts within
the State of Maine and elsewhere which shall be and become necessary, proper or
convenient to carry out or put into effect any of the provisions of this Plan
and Agreement of Merger' or of the merger provided for herein.
14. Abandonment of Merger. This Plan and Agreement of Merger may be terminated
or abandoned before it becomes effective without further action or approval by
the stockholders of any of the Constituent Companies by majority vote of the
Board of Directors of any Constituent Company.
<PAGE>
IN WITNESS WHEREOF, this Plan and Agreement of Merger having been authorized,
adopted, and approved by resolutions duly adopted by the respective Boards of
Directors of UNUM Life, UPIC and UNUm America and having been approved by
resolutions duly and unanimously adopted by the stockholders of each of the
Constituent Companies, each such company has caused this Plan and Agreement of
Merger to be signed by its President and Secretary as of the date first written
above under the corporate seals of the respective Constituent Companies.
UNUM LIFE INSURANCE COMPANY
(CORPORATE SEAL) By /s/ James F. Orr III
------------------------------
James F. Orr III, President
ATTEST:
/s/ Kevin J. Tierney
------------------------------
Kevin J. Tierney, Secretary
UNUM PENSION AND INSURANCE COMPANY
(CORPORATE SEAL) By /s/ James F. Orr III
------------------------------
James F. Orr III, President
ATTEST:
/s/ Kevin J. Tierney
---------------------------------
Kevin K. Tierney, Secretary
UNUM LIFE INSURANCE COMPANY OF AMERICA
(CORPORATE SEAL) By /s/ James F. Orr III
------------------------------
James F. Orr III, President
ATTEST:
/s/ Kevin J. Tierney
---------------------
<PAGE>
Kevin J. Tierney, Secretary
Attachment A
Exchange of Constituent Company Shares
The number of shares to be exchanged for the shares outstanding of each of the
Constituent Companies shall be calculated as follows:
1. Calculate the assumed capitalization of UNUM Corporation by adding the sum
of its equity capital and external debt as of 12/31/91 where equity capital
equals shares outstanding multiplied by the closing price of UNUM Corporation
Common Stock as reported on the NYSE on the last business day prior to the
Effective Date of the merger.
2. Calculate the enterprise capitalization of the insurance subsidiaries by
subtracting the following from the assumed capitalization (calculated in step
1):
a. The assumed market capitalization of UNUM Corporation's United Kingdom
subsidiaries, calculated by subtracting from the purchase price of $120
million any purchase price paid to UNUM in respect of any of such companies
which have been sold as of the merger date:
b. $931.5 million, representing the capital, surplus and Mandatory Securities
Valuation Reserve as at 12/31/90, adjusted for outstanding surplus notes,
of each of UNUM Corporation's U.S. insurance subsidiaries: and
c. The net value (negative or positive) of UNUM Corporation's assets (other
than the common stock of its subsidiaries and surplus notes) minus its
liabilities (other than external debt, but including amounts payable to
subsidiaries under revolving credit arrangements) as at 12/31/91.
3. Calculate a statutory earnings multiple by dividing the result of step 2 by
$85.5 million (representing the statutory earnings for the year ended December
31, 1990 of the U. S. insurance subsidiaries of UNUM Corporation adjusted for
non-recurring gains).
4. Multiply the statutory earnings multiple (calculated in step 3) by the
statutory earnings for the year ended December 31, 1990 as adjusted for non-
recurring gains of each of the respective Constituent Companies.
5. Calculate the market capitalization contribution of each Constituent
Company by adding, the gain component (calculated in step 4) for such company to
the capital, surplus and MSVR of such company as at 12/31/90, as adjusted for
outstanding surplus notes.
6. Calculate the valuation ratio for each of the Constituent Companies by
dividing the capitalization contribution of such company (calculated in step 5)
by the total of the capitalization contributions of all three Constituent
Companies.
<PAGE>
7. The number of shares to be issued in exchange for all of the outstanding
shares of each of the constituent companies shall equal the valuation ratio for
such company (calculated in step 6) multiplied by 250,000, representing the
total number of shares to be issued by the Surviving Corporation.
<PAGE>
WRITTEN CONSENT UNDER MAINE BUSINESS CORPORATION ACT SECTION 620
IN LIEU OF A SPECIAL MEETING OF STOCKHOLDERS OF
UNUM LIFE INSURANCE COMPANY OF AMERICA
WHEREAS, Section 620 of the Maine Business Corporation Act and Section 2.11
of Article II of the Bylaws of UNUM Life Insurance Company of America provide
that whenever the vote of stockholders at a meeting thereof is required or
permitted to be taken for, or in connection with, any corporate action, by any
provision of Maine law, the meeting and vote of the stockholders may be
dispensed with if all of the stockholders who would have been entitled to vote
upon the action if such meeting were held shall consent in writing to such
corporate action being taken; and
WHEREAS, UNUM Holding Company of Portland, Maine is the holder of record of
one hundred percent (100%) of the issued and outstanding voting stock of UNUM
Life Insurance Company of America;
WHEREAS, the Board of Directors of UNUM Holding Company, by a vote duly
taken at a meeting of the Board of Directors on September 13, 1991, authorized
James F. Orr III, as President of the Corporation, to vote the share~ of UNUM
Life Insurance Company of America in favor of the Merger of UNUM Life Insurance
Company and UNUM Pension and Insurance Company into UNUM Life Insurance Company
of America; and
WHEREAS, by written consent on September 13, 1991, the stockholders of the
Company approved such merger; and
WHEREAS, the undersigned desires by this writing, filed with the Minutes of
the proceedings of the Company to take various actions and to do so in lieu of
holding a special meeting of the stockholders of the Company;
NOW, THEREFORE, the following are adopted as actions taken by the
stockholders of UNUM Life Insurance Company of America:
RESOLVED, to amend the Plan and Agreement of Merger of UNUM Life Insurance
Company and UNUM Pension and Insurance Company into UNUM Life Insurance
Company of America (the "Plan and Agreement of Merger") by substituting
Exhibit I, as attached, for Attachment A thereto.
RESOLVED, that the proper officers of the Company be, and they hereby are,
authorized and empowered from time to time to execute or cause to be
executed all such further documents and writings and to cause to take all
such actions as such officers may deem necessary or desirable to give
effect to the foregoing resolution.
IN WITNESS WHEREOF, the undersigned has subscribed his name as of the 25th
day of November, 1991.
/s/
---------------------------
James F. Orr III
President
UNUM Holding Company
<PAGE>
Exhibit I
Attachment A
The number of shares to be issued in exchange for the shares outstanding of each
of the Constituent Companies shall be as follows:
In respect of the shares of UPIC: 1,521
In respect of the shares of UNUM America: 435,663
In respect of the shares of UNUM Life: 62,816
<PAGE>
WRITTEN CONSENT UNDER MAINE BUSINESS CORPORATION ACT SECTION 620
IN LIEU OF A SPECIAL MEETING OF STOCKHOLDERS OF
UNUM LIFE INSURANCE COMPANY OF AMERICA
WHEREAS, Section 620 of the Maine Business Corporation Act and Section 2.11
of Article II of the Bylaws of UNUM Life Insurance Company of America provide
that whenever the vote of stockholders at a meeting thereof is required or
permitted to be taken for, or in connection with, any corporate action, by any
provision of Maine law, the meeting and vote of the stockholders may be
dispensed with if all of the stockholders who would have been entitled to vote
upon the action if such meeting were held shall consent in writing to such
corporate action being taken; and
WHEREAS, UNUM Holding Company of Portland, Maine is the holder of record of
one hundred percent (100%) of the issued and outstanding voting stock of UNUM
Life Insurance Company of America;
WHEREAS, the Board of Directors of UNUM Holding Company, by a vote duly
taken at a meeting of the Board of Directors on September 13, 1991, authorized
James F. Orr III, as President of the Corporation, to vote the shares of UNUM
Life Insurance Company of America in favor of the Plan and Agreement of Merger
of UNUM Life Insurance Company and UNUM Pension and Insurance Company into UNUM
Life Insurance Company of America (the "Plan and Agreement of Merger"); and
WHEREAS, by written consent on September 13, 1991, the stockholders of the
Company approved the Plan and Agreement of Merger; and
WHEREAS, by written consent on November 25th, 1991, the stockholders of the
Company amended the Plan and Agreement of Merger; and
WHEREAS, the undersigned desires by this writing, filed with the Minutes of
the proceedings of the Company to take various actions and to do so in lieu of
holding a special meeting of the stockholders of the Company;
NOW, THEREFORE, the following are adopted as actions taken by the
stockholders of UNUM Life Insurance Company of America:
RESOLVED, to amend the Plan and Agreement of Merger of UNUM Life Insurance
Company and UNUM Pension and Insurance Company into UNUM Life Insurance
Company of America (the "Plan and Agreement of Merger") by substituting
Exhibit I, as attached, for Attachment A thereto.
RESOLVED, that the proper officers of the Company be, and they hereby are,
authorized and empowered from time to time to execute or cause to be
executed all such further documents and writings and to cause to take all
such actions as such officers may deem necessary or desirable to give
effect to the foregoing resolution.
IN WITNESS WHEREOF, the undersigned has subscribed his name as of the 2nd
day of December, 1991.
--------------------
James F. Orr III
President
UNUM Holding Company
<PAGE>
Exhibit I
Attachment A
The number of shares to be issued in exchange for the shares outstanding of each
of the Constituent Companies shall be as follows:
In respect of the shares of UPIC. 7,909
In respect of the shares of UNUM America: 429,453
In respect of the shares of UNUM Life: 62,638
<PAGE>
ACTION TAKEN BY UNANIMOUS WRITTEN CONSENT
OF SHAREHOLDERS OF UNUM LIFE INSURANCE COMPANY OF AMERICA
Pursuant to 13-A. M.R.S.A. Section 805(5). the undersigned, being the holder of
all issued and outstanding shares of the Company entitled to vote on the
following action, hereby consents to the taking of, and hereby takes the
following action, such action being stated in the form of votes which shall have
the same effect as if such votes were unanimously adopted at a Special Meeting
of the Shareholders of the Company duly called and held on the date hereof, at
which the undersigned shareholder was present and acting throughout, but in lieu
of and without actually holding such meeting.
RESOLVED, that Section 4 of the Articles of Incorporation be amended to read in
its entirety as follows:
Capital Stock. The company shall have authorized capital and surplus in an
amount not less than $5,000,000. The authorized capital stock shall consist of
one million (1,000,000) shares of common stock with a par value of ten dollars
($10.00) per share. The aggregate par value of all shares which the Corporation
shall have authority to issue is $10,000,000. Such shares shall be non-
assessable. Subject to the conditions and limitations contained in Maine Law as
the same may be amended from time to time, the company may have the right to
change the capital stock by majority vote of the holders of stock issued and
outstanding to such an amount as they deem necessary and expedient.
RESOLVED, that the Section 6.01 of Article 6 of the Corporation's Bylaws be
deleted resulting in the renumbering of the subsequent sections within Article
6; and it was further
RESOLVED, that the Officers of the Corporation, or any one or more of them, be
and they are hereby, authorized to execute and file proper certificates and to
take all steps and do all acts and things that may be necessary and proper to
comply with all applicable laws and provisions relating in any way to the
subject matter of these resolutions.
UNUM Holding Company
December 13, 1991
By: /s/ James F. Orr III
---------------------------
James F. Orr III, President
<PAGE>
WRITTEN CONSENT UNDER MAINE BUSINESS CORPORATION ACT SECTION 620
IN LIEU OF A SPECIAL MEETING OF STOCKHOLDERS OF
UNUM LIFE INSURANCE COMPANY OF AMERICA
WHEREAS, Section 620 of the Maine Business Corporation Act and Section 2.11
of Article II of the Bylaws of UNUM Life Insurance Company of America provide
that whenever the vote of stockholders at a meeting thereof is required or
permitted to be taken for, or in connection with, any corporate action, by any
provision of Maine law, the meeting and vote of the stockholders may be
dispensed with if all of the stockholders who would have been entitled to vote
upon the action if such meeting were held shall consent in writing to such
corporate action being taken; and
WHEREAS, UNUM Holding Company of Portland, Maine is the holder of record of
one hundred percent (100%) of the issued and outstanding voting stock of UNUM
Life Insurance Company of America;
WHEREAS, the Board of Directors of UNUM Holding Company, by a vote duly
taken at a meeting of the Board of Directors on September 13, 1991, authorized
James F. Orr III, as President of the Corporation, to vote the shares of UNUM
Life Insurance Company of America in favor of the Plan and Agreement of Merger
of UNUM Life Insurance Company and UNUM Pension and Insurance Company into UNUM
Life Insurance Company of America (the "Plan and Agreement of Merger"); and
WHEREAS, by written consent on September 13, 1991, the stockholders of the
Company approved the Plan and Agreement of Merger; and
WHEREAS, by written consents on November 25, 1991 and December 2, 1991, the
stockholders of the Company amended the Plan and Agreement of Merger; and
WHEREAS, the undersigned desires by this writing, filed with the Minutes of
the proceedings of the Company to take various actions and to do so in lieu of
holding a special meeting of the stockholders of the Company;
NOW, THEREFORE, the following are adopted as actions taken by the
stockholders of UNUM Life Insurance Company of America:
RESOLVED, to amend Sections 4 and 5 of the Plan and Agreement of Merger of
UNUM Life Insurance Company and UNUM Pension and Insurance Company into
UNUM Life Insurance Company of America (the "Plan and Agreement of Merger")
in their entirety as indicated on Attachment A hereto.
RESOLVED, that the proper officers of the Company be, and they hereby are,
authorized and empowered from time to time to execute or cause to be
executed all such further documents and writings and to cause to take all
such actions as such officers may deem necessary or desirable to give
effect to the foregoing resolution.
IN WITNESS WHEREOF, the undersigned has subscribed his name as of the 13th
day of December, 1991.
----------------------
James F. Orr III
President
UNUM Holding Company
<PAGE>
EXHIBIT 8(a)
Fund Participation Agreement
----------------------------
This Agreement is entered into as of the 6th day of September, 1989, between
UNUM Life insurance company ("UNUM"), a life insurance company organized under
the laws of the State of Maine, and Dreyfus Life and Annuity Index Fund, Inc.
("Fund"), a corporation organized under the laws of the State of Maryland.
ARTICLE I
DEFINITIONS
1.1 "act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Directors of the Fund having the
responsibility for management and control of the Fund.
1.3 "Business Day": A day on which Unum and the New York Stock Exchange are
customarily open for business.
1.4 "Commission" Shall mean the Securities and Exchange Commission.
1.5 "Contract" shall mean a variable annuity contract or a variable life
insurance contract that uses the Fund as an underlying investment medium.
Individuals who participate under a Contract are Participants.
1.6 "Contractholder" shall mean any entity that is a party to a Contract with a
Participating Company.
1.7 "Disinterested Board Members" shall mean those members of the Board that
are not deemed to be "interested persons" of the Fund, as defined by the
Act.
1.8 "Dreyfus" shall mean the Dreyfus Corporation and its affiliates.
1.9 "Effective Date" shall mean the date the Fund's Registration Statement on
Form N-1A is declared effective by the Commission.
1.10 "Participating Companies" shall mean any insurance company (including
UNUM), which offers variable annuity and/or variable life insurance
contracts to the public and which has entered into an agreement with the
Fund similar hereto for the purpose of making Fund shares available to
serve as the underlying investment medium for the aforesaid Contracts.
1.11 "Separate Account" shall mean TSAVA Separate Account, a separate account
established by UNUM in accordance with the laws of the State of Maine.
<PAGE>
1.12 "Software Program" shall mean the software program used by the fund for
providing Fund and account balance information including net asset value
per share. Such Program may include the Lion System. In situations where
the Lion System or any other Software Program used by the Fund is not
available, such information may be provided by telephone. The Lion System
shall be provided to UNUM at no charge.
1.13 "UNUM'S General Account(s)" shall mean the general account(s) of UNUM and
its affiliates which invest in the Fund.
ARTICLE II
REPRESENTATIONS
2.1 UNUM represents and warrants that (a) it is an insurance company duly
organized and in good standing under applicable law; (b) it has legally and
validly established the Separate Account pursuant to the Maine Insurance
Code for the purpose of offering the public certain group variable annuity
contracts; and (c) it has registered the Separate Account as a unit
investment trust under the Act to serve as the segregated investment
account for the Contracts.
2.2 UNUM represents an warrants that (a) the Contracts will be described in a
registration statement filed under the Securities Act of 1933 ("1993 Act");
(b) the Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws; and (c) the sale of
the Contracts shall comply in all respects with state insurance law
requirements.
2.3 UNUM represents that the income, gains and losses, whether or not realized,
from assets allocated to the Separate Account are, in accordance with the
applicable Contracts, to be credited to or charged against such Separate
Account without regard to other income, gains or losses of UNUM.
2.4 Fund represents that the Fund is registered with the Commission under the
Act as an open-end, non-diversified management investment company and
possesses, and shall maintain, all legal and regulatory licenses,
approvals, consents and/or exemption required for Fund, to operate and
offer its shares as an underlying investment medium for Participating
Companies.
2.5 Fund represents that it is currently qualified as a Regulated Investment
Company under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision)
and that it will notify UNUM immediately upon having a reasonable basis for
<PAGE>
believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.6 UNUM represents that the Contracts are currently treated as life insurance
policies or annuity contracts, under applicable provisions of the Code and
that it will make every effort to maintain such treatment and that it will
notify the Fund immediately upon having a reasonable basis for believing
that the Contracts have ceased to be so treated in that they might not be
so treated in the future.
2.7 Fund agrees that the Fund's assets shall be managed and invested in a
manner that complies with the requirements of Section 817 (h) of the Code.
2.8 Fund agrees to establish up to six accounts in the name of UNUM and its
affiliates and to make its shares available to such accounts. one account
shall represent investments by the Separate Account in the Fund. The other
accounts shall represent investments by UNUM'S General Accounts. The shares
shall be offered to the Separate Account and to UNUM'S General Account at
the net asset value of such shares.
2.9 UNUM and Fund agree that UNUM shall be permitted (subject to the other
terms of this Agreement) to utilize and employ other management investment
companies as underlying investment media for the Separate Account.
2.10 Fund represents and warrants that any of its directors, officers,
employees, investment advisers, and other individuals/entities who deal
with the money and/or securities of the Fund are and shall continue to be
at all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund in an amount not less that that required by Rule 17g-1
under the Act. The aforesaid Bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.11 UNUM represents and warrants that all of its employees and agents who deal
with the money and/or securities of the Fund are and shall continue to be
at all times covered by a blanket fidelity bond or similar coverage in an
amount not less than the coverage required to be maintained by the Fund.
The aforesaid Bond shall include coverage for larceny and embezzlement and
shall be issued by a reputable bonding company.
2.12 UNUM agrees that Dreyfus shall be deemed a third party beneficiary under
this Agreement and may enforce any and all rights conferred by virtue of
the agreement.
2.13 If UNUM issue variable life insurance policies through the Separate Account
or the Fund enter into a participation agreement with a Participating
<PAGE>
Company (including UNUM) offering variable life insurance policies through
a separate account investing in the Fund, UNUM and the Fund will promptly
amend this Agreement to add any provisions, conditions or undertakings
required by an exemptive order under the Act on which the Fund is then
relying.
ARTICLE III
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in the shares of the Fund.
3.2 Fund agrees to make its shares available for purchase at the applicable net
asset value per share by UNUM and the Separate Account on those days on
which the Fund calculates its net asset value pursuant to rules of the
Commission and the fund shall use all reasonable efforts to calculate such
net value on each Business Day. Notwithstanding the foregoing, the Fund may
refuse to sell its shares to any person, or suspend or terminate the
offering of the Fund's shares if such action is required by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board,
acting in good faith and in light of its fiduciary duties under federal law
and any applicable state laws, necessary and in the best interests of the
Fund's shareholders.
3.3 Fund agrees that shares will be sold only to Participating Companies and
their separate accounts and to the general accounts of those Participating
Companies and their affiliates. No Fund shares will be sold to the general
public.
3.4 Fund shall use its best efforts to provide closing net asset value,
dividend and capital gain information on a per-share and fund basis to UNUM
by 6:00 p.m. Eastern Time on each Business Day. Any material errors in the
calculation of net asset value, dividend and capital gain information shall
be reported immediately upon discovery to UNUM. Non-material error will be
corrected in the next Business Day's net asset value per share.
3.5 At the end of each Business Day, UNUM will use the information described in
Sections 3.2 and 3.4 to calculate the Separate Account unit values for the
day. Using this unit value, UNUM will process the day's Separate Account
transactions received by it by 4:00 p.m. Eastern time to determine the net
dollar amount of Fund shares which will be purchased or redeemed at the
day's closing net asset value per share. The net purchase or redemption
orders will be transmitted to the Fund by UNUM by 11:00 a.m. Eastern Time
on the Business Day next following UNUM'S receipt of that information.
Subject to SECTION 3.6, all purchase and redemption orders for UNUM'S
General
<PAGE>
Accounts shall be effected at the net asset value per share next calculated
after receipt of the order by the Fund or its Transfer Agent.
3.6 Fund appoints UNUM as its agent for the limited purpose of accepting orders
for the purchase and redemption of Fund shares for the Separate Account.
Fund will execute orders at the net asset value per share determined as of
the close of trading on the day of receipt of such orders by UNUM acting as
agent ("effective trade date"), provided that the Fund receives notice of
such orders by 11;00 a.m. Eastern Time on the next following Business Day.
3.7 UNUM will make its best efforts to notify Fund in advance of any unusually
large purchase or redemption orders.
3.8 If UNUM'S order requests the purchase of Fund shares, Unum will pay for
such purchases by wiring federal Funds to fund or its designated custodial
account on the day the order is transmitted. If UNUM'S order requests the
redemption of Fund shares valued at less than $1 million dollars, the fund
will wire such amount to UNUM on the next business day following the day
the order is transmitted. If UNUM'S order requests the redemption of Fund
shares valued at or greater than $1 million dollars, the Fund will wire
such amount to UNUM within seven days of the order.
3.9 Fund has the obligation to ensure that Fund shares are registered with
applicable federal agencies at all times.
3.10 Fund will confirm each purchase or redemption order made by UNUM. Transfer
of Fund shares will be by book entry only. No stock certificates will be
issued to UNUM. UNUM will record shares ordered from Fund in an appropriate
title for the corresponding account.
3.11 Fund shall credit UNUM with the appropriate number of shares.
3.12 On each ex-dividend date of the Fund or, if not a Business Day, on the
First Business Day thereafter, Fund shall communicate to UNUM the amount if
dividend and capital gain, if any per share. All dividend and capital gains
shall be automatically reinvested in additional shares of the Fund at the
net asset value per share of the Fund on the ex-dividend date. Fund shall,
on the day after the ex-dividend date or, if not a Business Day, on the
first Business day thereafter, notify UNUM of the number of shares so
issued.
ARTICLE IV
STATEMENTS AND REPORTS
<PAGE>
4.1 Fund shall provide monthly statements of accounts as of the end of each
month for all of UNUM'S accounts by the fifteenth (15th) Business Day of
the following month.
4.2 Fund shall distribute to UNUM copies of the FUND'S prospectuses, proxy
materials, notices, periodic reports and other printed materials (which the
Fund customarily provides to its shareholders) in quantities as UNUM may
reasonably request for distribution to each Contractholder and Participant.
4.3 Fund will provide to UNUM at least one complete copy of all registration
statements, prospectuses, statements of additional information, reports,
proxy statements, sales literature, and other promotional materials,
applicant for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Commission or
other regulatory authorities.
4.4 UNUM will provide to the FUND at least one copy of all registration
statements, prospectuses, statements of additional information, reports,
proxy statements, sales literature and other promotional materials,
applicants for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Separate Account,
contemporaneously with the filing of such document with the Commission.
ARTICLE V
INITIAL CAPITALIZATION AND EXPENSES
5.1 UNUM'S General Accounts will initially invest the sum of $50 million
("initial investment") in the Fund. The initial investment shall be made
within five (5) days of the Effective Date or at the latest by October 2,
1989.
5.2 The charge to the Fund for all expenses and costs of the Fund including but
not limited to, management fees, administrative expenses and legal and
regulatory costs, will be made in the determination of the Fund's daily net
asset value per share so as to accumulate to an annual charge of not more
than .40 of 1% of the Fund's average daily net assets. Excluded from the
expense limitation described herein shall be brokerage commissions and
transaction fees and extraordinary expenses.
5.3 As long as the number of shares owned by UNUM'S General Accounts ("General
Account shares") is at least equal to the number of share purchased by the
$50 million ("initial shares"), there will be no expense assessment
pursuant to Sections 5.4, 5.5, 5.6, and 5.7
<PAGE>
5.4 If in the first three fiscal years beginning with the date UNUM purchases
the initial shares, UNUM redeems General Account shares such that the
number of remaining General Account shares is less than the number of
initial shares, and subject to Section 5.9,
a. there will be no expense assessments as long as there is at least $100
million in the Fund, (including amounts not owned by UNUM),
immediately after the redemption of such General Account shares,
B. UNUM will pay Dreyfus an expense assessment if there is less than $100
million in the Fund immediately after the redemption. Such assessment
will be calculated as of the end of the day prior to the next
anniversary of the date of the initial investment, equal to the lesser
of
i. the amount determined by multiplying the 40 basis point charge by
the product of (A) the Fund's weighted average net asset value
per share measured from the date the redemption reduced the total
number of UNUM's General Account shares below the number of
initial shares and ending on such anniversary date (such a period
being the "Measurement Period") and (B) the weighted average
number of General Account shares redeemed during the Measurement
Period, provided that if the UNUM General Account has purchased
General Account shares in addition to the initial shares, then
for purposes of the following calculation, the number of General
Account shares redeemed during the Measurement Period shall not
include such additional shares, and multiplying further by the
anniversary, and
ii. $400,000 times the fraction of a year remaining until the
anniversary minus the amount that the 40 basis point expense
charge generated on all shares of the Fund during the remainder
of the Fiscal year.
5.5 If a redemption as described in Section 5.4b occurs, the following expense
assessment formulas will apply for fiscal years subsequent to the year of
the redemption.
a. when there is at least $100 million in the Fund on the beginning of
such subsequent fiscal year ($50 million on the beginning of the
fourth and later fiscal years), there will be no further expense
assessments unless fewer than the number of initial shares had been
sold and additional General Account shares are subsequently sold, in
which case Section, 5.4 is reapplied.
B. if there is less than $100 million in the Fund on the beginning of
each subsequent fiscal year ($50 million on the beginning of the
fourth and
<PAGE>
later fiscal years), UNUM will pay Dreyfus an expense assessment,
calculated as of the end of the day prior to the next anniversary of
the initial purchase date, equal to the lesser of
i. the amount determined by multiplying the 40 basis point charge by
the product of (A) the Fund's weighted average net asset value
per share during such fiscal year and (B) the weighted average
number of General Account shares redeemed, provided that if the
UNUM General Account shares in addition to the initial shares,
then for purposes of the foregoing calculation, the number of
General Account shares redeemed shall not include such additional
shares, and
ii. $400,000 ($200,000 for the fourth and later fiscal years) minus
the amount that the 40 basis point expense charge generated on
all shares of the Fund during the fiscal year.
5.6 If a redemption as described in Section 5.4 occurs after the end of the
third fiscal year, the expense assessment formulas in Sections 5.4 and 5.5
apply, using $50 million in place of $100 million and $200,000 in place of
$400,000.
5.7 When UNUM has redeemed all of its General Account shares and all of its
Separate Account shares after the end of the third fiscal year in order to
transfer the assets to another fund (such redemption of Separate Account
shares is not permitted before the end if the third fiscal year), no
further expense assessments will accrue. If, however, in the fiscal year of
such redemption either of the formulas in Section 5.5 or 5.6 already was
operable because of a previous redemption of the General Account shares and
UNUM'S failure to pass the $50 million test, a final assessment will be
determined as the less of:
a. the amount that the 40 basis point charge would have generated up to
this final redemption date on the number of shares on which the
formulas were operable, and
B. $200,000 times the fraction of a year up to this final redemption date
that the formulas were operable minus the amount that the 40 basis
point expense charge generated on all shares of the Fund during the
fraction of the year.
5.8 UNUM may redeem some or all of its shares without an expense assessment if
at the end of any fiscal year, the Fund's investment results including the
reinvestment of dividends and after deduction of the charges for expenses
and commissions, are not equal to or better than the charge in the Standard
and Poor's 500 index including the reinvestment of dividends, minus one
hundred fifty basis points.
<PAGE>
5.9 Except as provided in this Article V and, in particular in the next
sentence, UNUM shall not be required to pay directly any expense of the
Fund or expenses relating to the distribution of its shares. UNUM shall pay
the following expenses or costs:
a. Such amount of the production expenses of any Fund materials or
marketing for prospective UNUM Contractholders and Participants as
Dreyfus and UNUM shall agree from time to time.
B. Distribution expenses of any Fund materials or marketing material for
prospective UNUM Contractholders and Participants.
C. Distribution expenses of Fund materials or marketing materials for
UNUM Contractholders and Participants.
Except as provided herein, all other Fund expenses shall not be borne by
UNUM.
ARTICLE VI
EXEMPTIVE RELIEF
6.1 UNUM has reviewed a copy of an application for exemptive relief, as
amended, filed by the Fund on February 24, 1989 with the Securities and
Exchange Commission and, in particular, has reviewed the conditions to the
requested relief set forth therein. As set forth in such application, UNUM
agrees to report any potential or existing conflicts promptly to the Board,
and in particular whenever contract voting instructions are disregarded,
and recognizes that it will be responsible for assisting the Board in
carrying out its responsibilities under such application. UNUM agrees to
carry out such responsibilities with a view to the interests of existing
Contractholders.
6.2 If a majority of the Board, or a majority of Disinterested Board Members,
determines that a material irreconcilable conflict exists with regard to
Contractholder investments in the Fund, the Board shall give prompt notice
to all Participating Companies. If the Board determines that UNUM is
responsible for causing or creating said conflict, UNUM shall at its sole
cost and expense, and to the extent reasonably practicable (as determined
by a majority of the Disinterested Board Members), take such action as is
necessary to remedy or eliminate the irreconcilable material conflict. Such
necessary action may include, but shall not be limited to:
a. Withdrawing the assets allocable to the Separate Account from the Fund
and reinvesting such assets in a different investment medium, or
<PAGE>
submitting the question of whether such segregation should
be implemented to a vote or all affected Contractholders;
and/or:
b. Establishing A New Registered Management Investment Company.
6.3 If a material irreconcilable conflict arises as a result of a decision by
UNUM to disregard Contractholder voting instructions and said decision
represents a minority position or would preclude a majority vote by all
Contractholders having interest in the Fund, UNUM may be required, at the
Board's election to withdraw the Separate Account's investment in the Fund.
6.4 For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, nut in no event will the
Fund be required to bear the expense of establishing a new funding medium
for any Contract. UNUM shall not be required by this Article to establish a
new funding medium for any Contract if an offer to do so has been declined
by vote of a majority of the Contractholders materially adversely affected
by the irreconcilable material conflict.
6.5 No action by UNUM taken or omitted, and no action by the Separate Account
or the Fund taken or omitted as a result of any act or failure to act by
UNUM, pursuant to this Article VI shall relieve UNUM of its obligations
under, or otherwise affect the operation of, Article V. However, no expense
assessment will be made pursuant to Article V if UNUM redeems all of its
shares as a result of the failure by the Board to take action, where the
board is required to take action, to remedy a material irreconcilable
conflict cause by a Participating Company other than UNUM.
ARTICLE VII
VOTING OF FUND SHARES
7.1 Fund shall provide UNUM with copies of the Fund's proxy material, reports
to stockholders and other communications to stockholders in such quantity
as UNUM shall reasonably require for distributing to Contractholders or
Participants.
UNUM shall:
(a) solicit voting instructions from Contractholders or Participants on a
timely basis and in accordance with applicable law;
<PAGE>
(b) vote the Fund shares in accordance with instruction received from
Contractholders or Participants; and
(c) vote Fund shares for which no instructions have been received in the
same proportion as Fund shares for which instructions have been
received.
UNUM agrees at all times to vote its General Account shares in the same
proportion as Fund shares for which instructions have been received from
Contractholders or Participants.
ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 The Fund or its Underwriter shall periodically furnish UNUM with the
following documents, in quantities as UNUM may reasonably request:
a. Current Fund Prospectus and any supplements thereto;
b. Current Statement of Additional Information and any supplements
thereto; and
c. other marketing materials
Expenses for the production of such documents may be borne by UNUM in
accordance with Section 5.9 of this Agreement.
8.2 UNUM shall designate certain persons or entities which shall have the
requisite licenses to solicit applications for the sale of Contracts. No
representations is made as to the number or amount of Contracts that are to
be sold by UNUM. UNUM shall make reasonable efforts to market the Contracts
and shall comply will all applicable federal and state laws in connection
therewith.
8.3 UNUM shall furnish, or shall cause to be furnished, to the Fund, each piece
of sales literature or other promotional material in which the Fund, its
investment adviser or the administrator is named, at least fifteen Business
Days prior to use. No such material shall be used unless the Fund approves
such material. Such approval (if given) must be in writing and shall be
presumed not given if not received within ten Business Days after receipt
of such material. The fund shall use all reasonable efforts to respond
within ten days of receipt.
8.4 UNUM shall not give any information or make any representations or
statements on behalf of the Fund or concerning the Fund in connection with
<PAGE>
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus of the Fund, as may
be amended or supplemented from time to time, or in reports or proxy
statements for the Fund, or in sales literature or other promotional
material approved by the Fund.
8.5 Fund shall furnish, or shall cause to be furnished, to UNUM, each piece of
the Fund's sales literature or other promotional material in which UNUM or
the Separate Account is named, at least fifteen Business Days prior to its
use. No such material shall be used unless UNUM approves such material.
Such approval (if given) must be in writing and shall be presumed not given
if not received within ten Business Days after receipt of such material.
UNUM shall use all reasonable efforts to respond within ten days of
receipt.
8.6 Fund shall not, in connection with the sale of Fund shares, give any
information or make any representations on behalf of UNUM or concerning
UNUM, the Separate Account, or the Contracts other than the information or
representations contained in a registration statement or prospectus for the
Contracts, as may be amended or supplemented from time to time, or in
published reports for the Separate Account which are in the public domain
or approved by UNUM for distribution to Contractholders or Participants, or
in sales literature or other promotional material approved by UNUM.
ARTICLE IX
INDEMNIFICATION
9.1 UNUM agrees to indemnify and hold harmless the Fund, Dreyfus, the Fund's
investment advisor, and their affiliates, and each of their directors,
officers, employees, agents and each person, if any, who controls any of
the foregoing entities or persons within the meaning of the 1933 act
(collectively the "Indemnified Parties" for purposes of Section 9.1),
against any losses, claims, damages, or liabilities for which the
Indemnified Party may become subject, under the 1933 Act otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect to
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in information furnished by
UNUM for use in the registration statement or prospectus or sales
literature or advertisements of the Fund, 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, or arise out of or as a result of conduct, statements, or
representations (other than statements or representations contained in the
prospectus and sales literature or advertisements of the Fund) of UNUM or
its agents, with respect to the sale and distribution of Contracts for
which Fund
<PAGE>
shares are an underlying investment; and UNUM will reimburse any
Indemnified Party in connection with investigation or defending any such
loss, claim, damage, liability or action. This indemnity agreement will be
in addition to any liability which UNUM may otherwise have.
9.2 The Fund agrees to indemnify and hold harmless UNUM and each of its
directors, officers, employees, agents and each person, if any, who
controls UNUM within the meaning if the 1933 Act against any losses,
claims, damages, or liabilities to which UNUM or any such director,
officer, employee, agent or controlling person may become subject, under
the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) (1) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the registration statement or prospectus or sales literature
or advertisements of the Fund; (2) arise out of or are based upon the
omission to state in the registration statement or prospectus or sales
literature or advertisements of the Fund of any material fact required to
be stated therein or necessary to make the statements therein not
misleading; or (3) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the registration
statement or prospectus or sales literature or advertisements with respect
to the separate account or the contracts and such statements were based on
information provided to UNUM by the Fund; and the Fund will reimburse any
legal or other expenses reasonably incurred by UNUM or any such director,
officer, employee, agent or controlling person in connection investigation
or defending any such loss, claim, damage, liability or action; provided,
however, that the fund will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or omission or alleged omission made in such
Registration Statement, prospects, sales literature or advertisements in
conformity with written information furnished to the fund by UNUM
specifically for use therein. This indemnity agreement will be in addition
to any liability which the Fund may otherwise have.
9.3 The Fund shall indemnify and hold UNUM harmless against any and all
liability, loss, damages, costs or expenses, which UNUM may incur, suffer
or be required to pay due to the Fund's (1) incorrect calculation of the
daily net asset value, dividend rate or capital gain distribution rate; (2)
incorrect reporting of the daily net asset value, dividend rate or capital
gain distribution rate; and/or (3) untimely reporting of the net asset
value, dividend rate or capital gain distribution rate.
9.4 UNUM shall indemnify and hold the Fund harmless against any and all
liability, loss, damages, costs or expenses which the Fund may incur,
suffer or be required to pay due to UNUM's incorrect calculation and/or
untimely reporting of net purchase or redemption orders.
<PAGE>
9.5 Promptly after receipt by an indemnified party under this Article of
notices of the commencement of action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Article, notify the indemnifying party of the commencement thereof;
but the omission to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
under this Article. In case any such action is brought against any
indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, assume the defense
thereof, with counsel satisfactory to such indemnified party, after notice
from the indemnifying party to such indemnified party under this Article
for any legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable costs of
investigation.
9.6 UNUM shall indemnify and hold the Fund, Dreyfus and the Fund's investment
advisor harmless against any tax liability incurred by the Fund under
Section 851 of the Code arising from purchases or redemptions by UNUM's
General Accounts or the account of its affiliates.
ARTICLE X
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the Effective Date and shall
continue in force until terminated in accordance with the provisions
herein.
10.2 This Agreement shall terminate without penalty:
a. At the option of UNUM or the Fund at any time after three years from
the Effective Date of this Agreement upon 180 days' notice, unless a
shorter time is agreed to by the parties;
b. At the option of UNUM, if any of the Fund's shares are not reasonably
available to meet the requirements of the Contracts as determined by
UNUM. Prompt notice of election to terminate shall be furnished by
UNUM, said termination to be effective ten days after receipt of
notice unless the Fund makes available a sufficient number of shares
to meet the requirements of the Contracts within said ten-day period;
C. At the option of UNUM, upon the institution of formal proceedings
against the Fund by the Commission, National Association of Securities
Dealers or any other regulatory body, the expected or anticipated
ruling, judgment or outcome of which would in UNUM's reasonable
judgment,
<PAGE>
materially impair the Fund's ability to meet and perform the
Fund's obligation and duties hereunder. Prompt notice of election to
terminate shall be furnished by UNUM with said termination to be
effective upon receipt of notice;
d. At the option of the Fund, upon the institution of formal proceedings
against UNUM by the Commission, National Association of Securities
Dealers or any other regulatory body, the expected or anticipated
ruling, judgment or outcome of which would, in the Fund's reasonable
judgment, materially impair UNUM's ability to meet and perform UNUM's
obligations and duties hereunder. Prompt notice of election to
terminate shall be furnished by the Fund with said termination to be
effective upon receipt of notice;
e. At the option of the Fund, if the Fund shall determine, if its sole
judgment reasonably exercised in good faith, that UNUM has suffered a
material adverse change in its business or financial condition or is
the subject of material adverse publicity and such material adverse
change or material adverse publicity will have a material adverse
impact upon the business and operation of the Fund, the Fund shall
notify UNUM in writing of such determination and its intent to
terminate this Agreement, and after considering the actions taken by
UNUM and any other changes in circumstances since the giving of such
notice, such determination of the Fund shall continue to apply on the
sixtieth (60th) day following the giving of such notice, which
sixtieth day shall be the effective date of termination;
f. Upon termination of the Management Agreement between the Fund and
Wells Fargo Investment Advisors or its successors unless UNUM
specifically approves the selection of a new Fund manager. the Fund
shall promptly furnish notice of such termination to UNUM;
g. In the event the Fund's shares are not registered, issued or sold in
accordance with applicable federal law, or such law precludes the use
of such shares as the underlying investment medium of Contracts issued
or to be issued by UNUM. Termination shall be effective immediately
upon such occurrence without notice; or
h. Upon assignment of the Agreement, unless made with the written consent
of the non-assigning party.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f, 10.2h
herein shall not affect the operation of Article V of this Agreement.
<PAGE>
ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement shall be made by agreement
in writing between UNUM and the fund.
ARTICLE XII
NOTICE
12.1 Each notice required by this Agreement shall be give by certified mail,
return receipt requested, to the appropriate parties at the following
addresses:
UNUM: UNUM Life Insurance Company
Attn.: Legal Department-Pensions
2211 Congress Street
PORTLAND, MAINE 04122
Fund: Dreyfus Life And Annuity Index Fund, Inc.
885 Third Avenue
New York, New York 10022
Attn.: Steven F. Newman, Secretary
with copies to:
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn.: Lewis G. Cole, Esq.
Stuart H. Colman, Esq.
Notice shall be deemed to be give on the date of the receipt by the address
as evidence by the return receipt.
ARTICLE XIII
MISCELLANEOUS
13.1 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.
<PAGE>
-18-
14.1 This Agreement shall be construed in accordance with the internal laws of
the State of New York without giving effect to principles of conflict of
laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
duly executed and attested as of the date first above written.
UNUM LIFE INSURANCE COMPANY
By: /s/ T. J. Wilson
-----------------------------
Its: Vice President
-----------------------------
Attest: /s/ Joan Sarles Lee
-------------------
DREYFUS LIFE AND ANNUITY
INDEX FUND, INC.
By: /s/
-----------------------------
Its: Vice President
----------------------------
Attest: /s/ Charles J. Demarc
---------------------
<PAGE>
AMENDMENT #1 TO
FUND PARTICIPATION AGREEMENT BETWEEN
UNUM LIFE INSURANCE COMPANY OF AMERICA AND
DREYFUS LIFE AND ANNUITY INDEX FUND, INC.
This Amendment to be effective as of January 1, 1992, by and among UNUM and the
Fund which entities are more fully described in the Fund Participation Agreement
dated September 6, 1989.
Whereas, on December 31, 1991, at 11:59 p.m. UNUM Life Insurance Company merged
with UNUM Life Insurance Company of America and the resulting company was named
UNUM Life Insurance Company of America, and
Whereas, all the rights and obligations of UNUM Life Insurance Company became
rights and obligations of UNUM Life Insurance Company of America on such date,
Now therefore, in consideration of their mutual promises, UNUM and the Fund
agree that all references in the aforementioned participation agreement to UNUM
shall be deemed to refer to UNUM Life Insurance Company of America. No other
terms in the agreement shall be altered in any way by this Amendment #1. All
parties shall continue to have the same rights and obligations that were agreed
to in the Fun Participation Agreement.
In witness whereof, each of the parties hereto has caused this amendment to be
executed in its name and on its behalf by its duly authorized representative as
of the date specified below.
UNUM LIFE INSURANCE COMPANY
OF AMERICA
Date: 2-7-92 By: /s/ Russell W. Anderson
-----------------------
Its Authorized Officer
Witness: /s/ Charlotte F. Vadas Vice President
---------------------- ---------------------------
Title
DREYFUS LIFE AND ANNUITY
INDEX FUND, INC.
Date: 1-29-92 By: /s/
-----------------------
Its Authorized Officer
Witness: /s/ Senior Vice President
----------------------- ---------------------
Title
<PAGE>
EXHIBIT 8(b)
PARTICIPATION AGREEMENT
-----------------------
Among
VARIABLE INSURANCE PRODUCTS FUND,
--------------------------------
FIDELITY DISTRIBUTORS CORPORATION
---------------------------------
and
UNUM Life Insurance Company
---------------------------
THIS AGREEMENT, made and entered into this 1st day of May, 1991 by and
among UNUM LIFE INSURANCE COMPANY, (hereinafter the "Company"), a Maine
corporation, on its own behalf and on behalf of each segregated asset account on
the Company set forth on Schedule A hereto as may be amended from time to time
(each such account hereinafter referred to as the "Account"), a segregated asset
account of the Company, and the VARIABLE INSURANCE PRODUCTS FUND, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements substantially
identical to this Agreement (hereinafter "Participating Insurance Companies");
and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio" and representing
1
<PAGE>
the interest in a particular managed portfolio of securities and other assets;
and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated October 15, 1985 (File No. 812-6102), granting Participating
Insurance Companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has described its variable annuity contracts in a
registration statement filed under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable annuity contracts; and
WHEREAS, the Company has registered or will register the Accounts as a unit
investment trust under the 1940 Act; and
2
<PAGE>
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of01934, as
amended, (hereinafter the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of the Accounts to fund certain of the aforesaid variable annuity 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 each Accounts orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the Company
shall be the designee of the Fund for receipt of such orders from the Accounts
and receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such order by 9:30 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission. The
Company shall provide to the Fund a list of persons authorized to place orders
for purchases and redemption of Fund Shares.
3
<PAGE>
Fund shall accept orders on behalf of the Company only from persons on such
list. The Company shall replace such list with another in the event of changes
in authorized persons. The Company agrees that any person whose name appears on
the list from time to time will be duly authorized by appropriate corporate
action by the Company.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction re is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares on any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Sections 2.5 and 2.12 of
Article II of this Agreement is in effect to govern such sales.
4
<PAGE>
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund for its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from the Accounts and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable annuity contracts with the form number(s) which are
listed of Schedule B attached hereto and incorporated herein by this reference,
as such Schedule B may be amended from time to time hereafter by the Company,
(the "Contracts") shall be invested in the Fund, in such other Funds advised by
the Adviser as may be mutually agreed to in writing by the parties hereto, or in
the Company's general account, provided that such amounts may also be invested
in an investment company other than the Fund if (a) such other investment
company, or series thereof, has investment objectives and policies that are
substantially different from the investment objectives and policies of all the
Portfolios of the Fund; or (b) the Company gives the Fund and the Underwriter 45
days written notice of its intention to make such other investment company
available as a funding vehicle for the Contracts; or (c) such other investment
company was available as a funding vehicle for the Contracts prior to the date
of this Agreement and the Company so
5
<PAGE>
informs the Fund and Underwriter prior to their signing this Agreement; or (d)
the Fund or Underwriter consents to the use of such other investment company.
1.7. The Company shall bay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For
the purpose of Sections 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Accounts.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Funds' shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 7 p.m. Boston time.
6
<PAGE>
ARTICLE II. Representations and Warranties
------------------------------
2.1. The Company represents and warrants that the Contracts will be
described in a registration statement under the 1933 Act; that the Contracts
will be issued and sold in compliance in all material respects with all
applicable Federal and State laws and that the sale of the Contracts shall
comply in all material respects with state insurance suitability requirements.
The Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established the Account prior to any issuance or sale thereof as a
segregated asset account under Section 2537 of the Maine Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register toe
Account as a unit investment trust in accordance with the provisions of the 1940
Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that the Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Maine and all
applicable de]]federal and state securities laws ant that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuos 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.
7
<PAGE>
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, ad
amended, (the "Code") and that it will make every effort to maintain such
qualification (under subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that is might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated as
endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. 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 suture. The Fund has adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a board of
trustees, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's
8
<PAGE>
investment policies, fees and expenses are and shall at all times remain in
compliance with the laws of the State of Maine and the Fund and the Underwriter
represents that their respective operations are and shall at all times remain in
material compliance with the laws of the State of Maine to the extent required
to perform this Agreement.
2.7. The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Maine and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and shall
remain duly registered in all material respects under all applicable federal and
state securities laws ant that the Adviser shall perform its obligations for the
Fund in compliance in all material respect with the laws of the State of Maine
and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Section 17g-1 of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
9
<PAGE>
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 and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Fund, in an amount not less that the minimal coverage as required currently
by entities subject to Rule 17g-1 of the 1940 Act or related provisions or may
by promulgated from time to time. The aforesaid Bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
2.12. The Company may purchase Fund shares with Account assets derived from
any sale of a Contract to any other type of tax-advantaged employee benefit
plan; provided however that the sale of Contracts to deferred compensation plans
--------
with respect to service for state and local governments which qualify under
Section 457 of the Code shall be limited to plans with no more that 3,000
employees who are eligible to participant at the time of the first such purchase
by the Company of Fund shares derived from the sale of such Contract unless
otherwise agreed to in writing by the Fund and the Underwriter.
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 (including any supplements
thereto) as the Company may reasonably request. If requested by the Company in
lieu thereof, the Fund shall provide such documentation (including a final copy
of the new prospectus as set in type at the Fund's expense) and other assistance
as is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus for the Fund is amended) to have the prospectus for
the Contracts and the Fund's prospectus printed together in one document (such
printing to be at the Company's expense).
10
<PAGE>
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company in a timely
manner with copies of its proxy material, reports to stockholders and other
communications to stockholders in such quantity as the Company shall reasonably
require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract Owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such portfolio for
which instructions have been received:
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the Investment Company Act to require pass-through voting
privileges for variable contract owners. The Company reserves the right to vote
Fund shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule B attached hereto and incorporated herein by this reference, which
standards will also be provided to the other Participating Insurance Companies.
11
<PAGE>
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least ten Business Days prior to its use. No such material shall be
used if the Fund or its designee object to such use within ten Business Days
after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund Shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
12
<PAGE>
4.3. The Fund, Underwriter, or its designee shall furnish, or shall cause
to be furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or any Account, is named
at least ten Business Days prior to its use. No such material shall be used in
the Company or its designee object to such use within ten 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, the
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 the Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statement of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of
13
<PAGE>
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 the Account, contemporaneously with the filing of
such document with the Securities and Exchange Commission.
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 article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund and Underwriter shall pay no fee or other compensation to
the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
Underwriter for the Contracts if and in amounts
14
<PAGE>
agreed to by the Underwriter in writing and such payments will be made out of
existing fees otherwise payable to the Underwriter, past profits of the
Underwriter or other resources available to the Underwriter. No such payments
shall be made directly by the Fund. Currently, no such payments are
contemplated.
5.2. All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses for
the cost of registration and qualification of the Fund's shares, preparation and
filing of the Fund's prospectus and registration statement, proxy materials and
reports, setting the prospectus in type, setting in type and printing the proxy
materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), 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.
5.3. The Company shall bear the expenses of printing and distributing the
Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification
---------------
6.1. The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder.
15
<PAGE>
Without limiting the scope of the foregoing, the Fund will at all times comply
with Section 817(h) of the Code and Treasury Regulation (S)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
Regulation.
ARTICLE VII. Potential Conflicts
-------------------
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive
16
<PAGE>
Order, by providing the Board with all information reasonably necessary for the
Board to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Board whenever contract owner voting
instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
----
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Board's election, to withdraw the Account's investment
in the Fund and terminate this
17
<PAGE>
Agreement; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
Account's investment in the Fund and terminate this Agreement within six months
after the Board informs the Company in writing that it has determined that such
decision has created an irreconcilable material conflict; provided, however,
that such withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a majority of
the disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners
18
<PAGE>
materially adversely affected by the irreconcilable material conflict. In the
event that the Board determines that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Fund and terminate this Agreement within six (6)
months after the Board informs the Company in writing of the foregoing
determination, provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) an terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may by necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent the terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By The Company
------------------------------
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each member of the Board and officers and each person, if any, who
19
<PAGE>
controls the Fund within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of the Fund's shares or
the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the Contracts
(or any amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided
that this agreement to indemnify shall not apply as to any
Indemnified Party is such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity
with information furnished to the Company by or on behalf of the
Fund for use in the Registration Statement or prospectus for the
Contracts or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection with
the sale of the Contracts or Fund shares; or
20
<PAGE>
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the Fund
not supplied by the Company, or persons under its control) or
wrongful conduct of the Company or persons under its control, with
respect to the sale or distribution of the Contracts of Fund
Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the Fund or any
amendment thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading
if such a statement of omission was made in reliance upon
information furnished to the Fund by or on behalf of the Company:
or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Company, as limited by and in accordance
with the provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages,
21
<PAGE>
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 or duties
under this Agreement or to the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such Party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
22
<PAGE>
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
8.2. Indemnification by the Underwriter
----------------------------------
8.2(a). The Underwriter agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement or prospectus of sales literature of the
Fund (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and
in conformity with information
23
<PAGE>
furnished to the Underwriter of Fund by or on behalf of the
Company for use in the Registration Statement or prospectus for
the Fund or in sales literature (or any amendment or supplement)
or otherwise for use in connection with the sale of the Contracts
of Fund shares: or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or Underwriter
or persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature covering the Contracts,
or any amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or omission
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on behalf
of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
24
<PAGE>
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter; as limited by and in
accordance with the provisions of Sections 8.2(b) and 8.2(c)
hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter
25
<PAGE>
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the Underwriter to such
party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other that reasonable costs
of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3. Indemnification By the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid is settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operation of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
26
<PAGE>
Agreement (including a failure to comply with the diversification
requirements specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company, the Fund, the Underwriter or the Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claims made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise that on
account of this Indemnification
27
<PAGE>
provision. In case any such action is brought against the Indemnified Parties,
the Fund will be entitled to participate, at its own expense, in the defense
thereof. The Fund also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Fund to such party of the Fund's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other that reasonable costs
of investigation. 8.3(d). The Company and the Underwriter agree promptly to
notify the Fund of the commencement of any litigation or proceedings against it
or any of its respective officers or directors in connection with this
Agreement, the issuance or sale of the Contracts, the operation of the Account,
or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933, 1933
and 1940 acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
28
<PAGE>
ARTICLE X. Termination
-----------
10.1. This Agreement shall terminate:
(a) at the option of any party upon one year advance written notice
to the other parties; provided, however such notice shall not be
given earlier than one year following the date of this Agreement; or
(b) at the option of the Company to the extent that shares of
Portfolios are not reasonably available to meet the requirements of
the Contracts as determined by the Company, provided however, at the
option of the Company that such termination shall apply only to the
Portfolio(s) not reasonably available. Prompt notice of the election
to terminate for such cause shall be furnished by the Company.
Termination of the Portfolios other than the Portfolio not
reasonably available shall be effective on ninety (90) days notice;
or
(c) at the option of the Fund in the event that formal proceedings
are instituted against the Company by the NASD, the Securities and
Exchange Commission, the Insurance Commissioner or any other
regulatory body regarding the Company's duties under this Agreement
or related to the sale of the Contracts, the operation of any
Account, or the purchase of the Fund shares, provided, however, that
the Fund determines in its sole judgment exercised in good faith,
that any such administrative proceedings will have a material
adverse effect upon the ability of the Company to perform its
obligations under this Agreement; or
29
<PAGE>
(d) at the option of the Company in the event that formal proceedings
are instituted against the Fund or Underwriter by the NASD, the
Securities and Exchange Commission, or any state securities or
insurance department or any other regulatory body, provided, however,
that the Company determines in its sole judgment exercised in good
faith, that any such administrative proceedings will have a material
adverse effect upon the ability of the Fund or Underwriter to perform
its obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the Contract
owners having an interest in such 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 to replace the Fund's shares; or
(f) at the option of the Company, in the event any of the Fund's
shares are not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes the use of
such shares as the underlying investment media of the Contracts issued
or to be issued by the Company; or
(g) at the option of the Company, if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code or under
any successor or similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify; or
30
<PAGE>
(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 either the Fund or the Underwriter; if (l) the
Fund or the Underwriter, respectively, shall determine, in their sole
judgment reasonably exercised in good faith, that the Company has
suffered a material adverse change in its business or financial
condition or is the subject of material adverse publicity and such
material adverse change or material adverse publicity will have a
material adverse impact upon the business and operations of either the
Fund or the Underwriter, (2) the Fund or the Underwriter shall notify
the Company in writing of such determination and its intent to
terminate this Agreement, and (3) after considering the actions taken
by the Company and any other changes in circumstances since the giving
of such notice, such determination of the Fund or the Underwriter
shall continue to apply on the sixtieth (60th) day following the
giving of such notice, which sixtieth day shall be the effective date
of termination; or
(j) at the option of the Company, if (l) the Company shall determine,
in its sole judgment reasonably exercised in good faith, that either
the Fund or the Underwriter has suffered a material adverse change in
its business or financial condition or is the subject of material
adverse publicity and such material adverse change or material adverse
publicity will have a material adverse impact upon the business and
31
<PAGE>
operations of the Company, (2) the Company shall notify the Fund and
the Underwriter in writing of such determination and its intent to
terminate the Agreement, and (3) after considering the actions taken
by the Fund and/or the Underwriter and any other changes in
circumstances since the giving of such notice, such determination
shall continue to apply on the sixtieth (60th) day following the
giving of such notice, which sixtieth day shall be the effective
date of termination; or
(k) at the option of either the Fund or the Underwriter, if the
Company gives the Fund and the Underwriter the written notice
specified in Section 1.6(b) hereof and at the time such notice was
given there was no notice of termination outstanding under any other
provision of this Agreement; provided, however any termination under
this Section 10.1(k) shall be effective ninety (90) days after the
notice specified in Section 1.6(b) was given; or
(l) at the option of any party if this Agreement is assigned without
the consent of all parties.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3. Notice Requirement. No termination of this Agreement shall be
------------------
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to terminate
which notice shall set forth the basis for such termination. Furthermore,
(a) In the event that any termination is based upon the provisions
of Article VII, or the provision of Section
32
<PAGE>
10.1(a), 10.1(i), 10.1(j) or 10.1(k) of this Agreement, such prior written
notice shall be given in advance of the effective date of termination as
required by such provisions; and
(b) in the event that any termination is based upon the provisions of
Section 10.1(c) or 10.1(d) of this Agreement, such prior written notice
shall be given at least ninety (90) days before the effective date of
termination.
10.4. Effect of Termination. Notwithstanding any termination of this
----------------------
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.4 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.
10.5. The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated
transactions, (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent or general application (hereinafter referred
to as a "Legally Required Redemption"), or (iii) as necessary to implement the
results of a Contract holder voting regarding the substitution of shares of the
Fund. Upon request, the Company will promptly furnish to the Fund and the
33
<PAGE>
Underwriter the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund and the Underwriter) to the effect that any
redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract Owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Fund or the Underwriter 90 days notice of its intention to do so.
ARTICLE XI. Notices
-------
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
UNUM Life Insurance Company
2211 Congress Street
Portland, Maine 04122
Attention: ___________________
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
-------------
12.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
34
<PAGE>
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it may
come into the public domain without the express written consent of the affected
party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
12.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
35
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representatives
and its seal to be hereunder affixed hereto as of the date specified below.
Company:
UNUM LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/ Stephen L. Smith
---------------------
Title: Vice President
--------------
Date: 6/6/91
------
Fund:
VARIABLE INSURANCE PRODUCTS FUND
By its authorized officer,
By: /s/ J. Gary Burkhead
---------------------
Title: Senior Vice President
---------------------
Date: 5/1/91
------
Underwriter:
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
By: /s/
Title: President
---------
Date: 4/29/91
-------
36
<PAGE>
Schedule A
----------
Accounts
--------
Name of Account Date of Resolution of Company's Board
which Established the Account
37
<PAGE>
AMENDMENT NO. 1
Amendment to the Participation Agreement among UNUM Life Insurance Company
of America (the "Company"), Variable Insurance Products Fund (the "Fund") and
Fidelity Distributors Corporation (the "Underwriter") dated May 1, 1991, (the
"Agreement").
WHEREAS, each of the parties is desirous of expanding the ability of
Company to participate in the qualified markets, the Company, the Underwriter
and the Fund hereby agree to amend the Agreement by deleting from Section 1.4
the reference to Section 2.12 and by deleting Section 2.12 is its entirety.
In witness whereof, each of the parties has caused this Amendment to be
executed in its name and on its behalf by its duly authorized representative as
of November 1, 1991.
UNUM LIFE INSURANCE COMPANY FIDELITY DISTRIBUTORS CORPORATION
OF AMERICA
By: /s/ Sandra L. Plette By: /s/ Roger T. Servison
--------------------- ----------------------
Name: Sandra L. Plette Name: Roger T. Servison
--------------------- ----------------------
Title: Vice President Title: President
--------------------- ----------------------
VARIABLE INSURANCE PRODUCTS FUND
By: /s/ J. Gary Burkhead
---------------------
Name: J. Gary Burkhead
----------------
Title: Senior V. P.
------------
38
<PAGE>
AMENDMENT NO. 2 TO PARTICIPATION AGREEMENT AMONG
-
VARIABLE INSURANCE PRODUCTS FUND
FIDELITY DISTRIBUTORS CORPORATION
and
UNUM LIFE INSURANCE COMPANY
WHEREAS, UNUM LIFE INSURANCE COMPANY (the "Company"), VARIABLE INSURANCE
PRODUCTS FUND (the "Fund") and FIDELITY DISTRIBUTORS CORPORATION have previously
entered into a Participation Agreement (the "Agreement") containing certain
arrangements concerning prospectus costs; and
WHEREAS, the Trustees of the Fund have approved certain changes to the
expense structure of the Fund; and
NOW, THEREFORE, the parties do hereby agree to amend the Agreement by
substituting the following arrangements in place of any inconsistent language in
the Participation Agreement, wherever found:
1. The Fund will provide to the Company each year, at the Fund's cost,
such number of prospectuses and Statements of Additional Information as are
actually distributed to the Company's then-existing variable life and/or
variable annuity contract owners.
2. If the Company takes camera-ready film or computer diskettes containing
Fund's prospectus and/or Statement of Additional Information in lieu of
receiving hard copies of these docents, the Fund will reimburse the Company in
an amount computed as follows. The number of prospectuses and Statements of
Additional Information actually distributed to existing contract owners by the
Company will be multiplied by the Fund's actual per-unit cost of printing the
documents.
3. The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund in order to verify that
the prospectuses and Statements of Additional Information provided to the
Company, or the reimbursement made to the Company, are or have been used only
for the purposes set forth hereinabove.
IN WITNESS WHEREOF we have set our hands as of the 15th day of December,
1994.
UNUM LIFE INSURANCE COMPANY
By: /s/ David E. Hughes
--------------------
Name: David E. Hughes
--------------------
Title: Senior Vice President, Retirement Security Division
---------------------------------------------------
VARIABLE INSURANCE PRODUCTS FUND FIDELITY DISTRIBUTORS CORPORATION
By: /s/ J. Gary Burkhead By: /s/ Kurt A. Lange
--------------------- ------------------
Name: J. Gary Burkhead Name: Kurt A. Lange
--------------------- ------------------
Title: Senior Vice President Title: President
--------------------- ------------------
39
<PAGE>
EXHIBIT 8(C)
PARTICIPATION AGREEMENT
-----------------------
Among
VARIABLE INSURANCE PRODUCTS FUND II,
-----------------------------------
FIDELITY DISTRIBUTORS CORPORATION
---------------------------------
and
UNUM Life Insurance Company
---------------------------
THIS AGREEMENT, made and entered into this 1st day of May, 1991 by and
among UNUM LIFE INSURANCE COMPANY, (hereinafter the "Company"), a Maine
corporation, on its own behalf and on behalf of each segregated asset account on
the Company set forth on Schedule A hereto as may be amended from time to time
(each such account hereinafter referred to as the "Account"), a segregated asset
account of the Company, and the VARIABLE INSURANCE PRODUCTS FUND II, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements substantially
identical to this Agreement (hereinafter "Participating Insurance Companies");
and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio" and representing
1
<PAGE>
the interest in a particular managed portfolio of securities and other assets;
and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated September 17, 1986 (File No. 812-6422), granting Participating
Insurance Companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has described its variable annuity contracts in a
registration statement filed under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable annuity contracts; and
WHEREAS, the Company has registered or will register the Accounts as a unit
investment trust under the 1940 Act; and
2
<PAGE>
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of01934, as
amended, (hereinafter the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of the Accounts to fund certain of the aforesaid variable annuity 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 each Accounts orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the Company
shall be the designee of the Fund for receipt of such orders from the Accounts
and receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such order by 9:30 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission. The
Company shall provide to the Fund a list of persons authorized to place orders
for purchases and redemption of Fund Shares.
3
<PAGE>
Fund shall accept orders on behalf of the Company only from persons on such
list. The Company shall replace such list with another in the event of changes
in authorized persons. The Company agrees that any person whose name appears on
the list from time to time will be duly authorized by appropriate corporate
action by the Company.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction re is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares on any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Sections 2.5 and 2.12 of
Article II of this Agreement is in effect to govern such sales.
4
<PAGE>
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund for its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from the Accounts and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable annuity contracts with the form number(s) which are
listed of Schedule B attached hereto and incorporated herein by this reference,
as such Schedule B may be amended from time to time hereafter by the Company,
(the "Contracts") shall be invested in the Fund, in such other Funds advised by
the Adviser as may be mutually agreed to in writing by the parties hereto, or in
the Company's general account, provided that such amounts may also be invested
in an investment company other than the Fund if (a) such other investment
company, or series thereof, has investment objectives and policies that are
substantially different from the investment objectives and policies of all the
Portfolios of the Fund; or (b) the Company gives the Fund and the Underwriter 45
days written notice of its intention to make such other investment company
available as a funding vehicle for the Contracts; or (c) such other investment
company was available as a funding vehicle for the Contracts prior to the date
of this Agreement and the Company so
5
<PAGE>
informs the Fund and Underwriter prior to their signing this Agreement; or (d)
the Fund or Underwriter consents to the use of such other investment company.
1.7. The Company shall bay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For
the purpose of Sections 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Accounts.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Funds' shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 7 p.m. Boston time.
6
<PAGE>
ARTICLE II. Representations and Warranties
------------------------------
2.1. The Company represents and warrants that the Contracts will be
described in a registration statement under the 1933 Act; that the Contracts
will be issued and sold in compliance in all material respects with all
applicable Federal and State laws and that the sale of the Contracts shall
comply in all material respects with state insurance suitability requirements.
The Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established the Account prior to any issuance or sale thereof as a
segregated asset account under Section 2537 of the Maine Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register toe
Account as a unit investment trust in accordance with the provisions of the 1940
Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that the Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of the State
of Maine and all applicable de]]federal and state securities laws ant that the
Fund is and shall remain registered under the 1940 Act. The Fund shall
amend the Registration Statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuos
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.
7
<PAGE>
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, ad
amended, (the "Code") and that it will make every effort to maintain such
qualification (under subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that is might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated as
endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. 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 suture. The Fund has adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a board of
trustees, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's
8
<PAGE>
investment policies, fees and expenses are and shall at all times remain in
compliance with the laws of the State of Maine and the Fund and the Underwriter
represents that their respective operations are and shall at all times remain in
material compliance with the laws of the State of Maine to the extent required
to perform this Agreement.
2.7. The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Maine and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and shall
remain duly registered in all material respects under all applicable federal and
state securities laws ant that the Adviser shall perform its obligations for the
Fund in compliance in all material respect with the laws of the State of Maine
and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Section 17g-1 of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
9
<PAGE>
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 and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Fund, in an amount not less that the minimal coverage as required currently
by entities subject to Rule 17g-1 of the 1940 Act or related provisions or may
by promulgated from time to time. The aforesaid Bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
2.12. The Company may purchase Fund shares with Account assets derived
from any sale of a Contract to any other type of tax-advantaged employee benefit
plan; provided however that the sale of Contracts to deferred compensation plans
--------
with respect to service for state and local governments which qualify under
Section 457 of the Code shall be limited to plans with no more that 3,000
employees who are eligible to participant at the time of the first such purchase
by the Company of Fund shares derived from the sale of such Contract unless
otherwise agreed to in writing by the Fund and the Underwriter.
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 (including any supplements
thereto) as the Company may reasonably request. If requested by the Company in
lieu thereof, the Fund shall provide such documentation (including a final copy
of the new prospectus as set in type at the Fund's expense) and other assistance
as is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus for the Fund is amended) to have the prospectus for
the Contracts and the Fund's prospectus printed together in one document (such
printing to be at the Company's expense).
10
<PAGE>
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company in a timely
manner with copies of its proxy material, reports to stockholders and other
communications to stockholders in such quantity as the Company shall reasonably
require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract Owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
portfolio for which instructions have been received:
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the Investment Company Act to require pass-through voting
privileges for variable contract owners. The Company reserves the right to vote
Fund shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule B attached hereto and incorporated herein by this reference, which
standards will also be provided to the other Participating Insurance Companies.
11
<PAGE>
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least ten Business Days prior to its use. No such material shall be
used if the Fund or its designee object to such use within ten Business Days
after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for
the Fund Shares, as such registration statement and prospectus may be
amended or supplemented from time to time, or in reports or proxy
statements for the Fund, or in sales literature or other promotional
material approved by the Fund or its designee or by the Underwriter,
except with the permission of the Fund or the Underwriter or the designee
of either.
12
<PAGE>
4.3. The Fund, Underwriter, or its designee shall furnish, or shall cause
to be furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or any Account, is named
at least ten Business Days prior to its use. No such material shall be used in
the Company or its designee object to such use within ten 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, the
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 the Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statement of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of
13
<PAGE>
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 the Account, contemporaneously with the filing of
such document with the Securities and Exchange Commission.
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 article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund and Underwriter shall pay no fee or other compensation to
the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
Underwriter for the Contracts if and in amounts
14
<PAGE>
agreed to by the Underwriter in writing and such payments will be made out of
existing fees otherwise payable to the Underwriter, past profits of the
Underwriter or other resources available to the Underwriter. No such payments
shall be made directly by the Fund. Currently, no such payments are
contemplated.
5.2. All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses for
the cost of registration and qualification of the Fund's shares, preparation and
filing of the Fund's prospectus and registration statement, proxy materials and
reports, setting the prospectus in type, setting in type and printing the proxy
materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), 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.
5.3. The Company shall bear the expenses of printing and distributing the
Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification
---------------
6.1. The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder.
15
<PAGE>
Without limiting the scope of the foregoing, the Fund will at all times comply
with Section 817(h) of the Code and Treasury Regulation (S)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
Regulation.
ARTICLE VII. Potential Conflicts
-------------------
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive
16
<PAGE>
Order, by providing the Board with all information reasonably necessary for the
Board to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Board whenever contract owner voting
instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
-----
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Board's election, to withdraw the Account's investment
in the Fund and terminate this
17
<PAGE>
Agreement; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
Account's investment in the Fund and terminate this Agreement within six months
after the Board informs the Company in writing that it has determined that such
decision has created an irreconcilable material conflict; provided, however,
that such withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a majority of
the disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners
18
<PAGE>
materially adversely affected by the irreconcilable material conflict. In the
event that the Board determines that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Fund and terminate this Agreement within six (6)
months after the Board informs the Company in writing of the foregoing
determination, provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) an terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may by necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent the terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By The Company
------------------------------
8.1(a). The Company agrees to indemnify and hold harmless the
Fund and each member of the Board and officers and each person, if any,
who
19
<PAGE>
controls the Fund within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of the Fund's shares or
the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement or prospectus for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party is such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or
on behalf of the Fund for use in the Registration Statement or
prospectus for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
20
<PAGE>
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the Fund not
supplied by the Company or persons under its control) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or distribution of the Contracts of Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus,
or sales literature of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement of omission was
made in reliance upon information furnished to the Fund by or on
behalf of the Company: or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages,
21
<PAGE>
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 or duties
under this Agreement or to the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such Party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
22
<PAGE>
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
8.2. Indemnification by the Underwriter
----------------------------------
8.2(a). The Underwriter agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement or prospectus of sales literature of the Fund (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information
23
<PAGE>
furnished to the Underwriter of Fund by or on behalf of the Company
for use in the Registration Statement or prospectus for the Fund or in
sales literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts of Fund shares: or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or Underwriter or
persons under their control, with respect to the sale or distribution
of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus,
or sales literature covering the Contracts, or any amendment thereof
or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or omission therein not misleading, if such
statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified
in Article VI of this Agreement); or
24
<PAGE>
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Underwriter; as limited by and in
accordance with the provisions of Sections 8.2(b) and 8.2(c)
hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter
25
<PAGE>
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the Underwriter to such
party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other that reasonable costs
of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3. Indemnification By the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid is settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operation of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
26
<PAGE>
Agreement (including a failure to comply with the diversification
requirements specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company, the Fund, the Underwriter or the Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification provision
with respect to any claims made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve the Fund from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise that on account of this
indemnification
27
<PAGE>
provision. In case any such action is brought against the Indemnified Parties,
the Fund will be entitled to participate, at its own expense, in the defense
thereof. The Fund also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Fund to such party of the Fund's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other that reasonable costs
of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the Fund
of the commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1933 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
28
<PAGE>
ARTICLE X. Termination
-----------
10.1. This Agreement shall terminate:
(a) at the option of any party upon one year advance written
notice to the other parties; provided, however such notice shall not
be given earlier than one year following the date of this Agreement;
or
(b) at the option of the Company to the extent that shares of
Portfolios are not reasonably available to meet the requirements of
the Contracts as determined by the Company, provided however, at the
option of the Company that such termination shall apply only to the
Portfolio(s) not reasonably available. Prompt notice of the election
to terminate for such cause shall be furnished by the Company.
Termination of the Portfolios other than the Portfolio not reasonably
available shall be effective on ninety (90) days notice; or
(c) at the option of the Fund in the event that formal proceedings
are instituted against the Company by the NASD, the Securities and
Exchange Commission, the Insurance Commissioner or any other
regulatory body regarding the Company's duties under this Agreement or
related to the sale of the Contracts, the operation of any Account, or
the purchase of the Fund shares, provided, however, that the Fund
determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon
the ability of the Company to perform its obligations under this
Agreement; or
29
<PAGE>
(d) at the option of the Company in the event that formal proceedings are
instituted against the Fund or Underwriter by the NASD, the Securities and
Exchange Commission, or any state securities or insurance department or any
other regulatory body, provided, however, that the Company determines in
its sole judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of the
Fund or Underwriter to perform its obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the Contract
owners having an interest in such 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 to replace the Fund's shares; or
(f) at the option of the Company, in the event any of the Fund's shares
are not registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such shares as the
underlying investment media of the Contracts issued or to be issued by the
Company; or
(g) at the option of the Company, if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably believes that
the Fund may fail to so qualify; or
30
<PAGE>
(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 either the Fund or the Underwriter; if (1) the Fund
or the Underwriter, respectively, shall determine, in their sole judgment
reasonably exercised in good faith, that the Company has suffered a
material adverse change in its business or financial condition or is the
subject of material adverse publicity and such material adverse change or
material adverse publicity will have a material adverse impact upon the
business and operations of either the Fund or the Underwriter, (2) the Fund
or the Underwriter shall notify the Company in writing of such
determination and its intent to terminate this Agreement, and (3) after
considering the actions taken by the Company and any other changes in
circumstances since the giving of such notice, such determination of the
Fund or the Underwriter shall continue to apply on the sixtieth (60th) day
following the giving of such notice, which sixtieth day shall be the
effective date of termination; or
(j) at the option of the Company, if (1) the Company shall determine, in
its sole judgment reasonably exercised in good faith, that either the Fund
or the Underwriter has suffered a material adverse change in its business
or financial condition or is the subject of material adverse publicity and
such material adverse change or material adverse publicity will have a
material adverse impact upon the business and
31
<PAGE>
operations of the Company, (2) the Company shall notify the Fund
and the Underwriter in writing of such determination and its
intent to terminate the Agreement, and (3) after considering the
actions taken by the Fund and/or the Underwriter and any other
changes in circumstances since the giving of such notice, such
determination shall continue to apply on the sixtieth (60th) day
following the giving of such notice, which sixtieth day shall be
the effective date of termination; or
(k) at the option of either the Fund or the Underwriter, if the
Company gives the Fund and the Underwriter the written notice
specified in Section 1.6(b) hereof and at the time such notice
was given there was no notice of termination outstanding under
any other provision of this Agreement; provided, however any
termination under this Section 10.1(k) shall be effective ninety
(90) days after the notice specified in Section 1.6(b) was given;
or
(l) at the option of any party if this Agreement is assigned
without the consent of all parties.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3. Notice Requirement. No termination of this Agreement
------------------
shall be effective unless and until the party terminating this Agreement gives
prior written notice to all other parties to this Agreement of its intent to
terminate which notice shall set forth the basis for such termination.
Furthermore,
(a) In the event that any termination is based upon the
provisions of Article VII, or the provision of Section
32
<PAGE>
10.1(a), 10.1(i), 10.1(j) or 10.1(k) of this Agreement, such prior
written notice shall be given in advance of the effective date of
termination as required by such provisions; and
(b) in the event that any termination is based upon the provisions
of Section 10.1(c) or 10.1(d) of this Agreement, such prior written
notice shall be given at least ninety (90) days before the effective
date of termination.
10.4. Effect of Termination. Notwithstanding any termination of
---------------------
this Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.4 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.
10.5. The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated
transactions, (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent or general application (hereinafter referred
to as a "Legally Required Redemption"), or (iii) as necessary to implement the
results of a Contract holder voting regarding the substitution of shares of the
Fund. Upon request, the Company will promptly furnish to the Fund and the
33
<PAGE>
Underwriter the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund and the Underwriter) to the effect that any
redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract Owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Fund or the Underwriter 90 days notice of its intention to do so.
ARTICLE XI. Notices
-------
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
UNUM Life Insurance Company
2211 Congress Street
Portland, Maine 04122
Attention: __________________
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
-------------
12.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
34
<PAGE>
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it may
come into the public domain without the express written consent of the affected
party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
12.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
35
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representatives
and its seal to be hereunder affixed hereto as of the date specified below.
Company:
UNUM LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/ Stephen L. Smith
--------------------
Title: Vice President
--------------
Date: 5/15/91
-------
Fund:
VARIABLE INSURANCE PRODUCTS FUND II
By its authorized officer,
By: /s/ J. Gary Burkhead
---------------------
Title: Senior Vice President
---------------------
Date: 5/7/91
------
Underwriter:
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
By: /s/
Title: Vice President
--------------
Date: 5/6/91
------ ------
36
<PAGE>
Schedule A
----------
Accounts
--------
Name of Account Date of Resolution of Company's
Board which Established the Account
37
<PAGE>
Schedule B
----------
Contracts
---------
1. Contract Form _______________________
38
<PAGE>
AMENDMENT NO. 1
Amendment to the Participation Agreement among UNUM Life Insurance Company
of America (the "Company"), Variable Insurance Products Fund II (the "Fund") and
Fidelity Distributors Corporation (the "Underwriter") dated May 1, 1991, (the
"Agreement").
WHEREAS, each of the parties is desirous of expanding the ability of
Company to participate in the qualified markets, the Company, the Underwriter
and the Fund hereby agree to amend the Agreement by deleting from Section 1.4
the reference to Section 2.12 and by deleting Section 2.12 is its entirety.
In witness whereof, each of the parties has caused this Amendment to be
executed in its name and on its behalf by its duly authorized representative as
of November 1, 1991.
UNUM LIFE INSURANCE COMPANY FIDELITY DISTRIBUTORS CORPORATION
OF AMERICA
By: /s/ Sandra L. Plette By: /s/ Roger T. Servison
-------------------- ---------------------
Name: Sandra L. Plette Name: Roger T. Servison
---------------- -----------------
Title: Vice President Title: President
-------------- ---------
VARIABLE INSURANCE PRODUCTS FUND II
By: /s/ J. Gary Burkhead
--------------------
Name: J. Gary Burkhead
----------------
Title: Senior V. P.
------------
39
<PAGE>
EXHIBIT 8 (d)
FUND PARTICIPATION AGREEMENT
----------------------------
This Agreement is entered into on this 28th day of February, 1991, between UNUM
----
Life Insurance Company ("UNUM"), a life insurance company organized under the
laws of the State of Maine, as sponsor of VA-I Separate Account ("Separate
Account"), a separate account established by UNUM in accordance with the laws of
Maine, and TCI Portfolios, Inc., ("TCIP"), a management investment company
organized under the laws of the State of Maryland, and its investment adviser,
Investor Research Corporation ("Investors Research"), an investment advisory
company organized under the laws of Delaware.
ARTICLE I
DEFINITIONS
1.1 "Business Day" shall mean a day on which UNUM and the New York Stock
-------------
Exchange are customarily open for business.
1.2 "Contract" shall mean a variable annuity contract issued by UNUM
--------
under plans qualified for federal income tax advantages under
Sections 401(a), 403(b), 408 and 457 of the Internal Revenue Code of
1986 as amended (the "Code").
1.3 "Contractholder" shall mean any employer or trustee(s) who is a
--------------
party to a Contract.
1.4 "Participant" shall mean any employee of an employer or
-----------
Contractholder who is enrolled to participate under the Contract.
1.5 "Participating Company" shall mean any insurance company (including
---------------------
UNUM), which offers variable annuity and/or variable life insurance
contracts to the public and which has entered into an agreement with
the Fund similar hereto for the purpose of making Fund shares
available to serve as the underlying investment medium for the
aforesaid contracts.
1.6 "Fund" shall mean a portfolio of investments of TCIP having specific
----
investment objectives, policies and restrictions.
1.7 "Sub-account" shall mean any sub-account of Separate Account set up
-----------
for the purpose of investing in a corresponding Fund of TCIP.
<PAGE>
-2-
ARTICLE II
REPRESENTATIONS
2.1 UNUM represents that:
a. UNUM is an insurance company organized under the laws of Maine.
b. Separate Account has been established by UNUM pursuant to the Maine
Insurance Code for the purpose of serving as a funding medium for
Contracts.
c. Separate Account is registered under the Investment Company Act of
1940 as a unit investment trust.
d. Contracts offered by UNUM and funded through Separate Account are
described in a registration statement filed under the Securities Act
of 1933 (the "1933 Act").
e. The income, gains and losses, whether or not realized, from assets
allocated to Separate Account are, in accordance with the applicable
Contracts, to be credited to or charged against such Separate Account
without regard to other income, gains or losses of UNUM.
f. Separate Account is subdivided into various sub-accounts under
which income, gains and losses, whether or not realized, from
assets allocated to each sub-account are, in accordance with
applicable Contracts, to be credited to or charged against such
sub-accounts without regard to other income, gains or losses of
other sub-accounts or of UNUM.
g. UNUM has established Separate Account in such a manner as to
enable it to use Fund shares as the underlying investment
medium for a corresponding Sub-account.
h. UNUM possesses, or will posses prior to selling Contracts, and
shall maintain all licenses and approvals required to offer and
sell Contracts.
2.2 TCIP represents that:
a. TCIP is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940 as an open-end,
diversified management investment company and possesses, and
shall maintain, all legal and regulatory licenses, approvals,
consents and/or exemptions required for TCIP to operate and
offer Fund shares as the underlying investment medium for
certain Sub-accounts.
<PAGE>
-3-
b. TCIP is currently qualified as a Regulated Investment Company under
Subchapter M of Code and that it intends to maintain such
qualification (under Subchapter M or any successor or similar
provision) and that it will notify UNUM with reasonable promptness
after having a reasonable basis for believing that the it has ceased
to so qualify or that it might not so qualify in the future.
c. TCIP is divided into various funds, each Fund being subject to
separate investment objectives, policies and restrictions which
may not be changed without a majority vote of the shareholders
of such Fund.
d. TCIP assets shall be managed and invested in a manner that
complies with the requirements of Section 817(h) of the Code.
e. Shares of TCIP will be sold only to insurance companies and
their separate accounts that offer variable annuity and/or
variable life insurance contracts. No shares will be
offered to the general public.
2.3 Investors Research represents that:
a. Pursuant to a management agreement with TCIP, Investors
Research supervises and manages the investment portfolios of
each Fund, subject only to any directions of TCIP's board of
directors.
B. Investors Research is registered as an investment adviser with
the Securities and Exchange Commission under the Investment
Advisers Act of 1940 and possesses, and shall maintain, all
legal and regulatory licenses, approvals, consents and/or
exemptions required to manage Funds.
ARTICLE III
SELECTION OF SUB-ACCOUNTS
3.1 The Contracts funded through Separate Account will provide for the
allocation of net amounts among the various Sub-accounts. The
Sub-Accounts will invest in Fund shares. The selection of a
particular Sub-Account is to be made by a Participant and such
selection may be changed in accordance with the terms of the
Contracts. The selection and number of Sub-accounts available to
Participants will be limited by the Contracts.
<PAGE>
-4-
ARTICLE IV
FUND SHARES
4.1 TCIP agrees to make shares in the Funds listed of Schedule A
available to UNUM to serve as the underlying investment media for
certain Sub-accounts.
4.2 TCIP agrees to make additional Fund shares (other than those listed
on Schedule A) available to serve as investment media for
Sub-accounts in the future should UNUM so request.
4.3 UNUM shall be permitted to utilize and employ shares of management
investment companies other than TCIP as underlying investment media
for Sub-accounts.
4.4 TCIP shall ensure that Fund shares are registered with applicable
federal and state agencies at all times.
4.5 Transfer of Fund shares will be by book entry only. TCIP will
credit UNUM as Separate Account sponsor with the appropriate number
of shares of each Fund. No stock certificates will be issued to
UNUM. UNUM will record shares ordered from a particular Fund in an
appropriate title for the corresponding Sub-accounts.
ARTICLE V
PROCEDURES FOR PLACING ORDERS
5.1 Each business day TCIP will telephone closing net asset value,
dividend and capital gain information of UNUM by 5:30 P.M. Eastern
time, or as soon thereafter as practicable. UNUM will telephone
orders to purchase and/or redeem Fund shares by 10:00 a.m. Eastern
time the following business day directly with TCIP or its specified
agent.
TCIP appoints UNUM as its agent for the limited purposes of accepting
orders for Fund shares for Separate Account. TCIP will execute
orders at the net asset value determined as of the close of trading
on the day of receipt of such orders by UNUM acting as agent
("effective trade date"). However, any orders received by UNUM
acting as agent after the close on New York Stock Exchange will
be executed at the net asset value determined at the end of the
following business day.
5.2 Each business day UNUM shall send TCIP a telecopy listing its orders
for purchasing and redeeming Fund shares (as a follow-up to the
earlier telephonic trade instructions). Later that day TCIP shall
send UNUM a telecopy confirming such orders and listing the closing
net asset value for the prior business day.
<PAGE>
-5-
5.3 UNUM shall provide to TCIP a list of persons authorized to place
orders for purchases and redemptions with TCIP. TCIP shall accept
orders on behalf of UNUM only from persons named on such list. UNUM
shall replace such list with another in the event of changes in
authorized persons. UNUM agrees that any person whose name appears
on the list from time to time will be duly authorized by appropriate
corporate action by UNUM.
ARTICLE VI
SETTLEMENT
6.1 On the day following the effective trade date, payment will be
initiated by electronic funds transfer (ACH transaction) to a
custodial account designated by TCIP. For redemption orders, TCIP
will use best efforts to send a check payment to UNUM two days
following the effective trade date via overnight courier.
6.2 TCIP shall mail to UNUM a copy of a detail transaction report and a
transaction history report following each trade.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
7.1 TCIP shall furnish to UNUM notice of any dividend or distribution
payable on its shares at least five (5) business days prior to the
ex-dividend date. On the ex-dividend date or, if not a business
day, on the first business day thereafter, TCIP shall furnish to
UNUM the actual amount of dividend or distribution payable per
share. All of such dividends and distributions as are payable on
each Fund's shares shall be automatically reinvested in additional
shares of that Fund. TCIP shall, on the date of issuance or, if not
a business day, on the first business day thereafter, notify UNUM of
the number of shares so issued.
ARTICLE VIII
EXPENSES
8.1 All expenses incident to the performance by TCIP under this
Agreement shall be paid by Investors Research pursuant to its
management agreement with TCIP, including the cost of registration
of TCIP's shares with the Securities and Exchange Commission and in
states where required. UNUM shall bear none of the expenses for the
registration of TCIP's shares, preparation of TCIP's prospectuses,
proxy materials, notices and periodic reports, the preparation of
<PAGE>
-6-
any statements and notices required by any federal or state law, or
taxes on the issue or transfer of TCIP's shares subject to this
Agreement. However, UNUM shall be responsible for the expenses of
distributing such materials from UNUM to Contractholders and
Participants.
ARTICLE IX
STATEMENTS AND REPORTS
9.1 TCIP shall provide monthly statements of account as of the end of
each month for all of UNUM's accounts by the fifteenth (15th)
Business Day of the following month.
9.2 TCIP will provide to UNUM 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 Commission or other regulatory authorities.
9.3 UNUM will provide to TCIP at least one 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-actin
letters, and all amendments to any of the above, that relate to the
Contracts or the Separate Account, contemporaneously with the filing
of such document with the Commission.
ARTICLE X
VOTING OF FUND SHARES
10.1 TCIP shall ensure that each Fund complies with all provisions of the
Investment Company Act of 1940 with respect to voting by
shareholders and with all rules and valid interpretations of the
Securities and Exchange Commission with respect thereto.
10.2 TCIP, at its expense, shall provide UNUM with copies of its proxy
material in such quantity as UNUM shall reasonable require for
distribution to Contractholders.
10.3 UNUM shall provide pass-through voting privileges to all
Contractholders so long as the Securities and Exchange Commission
continues to interpret the Investment Company Act of 1940 as
requiring pass-through voting privileges for variable contract
owners. It shall be the responsibility of UNUM to assure that it
and the separate accounts of the other Participating Companies
participating in any Fund calculate voting privileges in a
consistent manner.
<PAGE>
-7-
10.4 UNUM will distribute to Contractholders all proxy material furnished by
TCIP and will vote shares in accordance with instructions received from
those Contractholders with contract value allocated to TCIP shares. UNUM
shall vote TCIP shares for which no instructions have been received in the
same proportion as shares for which such instructions have been received
from Contractholders. UNUM and its agents will in no way recommend action
in connection with or oppose or interfere with the solicitation of proxies
for TCIP shares held for such Contractholders.
ARTICLE XI
MARKETING AND REPRESENTATIONS
11.1 TCIP shall periodically furnish UNUM with the following printed materials
in sufficient quantities for UNUM to distribute to each Contractholder and
Participant and to support UNUM's Contract marketing efforts:
a. Current Fund Prospectus and any supplements thereto;
b. Current Statement of Additional Information;
c. Current proxy materials;
d. Current annual and semiannual reports and supplements thereto;
e. Current quarterly Fund performance reports;
f. Other marketing materials.
Such materials will be furnished to UNUM in time for UNUM to comply with
its regulatory responsibilities under the federal securities laws.
11.2 UNUM shall designate certain persons or entities which shall have
the requisite licenses to solicit applications for the sale of
Contracts. No representation is made as to the number or amount of
Contracts that are to be sold by UNUM. UNUM shall make reasonable
efforts to market the Contracts and shall comply with all applicable
federal and state laws in connection therewith.
11.3 UNUM shall make no representations concerning Fund shares except
those contained in a current Fund prospectus, in printed information
supplemental to such prospectus, and in materials which have
received the prior approval of TCIP.
<PAGE>
-8-
ARTICLE XII
ADMINISTRATIVE SERVICE FEE
12.1 Administrative services to Participants and Contractholders shall be
the responsibility of UNUM. TCIP and Investors Research recognize
UNUM as the sole shareholder of record of Fund shares issued under
this Agreement. TCIP and Investors Research further recognize that
they will derive a substantial savings in administrative expense by
virtue of having a sole shareholder rather than multiple
shareholders. In consideration of the administrative savings
resulting from such arrangements, Investors Research agrees to pay to
UNUM an amount equal to 20 percent (20%) of Investors Research's
management fee, as described and computed in the Fund Prospectus,
with respect to amounts invested by UNUM under this Agreement. The
parties understand that Investors Research customarily pays, out of
its management fee, another affiliated corporation for the type of
administrative services to be provided by UNUM to the
Contractholders and Participants. The parties agree that Investors
Research's payments to UNUM, like Investors Research's payments to
its affiliated corporation, are for administrative services only and
do not constitute payment in any manner for investment advisory
services.
12.2 Notwithstanding Section 12.1, the maximum payment that Investors
research shall be obligated to make to UNUM with respect to any
month shall be 1.667 basis points (0.01667%) of the average
aggregate amount invested in the Funds by UNUM under this Agreement
over such month. The average aggregate amount invested by UNUM over
a one month period shall be computed by totalling UNUM's aggregate
investment (share net asset value multiplied by total number of
shares held by UNUM) on each business day during the month and
dividing by the total number of business days during such month.
12.3 Investors Research will calculate the reimbursement of
administrative expenses at the end of each calendar quarter and will
make such reimbursement to UNUM within 30 days thereafter. The
reimbursement check will be accompanied by a statement showing the
calculation of the monthly amounts payable by Investors Research and
such other supporting data as may be reasonable requested by UNUM.
ARTICLE XIII
POTENTIAL CONFLICTS
13.1 UNUM has reviewed a copy of an application for exemptive relief, as
amended, filed by TCIP on December 21, 1987, with the Securities and
Exchange Commission and, in particular, has reviewed the conditions
to the requested relief set forth therein. As set forth in such
<PAGE>
-9-
application, the Board of Directors of TCIP ("the Board") will monitor
TCIP for the existence of any material irreconcilable conflict between the
interests of the contractholders of all separate accounts investing in
TCIP. 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 contractholders and variable life
insurance contractholders; or (f) a decision by an insurer to disregard
the voting instructions of contractholders. The Board shall promptly
inform UNUM if it determines that an irreconcilable material conflict
exists and the implications thereof.
13.2 UNUM will report any potential or existing conflicts of which it is aware
to the Board. UNUM will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an
obligation by UNUM to inform the Board whenever Conrtactholders voting
instructions are disregarded.
13.3 If a majority of the Board, or a majority of Disinterested Board Members,
determines that a material irreconcilable conflict exists with regard to
Contractholder investments if the Fund, the Board shall give prompt notice
to all Participating Companies. If the Board determines that UNUM is
responsible for causing or creating said conflict, UNUM shall at its sole
cost and expense, and to the extent reasonably practicable (as determined
by a majority of the Disinterested Board Members), take such action as is
necessary to remedy or eliminate the irreconcilable material conflict.
Such necessary action may include, but shall not be limited to:
a. withdrawing the assets allocated to the Separate Account from the Fund
and reinvesting such assets in a different investment medium, or
submitting the question of whether such segregation should be
implemented to a vote of all affected Contractholders 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 Companies) that votes in
favor of such segregation, or offering to the affected Contractholders
the option of making such a change; and/or
b. Establishing a new registered management investment company or managed
separate account.
<PAGE>
-10-
13.4 If a material irreconcilable conflict arises as a result of a decision by
UNUM to disregard Contractholder voting instructions and said decision
represents a minority position or would preclude a majority vote by all
Contractholders having an interest in TCIP, UNUM, at UNUM's sole cost,
may be required, at the Board's election, to withdraw the Separate
Account's investment in TCIP and terminate this agreement; provided,
however that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board.
13.5 For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event will the
Fund be required to establish a new funding medium for any Contract. UNUM
shall not be required by this Article to establish a new funding medium
for any Contract if an offer to do so has been declined by vote of a
majority of the Contractholders materially adversely affected by the
irreconcilable material conflict.
ARTICLE XIV
INDEMNIFICATION
14.1 UNUM shall indemnify and hold harmless TCIP and Investors Research and
each of its directors, officers, employees, agents and each person, if
any, who controls TCIP and Investors Research within the meaning of the
1933 Act against any losses, claims, damages or liabilities to which the
TCIP or any such director, officer, employee, agent or controlling person
may become subject, insofar as such losses, claims, damages or liabilities
(or actions in respect to thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in information furnished by UNUM for use in a Fund's
registration statement or prospectus or sales literature or advertisements
of the Fund, 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, or arise out of
or as a result of conduct, statements or representations (other than
statements or representations contained in the Fund's prospectus and sales
literature) of UNUM or its agents, with respect to the sale and
distribution of Contracts for which Fund shares are an underlying
investment; and UNUM will reimburse any legal or other expenses reasonably
incurred by TCIP or Investors Research or any such director, officer,
employee, agent, or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. This
indemnity agreement will be in addition to any liability which UNUM may
otherwise have.
<PAGE>
-11-
14.2 TCIP and Investors Research shall indemnify and hold harmless UNUM and
each of its directors, officers, employees, agents and each person, if
any, who controls UNUM within the meaning of the 1933 Act against any
losses, claims, damages or liabilities to which UNUM or any such director,
officer, employee, agent or controlling person may become subject, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in a Fund's registration
statement or prospectus or sales literature 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' and TCIP and Investors Research will reimburse any legal
or other expenses reasonably incurred by UNUM or any such director,
officer, employee, arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature or advertisements
with respect to the Separate Account or the Contracts and such statements
were based on information provided to UNUM by the Fund; and the Fund will
reimburse any legal or other expenses reasonably incurred by UNUM or any
such director, officer, employee, agent or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that TCIP or Investors Research
will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or omission or alleged omission made in such Registration
Statement or prospectus in conformity with written information furnished
to TCIP or Investors Research by UNUM specifically for use therein. This
indemnity agreement will be in addition to any liability which TCIP or
Investors Research may otherwise have.
14.3 TCIP and Investors Research shall indemnify and hold harmless UNUM against
any and all liability, loss, damages, costs or expenses which UNUM may
incur, suffer or be required to pay due to TCIP or Investors Research's
(1) incorrect calculation of the daily net asset value, dividend rate or
capital gain distribution rate; (2) incorrect reporting of the daily net
asset value, dividend rate or capital gain distribution rate; and/or (3)
untimely reporting of the net asset value, dividend rate or capital gain
distribution rate.
14.4 Promptly after receipt by an indemnified party under this paragraph of
notices of the commencement of action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party
under this paragraph, notify the indemnifying party of the commencement
thereof; but the omission to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
otherwise than under this paragraph. In case any such action is brought
against any indemnified party, and it notified the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such indemnified party.
<PAGE>
-12-
ARTICLE XV
COMMENCEMENT AND TERMINATION
15.1 This Agreement shall be effective as of the date set forth in the first
paragraph of this Agreement and shall continue in force until terminated
in accordance with the provisions therein.
15.2 This Agreement shall terminate as to the sale and issuance of new
Contracts:
a. At the option of UNUM, TCIP or Investors Research at upon six months
advance written notice to all other parties;
b. At the option of UNUM, if any Fund shares are not reasonably available
to meet the requirements of the Contracts as determined by UNUM.
Prompt notice of election to terminate shall be furnished by UNUM,
said termination to be effective ten days after receipt of notice
unless TCIP makes available a sufficient number of shares to meet the
requirements of the Contracts within said ten-day period;
c. At the option of UNUM, upon the institution of formal proceedings
against TCIP or Investors Research by the Securities and Exchange
Commission, National Association of Securities Dealers or any other
regulatory body, the expected or anticipated ruling, judgment or
outcome of which may, in UNUM's reasonable judgment, materially impair
TCIP's or Investors Research's ability to meet and perform its
obligations and duties hereunder. Prompt notice of election to
terminate shall be furnished by UNUM with said termination to be
effective upon receipt of notice;
d. Upon termination of the management agreement between a Fund listed on
Schedule A and Investors Research. TCIP must provide immediate
notification of such termination to UNUM. This paragraph d. shall not
be deemed to apply if, contemporaneously with such termination, a new
management agreement of substantially similar terms is entered into
between TCIP and Investors Research;
e. In the event a Fund's shares are not registered, issued or sold on
accordance with applicable state and/or federal law, or such law
precludes the use of such shares as the underlying investment medium
of Contracts issued or to be issued by UNUM. Termination shall be
effective immediately upon such occurrence without notice;
f. Upon assignment of this Agreement unless made with the written consent
of each party.
<PAGE>
-13-
ARTICLE XVI
AMENDMENTS
16.1 This Agreement shall automatically be amended to comply with any amendment
to the Investment Company Act of 1940 or rule of any regulatory authority
which affects in any manner the actions and relationships authorized
hereunder.
16.2 Any other changes in the terms of this Agreement, including adding or
deleting Funds to or from Schedule A, shall be made by agreement in
writing between all parties.
ARTICLE XVII
NOTICE
17.1 Each notice required by this Agreement shall be given by certified mail,
return receipt requested, to the appropriate parties at the following
addresses:
UNUM: UNUM Life Insurance Company
Attn: Legal Department - Retirement Products
2211 Congress Street
Portland, Maine 04122
and UNUM Life Insurance Company
Attn: Retirement Products - Variable Annuity
2211 Congress Street
Portland, Maine 04122
TCIP:
TCIP Portfolios, Inc.
ATTN: William M. Lyons
P.O. Box 419385
Kansas City, MO 64141-6385
INVESTORS RESEARCH:
Investors Research Corporation
ATTN: William M. Lyons
P.O. Box 418210
Kansas City, MO 64141-9210
Notice shall be deemed to be given on the date of receipt by the addressee
as evidenced by the return receipt.
<PAGE>
-14-
ARTICLE XVIII
LAW
18.1 This Agreement shall be construed in accordance with the laws of the State
of Maine
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
duly executed and attested as of the date first above written.
UNUM Life Insurance Company /s/ Russell W. Anderson
------------------------
Attest: /s/ David Robinson By: Russell Anderson
------------------- ----------------
Its: Vice President
--------------
TCI PORTFOLIOS, INC. /s/ William M. Lyons
---------------------
Attest: Wendy B. By: William M. Lyons
----------------
Its: Vice President
--------------
INVESTORS RESEARCH CORPORATION /s/ Dennis C. von Waaden
-------------------------
Attest: Wendy B. By: Dennis C. von Waaden
--------------------
Its: Vice President
--------------
<PAGE>
AMENDMENT #1
TO
FUND PARTICIPATION AGREEMENT
This Agreement, to be effective as of January 1, 1992, between UNUM Life
Insurance Company of America ("UNUM"), a life insurance company organized under
the laws of the State of Maine, and TCI Portfolios, Inc. ("TCIP"), a management
investment company organized under the laws of the State of Maryland and its
investment adviser, Investors Research Corporation ("Investors Research"), and
investment advisory company organized under the laws of Delaware.
All references to `UNUM" in the Fund Participation Agreement, dated February 28,
1991, and executed by the aforementioned parties, are hereby amended to refer to
UNUM Life Insurance Company of America, the surviving company of a merger
between UNUM Life Insurance Company, the original contracting party, and UNUM
Life Insurance Company of America. Such merger was effective at 11:59 p.m. on
December 31, 1991. UNUM Life Insurance Company of America shall have all the
rights and obligations of UNUM Life Insurance Company under the Fund
Participation Agreement.
This Agreement does not alter in any way the terms, provisions, rights and
obligations of the Fund Participation Agreement with respect to any of the
parties other than changing the name of the contracting life insurance company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by and through their duly authorized representatives/
UNUM LIFE INSURANCE COMPANY OF AMERICA
By /s/ Russell W. Anderson
------------------------
Its: Vice President
--------------
_______________________
Witness
TCI PORTFOLIOS, INC.>
By /s/ Patrick A.
---------------
Its: Vice President
--------------
_______________________
Witness
INVESTORS RESEARCH CORPORATION
By /s/ William M. Lyons
---------------------
Its: Vice President
--------------
_______________________
Witness
<PAGE>
AMENDMENT #2
TO
FUND PARTICIPATION AGREEMENT
This Amendment, to be effective as of January 1, 1992, between UNUM Life
Insurance Company of America ("UNUM"), a life insurance company organized under
the laws of the State of Maine, and Twentieth Century Investors, Inc. ("TCI"), a
management investment company organized under the laws of the State of Maryland
and its investment adviser, Investors Research Corporation ("Investors
Research"), an investment advisory company organized under the laws of Delaware.
All references to "UNUM" in the Fund Participation Agreement, dated October 31,
1988, and amended by Amendment No. 1 thereto dated November 1, 1991, and
executed by the aforementioned parties, are hereby amended to refer to UNUM Life
Insurance Company of America, the surviving company of a merger between UNUM
Life Insurance Company, the original contracting party, and UNUM Life Insurance
Company of America. Such merger was effective at 11:59 p.m. on December 31,
1991. UNUM Life Insurance Company of America shall have all the rights and
obligations of UNUM Life Insurance Company under the Fund Participation
Agreement.
This Amendment does not alter in any way the terms, provisions, rights and
obligations of the Fund Participation Agreement as previously amended with
respect to any of the parties other than changing the name of the contracting
life insurance company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by and through their duly authorized representatives.
UNUM LIFE INSURANCE COMPANY OF AMERICA
By: /s/ Russell W. Anderson
------------------------
Its: Vice President
--------------
________________________
Witness
TWENTIETH CENTURY INVESTORS, INC.
By: /s/ William M. Lyons
---------------------
Its: Vice President
--------------
________________________
Witness
INVESTORS RESEARCH CORPORATION
By: /s/ William M. Lyons
---------------------
Its: Vice President
--------------
________________________
Witness
<PAGE>
SCHEDULE A
TO
FUND PARTICIPATION AGREEMENT
DATED FEBRUARY 28, 1991
Funds of TCI Portfolios, Inc. to be made available to UNUM Life
Insurance Company as the sponsor of the VA-I Separate Account:
1. TCI Growth
2. TCI Balanced
<PAGE>
Exhibit 8(e)
FUND PARTICIPATION AGREEMENT
----------------------------
This Agreement is entered into as of the 8th day of August, 1994, between UNUM
LIFE INSURANCE COMPANY OF AMERICA ("Insurance Company"), a life insurance
company organized under the laws of the State of Maine, and DREYFUS VARIABLE
INVESTMENT FUND ("Fund"), an unincorporated business trust organized under the
laws of the Commonwealth of Massachusetts.
ARTICLE I
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Trustees of the fund having the
responsibility for management and control of the Fund.
1.3 "Business Day" shall mean any day for which the fund calculatesnet asset
value per share as described in the Fund's Prospectus.
1.4 "Commission" shall mean the securities and Exchange Commission.
1.5 "Contract" shall mean a variable annuity contract that uses the Fund as an
underlying investment medium. individuals who participate under a group
Contract are "Participants".
1.6 "Contractholder"shall mean any entity that is a party to a Contract with a
Participating Company.
1.7 "Disinterested Board Members" shall mean those members of the Board that
are not deemed to be "interested Persons" of the Fund, as defined by the
Act.
1.8 "Dreyfus" shall mean The Dreyfus Corporation and its affiliates, including
Dreyfus Service Corporation.
1.9 "Participating Companies" shall mean any insurance company (including
Insurance Company), which offers variable annuity and/or variable life
insurance contracts to the public and which has entered into and agreement
with the Fund for the purpose of making Fund shares available to serve as
the underlying investment medium for the aforesaid Contracts.
1.10 "Prospectus" shall mean the Fund's current prospectus and statement of
additional information, as most recently filed with the Commission.
<PAGE>
1.11 "Separate Account" shall mean UNUM Life Insurance Company of America
Variable Annuity Separate Account, a separate account established by
Insurance Company in accordance with the laws of the State of Maine.
1.12 "Software Program" shall mean the software program used by the Fund for
providing Fund and account balance information including net asset value
per share. Such Program may include the Lion System. In situations where
the Lion System or any other Software Program used by the Fund is not
available, such information may be provided by telephone. The Lion System
shall be provided to Insurance company at no charge.
1.13 "Insurance Company's General Account(s)" shall mean the general account(s)
of Insurance Company and its affiliates which invest in the Fund.
ARTICLE II
REPRESENTATIONS
2.1 Insurance Company represents and warrants that (a) it is an insurance
company duly organized and in good standing under applicable law; (b) it
has legally and validly established the separate account pursuant to the
[NAME OF STATE INSURANCE LAWS] for the purpose of offering to the public
certain individual variable annuity contracts; (c) it has registered the
Separate Account as a unit investment trust under the Act to serve as the
segregated investment account for the Contracts; and (d) each Separate
Account is eligible to invest in shares of the Fund without such investment
disqualifying the Fund as an investment medium for insurance company
separate accounts supporting variable annuity contracts or variable life
insurance contracts.
2.2 Insurance company represents and warrants that (a) the contracts will be
described in a registration statement filed under the Securities Act of
1933, as amended ("1933 act"); (b) the Contracts will be issued and sold
in compleiance in all material respects with all applicable federal and
state laws; and (c) the sale of the Contracts shall comply in all material
respects with the state insurance law requirements. Insurance company
agrees to inform the fund promptly of any investment restrictions imposed
by state insurance law and applicable to the Fund.
2.3 Insurance company represents and warrants that the income, gains and
losses, whether or no realized, from assets allocated to the Separate
Account ate, in accordance with the applicable Contracts, to be credited to
or charged against such Separate Account without regard to other income,
gains or losses from assets allocated to any other accounts of Insurance
Company. Insurance Company represents and warrants that the assets of the
Separate Account are and will be kept separate from Insurance Company's
General Account and any other separate accounts insurance company may have,
and will not be charged with liabilities from any business that Insurance
Company may conduct of the liabilities of any companies affiliated with
Insurance Company.
<PAGE>
2.4 Fund represents that the Fund is registered with the Commission under the
Act as an open-end, diversified management investment company and
possesses, and shall maintain, all legal and regulatory licencses,
approvals, consents and/or exemptions required for Fund to operate and
offer its shares as an underlying investment medium for Participating
Companies. The Fund has established six series (each, a "Series") and may
in the future establish other series of shares.
2.5 Fund represents that it is currently qualified as a Regulated Investment
Company under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor of similar provision)
and that it will notify Insurance Company immediately upon having a
reasonable basis for believing that it has ceased to so qualify or that it
might not so qualify in the future.
2.6 Insurance Company represents and agrees that the Contracts are currently,
and at the time of issuance will be , treated as life insurance policies of
annuity contracts, whichever is appropriate, under applicable provisions of
the Code, and that it will make every effort to maintain such treatment and
that it will notify the Fund and Dreyfus immediately upon having a
reasonable basis for believing that the Contracts have ceased to ve so
treated of that they might not be so treated in the future. Insurance
company agrees that any prospectus offering a Contract that is a "modified
endowment contract, " as that term is defined in Section 77702a of the
Code, will identify such Contract as a modified endowment contract (or
policy).
2.7 Fund agrees that the fund's assets shall be managed and invested in a
manner that complies with the requirements of section 817(h) of the Code.
2.8 Insurance Company agrees that the Fund shall be permitted (subject to the
other terms of this Agreement) to make Series' shares available to other
Participating Companies and contractholders.
<PAGE>
2.9 Fund represents and warrants that any of its trustees, officers,
employees, investment advisers, and other individuals/entities who deal
with the money and/or securities of the Fund are and shall continue to be
at all times covered by a blankey fidelity bond or similar coverage for the
benefit of the fund in an amount not less that that required by Rule 17g-1
under the act. The aforesaid bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.10 Insurance Company represents and warrants that all of its employees and
agents who deal with the money and /or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage in an amount not less that the coverage required to be maintained
by the Fund. The aforesaid Bond shall include coverage for larcey and
embezzlement and shall be issued by a reputable bonding company.
2.11 Insurance Company agrees that Dreyfus shall be deemed a third party
beneficiary under this Agreement and may enforce any and all rights
conferred by virtue of this Agreement.
ARTICLE III
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in the Series' shares.
3.2 Fund agrees to make the shares of its Series available for purchase at the
then applicable net asset value per share by Insurance Company and the
Separate Account on each Business Day pursuant to rules of the Commission.
Notwithstanding the foregoing, the fund may refuse to sell the shares of
any Series to any person, or suspend or terminate the offering of the
shares of any Series if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board,
acting in good faith and in light of its fiduciary duties under federal and
any applicable state laws, necessary and in the best interests of the
shareholders of such Series.
3.3 Fund agrees that shares of the Fund will be sold only to Participating
Companies and their separate accounts and to the general accounts and to
Participating Companies and their separate accounts and to the general
accounts of those Participating Companies and their affiliates. No shares
of any Series will be sold to the general public.
3.4 Fund shall use its best efforts to provide closing net asset value,
dividend and capital gain information for each Series available on a per-
share and Series basis to Insurance Company by 6:00 p.m. Eastern Time on
each business day.
<PAGE>
Any material errors in the calculation of the net asset value, dividend and
capital gain information shall be reported immediately upon discovery to
Insurance Company. Non-material errors will be corrected in the next
Business Day's net asset value per share for the series in question.
3.5 At the end of each Business Day, Insurance Company will use the information
described in Sections 3.2 and 3.4 to calculate the Separate Account unit
values for the day. Using this unit value, insurance company will process
the day's Separate Account transactions received by it by the close of
trading on the floor of the New York Stock Exchange (currently 4:00 p.m.
eastern time) to determine the net dollar amount of series shares which
will be purchased or redeemed at that day's closing net asset value per
share for such series. The net purchase or redemption orders will be
transmitted to the Fund by Insurance Company by 11:00 a.m. Eastern Time on
the Business Day next following Insurance Company's receipt of that
information. Subject to Sections 3.6 and 3.8, all purchase and redemption
orders for Insurance Company's General Accounts shall be effected at the
net asset value per share of the relevant Series next calculated after
receipt of the order by the Fund or its Transfer Agent.
3.6 Fund appoints Insurance Company as its agent for the limited purpose of
accepting orders for the purchase and redemption of shares of each Series
for the Separate Account. Fund will execute orders for any Series at the
applicable net asset value per share determined as of the close of trading
on the day of receipt of such orders by Insurance Company acting as agent
("effective trade date"), provided that the Fund receives notice of such
orders by 11:00 a.m. Eastern Time on the next following Business Day and,
if such orders request the purchase of Series shares, the conditions
specified in Section 3.8, as applicable, are satisfied. A redemption or
purchase request for any Series that does not satisfy the conditions
specified in Section 3.8, as applicable, will be effected at the net asset
value computed for such Series on the Business Day immediately preceding
the next following Business Day upon which such conditions have been
satisfied.
3.7 Insurance Company will make its best efforts to notify fund in advance of
any unusually large purchase or redemption orders.
3.8 If Insurance Company's order requests the purchase of Series shares,
Insurance Company will pay for such purchases by wiring Federal Funds to
Fund or its designated custodial account on the day the order is
transmitted. Insurance Company shall make all reasonable efforts to
transmit to the Fund payment in Federal Funds by 12:00 noon Eastern Time on
the Business Day the Fund receives the notice of the order pursuant to
Section 3.5. Fund will execute such orders at the applicable net asset
value per share determined as of the close of trading on the effective
trade date if Fund receives payment in
<PAGE>
Federal Funds by 12:00 midnight Eastern Time on the Business Day Fhe fund
receives the notice of the order pursuant to Section 3.5. if payment in
Federal Funds for any purchase is not received or is received by the Fund
after 12:00 noon Eastern Time on such Business Day, Insurance Company shall
promptly upon the Fund's request, reimburse the fund for any charges,
costs, fees, interest or other expenses, incurred by the Fund in connection
with any advances to, or borrowings or overdrafts by, the Fund, or similar
expenses incurred by the Fund, as a result of portfolio transactions
effected by the Fund based upon such purchase request. If Insurance
Company's order requests the redemption of Series shares valued at or
greater than $1 million dollars, the Fund will wire such amount to
Insurance Company within seven days of the order.
3.9 Fund has the obligation to ensure that Series shares are registered with
applicable federal agencies at all times.
3.10 Fund will confirm each purchase or redemption order made by Insurance
Company. Transfer of Series shares will be by book entry only. No share
certificates will be issued to Insurance Company. Insurance Company will
record shares ordered from Fund in an appropriate title for the
corresponding account.
3.11 Fund shall credit Insurance Company with the appropriate number of shares.
3.12 On each ex-dividend date of the Fund or, if not a Business Day, on the
first Business Day thereafter, Fund shall communicate to Insurance Company
the amount of dividend and capital gain, if any, per share of each Series.
All dividends and capital gains of any Series shall be automatically
reinvested in additional shares of the relevant Series at the applicable
net asset value per share of such Series on the payable date. Fund shall,
on the day after the payable date or, if not a Business Day, on the first
business day thereafter, notify Insurance Company of the number of shares
so issued.
ARTICLE IV
STATEMENTS AND REPORTS
4.1 Fund shall provide monthly statements of account as of the end of each
month for all of Insurance Company's accounts by the fifteenth (15th)
Business day of the following month.
4.2 Fund shall distribute to Insurance Company copies of the Fund's
Prospestuses, proxy materials, notices, periodic reports and other printed
materials (which the Fund customarily provides to its shareholders) in
quanties as Insurance
<PAGE>
Company may reasonably request for distribution to each Contractholder and
Participant.
4.3 Fund will provide to Insurance Company at least one complete copy of all
registration statements, Prospectuses, reports, proxy statements sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above,
that relate to the Fund or its shares, contemporaneously with the filing of
such document with the Commission or other regulatory authorities.
4.4 Insurance Company will provide to the Fund at least one copy of all
registration statements, Prospectuses, reports, proxy statements, sales
literature, and other promotional materials, applications for exemptions,
requests, for no-action letters, and all amendments to any of the above,
that relate to the Contracts or the Separate Account, contemporaneously
with the filing of such document with the Commission.
ARTICLE V
EXPENSES
5.1 The charge to the Fund for all expenses and costs of the Series, including
but not limited to management fees, administrative expenses and legal and
regulatory costs, will be made in the determination of the relevant Series'
daily net asset value per share so as to accumulate to an annual charge at
the rate set forth in the Fund's Prospectus. Excluded from the expense
limitation described herein shall be brokerage commissions and transaction
fees and extraordinary expenses.
5.2 Except as provided in this Article V and, in particular in the next
sentence, Insurance Company shall not be required to pay directly any
expenses of the Fund or expenses relating to the distribution of its
shares. Insurance Company shall pay the following expenses or costs:
a. Such amount of the including the cost of materials for Participants as
to time. production expenses printing the Fund's prospective Insurance
Dreyfus and of any Fund Prospectus, or Company Insurance Company
materials, marketing Contractholders and shall agree from time
b. Distribution expenses of any Fund materials or materials for
prospective Insurance Company Contractholders and Participants.
c. Distribution expenses of Fund materials or marketing materials for
Insurance Company Contractholders and Participants.
<PAGE>
Except as provided herein, all other Fund expenses shall not be borne
by Insurance Company.
ARTICLE VI
EXEMPTIVE RELIEF
6.1 Insurance Company has reviewed a copy of the order dated December 23, 1987
of the Securities and Exchange Commission under Section 6(c) of the Act
and, in particular, has reviewed the conditions to the relief set forth in
the related Notice. As set forth therein, Insurance Company agrees to
report any potential or existing conflicts promptly to the Board, and in
particular whenever contract voting instructions are disregarded, and
recognizes that it will be responsible for assisting the Board in carrying
out its responsibilities under such application. Insurance Company agrees
to carry out such responsibilities with a view to the interests of existing
Contractholders.
6.2 If a majority of the Board, or a majority of Disinterested Board Members,
determines that a material irreconcilable conflict exists with regard to
Contractholder investments in the Fund, the Board shall give prompt notice
to all Participating Companies. If the Board determines that Insurance
Company is responsible for causing or creating said conflict, Insurance
Company shall at its sole cost and expense, and to the extent reasonably
practicable (as determined by a majority of the Disinterested Board
Members), take such action as is necessary to remedy or eliminate the
irreconcilable material conflict. Such necessary action may include, but
shall not be limited to:
a. Withdrawing the assets allocable to the Separate Account from the
Series and reinvesting such assets in a different investment medium,
or submitting the question of whether such segregation should be
implemented to a vote or all affected Contractholders: and/or
b. Establishing a new registered management investment company.
6.3 If a material irreconcilable conflict arises as a result of a decision by
Insurance Company to disregard Contractholder voting instructions and said
decision represents a minority position or would preclude a majority vote
by all Contractholders having an interest in the Fund, Insurance Company
may be required, at the Board's election, to withdraw the Separate
Account's Investment in the Fund.
6.4 For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event will the
Fund be required to bear the expense of establishing a new funding medium
for any Contract.
<PAGE>
Insurance Company shall not be required by this Article to establish a new
funding medium for any Contract if an offer to do so has been declined by
vote of a majority of the Contractholders materially adversely affected by
the irreconcilable material conflict.
6.5 No action by Insurance Company taken or omitted, and no action by the
Separate Account or the Fund taken or omitted as a result of any act or
failure to act by Insurance Company pursuant to this Article VI shall
relieve Insurance Company of its obligations under, or otherwise affect the
operation of, Article V.
ARTICLE VII
VOTING OF FUND SHARES
7.1 Fund shall provide Insurance Company with copies at no cost to Insurance
Company, of the Fund's proxy material, reports to share holders and other
communications to shareholders in such quantity as Insurance Company shall
reasonably require for distributing to Contractholders or Participants.
Insurance Company shall:
(a) solicit voting instructions from timely basis and in accordance with
Contractholders or Participants on a applicable law;
(b) vote the Series shares in accordance with Contractholders or
Participants; and instructions received from
(c) vote Series shares for which no instructions same proportion as Series
shares for which received. Have been received in the instructions have
been
Insurance Company agrees at all times to vote its General Account shares in
the same proportion as Series shares for which instructions have been
received from Contractholders or Participants. Insurance Company further
agrees to be responsible for assuring that voting Fund shares for the
Separate Account is conducted in a manner consistent with other
Participating Companies.
7.2 Insurance Company agrees that it shall not, without the prior written
consent of the Fund and Dreyfus, solicit, induce or encourage
Contractholders to (a) change or supplement the Fund's current investment
adviser or (b) change, modify, substitute, add or delete the Fund from the
current investment media for the Contracts.
<PAGE>
ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 The Fund or its underwriter shall periodically furnish Insurance Company
with the following documents, in quantities as Insurance Company may
reasonably request:
a. Current Prospectus and any supplements thereto;
b. other marketing materials.
Expenses for the production of such documents shall be borne by Insurance
Company in accordance with Section 5.2 of this Agreement.
8.2 Insurance Company shall designate certain persons or entities which shall
have the requisite licenses to solicit applications for the sale of
contracts. No representation is made as to the number or amount of
contracts that are to be sold by insurance company. Insurance Company shall
make reasonable efforts to market the contracts and shall comply with all
applicable federal and state laws in connection therewith.
8.3 Insurance Company shall furnish, or shall cause to be furnished, to the
Fund, each piece of sales literature or other promotional material in which
the Fund, its investment adviser or the administrator is named, at least
Fifteen Business Days prior to its use. No such material shall be used
unless the Fund approves such material. Such approval (if give) must be in
writing and shall be presumed not given if not received within ten Business
Days after receipt of such material. The Fund shall use all reasonable
efforts to respond within ten days of receipt.
8.4 Insurance Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund
or any Series in connection with the sale of Contracts other than the
information or representations contained in the registration statement or
Prospectus, as may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in sales literature or other
promotional material approved by the Fund.
8.5 Fund shall furnish, or shall cause to be furnished, to Insurance Company,
each piece of the Fund's sales literature or other promotional material in
which Insurance Company or the Separate Account is named, at least fifteen
Business Days prior to use. No such material shall be used unless Insurance
Company approves such material. Such approval (if given) must be in writing
and shall be presumed not given if not received within ten business days
after
<PAGE>
receipt of material. Insurance Company shall use all reasonable efforts to
respond within ten days of receipt.
8.6 Fund shall not, in connection with the sale of Series shares, give any
information or make any representations on behalf of Insurance Company or
concerning Insurance Company, the Separate Account, or the Contracts other
than the information, or representations contained in a registration
statement or prospectus for the Contracts, as may be amended from time to
time, or in published reports for the Separate Account which are in the
public domain or approved by Insurance Company for distribution to
Contractholders or Participants, or in sales literature or other
promotional material approved by Insurance Company.
8.7 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without
limitation, advertisements (such as material published, or designed for
use, in a newspaper, magazine or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards, motion
pictures or other public media), sales literature (such as any written
communication distributed or made generally available to customers or the
public, including, brochures, circulars, research reports, markert letter,
form letter, 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 reportsand
proxy materials, and any other material constituting sales literature or
advertising under National Association of Securities Dealers, Inc. rules,
the Act or the 1933 Act.
ARTICLE IX
INDEMIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless the Funds, Dreyfus,
any sub-investment adviser or a Series, and their affilitates, and each of
their directors, trustees, officers, employees, agents and each person, if
any, who controls or is associated with any of the foregoing entities or
persons within the meaning if the 1933 act (collectively, the "Indemnified
Parties" for purposes of Section 9.1), against any and all losses, claims,
damages or liabilities joint or several (including any investigative,
legal, and other expenses reasonably incurred in connection with, and any
amounts paid in settlement of, any action, suit or proceeding or any claim
asserted) for which the Indemnified Parties may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect to thereof) (i) arise out of or are
based upon any untrue statement or alledged untrue statement or
<PAGE>
Prospectus or sales literature or advertisements of the Fund or with
respect to the Separate Account or Contracts, or arise out of or are based
upon the omission or the alleged omission to state therein or necessary to
make the statements therein not misleading; (ii) arise out of or as a
result of conduct, statements or representations (other than statements or
representations contained in the Prospectus and sales literature or
advertisement of the Fund) of Insurance Company or its agents, with respect
to the sale and distribution of Contracts for which Series' shares are an
underlying investment; (iii) arise out of the wrongful conduct of Insurance
Company or persons under its control with respect to the sale or
distribution of the Contracts or Series' shares; (iv) arise out of
Insurance Company's incorrect calculation and/or untimely reporting of net
purchase or redemption orders; or (v) arise out of any breach by insurance
company of a material term of this agreement or as a result of any failure
by Insurance Company to provide the services and furnish the materials or
to make any payments provided for in this Agreement. Insurance Company will
reimburse any Indemnified Party in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that with respect to clauses (i) and (ii) above Insurance Company
will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue
statement or omission or alleged omission made in such registration
statement, prospectus, sales literature, or advertisement in any conformity
with written information furnished to Insurance Company by the Fund
specifically for use there in. This indemnity agreement will be in addition
to any liability which Insurance Company may otherwise have.
9.2 The Fund agrees to indemnify and hold harmless Insurance Company and each
of its directors, officers, employees, agents and each person, if any, who
controls Insurance Company or any such director, officer, employee, agent
or controlling person may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) (1) arise out of or based upon any untrue statement or
alleged untrue statement of any material fact contained in the registration
statement or prospectus or sales literature or advertisement of the fund;
(2) arise out of or are based upon the omission to state in the
registration statement or prospectus or sales literature or advertisement
of the Fund any material fact required to be stated therein or necessary to
make the statements therein not misleading; or (3) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement or Prospectus or sales
literature or advertisements with respect to the Separate Account or the
Contract and such statements were based on information provided to
Insurance Company by the Fund; and the Fund will reimburse any legal or
other expenses reasonably incurred by Insurance Company or any such
director, officer, employee, agent or controlling person in connection with
investigating or defending any such loss, slaim, damage,
<PAGE>
liability, or action; provided, however, that the Fund will not be liable
in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or omission or
alleged omission made in such Registration Statement, Prospectus, sales
literature or advertisement in conformity with written information
furnished to the Fund By Insurance Company specifically for use therein.
This indemnity agreement will be in addition to any liability which the
Fund may otherwise have.
9.3 The Fund shall indemnify and hold Insurance Company harmless against any
and all liability, loss, damage, costs or expenses which Insurance Company
may incur, suffer or be required to pay due to the Fund's (1) incorrect
calculation of the daily net asset value, dividend rate or capital gain
distribution rate of a Series; (2) incorrect reporting of the daily net
asset value, dividend rate or capital gain distribution rate; and (3)
untimely reporting of the net asset value, dividend rate or capital gain
distribution rate; provided that the Fund shall have no obligation to
indemnify and hold harmless Insurance Company if the incorrect calculation
or incorrect or untimely reporting was the result of incorrect information
furnished by Insurance Company or information furnished untimely by
Insurance Company or otherwise as a result of or relating to a breach of
the Agreement by Insurance Company.
9.4 Promptly after receipt by ab indemnified party under this Article of notice
of the commencement of any action, such indemnified party will, if a claim
in respect thereof is to be made against the indemnifying party under this
Article, notify the indemnifying party of the commencement thereof. the
omission to so notify the indemnifying party will not relieve the
indemnifying party from any liability under this Article IX, except to the
extent that the omission results in a failure of actual notice to the
indemnifying party and such indemnifying is damaged solely as a result of
the failure to give such notice. In case any such action is brought against
any indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, assume the defense
thereof, with counsel satisfactory, to such indemnified party, and to the
extent that the indemnifying party has given notice to such effect to the
indemnified party and is performing its obligations under this article, the
indemnifying party shall not be liable for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation. Not
withstanding the foregoing, in any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless
(I) the indemnifying party and the indemnified party shall have mutally
agreed to the retentions of such counsel or (ii) the named parties to any
such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified
<PAGE>
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article IX.
9.5 Insurance Company shall indemnify and hold the Fund, Dreyfus and any sub-
investment adviser of a Series harmless against any tax liability incurred
by the Fund under Section 851 of the Code arising from purchases or
redemption by Insurance Company's General Accounts or the account of its
affiliates.
ARTICLE X
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the date hereof and shall continue
in force until terminated in accordance with the provisions herein.
10.2 This Agreement shall terminate without penalty as to one or more series at
the option of the terminating party:
a. At the option of Insurance Company or the Fund at any time from the
date hereof upon 180 days' notice, unless a shorter time is agreed to
by the parties;
b. At the option of the Insurance Company, if shares of any Series are
not reasonably available to meet the requirements of the Contracts as
determined by Insurance Company, Prompt notice of election to
terminate shall be furnished by Insurance Company, said termination to
be effective ten days after receipt of notice unless the Fund makes
available a sufficient number of shares to meet the requirements of
the Contracts within said ten-day period;
c. At the option of Insurance Company, upon the institution of formal
proceedings against the Fund by the Commission, National Association
of Securities Dealers or any other regulatory body, the expected or
anticipated ruling, judgement or outcome of which would, in Insurance
Company's reasonable judgment, materially impair the Fund's ability to
meet and perform the Fund's obligations and duties hereunder. Prompt
notice of election to terminate shall be furnished by Insurance
Company with said termination to be effective upon receipt of notice;
<PAGE>
d. At the option of the Fund, upon the institution of formal proceedings
against Insurance Company by the Commission, National Association of
Securities Dealers or any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which would, in the Fund's
reasonable judgment, materially impair Insurance Company's ability to
meet and perform Insurance Company's obligations and duties hereunder.
Prompt notice of election to terminate shall be furnished by the Fund
with said termination to be effective upon receipt of notice;
e. At the option of the Fund, if the Fund shall determine, in its sole
judgment reasonably exercised in good faith, that Insurance Company
has suffered a material adverse change in its business or financial
condition is the subject of material adverse publicity and such
material adverse change or material adverse publicity is likely to
have a material adverse impact upon the business and operation of the
Fund or Dreyfus, the Fund shall notify Insurance Company in writing of
such determination and its intent to terminate this Agreement, and
after considering the actions taken by Insurance Company and any other
changes in circumstances since the giving of such notice, such
determination of the Fund shall continue to apply on the sixtieth
(60th) day following the giving of such notice, which sixtieth day
shall be the effective date of termination;
f. Upon termination of the Investment Advisory Agreement between the Fund
and Dreyfus or its successors unless Insurance Company specifically
approves the selection of a new Fund investment adviser. The Fund
shall promptly furnish notice of such termination to Insurance
Company;
g. In the event the Fund's shares are not registered, issued or sold in
accordance with applicable federal law, or such law precludes the use
of such shares as the underlying investment medium of Contracts issued
or to be issued by the Insurance Company. Termination shall be
effective immediately upon such occurrence without notice;
h. At the option of the Fund upon a determination by the Board in good
faith that it is no longer advisable and in the best interests of
shareholders for the Fund to continue to operate pursuant to this
Agreement. Termination pursuant to this Subsection (h) shall be
effective upon notice by the Fund to Insurance Company of such
termination;
<PAGE>
i. At the option of the Fund if the Contracts cease to qualify as
annuity contracts or life insurance policies, as applicable, under
the Code, or if the Fund reasonably believes that the Contracts may
fail to so qualify;
j. At the option of either party to this Agreement, upon another party's
breach of any material provision of this Agreement;
k. At the option of the Fund, if the Contracts are not registered,
issued or sold in accordance with applicable federal and/or state
law; or
l. Upon assignment if this Agreement, unless made with the written
consent of the non-assigning party.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f or
10.2k herein shall not affect the operation of Article V of this
Agreement. Any termination of this Agreement shall not affect the
operation of Article IX of this Agreement.
10.3 Notwithstanding any termination of this Agreement pursuant to Section 10.2
hereof, the Fund and Dreyfus may, at the option of the Fund, continue to
make available additional Series shares for so long as the Fund desires
pursuant to the terms and conditions of this Agreement as provided below,
for all Contracts in effect on the effective date of termination of the
Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, if the Fund or Dreyfus so elects to make additional
Series shares available, the owners of the Existing Contracts or Insurance
Company, whichever shall have legal authority to do , shall be permitted
to reallocate investments in the Series, redeem investments in the Fund
and/or invest in the fund upon the making of additional purchase payments
under the Existing Contracts. In the event of a termination of this
Agreement pursuant to Section 10.2 hereof, the Fund and Dreyfus, as
promptly as is practicable under the circumstances, shall notify Insurance
Company Whether Dreyfus and the Fund will continue to make Series shares
available after such termination. If Series shares continue to be made
available after such termination, the provisions of this Agreement shall
remain in effect and thereafter either the Fund or Insurance Company may
terminate the Agreement, as so continued pursuant to this section 10.3,
upon prior written notice to the other party, such notice to be for a
period that is reasonable under the circumstances but, if given by the
Fund, need not be for more than six months.
ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement shall be made by
agreement in writing between Insurance Company and Fund.
<PAGE>
ARTICLE XII
NOTICE
12.1 Each notice required by this Agreement shall be given by certified mail,
return receipt requested, to the appropriate parties at the following
addresses:
Insurance Company: UNUM Life Insurance Company of America
2211 Congress Street
Portland, Maine
04122
Attn: Russell W. Anderson
Fund: Dreyfus Variable Investment Fund
200 Park Avenue
New York, New York
10166
Attn: Daniel C. Maclean, Secretary
with copies to: Stroock & Stroock & Lavan
7 Hanover Square
New York, New York
10004-2696
Attn: Lewis G. Cole, Esq.
Stuart H. Coleman, Esq.
Notice shall be deemed to be given on the date of receipt by the addresses
as evidenced by the return receipt.
ARTICLE XIII
MISCELLANEOUS
13.1 This Agreement has been executed on behalf of the Fund by the undersigned
officer of the Fund in his capacity as an officer of the Fund. The
obligations of this Agreement shall only be binding upon the assets and
property of the Fund and shall not be binding upon any Trustee, officer or
shareholder of the Fund individually.
13.2 See attached Amendments which are made a part of this Agreement.
<PAGE>
ARTICLE XIV
LAW
14.1 This Agreement shall be construed in accordance with the internal laws of
the State of New York, without giving effect to principles of conflict of
laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
duly executed and attested as of the date first above written.
UNUM LIFE INSURANCE COMPANY OF AMERICA
By: /s/ David E. Hughes
-------------------
Its Senior Vice President
Attest: /s/ Arlene J. Colprett
----------------------
DREYFUS VARIABLE INVESTMENT FUND
By: /s/ Daniel C. Maclean
---------------------
Secretary
Attest: /s/
-----------------
<PAGE>
AMENDMENT TO FUND PARTICIPATION AGREEMENT
This amendment is entered into by and between UNUM Life Insurance Company of
America and Dreyfus Variable Investment Fund (the "Parties"), and modifies the
terms of the Fund Participation Agreement entered into by and between the
Parties as of the 8th day of August, 1994.
Section 2.1(b) is amended to read:
"(b) it has legally and validly established the Separate Account pursuant to the
laws of the State of Maine for the purpose of offering to the public certain
group variable annuity contracts:"
The last sentence of Section 2.2 is amended to read:
"Insurance Company agrees to use its best efforts to inform the Fund of any
investment restrictions imposed by state law and applicable to the Fund that
come to the attention of Insurance Company."
The first sentence of Section 3.4 is amended to read:
"Fund shall use its best efforts to provide closing net asset value, dividend
and capital gain information for each Series available on a per-share and Series
basis to Insurance Company by 6:00 p.m. Eastern Time on each Business Day by
facsimile transmission."
Section 5.2(a) is amended to read:
"Such amount of the production expenses of any Fund materials or marketing
materials for prospective Insurance Company Contractholders and Participants as
Dreyfus and Insurance Company shall agree from time to time."
The last sentence of Section 8.1 is amended to read:
"Expenses for the production of such documents shall be borne in accordance with
Section 5.2 of this Agreement."
Section 10.2(h) is deleted in its entirety.
UNUM LIFE INSURANCE COMPANY OF AMERICA
By: /s/ David E. Hughes date: 8/8/94
Senior Vice President
DREYFUS VARIABLE INVESTMENT FUND
By: /s/ Daniel C. Maclean date: 6/3/94
Secretary
<PAGE>
1
EXHIBIT 8(f)
FUND PARTICIPATION AGREEMENT
----------------------------
This Agreement is entered into on this 15th day of March, 1994 between UNUM Life
Insurance Company of America ("UNUM"), a life insurance company organized under
the laws of the State of Maine, as sponsor of VA-I Separate Account ("Separate
Account"), a separate account established by UNUM in accordance with the laws of
Maine, and Acacia Capital Corporation, ("ACC"), a management investment company
organized under the laws of the State of Maryland.
ARTICLE I
DEFINITIONS
1.1 "Business Day" shall mean a day on which UNUM and the New York Stock
Exchange are customarily open for business.
1.2 "Contract" shall mean a group variable annuity contract issued by UNUM.
1.3 "Contractholder" shall mean any association, employer or trustee(s) who is
a party to a Contract.
1.4 "Participant" shall mean any employee of an employer or Contractholder who
is enrolled to participate under the Contract.
1.5 "Participating Company" shall mean any insurance company (including UNUM),
that offers variable annuity and/or variable life insurance contracts to
the public and which has entered into an agreement with the Fund similar
hereto for the purpose of making Fund shares available to serve as the
underlying investment medium for the aforesaid contracts.
1.6 "Fund" shall mean a portfolio of investments of ACC having specific
investment objectives, policies and restrictions.
1.7 "Sub-account" shall mean any sub-account of Separate Account set up for the
purpose of investing in a corresponding Fund.
<PAGE>
2
ARTICLE II
REPRESENTATIONS
2.1 UNUM represents that:
a. UNUM is an insurance company organized under the laws of Maine.
b. Separate Account has been established by UNUM pursuant to the
Maine Insurance Code fo the purpose of serving as a funding medium for
Contracts.
c. Separate Account is registered under the Investment Company Act
of 1940 as a unit investment trust.
d. Contracts offered by UNUM and funded through Spearate Account are
described in a registration statement filed under the Securities Act
of 1933 (the "1933 Act").
e. The income, gains and losses, whether or not realized, from
assets allocated to Separate Account are, in accordance with the
applicable Contracts, to be credited to or charged against such
Separate Account without regard to other income, gains or losses of
UNUM.
f. Separate Account is subdivided into various sub-accounts under
which income, gains and losses, whether or not realized from assets
allocated to each sub-account are, in accordance with applicable
Contracts, to be credited to or charged against such sub-accounts
without regard to other income, gains or losses of other sub-accounts
or of UNUM.
g. UNUM has established Separate Account in such a manner as to
enable it to use Fund shares as the underlying investment medium for a
corresponding Sub-account.
h. UNUM possess and shall maintain all licenses and approvals
required to offer and sell Contracts.
2.2 ACC represents that:
a. ACC is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940 as an open-end, diversified
management investment company and possess, and shall maintain, all
legal and regulatory licenses, approvals, consents and/or exemptions
required for ACC to operate and offer Fund shares as the underlying
investment medium for certain Sub-
<PAGE>
3
accounts.
b. ACC is currently qualified as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code of 1986, as amended,
and that it intends to maintain such qualification (under Subchapter M
or any successor of similar provision) and that it will notify UNUM
with reasonable promptness after having a reasonable basis for
believing that it has ceased to so qualify or that it might not so
qualify in the future.
c. ACC is divided into various funds, each Fund being subject to
separate investment objectives policies and restrictions which may not
be changed without a majority vote of the shareholders of such Fund.
d. ACC assets shall be managed and invested in a manner that complies
with the requirements of Section 817(h) of the Code.
e. Shares of ACC will be sold only to insurance companies and their
separate accounts that offer variable annuity and/or variable life
insurance contracts. No Fund shares will be offered to the general
public.
f. ACC shall comply with the terms of this Fund Participation
Agreement directly or through its third parties under contracted
obligation to ACC. Such third parties shall be referred herein as
"Agents".
ARTICLE III
SELECTION OF SUB-ACCOUNTS
3.1 The Contracts funded through Separate Account will provide for the
allocation of contributions among the various Sub-accounts. The Sub-
accounts will invest in shares of various registered management
investment companies. The selection of a particular Sub-account is to
be made by a Participant and such selection may be changed in
accordance with the terms of the Contracts. The selection and number
of Sub-accounts available to Participants will be limited by the
Contracts.
ARTICLE IV
FUND SHARES
4.1 ACC agrees to make shares in the Funds listed on Schedule A available to
UNUM to serve as the underlying investment media for certain Sub-accounts.
<PAGE>
4
4.2 ACC agrees to make additional Fund shares (other than those listed on
Schedule !) available to serve as investment media for Sub-accounts in the
future should UNUM so request.
UNUM shall be permitted to utilize and employ shares of management investment
companies other than ACC as underlying investment media for Sub-accounts.
4.3 ACC shall ensure that Fund shares are registered with applicable
federal and state agencies at all times.
4.2.1 ACC Shall ensure that Fund shares are registered with applicable
federal and state agencies at all times.
4.3 Transfer of Fund shares will be by book entry only. ACC will credit UNUM as
Separate Account sponsor with the appropriate number of shares of each
Fund. No stock certificates will be issued to UNUM. UNUM will record shares
ordered from a particular Fund in an appropriate title for the
corresponding Sub-account.
ARTICLE V
PROCEDURES FOR PLACING ORDERS
5.1 Each business day ACC will telephone closing net asset value, dividend and
capital gain information to UNUM by 5:00 p.p Eastern time, or as soon
thereafter as practicable. UNUM will telephone orders to purchase and/or
redeem Fund shares by 10:00a.m. Eastern time the following business day
directly with ACC or its specified agent.
ACC appoints UNUM as its agent for the limited purpose of accepting orders
for Fund shares for Separate Account. ACC will execute orders at the net
asset value determined as of the close of trading on the day of receipt of
such orders by UNUM acting as agent ("effective trade date"). However, any
orders received by UNUM acting as agent after the close of the New York
Stock Exchange will be executed at the net asset value determined at the
end of the following business day.
5.2 Each business day UNUM shall send ACC a telecopy listing its orders for
purchasing and redeeming Fund Shares (as a follow-up to the earlier
telephonic trade instructions). Later that day ACC shall send UNUM a
telecopy confirming such orders and listing the closing net asset value for
the prior business day.
5.3 UNUM shall provide to ACC a list of persons authorized to place orders for
purchases and redemptions with ACC. ACC shall accept orders on behalf of
UNUM only from persons named on such list. UNUM shall replace such list
with another in the event of changed in authorized persons. UNUM agrees
that any person whose name appears on the list from time to time will be
duly authorized by appropriate corporate action by UNUM.
<PAGE>
5
ARTICLE VI
SETTLEMENT
6.1 On the day following the effective trade date, payment will be initiated by
electronic funds transfer (ACH transaction) to a custodial account
designated by ACC. For redemption orders, ACC will use best efforts to and
a check payment to UNUM two days following the effective trade date via
overnight courier.
6.2 ACC shall mail to UNUM a copy of a detail transaction report and a
transaction history report following each trade.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
7.1 ACC shall furnish to UNUM notice of any dividend or distribution payable on
its shares at least five (5) business days prior to the ex-dividend date.
On the ex-dividend date or, if not a business day, on the first business
day thereafter, ACC shall furnish to UNUM the actual amount of dividend or
distribution payable per share. All of such dividends and distributions as
are payable on each Fund's shares shall be automatically reinvested in
additional shares of that Fund. Acc shall, on the date of issuance or if
not a business day on the first business day thereafter, notify UNUM of the
number of shares so issued.
ARTICLE VIII
EXPENSES
8.1 All expenses incident to the performance by ACC under this Agreement shall
be paid by ACC including the cost of registration of ACC shares with the
Securities and Exchange Commission and in the states where required. UNUM
shall bear none of the expenses for the registration of ACC's shares,
preparation of ACC's prospectuses, proxy materials notices and periodic
reports, the preparation of any statements and notices required by any
federal or state law, or taxes on the issue or transfer of ACC's shares
subject to this Agreement. However, UNUM shall be responsible for the
expenses of distributing such material from UNUM to Contractholders and
Participants.
<PAGE>
6
ARTICLE IX
STATEMENTS AND REPORTS
9.1 ACC shall provide monthly statements of account as of the end of each month
for all of UNUM's accounts by the fifteenth (15th) Business Day of the
following month.
9.2 ACC will provide to UNUM 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 related to the Fund or its shares,
contemporaneously with the filing of such document with the Commission or
other regulatory authorities.
ARTICLE X
VOTING OF FUND SHARES
10.1 ACC shall ensure that each Fund complies with all provisions of the
Investment Company Act of 1940 with respect to voting by shareholders and
with all rules and valid interpretations fo the Securities and Exchange
Commission with respect thereto.
10.2 ACC, at its expense, shall provide UNUM with copies of its proxy material
in such quantity as UNUM shall reasonable require for distributing to
Contractholders and Participants.
10.3 UNUM shall provide pass-through voting privileges to all Contractholders
so long as the Securities and Exchange Commission continues to interpret
the Investment Company Act of 1940 as requiring pass-through voting
privileges for variable contract owners. It shall be the responsibility of
UNUM to assure that it and the separate accounts of the other Participating
Companies participating in any Fund calculate voting privileges in a
consistent manner.
10.4 UNUM will distribute to Contractholders all proxy material furnished by
ACC and will vote shares in accordance with instructions received from
those Contractholders with contract value allocated to ACC shares. UNUM
shall vote
<PAGE>
7
ACC shares for which no instructions have been received in the same
proportion as shares for which instructions have been received from
Contractholders. UNUM and its agents will in no way recommend action in
connection with or oppose or interfere with the solicitaion of proxies for
ACC shares held for such Contractholders.
ARTICLE XI
MARKETING AND REPRESENTATIONS
11.1 ACC whall periodically furnish UNUM with the following printed
materials in reasonably sufficient quantities for UNUM to distribute
to each Contractholder and Participant and to support UNUM's Contract
marketing efforts:
a. Current Fund Prospectuses and any supplement thereto;
b. Current Statement of Additional Information;
c. Current proxy materials;
d. Current annual and semiannual reports and supplements thereto;
e. Current quarterly Fund performance reports;
f. Other marketing materials.
Such materials will be furnished to UNUM in time for UNUM to comply with
its regulatory responsibilities under the federal securities laws.
11.2 UNUM shall designate certain persons or entities which shall have the
requisite licenses to solicit applications for the sale of Contracts.
No representation is made as to the number or amount of Contracts
that are to be sold by UNUM. UNUM shall make reasonable efforts to
market the Contracts and shall comply with all applicable federal and
state laws in connection therewith.
11.3 UNUM shall make no representation concerning Fund shares except those
contained in a current Fund prospectus, in printed information
supplemental to such prospectus, and in materials which have received
the prior approval of ACC.
<PAGE>
8
ARTICLE XII
POTENTIAL CONFLICTS
12.1 UNUM has reviewed a copy of an application for exemptive relief, as
amended, filed by ACC on [ }, 19 , with the Securities and Exchange
Commission and, in particular, has reviewed the conditions to the
requested relief set forth therein. As set forth in such application, the
Board of Directors of ACC ("the Board") will monitor ACC for the
existence of any material irreconcilable conflict between the interest of
the Contractholders of all separate accounts investing in ACC. 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) and 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 contractholders and
variable life insurance contractholders; or (f) a decision by an insurer
to disregard the voting instructions of contractholders. The Board shall
promptly inform UNUM if it determines that an irreconcilable material
conflict exists and the implications thereof.
12.2 UNUM will report any potential or existing conflicts of which it is aware
to the Board. UNUM will assist the Board in carrying out its
responsibilities under the shared funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an
obligation by UNUM to inform the Board whenever Contractholder voting
instructions are disregarded.
12.3 If a majority of the Board, or majority of Disinterested Board Members,
determines that a material irreconcilable conflict exists with
Participating Companies. If the Board determines that UNUM is responsible
for causing or creating said conflict, UNUM shall at its sole cost and
expense, and to the extent reasonably practicable (as determined by at
its sole cost and expense, and to the extent reasonably practicable (as
determined by a majority of the Disinterested Board Members), take such
action as in necessary to remedy or eliminate the irreconcilable material
conflict. Such necessary action may include, but shall not be limited to:
a. Withdrawing the assets allocable to the Separate Account from the
Fund and reinvesting such assets in different investment medium, or
submitting the question of whether such segregation should be
implemented to a vote of all affect Contractholders 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 Companies) that votes in
favor or such segregation, or offering to the affected
Contractholders the option of making such a change; and/or
b. Establishing a new registered management investment company or
managed separate account.
12.4 If a material irreconcilable conflict arises as a result of a decision by
UNUM to disregard Contractholder voting instructions and said decision
represents a minority position or would preclude a majority vote by all
Contractholders having an interest in
<PAGE>
9
ACC, UNUM at UNUM's sole cost, may be required, at the Board's election,
to withdraw the Separate Account's investment in ACC and terminate this
agreement; provided, however that such withdrawal and termination shall
be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
members of the Board.
12.5 For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whither or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event will the
Fund be required to establish a new funding medium for any Contract. UNUM
shall not be required by this Article to establish a new funding medium
for any Contract of an offer to do so has been declined by vote of a
majority of the Contractholders materially adversely affected by the
irreconcilable material conflict.
ARTICLE XIII
INDEMNIFICATION
13.1 UNUM shall indemnify and hold harmless ACC and each of its directors,
officers, employees, agent and each person, if any, who controls ACC within the
meaning of the 1933 Act against any losses, claims, damages or liabilities to
which the Fund or any such director, officer, employee, agent or controlling
person may become subject, insofar as such losses, claims, damages or
liabilities (or actions in respect to thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in information furnished by UNUM for use in a Fund's registration statement or
prospectus or sales literature or advertisements of the Fund, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be state therein or necessary to make the statements therein
not mislieading, or arise out of or as a result of conduct, statements or
representations (other than statements or representations contained in the
Fund's prospectus and sales literature) of UNUM or its agents, with respect to
the sale and distribution of Contracts for which Fund shares are an underlying
investment; and UNUM will reimburse any legal or other expenses reasonably
incurred by ACC or any such director, officer, employee, agent, or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action. This indemnity agreement will be in addition to
any liability which UNUM may otherwise have.
13.2 ACC shall indemnify and hold harmless UNUM and each of its directors
officers, employees, agents and each person, if any, who controls UNUM within
the meaning of the 1933 Act against any losses, claims, damages or liabilities
to which UNUM or any such director, officer, employee, agent or controlling
person may become subject, insofar as such losses, claims, damages or
liabilities (or actions in respect to thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in a Fund's registration statement or prospectus or sales literature or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be state therein or necessary to make the statements
therein not misleading;
<PAGE>
10
and ACC will reimburse any legal or other expenses reasonably incurred by UNUM
or any such director, officer, employee, agent, or controlling person may become
subject insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement or
prospectus or sales literature or advertisements with respect to the Separate
Account or the Contracts and such statements were based on information provided
to UNUM by the Fund; and the Fund will reimburse any legal or other exopenses
reasonably incurred by UNUM or any such director, officer, employee, agent or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that ACC will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or omission or
alleged omission made in such Registration Statement or prospectus in conformity
with written information furnished to ACC by UNUM specifically for use therein..
This indemnity agreement will be in addition to any liability which ACC may
otherwise have.
13.3 ACC shall indemnify and hold harmless UNUM against any and all liability,
loss, damages, costs or expenses which UNUM may incur, suffer or be required to
pay due to ACC's or its Agent's (1) incorrect calculation of the daily net asset
value, dividend rate or capital gain distribution rate; (2) incorrect reporting
of the daily net asset value, dividend rate or capital gain distribution ratel
and/or (3) untimely reporting of the net asset value, dividend rate or capital
gain distribution rate.
13.4 Promptly after receipt by an indemnified party under this paragraph of
notices of the commencement of action, such indemnified party will, if a claim
in repect thereof is to be made against the indemnifying party under this
paragraph, promptly notify the indemnifying party of the commencement thereof.
In case any such action is brought against any indemnified party, and it
notified the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, assume the defense thereof, with counsel satisfactory to such indemnified
party.
ARTICLE XIV
COMMENCEMENT AND TERMINATION
14.1 This Agreement shall be effective as of the date set forth in the first
paragraph of this Agreement and shall continue in force until terminated in
accordance with the provisions herein.
14.2 This Agreement shall terminate as to the sale and issuance of new
Contracts:
<PAGE>
11
a. At the option of UNUM or ACC upon six months advance written notice to the
other party;
b. At the option of UNUM, if any Fund shares are not reasonably available to
meet the requirements of the Contracts as determined by UNUM. Prompt notice
of election to terminate shall be furnished by UNUM, said termination to be
effective ten days after receipt of notice unless ACC makes available a
sufficient number of shares to meet the requirements of the Contracts with
said ten-day period;
c. At the option of UNUM, upon the institution of formal proceedings against
ACC by the Securities and Exchange Commission, National Association of
Securities Dealers or any other regulatory body, the expected or
anticipated ruling, judgment, or outcome of which may, in UNUM's reasonable
judgment, materially impact ACC's ability to meet and perform its
obligations and duties hereunder. Prompt notice of election to terminate
shall be furnished by UNUM with said termination to be effective upon
receipt of notice.
d. In the event a Fund's shares are not registered, issued or sold in
accordance with applicable state and/or federal law, or such law precludes
the use of such shares as the underlying investment medium of Contracts
issued or to be issued by UNUM. Termination shall be effective immediately
upon such occurrence without notice;
e. Upon assignment of this Agreement unless made with the written consent of
each party.
ARTICLE XV
AMENDMENTS
15.1 This Agreement shall automatically be amended to comply with any
amendment to the Investment Company Act of 1940 or rule of any regulatory
authority which affects in any manner the actions and relationships authorized
hereunder.
15.2 Any other changes in the terms of this Agreement, including adding or
deleting Funds to or from Schedule A, shall be made by agreement in writing
between all parties.
<PAGE>
12
ARTICLE XVI
NOTICE
16.1 Each notice required by this Agreement shall be given by certified mail,
return receipt request, to the appropriate parties at the following
addresses:
UNUM UNUM Life Insurance Company of America
Attn: Legal Department - Retirement Services
2211 Congress Street
Portland, Maine 04122
ACC Acacia Capital Corporation
c/o Calvert Group - Legal Department
4550 Montgomery Avenue, 10th Floor
Bethesda, MD 20814
Notice shall be deemed to be given on the date of receipt by addressee as
evidenced by the return receipt.
ARTICLE XVII
LAW
17.1 This Agreement shall be contrued in accordance with the laws of the State
of Maine.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be duly
executed and attested as of the date first above written.
UNUM Life Insurance Company of America
Attest: /s/ David P. Robinson By: /s/ Peter S. Adams
--------------------- ------------------
Its: Vice President
--------------
Acacia Capital Corporation
Attest: /s/ Christine Teske By: /s/ William M. Tartehoff
------------------- ------------------------
Its: Vice President
--------------
<PAGE>
13
SCHEDULE A
TO
FUND PARTICIPATION AGREEMENT
DATED
Funds of ACC to be made available to UNUM Life Insurance Company of America as
the sponsor of the VA-I Separate Account:
<PAGE>
EXHIBIT 8(g)
PARTICIPATION AGREEMENT
-----------------------
Among
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. ROWE PRICE INVESTMENT SERVICES, INC.
and
UNUM LIFE INSURANCE COMPANY OF AMERICA
THIS AGREEMENT, made and entered into as of this 26th day of April, 1994 by
and among UNUM Life Insurance Company of America (hereinafter, the "Company"), a
Maine life insurance company, on its own behalf and on behalf of each segregated
asset account of the Company set forth on Schedule A hereto as may be amended
from time to time (each account hereinafter referred to as the "Account"), and
the T. Rowe Price International Series, Inc., a corporation organized under the
laws of Maryland (hereinafter referred to as the "Fund") and T. Rowe Price
Investment Services, Inc. (hereinafter the "Underwriter"), a Maryland
corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is, or will be available to act as the investment vehicle for
separate accounts established for variable life insurance and variable annuity
contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter (Hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund will obtain an order from the Securities and Exchange
Commission ("SEC") granting Participating Insurance Companies and variable
annuity and variable insurance separate accounts exempting from the provisions
of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act on 1940,
as amended (hereinafter the "1940 /act") and Rules 6e-2(b)(15) and 6e-3(T)
(b)(15) thereafter, if and to the extent necessary to permit shares of the Fund
to be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Rowe Price-Fleming International, Inc. (hereinafter referred to as
the "Advisor") is duly registered as an investment adviser under the federal
Investment Advisers Act of 1940, as amended, and any applicable state securities
laws; and
<PAGE>
- 2 -
WHEREAS, the Company has registered or will register certain variable life
insurance and variable annuity contracts supported wholly of partially by the
Account (the "Contracts") under the 1933 Act, and said Contracts are listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid Contracts; and
WHEREAS, the Company has registered or will register 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 listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
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
Designated Portfolios which the Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Designated Portfolios.
1.2 The Fund agrees to make shares of the Designated Portfolios available
for purchase at the applicable net asset value per share by the Company and the
Account on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission, and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees or Directors of the Fund (hereinafter the "Board") may refuse
to sell shares of any Designated Portfolio to any person, or suspend or
terminate the offering of shares of any Designated Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Board acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of such Designated Portfolios.
1.3 The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Designated Portfolios will be sole to the general public. The fund
and the Underwriter will not sell Fund shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Articles I, III and VII of this Agreement is in effect to govern such
sales.
<PAGE>
- 3 -
1.4 The Fund agrees to redeem, on the Company's request, any full or
fractional shares of the Designated Portfolios held by the Company, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the request for redemption, except that
the Fund 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 1940 Act and any sales thereunder, and in accordance with the procedures and
policies of the Fund as described in the then current prospectus.
1.5 For purposes of Sections 1.1 and 1.4, The Company shall be the
designee of the Fund for receipt of purchase and redemption orders from the
Account, and receipt by such designee shall constitute receipt by the Fund;
provided that the Company receives the order by 4:00 p.m. Baltimore time and the
Fund receives notice of such order by 9:30 a.m. Baltimore time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the SEC.
1.6 The Company agrees to purchase and redeem the shares of each
Designated Portfolio offered by the then current prospectus of the Fund and in
accordance with the provisions of such prospectus.
1.7 The Company shall pay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.5 hereof. Payment shall be in federal funds transmitted by wire by
4:00 p.m. Baltimore time. If payment in Federal Funds for any purchase is not
received or is received by the Fund after 4:00 p.m. Baltimore time on such
Business Day, the Company shall promptly, upon the Fund's request, reimburse the
Fund for any charges, costs, fees, interest or other expenses incurred by the
Fund in connection with any advances to, or borrowings or overdrafts by, the
Fund, or any similar expenses incurred by the Fund, as a result of portfolio
transactions effected by the Fund based upon such purchase request. For purposes
of Section 2.8 and 2.9 hereof, upon receipt by the Fund of the federal funds so
wired, such funds shall cease to be the responsibility of the Company and shall
become the responsibility of the Fund.
1.8 Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account. Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account.
1.9 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or capital gain
distributions payable on the Designated Portfolios' shares. The Company hereby
elects to receive all such income, dividends, and capital gain distributions as
are payable on Designated Portfolio shares in additional shares of that
Portfolio. The Company reserves the right to revoke this election and to receive
all such income dividends and capital gain distributions in cash. The Fund shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions. The Fund shall use its best efforts to furnish
advance notice of the day such dividends and distributions are expected to be
paid.
<PAGE>
- 4 -
1.10 The Fund shall make the net asset value per share for each Designated
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Baltimore time) and shall use its best efforts to make such net asset value
per share available by 7 P.M. Baltimore time.
1.11 The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies, provided,
however, that the Company on a best efforts basis gives the Fund and the
Underwriter written notice of its intention to make such other investment
company available as a funding vehicle for the Contracts.
ARTICLE II. Representations and Warranties
------------------------------
2.1 The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and that the sale to the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established the Account
prior to any issuance or sale thereof as a segregated asset account under the
Maine insurance laws and has registered or, prior to any issuance or sale of the
Contracts, will register the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts.
2.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Maine and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and quality the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3 The Fund currently does not intent to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may
make such payments in the future. To the extent that it decided to finance
distribution expenses pursuant to Rule 12b-1, the Fund will undertake to have a
Board, a majority of whom are not interested persons of the Fund, formulate and
approve any plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses.
2.4 The Fund makes no representation as to whether any aspect of its
operations, including but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the Fund's investment policies,
fees and expenses are and shall at all times remain in compliance with the laws
of the State of Maine to the extent required to perform this Agreement.
2.5 The Fund represents that it is lawfully organized and validly existing
under the laws of the State of Maryland and that it does and will comply in all
material respects with the 1940Act.
<PAGE>
- 5 -
2.6 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Maine and any applicable state and
federal securities laws.
2.7 The Underwriter represents and warrants that the Adviser is and shall
remain duly registered under all applicable federal and state securities laws
and that the Adviser shall perform its obligations for the Fund in compliance in
all material respects with the laws of the State of Maine and any applicable
state and federal securities laws.
2.8 The Fund and the Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other individuals or
entities dealing with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less that the minimum
coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.9 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities
employed or controlled by the Company dealing with the money and/or securities
of the Fund are covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund, in an amount not less that $5 million. The aforesaid bond
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. Prospectus and Proxy Statements; Voting
---------------------------------------
3.1 The Underwriter shall provide the Company (at the Underwriter's
expense) with as many copies of the Fund's current prospectus as the Company may
reasonable request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document (such printing to be at the
Company's expense).
3.2 The Fund's prospectus shall state that the Statement of Additional
Information ("SAI") for the Fund is available from the Company, and the
Underwriter (or the Fund), at its expense, shall print and provide a copy of
such SAI free of charge to the Company for itself and for an owner of a Contract
who requests such SAI.
3.3 The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4 The Company shall:
(I) solicit voting instructions from Contract owners;
<PAGE>
- 6 -
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such portfolio for
which instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract or to the extent
otherwise required by law. 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.
3.5 Participating Insurance Companies shall be responsible for assuming
that each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by the Shared Funding Exemptive Order
and consistent with any reasonable standards that the Fund may adopt.
3.6 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors or trustees and with whatever
rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Materials and Information
-------------------------------
4.1 The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material
that the Company develops or uses and in which the Fund (or a Portfolio thereof)
or the Adviser or the Underwriter is named, at least ten calendar days prior to
its use. No such material shall be used if the Fund or its designee reasonably
objects to such use within ten calendar days after receipt of such material. The
Fund or its designee reserves the right to reasonably object to the continued
use of such material and no such material shall be used if the Fund or its
designee so object.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus or SAI for the Fund
shares, as such registration statement and prospectus or SAI may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall cause
to be furnished, to the Company, each piece of sales literature or other
promotional material in which the Company, and/or its Account, is named at least
ten calendar days prior to its use. No such material shall be used if the
Company reasonably objects to such use within ten calendar days after receipt of
such material. The Company reserves the right to reasonably object to the
continued use of such material and no such material shall be used if the Company
so objects.
<PAGE>
- 7 -
4.4 The Fund and the Underwriter shall not give any information or make
any representation of behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus, or SAI for the Contracts,
as such registration statement and prospectus may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution of Contract owners, or
is sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, SAI's, 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(s) with the SEC or other regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, SAI's, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Contracts or the Account, contemporaneously with the
filing of such document(s) with the SEC or other regulatory authorities.
4.7 The Fund will provide the Company with as much notice as is reasonably
practicable of any proxy solicitations for any Designated Portfolio, and of any
material change in the fund's registration statement, particularly any change
resulting in change to the registration statement or prospectus for any Account.
The Fund will work with the Company so as to enable the Company to solicit
proxies from Contract Owners, or to make changes to its prospectus or
registration statement, in an orderly manner. The Fund will make reasonable
efforts to attempt to have changes affecting Contract prospectuses become
effective simultaneously with the annual updates for such prospectuses.
4.8 For purposes of this Article IV, the phrase "sales literature and
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
-----
available to customers or the public, including brochures, circulars, reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses, SAIs
shareholder reports, proxy materials, and any other communications distributed
or made generally available with regard to the Funds.
ARTICLE V. Fees and Expenses
-----------------
5.1 The Fund and the Underwriter shall pay no fee or other compensation to
the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12(b)-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing, and such payments will be made out of existing fees otherwise payable
to the Underwriter, past profits of the Underwriter, or other resources
available to the Underwriter.
<PAGE>
- 8 -
No such payments shall be made directly by the Fund. Currently, no such payments
are contemplated.
5.2 All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses for
the cost of registration and qualification of the Fund's shares, preparation and
filing of the Fund's prospectus and registration statement, proxy materials and
reports, setting the prospectus in type, setting in type and printing the proxy
materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all statements
and notices required by any federal or state law and all taxes on the issuance
or transfer of the Fund's shares.
5.3 The Company shall bear the expenses of distributing the Fund's
prospectus to owners of Contracts issued by the Company and of distributing the
Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification and Qualification
---------------------------------
6.1 The Fund will invest its assets in such a manner as to ensure that
the Contracts will be treated as annuity or life insurance contracts, whichever
is appropriate, under the Internal Revenue Code of 1986, as amended (the "Code")
and the regulations issued thereunder (or any successor provisions). Without
limiting the scope of the foregoing, the Fund will comply with Section 817(h) of
the Code and Treasury Regulation (S)1.817-5, and any Treasury interpretations
thereof, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts, and any amendments or other
modifications or successor provisions to such Section or Regulations. In the
event of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify the Company of such breach and (b) to adequately diversify
the Fund so as to achieve compliance within the grace period afforded by
Regulation 817.5.
6.2 The Fund represents that it is or will be qualified as a Regulated
Investment Company under Subchapter M of the Code, and that it will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provisions) and that it will notify the Company immediately upon having
a reasonable basis for believing that it has ceased to so qualify or that it
might not so qualify in the future.
6.3 The Company represents that the Contracts are currently, and at the
time of issuance shall be, treated as life insurance or annuity insurance
contracts, under applicable provisions of the Code, and that is will make every
effort to maintain such treatment, and that it will notify the Fund and the
Underwriter immediately upon having a reasonable basis for believing the
Contracts have ceased to be so treated or that they might not be so treated in
the future. The Company agrees that any prospectus offering a contract that is a
"modified endowment contract" as that term is defined in Section 7702A of the
Code (or any successor or similar provision), shall identify such contract as a
modified endowment contract.
<PAGE>
- 9 -
ARTICLE VII. Potential Conflicts
-------------------
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authority; (c) an administrative or judicial
decision is any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2 The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information necessary for the Board to consider any issues
raised. This includes, but is not limited to, an obligation by the Company to
inform the Board whenever Contract owner voting instructions are disregarded.
7.3 If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
-----
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the Account's investment in
the Fund and terminate this Agreement with respect to each Account provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. Any such withdrawal and
termination must take place within six (6) months after the Fund gives written
notice that this provision is being implemented, and until the end of that six
month period the Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict;
<PAGE>
- 10 -
provided, however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested members of the Board. Until the end of the
foregoing six month period, the Fund shall continue to accept and implement
orders by the company for the purchase (and redemption) of shares of the Fund.
7.6 For purposes of Section 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a new funding
medium for the Contract if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material. In the event that the Board determines that any proposed action odes
not adequately remedy any irreconcilable material conflict, then the Company
will withdraw the Account's investment in the Fund and terminate this Agreement
within six (6) months after the Board informs the Company in writing of the
foregoing determination; provided, however, that such withdrawal and termination
shall be limited to the extent required by any such material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
7.7 If and to the extent the Shared Funding Order contains terms and
conditions different from Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of
this Agreement, then the Fund and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with the Shared
Funding Exemptive Order, and Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5
of the Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in the Shared
Funding Exemptive Order or any amendment thereto. If and to the extent that Rule
6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive
relief from any provision of the 1940 Act or the rules promulgated thereunder
with respect to mixed or shared funding (as defined in the Shared Funding
Exemptive Order) on terms and conditions materially different from those
contained in the Shared Funding Exemptive Order, then (a) the Fund and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3 (T), as amended, and Rule 6e-3,
as adopted, to the extent such rules are applicable; and (b) Sections 3.4, 3.5,
3.6, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only
to the extent that terms and conditions substantially identical to such Sections
are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
---------------
8.1 Indemnification By the Company
------------------------------
8.1(a). The Company agrees to indemnify and hold harmless the Fund and the
Underwriter and each of their officers and directors and each person, if any,
who controls the Fund or the Underwriter within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
<PAGE>
- 11 -
(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 for
the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on behalf
of the Fund for use in the Registration Statement, prospectus or
statement of additional information for the Contracts or in the
Contracts of sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts of
Fund shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied
by the Company or persons under its control) or wrongful conduct of
the Company or persons under its authorization or control, with
respect to the sale or distribution of the Contracts of Fund Shares;
or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus, or
sales literature 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 on necessary to make the
statements therein not misleading if such a statement or omission
was made in reliance upon information furnished to the Fund by or in
behalf of the Company; or
(iv) arise as a result of any material failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the qualification requirements
specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnification Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of its obligations or duties under this Agreement.
<PAGE>
- 12 -
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against show such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, it the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear for fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other that reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them is connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.
8.2 Indemnification by the Underwriter
----------------------------------
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of it directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts; and
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus or SAI or sales literature
of the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information
furnished to the Underwriter or Fund by or on behalf of the
Company for use in the Registration Statement or prospectus for
the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of
the Contracts or Fund shares; or
<PAGE>
- 13 -
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund or Underwriter or
persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the
Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification and
other qualification requirements specified in Article VI of
this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) thereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance or such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Party, the Underwriter will be entitled to participate,
at its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Underwriter will not be liable
<PAGE>
- 14 -
to such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3 Indemnification By the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company
and each of its directory and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation (including legal
and other expenses) to which the Indemnified Parties may be required to pay or
may become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, expenses, damages, liabilities or expenses (or
actions in respect thereof) or settlements, are related to the operations of the
Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional
or in good faith or otherwise, to comply with the
diversification and other qualification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or the Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participant, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the expense thereof, with counsel satisfactory to the party
<PAGE>
- 15 -
named in the action. After notice from the Fund to such party of the Fund's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Fund will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with the Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
--------------
9.1 This Agreement shall be construed and the provisions hereto
interpreted under and in accordance with the laws of the State of Maryland.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including but not limited to, any Shared Funding Exemptive Order) and the terms
hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
-----------
10.1 This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party, for any reason with respect to some or
all Designated Portfolios, by six (6) months' advance written
notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter based upon the Company's determination that shares of
the Fund are not reasonably available to meet the requirements of
the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter in the event any of the Portfolio's shares are not
registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such shares
as the underlying investment media of the Contracts issued or to
be issued by the Company; or
(d) termination by the Fund of Underwriter in the event that formal
administrative proceedings are instituted against the Company by
the National Association of Securities Dealers, Inc. ("NASD"),
the Securities and Exchange Commission, the Insurance
Commissioner of like official of any state or any other
regulatory body regarding the Company's duties under this
Agreement or related to the sale of the Contracts, the operation
of any Account, or the purchase of the Fund shares, provided,
however, that the Fund or Underwriter determines in its sole
judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect
<PAGE>
- 16 -
upon the ability of the Company to perform its obligations under
this Agreement; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the Fund of
Underwriter by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body, provided,
however, that the Company determines in its sole judgment
exercised in good faith, that any such administrative proceedings
will have a material adverse effect upon the ability of the Fund
or Underwriter to perform its obligations under this Agreement;
or
(f) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Designated Portfolio in the event
that such Portfolio ceases to qualify as a Regulated Investment
Company under Subchapter M or fails to comply with the Section
817(h) diversification requirements specified in Article VI
hereof, or if the Company reasonably believes that such Portfolio
may fail to so qualify or comply; or
(g) termination by the Fund or Underwriter by written notice to the
Company in the event that the Contracts fail to meet the
qualifications specified in Article VI hereof; or
(h) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole judgment
exercised in good faith, that the Company has suffered a material
adverse change in its business, operations, financial condition,
or prospects since the date of this Agreement or is the subject
of material adverse publicity; or
(i) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that the Fund or the Underwriter has
suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement
or is the subject of material adverse publicity; or
(j) termination by the Fund or the Underwriter by written notice to
the Company, if the Company gives the Fund and the Underwriter
the written notice specified in Section 1.11 hereof and at the
time such notice was given there was no notice of termination
outstanding under any other provision of this Agreement;
provided, however, any termination under this Section 10.1(j)
shall be effective forty-five days after the notice specified in
Section 1.11 was given.
10.2 Effect of Termination. Notwithstanding any termination of this
---------------------
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, the owners of the Existing Contracts may be permitted
to reallocate investments in the Fund, redeem investments in the Fund and/or
invest in the Fund upon the
<PAGE>
- 17 -
making of additional purchase payments under the Existing Contracts. The parties
agree that this Section 10.2 shall not apply to any termination under Article
VII and the effect of such Article VII termination shall be governed by Article
VII of this Agreement. The parties further agree that this Section 10.2 shall
not apply to any termination under Section 10.1(g) of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
where permitted under the terms of the Contracts, the Company shall not prevent
Contract Owners from allocating payments to a Portfolio that was otherwise
available under the Contracts without first giving the Fund or the Underwriter
90 days notice of its intention to do so.
10.4 Notwithstanding any termination of this Agreement, each party's
obligations under Article VIII to indemnify the other parties shall survive.
ARTICLE XI. Notices
-------
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Nancy M. Morris, Esq.
If to the Company:
UNUM Life Insurance Company of America
attn: Legal Department and Retirement Services
2211 Congress Street
Portland, Maine 04122
If to Underwriter:
T. Rowe Price Investment Services
100 East Pratt Street
Baltimore, Maryland 04122
Attention: John Cammack
<PAGE>
- 18 -
ARTICLE XII. Miscellaneous
-------------
12.1 All persons dealing with the Fund must look solely to the property of
such Fund, and in the case of a series company, the respective Designated
Portfolio listed on Schedule A hereto as though such Designated Portfolio had
separately contracted with the Company and the Underwriter for the enforcement
of any claims against the Fund. The parties agree that neither the Board,
officers, agents or shareholders assume any personal liability or responsibility
for obligations entered into by or on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information may come into the
public domain.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitations the SEC, the
NASD, and state insurance regulators) and shall permit authorities reasonable
access to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Maine Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with the
Maine variable annuity laws and regulations and any other applicable law or
regulations.
12.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies, and obligations
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8 This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto.
<PAGE>
- 19 -
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
COMPANY: UNUM LIFE INSURANCE COMPANY OF AMERICA
By its authorized officer
By: /s/ Russell W. Anderson
------------------------
Title: Sr. Vice President
------------------
Date: 4/21/94
-------
FUND: T. ROWE INTERNATIONAL SERIES, INC.
By its authorized officer
By: /s/
---
Title: Vice President
--------------
Date: April 26, 1994
--------------
UNDERWRITER: T. ROWE PRICE INVESTMENT SERVICES, INC.
By its authorized officer
By: /s/
---
Title: Vice President
--------------
Date: April 26, 1994
--------------
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
NAME OF SEPARATE ACCOUNT AND CONTRACTS FUNDED BY
DATE ESTABLISHED BY BOARD OF DIRECTORS SEPARATE ACCOUNT DESIGNATED PORTFOLIOS
- -------------------------------------- ------------------- --------------------
<S> <C> <C>
VA-1 Separate Account (7/8/88) 403(b) VAI GAC 91-101.SP T. Rowe Price International
403(b) VAII GAC 91-101.SD Stock Portfolio
403(b) VAIII GAC 91-101.NL
401(a) VAI GAC 91-103.SP
401(a) VAII GAC 91-103.SD
401(a) VAIII GAC 91-103.NL
Group IRA Rider GAC 4059
Post Tax VAI GAC 91-105.SP
Post Tax VAII GAC 91-105.SD
Post Tax VAIII GAC 91-105.NL
457 VAI 91-109.SP
457 VAII 91-109.SD
457 VAIII 91-109.NL
</TABLE>
<PAGE>
Exhibit 10(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Amendment No. 33 to the Registration Statement on
Form N-4 (File No. 33-47786) of our report dated April 10, 1998, on our audits
of the statement of assets and liabilities as of December 31, 1997, and the
related statements of operations and changes in net assets for each of the two
years in the period then ended of the VA-I Separate Account of UNUM Life
Insurance Company of America and our report dated February 4, 1998, on our
audits of the financial statements as of and for the years ended December 31,
1997 and 1996, of UNUM Life Insurance Company of America. We also consent to the
reference to our Firm under the caption "Independent Accountants" in the
Statement of Additional Information.
/s/ Coopers & Lybrand L.L.P.
Portland, Maine
May 1, 1998
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Kevin J. Tierney his true and lawful attorney-in-fact
and agent, each acting alone, with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to execute and file a registration statement on Form N-4 pursuant to
the Securities Act of 1933 and the Investment Company Act of 1940 with respect
to any variable annuity products funded through one or more separate accounts of
UNUM Life Insurance Company of America, and any and all amendments (including
post-effective amendments) and all documents relating thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing necessary or advisable to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
WITNESS my signature on the date set forth below:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ James F. Orr III Director, Chairman March 11, 1998
- --------------------- & CEO --------------
James F. Orr III
/s/ Elaine D. Rosen Director and President March 6, 1998
- --------------------- --------------
Elaine D. Rosen
/s/ Thomas G. Brown Director and March 27, 1998
- --------------------- Executive Vice President --------------
Thomas G. Brown
/s/ Peter J. Moynihan Director and March 13, 1998
- --------------------- Senior Vice President --------------
Peter J. Moynihan
/s/ Diane M. Garofalo Senior Vice President March 17, 1998
- --------------------- --------------
Diane M. Garofalo
</TABLE>
<PAGE>
POWER OF ATTORNEY
I, an undersigned Director of UNUM Life Insurance Company of America ("UNUM"),
hereby appoint Kevin J. Tierney, my true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for me and in my stead, in
any and all capacities to execute and file a registration statement on Form N-4
pursuant to the Securities Act of 1933 and the Investment Company Act of 1940
with respect to any variable annuity products funded through one or more
separate accounts of UNUM, and any and all amendments (including post-effective
amendments) and all documents relating thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
necessary or advisable to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
WITNESS my signature on the date set forth below:
NAME TITLE DATE
- ---- ----- ----
/s/ Eileen C. Farrar Director April 6, 1998
- --------------------
Eileen C. Farrar
<PAGE>
UNUM - VA I (SEC, subacct inception date)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
One Quarter
- ------------------------------------------------------------------------------------------------------------------------
Small Cap Index Growth II Balanced Growth I Asst. Mgr. Equity Income Soc. Resp.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Fund Value $ 942.15
Fee $ 0.40
- ------------------------------------------------------------------------------------------------------------------------
Surr charge $ 47.09
Final Value $ 894.67
Cumulative Return -10.533%
Annualized Return -35.931%
- ------------------------------------------------------------------------------------------------------------------------
Calculation of Previous Quarter's Return
Final Value Quarter One = 1,000 * (31-Dec-97 Unit Value/30-Sep-97 Unit Value) - Annual Fee - Surrender Charge
Cumulative Return = Final Value Quarter One/1,000 - 1
Annualized Return = (Final Value Quarter One/1,000) * 4 - 1
- ------------------------------------------------------------------------------------------------------------------------
Date Small Cap Index Growth II Balanced Growth I Asst. Mgr. Equity Income Soc. Resp.
- ------------------------------------------------------------------------------------------------------------------------
09/30/97 18.714800
- ------------------------------------------------------------------------------------------------------------------------
12/31/97 17.632200
- ------------------------------------------------------------------------------------------------------------------------
Year To Date
- ------------------------------------------------------------------------------------------------------------------------
Small Cap Index Growth II Balanced Growth I Asst. Mgr. Equity Income Soc. Resp.
- ------------------------------------------------------------------------------------------------------------------------
Fund Value $1,153.48
- ------------------------------------------------------------------------------------------------------------------------
Fee $ 0.40
- ------------------------------------------------------------------------------------------------------------------------
Surr charge $ 47.09
---------------------------------------------------------------------------------------------------
Final Value $ 894.67
---------------------------------------------------------------------------------------------------
Annualized Return -10.533%
- ------------------------------------------------------------------------------------------------------------------------
Calculation of Year to Date Return
Final Value Year to Date= 1,000 * (31-Dec-97 Unit Value/31-Dec-96 Unit value) - Annual Fee - Surrender Charge
Annualized Return = Final Value Year to Date/1,000 - 1
- ------------------------------------------------------------------------------------------------------------------------
Date Small Cap Index Growth II Balanced Growth I Asst. Mgr. Equity Income Soc. Resp.
- ------------------------------------------------------------------------------------------------------------------------
12/31/96 15.286100
- ------------------------------------------------------------------------------------------------------------------------
12/31/97 17.632200
- ------------------------------------------------------------------------------------------------------------------------
Separate Account L - Standardized 1 Year Returns
One Year Returns Period Ending 12/31/97
- ------------------------------------------------------------------------------------------------------------------------
Small Cap Index Growth II Balanced Growth I Asst. Mgr. Equity Income Soc. Resp.
- ------------------------------------------------------------------------------------------------------------------------
Fund Value $1,153.48
---------------------------------------------------------------------------------------------------
Fee $ 0.44
- ------------------------------------------------------------------------------------------------------------------------
Surr charge $ 57.65
---------------------------------------------------------------------------------------------------
Final Value $1,095.39
---------------------------------------------------------------------------------------------------
Annualized Return 9.539%
- ------------------------------------------------------------------------------------------------------------------------
Calculation of Annual Return
Final Value = 1,000 * (31-Dec-97 Unit Value/31-Dec-96 Unit value) - Annual Fee - Surrender Charge
Annualized Return = Final Value/1,000 - 1
- ------------------------------------------------------------------------------------------------------------------------
Date Small Cap Index Growth II Balanced Growth I Asst. Mgr. Equity Income Soc. Resp.
- ------------------------------------------------------------------------------------------------------------------------
12/31/96 15.286100
- ------------------------------------------------------------------------------------------------------------------------
12/31/97 17.632200
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Three-Year Return Small Cap Index Growth II Balanced Growth I Asst. Mgr. Equity Income Soc. Resp.
- ------------------------------------------------------------------------------------------------------------------------
One Year $1,278.32
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------
Fee $ 0.57
---------------------------------------------------------------------------------------------------
Final Value $1,277.75
- ------------------------------------------------------------------------------------------------------------------------
Two Year $1,471.73
---------------------------------------------------------------------------------------------------
Fee $ 0.62
---------------------------------------------------------------------------------------------------
Final Value $1,471.11
- ------------------------------------------------------------------------------------------------------------------------
Three Year $1,696.90
---------------------------------------------------------------------------------------------------
Fee $ 0.65
- ------------------------------------------------------------------------------------------------------------------------
Surr charge $ 84.81
---------------------------------------------------------------------------------------------------
Final Value $1,611.44
---------------------------------------------------------------------------------------------------
Cumulative Return 61.144%
---------------------------------------------------------------------------------------------------
Annualized Return 17.239%
- ------------------------------------------------------------------------------------------------------------------------
Calculation of Three Year Return
Final Value Year One = 1,000* (31-Dec-95 Unit Value/ 31-Dec-94 Unit Value) - Annual Fee Year One
Final Value Year Two = 1,000* (31-Dec-96 Unit Value/ 31-Dec-95 Unit Value) - Annual Fee Year Two
Final Value Year Three = 1,000* (31-Dec-97 Unit Value/ 31-Dec-96 Unit Value) - Annual Fee Year Three - Surrender Charge
Cumulative Return = Final Value Year Five/1000 - 1
Annualized Return = (Final Value Year Five/1000) * (1/3) - 1
- ------------------------------------------------------------------------------------------------------------------------
Date Small Cap Index Growth II Balanced Growth I Asst. Mgr. Equity Income Soc. Resp.
- ------------------------------------------------------------------------------------------------------------------------
12/31/94 10.381800
- ------------------------------------------------------------------------------------------------------------------------
12/31/95 13.271300
- ------------------------------------------------------------------------------------------------------------------------
12/31/96 15.286100
- ------------------------------------------------------------------------------------------------------------------------
12/31/97 17.632200
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Separate Account L - Standardized Lifetime Returns
Lifetime
- ------------------------------------------------------------------------------------------------------------------------
Small Cap Index Growth II Balanced Growth I Asst. Mgr. Equity Income Soc. Resp.
- ------------------------------------------------------------------------------------------------------------------------
Four Years Prior $1,033.38
---------------------------------------------------------------------------------------------------
Fee $ 0.50
---------------------------------------------------------------------------------------------------
Final Value $1,032.88
- ------------------------------------------------------------------------------------------------------------------------
Three Years Prior $1,320.36
---------------------------------------------------------------------------------------------------
Fee $ 0.53
---------------------------------------------------------------------------------------------------
Final Value $1,319.82
- ------------------------------------------------------------------------------------------------------------------------
Two Years Prior $1,520.19
---------------------------------------------------------------------------------------------------
Fee $ 0.58
---------------------------------------------------------------------------------------------------
Final Value $1,519.61
- ------------------------------------------------------------------------------------------------------------------------
One Year Prior $1,752.84
---------------------------------------------------------------------------------------------------
Fee $ 0.60
---------------------------------------------------------------------------------------------------
Period (Years) 3.67
- ------------------------------------------------------------------------------------------------------------------------
Surr charge $ 87.61
---------------------------------------------------------------------------------------------------
Final Value $1,664.63
---------------------------------------------------------------------------------------------------
Cumulative Return 66.463%
---------------------------------------------------------------------------------------------------
Annualized Return 14.902%
- ------------------------------------------------------------------------------------------------------------------------
Calculation of Lifetime Return
Final Value Year One = 1,000* (31-Dec-94 Unit Value/ 02-May-94 Unit Value) - Annual Fee Year One
Final Value Year Two = 1,000* (31-Dec-95 Unit Value/ 31-Dec-94 Unit Value) - Annual Fee Year Two
Final Value Year Three = 1,000* (31-Dec-96 Unit Value/ 31-Dec-95 Unit Value) - Annual Fee Year Three
Final Value Year Four = 1,000* (31-Dec-97 Unit Value/ 31-Dec-96 Unit Value) - Annual Fee Year Four - Surrender Charge
Cumulative Return = Final Value for Last Year/1000 - 1
Annualized Return = (Final Value for Last Year/1000)*(1/Period) - 1
- ------------------------------------------------------------------------------------------------------------------------
Date Small Cap Index Growth II Balanced Growth I Asst. Mgr. Equity Income Soc. Resp.
- ------------------------------------------------------------------------------------------------------------------------
Inception Date 05/02/94
- ------------------------------------------------------------------------------------------------------------------------
Inception Date Unit
Value 10.000000
- ------------------------------------------------------------------------------------------------------------------------
12/31/94 10.381800
- ------------------------------------------------------------------------------------------------------------------------
12/31/95 13.271300
- ------------------------------------------------------------------------------------------------------------------------
12/31/96 15.286100
- ------------------------------------------------------------------------------------------------------------------------
12/31/97 17.632200
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
