AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 8, 1999
File No. 333-
File No. 811-7924
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AND
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1940
POST-EFFECTIVE AMENDMENT NO. 22
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
(Exact Name of Registrant)
LINCOLN BENEFIT LIFE COMPANY
(Name of Depositor)
206 South 13th Street
Lincoln, Nebraska 68508
(Complete Address of Depositor's Principal Office)
JOHN MORRIS
Lincoln Benefit Life Company
206 South 13th Street
Lincoln, Nebraska 68508
1-800-525-9287
(Name and Complete Address of Agent for Service)
Copy to:
JOAN E. BOROS, ESQ.
Jorden Burt Boros Cicchetti
Berenson & Johnson LLP
1025 Thomas Jefferson Street N.W.
Suite 400 East
Washington, D.C. 20007-0805
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SECURITIES BEING OFFERED: FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY
CONTRACTS
Approximate Date of Proposed Public Offering: As soon as practicable after
effective date.
An indefinite number of shares are deemed to be registered and no filing fee is
due because of reliance on Section 24(f) of the Investment Company Act of 1940.
The registrant hereby amends this registration statement on such dates as may be
necessary to delay its effective date until the registrant shall file a further
amendment which specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the registration statement shall become effective on such
date as the Commission, acting pursuant to Section 8(a), may determine.
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CROSS REFERENCE SHEET
Showing Location in Part A (Prospectus) and Part B of Registration Statement of
Additional Information Required by Form N-4
<TABLE>
<CAPTION>
ITEM OF FORM N-4
PART A: INFORMATION REQUIRED IN A PROSPECTUS
<S> <C>
1. Cover Page..................................... Cover Page
2. Definitions.................................... Definitions
3. Synopsis....................................... Questions and Answers About your Contract; Fee Tables; Examples;
Explanation of Fee Tables and Examples
4. Condensed Financial Information
(a) Accumulation Unit Values................... Not Applicable
(b) Explanation of Calculation of
Performance.............................. Appendix A: Portfolios and Performance Data
(c) Location of Other Financial Statements..... Condensed Financial Data
5. General Description of Registrant, Depositor,
and Portfolio Companies
(a) Depositor.................................. Lincoln Benefit Life Company
(b) Registrant................................. Separate Account
(c) Portfolio Companies........................ The Portfolios
(d) Portfolio Company Prospectuses............. The Portfolios
(e) Voting Rights.............................. Voting Rights
(f) Administrators............................. Administration
6. Deductions
(a) General.................................... Contract Charges
(b) Sales Load Percent......................... Sales Charges
(c) Special Purchase Plans..................... Sales Charges
(d) Commissions................................ Distribution of the Contracts
(e) Portfolio Expenses......................... Other Expenses
(f) Operating Expenses......................... Fee Tables; Contract Charges
7. General Description of Contracts
(a) Persons with Rights........................ Description of the Contracts; Annuity Benefits;
Other Contract Benefits; Voting Rights; Beneficiary
(b) (i) Allocation of Purchase Payments....... Allocation of Purchase Payments
(ii) Transfers.............................. Purchases and Contract Value; Transfers During
Annuity Period
(iii) Exchanges............................. Not Applicable
(c) Changes.................................... Modification of the Contract
(d) Inquiries.................................. Questions and Answers about Your Contract: Who
Should I Contact for More Information
8. Annuity Period................................. Annuity Benefits; Enhanced Death Benefit and Income Benefit Rider
9. Death Benefit.................................. Death Benefit; Enhanced Death Benefit Rider;
Enhanced Death Benefit and Income Benefit Rider
10. Purchases and Contract Value................... Purchases and Contract Value; Distribution of
the Contracts
11. Redemptions
(a) By Owners.................................. Withdrawals (Redemptions); Substantially Equal
Periodic Payments; Systematic Withdrawal
Program
(b) By Annuitant............................... Annuity Options
(c) Texas ORP.................................. Not Applicable
(d) Lapse...................................... Minimum Contract Value
(e) Free Look.................................. Free Look Period
12. Taxes.......................................... Taxes
13. Legal Proceedings.............................. Legal Proceedings
14. Table of Contents of SAI....................... Table of Contents of SAI
PART B: INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
15. Cover Page..................................... Cover Page
16. Table of Contents.............................. Table of Contents
17. General Information and History
(a) Depositor's Name........................... Not Applicable
(b) Assets of Subaccount....................... Not Applicable
(c) Control of Depositor....................... Prospectus: Lincoln Benefit Life Company
18. Services
(a) Fees and Expenses of Registrant............ Not Applicable
(b) Management Contracts....................... Not Applicable
(c) Custodian.................................. Prospectus: Separate Account
Independent Public Accountant.................. Prospectus: Experts
(d) Assets of Registrant....................... Prospectus: Separate Account
(e) Affiliated Persons......................... Not Applicable
(f) Principal Underwriter...................... Prospectus: Distribution of the Contracts
19. Purchase of Securities Being Offered........... Prospectus: Distribution of the Contracts
20. Underwriters................................... Prospectus: Distribution of the Contracts
21. Calculation of Performance Data................ Prospectus: Appendix A: Portfolios and
Performance Data; Separate Account Performance
22. Annuity Payments............................... SAI: The Contract
23. Financial Statements
(a) Financial Statements of Registrant......... SAI: Financial Statements
(b) Financial Statements of Depositor.......... Prospectus: Financial Statements
</TABLE>
PART C: OTHER INFORMATION
The information required to be provided in Part C is separately identified by
Item number.
<PAGE>
FLEXIBLE PREMIUM
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY
LINCOLN BENEFIT LIFE COMPANY
IN CONNECTION WITH
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STREET ADDRESS: 206 SOUTH 13TH ST., LINCOLN, NE 68508-1993
MAILING ADDRESS: P. O. BOX 82532, LINCOLN, NE 68501-2532
TELEPHONE NUMBER: 1-800-525-9287
The Contract is a deferred annuity contract designed to aid you in long-term
financial planning. You may purchase it on either a tax qualified or non-tax
qualified basis.
Because this is a flexible premium annuity contract, you may pay multiple
premiums. We allocate your premium to the investment options under the Contract
and our Fixed Account in the proportions that you choose. The Contract currently
offers forty investment options, each of which is a subaccount of the Lincoln
Benefit Life Variable Annuity Account ("Separate Account"). Each Subaccount
invests exclusively in shares of one of the following Portfolios:
GOLDMAN SACHS VARIABLE INSURANCE TRUST: CORE Small Cap Equity, International
Equity
J.P. MORGAN SERIES TRUST II: Small Company
LAZARD RETIREMENT SERIES, INC.: Emerging Markets, International Equity
LSA VARIABLE SERIES TRUST: Aggressive Equity, Balanced, Growth Equity,
Structured Equity, Value Equity
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS: Mid-Cap Growth, Mid-Cap Value, High
Yield Bond
OCC ACCUMULATION TRUST: Equity, Small Cap
PIMCO VARIABLE INSURANCE TRUST: Stocks PLUS Growth and Income, Foreign Bond,
Total Return Bond, Money Market
SALOMON BROTHERS VARIABLE SERIES FUNDS: Capital
Some of the portfolios described in this Prospectus may not be available in your
Contract. We may make available other investment options in the future.
Your Contract Value will vary daily as a function of the investment performance
of the Subaccounts to which you have allocated Purchase Payments and any
interest credited to the Fixed Account. We do not guarantee any minimum Contract
Value for amounts allocated to the Subaccounts. Benefits provided by this
Contract, when based on the Fixed Account, are subject to a Market Value
Adjustment, which may result in an upwards or downwards adjustment in withdrawal
benefits, death benefits, settlement values, and transfers to the Subaccounts.
You may not purchase a Contract if either you or the Annuitant are 85 years old
or older before we receive your application.
In certain states the Contract may be offered as a group contract with
individual ownership represented by Certificates. The discussion of Contracts in
this prospectus applies equally to Certificates under group contracts, unless
the content specifies otherwise.
This prospectus sets forth the information you ought to know about the Contract.
You should read it before investing and keep it for future reference.
We have filed a Statement of Additional Information with the Securities and
Exchange Commission ("SEC"). The current Statement of Additional Information is
dated July 7, 1999. The information in the Statement of Additional Information
is incorporated by reference in this
(continued on next page)
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES NOR HAS IT PASSED ON THE ACCURACY OR THE ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JULY 7, 1999.
prospectus. You can obtain a free copy by writing us or calling us at the
telephone number given above. The Table of Contents of the Statement of
Additional Information appears on page [ ] of this prospectus.
At least once each year we will send you an annual statement. The annual
statement details values and specific information for your Contract. It does not
contain our financial statements. Our financial statements begin on page F-1 of
this prospectus. Lincoln Benefit will file annual and quarterly reports and
other information with the SEC. You may read and copy any reports, statements or
other information we file at the SEC's public reference room in Washington, D.C.
You can obtain copies of these documents by writing to the SEC and paying a
duplicating fee. Please call the SEC at 1-800-SEC-0330 for further information
as to the operation of the public reference room. Our SEC filings are also
available to the public on the SEC Internet site (http://www.sec.gov).
THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED OR PRECEDED BY CURRENT PROSPECTUSES
FOR THE PORTFOLIOS LISTED ABOVE. IF ANY OF THESE PROSPECTUSES IS MISSING OR
OUTDATED, PLEASE CONTACT US AND WE WILL SEND YOU THE PROSPECTUS YOU NEED.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR YOUR FUTURE REFERENCE.
<PAGE>
TABLE OF CONTENTS
DEFINITIONS......................................................
FEE TABLES.......................................................
EXAMPLES.........................................................
EXPLANATION OF FEE TABLES AND EXAMPLES...........................
QUESTIONS AND ANSWERS ABOUT YOUR CONTRACT........................
CONDENSED FINANCIAL INFORMATION..................................
DESCRIPTION OF THE CONTRACTS.....................................
Summary..........................................................
Contract Owner...................................................
Annuitant........................................................
Modification of the Contract.....................................
Assignment.......................................................
Free Look Period.................................................
PURCHASES AND CONTRACT VALUE.....................................
Minimum Purchase Payment.........................................
Automatic Payment Plan...........................................
Credit Enhancement...............................................
Allocation of Purchase Payments..................................
Contract Value...................................................
Separate Account Accumulation Unit Value.........................
Transfer During Accumulation Period..............................
Transfers Authorized by Telephone................................
Automatic Dollar Cost Averaging Program..........................
Portfolio Rebalancing............................................
THE INVESTMENT AND FIXED ACCOUNT OPTIONS.........................
Separate Account Investments.....................................
The Portfolios...................................................
Voting Rights....................................................
Additions, Deletions, and Substitutions of Securities............
The Fixed Account................................................
General..........................................................
Guaranteed Maturity Fixed Account Option.........................
Market Value Adjustment..........................................
Dollar Cost Averaging Fixed Account Option.......................
ANNUITY BENEFITS.................................................
Annuity Date.....................................................
Annuity Options..................................................
Other Options....................................................
Annuity Payments: General........................................
Variable Annuity Payments........................................
Fixed Annuity Payments...........................................
Transfers During Annuity Period..................................
Death Benefit During Annuity Period..............................
Certain Employee Benefit Plans...................................
OTHER CONTRACT BENEFITS..........................................
Death Benefit....................................................
Enhanced Death Benefit Rider.....................................
Beneficiary......................................................
Contract Loans for 401(a), 401(k), and 403(b) Contracts..........
Withdrawals (Redemptions)........................................
Substantially Equal Periodic Payments............................
Systematic Withdrawal Program....................................
ERISA Plans......................................................
Minimum Contract Value...........................................
CONTRACT CHARGES.................................................
Mortality and Expense Risk Charge................................
Administrative Charges...........................................
Contract Maintenance Charge......................................
Administrative Expense Charge....................................
Transfer Fee.....................................................
Sales Charges....................................................
Withdrawal Charge................................................
Free Withdrawal..................................................
Waiver Benefits..................................................
General..........................................................
Confinement Waiver Benefit.......................................
Terminal Illness Waiver Benefit..................................
Waiver of Withdrawal Charge for Certain Qualified Plan
Withdrawals.....................................................
Premium Taxes....................................................
Deduction for Separate Account Income Taxes......................
Other Expenses...................................................
FEDERAL TAX MATTERS..............................................
Taxation of Annuities in General.................................
Tax Qualified Contracts..........................................
Income Tax Withholding...........................................
DESCRIPTION OF LINCOLN BENEFIT LIFE COMPANY AND THE SEPARATE
ACCOUNT..........................................................
Lincoln Benefit Life Company.....................................
Consolidated Financial Statements of Lincoln Benefit.............
Selected Financial Data..........................................
Investments by Lincoln Benefit...................................
Management's Discussion and Analysis of Financial Condition and
Results of Operations...........................................
Competition......................................................
Employees........................................................
Properties.......................................................
Executive Officers and Directors of Lincoln Benefit..............
Executive Compensation...........................................
State Regulation of Lincoln Benefit..............................
Separate Account.................................................
ADMINISTRATION...................................................
MARKET TIMING AND ASSET ALLOCATION SERVICES......................
DISTRIBUTION OF CONTRACTS........................................
LEGAL PROCEEDINGS................................................
LEGAL MATTERS....................................................
EXPERTS..........................................................
REGISTRATION STATEMENT...........................................
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.........
CONSOLIDATED FINANCIAL STATEMENTS................................ F-1
APPENDIX A--PORTFOLIOS AND PERFORMANCE DATA..................... A-1
APPENDIX B--ILLUSTRATION OF A MARKET VALUE ADJUSTMENT............ B-1
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
<PAGE>
DEFINITIONS
Please refer to this list for the meaning of the following terms:
ACCUMULATION PERIOD - The period, beginning on the Issue Date, during which
Contract Value builds up under your Contract.
ACCUMULATION UNIT - A unit of measurement which we use to calculate Contract
Value.
ANNUITANT - The natural person on whose life the annuity benefits under a
Contract are based.
ANNUITIZATION - The process to begin annuity payments under the Contract.
ANNUITIZED VALUE - The Contract Value adjusted by any applicable Market Value
Adjustment and less any applicable taxes.
ANNUITY DATE - The date on which annuity payments are scheduled to begin.
ANNUITY PERIOD - The period during which annuity payments are paid. The Annuity
Period begins on the Annuity Date.
ANNUITY UNIT - A unit of measurement which we use to calculate the amount of
Variable Annuity payments.
BENEFICIARY(IES) - The person(s) designated to receive any death benefits under
the Contract.
COMPANY ("WE," "US," "OUR," "LINCOLN BENEFIT") - Lincoln Benefit Life Company.
CONTRACT ANNIVERSARY - Each anniversary of the Issue Date.
CONTRACT OWNER ("YOU") - The person(s) having the privileges of ownership
defined in the Contract. If your Contract is issued as part of a retirement
plan, your ownership privileges may be modified by the plan.
CONTRACT VALUE - The sum of the values of your interests in the Subaccounts of
the Separate Account and the Fixed Account.
CONTRACT YEAR - Each twelve-month period beginning on the Issue Date and each
Contract Anniversary.
CONTRIBUTION YEAR - Each twelve-month period beginning on the date a Purchase
Payment is allocated to a Subaccount, or each anniversary of that date.
CREDIT ENHANCEMENT - An amount we add to your Contract Value when a Purchase
Payment is received. Each Credit Enhancement will be counted as earnings under
your Contract.
FIXED ACCOUNT - The portion of the Contract Value allocated to our general
account.
FIXED ANNUITY - A series of annuity payments that are fixed in amount.
GUARANTEE PERIODS - A period of years for which we have guaranteed a specific
effective annual interest rate on an amount allocated to the Fixed Account.
ISSUE DATE - The date when the Contract becomes effective.
LATEST ANNUITY DATE - The latest date by which you must begin annuity payments
under the Contract.
LOAN ACCOUNT - An account established for amounts transferred from the
Subaccounts or the Fixed Account as security for outstanding Contract loans.
MARKET VALUE ADJUSTMENT - An amount added to or subtracted from certain
transactions involving your interest in the Fixed Account, to reflect the impact
of changing interest rates.
NET INVESTMENT FACTOR - The factor used to determine the value of an
Accumulation Unit and Annuity Unit in any Valuation Period. We determine the Net
Investment Factor separately for each Subaccount.
NON-QUALIFIED PLAN - A retirement plan which does not receive special tax
treatment under Sections 401, 403(b), 408, 408A or 457 of the Tax Code.
PORTFOLIO(S) - The underlying mutual funds in which the Subaccounts invest. Each
Portfolio is an investment company registered with the SEC or a separate
investment series of a registered investment company.
PURCHASE PAYMENTS - Amounts paid to us as premium for the Contract by you or on
your behalf.
QUALIFIED PLAN - A retirement plan which receives special tax treatment under
Sections 401, 403(b), 408 or 408A of the Tax Code or a deferred compensation
plan for a state and local government or another tax exempt organization under
Section 457 of the Tax Code.
SEPARATE ACCOUNT - The Lincoln Benefit Life Variable Annuity Account, which is a
segregated investment account of the Company.
SUBACCOUNT - A subdivision of the Separate Account, which invests wholly in
shares of one of the Portfolios.
SURRENDER VALUE - The amount paid upon complete surrender of the Contract, equal
to the Contract Value, less any applicable premium taxes, Withdrawal Charge, and
the contract maintenance charge and increased or decreased by any Market Value
Adjustment.
TAX CODE - The Internal Revenue Code of 1986, as amended.
TREASURY RATE - The U.S. Treasury Note Constant Maturity Yield for the preceding
week as reported in Federal Reserve Bulletin Release H.15.
VALUATION DATE - Each day the New York Stock Exchange is open for business.
VALUATION PERIOD - The period of time over which we determine the change in the
value of the Subaccounts in order to price Accumulation Units and Annuity Units.
Each Valuation Period begins at the close of normal trading on the New York
Stock Exchange ("NYSE") currently 4:00 p.m. Eastern time on each Valuation Date
and ends at the close of the NYSE on the next Valuation Date.
VARIABLE ANNUITY - A series of annuity payments that vary in amount based on
changes in the value of the Subaccounts to which your Contract Value has been
allocated.
WITHDRAWAL CHARGE - The contingent deferred sales charge that may be required
upon some withdrawals.
FEE TABLES
CONTRACT OWNER TRANSACTION EXPENSES
Contingent Deferred Sales Charge -- Withdrawal Charge
(as a percentage of Purchase Payments)
CONTRIBUTION APPLICABLE CONTRIBUTION APPLICABLE
YEAR CHARGE YEAR CHARGE
- ------------ ---------- ------------ ----------
1 8%
2-3 7% 7 4%
4-5 6% 8 3%
6 5% 9+ 0
ANNUAL CONTRACT MAINTENANCE CHARGE (waived if total
Purchase Payments are greater than $40,000).................... $ 35.00
TRANSFER FEE (Applies solely to the second and
subsequent transfers within a calendar month.
We are currently waiving the transfer fee).................... $ 10.00
SEPARATE ACCOUNT EXPENSES (AS A PERCENTAGE OF
DAILY NET ASSET VALUE DEDUCTED FROM EACH OF THE
SUBACCOUNTS OF THE SEPARATE ACCOUNT)
Mortality and Expense Risk Charge*..................... 1.30%
Administrative Expense Charge.......................... 0.10%
---------
Total Separate Account Annual Expenses................. 1.40%
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* If you select the Enhanced Death Benefit Rider, the Mortality and Expense
Risk Charge will be equal to 1.50% of your Contract's average daily net
assets in the Separate Account.
PORTFOLIO COMPANY ANNUAL EXPENSES
(AS A PERCENTAGE OF PORTFOLIO AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
MANAGEMENT FEE RULE 12b-1 FEES OTHER EXPENSES TOTAL
-------------- --------------- -------------- -----
GOLDMAN SACHS VARIABLE INSURANCE TRUST
<S> <C> <C> <C> <C> <C>
Core Small Cap Equity (1) 0.75% 0 0.15% 0.90%
International Equity (1) 1.00% 0 0.25% 1.25%
J.P. MORGAN SERIES TRUST II
Small Company (after reimbursement)(2) 0.60% 0 0.55% 1.15%
LAZARD RETIREMENT SERIES, INC.
Emerging Markets 1.00% 0.25% 0 1.25%
International Equity 0.75% 0.25% 0 1.00%
LSA VARIABLE TRUST
Aggressive Equity (3) 0.95% 0 .30% 1.25%
Balanced (3) 0.85% 0 .30% 1.15%
Growth Equity (3) 0.85% 0 .30% 1.15%
Structured Equity (3) 0.75% 0 .30% 1.05%
Value Equity (3) 0.85% 0 .30% 1.15%
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS
Mid-Cap Growth (6) 0.75% 0 .30% 1.05%
Mid-Cap Value (6) 0.75% 0 .30% 1.05%
High Yield Bond (7) 0.50% 0 .30% 0.80%
OCC ACCUMULATION TRUST
Equity 0.80% 0 0 0.80%
Small Cap 0.80% 0 0 0.80%
PIMCO VARIABLE INSURANCE TRUST
Stocks PLUS Growth and Income (4) 0.40% 0 0.25% 0.65%
Foreign Bond (4) 0.60% 0 0.30% 0.90%
Total Return Bond (4) 0.40% 0 0.25% 0.65%
Money Market (4) 0.30% 0 0.20% 0.50%
SALOMON BROTHERS VARIABLE SERIES FUNDS
Capital (5) 0 0 1.00% 1.00%
</TABLE>
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(1) The investment advisers have voluntarily agreed to reduce Other Expenses to
the extent such expenses exceed the amount reflected above. Without such
reductions, Other Expenses and Total expenses for the period ended December
31, 1998 would have been 3.17 and 3.92% for CORE Small Cap Equity, and 1.97
and 2.97% for International Equity. Such expense reductions, if any, are
calculated monthly on a cumulative basis and may be discontinued or
modified by the Investment Advisers in their discretion at any time.
(2) Without reimbursement, Other Expenses and Total Operating Expenses would
have been 2.83% and 3.43% for Small Company. There is no guarantee that
such reimbursement will continue beyond December 31, 1999.
(3) The Manager has agreed to reduce Other Expenses or reimburse the Funds so
that no Fund will incur expenses that exceed 0.30% of its assets. The
Portfolios commenced operations with the offering of the Contracts
described in this Prospectus. Without these fee reductions or expense
reimbursements, the Manager estimates that Other Expenses and Total
Expenses will be [ ]. These fee reductions or expense reimbursements may be
terminated at any time without notice.
(4) The investment adviser has agreed to reduce its administrative fees
included in Total Expenses such that without the expense reduction Total
Expenses would have been 0.72, 0.92%, 0.67%, and .052% for Stocks PLUS,
Foreign Bond, Real Return Bond, and Money Market respectively.
(5) The fund manager is currently waiving all management fees and reimburses
the fund for certain expenses such that Total Operating Expenses for the
Fund will not exceed 1.00%. Without such waivers and reductions, Management
Fees, Other Expenses and Total Expenses would have been .85%, 2.41% and
3.26% respectively for the Capital Fund. The fund manager may discontinue
this waiver at any time.
(6) The management fee for each of the portfolios is 0.75% for the first $500
million in assets, 0.70% for $500 million to $1 billion in assets, and
0.65% for assets in excess of $1 billion. The advisor has agreed to reduce
its management fee and/or reimburse the Portfolio so that Total Annual
Operating expenses of the Portfolios will not exceed 1.05%, excluding
certain investment related expenses such as foreign country tax expense and
interest expense on amounts borrowed. Without such fee reductions and
reimbursements, Total Expenses for the period ended December 31, 1998 would
have been 1.57% for Mid Cap Value. For fiscal year ended December 31, 1998,
the adviser received a fee of (net of fee waivers) equal to 0.23% for
MidCap Value. Fee waivers and expense reimbursements may be terminated at
any time.
(7) The management fee for the portfolio is 0.50% for the first %500 million in
assets, 0.45% for $500 million to $1 billion in assets, and 0.40% for
assets in excess of $1 billion. The advisor has agreed to reduce its
management fee and/or reimburse the Portfolio so that Total Annual
Operating expenses of the Portfolios will not exceed 0.80%, excluding
certain investment related expenses such as foreign country tax expense and
interest expense on amounts borrowed. Without such fee reductions and
reimbursements, Total Expenses for the period ended December 31, 1998 would
have been 1.15% for High Yield Bond. For fiscal year ended December 31,
1998, the adviser received a fee of (net of fee waivers) equal to 0.15% for
High Yield Bond Value. Fee waivers and expense reimbursements may be waived
at any time.
EXAMPLES
IF YOU SURRENDER YOUR CONTRACT AT THE END OF THE APPLICABLE TIME PERIOD, YOU
WOULD PAY THE FOLLOWING EXPENSES ON A $1,000 INVESTMENT, ASSUMING A 4% CREDIT
ENHANCEMENT AND A 5% ANNUAL RETURN ON ASSETS.
<TABLE>
<CAPTION>
Sub-Account 1 Year 3 Years
- ----------------------------------------- ------- --------
<S> <C> <C>
Goldman CORE Small Cap Equity $93 $137
Goldman International Equity $97 $148
J.P. Morgan Small Company $96 $145
LAZARD Emerging Markets $97 $148
LAZARD International Equity $94 $140
LSA Aggressive Equity $97 $148
LSA Balanced $96 $145
LSA Growth Equity $96 $145
LSA Structured Equity $95 $142
LSA Value Equity $96 $145
Morgan Stanley Dean Witter Mid-Cap Growth $95 $142
Morgan Stanley Dean Witter Mid-Cap Value $95 $142
Morgan Stanley Dean Witter High Yield Bond $94 $140
OCC Equity $89 $124
OCC Small Cap $92 $134
PIMCO Stocks PLUS Growth and Income $92 $134
PIMCO Foreign Bond $91 $129
PIMCO Total Return Bond $92 $134
PIMCO Money Market $91 $129
Salomon Brothers Capital $93 $137
</TABLE>
If you annuitize or if you do not surrender your contact at the end of the
applicable time period, you would pay the following expenses on a $1,000
investment, assuming A 4% CREDIT ENHANCEMENT AND A 5% annual return on assets.
<TABLE>
<CAPTION>
Sub-Account 1 Year 3 Years
- ----------------------------------------- ------- --------
<S> <C> <C>
Goldman CORE Small Cap Equity $25 $77
Goldman International Equity $29 $89
J.P. Morgan Small Company $28 $85
LAZARD Emerging Markets $29 $89
LAZARD International Equity $26 $81
LSA Aggressive Equity $29 $89
LSA Balanced $28 $85
LSA Growth Equity $28 $85
LSA Structured Equity $27 $82
LSA Value Equity $28 $85
Morgan Stanley Dean Witter Mid-Cap Growth $27 $82
Morgan Stanley Dean Witter Mid-Cap Value $27 $82
Morgan Stanley Dean Witter High Yield Bond $26 $81
OCC Equity $21 $65
OCC Small Cap $24 $74
PIMCO Stocks PLUS Growth and Income $24 $74
PIMCO Foreign Bond $23 $69
PIMCO Total Return Bond $24 $74
PIMCO Money Market $23 $69
Salomon Brothers Capital $25 $77
</TABLE>
* We will not charge a Withdrawal Charge on Annuitization if you select a
Payment Option that provides payments over at least five years or over the
Annuitant's lifetime.
EXPLANATION OF FEE TABLES AND EXAMPLES
1. We have included the table and examples shown above to assist you in
understanding the costs and expenses that you will bear directly or indirectly
by investing in the Separate Account. The table reflects expenses of the
Separate Account as well as the Portfolios. For additional information, you
should read "Contract Charges," which begins on page [ ] below; you should also
read the sections relating to expenses of the Portfolios in their prospectuses.
The examples do not include any taxes or tax penalties you may be required to
pay if you surrender your Contract.
2. The examples assume that you did not make any transfers. We are currently
waiving the transfer fee, but in the future, we may decide to charge $10 for the
second and each subsequent transfer within a calendar month. Premium taxes are
not reflected. Currently, we deduct premium taxes (which range from 0% to 3.5%)
from Contract Value upon full surrender, death or annuitization.
3. To reflect the contract maintenance charge in the examples, we estimated an
equivalent percentage charge, which we calculated by dividing the total amount
of contract maintenance charges expected to be collected during a year by the
total estimated average net assets of the Subaccounts and the Fixed Account
attributable to the Contracts.
4. The examples reflect any Free Withdrawal Amounts.
NEITHER THE FEE TABLES NOR THE EXAMPLES SHOULD BE CONSIDERED REPRESENTATIONS OF
PAST OR FUTURE EXPENSES. YOUR ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. SIMILARLY, THE ANNUAL RATE OF RETURN OF 5% ASSUMED IN THE EXAMPLE IS NOT
AN ESTIMATE OR GUARANTEE OF FUTURE INVESTMENT PERFORMANCE.
QUESTIONS AND ANSWERS
ABOUT YOUR CONTRACT
The following are answers to some of the questions you may have about some of
the more important features of the Contract. The Contract is more fully
described in the rest of the Prospectus. Please read the Prospectus carefully.
1. WHAT IS THE CONTRACT?
The Contract is a flexible premium deferred variable annuity contract. It is
designed for tax-deferred retirement investing. The Contract is available for
non-qualified or qualified retirement plans. The Contract, like all deferred
annuity contracts, has two phases: the Accumulation Period and the Annuity
Period. During the Accumulation Period, earnings accumulate on a tax-deferred
basis and are taxed as income when you make a withdrawal. The Annuity Period
begins when you begin receiving payments under one of the annuity payment
options described in the answer to Question 2. The amount of money accumulated
under your Contract during the Accumulation Period will be used to determine the
amount of your annuity payments during the Annuity Period.
Your premiums are invested in one or more of the Subaccounts of the Separate
Account or allocated to the Fixed Account, as you instruct us. If we offer
additional Subaccounts in the future, we may limit your right to allocate your
Contract Value to up to twenty-one options under the Contract, counting each
Subaccount and the Fixed Account as one option. We will treat all of your
Contract Value allocated to the Fixed Account as one option for purposes of this
limit, even if you have chosen more than one Guarantee Period. The value of your
Contract will depend on the investment performance of the Subaccounts and the
amount of interest we credit to the Fixed Account.
Each Subaccount will invest in a single investment portfolio (a "Portfolio") of
a mutual fund. The Portfolios offer a range of investment objectives, from
conservative to aggressive. You bear the entire investment risk on amounts
allocated to the Subaccounts. The investment policies and risks of each
Portfolio are described in the accompanying prospectuses for the Portfolios.
In some states, you may also allocate all or part of your Contract Value to the
"Fixed Account", as described in the answer to Question 5.
2. WHAT ANNUITY OPTIONS DOES THE CONTRACT OFFER?
You may receive annuity payments on a fixed or a variable basis or a combination
of the two. We offer a variety of annuity options including:
- - a life annuity with payments guaranteed for five to twenty years;
- - a joint and full survivorship annuity, with payments guaranteed for five to
twenty years; and
- - fixed payments for a specified period of five to thirty years.
Call us to inquire about other options.
You may change your annuity option at any time before annuitization. You may
select the date to annuitize the Contract. The date you select, however, may be
no later than the later of the tenth Contract Anniversary or the Annuitant's
90th birthday. If your Contract was issued in connection with a qualified plan,
different deadlines may apply.
If you select annuity payments on a variable basis, the amount of our payments
to you will be affected by the investment performance of the Subaccounts you
have selected. The fixed portion of your annuity payments, on the other hand,
generally will be equal in amount to the initial payment we determine. As
explained in more detail below, however, during the Annuity Period you will have
a limited ability to change the relative weighting of the Subaccounts on which
your variable annuity payments are based or to increase the portion of your
annuity payments consisting of Fixed Annuity payments.
3. HOW DO I BUY A CONTRACT?
You can obtain a Contract application from your Lincoln Benefit agent. You must
pay at least $10,000 in Purchase Payments during the first Contract Year.
Purchase Payments must be at least $500, unless you enroll in an automatic
payment plan. Your periodic payments in an automatic payment plan must be at
least $100 per month. We may lower these minimums at our sole discretion. We
will not issue a Contract to you if either you or the Annuitant is age 85 or
older before we receive your application.
4. WHAT ARE MY INVESTMENT CHOICES UNDER THE CONTRACT?
You can allocate and reallocate your investment among the Subaccounts, each of
which in turn invests in a single Portfolio. Under the Contract, the Separate
Account currently invests in the following Portfolios:
Fund Portfolio(s)
- ----------------------------- -------------------------------------
- --------------------------------------------------------------------
Goldman Sachs Variable CORE Small Cap Equity
Insurance Trust International Equity
- --------------------------------------------------------------------
J.P. Morgan Series Small Company
Trust II
- --------------------------------------------------------------------
LAZARD Retirement Series, Inc. Emerging Markets
International Equity
- --------------------------------------------------------------------
LSA Variable Series Trust Aggressive Equity
Balanced
Growth Equity
Structured Equity
Value Equity
- --------------------------------------------------------------------
Morgan Stanley Dean Witter Mid-Cap Growth
Universal Funds Mid-Cap Value
High Yield Bond
- --------------------------------------------------------------------
OCC Accumulation Trust Equity
Small Cap
- --------------------------------------------------------------------
PIMCO Variable Insurance Trust Stocks PLUS
Foreign Bond
Total Return Bond
Money Market
- --------------------------------------------------------------------
Salomon Brothers Variable Capital
Series Funds
- --------------------------------------------------------------------
Some of the Portfolios described in this Prospectus may not be available in your
Contract.
Each Portfolio holds its assets separately from the assets of the other
Portfolios. Each Portfolio has distinct investment objectives and policies which
are described in the accompanying prospectuses for the Portfolios.
5. WHAT IS THE FIXED ACCOUNT OPTION?
We offer two Fixed Account interest crediting options: the Guaranteed Maturity
Fixed Account Option and the Dollar Cost Averaging Fixed Account Option.
We will credit interest to amounts allocated to the Guaranteed Maturity Fixed
Account Option at a specified rate for a specified Guarantee Period. You select
the Guarantee Period for each amount that you allocate to the Guaranteed
Maturity Fixed Account Option. We will tell you what interest rates and
Guarantee Periods we are offering at a particular time. At the end of each
Guarantee Period, you may select a new Guarantee Period from among the choices
we are then making available or transfer or withdraw the relevant amount from
the Fixed Account without any Market Value Adjustment.
We may offer Guarantee Periods ranging from one to ten years in length. We are
currently offering Guarantee Periods of one, three, five, seven, and ten years
in length. In the future we may offer Guarantee Periods of different lengths or
stop offering some Guarantee Periods.
We will not change the interest rate credited to a particular allocation until
the end of the relevant Guarantee Period. From time to time, however, we may
change the interest rate that we offer to credit to new allocations to the
Guaranteed Maturity Fixed Account Option and to amounts rolled over in the Fixed
Account for new Guarantee Periods.
In addition, if you participate in our dollar cost averaging program, you may
designate amounts to be held in the Dollar Cost Averaging Fixed Account Option
until they are transferred monthly to the Subaccounts or Guarantee Periods of
your choosing. When you make an allocation to the Fixed Account for this
purpose, we will set an interest rate applicable to that amount. We will then
credit interest at that rate to that amount until it has been entirely
transferred to your chosen Subaccounts or Guarantee Periods. We will complete
the transfers within one year of the allocation. In our discretion we may change
the rate that we set for new allocations to the Fixed Account for the dollar
cost averaging program. We will never, however, set a rate less than an
effective annual rate of 3%.
A Market Value Adjustment may increase or decrease the amount of certain
transactions involving the Guaranteed Maturity Fixed Account, to reflect changes
in interest rates. As a general rule, we will apply a Market Value Adjustment to
the following transactions: (1) when you withdraw funds from the Guaranteed
Maturity Fixed Account Option in an amount greater than the Free Withdrawal
Amount (which is described in the answer to Question 6); (2) when you transfer
funds from the Guaranteed Maturity Fixed Account Option to the Subaccounts; (3)
when you allocate part of your interest in the Guaranteed Maturity Fixed Account
Option to a new Guarantee Period before the end of the existing Guarantee
Period; (4) when you annuitize your Contract; and (5) when we pay a death
benefit. We will not apply a Market Value Adjustment to a transaction to the
extent that: (1) it occurs within 30 days after the end of a Guarantee Period
applicable to the funds involved in the transaction; or (2) it is necessary to
meet IRS minimum withdrawal requirements. We determine the amount of a Market
Value Adjustment using a formula that takes into consideration: (1) whether
current interest rates differ from interest rates at the beginning of the
applicable Guarantee Period; and (2) how many years are left until the end of
the Guarantee Period. As a general rule, if interest rates have dropped, the
Market Value Adjustment will be an addition; if interest rates have risen, the
Market Value Adjustment will be a deduction. It is therefore possible that if
you withdraw an amount from the Fixed Account during a Guarantee Period, a
Market Value Adjustment may cause you to receive less than you initially
allocated to the Fixed Account.
6. WHAT ARE MY EXPENSES UNDER THE CONTRACT?
CONTRACT MAINTENANCE CHARGE. During the Accumulation Period, each year we
subtract an annual contract maintenance charge of $35 from your Contract Value
allocated to the Subaccounts. We will waive this charge if you pay $50,000 or
more in Purchase Payments or if you allocate all of your Contract Value to the
Fixed Account.
During the Annuity Period, we will subtract the annual contract maintenance
charge in equal parts from your annuity payments. We waive this charge if on the
Annuity Date your Contract Value is $40,000 or more or if all payments are Fixed
Annuity payments.
ADMINISTRATIVE EXPENSE CHARGE AND MORTALITY AND EXPENSE RISK CHARGE. We impose a
mortality and expense risk charge at an annual rate of 1.30% of average daily
net assets and an administrative expense charge at an annual rate of .10% of
average daily net assets. If you select our optional enhanced death benefit
rider, however, we may charge you a higher mortality and expense risk charge.
These charges are assessed each day during the Accumulation Period and the
Annuity Period. We guarantee that we will not raise these charges.
TRANSFER FEE. Although we currently are not charging a transfer fee, the
Contract permits us to charge you up to $10 per transfer for each transfer after
the first transfer in each month.
WITHDRAWAL CHARGE (CONTINGENT DEFERRED SALES CHARGE). During the Accumulation
Period, you may withdraw all or part of the value of your Contract before your
death or, if the Contract is owned by a company or other legal entity, before
the Annuitant's death. Certain withdrawals may be made without payment of any
Withdrawal Charge, which is a contingent deferred sales charge. Other
withdrawals are subject to the Withdrawal Charge.
The Withdrawal Charge will vary depending on how many complete years have passed
since you paid the Purchase Payment being withdrawn. The Withdrawal Charge
applies to each Purchase Payment for eight complete years from the date of the
Payment (each a "Contribution Year") as follows:
CONTRIBUTION APPLICABLE
YEAR CHARGE
- ------------ ----------
1 8%
2-3 7%
4-5 6%
6 5%
7 4%
8 3%
9+ 0%
In determining Withdrawal Charges, we will deem your Purchase Payments to be
withdrawn on a first-in first-out basis.
Each year, free of Withdrawal Charge or any otherwise applicable Market Value
Adjustment, you may withdraw the Free Withdrawal Amount, which equals:
(a) the greater of:
- earnings not previously withdrawn; or
- 15% of your total Purchase Payments made in the most recent eight
years; plus
(b) an amount equal to your total Purchase Payments made more than eight
years ago, to the extent not previously withdrawn.
In most states, we also may waive the Withdrawal Charge if you: (1) require
long-term medical or custodial care outside the home; or (2) are diagnosed with
a terminal illness. These provisions will apply to the Annuitant, if the
Contract is owned by a company or other legal entity. Additional restrictions
and costs may apply to Contracts issued in connection with qualified plans. In
addition, withdrawals may trigger tax liabilities and penalties. You should
consult with your tax counselor to determine what effect a withdrawal might have
on your tax liability. As described in the answer to Question 3, we may increase
or decrease certain withdrawals by a Market Value Adjustment.
PREMIUM TAXES. Certain states impose a premium tax on annuity purchase payments
received by insurance companies. Any premium taxes relating to the Contract may
be deducted from Purchase Payments or the Contract Value when the tax is
incurred or at a later time. State premium taxes generally range from 0% to
3.5%.
OTHER EXPENSES. In addition to our charges under the Contract, each Portfolio
deducts amounts from its assets to pay its investment advisory fees and other
expenses.
7. HOW WILL MY INVESTMENT IN THE CONTRACT BE TAXED?
You should consult a qualified tax adviser for personalized answers. Generally,
earnings under variable annuities are not taxed until amounts are withdrawn or
distributions are made. This deferral of taxes is designed to encourage
long-term personal savings and supplemental retirement plans. The taxable
portion of a withdrawal or distribution is taxed as ordinary income.
Special rules apply if the Contract is owned by a company or other legal entity.
Generally, such an owner must include in income any increase in the excess of
the Contract Value over the "investment in the contract" during the taxable
year.
8. DO I HAVE ACCESS TO MY MONEY?
At any time during the Accumulation Period, we will pay you all or part of the
value of your Contract, minus any applicable charge, if you surrender your
Contract or request a partial withdrawal. Under some plans, you may also take a
loan against the value of your Contract. Generally, a partial withdrawal must
equal at least $50, and after the withdrawal your remaining Contract Value must
at least equal $500.
Although you have access to your money during the Accumulation Period, certain
charges, such as the contract maintenance charge, the Withdrawal Charge, and
premium tax charges, may be deducted on a surrender or withdrawal. You may also
incur federal income tax liability or tax penalties. In addition, if you have
allocated some of the value of your Contract to the Fixed Account, the amount of
your surrender proceeds or withdrawal may be increased or decreased by a Market
Value Adjustment.
After annuitization, under certain settlement options you may be entitled to
withdraw the commuted value of the remaining payments.
9. WHAT IS THE DEATH BENEFIT?
We will pay a death benefit while the Contract is in force and before the
Annuity Date, if the Contract Owner dies, or if the Annuitant dies and the
Contract Owner is not a natural person. To obtain payment of the Death Benefit,
the Beneficiary must submit to us written proof of death as specified in the
Contract.
The standard death benefit is the greatest of the following:
(1) your total Purchase Payments reduced proportionately for any prior partial
withdrawals;
(2) your Contract Value;
(3) the amount you would have received by surrendering your Contract; or
(4) your Contract Value on each Contract Anniversary evenly divisible by eight,
increased by the total Purchase Payments since that anniversary and reduced
proportionately by any partial withdrawals since that anniversary.
We also offer an optional enhanced death benefit rider, which is described later
in this prospectus.
We will determine the value of the death benefit on the day that we receive all
of the information that we need to process the claim.
10. WHAT ELSE SHOULD I KNOW?
ALLOCATION OF PURCHASE PAYMENTS. You allocate your initial Purchase Payment
among the Subaccounts and the Fixed Account in your Contract application. You
may make your allocations in specific dollar amounts or percentages, which must
be whole numbers that add up to 100%. When you make subsequent Purchase
Payments, you may again specify how you want your payments allocated. If you do
not, we will automatically allocate the payment based on your most recent
instructions. You may not allocate Purchase Payments to the Fixed Account if it
is not available in your state.
CREDIT ENHANCEMENTS. We will credit your Contract Value with a Credit
Enhancement of 4% of each Purchase Payment before we allocate that Purchase
Payment among the Subaccounts or to the Fixed Account. We will deduct certain
Credit Enhancements from the amount paid you, if you cancel your Contract during
the free look period. The Credit Enhancements will be allocated in the same
proportions as the corresponding Purchase Payment.
TRANSFERS. During the Accumulation Period, you may transfer Contract Value among
the Subaccounts and from the Subaccounts to the Fixed Account. If we offer
additional Subaccounts in the future, we may limit your right to allocate your
Contract Value to no more than twenty-one options under the Contract. While you
may also transfer amounts from the Fixed Account, a Market Value Adjustment may
apply. You may instruct us to transfer Contract Value by writing or calling us.
You may also use our automatic dollar cost averaging or portfolio rebalancing
programs. You may not use both programs at the same time.
Under the dollar cost averaging program, amounts are automatically transferred
at regular intervals from the Fixed Account or a Subaccount of your choosing to
up to eight options, including other Subaccounts or the Fixed Account. Transfers
from the Dollar Cost Averaging Fixed Account may be made monthly only. Transfers
from Subaccounts may be made monthly, quarterly, or annually.
Under the portfolio rebalancing program, you can maintain the percentage of your
Contract Value allocated to each Subaccount at a pre-set level. Investment
results will shift the balance of your Contract Value allocations. If you elect
rebalancing, we will automatically transfer your Contract Value back to the
specified percentages at the frequency (monthly, quarterly, semiannually,
annually) that you specify. You may not include the Fixed Account in a portfolio
rebalancing program. You also may not elect rebalancing after annuitization.
During the Annuity Period, you may not make any transfers for the first six
months after the Annuity Date. Thereafter, you may make transfers among the
Subaccounts or from the Subaccounts to increase your Fixed Annuity payments.
Your transfers, however, must be at least six months apart. You may not,
however, convert any portion of your right to receive Fixed Annuity payments
into Variable Annuity payments.
FREE-LOOK PERIOD. You may cancel the Contract by returning it to us within 10
days after you receive it, or after whatever longer period may be permitted by
state law. You may return it by delivering it or mailing it to us. If you return
the Contract, the Contract terminates and, in most states, we will pay you an
amount equal to the Contract Value on the date we receive the Contract from you,
less any amount that we applied as a Credit Enhancement to your Contract. The
Contract Value may be more or less than your Purchase Payments. In some states,
we are required to send you the amount of your Purchase Payments. The amount
returned to you will always at least equal your Contract Value (minus any unpaid
loans) less the Withdrawal Charge. Since state laws differ as to the
consequences of returning a Contract, you should refer to your Contract for
specific information about your circumstances.
11. WHO CAN I CONTACT FOR MORE INFORMATION?
You can write to us at Lincoln Benefit Life Company, P.O. Box 82532, Lincoln,
Nebraska 68501-2532, or call us at (800) 525-9287.
CONDENSED FINANCIAL INFORMATION
We have included the Separate Account's statements of assets and liabilities and
contract owners' equity as of December 31, 1998 and the related statements of
operations for the year then ended, and the statements of changes in contract
owners' equity for the years ended December 31, 1998, and 1997, which have been
audited by Deloitte & Touche LLP, independent auditors, in the Statement of
Additional Information.* These financial statements do not reflect any assets
attributable to the Contracts during the period covered by these financial
statements. The Statement of Additional Information also includes a brief
explanation of how performance of the Subaccounts is calculated.
* To be provided by pre-effective Amendment
DESCRIPTION OF THE CONTRACTS
SUMMARY. The Contract is a deferred annuity contract designed to aid you in
long-term financial planning. You may add to the Contract Value by making
additional Purchase Payments. In addition, the Contract Value will change to
reflect the performance of the Subaccounts to which you allocate your Purchase
Payments and your Contract Value, as well as to reflect Credit Enhancements and
interest credited to amounts allocated to the Fixed Account. You may withdraw
your Contract Value by making a partial withdrawal or by surrendering your
Contract. Upon Annuitization, we will pay you benefits under the Contract in the
form of an annuity, either for the life of the Annuitant or for a fixed number
of years. All of these features are described in more detail below.
CONTRACT OWNER. As the Contract Owner, you are the person usually entitled to
exercise all rights of ownership under the Contract. You usually are also the
person entitled to receive benefits under the Contract or to choose someone else
to receive benefits. If your Contract was issued under a Qualified Plan,
however, the Plan may limit or modify your rights and privileges under the
Contract and may limit your right to choose someone else to receive benefits. We
will not issue a Contract to a purchaser who has attained age 85, or where the
Annuitant has attained age 85.
ANNUITANT. The Annuitant is the living person whose life span is used to
determine annuity payments. You initially designate an Annuitant in your
application. You may change the Annuitant at any time before annuity payments
begin. If your Contract was issued under a plan qualified under Section 403(b),
408 or 408A of the Tax Code, you must be the Annuitant. You may also designate a
Joint Annuitant, who is a second person on whose life annuity payments depend.
Additional restrictions may apply in the case of Qualified Plans. If you are not
the Annuitant and the Annuitant dies before annuity payments begin, then either
you become the new Annuitant or you must name another person as the new
Annuitant. You must attest that the Annuitant is alive in order to annuitize
your Contract.
MODIFICATION OF THE CONTRACT. Only a Lincoln Benefit officer may approve a
change in or waive any provision of the Contract. Any change or waiver must be
in writing. None of our agents has the authority to change or waive the
provisions of the Contract.
We are permitted to change the terms of the Contract if it is necessary to
comply with changes in the law. If a provision of the Contract is inconsistent
with state law, we will follow state law.
ASSIGNMENT. Before the Annuity Date, if the Annuitant is still alive, you may
assign a Contract issued under a Non-Qualified Plan that is not subject to Title
1 of the Employee Retirement Income Security Act of 1974 ("ERISA"). If a
Contract is issued pursuant to a Qualified Plan or a Non-Qualified Plan that is
subject to Title 1 of ERISA, the law prohibits some types of assignments,
pledges and transfers and imposes special conditions on others. An assignment
may also result in taxes or tax penalties.
We will not be bound by any assignment until we receive written notice of it.
Accordingly, until we receive written notice of an assignment, we will continue
to act as though the assignment had not occurred. We are not responsible for the
validity of any assignment.
BECAUSE OF THE POTENTIAL TAX CONSEQUENCES AND ERISA ISSUES ARISING FROM AN
ASSIGNMENT, YOU SHOULD CONSULT WITH AN ATTORNEY BEFORE TRYING TO ASSIGN YOUR
CONTRACT.
FREE LOOK PERIOD. You may cancel the Contract by returning it to us within 10
days after you receive it, or within whatever longer period may be permitted by
state law. You may return it by delivering it to your agent or mailing it to us.
If you return the Contract, the Contract terminates and, in most states, we will
pay you an amount equal to the Contract Value on the date we receive the
Contract from you, less any amount that we applied as a Credit Enhancement to
your Contract. The Contract Value at that time may be more or less than your
Purchase Payments. However, the amount returned to you will always be more than
your Contract Value (minus any unpaid loans) less the Withdrawal Charge.
In some states, if you exercise your "free look" rights, we are required to
return the amount of your Purchase Payments. Currently, if you live in one of
those states,on the Issue Date we will allocate your Purchase Payment to the
Subaccounts and the Fixed Account Options as you specified in your application.
However, we reserve the right in the future to delay allocating your Purchase
Payments to the Subaccounts you have selected or to the Fixed Account until 20
days after the Issue Date or, if your state's free look period is longer than
ten days, for ten days plus the period required by state law. During that time,
we will allocate your Purchase Payment to the PIMCO Money Market Subaccount.
Your Contract will contain specific information about your free-look rights in
your state.
PURCHASES AND CONTRACT VALUE
MINIMUM PURCHASE PAYMENT. The minimum initial Purchase Payment for a Contract is
$10,000. You may pay it in a lump sum or in installments of your choice over the
first Contract Year. You may not pay more than $1 million in Purchase Payments
without our prior approval. As a general rule, subsequent Purchase Payments may
be made in amounts of $500 or more. Subsequent Purchase Payments made as part of
an Automatic Payment Plan, however, may be as small as $100 per month. We may
lower these minimums if we choose. We may refuse any Purchase Payment at any
time.
AUTOMATIC PAYMENT PLAN. You may make scheduled Purchase Payments of $100 or more
per month by automatic payment through your bank account. Call or write us for
an enrollment form.
CREDIT ENHANCEMENT. We will add a Credit Enhancement to your Contract Value when
each Purchase Payment is received. The Credit Enhancement is payable from our
general account. The amount of a Credit Enhancement is 4% of each Purchase
Payment. The Credit Enhancement will be allocated among the Subaccounts and
Fixed Account in the same proportion that the applicable Purchase Payment is
allocated. The amount returned if the Contract Owner exercises his or her right
to return the Contract during your Free Look period will be reduced by any
Credit Enhancements applied.
Credit Enhancements are treated as "earnings" for purposes of determining
Withdrawal Charges and free withdrawal amounts on surrenders and partial
withdrawals. Similarly, Credit Enhancements are not treated as an "investment in
the contract" for tax purposes.
ALLOCATION OF PURCHASE PAYMENTS. Your Purchase Payments are allocated to the
Subaccount(s) and the Fixed Account in the proportions that you have selected.
You must specify your allocation in your Contract application, either as
percentages or specific dollar amounts. If you make your allocation in
percentages, the total must equal 100%. We will allocate your subsequent
Purchase Payments in those percentages, until you give us new allocation
instructions. You may not allocate Purchase Payments to the Fixed Account if it
is not available in your state.
If we offer additional Subaccounts in the future, we may limit your right to
allocate your Purchase Payments to up to twenty-one options, counting each
Subaccount and the Fixed Account as one option. For this purpose, we will treat
all of your allocations to the Fixed Account as one option, even if you choose
more than one Guarantee Period.
If your application is complete, we will issue your Contract within two business
days of its receipt at our P.O. Box shown on the first page of this prospectus.
If your application for a Contract is incomplete, we will notify you and seek to
complete the application within five business days. For example, if you do not
fill in allocation percentages, we will contact you to obtain the missing
percentages. If we cannot complete your application within five business days
after we receive it, we will return your application and your Purchase Payment,
unless you expressly permit us to take a longer time.
Usually, we will allocate your initial Purchase Payment to the Subaccounts and
the Fixed Account, as you have instructed us, on the Issue Date. We will
allocate your subsequent Purchase Payments on the date that we receive them at
the next computed Accumulation Unit Value.
In some states, however, we are required to return at least your Purchase
Payment if you cancel your Contract during the "free-look" period. In those
states, we currently will allocate your Purchase Payments on the Issue Date as
you have instructed us, as described above. In the future, however, we reserve
the right, if you live in one of those states, to allocate all Purchase Payments
received during the "free-look period" to the PIMCO Money Market Subaccount. If
we exercise that right and your state's free look period is ten days, we will
transfer your Purchase Payments to your specified Subaccounts or the Fixed
Account 20 days after the Issue Date; if your state's free look period is
longer, we will transfer your Purchase Payment after ten days plus the period
required by state law have passed.
We determine the number of Accumulation Units in each Subaccount to allocate to
your Contract by dividing that portion of your Purchase Payment allocated to a
Subaccount by that Subaccount's Accumulation Unit Value on the Valuation Date
when the allocation occurs.
CONTRACT VALUE. We will establish an account for you and will maintain your
account during the Accumulation Period. The total value of your Contract at any
time is equal to the sum of the value of your Accumulation Units in the
Subaccounts you have selected, plus the value of your interest in the Fixed
Account.
SEPARATE ACCOUNT ACCUMULATION UNIT VALUE. As a general matter, the Accumulation
Unit Value for each Subaccount will rise or fall to reflect changes in the share
price of the Portfolio in which the Subaccount invests. In addition, we subtract
from Accumulation Unit Value amounts reflecting the mortality and expense risk
charge, administrative expense charge, and any provision for taxes that have
accrued since we last calculated the Accumulation Unit Value. We determine
Withdrawal Charges, transfer fees and contract maintenance charges separately
for each Contract. They do not affect Accumulation Unit Value. Instead, we
obtain payment of those charges and fees by redeeming Accumulation Units.
We determine a separate Accumulation Unit Value for each Subaccount. We also
determine a separate set of Accumulation Unit Values reflecting the cost of the
enhanced death benefit rider described on page A-1 below. If we elect or are
required to assess a charge for taxes, we may calculate a separate Accumulation
Unit Value for Contracts issued in connection with Non-Qualified and Qualified
Plans, respectively, within each Subaccount. We determine the Accumulation Unit
Value for each Subaccount Monday through Friday on each day that the New York
Stock Exchange is open for business.
You should refer to the prospectuses for the Portfolios which accompany this
prospectus for a description of how the assets of each Portfolio are valued,
since that determination has a direct bearing on the Accumulation Unit Value of
the corresponding Subaccount and, therefore, your Contract Value.
TRANSFER DURING ACCUMULATION PERIOD. During the Accumulation Period, you may
transfer Contract Value among the Fixed Account and the Subaccounts in writing
or by telephone. Currently, there is no minimum transfer amount. The Contract
permits us to set a minimum transfer amount in the future. You may not make a
transfer that would result in your allocating your Contract Value to more than
twenty-one options under the Contract at one time.
As a general rule, we only make transfers on days when we and the NYSE are open
for business. If we receive your request on one of those days, we will make the
transfer that day. We close our office for business on certain days immediately
preceding or following certain national holidays when the NYSE is open for
business. For calendar year 1999, our office will be closed on July 5th,
November 26th, December 24th and December 31st. For transfers requested on these
days, we will make the transfer on the first subsequent day on which we and the
NYSE are open.
If you transfer an amount from the Fixed Account to a Subaccount before the end
of the applicable Guarantee Period or you allocate an amount in the Fixed
Account to a new Guarantee Period before the end of the existing Guarantee
Period, we usually will increase or decrease the amount by a Market Value
Adjustment. The calculation of the Market Value Adjustment is described in
"Market Value Adjustment" on page [ ] below.
Transfers within 30 days after the end of the applicable Guarantee Period are
not subject to a Market Value Adjustment.
The investment advisers to the Portfolios have the right to reject requests for
transfers should they determine that executing such transfer requests may impair
the interests of other contract owners in the Portfolio. The Contract permits us
to defer transfers from the Fixed Account for up to six months from the date you
ask us.
You may not transfer Contract Value into the Dollar Cost Averaging Fixed Account
Option. You may not transfer Contract Value out of the Dollar Cost Averaging
Fixed Account Option except as part of a Dollar Cost Averaging program.
TRANSFERS AUTHORIZED BY TELEPHONE. You may make transfers by telephone, if you
first send us a completed authorization form. The cut off time for telephone
transfer requests is 4:00 p.m. Eastern time. Calls completed before 4:00 p.m.
will be effected on that day at that day's price. Calls completed after 4:00
p.m. will be effected on the next day on which we and the NYSE are open for
business, at that day's price.
We may charge you the transfer fee described on page [ ] below, although we
currently are waiving it. In addition, we may suspend, modify or terminate the
telephone transfer privilege at any time without notice.
We use procedures that we believe provide reasonable assurance that telephone
authorized transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
AUTOMATIC DOLLAR COST AVERAGING PROGRAM. Under our Automatic Dollar Cost
Averaging program, you may authorize us to transfer a fixed dollar amount at
fixed intervals from the Dollar Cost Averaging Fixed Account Option or a
Subaccount of your choosing to up to eight options, including other Subaccounts
or the Guaranteed Maturity Fixed Account Option. The interval between transfers
from the Dollar Cost Averaging Fixed Account may be monthly only. The interval
between transfers from Subaccounts may be monthly, quarterly, or annually, at
your option. The transfers will be made at the Accumulation Unit Value on the
date of the transfer. The transfers will continue until you instruct us
otherwise, or until your chosen source of transfer payments is exhausted.
Currently, the minimum transfer amount is $100 per transfer. However, if you
wish to Dollar Cost Average to a Guaranteed Maturity Fixed Account Option, the
minimum amount that must be transferred into any one Option is $500. We may
change this minimum or grant exceptions. If you elect this program, the first
transfer will occur one interval after your Issue Date. You may not use the
Dollar Cost Averaging program to transfer amounts from the Guaranteed Maturity
Fixed Account Option.
Your request to participate in this program will be effective when we receive
your completed application at the P.O. Box given on the first page of this
prospectus. Call or write us for a copy of the application. You may elect to
increase, decrease or change the frequency or amount of transfers under a Dollar
Cost Averaging program. We will not charge a transfer fee for Dollar Cost
Averaging.
The theory of dollar cost averaging is that you will purchase greater numbers of
units when the unit prices are relatively low rather than when the prices are
higher. As a result, when purchases are made at fluctuating prices, the average
cost per unit is less than the average of the unit prices on the purchase dates.
However, participation in this program does not assure you of a greater profit
from your purchases under the program; nor will it prevent or necessarily reduce
losses in a declining market. You may not use Dollar Cost Averaging and
Portfolio Rebalancing at the same time.
PORTFOLIO REBALANCING. Portfolio Rebalancing allows you to maintain the
percentage of your Contract Value allocated to each Subaccount at a pre-set
level. For example, you could specify that 30% of your Contract Value should be
in the Balanced Portfolio, 40% in the Growth Portfolio-Janus Aspen Series and
30% in Federated High Income Bond Fund II. Over time, the variations in each
Subaccount's investment results will shift the balance of your Contract Value
allocations. Under the Portfolio Rebalancing feature, each period, if the
allocations change from your desired percentages, we will automatically transfer
your Contract Value, including new Purchase Payments (unless you specify
otherwise), back to the percentages you specify. Portfolio Rebalancing is
consistent with maintaining your allocation of investments among market
segments, although it is accomplished by reducing your Contract Value allocated
to the better performing segments.
You may choose to have rebalances made monthly, quarterly, semi-annually, or
annually until your Annuity Date. Portfolio Rebalancing is not available after
you annuitize. We will not charge a transfer fee for Portfolio Rebalancing. No
more than eight Subaccounts can be included in a Portfolio Rebalancing program
at one time. You may not include the Fixed Account in a Portfolio Rebalancing
program.
You may request Portfolio Rebalancing at any time before your Annuity Date by
submitting a completed written request to us at the P.O. Box given on the first
page of this prospectus. Please call or write us for a copy of the request form.
If you stop Portfolio Rebalancing, you must wait 30 days to begin again. In your
request, you may specify a date for your first rebalancing. If you specify a
date fewer than 30 days after your Issue Date, your first rebalance will be
delayed one month. If you request Portfolio Rebalancing in your Contract
application and do not specify a date for your first rebalancing, your first
rebalance will occur one period after the Issue Date. For example, if you
specify quarterly rebalancing, your first rebalance will occur three months
after your Issue Date. Otherwise, your first rebalancing will occur one period
after we receive your completed request form. All subsequent rebalancing will
occur at the intervals you have specified on the day of the month that coincides
with the same day of the month as your Contract Anniversary Date.
Generally, you may change the allocation percentages, frequency, or choice of
Subaccounts at any time. If your total Contract Value subject to rebalancing
falls below any minimum value that we may establish, we may prohibit or limit
your use of Portfolio Rebalancing. You may not use Dollar Cost Averaging and
Portfolio Rebalancing at the same time. We may change, terminate, limit, or
suspend Portfolio Rebalancing at any time.
THE INVESTMENT AND FIXED ACCOUNT OPTIONS
SEPARATE ACCOUNT INVESTMENTS
THE PORTFOLIOS. Each of the Subaccounts of the Separate Account invests in the
shares of one of the Portfolios. Each Portfolio is either an open-end management
investment company registered under the Investment Company Act of 1940 or a
separate investment series of an open-end management investment company. We have
briefly described the Portfolios below. You should consult the current
prospectuses for the Portfolios for more detailed and complete information
concerning the Portfolios. If you do not have a prospectus for a Portfolio,
contact us and we will send you a copy. Appendix B contains a description of how
advertised performance data for the Subaccounts are computed.
We do not promise that the Portfolios will meet their investment objectives.
Amounts you have allocated to Subaccounts may grow in value, decline in value,
or grow less than you expect, depending on the investment performance of the
Portfolios in which those Subaccounts invest. You bear the investment risk that
those Portfolios possibly will not meet their investment objectives. You should
carefully review their prospectuses before allocating amounts to the Subaccounts
of the Separate Account.
GOLDMAN SACHS VARIABLE INSURANCE TRUST
CORE SMALL CAP EQUITY FUND (investment adviser: Goldman Sachs Asset Management)
seeks long-term growth of capital through a broadly diversified portfolio of
equity securities of U.S. issuers which are included in the Russell 2000 Index
at the time of investment.
INTERNATIONAL EQUITY FUND (investment adviser: Goldman Sachs Asset Management
International) seeks long-term capital appreciation through investments in
equity securities of companies that are organized outside the U.S. or whose
securities are principally traded outside the U.S.
J.P. MORGAN SERIES TRUST II (investment adviser: J.P. Morgan Investment
Management Inc.)
SMALL COMPANY PORTFOLIO seeks to provide a high total return from a portfolio of
equity securities of small companies. Total return will consist of realized and
unrealized capital gains and losses plus income less expenses. The Portfolio
invests at least 65% of the value of its total assets in the common stock of
small U.S. companies primarily with market capitalizations less than $1 billion.
LAZARD RETIREMENT SERIES, Inc. (investment adviser: Lazard Asset Management)
EMERGING MARKETS PORTFOLIO seeks long-term capital appreciation. This Portfolio
invests primarily in equity securities of non-United States companies whose
principal activities are in emerging market countries that the Investment
Manager believes are undervalued based on their earnings, cash flow or asset
values.
INTERNATIONAL EQUITY PORTFOLIO seeks long-term capital appreciation. This
Portfolio invests primarily in the equity securities of non-United States
companies whose total market value is more than $1 billion that the investment
adviser believes are undervalued based on their earnings, cash flow or asset
values.
LSA VARIABLE SERIES TRUST (manager: LSA Asset Management LLC)
AGGRESSIVE EQUITY FUND (investment adviser: Morgan Stanely Asset Management)
seeks to provide capital appreciation by investment primarily in equity
securities of U.S. and foreign companies.
GROWTH EQUITY FUND (investment adviser: Goldman Sachs Asset Management) seeks to
provide long-term growth of capital.
STRUCTURED EQUITY FUND (investment adviser: J.P. Morgan Investment Management
Inc.) seeks to provide a consistently high total return from a broadly
diversified portfolio of equity securities with risk characteristics similar to
the Standard & Poor's 500 Stock Index.
VALUE EQUITY FUND (investment adviser: Salomon Brothers Asset Management Inc.)
seeks to provide long-term growth of capital with current income as a secondary
objective.
BALANCED FUND (investment adviser: OpCap Advisor) seeks to provide a combination
of growth of capital and investment income (growth of capital is the primary
objective) by investing in a mix of equity and debt.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS (investment adviser: Morgan Stanely
Asset Management, Inc. and Miller Anderson & Sherrerd, LLP)
MID CAP VALUE PORTFOLIO seeks long term capital growth by investing primarily in
common stocks and other equity securities. The Advisor particularly focuses on
the expectations of stock analysts and invests the Portfolio in stocks of
companies that it believes will report earnings growth exceeding analysts'
expectations. The equity capitalization of these companies will generally match
those in the S&P MidCap 400 index (currently $500 million to $6 billion).
MID CAP VALUE PORTFOLIO seeks above average total return over a market cycle of
three to five years by investing in common stocks and other equity securities.
The Portfolio focuses on stocks that the Advisor believes are undervalued based
on its proprietary measures of value. The equity capitalization of the companies
the Portfolio invests in will generally match those in the S&P MidCap 400 Index
(currently $500 million to $6 billion). The Portfolio may invest to a limited
extent in foreign equity securities.
HIGH YIELD PORTFOLIO seeks above-average total return over a market cycle of
three to five years by investing primarily in a portfolio of high yield
securities. The Portfolio invests primarily in high yield securities (commonly
referred to as "junk bonds"). The Portfolio also may invest in other fixed
income securities, including U.S. Government securities, mortgage securities,
and investment grade corporate bonds.
OCC ACCUMULATION TRUST (investment adviser: OpCap Advisors Balanced)
EQUITY PORTFOLIO seeks long term capital appreciation. The Portfolio invests
primarily in equity securities listed on the New York Stock Exchange.
SMALL CAP PORTFOLIO seeks capital appreciation. The Portfolio invests primarily
in equity securities of companies with market capitalizations under $1 billion.
PIMCO VARIABLE INSURANCE TRUST (investment adviser: pacific Investment
Management Company and PIMCO Advisers L.P.)
STOCKSPLUS GROWTH AND INCOME PORTFOLIO seeks to achieve a total return which
exceeds the total return performance of the S&P 500. The Portfolio invests in
common stocks, options, futures, options on futures and swaps. Under normal
market conditions, the Portfolio invests substantially all of its assets in S&P
500 derivatives, backed by a portfolio of Fixed Income Instruments. The
Portfolio uses S&P 500 derivatives in addition to or in place of S&P 500 stocks
to attempt to equal or exceed the performance of the S&P 500.
FOREIGN BOND PORTFOLIO seeks to maximize total return, consistent with
preservation of capital and prudent investment management. The Portfolio invests
under normal circumstances at least 85% of its assets in Fixed Income
instruments of issuers located outside the United States, representing at least
three foreign countries, which may be represented by futures contracts
(including related options) with respect to such securities, and options on such
securities, when the Adviser deems it appropriate to do so. The Portfolio will
hedge at least 75% of its exposure to foreign currency.
TOTAL RETURN BOND PORTFOLIO seeks to maximize total return, consistent with
preservation of capital and prudent investment management. The Portfolio invests
under normal circumstances at least 65% of its assets in a diversified portfolio
of Fixed Income Instruments of varying maturities. The average portfolio
duration of this Portfolio will normally vary within a three- to six-year time
frame based on the Adviser's forecast for interest rates.
MONEY MARKET PORTFOLIO seeks to obtain maximum current income consistent with
preservation of capital and daily liquidity. The Portfolio also attempts to
maintain a stable net asset value of $1.00 per share, although there is no
assurance that it will be successful in doing so.
SALOMON BROTHERS VARIABLE SERIES FUNDS (investment adviser: Salomon Asset
Management)
CAPITAL FUND seeks capital appreciation through investment and securities which
the manager believes have above-average capital appreciation potential. The Fund
invests primarily in equity securities of U.S. Companies. These companies may
range in size from established large capitalization (over 5 billion in market
capitalization) companies to small capitalization (less than 1 billion in market
capitalization) companies at the beginning of their life cycles.
Each Portfolio is subject to certain investment restrictions and policies which
may not be changed without the approval of a majority of the shareholders of the
Portfolio. See the accompanying Prospectuses of the Portfolios for further
information.
We automatically reinvest all dividends and capital gains distributions from the
Portfolios in shares of the distributing Portfolio at their net asset value. The
income and realized and unrealized gains or losses on the assets of each
Subaccount are separate and are credited to or charged against the particular
Subaccount without regard to income, gains or losses from any other Subaccount
or from any other part of our business. We will use the net Purchase Payments
you allocate to a Subaccount to purchase shares in the corresponding Portfolio
and will redeem shares in the Portfolios to meet Contract obligations or make
adjustments in reserves. The Portfolios are required to redeem their shares at
net asset value and to make payment within seven days.
Some of the Portfolios have been established by investment advisers which manage
publicly traded mutual funds having similar names and investment objectives.
While some of the Portfolios may be similar to, and may in fact be modeled after
publicly traded mutual funds, you should understand that the Portfolios are not
otherwise directly related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and any similarly named
Portfolio may differ substantially.
Certain of the Portfolios sell their shares to separate accounts underlying both
variable life insurance and variable annuity contracts. It is conceivable that
in the future it may be unfavorable for variable life insurance separate
accounts and variable annuity separate accounts to invest in the same Portfolio.
Although neither we nor any of the Portfolios currently foresees any such
disadvantages either to variable life insurance or variable annuity contract
owners, each Portfolio's Board of Directors intends to monitor events in order
to identify any material conflicts between variable life and variable annuity
contract owners and to determine what action, if any, should be taken in
response thereto. If a Board of Directors were to conclude that separate
investment funds should be established for variable life and variable annuity
separate accounts, Lincoln Benefit will bear the attendant expenses.
VOTING RIGHTS. As a general matter, you do not have a direct right to vote the
shares of the Portfolios held by the Subaccounts to which you have allocated
your Contract Value. Under current law, however, you are entitled to give us
instructions on how to vote those shares on certain matters. We will notify you
when your instructions are needed. We will also provide proxy materials or other
information to assist you in understanding the matter at issue. We will
determine the number of shares for which you may give voting instructions as of
the record date set by the relevant Portfolio for the shareholder meeting at
which the vote will occur.
As a general rule, before the Annuity Date, you are the person entitled to give
voting instructions. After the Annuity Date, the payee is that person.
Retirement plans, however, may have different rules for voting by plan
participants.
If you send us written voting instructions, we will follow your instructions in
voting the Portfolio shares attributable to your Contract. If you do not send us
written instructions, we will vote the shares attributable to your Contract in
the same proportions as we vote the shares for which we have received
instructions from other Contract Owners. We will vote shares that we hold in the
same proportions as we vote the shares for which we have received instructions
from other Contract Owners.
We may, when required by state insurance regulatory authorities, disregard
Contract Owner voting instructions if the instructions require that the shares
be voted so as to cause a change in the sub-classification or investment
objective of one or more of the Portfolios or to approve or disapprove an
investment advisory contract for one or more of the Portfolios.
In addition, we may disregard voting instructions in favor of changes initiated
by Contract Owners in the investment objectives or the investment adviser of the
Portfolios if we reasonably disapprove of the proposed change. We would
disapprove a proposed change only if the proposed change is contrary to state
law or prohibited by state regulatory authorities or we reasonably conclude that
the proposed change would not be consistent with the investment objectives of
the Portfolio or would result in the purchase of securities for the Portfolio
which vary from the general quality and nature of investments and investment
techniques utilized by the Portfolio. If we disregard voting instructions, we
will include a summary of that action and our reasons for that action in the
next semi-annual financial report to you.
This description reflects our view of currently applicable law. If the law
changes or our interpretation of the law changes, we may decide that we are
permitted to vote the Portfolio shares without obtaining instructions from our
Contract Owners, and we may choose to do so.
ADDITIONS, DELETIONS, AND SUBSTITUTIONS OF SECURITIES. If the shares of any of
the Portfolios are no longer available for investment by the Separate Account or
if, in the judgment of our Board of Directors, further investment in the shares
of a Portfolio is no longer appropriate in view of the purposes of the Contract,
we may add or substitute shares of another Portfolio or mutual fund for
Portfolio shares already purchased or to be purchased in the future by Purchase
Payments under the Contract. Any substitution of securities will comply with the
requirements of the 1940 Act.
We also reserve the right to make the following changes in the operation of the
Separate Account and the Subaccounts:
(a) to operate the Separate Account in any form permitted by law;
(b) to take any action necessary to comply with applicable law or obtain and
continue any exemption from applicable laws;
(c) to transfer assets from one Subaccount to another, or from any subaccount
to our general account;
(d) to add, combine, or remove Subaccounts in the Separate Account; and
(e) to change the way in which we assess charges, as long as the total charges
do not exceed the maximum amount that may be charged the Separate Account
and the Portfolios in connection with the Contracts.
If we take any of these actions, we will comply with the then applicable legal
requirements.
THE FIXED ACCOUNT
GENERAL. You may allocate part or all of your Purchase Payments to the Fixed
Account in states where it is available. Amounts allocated to the Fixed Account
become part of the general assets of Lincoln Benefit. Allstate Life invests the
assets of the general account in accordance with applicable laws governing the
investments of insurance company general accounts. The Fixed Account may not be
available in all states. Please contact us at 1-800-525-9287 for current
information.
GUARANTEED MATURITY FIXED ACCOUNT OPTION. We will credit interest to each amount
allocated to the Guaranteed Maturity Fixed Account Option at a specified rate
for a specified Guarantee Period. You select the Guarantee Period for each
amount that you allocate to this option. We will declare the interest rate that
we will guarantee to credit to that amount for that Guarantee Period. Each
amount allocated to a Guarantee Period under this option must be at least $500.
We reserve the right to limit the number of additional Purchase Payments that
may be allocated to this option.
We will tell you what interest rates and Guarantee Periods we are offering at a
particular time. We may offer Guarantee Periods ranging from one to ten years in
length. We will decide in our discretion which Guarantee Periods to offer.
Currently, we offer Guarantee Periods of one, three, five, seven and ten years.
In the future we may offer Guarantee Periods of different lengths or stop
offering some Guarantee Periods.
We will credit interest daily to each amount allocated to a Guarantee Period
under this option at a rate which compounds to the effective annual interest
rate that we declared at the beginning of the applicable Guarantee Period. We
will not change the interest rate credited to a particular allocation until the
end of the relevant Guarantee Period. We may declare different interest rates
for Guarantee Periods of the same length that begin at different times.
The following example illustrates how a Purchase Payment allocated to this
option would grow, given an assumed Guarantee Period and effective annual
interest rate:
EXAMPLE
Purchase Payment $10,000
Guarantee Period 5 years
Effective Annual Rate 4.50%
Credit Enhancement $400
<TABLE>
<CAPTION>
END OF CONTRACT YEAR
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Beginning Contract Value $10,400.00
X (1 + Effective Annual Rate) X 1.045
---------
$10,868.00
Contract Value at end of Contract Year $10,868.00
X (1 + Effective Annual Rate) X 1.045
---------
$11,357.06
Contract Value at end of Contract Year $11,357.06
X (1 + Effective Annual Rate) X 1.045
---------
$11,868.13
Contract Value at end of Contract Year $11,868.13
X (1 + Effective Annual Rate) X 1.045
---------
$12,402.19
Contract Value at end of Contract Year $12,402.19
X (1 + Effective Annual Rate) X 1.045
---------
$12,960.29
</TABLE>
Total Interest Credited During Guarantee Period = $2,560.29 ($12,960.29
- -$10,400)
NOTE: This example assumes no withdrawals during the entire five year Guarantee
Period. If you were to make a partial withdrawal, you might be required to pay a
Withdrawal Charge and the amount withdrawn might be increased or decreased by a
Market Value Adjustment. The hypothetical interest rate is for illustrative
purposes only and is not intended to predict future interest rates to be
declared under the Contract.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
relevant factors such as then current interest rates, regulatory and tax
requirements, our sales commission and administrative expenses, general economic
trends, and competitive factors. For current interest rate information, please
contact us at 1-800-525-9287.
WE WILL DETERMINE THE INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE
CAN NEITHER PREDICT NOR GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE.
At the end of each Guarantee Period, we will mail you a notice asking you what
to do with the relevant amount, including the accrued interest. During the
30-day period after the end of the Guarantee Period, you may:
(1) take no action. If so, we will automatically keep the relevant amount in
the Guaranteed Maturity Fixed Account Option. The new Guarantee Period will
be the same length as the expiring Guarantee Period and will begin on the
day the previous Guarantee Period ends. The new interest rate will be our
then current declared rate for Guarantee Periods of that length; or
(2) allocate the relevant Contract Value to one or more new Guarantee Periods
of your choice in the Guaranteed Maturity Fixed Account Option. The new
Guarantee Period(s) will begin on the day the previous Guarantee Period
ends. The new interest rate will be our then current declared rate for
those Guarantee Periods; or
(3) instruct us to transfer all or a portion of the relevant amount to one or
more Subaccounts. We will effect the transfer on the day we receive your
instructions. We will not adjust the amount transferred to include a Market
Value Adjustment; or
(4) withdraw all or a portion of the relevant amount through a partial
withdrawal. You may be required to pay a Withdrawal Charge, but we will not
adjust the amount withdrawn to include a Market Value Adjustment. The
amount withdrawn will be deemed to have been withdrawn on the day the
Guarantee Period ends.
Under our Automatic Laddering Program, you may choose, in advance, to use
Guarantee Periods of the same length for all renewals in the Guaranteed Maturity
Fixed Account Option. You can select this program at any time during the
Accumulation Period, including on the Issue Date. We will apply renewals to
Guarantee Periods of the selected length until you direct us in writing to stop.
We may stop offering this program at any time.
MARKET VALUE ADJUSTMENT. We may increase or decrease the amount of some
transactions involving your interest in the Guaranteed Maturity Fixed Account
Option to include a Market Value Adjustment. The formula for determining Market
Value Adjustments reflects changes in interest rates since the beginning of the
relevant Guarantee Period. As a result, you will bear some of the investment
risk on amounts allocated to the Guaranteed Maturity Fixed Account Option.
As a general rule, we will apply a Market Value Adjustment to the following
transactions involving your Fixed Account balance:
(1) when you withdraw funds from the Guaranteed Maturity Fixed Account Option
in an amount greater than the Free Withdrawal Amount, as described on page
32 below;
(2) when you transfer funds from the Guaranteed Maturity Fixed Account Option
to the Subaccounts;
(3) when you allocate part of your balance in the Guaranteed Maturity Fixed
Account Option to a new Guarantee Period before the end of the existing
Guarantee Period;
(4) when you annuitize your Contract; and
(5) when we pay a death benefit.
We will not apply a Market Value Adjustment to a transaction, to the extent
that: (1) it occurs within 30 days after the end of a Guarantee Period
applicable to the funds involved in the transaction; or (2) you make a
withdrawal to satisfy the IRS' required minimum distribution rules for this
Contract.
The formula for calculating Market Value Adjustments is set forth in Appendix C
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment. This formula primarily compares: (1) the
Treasury Rate at the time of the relevant transaction for a maturity equal in
length to the relevant Guarantee Period; and (2) the Treasury Rate at the
beginning of the Guarantee Period for a maturity equal in length to the
Guarantee Period. Generally, if the Treasury Rate at the beginning of the
Guarantee Period is higher than the corresponding current Treasury Rate, then
the Market Value Adjustment will increase the amount payable to you or
transferred. Similarly, if the Treasury Rate at the beginning of the Guarantee
Period is lower than the corresponding current Treasury Rate, then the Market
Value Adjustment will reduce the amount payable to you or transferred.
For example, assume that you purchased a Contract and selected an initial
Guarantee Period of five years and the five-year Treasury Rate for that duration
is 4.50%. Assume that at the end of three years, you make a partial withdrawal.
If, at that later time, the current five-year Treasury Rate is 4.20%, then the
Market Value Adjustment will be positive, which will result in an increase in
the amount payable to you. Similarly, if the current five-year Treasury Rate is
4.80%, then the Market Value Adjustment will be negative, which will result in a
decrease in the amount payable to you.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION. You may also allocate Purchase
Payments to the Dollar Cost Averaging Fixed Account Option. We will credit
interest to Purchase Payments allocated to this option for up to one year at the
current rate that we declare when you make the allocation. The effective annual
rate will never be less than 3%. You may not transfer funds to this option from
the Subaccounts or the Guaranteed Maturity Fixed Account Option. We will follow
your instructions in transferring amounts from this option to the Subaccounts or
the Guaranteed Maturity Fixed Account Option on a monthly basis only, as
described in "Automatic Dollar Cost Averaging Program" on page 23 of this
prospectus.
ANNUITY BENEFITS
ANNUITY DATE. You may select the Annuity Date, which is the date on which
annuity payments are to begin, in your application. The Annuity Date must always
be the business day immediately following the tenth day of a calendar month.
The Annuity Date may be no later than the Latest Annuity Date. As a general
rule, the Latest Annuity Date is the later of the 10th Contract Anniversary or
the Annuitant's 90th birthday. If your Contract was issued pursuant to a
Qualified Plan, however, the Tax Code generally requires you to begin to take at
least a minimum distribution by the later of:
- - the year of your separation from service; or
- - April 1 of the calendar year following the calendar year in which you
attain age 70 1/2.
If your Contract is issued pursuant to Section 408 of the Tax Code (traditional
IRAs), you must begin taking minimum distributions by April 1 of the calendar
year following the calendar year in which you reach age 70 1/2. No minimum
distributions are required by the Tax Code for Contracts issued pursuant to
Section 408A (Roth IRAs).
If you are in a Qualified Plan, we may require you to annuitize by the date
required by the Tax Code, unless you show us that you are meeting the minimum
distribution requirements in some other way.
If you do not select an Annuity Date, the Latest Annuity Date will automatically
become the Annuity Date. You may change the Annuity Date by writing to us at the
address given on the first page of the prospectus.
ANNUITY OPTIONS. You may elect an Annuity Option at any time before the Annuity
Date. As part of your election, you may choose the length of the applicable
guaranteed payment period within the limits available for your chosen Option. If
you do not select an Annuity Option, we will pay monthly annuity payments in
accordance with the applicable default Option. The default Options are:
- - Option A with 10 years (120 months) guaranteed, if you have designated only
one Annuitant; and
- - Option B with 10 years (120 months) guaranteed, if you have designated
joint Annuitants.
You may freely change your choice of Annuity Option, as long as you request the
change at least thirty days before the Annuity Date.
Three Annuity Options are generally available under the Contract. Each is
available in the form of:
- - a Fixed Annuity;
- - a Variable Annuity; or
- - a combination of both Fixed and Variable Annuity.
The three Annuity Options are:
OPTION A, LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 5 TO 20 YEARS. We make
periodic payments at least as long as the Annuitant lives. If the Annuitant dies
before all of the guaranteed payments have been made, we will pay the remaining
guaranteed payments to the Beneficiary.
OPTION B, JOINT AND SURVIVOR ANNUITY, WITH PAYMENTS GUARANTEED FOR 5 TO 20
YEARS. We make periodic payments at least as long as either the Annuitant or the
joint Annuitant is alive. If both the Annuitant and the Joint Annuitant die
before all of the guaranteed payments have been made, we will pay the remaining
guaranteed payments to the Beneficiary.
OPTION C, PAYMENTS FOR A SPECIFIED PERIOD CERTAIN OF 5 YEARS TO 30 YEARS. We
make periodic payments for the period you have chosen. If the Annuitant dies
before all of the guaranteed payments have been made, we will pay the remaining
guaranteed payments to the Beneficiary. If you elect this option, and request
Variable Annuity payments, you may at any time before the period expires request
a lump sum payment, subject to a Withdrawal Charge. We will charge a Withdrawal
Charge on any portion of your lump sum payment attributable to Purchase Payments
made within the prior eight years. The amount of the Withdrawal Charge will be
determined as described in "Withdrawal Charges" on pages [ ] below. If you
elected Variable Annuity payments, the lump sum payment after Withdrawal Charge
will depend on:
- - the investment results of the Subaccounts you have selected,
- - the Contract Value at the time you elected annuitization,
- - the length of the remaining period for which the payee would be entitled to
payments.
No lump sum payment is available if you request Fixed Annuity payments.If you
purchased your Contract under a retirement plan, you may have a more limited
selection of Annuity Options to choose from. You should consult your Plan
documents to see what is available.
You may not "annuitize" your Contract for a lump sum payment. Instead, before
the Annuity Date you may surrender your Contract for a lump sum. As described in
page [ ] above, however, we will subtract any applicable Withdrawal Charge and
increase or decrease your surrender proceeds by any applicable Market Value
Adjustment.
OTHER OPTIONS. We may have other Annuity Options available. You may obtain
information about them by writing or calling us.
If your Contract is issued under Sections 401, 403(b), 408 or 408A of the Tax
Code, we will only make payments to you and/or your spouse.
ANNUITY PAYMENTS: GENERAL. On the Annuity Date, we will apply the Annuitized
Value of your Contract to the Annuity Option you have chosen. Your annuity
payments may consist of Variable Annuity payments or Fixed Annuity payments or a
combination of the two. We will determine the amount of your annuity payments as
described in "Variable Annuity Payments" and "Fixed Annuity Payments" on pages
37 below.
You must notify us in writing at least 30 days before the Annuity Date how you
wish to allocate your Annuitized Value between Variable Annuity and Fixed
Annuity payments. You must apply at least the Contract Value in the Fixed
Account on the Annuity Date to Fixed Annuity payments. If you wish to apply any
portion of your Fixed Account balance to your Variable Annuity payments, you
should plan ahead and transfer that amount to the Subaccounts prior to the
Annuity Date. If you do not tell us how to allocate your Contract Value among
Fixed and Variable Annuity payments, we will apply your Contract Value in the
Separate Account to Variable Annuity payments and your Contract Value in the
Fixed Account to Fixed Annuity payments.
Annuity payments begin on the Annuity Date. We make subsequent annuity payments
on the tenth of the month or, if the NYSE is closed on that day, the next day on
which the NYSE is open for business.
Annuity payments will be made in monthly, quarterly, semi-annual or annual
installments as you select. If the amount available to apply under an Annuity
Option is less than $5,000, however, and state law permits, we may pay you a
lump sum instead of the periodic payments you have chosen. In addition, if the
first annuity payment would be less than $50, and state law permits us, we may
reduce the frequency of payments so that the initial payment will be at least
$50.
We may defer for up to 15 days the payment of any amount attributable to a
Purchase Payment made by check to allow the check reasonable time to clear.
YOU MAY NOT WITHDRAW CONTRACT VALUE DURING THE ANNUITY PERIOD, IF WE ARE MAKING
PAYMENTS TO YOU UNDER ANY ANNUITY OPTION, SUCH AS OPTION A OR B ABOVE, INVOLVING
PAYMENT TO THE PAYEE FOR LIFE OR ANY COMBINATION OF PAYMENTS FOR LIFE AND
MINIMUM GUARANTEE PERIOD FOR A PREDETERMINED NUMBER OF YEARS.
VARIABLE ANNUITY PAYMENTS. One basic objective of the Contract is to provide
Variable Annuity Payments which will to some degree respond to changes in the
economic environment. The amount of your Variable Annuity Payments will depend
upon the investment results of the Subaccounts you have selected, any premium
taxes, the age and sex of the Annuitant, and the Annuity Option chosen. We
guarantee that the Payments will not be affected by (1) actual mortality
experience and (2) the amount of our administration expenses.
We cannot predict the total amount of your Variable Annuity payments. The
Variable Annuity payments may be more or less than your total Purchase Payments
because (a) Variable Annuity payments vary with the investment results of the
underlying Portfolios; and (b) Annuitants may die before their actuarial life
expectancy is achieved.
The length of any guaranteed payment period under your selected Annuity Option
will affect the dollar amounts of each Variable Annuity payment. As a general
rule, longer guarantee periods result in lower periodic payments, all other
things being equal. For example, if a life Annuity Option with no minimum
guaranteed payment period is chosen, the Variable Annuity payments will be
greater than Variable Annuity payments under an Annuity Option for a minimum
specified period and guaranteed thereafter for life.
The investment results of the Subaccounts to which you have allocated your
Contract Value will also affect the amount of your periodic payment. In
calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3 1/2%. If the actual net
investment return is less than the assumed investment rate, then the dollar
amount of the Variable Annuity payments will decrease. The dollar amount of the
Variable Annuity payments will stay level if the net investment return equals
the assumed investment rate and the dollar amount of the Variable Annuity
payments will increase if the net investment return exceeds the assumed
investment rate. You should consult the Statement of Additional Information for
more detailed information as to how we determine Variable Annuity Payments.
FIXED ANNUITY PAYMENTS. You may choose to apply a portion of your Annuitized
Value to provide Fixed Annuity payments. We determine the Fixed Annuity payment
amount by applying the applicable Annuitized Value to the Annuity Option you
have selected.
As a general rule, subsequent Fixed Annuity payments will be equal in amount to
the initial payment. However, as described in "Transfers During the Annuity
Period" below, after the Annuity Date, you will have a limited ability to
increase the amount of your Fixed Annuity payments by making transfers from the
Subaccounts.
We may defer making Fixed Annuity payments for a period of up to six months or
whatever shorter time state law may require. During the deferral period, we
credit interest at a rate at least as high as state law requires.
TRANSFERS DURING THE ANNUITY PERIOD. During the Annuity Period, you will have a
limited ability to make transfers among the Subaccounts so as to change the
relative weighting of the Subaccounts on which your Variable Annuity payments
will be based. In addition, you will have a limited ability to make transfers
from the Subaccounts to increase the proportion of your annuity payments
consisting of Fixed Annuity payments. You may not, however, convert any portion
of your right to receive Fixed Annuity payments into Variable Annuity payments.
You may not make any transfers for the first six months after the Annuity Date.
Thereafter, you may make transfers among the Subaccounts or make transfers from
the Subaccounts to increase your Fixed Annuity payments. Your transfers must be
at least six months apart.
DEATH BENEFIT DURING ANNUITY PERIOD. After annuity payments begin, upon the
death of the Annuitant and any Joint Annuitant, we will make any remaining
annuity payments to the Beneficiary. The amount and number of these annuity
payments will depend on the Annuity Option in effect at the time of the
Annuitant's death. After the Annuitant's death, any remaining interest will be
distributed at least as rapidly as under the method of distribution in effect at
the Annuitant's death.
CERTAIN EMPLOYEE BENEFIT PLANS. In some states, the Contracts offered by this
prospectus contain life annuity tables that provide for different benefit
payments to men and women of the same age. In certain employment-related
situations, however, the U.S. Supreme Court's decision in ARIZONA GOVERNING
COMMITTEE V. NORRIS requires employers to use the same annuity tables for men
and women. Accordingly, if the Contract is to be used in connection with an
employment-related retirement or benefit plan and we do not offer unisex annuity
tables in your state, you should consult with legal counsel as to whether the
purchase of a Contract is appropriate under NORRIS.
OTHER CONTRACT BENEFITS
DEATH BENEFIT. We will pay a distribution on death, if:
(1) the Contract is in force;
(2) annuity payments have not begun; and
(3) either:
(a) you die; or
(b) if the Contract is owned by a company or other legal entity, the
Annuitant dies.
Currently, we will pay a distribution on death equal in amount to the Death
Benefit or Enhanced Death Benefit, as appropriate. Under the Contract, however,
we have the right to pay a distribution equal in amount to the Surrender Value
unless:
(1) the Beneficiary chooses to receive the Death Benefit in a lump sum within
180 days of the date of death; and
(2) the Beneficiary requests that the Death Benefit be paid as of the date we
receive the completed claim for a distribution on death.
We currently are waiving this 180 day limitation, but we may enforce it in the
future. If we do, we will calculate the distribution as of the earlier of the
requested distribution date or the fifth anniversary of the date of death.
We determine the Death Benefit as of the date we receive all of the information
we need to process the Death Benefit claim. The standard Death Benefit under the
Contract is the greatest of the following:
(1) the total Purchase Payments, less a withdrawal adjustment for any prior
partial withdrawals;
(2) the Contract Value on the date as of which we calculate the Death Benefit.
(3) the Surrender Value;
(4) the Contract Value on the eighth Contract Anniversary and each subsequent
Contract Anniversary evenly divisible by eight, increased by the total
Purchase Payments since that anniversary and reduced by a withdrawal
adjustment for any partial withdrawals since that anniversary.
The withdrawal adjustment for the Death Benefit will equal (a) divided by (b),
with the result multiplied by (c), where:
(a) = the withdrawal amount;
(b) = the Contract Value immediately before the withdrawal; and
(c) = the value of the applicable Death Benefit immediately before the
withdrawal.
A claim for a distribution on death must be submitted before the Annuity Date.
As part of the claim, the Beneficiary must provide "Due Proof of Death". We will
accept the following documentation as Due Proof of Death:
- - a certified original copy of the Death Certificate;
- - a certified copy of a court decree as to the finding of death; or
- - a written statement of a medical doctor who attended the deceased at the
time of death.
In addition, in our discretion we may accept other types of proof.
We will pay the Death Benefit in a lump sum within seven days of receiving a
completed claim for a distribution on death, unless the Beneficiary selects one
of the other alternatives described below.
If the Beneficiary is a natural person, the Beneficiary may choose from the
following alternative ways of receiving the distribution:
- - the Beneficiary may receive the distribution as a lump sum payment;
- - the Beneficiary may apply the distribution to receive a series of equal
periodic payments over the life of the Beneficiary, over a fixed period no
longer than the Beneficiary's life expectancy, or over the life of the
Beneficiary with payments guaranteed for a period not to exceed the life
expectancy of the Beneficiary (the payments must begin within one year of
the date of death); or
- - if there is only one Beneficiary, he or she may defer payment for up to
five years from the date of death. Any remaining funds must be distributed
at the end of the five-year period. An Annuitant is necessary for this
option. If prior to your death you were the Annuitant, the Beneficiary will
become the new Annuitant.
If your spouse is the Beneficiary, he or she may choose to continue the Contract
as the new Contract Owner. If your spouse chooses to continue the Contract, the
following conditions apply:
(1) On the day the Contract is continued, we will set the Contract Value equal
to the Death Benefit or Enhanced Death Benefit, as appropriate, calculated
as of the date on which we receive all of the information we need to
process your spouse's request to continue the Contract after your death.
Because the Death Benefit and Enhanced Death Benefit can never be less
than the then current Contract Value, our resetting the Contract will not
cause the Contract Value to decrease. During the continuation period,
however, the Contract Value will continue to increase or decrease to
reflect the investment performance of the Subaccounts, interest credited
to the Fixed Account, and charges and expenses under the Contract, as
described in this prospectus.
(2) Within one year of the date of death, your spouse may withdraw one lump
sum without paying any Withdrawal Charge or incurring any Market Value
Adjustment;
(3) During the continuation period, currently we will pay a distribution on
death equal to the Death Benefit or the Enhanced Death Benefit, as
appropriate, determined as of the date on which we receive due proof of
your spouse's death. As described above, we also reserve the right to pay
a distribution equal in amount to the Surrender Value as of the date on
which we receive due proof of death. The standard Death Benefit payable
upon your spouse's death will be calculated using the formula described
above. Thus, the amount of the distribution on death may increase or
decrease during the continuation period, depending on changes in the
Contract Value and other Contract transactions during the continuation
period.
(4) If before your death you were the Annuitant, your surviving spouse becomes
the Annuitant.
(5) If you selected the Enhanced Death Benefit Rider or the Enhanced Death and
Income Benefit Rider, that rider will continue during the continuation
period. Your spouse will be treated as the Contract Owner under the
applicable Rider.
Your surviving spouse may also select one of the options listed above.
If the Beneficiary is a company or other legal entity, then the Beneficiary must
receive the Death Benefit in a lump sum, and the options listed above are not
available.
Different rules may apply to Contracts issued in connection with Qualified
Plans.
ENHANCED DEATH BENEFIT RIDER: When you purchase your Contract, you may select
the Enhanced Death Benefit Rider. If you are not an individual, the Enhanced
Death Benefit applies only to the Annuitant's death. If you select this rider,
the Death Benefit will be the greater of the value provided in your Contract or
the Enhanced Death Benefit. The Enhanced Death Benefit will be the greater of
the Enhanced Death Benefit A and Enhanced Death Benefit B. As described below,
we will charge a higher mortality and expense risk charge if you select this
Rider.
ENHANCED DEATH BENEFIT A. At issue, Enhanced Death Benefit A is equal to the
initial Purchase Payment. After issue, Enhanced Death Benefit A is adjusted
whenever you pay a Purchase Payment or make a withdrawal and on each Contract
Anniversary as follows:
- - When you pay a Purchase Payment, we will increase Enhanced Death Benefit A
by the amount of the Purchase Payment;
- - When you make a withdrawal, we will decrease Enhanced Death Benefit A by a
withdrawal adjustment, as described below; and
- - On each Contract Anniversary, we will set Enhanced Death Benefit A equal to
the greater of the Contract Value on that Contract Anniversary or the most
recently calculated Death Benefit A.
If you do not pay any additional purchase payments or make any withdrawals,
Enhanced Death Benefit A will equal the highest of the Contract Value on the
Issue Date and all Contract Anniversaries prior to the date we calculate the
Death Benefit.
We will continuously adjust Enhanced Death Benefit A as described above until
the oldest Contract Owner's 85th birthday or, if the Contract Owner is not a
living individual, the Annuitant's 85th birthday. Thereafter, we will adjust
Enhanced Death Benefit A only for Purchase Payments and withdrawals.
ENHANCED DEATH BENEFIT B. Enhanced Death Benefit B is equal to (a) your total
Purchase Payments, (b) reduced by any withdrawal adjustments and (c) accumulated
daily at an effective annual rate of 5% per year, until: (1) the first day of
the month following the oldest Contract owner's 85th birthday or (2) if the
Contract Owner is a company or other legal entity, the Annuitant's 85th
birthday. Thereafter, we will only adjust Enhanced Death Benefit B to reflect
additional Purchase Payments and withdrawals. Enhanced Death Benefit B will
never be greater than the maximum death benefit allowed by any nonforfeiture
laws which govern the Contract.
The withdrawal adjustment for both Enhanced Death Benefit A and Enhanced Death
Benefit B will equal (a) divided by (b), with the result multiplied by (c),
where:
(a) = the withdrawal amount;
(b) = the Contract Value immediately before the withdrawal; and
(c) = the most recently calculated Enhanced Death Benefit A or B, as
appropriate.
BENEFICIARY. You name the Beneficiary. You may name a Beneficiary in the
application. You may change the Beneficiary or add additional Beneficiaries at
any time before the Annuity Date. We will provide a form to be signed and filed
with us.
Your changes in Beneficiary take effect when we receive them, effective as of
the date you signed the form. Until we receive your change instructions, we are
entitled to rely on your most recent instructions in our files. We are not
liable for making a payment to a Beneficiary shown in our files or treating that
person in any other respect as the Beneficiary. Accordingly, if you wish to
change your beneficiary, you should deliver your instructions to us promptly.
If you did not name a Beneficiary or if the named Beneficiary is no longer
living, the Beneficiary will be:
- - your spouse if he or she is still alive; or, if he or she is no longer alive,
- - your surviving children equally; or if you have no surviving children,
- - your estate.
If you name more than one Beneficiary, we will divide the Death Benefit among
your Beneficiaries according to your most recent written instructions. If you
have not given us written instructions, we will pay the Death Benefit in equal
shares to the Beneficiaries. If one of the Beneficiaries dies before you, we
will divide the Death Benefit among the surviving Beneficiaries.
Different rules may apply to Contracts issued in connection with Qualified
Plans.
CONTRACT LOANS FOR 401(a), 401(k), AND 403(b) CONTRACTS. Subject to the
restrictions described below, we will make loans to the Owner of a Contract used
in connection with a Tax Sheltered Annuity Plan ("TSA Plan") under Section
403(b) of the Tax Code, or an Owner of a Contract purchased by a pension,
profit-sharing, or other similar plan qualified under Section 401(a) of the Tax
Code (a "401 Plan"), including a Section 401(k) plan, where a plan trustee is
the Owner. Loans are not available under Non-Qualified Contracts. We will only
make loans after the free look period and before annuitization. All loans are
subject to the terms of the Contract, the relevant Plan, and the Tax Code, which
impose restrictions on loans.
We will not make a loan to you if the total of the requested loan and your
unpaid outstanding loans will be greater than the Surrender Value of your
Contract on the date of the loan. In addition, we will not make a loan to you if
the total of the requested loan and all of the plan participant's Contract loans
under TSA plans and 401 plans is more than the lesser of (a) or (b) where:
(a) equals $50,000 minus the excess of the highest outstanding loan balance
during the prior 12 months over the current outstanding loan balance; and
(b) equals the greater of $10,000 or 1/2 of the Surrender Value.
The minimum loan amount is $1,000.
To request a Contract loan, write to us at the address given on the first page
of the prospectus. You alone are responsible for ensuring that your loan and
repayments comply with tax requirements. Loans made before the Annuity Date are
generally treated as distributions under the Contract, and may be subject to
withholding and tax penalties for early distributions. Some of these
requirements are stated in Section 72 of the Tax Code and Title 1 of ERISA.
Please seek advice from your plan administrator or tax advisor.
When we make a loan, we will transfer an amount equal to the loan amount from
the Separate Account and/or the Fixed Account to the Loan Account as collateral
for the loan. You may select from which account(s) to transfer the loan value.
However, we will not transfer amounts from the Fixed Account in an amount
greater than the total amount of the loan multiplied by the ratio of the value
of the Fixed Account to the Contract Value immediately before the loan. If you
do not give us instructions, we will first transfer to the Loan Account amounts
from the Separate Account in proportion to the assets in each Subaccount. If
your loan amount is greater than your Contract Value in the Subaccounts, we will
transfer the remaining required collateral from the Fixed Account.
We will not charge a Withdrawal Charge on the loan or on the transfer from the
Subaccounts or the Fixed Account. We may, however, apply a Market Value
Adjustment to a transfer from the Fixed Account to the Loan Account. If we do,
we will increase or decrease the amount remaining in the Fixed Account by the
amount of the Market Value Adjustment, so that the net amount transferred to the
Loan Account will equal the desired loan amount.
We will credit interest to the amounts in the Loan Account. The annual interest
rate credited to the Loan Account will be the greater of: (a) 3%; or (b) the
loan interest rate minus 2.25%. The value of the amounts in the Loan Account are
not affected by the changes in the value of the Subaccounts.
When you take out a loan, we will set the loan interest rate. That rate will
apply to your loan until it is repaid. From time to time, we may change the loan
interest rate applicable to new loans. We also reserve the right to change the
terms of new loans.
We will subtract the outstanding Contract loan balance, including accrued but
unpaid interest, from:
(1) the Death Benefit;
(2) surrender proceeds;
(3) the amount available for partial withdrawal; and
(4) the amount applied on the Annuity Date to provide annuity payments.
Usually you must repay a Contract loan within five years of the date the loan is
made. Scheduled payments must be level, amortized over the repayment period, and
made at least quarterly. We may permit a repayment period of 15 or 30 years if
the loan proceeds are used to acquire your principal residence. We may also
permit other repayment periods.
You must mark your loan repayments as such. We will assume that any payment
received from you is a Purchase Payment, unless you tell us otherwise.
If you do not make a loan payment when due, we will continue to charge interest
on your loan. We also will declare the entire loan in default. We will subtract
the defaulted loan balance plus accrued interest from any future distribution
under the Contract and keep it in payment of your loan. Any defaulted amount
plus interest will be treated as a distribution for tax purposes (as permitted
by law). As a result, you may be required to pay taxes on the defaulted amount,
incur the early withdrawal tax penalty, and be subject to mandatory 20% federal
withholding.
If the total loan balance exceeds the Surrender Value, we will mail written
notice to your last known address. The notice will state the amount needed to
maintain the Contract in force. If we do not receive payment of this amount
within 31 days after we mail this notice, we will terminate your Contract.
We may defer making any loan for 6 months after you ask us for a loan, unless
the loan is to pay a premium to us.
WITHDRAWALS (REDEMPTIONS). Except as explained below, you may redeem a Contract
for all or a portion of its Contract Value before the Annuity Date. We may
impose a Withdrawal Charge, which would reduce the amount paid to you upon
redemption. The Withdrawal Charges are described on page [ ] below. Withdrawals
from the Fixed Account may be increased or decreased by a Market Value
Adjustment, as described in "Market Value Adjustment" on page [ ] above.
In general, you must withdraw at least $50 at a time. You may also withdraw a
lesser amount if you are withdrawing your entire interest in a Subaccount. If
your request for a partial withdrawal would reduce the Contract Value to less
than $500, we may treat it as a request for a withdrawal of your entire Contract
Value, as described in "Minimum Contract Value" on page [ ]. Your Contract will
terminate if you withdraw all of your Contract Value.
We may be required to withhold 20% of withdrawals and distributions from
Contracts issued in connection with certain Qualified Plans, as described on
page [ ] below. Withdrawals also may be subject to a 10% penalty tax, as
described on page [ ] below.
To make a withdrawal, you must send us a written withdrawal request or
systematic withdrawal program enrollment form. You may obtain the required forms
from us at the address and phone number given on the first page of this
prospectus. We will not honor your request unless the required form includes
your Tax I.D. Number (E.G., Social Security Number) and provides instructions
regarding withholding of income taxes.
For partial withdrawals, you may allocate the amount among the Subaccounts and
the Fixed Account. If we do not receive allocation instructions from you, we
usually will allocate the partial withdrawal proportionately among the
Subaccounts and the Fixed Account based upon the balance of the Subaccounts and
the Fixed Account. You may not make a partial withdrawal from the Fixed Account
in an amount greater than the total amount of the partial withdrawal multiplied
by the ratio of the value of the Fixed Account to the Contract Value immediately
before the partial withdrawal.
If you request a total withdrawal, you must send us your Contract. The Surrender
Value will equal the Contract Value minus any applicable Withdrawal Charge and
adjusted by any applicable Market Value Adjustment. We also will deduct a
contract maintenance charge of $35, unless we have waived the contract
maintenance charge on your Contract as described on page [ ] below. We determine
the Surrender Value based on the Contract Value next computed after we receive a
properly completed surrender request. We will usually pay the Surrender Value
within seven days after the day we receive a completed request form. However, we
may suspend the right of withdrawal from the Separate Account or delay payment
for withdrawals for more than seven days in the following circumstances:
(1) whenever the New York Stock Exchange ("NYSE") is closed (other than
customary weekend and holiday closings);
(2) when trading on the NYSE is restricted or an emergency exists, as
determined by the SEC, so that disposal of the Separate Account's
investments or determination of Accumulation Unit Values is not reasonably
practicable; or
(3) at any other time permitted by the SEC for your protection.
In addition, we may delay payment of the Surrender Value in the Fixed Account
for up to 6 months or a shorter period if required by law. If we delay payment
from the Fixed Account for more than 30 days, we will pay interest as required
by applicable law.
You may withdraw amounts attributable to contributions made pursuant to a salary
reduction agreement (in accordance with Section 403(b)(11) of the Tax Code) only
in the following circumstances:
(1) when you attain age 59 1/2;
(2) when you terminate your employment with the plan sponsor;
(3) upon your death;
(4) upon your disability as defined in Section 72(m)(7) of the Tax Code; or
(5) in the case of hardship.
If you seek a hardship withdrawal, you may only withdraw amounts attributable to
your Purchase Payments; you may not withdraw any earnings. These limitations on
withdrawals apply to:
(1) salary reduction contributions made after December 31, 1988;
(2) income attributable to such contributions; and
(3) income attributable to amounts held as of December 31, 1988.
The limitations on withdrawals do not affect transfers between certain Qualified
Plans. Additional restrictions and limitations may apply to distributions from
any Qualified Plan. Tax penalties may also apply. You should seek tax advice
regarding any withdrawals or distributions from Qualified Plans.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS. In general, earnings on annuities are
taxable as ordinary income upon withdrawal. As described on page 35 below, a 10%
tax penalty is imposed on certain "premature" payments under annuity contracts.
The tax penalty applies to any payment received before age 59 1/2, to the extent
it is includable in income and is not subject to an exception. The Tax Reform
Act of 1986 clarified an exception to this tax penalty. This exception is known
as "substantially equal periodic payments."
Generally, under this exception you may take "substantially equal periodic
payments" before age 59 1/2 without incurring the tax penalty. These "payments"
are withdrawals, as opposed to an annuitization of the Contract. Accordingly,
you may need to pay a Withdrawal Charge, and withdrawals from the Fixed Account
may be subject to a Market Value Adjustment.
To qualify for this exception, the payments must meet the following
requirements:
1) The payments must continue to the later of age 59 1/2 or for five years.
2) Payments must be established under one of the approved methods detailed by
the IRS in IRS Notice 89-25.
3) You must have separated from service, if you purchased your Contract under
a qualified retirement plan or tax sheltered annuity.
If you modify the payment stream in any way, except for reason of death or
disability, you will loose the exception. Modification includes changing the
amount or timing of the payments, or making additional Purchase Payments. Any
subsequent periodic payment will be subject to the penalty tax, unless it
qualifies for a different exception. In addition, in the year of the
modification, you will be required to pay the penalty tax (plus interest) that
you would have been required to pay on the earlier payments if this exception
had not applied.
SYSTEMATIC WITHDRAWAL PROGRAM. If your Contract was issued in connection with a
Non-Qualified Plan or IRA, you may participate in our Systematic Withdrawal
Program. You must complete an enrollment form and send it to us. You must
complete the withholding election section of the enrollment form before the
systematic withdrawals will begin. You may choose withdrawal payments of a flat
dollar amount, earnings, or a percentage of Purchase Payments. You may choose to
receive systematic withdrawal payments on a monthly, quarterly, semi-annual, or
annual basis. Systematic withdrawals will be deducted from your Subaccount and
Fixed Account balances, excluding the Dollar Cost Averaging Fixed Account, on a
pro rata basis.
Depending on fluctuations in the net asset value of the Subaccounts and the
value of the Fixed Account, systematic withdrawals may reduce or even exhaust
the Contract Value. The minimum amount of each systematic withdrawal is $50.
We will make systematic withdrawal payments to you or your designated payee. We
may modify or suspend the Systematic Withdrawal Program and charge a processing
fee for the service. If we modify or suspend the Systematic Withdrawal Program,
existing systematic withdrawal payments will not be affected.
ERISA PLANS. A married participant may need spousal consent to receive a
distribution from a Contract issued in connection with a Qualified Plan or a
Non-Qualified Plan covered by to Title 1 of ERISA. You should consult an
adviser.
MINIMUM CONTRACT VALUE. If as a result of withdrawals your Contract Value would
be less than $500 and you have not made any Purchase Payments during the
previous three full calendar years, we may terminate your Contract and
distribute its Surrender Value to you. Before we do this, we will give you 60
days notice. We will not terminate your Contract on this ground if the Contract
Value has fallen below $500 due to either a decline in Accumulation Unit Value
or the imposition of fees and charges. In addition, in some states we are not
permitted to terminate Contracts on this ground. Different rules may apply to
Contracts issued in connection with Qualified Plans.
CONTRACT CHARGES
We assess charges under the Contract in three ways:
(1) as deductions from Contract Value for contract maintenance charges and for
premium taxes, if applicable;
(2) as charges against the assets of the Separate Account for administrative
expenses or for the assumption of mortality and expense risks; and
(3) as Withdrawal Charges (contingent deferred sales charges) subtracted from
withdrawal and surrender payments.
In addition, certain deductions are made from the assets of the Portfolios for
investment management fees and expenses. Those fees and expenses are summarized
in the Fee Tables on pages [ ], and described more fully in the Prospectuses and
Statements of Additional Information for the Portfolios.
MORTALITY AND EXPENSE RISK CHARGE. We deduct a mortality and expense risk charge
from each Subaccount during each Valuation Period. The mortality and expense
risk charge is equal, on an annual basis, to 1.30% of the average net asset
value of each Subaccount. The mortality risks arise from our contractual
obligations:
(1) to make annuity payments after the Annuity Date for the life of the
Annuitant(s);
(2) to waive the Withdrawal Charge upon your death; and
(3) to provide the Death Benefit prior to the Annuity Date. A detailed
explanation of the Death Benefit may be found beginning on page [ ] above.
The expense risk is that it may cost us more to administer the Contracts and the
Separate Account than we receive from the contract maintenance charge and the
administrative expense charge. We guarantee the mortality and expense risk
charge and we cannot increase it. We assess the mortality and expense risk
charge during both the Accumulation Period and the Annuity Period.
If you select the Enhanced Death Benefit Rider, your mortality and expense risk
charge will be 1.50% of average net asset value of each Subaccount. We charge a
higher mortality and expense risk charge for the Rider to compensate us for the
additional risk that we accept by providing the Rider. We will calculate a
separate Accumulation Unit Value for the base Contract, and for Contracts with
the Rider, in order to reflect the difference in the mortality and expense risk
charges.
ADMINISTRATIVE CHARGES.
CONTRACT MAINTENANCE CHARGE. We charge an annual contract maintenance charge of
$35 on your Contract. The amount of this charge is guaranteed not to increase.
This charge reimburses us for our expenses incurred in maintaining your
Contract.
Before the Annuity Date, we assess the contract maintenance charge on each
Contract Anniversary. To obtain payment of this charge, on a pro rata basis we
will allocate this charge among the Subaccounts and the Fixed Account to which
you have allocated your Contract Value, and redeem Accumulation Units and reduce
your interest in the Fixed Account accordingly. We will waive this charge if you
pay more than $40,000 in Purchase Payments or if you allocate all of your
Contract Value to the Fixed Account. If you surrender your Contract, we will
deduct the full $35 charge as of the date of surrender, unless your Contract
qualifies for a waiver.
After the Annuity Date, we will subtract this charge in equal parts from each of
your annuity payments. We will waive this charge if on the Annuity Date your
Contract Value is $40,000 or more or if all of your annuity payments are Fixed
Annuity payments.
ADMINISTRATIVE EXPENSE CHARGE. We deduct an administrative expense charge from
each Subaccount during each Valuation Period. This charge is equal, on an annual
basis, to 0.10% of the average net asset value of the Subaccounts. This charge
is designed to compensate us for the cost of administering the Contracts and the
Separate Account. The administrative expense charge is assessed during both the
Accumulation Period and the Annuity Period.
TRANSFER FEE. We currently are waiving the transfer fee. The Contract, however,
permits us to charge a transfer fee of $10 on the second and each subsequent
transaction in each calendar month in which transfer(s) are effected between
Subaccount(s) and/or the Fixed Account. We will notify you if we begin to charge
this fee. We will not charge a transfer fee on transfers that are part of a
Dollar Cost Averaging or Portfolio Rebalancing program.
The transfer fee will be deducted from Contract Value that remains in the
Subaccount(s) or Fixed Account from which the transfer was made. If that amount
is insufficient to pay the transfer fee, we will deduct the fee from the
transferred amount.
SALES CHARGES.
WITHDRAWAL CHARGE. We may charge a Withdrawal Charge, which is a contingent
deferred sales charge, upon certain withdrawals.
As a general rule, the Withdrawal Charge equals a percentage of Purchase
Payments withdrawn that are: (a) less than eight years old; and (b) not eligible
for a free withdrawal. The applicable percentage depends on how many years ago
you made the Purchase Payment being withdrawn, as shown in this chart:
CONTRIBUTION WITHDRAWAL CHARGE
YEAR PERCENTAGE
- --------------------------------------- ------------------
First.................................. 8%
Second and Third....................... 7%
Fourth and Fifth....................... 6%
Sixth.................................. 5%
Seventh................................ 4%
Eighth................................. 3%
Ninth and later........................ 0%
When we calculate the Withdrawal Charge, we do not take any applicable Market
Value Adjustment into consideration.
We subtract the Withdrawal Charge from the Contract Value remaining after your
withdrawal. As a result, the decrease in your Contract Value will be greater
than the withdrawal amount requested and paid.
For purposes of determining the Withdrawal Charge, the Contract Value is deemed
to be withdrawn in the following order:
FIRST. Earnings -- the current Contract Value minus all Purchase Payments that
have not previously been withdrawn; Credit Enhancements are treated as
"earnings" for this purpose;
SECOND. "Old Purchase Payments" -- Purchase Payments received by us more than
seven years before the date of withdrawal that have not been previously
withdrawn;
THIRD. Any additional amounts available as a "Free Withdrawal," as described
below;
FOURTH. "New Purchase Payments" -- Purchase Payments received by us less than
seven years before the date of withdrawal. These Payments are deemed to be
withdrawn on a first-in, first-out basis.
No Withdrawal Charge is applied in the following situations:
- - on annuitization;
- - the payment of a death benefit;
- - a free withdrawal amount, as described on page 48 below;
- - certain withdrawals for Contracts issued under 403(b) plans or 401 plans
under our prototype as described on page 49 below;
- - withdrawals taken to satisfy IRS minimum distribution rules;
- - withdrawals that qualify for one of the waiver benefits described at page
[ ] below; and
- - withdrawal under Contracts issued to employees of Lincoln Benefit Life
Company or its affiliates to their spouses or minor children.
We will never waive or eliminate a Withdrawal Charge where such waiver or
elimination would be unfairly discriminatory to any person or where it is
prohibited by state law.
We use the amounts obtained from the Withdrawal Charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the Withdrawal Charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals may also be subject to tax penalties or income tax. The amount of
your withdrawal may be affected by a Market Value Adjustment. Additional
restrictions may apply to Contracts held in Qualified Plans. We outline the tax
requirements applicable to withdrawals on pages 51-52 below. You should consult
your own tax counsel or other tax advisers regarding any withdrawals.
FREE WITHDRAWAL. Withdrawals of the following amounts are never subject to the
Withdrawal Charge:
- - In any Contract Year, the greater of: (a) earnings that have not previously
been withdrawn; or (b) 15 percent of New Purchase Payments; and
- - Any Old Purchase Payments that have not been previously withdrawn.
Credit Enhancements are treated as earnings for purposes of determining the free
withdrawal amount. However, even if you do not owe a Withdrawal Charge on a
particular withdrawal, you may still owe taxes or penalty taxes, or be subject
to a Market Value Adjustment. The tax treatment of withdrawals is summarized on
pages [ ] below.
WAIVER BENEFITS
GENERAL. If approved in your state, we will offer the two waiver benefits
described below. In general, if you qualify for one of these benefits, we will
permit you to make one or more partial or full withdrawals without paying any
otherwise applicable Withdrawal Charge or Market Value Adjustment. While we have
summarized those benefits here, you should consult your Contract for the precise
terms of the waiver benefits.
Some Qualified Plans may not permit you to utilize these benefits. Also, even if
you do not need to pay our Withdrawal Charge because of these benefits, you
still may be required to pay taxes or tax penalties on the amount withdrawn. You
should consult your tax adviser to determine the effect of a withdrawal on your
taxes.
CONFINEMENT WAIVER BENEFIT. Under this benefit, we will waive the Withdrawal
Charge and Market Value Adjustment on all withdrawals under your Contract if the
following conditions are satisfied:
(1) Any Contract owner or the Annuitant, if the Contract is owned by a company
or other legal entity, is confined to a long term care facility or a
hospital for at least 90 consecutive days. The insured must enter the long
term care facility or hospital at least 30 days after the Issue Date;
(2) You request the withdrawal no later than 90 days following the end of the
Insured's stay at the long term care facility or hospital. You must provide
written proof of the stay with your withdrawal request; and
(3) A physician must have prescribed the stay and the stay must be medically
necessary.
You may not claim this benefit if the physician prescribing the insured's stay
in a long term care facility is the insured or a member of the insured's
immediate family.
TERMINAL ILLNESS WAIVER BENEFIT. Under this benefit, we will waive any
Withdrawal Charge and Market Value Adjustment on all withdrawals under your
Contract if, at least 30 days after the Issue Date, you or the Annuitant are
diagnosed with a terminal illness. We may require confirmation of the diagnosis
as provided in the Contract.
WAIVER OF WITHDRAWAL CHARGE FOR CERTAIN QUALIFIED PLAN WITHDRAWALS. For
Contracts issued under a Section 403(b) plan or a Section 401 plan under our
prototype, we will waive the Withdrawal Charge when:
(1) the Annuitant becomes disabled (as defined in Section 72(m)(7)) of the Tax
Code;
(2) the Annuitant reaches age 59 1/2 and at least 5 Contract Years have passed
since the Contract was issued;
(3) at least 15 Contract Years have passed since the Contract was issued.
Our prototype is a Section 401 Defined Contribution Qualified Retirement plan.
This plan may be established as a Money Purchase plan, a Profit Sharing plan, or
a paired plan (Money Purchase and Profit Sharing). For more information about
our prototype plan, call us at 1-800-525-9287.
PREMIUM TAXES. We will charge premium taxes or other state or local taxes
against the Contract Value, including Contract Value that results from amounts
transferred from existing policies (Section 1035 exchange) issued by us or other
insurance companies. Some states assess premium taxes when Purchase Payments are
made; others assess premium taxes when annuity payments begin. We will deduct
any applicable premium taxes upon full surrender, death, or annuitization.
Premium taxes generally range from 0% to 3.5%.
DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES. We are not currently maintaining a
provision for taxes. In the future, however, we may establish a provision for
taxes if we determine, in our sole discretion, that we will incur a tax as a
result of the operation of the Separate Account. We will deduct for any taxes we
incur as a result of the operation of the Separate Account, whether or not we
previously made a provision for taxes and whether or not it was sufficient. Our
status under the Tax Code is briefly described in the Statement of Additional
Information.
OTHER EXPENSES. You indirectly bear the charges and expenses of the Portfolios
whose shares are held by the Subaccounts to which you allocate your Contract
Value. For a summary of current estimates of those charges and expenses, see
pages [ ] above. For more detailed information about those charges and expenses,
please refer to the prospectuses for the appropriate Portfolios. We may receive
compensation from the investment advisers or administrators of the Portfolios in
connection with administrative service and cost savings experienced by the
investment advisers or administrators.
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. ONLY
FEDERAL INCOME TAX ISSUES ARE ADDRESSED. LINCOLN BENEFIT MAKES NO GUARANTEE
REGARDING THE TAX TREATMENT OF ANY CONTRACT OR TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences of your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
(1) the owner is a natural person,
(2) the investments of the Separate Account are "adequately diversified"
according to Treasury Department regulations, and
(3) Lincoln Benefit is considered the owner of the Separate Account assets for
federal income tax purposes.
Non-natural Owners. As a general rule, annuity contracts owned by non-natural
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. Any increase in the value of
such contracts is taxed as ordinary income received or accrued by the owner
during the taxable year. Please see the Statement of Additional Information for
a discussion of several exceptions to the general rule for contracts owned by
non-natural persons.
Diversification Requirements. For a contract to be treated as an annuity for
federal income tax purposes, the investments in the Separate Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Separate Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the owner during the taxable year.
Although Lincoln Benefit does not have control over the Portfolios or their
investments, we expect the Portfolios to meet the diversification requirements.
Ownership Treatment. The IRS has stated that you will be considered the owner of
Separate Account assets if you possess incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. At the time
the diversification regulations were issued, the Treasury Department announced
that the regulations do not provide guidance concerning circumstances in which
investor control of the Separate Account investments may cause an investor to be
treated as the owner of the Separate Account. The Treasury Department also
stated that future guidance would be issued regarding the extent that owners
could direct sub-account investments without being treated as owners of the
underlying assets of the Separate Account.
Your rights under this contract are different than those described by the IRS in
rulings in which it found that contract owners were not owners of Separate
Account assets. For example, you have the choice to allocate premiums and
contract values among more investment options. Also, you may be able to transfer
among investment options more frequently than in such rulings. These differences
could result in you being treated as the owner of the Separate Account. If this
occurs, income and gain from the Separate Account assets would be includible in
your gross income. Lincoln Benefit does not know what standards will be set
forth in any regulations or rulings which the Treasury Department may issue. It
is possible that future standards announced by the Treasury Department could
adversely affect the tax treatment of your contract. We reserve the right to
modify the Contract as necessary to attempt to prevent you from being considered
the federal tax owner of the assets of the Separate Account. However, we make no
guarantee that such modification to the Contract will be successful.
Taxation of Partial and Full Withdrawals. If you make a partial withdrawal under
a non-qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
Contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. Credit Enhancements provided
under a Contract are not treated as Purchase Payments and therefore do not
increase your investment in the Contract. If you make a partial withdrawal under
a qualified Contract, the portion of the payment that bears the same ratio to
the total payment that the investment in the contract (i.e., nondeductible IRA
contributions, after tax contributions to qualified plans) bears to the contract
value, is excluded from your income. You should contact a competent tax advisor
with respect to the potential tax consequences of a Market Value Adjustment, as
no definitive guidance exists on the proper tax treatment of Market Value
Adjustments. If you make a full withdrawal under a non-qualified Contract or a
qualified Contract, the amount received will be taxable only to the extent it
exceeds the investment in the contract.
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. "Qualified distributions" from Roth IRAs are
not included in gross income. "Qualified distributions" are any distributions
made more than five taxable years after the taxable year of the first
contribution to any Roth IRA and which are:
- - made on or after the date the individual attains age 59 1/2,
- - made to a beneficiary after the owner's death, - attributable to the owner
being disabled, or
- - for a first time home purchase (first time home purchases are subject to a
lifetime limit of $10,000).
If you transfer a nonqualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract value and the
investment in the Contract at the time of transfer. Except for certain qualified
contracts, any amount you receive as a loan under a Contract, and any assignment
or pledge (or agreement to assign or pledge) of the Contract Value is treated as
a withdrawal of such amount or portion.
Taxation of Annuity Payments. Generally, the rule for income taxation of annuity
payments received from a nonqualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If you die, and annuity payments cease before the total amount of the
investment in the contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
Taxation of Annuity Death Benefits. Death of an owner, or death of the annuitant
if the Contract is owned by a non-natural person, will cause a distribution of
Death Benefits from a Contract. Generally, such amounts are included in income
as follows:
(1) if distributed in a lump sum, the amounts are taxed in the same manner as a
full withdrawal, or
(2) if distributed under an annuity option, the amounts are taxed in the same
manner as an annuity payment. Unlike some other assets, a holder's basis
for an annuity is not increased or decreased to the fair market value of
the Contract on the date of death. Please see the Statement of Additional
Information for more detail on distribution at death requirements.
Penalty Tax on Premature Distributions. A 10% penalty tax applies to the taxable
amount of any premature distribution from a nonqualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
59 1/2. However, no penalty tax is incurred on distributions:
(1) made on or after the date the owner attains age 59 1/2;
(2) made as a result of the owner's death or disability;
(3) made in substantially equal periodic payments over the owner's life or life
expectancy,
(4) made under an immediate annuity; or
(5) attributable to investment in the contract before August 14, 1982.
You should consult a competent tax advisor to determine if any other exceptions
to the penalty apply to your situation. Similar exceptions may apply to
distributions from qualified Contracts.
Aggregation of Annuity Contracts. All non-qualified deferred annuity contracts
issued by Lincoln Benefit (or its affiliates) to the same owner during any
calendar year will be aggregated and treated as one annuity contract for
purposes of determining the taxable amount of a distribution.
Tax Qualified Contracts
Contracts may be used as investments with certain Qualified Plans such as:
- - Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
- - Roth IRAs under Section 408A of the Code;
- - Simplified Employee Pension Plans under Section 408(k) of the Code;
- - Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
- - Tax Sheltered Annuities under Section 403(b) of the Code;
- - Corporate and Self Employed Pension and Profit Sharing Plans; and
- - State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans.
In the case of certain Qualified Plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
Restrictions Under Section 403(b) Plans. Section 403(b) of the Tax Code provides
tax-deferred retirement savings plans for employees of certain non-profit and
educational organizations. Under Section 403(b), any Contract used for a 403(b)
plan must provide that distributions attributable to salary reduction
contributions made after 12/31/88, and all earnings on salary reduction
contributions, may be made only on or after the date the employee:
- - attains age 59 1/2,
- - separates from service,
- - dies,
- - becomes disabled, or
- - on account of hardship (earnings on salary reduction contributions may not
be distributed on the account of hardship).
These limitations do not apply to withdrawals where Lincoln Benefit is directed
to transfer some or all of the Contract Value to another '403(b) plan.
Income Tax Withholding
Lincoln Benefit is required to withhold federal income tax at a rate of 20% on
all "eligible rollover distributions" unless you elect to make a "direct
rollover" of such amounts to another qualified plan or IRA. Eligible rollover
distributions generally include all distributions from qualified Contracts,
excluding IRAs, with the exception of:
(1) required minimum distributions, or
(2) a series of substantially equal periodic payments made over a period of at
least 10 years, or,
(3) over the life (joint lives) of the participant (and beneficiary).
Lincoln Benefit may be required to withhold federal and state income taxes on
any distributions from either non-qualified or qualified Contracts that are not
eligible rollover distributions unless you notify us of your election to not
have taxes withheld.
DESCRIPTION OF LINCOLN BENEFIT LIFE
COMPANY AND THE SEPARATE ACCOUNT
LINCOLN BENEFIT LIFE COMPANY. Lincoln Benefit Life Company is a stock life
insurance company organized under the laws of the state of Nebraska in 1938. Our
legal domicile and principal business address is 206 South 13th Street, Lincoln,
Nebraska. Lincoln Benefit is a wholly owned subsidiary of Allstate Life
Insurance Company ("Allstate Life" or "ALIC"), a stock life insurance company
incorporated under the laws of the State of Illinois. Allstate Life is a wholly
owned subsidiary of Allstate Insurance Company ("AIC"), a stock
property-liability insurance company incorporated under the laws of Illinois.
All outstanding capital stock of Allstate is owned by The Allstate Corporation
("Allstate").
We are authorized to conduct life insurance and annuity business in the District
of Columbia, Guam, U.S. Virgin Islands and all states except New York. We intend
to market the Contract everywhere we conduct variable annuity business. The
Contracts offered by this prospectus are issued by us and will be funded in the
Separate Account and/or the Fixed Account.
Under our reinsurance agreements with Allstate Life, substantially all contract
related transactions are transferred to Allstate Life. Through our reinsurance
agreements with Allstate Life, substantially all of the assets backing our
reinsured liabilities are owned by Allstate Life. These assets represent our
general account and are invested and managed by Allstate Life. Accordingly, the
results of operations with respect to applications received and contracts issued
by Lincoln Benefit are not reflected in our consolidated financial statements.
The amounts reflected in our consolidated financial statements relate only to
the investment of those assets of Lincoln Benefit that are not transferred to
Allstate Life under the reinsurance agreements. While the reinsurance agreements
provide us with financial backing from Allstate Life, it does not create a
direct contractual relationship between Allstate Life and you.
Under the Company's reinsurance agreements with ALIC, the Company reinsures all
reserve liabilities with ALIC except for variable contracts. The Company's
variable contract assets and liabilities are held in legally-segregated,
unitized Separate Accounts and are retained by the Company. However, the
transactions related to such variable contracts such as premiums, expenses and
benefits are transferred to ALIC.
Lincoln Benefit is highly rated by independent agencies, including A.M. Best,
Moody's, and Standard & Poor's. These ratings are based on our reinsurance
agreement with Allstate Life, and reflect financial soundness and strong
operating performance. The ratings are not intended to reflect the financial
strength or investment experience of the Separate Account. We may from time to
time advertise these ratings in our sales literature.
CONSOLIDATED FINANCIAL STATEMENTS OF LINCOLN BENEFIT. The Company's consolidated
financial statements and notes thereto are included in this Prospectus beginning
on page F-1. * You should consider those consolidated financial statements only
as bearing on Lincoln Benefit's ability to meet its obligations under the
Policy. They do not relate to the investment performance of the assets held in
the Separate Account. The financial statements for the Separate Account are set
forth in the Statement of Additional Information.
* To be provided by pre-effective amendment.
SELECTED FINANCIAL DATA. The following selected financial data for the Company
should be read in conjunction with the consolidated financial statements and
notes thereto included in the prospectus beginning on page F-1.
LINCOLN BENEFIT LIFE COMPANY
SELECTED FINANCIAL DATA
(IN THOUSANDS)
YEAR-END FINANCIAL DATA 1998 1997 1996 1995 1994
- ----------------------- --------- -------- --------- -------- -------
For the Years Ended
December 31:
Income Before
Income Tax Expense... $10,374 $ 10,587 $ 8,603 $ 7,838 $ 4,641
Net Income............. 6,670 6,852 5,583 5,093 3,036
As of December 31:
Total Assets........... $8,120,008 $7,507,203 $7,108,502 $6,347,097 $5,319,707
INVESTMENTS BY LINCOLN BENEFIT. Our general account assets, like the general
account assets of other insurance companies, including Allstate Life, must be
invested in accordance with applicable state laws. These laws govern the nature
and quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of
investment. In general, these laws permit us, within specified limits and
subject to certain qualifications, to invest in federal, state, and municipal
obligations, corporate bonds, preferred stocks, real estate mortgages, real
estate and certain other investments. All of our general account assets are
available to meet our obligations.
We will primarily invest our general account assets in investment-grade fixed
income securities including the following:
Securities issued by the United States Government or its agencies or
instrumentalities, which may or may not be guaranteed by the United States
Government;
Debt instruments, including issues of or guaranteed by banks or bank holding
companies, and of corporations, which our management deems to have qualities
appropriate for inclusion in our general account;
Commercial mortgages, mortgage-backed securities collateralized by real estate
mortgage loans, or securities collateralized by other assets, that are insured
or guaranteed by the Federal Home Loan Mortgage Association, the Federal
National Mortgage Association or the Government National Mortgage Association,
or that have an investment grade at time of purchase within the four highest
grades assigned by Moody's Investors Services, Inc. (Aaa, Aa, A or Baa),
Standard & Poor's Corporation (AAA, AA, A or BBB) or any other nationally
recognized rating service;
Commercial paper, cash or cash equivalents, and other short-term investments
having a maturity of less than one year that our management considers to have
investment quality comparable to securities having the ratings stated above.
In addition, interest rate swaps, futures, options, rate caps, and other hedging
instruments may be used solely for non-speculative hedging purposes. Anticipated
use of these financial instruments shall be limited to protecting the value of
portfolio sales or purchases, or to enhance yield through the creation of a
synthetic security.
In addition, Lincoln Benefit maintains certain unitized separate accounts which
invest in shares of open-end investment companies registered under the
Investment company Act of 1940, as amended. The Subaccounts under this Contract
are subdivisions of one of those Separate Accounts. These separate account
assets do not support our obligations under the Fixed Account provisions of the
Contracts.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion highlights significant factors influencing the
results of operations and changes in financial position of Lincoln Benefit Life
Company ("LBL") and its wholly owned subsidiary, Allstate Financial
Distributors, Inc. (collectively the "Company"). It should be read in
conjunction with the consolidated financial statements and related notes. To
conform with the 1998 presentation, certain prior year amounts have been
reclassified.
LBL is a wholly owned subsidiary of Allstate Life Insurance Company
("ALIC"), which is wholly owned by Allstate Insurance Company ("AIC"), a wholly
owned subsidiary of The Allstate Corporation ("Corporation"). The Company
markets a broad line of life insurance and savings products through independent
insurance agents and brokers. Life insurance includes traditional products such
as whole life and term life insurance, as well as variable life, universal life
and other interest-sensitive life products. Savings products include deferred
annuities, such as variable annuities and fixed rate single and flexible premium
annuities, and immediate annuities. The Company has identified itself as a
single segment entity.
The assets and liabilities related to flexible premium deferred variable
annuity contracts and variable life policies are legally segregated and
reflected as Separate Account assets and liabilities and carried at fair value
in the consolidated statements of financial position. Investment income and
realized gains and losses of the Separate Accounts accrue directly to the
contractholders (net of fees) and, therefore, are not included in the Company's
consolidated statements of operations and comprehensive income.
<TABLE>
<CAPTION>
CONSOLIDATED RESULTS OF OPERATIONS
($ in thousands)
1998 1997 1996
-------------- ------------ ---------
<S> <C> <C> <C>
Net investment income $ 10,240 $ 10,570 $ 9,519
============= ============= =============
Realized capital gains and losses, after-tax $ 87 $ 11 $ 4
============= ============= =============
Operating costs and expenses $ - $ - $ 457
============= ============= =============
Net income $ 6,670 $ 6,852 $ 5,583
============= ============= =============
Total investments $ 162,659 $ 148,931 $ 139,499
============= ============= =============
</TABLE>
The Company has reinsurance agreements under which contract and policy
related transactions are transferred primarily to ALIC. The Company's
consolidated results of operations include only net investment income and
realized capital gains and losses earned on the assets of the Company that are
not transferred under the reinsurance agreements, and income provided by the
Company's broker-dealer subsidiary, Allstate Financial Distributors, Inc. Prior
to December 31, 1996, the Company retained a block of paid up life insurance,
which was ceded to ALIC on that date.
Net income was $6.7 million in 1998 compared to $6.9 million in 1997, as
lower net investment income was partially offset by higher realized capital
gains and losses. In 1997, net income was higher than in 1996 primarily due to
increased net investment income.
Pretax net investment income decreased 3.1% to $10.2 million in 1998
primarily due to lower income from the broker-dealer. In 1997, pretax net
investment income increased by $1.1 million, or 11.0%. The increased investment
income was due to higher investment balances, arising from positive cash flows
from operating activities and increased broker-dealer income.
In 1997, operating costs and expenses decreased as a result of the cession
of the block of paid up life insurance and the expenses on that block of
business that were incurred in 1996.
Realized capital gains, after-tax, were $87 thousand and $11 thousand in
1998 and 1997, respectively, and arose principally from pre-payments of fixed
income securities.
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL POSITION
($ in thousands)
1998 1997
----------------- -------------
<S> <C> <C>
Fixed income securities (1) $ 158,984 $ 147,911
Short-term investments 3,675 1,020
-------------- ---------------
Total investments $ 162,659 $ 148,931
============== ===============
Reinsurance recoverable from ALIC $ 6,933,084 $ 6,732,755
============== ===============
Separate Account assets and liabilities $ 763,416 $ 447,658
============== ===============
Contractholder funds $ 6,785,070 $ 6,607,130
============== ===============
</TABLE>
(1) Fixed income securities are carried at fair value. Amortized cost for these
securities was $149,898 and $141,553 at December 31, 1998 and 1997,
respectively.
Total investments increased to $162.7 million at December 31, 1998 from $148.9
million at December 31, 1997. The increase was primarily due to amounts invested
from positive cash flows generated from operations and increases in market
values of fixed income securities.
Fixed Income Securities The Company's fixed income securities portfolio consists
of publicly traded corporate bonds, mortgage-backed securities, and U.S.
government bonds. The Company generally holds its fixed income securities for
the long term, but has classified all these securities as available for sale to
allow maximum flexibility in portfolio management. At December 31, 1998,
unrealized net capital gains on the fixed income securities portfolio totaled
$9.1 million compared to $6.4 million as of December 31, 1997. The increase in
the unrealized gain position is primarily attributable to lower interest rates.
At December 31, 1998, all of the Company's fixed income securities portfolio was
rated investment grade, which is defined by the Company as a security having a
National Association of Insurance Commissioners ("NAIC") rating of 1 or 2, a
Moody's rating of Aaa, Aa, A or Baa, or a comparable Company internal rating.
The quality mix of the Company's fixed income securities portfolio at December
31, 1998 is presented below.
($ in thousands)
<TABLE>
<CAPTION>
NAIC
ratings Moody's equivalent description Fair value Percent to total
<S> <C> <C> <C> <C>
1 Aaa/Aa/A $ 146,533 92.2%
2 Baa 12,451 7.8%
------------- --------------
$ 158,984 100.0%
=========== ============
</TABLE>
At December 31, 1998 and 1997, $51.2 million and $55.1 million,
respectively, of the fixed income portfolio were invested in mortgage-backed
securities ("MBS"). At December 31, 1998, all of the MBS were investment grade
and approximately 97% have underlying collateral guaranteed by the U.S.
government entities; thus credit risk is minimal.
MBS, however, are subject to interest rate risk as the duration and
ultimate realized yield are affected by the rate of repayment of the underlying
mortgages. The Company attempts to limit interest rate risk by purchasing MBS
where cost does not significantly exceed par value, and with repayment
protection to provide a more certain cash flow to the Company. At December 31,
1998, the amortized cost of the MBS portfolio was below par value by $2.4
million and over 23% of the MBS portfolio was invested in planned amortization
class bonds. This type of MBS is purchased to provide additional protection
against declining interest rates.
The Company closely monitors its fixed income portfolio for declines in
value that are other than temporary. Securities are placed on non-accrual status
when they are in default or when the receipt of interest payments is in doubt.
Short-term investments The Company's short-term investment portfolio was
$3.7 million and $1.0 million at December 31, 1998 and 1997, respectively. The
Company invests available cash balances primarily in taxable short-term
securities having a final maturity date or redemption date of one year or less.
Contractholder funds and reinsurance recoverable from ALIC Contractholder
funds increased $177.9 million and $185.0 million at December 31, 1998 and 1997,
respectively. Reinsurance recoverable from ALIC increased $200.3 million and
$188.0 million at December 31, 1998 and 1997, respectively. In 1998, the
increase in contractholder funds was due primarily to universal life-type
policies, as higher sales and interest credited to contractholders were
partially offset by surrenders and benefits paid on universal life-type
policies. Reinsurance recoverable from ALIC relates to contract benefit
obligations ceded to ALIC.
Separate Accounts Separate Account assets and liabilities increased by
$315.8 million, primarily attributable to sales of flexible premium deferred
variable annuity and variable life contracts and favorable investment
performance of the Separate Accounts investment portfolios, partially offset by
variable annuity surrenders and withdrawals.
MARKET RISK
Market risk is the risk that the Company will incur losses due to adverse
changes in equity prices or interest rates. The Company's primary market risk
exposure is to changes in interest rates, although the Company also has certain
exposures to changes in equity prices.
Interest Rate Risk Interest rate risk is the risk that the Company will
incur economic losses due to adverse changes in interest rates, as the Company
invests substantial funds in interest-sensitive assets.
One way to quantify this exposure is duration. Duration measures the
sensitivity of the fair value of assets to changes in interest rates. For
example, if interest rates increase 1%, the fair value of an asset with a
duration of 5 years is expected to decrease in value by approximately 5%. At
December 31, 1998, the Company's asset duration was approximately 4.3 years, a
slight decrease from the 4.6 years reported for December 31, 1997.
To calculate duration, the Company projects asset cash flows and discounts
them to a net present value basis using a risk-free market rate adjusted for
credit quality, sector attributes, liquidity and other specific risks. Duration
is calculated by revaluing these cash flows at an alternative level of interest
rates, and determining the percentage change in fair value from the base case.
The projections include assumptions (based upon historical market and Company
specific experience) reflecting the impact of changing interest rates on the
prepayment and/or option features of instruments, where applicable. Such
assumptions relate primarily to mortgage-backed securities, collateralized
mortgage obligations, and municipal and corporate obligations.
Based upon the information and assumptions the Company uses in its
duration calculation and interest rates in effect at December 31, 1998,
management estimates that a 100 basis point immediate, parallel increase in
interest rates ("rate shock") would decrease the net fair value of its assets
identified above by approximately $6.8 million, an amount essentially unchanged
from the amount reported for December 31, 1997. The selection of a 100 basis
point immediate rate shock should not be construed as a prediction by the
Company's management of future market events; but rather, to illustrate the
potential impact of such an event.
To the extent that actual results differ from the assumptions utilized,
the Company's duration and rate shock measures could be significantly impacted.
Additionally, the Company's calculation assumes that the current relationship
between short-term and long-term interest rates (the term structure of interest
rates) will remain constant over time. As a result, these calculations may not
fully capture the impact of non-parallel changes in the term structure of
interest rates and/or large changes in interest rates.
Equity Price Risk Equity price risk is the risk that the Company will incur
economic losses due to adverse changes in equity prices. At December 31, 1998
the Company had variable annuity and variable life funds with balances totaling
$763.4 million. The Company earns mortality and expense fees as a percentage of
fund balance. In the event of an immediate decline of 10% in the fund balances
due to equity market declines, the Company would earn approximately $1.0 million
less in annualized fee income which would be ceded to ALIC.
Corporate Oversight In formulating and implementing policies for investing
new and existing funds, AIC, as indirect parent of the Company, administers and
oversees investment risk management processes primarily through three oversight
bodies: the Boards of Directors and Investment Committees of its operating
subsidiaries, and the Credit and Risk Management Committee ("CRMC"). The Boards
of Directors and Investment Committees provide executive oversight of investment
activities. The CRMC is a senior management committee consisting of the Chief
Investment Officer, the Investment Risk Manager, and other investment officers
who are responsible for the day-to-day management of market risk. The CRMC meets
at least monthly to provide detailed oversight of investment risk, including
market risk.
AIC has investment guidelines that define the overall framework for
managing market and other investment risks, including the accountabilities and
controls over these activities. In addition, AIC has specific investment
policies for each of its affiliates, including the Company, that delineate the
investment limits and strategies that are appropriate for the Company's
liquidity, surplus, product and regulatory requirements.
LIQUIDITY AND CAPITAL RESOURCES
Under the terms of reinsurance agreements, all premiums and deposits,
excluding those relating to Separate Accounts, are transferred primarily to
ALIC, which maintains the investment portfolios supporting the Company's
products. Payments of policyholder claims, benefits, contract maturities,
contract surrenders and withdrawals and certain operating costs are also
reimbursed primarily by ALIC, under the terms of the reinsurance agreements. The
Company continues to have primary liability as a direct reinsurer for risks
reinsured. The Company's ability to meet liquidity demands is dependent on
ALIC's ability to meet those demands. ALIC's claims-paying ability was rated
Aa2, AA+, and A+ by Moody's, Standard & Poor's and A.M. Best, respectively at
December 31, 1998.
The primary sources for the remainder of the Company's funds are
collection of principal and interest from the investment portfolio and capital
contributions from ALIC. The primary uses for the remainder of the Company's
funds are to purchase investments and pay costs associated with the maintenance
of the Company's investment portfolio.
At December 31, 1998, the Moody's and Standard and Poor's financial
strength ratings for the Company were Aa2 and AA+, respectively.
The NAIC has a standard for assessing the solvency of insurance companies,
which is referred to as risk-based capital ("RBC"). The requirement consists of
a formula for determining each insurer's RBC and a model law specifying
regulatory actions if an insurer's RBC falls below specified levels. The RBC
formula for life insurance companies establishes capital requirements relating
to insurance, business, asset and interest rate risks. At December 31, 1998, RBC
for the Company was significantly above levels that would require regulatory
actions.
YEAR 2000
The Company is dependent upon certain services provided for it by the
Corporation including computer-related systems, and systems and equipment that
are not typically thought of as computer-related (referred to as "non-IT"). For
this reason, the Company is reliant upon the Corporation for the establishment
and maintenance of its computer-related systems and non-IT.
The Corporation is heavily dependent upon complex computer systems for all
phases of its operations, including customer service, insurance processing,
underwriting, loss reserving, investments and other enterprise systems. Since
many of the Corporation's older computer software programs recognize only the
last two digits of the year in any date, some software may fail to operate
properly in or after the year 1999, if the software is not reprogrammed,
remediated, or replaced ("Year 2000"). Also, non-IT often contain embedded
hardware or software that may have a Year 2000 sensitive component. The
Corporation believes that many of its counterparties and suppliers also have
Year 2000 issues and non-IT issues which could affect the Corporation.
In 1995, the Corporation commenced a plan consisting of four phases which
are intended to mitigate and/or prevent the adverse effects of Year 2000 issues
on its systems: 1) inventory and assessment of affected systems and equipment,
2) remediation and compliance of systems and equipment through strategies that
include the replacement or enhancement of existing systems, upgrades to
operating systems already covered by maintenance agreements and modifications to
existing systems to make them Year 2000 compliant, 3) testing of systems using
clock-forward testing for both current and future dates and for dates which
trigger specific processing, and 4) contingency planning which will address
possible adverse scenarios and the potential financial impact to the
Corporation's results of operations, liquidity or financial position.
The Corporation believes that the first three steps of this plan,
assessment, remediation and testing, including clock-forward testing which is
being performed on the Corporation's systems and non-IT, are mostly complete for
the Corporation's critical systems. In April 1998, the Corporation announced its
main premium application system, ALERT, which manages more than 20 million auto
and homeowners policies is Year 2000 compliant. The Corporation is relying on
other remediation techniques for its midrange and personal computer
environments, and certain mainframe applications.
Certain investment processing systems, midrange computers and personal
computer environments are planned to be remediated by the middle of 1999, and
some systems and non-IT related to discontinued or non-critical functions of the
Corporation are planned to be abandoned by the end of 1999.
The Corporation is currently in the process of identifying key processes
and developing contingency plans in the event that the systems supporting these
key processes are not Year 2000 compliant at the end of 1999. Management
believes these contingency plans should be completed by mid-1999. Until these
plans are complete, management is unable to determine an estimate of the most
reasonably possible worst case scenario due to issues relating to the Year 2000.
In addition, the Corporation is actively working with its major external
counterparties and suppliers to assess their compliance efforts and the
Corporation's exposure to both their Year 2000 issues and non-IT issues. This
assessment has included the solicitation of external counterparties and
suppliers, evaluating responses received and testing third party interfaces and
interactions to determine compliance. Currently, the Corporation has solicited
approximately 1,500 and has received responses from approximately 75% of its
counterparties and suppliers. The Corporation will continue its efforts to
solicit responses on Year 2000 compliance from these parties. The majority of
these responses have stated that the counterparties and suppliers believe that
they will be Year 2000 compliant and that no transactions will be affected.
However, some key vendors have not provided affirmative responses to date. The
Corporation has also decided to test certain interfaces and interactions to gain
additional assurance on third party compliance. If key vendors are unable to
meet the Year 2000 requirement, the Corporation is preparing contingency plans
that will allow the Corporation to continue to sell its products and to service
its customers. Management believes these contingency plans should be completed
by mid-1999. The Corporation currently does not have sufficient information to
determine whether or not all of its external counterparties and suppliers will
be Year 2000 ready.
The Corporation is currently assessing the level of Year 2000 risk that is
associated with certain personal lines policies that have been issued. To date,
no changes have been made in the coverages provided by the Corporation's
personal auto and homeowners lines policies to specifically exclude coverage for
Year 2000 related claims. This does not mean that all losses, or any particular
type of loss, that might be related to Year 2000 will be covered. Rather, all
claims will continue to be evaluated on a case-by-case basis to determine
whether coverage is available for a particular loss in accordance with
applicable policy terms and conditions of the policy in force.
The Corporation also has investments which have been publicly or privately
placed. The Corporation may be exposed to the risk that the issuers of these
investments will be adversely impacted by Year 2000 issues. The Company assesses
the impact which Year 2000 issues have on the Corporation's investments as part
of due diligence for proposed new investments, and in its ongoing review of all
current portfolio holdings. Any recommended actions with respect to individual
investments are determined by taking into account the potential impact of Year
2000 on the issuer. Contingency plans are being created for any securities held
whose issuer is determined to not be Year 2000 compliant.
The Corporation presently believes that it will resolve the Year 2000
issue in a timely manner. Year 2000 costs are expensed as incurred, therefore
the majority of expenses related to this project have been incurred as of
December 31, 1998. The Corporation estimates that approximately $125 million in
costs will be incurred between the years of 1995 and 2000. These amounts include
costs directly related to fixing Year 2000 issues, such as modifying software
and hiring Year 2000 solution providers. These amounts also include costs to
replace certain non-compliant systems which would not have been otherwise
replaced. A portion of these costs will be incurred by the Company on a pro rata
basis of usage of the computer-related systems and non-IT, as compared to the
usage of all entities which share these services with the Corporation. These
amounts are not expected to be material to the results of operations of the
Company.
PENDING ACCOUNTING STANDARDS
In December 1997, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants ("AICPA") issued Statement of
Position ("SOP") 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-related Assessments." The SOP is required to be adopted in 1999. The
SOP provides guidance concerning when to recognize a liability for
insurance-related assessments and how those liabilities should be measured.
Specifically, insurance-related assessments should be recognized as liabilities
when all of the following criteria have been met: 1) an assessment has been
imposed or it is probable that an assessment will be imposed, 2) the event
obligating an entity to pay an assessment has occurred and 3) the amount of the
assessment can be reasonably estimated. The Company is currently evaluating the
effects of this SOP on its accounting for insurance-related assessments. Certain
information required for compliance is not currently available and therefore the
Company is studying alternatives for estimating the accrual. In addition,
industry groups are working to improve the information available. Adoption of
this standard is not expected to be material to the results of operations or
financial position of the Company.
FORWARD-LOOKING STATEMENTS
The statements contained in this Management's Discussion and Analysis that
are not historical information are forward-looking statements that are based on
management's estimates, assumptions and projections. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor under The Securities Act of
1933 and The Securities Exchange Act of 1934 for forward-looking statements.
COMPETITION. Lincoln Benefit is engaged in a business that is highly
competitive. Many other life insurance companies and other entities sell
insurance and annuities. There are approximately 1,700 insurers in business in
the United States. As of April 1, 1998, A.M. Best Company assigns a rating of A+
(Superior) to Allstate Life, which automatically reinsures all net general
account business of Lincoln Benefit. A.M. Best Company also assigns Lincoln
Benefit a rating of A+(r), because Lincoln Benefit automatically reinsures all
general account business with Allstate Life. Standard & Poor's Insurance Rating
Services assigns an AA+ (Very Strong) to Lincoln Benefit's financial strength
rating. Moody's assigns an Aa2 (Excellent) financial stability rating to Lincoln
Benefit. Lincoln Benefit shares the same ratings as its parent, Allstate Life.
EMPLOYEES. As of December 31, 1998, Lincoln Benefit had approximately 571
employees at its home office in Lincoln, Nebraska.
PROPERTIES. Lincoln Benefit owns and leases office space in Lincoln, Nebraska.
The combined owned and leased spaces are used for home office administrative
operations.
EXECUTIVE OFFICERS AND DIRECTORS OF LINCOLN BENEFIT. Our directors and executive
officers are listed below, together with information as to their ages, dates of
election and principal business occupations during the last five years (if other
than their present occupation).
JANET P. ANDERBERY, VICE PRESIDENT AND CONTROLLER, 1994, Associate Vice
President and Controller 5/84-4/94, Lincoln Benefit Life Company; Vice President
and Controller 1/94-present, Surety Life Insurance Company; Vice President &
Controller 1/99-present, Allstate Financial Distributors; Vice President and
Controller 5/93-1/99, Lincoln Benefit Financial Services, Inc.
THOMAS R. ASHLEY, SENIOR VICE PRESIDENT & MEDICAL DIRECTOR, 1998, Vice President
and Medical Director 10/96-5/98 Lincoln Benefit Life Company; Senior Vice
President & Medical Director 5/98-present, Vice President and Medical Director
1/97-5/98, Surety Life Insurance Company.
THOMAS J. BERNEY, SENIOR VICE PRESIDENT 1998, Vice President 1982-1998 Lincoln
Benefit Life Company.
JOHN H. COLEMAN, III, SENIOR VICE PRESIDENT, DIRECTOR, 1998-present, Vice
President 4/94-5/98, Lincoln Benefit Life Company; Senior Vice President,
Director 5/98-present, Vice President 9/96-5/98, Surety Life Insurance Company.
LAWRENCE W. DAHL, EXECUTIVE VICE PRESIDENT, DIRECTOR 1999, Lincoln Benefit Life
Company; Executive Vice President, Director 1999, Surety Life Insurance Company;
Tax Director, 2/87-6/99, Allstate Life Insurance Company.
MARVIN P. EHLY, SENIOR VICE PRESIDENT AND TREASURER, DIRECTOR, 1999; Vice
President 6/93-12/98, Lincoln Benefit Life Company; Senior Vice President and
Treasurer, Director 1/99-present, Surety Life Insurance Company.
DOUGLAS F. GAER, EXECUTIVE VICE PRESIDENT 1997, DIRECTOR, 1981, Senior Vice
President, 4/95-2/97, Senior Vice President and Treasurer 4/94-3/95, Vice
President 3/81-4/94, Lincoln Benefit Life Company; Executive Vice President
1/97-present, Senior Vice President and Treasurer, 1/94-12/96, Director
1/94-present, Surety Life Insurance Company; Director 5/93-1/99, Lincoln Benefit
Financial Services, Inc.
PETER H. HECKMAN, CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER 1999, DIRECTOR,
1990, Vice Chairman of the Board 8/96-12/98, Lincoln Benefit Life Company; Vice
President, Director 4/92-present, Glenbrook Life & Annuity Company; Vice
President 11/90-present, Director 9/90-present, Glenbrook Life Insurance
Company; Vice President 6/89-present, Director 7/90-present, Allstate Life
Insurance Company of New York; Vice President 4/89-present, Director
12/88-present, Allstate Life Insurance Company; Vice President, Director
12/88-present, Northbrook Life Insurance Company; Director 5/90-present, Surety
Life Insurance Company.
RODGER A. HERGENRADER, SENIOR VICE PRESIDENT 1999, Vice President 1995-1998,
Underwriter 1988-1995, Lincoln Benefit Life Company; Senior Vice President
1999-present, Surety Life Insurance Company.
LOUIS G. LOWER, II, DIRECTOR, 1989, Chairman of the Board 5/89-12/98, Lincoln
Benefit Life Company; Chairman of the Board and Chief Executive Officer
6/95-present, Chairman of the Board & President, 4/92-6/95, Glenbrook Life &
Annuity Company; Chairman of the Board and Chief Executive Officer
12/95-present, Chairman of the Board & President 1/91-12/95, Director
9/90-present, Glenbrook Life Insurance Company; President 1/90-present, Director
10/86-present, Allstate Life Insurance Company; Chairman of the Board and Chief
Executive Officer 6/95-present, Chairman of the Board and President 4/90-6/95,
Chairman of the Board 4/90-7/90, Executive Vice President 1/89-4/90, Senior Vice
President and Treasurer 10/86-4/89, Director 4/86-present, Northbrook Life
Insurance Company; Chairman of the Board & President 6/90-present, Director
12/83-present, Allstate Life Insurance Company of New York; Chairman of the
Board & Chief Executive Officer 3/90-present, Director 5/89-present, Surety Life
Insurance Company; Director 10/86-present Allstate Insurance Company; Director
4/90-present, Allstate Settlement Company; Director 5/91-present, Allstate Life
Financial Services.
JOHN J. MORRIS, SENIOR VICE PRESIDENT/SECRETARY 1994, DIRECTOR, 1987, Vice
President & Secretary 8/85-4/94, Lincoln Benefit Life Company; Senior Vice
President 9/96-present, Director 6/95-present, Surety Life Insurance Company;
Vice President & Secretary, Director 5/93-1/99, Lincoln Benefit Financial
Services Inc.
ROBERT E. RICH, EXECUTIVE VICE PRESIDENT 1996, DIRECTOR, 1987, Senior Vice
President/Chief Actuary and Treasurer, 4/95-5/96; Senior Vice President,
Assistant Secretary 4/94-3/95, Vice President/Assistant Secretary 1/84-5/96,
Lincoln Benefit Life Company; Executive Vice President 5/96-present, Senior Vice
President and Chief Actuary 1/94-5/96, Director 9/93-present, Surety Life
Insurance Company; Director 5/93-1/99, Lincoln Benefit Financial Services, Inc.
KEVIN R. SLAWIN, DIRECTOR, 1996, Lincoln Benefit Life Company; Director and Vice
President-Finance and Planning 1996-present, Allstate Life Insurance Company;
Director 8/96-present, Allstate Life Insurance Company of New York; Director
8/96-present, Laughlin Group Holdings, Inc.; Director 8/96-present, Northbrook
Life Insurance Company; Director 8/96-present, Surety Life Insurance Company;
Director 8/96-present, Glenbrook Life Insurance Company; Assistant Vice
President, Assistant Treasurer 1/95-8/96, Allstate Insurance Company; Assistant
Treasurer and Director 2/94-1/95, Sears Roebuck & Co.
J. SCOTT TAYLOR, SENIOR VICE PRESIDENT, 1999, Vice President 9/98-3/99, Director
of Sales Management 1/97-9/98, Lincoln Benefit Life Company; Director of
Marketing Development 1984-1997 Ameritas Life Insurance Corp.
MICHAEL J. VELOTTA, DIRECTOR 1992, Lincoln Benefit Life Company; Vice President,
Secretary & General Counsel 1/93-present, Director 12/92-present, Allstate Life
Insurance Company; Vice President, Secretary & General Counsel 1/93-present,
Director 12/92-present, Glenbrook Life Insurance Company; Vice President,
Secretary & General Counsel 1/93-present, Director 12/92-present, Glenbrook Life
& Annuity Company; Vice President, Secretary & General Counsel 1/93-present,
Director 12/92-present, Allstate Life Insurance Company of New York; Vice
President, Secretary & General Counsel 1/93-present, Director 12/92-present,
Northbrook Life Insurance Company; Assistant Secretary, Director 6/95-present,
Surety Life Insurance Company.
CAROL S. WATSON, SENIOR VICE PRESIDENT, GENERAL COUNSEL AND ASSISTANT SECRETARY
1994, DIRECTOR, 1992, Vice President & General Counsel 7/91-4/94, Lincoln
Benefit Life Company; Senior Vice President, General Counsel & Corporate
Secretary 1/98-present, Senior Vice President, General Counsel and Assistant
Secretary, 1/94-12/97, Director 6/95-present, Surety Life Insurance Company;
President, 1996-1/99, Director 5/93-1/99, Vice President and General Counsel
1993-1995, Lincoln Benefit Financial Services, Inc.
DEAN M. WAY, SENIOR VICE PRESIDENT AND ACTUARY, DIRECTOR, 1998, Vice President
and Actuary 5/92-5/98, Lincoln Benefit Life Company; Senior Vice President and
Actuary, Director, 5/98-present, Vice President and Actuary 9/96-5/98, Surety
Life Insurance Company.
THOMAS J. WILSON, II, DIRECTOR, 1999, Lincoln Benefit Life Company; Director
1/99-present, Surety Life Insurance Company; Senior Vice President, Director
6/95-present, Vice President 1/95-6/95, Allstate Insurance Company; Senior Vice
President, Director 7/96-present, Allstate Holdings, Inc.; President
1/99-present, Director 9/95-present, Allstate Life Insurance Company; President
12/98-present, Director 1/99-present, Allstate Life Insurance Company of New
York; Senior Vice President 6/95-present, Director 7/95-present, Allstate
Property and Casualty Insurance Company; Vice President 1/95-1/99, The Allstate
Corporation; Vice President 1993-1995, Sears, Roebuck & Company.
PATRICIA W. WILSON, DIRECTOR, 1997, Lincoln Benefit Life Company; Assistant Vice
President/Assistant Secretary/Assistant Treasurer, 7/97-present, Assistant Vice
President 1/93-7/97, Allstate Life Insurance Company; Assistant Vice President
6/91-present, Director 6/97-present, Allstate Life Insurance Company of New
York; Assistant Treasurer 7/97-present, Glenbrook Life Insurance Company;
Assistant Treasurer 7/97-present, Glenbrook Life Annuity Company; Assistant Vice
President/Assistant Secretary/Assistant Treasurer 7/97-present, Northbrook Life
Insurance Company; Director 7/97-present, Surety Life Insurance Company.
B. EUGENE WRAITH, PRESIDENT, CHIEF OPERATING OFFICER 1996, DIRECTOR, 1984,
President and Chief Operating Officer 3/96-present, Senior Vice President
4/94-3/96, Lincoln Benefit Life Company; President and Chief Operating Officer
3/96-present, Executive Vice President 1/94-3/96, Director 9/93-present, Surety
Life Insurance Company; Chairman of the Board, Director 1993-1/99, President
5/93-11/96, Lincoln Benefit Financial Services, Inc.; Vice President
3/96-present, Allstate Life Insurance Company.
EXECUTIVE COMPENSATION
Certain executive officers of Lincoln Benefit also serve as officers of Allstate
Life and receive no compensation directly from Lincoln Benefit. Some officers
also serve as executive officers of other companies affiliated with Lincoln
Benefit. Allocations have been made as to each individual's time devoted to his
or her duties as an executive officer of Lincoln Benefit. Those allocations are
reflected in the Summary Compensation Table set forth below, except that the
figures for Mr. Lower reflect his total compensation from Lincoln Benefit, its
affiliates, and parent company Allstate Life Insurance Company. Lincoln
Benefit's directors receive no compensation for serving as directors, in
addition to their compensation as employees at Lincoln Benefit, Allstate Life,
or their affiliates.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
LONG TERM COMPENSATION
----------------------------------
PAYOUTS
AWARDS ------------
ANNUAL COMPENSATION --------------
----------------------------- (f) (g)
(a) (e) ------------ --------- (h) (i)
- -------------------------- (b) (c) (d) -------------- SECURITIES UNDERLYING --------- --------------
NAME AND PRINCIPAL ----- --------- --------- OTHER ANNUAL RESTRICTED OPTIONS/ LTIP ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION STOCK AWARDS SARS(#) PAYOUTS($)
COMPENSATION(1)
- -------------------------- ----- --------- --------- -------------- ------------ --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Louis G. Lower II 1998 $ 458,700 $ 503,309 $ 25,064 55,417 $ 8,000
Chief Executive Officer 1997 $ 453,225 $ 500,000 $ 27,768 $280,589 25,914 $570,068 $ 8,000
Chairman of the Board 1996 $ 436,800 $ 246,781 $ 10,246 0 18,258 0 $ 5,250
----- --------- --------- ------- ------------ --------- --------- ------
Bernard Eugene Wraith 1998 104,500 32,744 10,156 4,083 $ 8,000
President 1997 99,500 24,733 4,887 0 1,002 0 $ 8,000
1996 90,750 26,500 10,435 0 14,275 0 $ 5,250
----- --------- --------- ------- ------------ --------- --------- ------
Robert Edwin Rich 1998 83,114 16,681 19,800 2,175 $ 8,000
Executive Vice President 1997 77,772 20,206 18,461 0 456 0 $ 8,000
and Chief Actuary 1996 71,824 23,500 19,611 0 132 0 $ 5,250
----- --------- --------- ------- ------------ --------- --------- ------
Thomas Robert Ashley 1998 151,742 15,574 5,959 1,212 $ 8,000
Senior Vice President 1997 141,733 25,000 6,550 0 0 $ 8,000
1996 23,502 0 0 0 0
----- --------- --------- ------- ------------ --------- --------- ------
John H. Coleman, III 1998 119,146 23,505 10,391 966 $ 7,133
Senior Vice President 1997 109,776 28,620 12,709 0 960 0 $ 6,633
1996 101,088 25,500 3,047 0 378 0 $ 4,238
</TABLE>
- ------------------------
(1) Amounts received represent the value allocated to each employee's account
from employer contributions under The Savings and Profit Sharing Fund of
Allstate Employees.
Shares of the Company and Allstate Life are not directly owned by any of our
directors or executive officers. The percentage of shares of The Allstate
Corporation beneficially owned by any director, and by all of our directors and
executive officers as a group does not exceed one percent of the class
outstanding.
STATE REGULATION OF LINCOLN BENEFIT. We are subject to the laws of Nebraska and
regulated by the Nebraska Department of Insurance. Every year we file an annual
statement with the Department of Insurance covering our operations for the
previous year and our financial condition as of the end of the year. We are
inspected periodically by the Department of Insurance to verify our contract
liabilities and reserves. We also are examined periodically by the NAIC. Our
books and records are subject to review by the Department of Insurance at all
times. We are also subject to regulation under the insurance laws of every
jurisdiction in which we operate.
SEPARATE ACCOUNT. Lincoln Benefit Life Variable Annuity Account was originally
established in 1992, as a segregated asset account of Lincoln Benefit. The
Separate Account meets the definition of a "separate account" under the federal
securities laws and is registered with the SEC as a unit investment trust under
the Investment Company Act of 1940. The SEC does not supervise the management of
the Separate Account or Lincoln Benefit.
We own the assets of the Separate Account, but we hold them separate from our
other assets. To the extent that these assets are attributable to the Contract
Value of the Contracts offered by this prospectus, these assets are not
chargeable with liabilities arising out of any other business we may conduct.
Income, gains, and losses, whether or not realized, from assets allocated to the
Separate Account are credited to or charged against the Separate Account without
regard to our other income, gains, or losses. Our obligations arising under the
Contracts are general corporate obligations of Lincoln Benefit.
The Separate Account is divided into Subaccounts. The assets of each Subaccount
are invested in the shares of one of the Portfolios. We do not guarantee the
investment performance of the Separate Account, its Subaccounts or the
Portfolios. Values allocated to the Separate Account and the amount of Variable
Annuity payments will rise and fall with the values of shares of the Portfolios
and are also reduced by Contract charges. We may also use the Separate Account
to fund our other annuity contracts. We will account separately for each type of
annuity contract funded by the Separate Account.
We have included additional information about the Separate Account in the
Statement of Additional Information. You may obtain a copy of the Statement of
Additional Information by writing to us or calling us at 1-800-525-9287. We have
reproduced the Table of Contents of the Statement of Additional Information on
page [ ] below.
ADMINISTRATION
We have primary responsibility for all administration of the Contracts and the
Separate Account. Our mailing address is P.O. Box 82532, Lincoln, Nebraska
68501-2532.
We provide the following administrative services, among others: issuance of the
Contracts; maintenance of Contract Owner records; Contract Owner services;
calculation of unit values; maintenance of the Separate Account; and preparation
of Contract Owner reports.
We will send you Contract statements and transaction confirmations at least
quarterly. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we will
make the adjustment as of the date that we receive notice of the potential
error.
We will also provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
MARKET TIMING AND ASSET
ALLOCATION SERVICES
Certain third parties offer market timing and asset allocation services in
connection with the Contracts. In certain situations, we will honor transfer
instructions from third party market timing and asset allocation services if
they comply with our administrative systems, rules and procedures, which we may
modify at any time. PLEASE NOTE that fees and charges assessed for third party
market timing and asset allocation services are separate and distinct from the
Contract fees and charges set forth herein. We neither recommend nor discourage
the use of market timing and asset allocation services.
DISTRIBUTION OF CONTRACTS
The Contracts described in this prospectus are sold by registered
representatives of broker-dealers who are our licensed insurance agents, either
individually or through an incorporated insurance agency. Commissions paid to
broker-dealers may vary, but we estimate that the total commissions paid on all
Contract sales will not exceed 5.5% of all Purchase Payments (on a present value
basis). From time to time, we may offer additional sales incentives to
broker-dealers who maintain certain sales volume levels. We do not pay
commission on Contract sales to our employees, our affiliate's employees or
their spouses or minor children.
Allstate Life Financial Services ("ALFS") located at 3100 Sanders Road,
Northbrook, IL 60062-7154 serves as distributor of the Contracts. ALFS, an
affiliate of Lincoln Benefit, is a wholly owned subsidiary of Allstate Life
Insurance Company. ALFS is a registered broker dealer under the Securities and
Exchange Act of 1934, as amended, and is a member of the National Association of
Securities Dealers, Inc.
Lincoln Benefit does not pay ALFS a commission for distribution of the
Contracts. The underwriting agreement with ALFS provides that we will reimburse
ALFS for expenses incurred in distributing the Contracts, including liability
arising out of services we provide on the Contracts.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Separate Account. Lincoln
Benefit and its subsidiaries are engaged in routine law suits which, in our
management's judgment, are not of material importance to their respective total
assets or material with respect to the Separate Account.
LEGAL MATTERS
All matters of Nebraska law pertaining to the Contract, including the validity
of the Contract and our right to issue the Contract under Nebraska law, have
been passed upon by Carol S. Watson, Senior Vice President and General Counsel
of Lincoln Benefit. Legal matters relating to the federal securities laws in
connection with the Contracts described in this prospectus are being passed upon
by the law firm of Jorden Burt Boros Cicchetti Berenson & Johnson, 1025 Thomas
Jefferson St., East Lobby-Suite 400, Washington, D.C. 20007-0805.
EXPERTS
The consolidated financial statements of Lincoln Benefit Life Company and
subsidiary as of December 31, 1998 and 1997, and for each of the three years in
the period ended December 31, 1998, included in this prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
REGISTRATION STATEMENT
We have filed a registration statement with the SEC, under the Securities Act of
1933 as amended, with respect to the Contracts offered by this prospectus. This
prospectus does not contain all the information set forth in the registration
statement and the exhibits filed as part of the registration statement. You
should refer to the registration statement and the exhibits for further
information concerning the Separate Account, Lincoln Benefit, and the Contracts.
The descriptions in this prospectus of the Contracts and other legal instruments
are summaries. You should refer to those instruments as filed for the precise
terms of those instruments. You may inspect and obtain copies of the
registration statement as described on the cover page of this prospectus.
<PAGE>
TABLE OF CONTENTS OF STATEMENT OF
ADDITIONAL INFORMATION
The Contract....................................................
Annuity Payments............................................
Initial Monthly Annuity Payment.............................
Subsequent Monthly Payments.................................
Transfers After Annuity Date................................
Annuity Unit Value..........................................
Illustrative Example of Variable Annuity Payments...........
Additional Federal Income Tax Information.......................
Introduction................................................
Taxation of Lincoln Benefit Life Company....................
Exceptions to the Non-natural Owner Rule....................
IRS Required Distribution at Death Rules....................
Qualified Plans.............................................
Types of Qualified Plans....................................
Separate Account Performance....................................
Experts.........................................................
Financial Statements............................................
<PAGE>
APPENDIX A
PORTFOLIOS AND PERFORMANCE DATA
PERFORMANCE DATA
From time to time the Separate Account may advertise the PIMCO Money Market
Subaccount's "yield" and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the PIMCO Money Market Subaccount refers to the net income earned by
the Subaccount over the seven-day period stated in the advertisement. This
income is then "annualized." That is, the amount of income earned during that
week is assumed to be generated each week over a 52-week period and is shown as
a percentage of the investment. The "effective yield" is calculated similarly
but, when annualized, the income earned by the investment is assumed to be
reinvested at the end of each seven-day period. The "effective yield" will be
slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment. Neither the yield nor the effective yield takes into
consideration the effect of any capital gains or losses that might have occurred
during the seven day period, nor do they reflect the impact of any premium tax
charge or Withdrawal Charges. The impact of other, recurring charges on both
yield figures is, however, reflected in them to the same extent it would affect
the yield (or effective yield) for a Contract of average size.
In addition, the Separate Account may advertise an annualized 30-day (or one
month) yield figure for Subaccounts other than the PIMCO Money Market
Subaccount. These yield figures are based upon the actual performance of the
Subaccount over a 30-day (or one month) period ending on a date specified in the
advertisement. Like the money market yield data described above, the 30-day (or
one month) yield data will reflect the effect of all recurring Contract charges,
but will not reflect any Withdrawal Charges or premium tax charge. The yield
figure is derived from net investment gain (or loss) over the period expressed
as a fraction of the investment's value at the end of the period.
The Separate Account may also advertise standardized and non-standardized "total
return" data for its Subaccounts. Like the yield figures described above, total
return figures are based on historical data and are not intended to indicate
future performance. The standardized "total return" compares the value of a
hypothetical investment made at the beginning of the period to the value of the
same hypothetical investment at the end of the period. Standardized total return
figures reflect the deduction of any Withdrawal Charge that would be imposed
upon a complete redemption of the Contract at the end of the period. Recurring
Contract charges are reflected in the standardized total return figures in the
same manner as they are reflected in the yield data for Contracts funded through
the Money Market Subaccount.
In addition to the standardized "total return," the Separate Account may
advertise non-standardized "total return." Non-standardized total return is
calculated in a similar manner and for the same time periods as the standardized
total return except that the Withdrawal Charge is not deducted. Further, we
assumed an initial hypothetical investment of $50,000, because $50,000 is closer
to the average Purchase Payment of a Contract which we expect to write.
Standardized total return, on the other hand, assumes an initial hypothetical
investment of $1,000.
The Separate Account may also disclose yield and non-standardized total return
for time periods before the date the Separate Account commenced operations. In
this case, performance data for the Subaccounts is calculated based on the
performance of the Portfolios and assumes that the Subaccounts existed during
the same time period as the Portfolios, with recurring Contract charges equal to
those currently assessed against the Subaccounts.
Our advertisements may also compare the performance of our Subaccounts with: (a)
certain unmanaged market indices, including but the Dow Jones Industrial
Average, the Standard & Poor's 500, and the Shearson Lehman Bond Index; and/or
(b) other management investment companies with investment objectives similar to
the underlying funds being compared. Our advertisements also may include the
performance ranking assigned by various publications, including the Wall Street
Journal, Forbes, Fortune, Money, Barron's, Business Week, USA Today, and
statistical services, including Lipper Analytical Services Mutual Fund Survey,
Lipper Annuity and Closed End Survey, the Variable Annuity Research Data Survey,
and SEI.
The Contract charges are described in more detail on pages [ ]. We have
described the computation of advertised performance data for the Separate
Account in more detail beginning on page [ ] of the Statement of Additional
Information.
<PAGE>
APPENDIX B
ILLUSTRATION OF A MARKET VALUE ADJUSTMENT
Purchase Payment: $40,000.00
Credit Enhancement: 1,600.00
Guarantee Period: 5 Years
Guaranteed Interest Rate: 5% Annual Effective Rate
5-year Treasury Rate at
Time of Purchase Payment: 6%
The following examples illustrate how the Market Value Adjustment and the
Withdrawal Charge may affect the values of a Contract upon a withdrawal. The 5%
assumed Guaranteed Interest Rate is the rate required to be used in the "Summary
of Expenses." In these examples, the withdrawal occurs one year after (in the
second Contract Year) the Issue Date. The Market Value Adjustment operates in a
similar manner for transfers, except that there is no free amount for transfers.
No Withdrawal Charge applies to transfers.
Assuming that the entire $40,000.00 Purchase Payment and $1,600.00 Credit
Enhancement are allocated to the Guaranteed Maturity Fixed Account for the
Guarantee Period specified above, at the end of the five-year Guarantee Period
the Contract Value would be $53,093.31. After one year, when the withdrawals
occur in these examples, the Contract Value would be $43,680.00. We have assumed
that no prior partial withdrawals or transfers have occurred.
The Market Value Adjustment and the Withdrawal Charge only apply to the portion
of a withdrawal that is greater than the Free Withdrawal Amount. Accordingly,
the first step is to calculate the Free Withdrawal Amount.
The Free Withdrawal Amount is equal to:
(a) the greater of:
- earnings not previously withdrawn; or
- 15% of your total Purchase Payments in the most recent eight years;
plus
(b) an amount equal to your total Purchase Payments made more than eight years
ago, to the extent not previously withdrawn.
Here, (a) equals $6,000.00, because 15% of the total Purchase Payments in the
most recent seven years ($6,000.00 = 15% X $40,000.00) is greater than the
earnings not previously withdrawn ($3,680.00). (B) equals $0, because all of the
Purchase Payments were made less than eight years age. Accordingly, the Free
Withdrawal Amount is $6,000.00.
The formula that we use to determine the amount of the Market Value Adjustment
is:
.9 X (I-J) X N,
where:
I = the Treasury Rate for a maturity equal to the relevant Guarantee Period
for the week preceding the beginning of the Guarantee Period;
J = the Treasury Rate for a maturity equal to the relevant Guarantee Period
for the week preceding our receipt of your withdrawal request, death
benefit request, transfer request, or annuity option request; and
N = the number of whole and partial years from the date we receive your
request until the end of the relevant Guarantee Period.
We will base the Market Value Adjustment on the current Treasury Rate for a
maturity corresponding in length to the relevant Guarantee Period. These
examples also show the Withdrawal Charge (if any), which would be calculated
separately from the Market Value Adjustment.
EXAMPLE OF A DOWNWARD MARKET VALUE ADJUSTMENT
A downward Market Value Adjustment results from a full or partial withdrawal
that occurs when interest rates have increased. Assume interest rates have
increased one year after the Purchase Payment, such that the five-year Treasury
Rate is now 6.5%. Upon a withdrawal, the market value adjustment factor would
be:
.9 X (.06 - .065) X 4 = -.0180
The Market Value Adjustment is a reduction of $678.24 from the amount withdrawn:
$-678.24 = -.0180 X ($43,680 - $6,000.00)
A Withdrawal Charge of 7% (assuming the Withdrawal occurs at the start of the
second Contract year) would be assessed against the Purchase Payments withdrawn
that are less than eight years old and are not eligible for free withdrawal.
Under the Contract, earnings are deemed to be withdrawn before Purchase
Payments. Accordingly, in this example, the amount of the Purchase Payment
eligible for free withdrawal would equal the Free Withdrawal Amount less the
interest credited or $2,320.00 ($6,000.00 - $3,680.00).
Therefore, the Withdrawal Charge would be:
$2,637.60 = 7% X (40,000.00 - $2,320.00)
As a result, the net amount payable to you would be:
$40,364.16 = $43,680.00 - $678.24 - $2,637.60
EXAMPLE OF AN UPWARD MARKET VALUE ADJUSTMENT
An upward Market Value Adjustment results from a withdrawal that occurs when
interest rates have decreased. Assume interest rates have decreased one year
after the Purchase Payment, such that the five-year Treasury Rate is now 5.5%.
Upon a withdrawal, the market value adjustment factor would be:
.9 X (.06 - .055) X 4 = .0180
The Market Value Adjustment would increase the amount withdrawn by $648.00, as
follows:
$678.24 = .0180 X ($43,680 - $6,000.00)
As above, in this example, the amount of the Purchase Payment eligible for free
withdrawal would equal the Free Withdrawal Amount less the interest credited or
$2,320.00 ($6,000.00 - $3,680.00). Therefore, the Withdrawal Charge would be:
$2,637.60 = 7% X ($40,000.00 - $2,320.00)
As a result, the net amount payable to you would be:
$41,720.64 = $43,680.00 + $678.24 - $2,637.60
EXAMPLE OF A PARTIAL WITHDRAWAL
If you request a partial withdrawal from a Guarantee Period, we can either (1)
withdraw the specified amount of Contract Value and pay you that amount as
adjusted by any applicable Market Value Adjustment or (2) pay you the amount
requested, and subtract an amount from your Contract Value that equals the
requested amount after application of the Market Value Adjustment and Withdrawal
Charge. Unless you instruct us otherwise, when you request a partial withdrawal
we will assume that you wish to receive the amount requested. We will make the
necessary calculations and on your request provide you with a statement showing
our calculations.
For example, if in the first example you wished to receive $20,000.00 as a
partial withdrawal, the Market Value Adjustment and Withdrawal Charge would be
calculated as follows:
let: AW = the total amount to be withdrawn from your contract value
MVA = Market Value Adjustment
WC = Withdrawal Charge
AW' = amount subject to Market Value Adjustment and Withdrawal
Charge
Then AW - $20,000.00 = WC-MVA
Since neither the Market Value Adjustment nor the Withdrawal Charge apply to the
free withdrawal amount, we can solve directly for the amount subject to the
Market Value Adjustment and the Withdrawal Charge (i.e., AW'), which equals AW
- -$6,000.00. Then, AW = AW' + $6,000, and AW' + $6,000.00 - $20,000.00 = MVA +
WC.
MVA = -.018 X AW'
WC = .07 X AW'
(since the Market Value Adjustment is a reduction from amount withdrawn, it
operates in the same direction as the Withdrawal Charge)
WC - MVA = .088AW'
AW' - $14,000.00 = .088AW'
AW' = $14,000.00 / (1 - .088) = $15,350.88
MVA = -.018 X $15,350.88 = $276.32
WC = .07 X $15,350.88 = $1,074.56
AW = Total amount withdrawn = $15,350.88 + $6,000.00 = $21,350.88
You receive $20,000.00; the total amount subtracted from your contract is
$21,350.88; the Market Value Adjustment is $276.32; and the Withdrawal Charge is
$1,074.56. Your remaining Contract Value is $20,649.12.
If, however, in the same example, you wished to withdraw $20,000.00 from your
Contract Value and receive the adjusted amount, the calculations would be as
follows:
By definition, AW = total amount withdrawn from your Contract Value = $20,000.00
AW' = amount that MVA & WC are applied to
= amount withdrawn in excess of Free Amount = $20,.000.00 -
$6,000.00 = $14,000.00
MVA = -.018 X $14,000.00 = $-252.00
WC = .07 X $14,000.00 = $980.00
You would receive $20,000.00 - $252.00 - $980.00 = $18,768.00; the total amount
subtracted from your Contract Value is $20,000.00. Your remaining Contract Value
would be $22,000.00.
EXAMPLE OF FREE WITHDRAWAL AMOUNT
Assume that in the foregoing example, after four years $10,565.06 in earnings;
including the Credit Enhancement had been credited and that the Contract Value
in the Fixed Account equaled $50,565.06. In this example, if no prior
withdrawals have been made, you could withdraw up to $10,565.06 without
incurring a Market Value Adjustment or a Withdrawal Charge. The Free Withdrawal
Amount would be $10,565.06, because the interest credited ($10,565.06) is
greater than 15% of the Total Purchase Payments in the most recent seven years
($40,000.00 X .15 = $6,000.00).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
DEPOSITOR: LINCOLN BENEFIT LIFE COMPANY
This Statement of Additional Information is not a prospectus. You should also
read the prospectus relating to the annuity contracts described above. You may
obtain a copy of the prospectus without charge by calling us at 1-800-525-9287
or writing to us at the following address:
Lincoln Benefit Life Company
P.O. Box 82532
Lincoln, Nebraska 68501-2532
The date of this Statement of Additional Information
and of the related Prospectus is: July 7, 1999.
TABLE OF CONTENTS
PAGE
----
THE CONTRACT......................................
ANNUITY PAYMENTS................................
INITIAL MONTHLY ANNUITY PAYMENTS................
SUBSEQUENT MONTHLY PAYMENTS.....................
TRANSFERS AFTER ANNUITY DATE....................
ANNUITY UNIT VALUE..............................
ILLUSTRATIVE EXAMPLE OF VARIABLE ANNUITY
PAYMENTS......................................
ADDITIONAL FEDERAL INCOME TAX INFORMATION.........
INTRODUCTION....................................
TAXATION OF LINCOLN BENEFIT LIFE COMPANY........
EXCEPTIONS TO THE NON-NATURAL OWNER RULE........
IRS REQUIRED DISTRIBUTION AT DEATH RULES........
QUALIFIED PLANS.................................
TYPES OF QUALIFIED PLANS........................
SEPARATE ACCOUNT PERFORMANCE......................
EXPERTS...........................................
FINANCIAL STATEMENTS..............................
<PAGE>
THE CONTRACT
ANNUITY PAYMENTS
The amount of your annuity payments will depend on the following factors:
(a) the amount of your Contract Value on the Valuation Date next preceding the
Annuity Date, minus any applicable premium tax charge and adjusted by any
applicable Market Value Adjustment;
(b) the Payment Option you have selected;
(c) the payment frequency you have selected;
(d) the age and, in some cases, the sex of the Annuitant and any Joint
Annuitant; and
(e) for Variable Annuity Payments only, the investment performance after the
Annuity Date of the Subaccounts you have selected.
INITIAL MONTHLY ANNUITY PAYMENT
For both Fixed and Variable Annuity payments, we determine the amount of your
initial annuity payment as follows. First, we subtract any applicable premium
tax charge from your Contract Value on the Valuation Date next preceding the
Annuity Date. We will also increase or decrease your Fixed Account balance by
any applicable Market Value Adjustment. Next, we apply that amount to the
Payment Option you have selected. For Fixed Annuity payments, we will use either
the Payment Option Tables in the Contract or our annuity tables in effect for
single premium immediate annuities at the time of the calculation, whichever
table is more favorable to the payee. For Variable Annuity payments, we will use
the Payment Options tables in the Contract (which reflect the assumed investment
rate of 3.5% which is used in calculating subsequent Variable Annuity payments,
as described below). The tables show the amount of the periodic payment a payee
could receive based on $1,000 of Contract Value. To determine the initial
payment amount, we divide your Contract Value, adjusted as described above, by
$1,000 and multiply the result by the relevant annuity factor for the
Annuitant's age and sex (if we are permitted to consider that factor) and the
frequency of the payments you have selected.
In some states and under certain Qualified Plans and other employer-sponsored
employee benefit plans, we are not permitted to take the Annuitant's sex into
consideration in determining the amount of periodic annuity payments. In those
states, we use the same annuity table for men and women.
SUBSEQUENT MONTHLY PAYMENTS
For a Fixed Annuity, the amount of the second and each subsequent monthly
annuity payment is usually the same as the first monthly payment. However, after
the Annuity Date you will have a limited ability to increase your Fixed Annuity
payments by making transfers from the Subaccounts, as described in "Transferred
after the Annuity Date" on page [ ] below. After each such transfer, however,
your subsequent annuity payments will remain at the new level until and unless
you make an additional transfer to your Fixed Annuity payments.
For a Variable Annuity, the amount of the second and each subsequent monthly
payment will vary depending on the investment performance of the Subaccounts to
which you allocated your Contract Value. We calculate separately the portion of
the monthly annuity payment attributable to each Subaccount you have selected as
follows. When we calculate your initial annuity payment, we also will determine
the number of Annuity Units in each Subaccount to allocate to your Contract for
the remainder of the Annuity Period. For each Subaccount, we divide the portion
of the initial annuity payment attributable to that Subaccount by the Annuity
Unit Value for that Subaccount on the Valuation Date next preceding the Annuity
Date. The number of Annuity Units so determined for your Contract is fixed for
the duration of the Annuity Period. We will determine the amount of each
subsequent monthly payment attributable to each Subaccount by multiplying the
number of Annuity Units allocated to your Contract by the Annuity Unit Value for
that Subaccount as of the Valuation Period next preceding the date on which the
annuity payment is due. Since the number of Annuity Units is fixed, the amount
of each subsequent Variable Annuity payment will reflect the investment
performance of the Subaccounts elected by you.
TRANSFERS AFTER THE ANNUITY DATE
The Contract provides that during the Annuity Period, you may make transfers
among the Subaccounts or increase the proportion of your annuity payments
consisting of Fixed Annuity payments. We will effect a transfer among the
Subaccounts at their Annuity Unit Value next determined after we receive your
instructions. After the transfer, your subsequent Variable Annuity payments will
be based on your new Annuity Unit balances. If you wish to transfer value from
the Subaccounts to increase your Fixed Annuity payments, we will determine the
amount of your additional Fixed Annuity payments as follows. First, we will
determine the Annuitized Value represented by the Annuity Units that you wish to
apply to a Fixed Annuity payment. Then, we will apply that amount to the
appropriate factor for the Payment Option you have selected, using either the
Payment Option Tables in the Contract or our annuity tables for single premium
immediate annuities at the time of the calculation, whichever table is more
favorable to the payee.
ANNUITY UNIT VALUE
We determine the value of an Annuity Unit independently for each Subaccount.
Initially, the Annuity Unit Value for each Subaccount was set at $100.00.
The Annuity Unit Value for each Subaccount will vary depending on how much the
actual net investment return of the Subaccount differs from the assumed
investment rate that was used to prepare the annuity tables in the Contract.
Those annuity tables are based on a 3.5% per year assumed investment rate. If
the actual net investment rate of a Subaccount exceeds 3.5%, the Annuity Unit
Value will increase and Variable Annuity payments derived from allocations to
that Subaccount will increase over time. Conversely, if the actual rate is less
than 3.5%, the Annuity Unit Value will decrease and the Variable Annuity
payments will decrease over time. If the net investment rate equals 3.5%, the
Annuity Unit Value will stay the same, as will the Variable Annuity payments. If
we had used a higher assumed investment rate, the initial monthly payment would
be higher, but the actual net investment rate would also have to be higher in
order for annuity payments to increase (or not to decrease).
For each Subaccount, we determine the Annuity Unit Value for any Valuation
Period by multiplying the Annuity Unit Value for the immediately preceding
Valuation Period by the Net Investment Factor for the current Valuation Period.
The result is then divided by a second factor which offsets the effect of the
assumed net investment rate of 3.5% per year.
The Net Investment Factor measures the net investment performance of a
Subaccount from one Valuation Date to the next. The Net Investment Factor may be
greater or less than or equal to one; therefore, the value of an Annuity Unit
may increase, decrease or remain the same.
To determine the Net Investment Factor for a Subaccount for a Valuation Period,
we divide (a) by (b), and then subtract (c) from the result, where:
(a) is the total of:
(1) the net asset value of a Portfolio share held in the Subaccount
determined as of the Valuation Date at the end of the Valuation Period;
plus
(2) the per share amount of any dividend or other distribution
declared by the Portfolio for which the "ex-dividend" date occurs during
the Valuation Period; plus or minus
(3) a per share credit or charge for any taxes which we paid or for
which we reserved during the Valuation Period and which we determine to be
attributable to the operation of the Subaccount. As described in the
prospectus, currently we do not pay or reserve for federal income taxes;
(b) is the net asset value of the Portfolio share determined as of the
Valuation Date at the end of the preceding Valuation Period; and
(c) is the mortality and expense risk charge and the administrative
expense risk charge.
ILLUSTRATIVE EXAMPLE OF ANNUITY UNIT VALUE CALCULATION
Assume that one share of a given Subaccount's underlying Portfolio had a net
asset value of $11.46 as of the close of the New York Stock Exchange ("NYSE") on
a Tuesday; that its net asset value had been $11.44 at the close of the NYSE on
Monday, the day before; and that no dividends or other distributions on that
share had been made during the intervening Valuation Period. The Net Investment
Factor for the Valuation Period ending on Tuesday's close of the NYSE is
calculated as follows:
Net Investment Factor = ($11.46/$11.44) - 0.0000381 = 1.0017102
The amount subtracted from the ratio of the two net asset values (0.0000381) is
the daily equivalent of the annual asset-based expense charges against the
Subaccount of 1.40%.
In the example given above, if the Annuity Unit value for the Subaccount was
$101.03523 on Monday, the Annuity Unit Value on Tuesday would have been:
$101.03523 X 1.0017102 = $101.19847
- ---------------------
1.0000943
ILLUSTRATIVE EXAMPLE OF VARIABLE ANNUITY PAYMENTS
Assume that a male Contract owner, P, owns a Contract in connection with which P
has allocated all of his Contract Value to a single Subaccount. P is also the
sole Annuitant. At age 60, P chooses to annuitize his Contract under Option B,
Life and 10 Years Certain. As of the last Valuation Date preceding the Annuity
Date, P's Account was credited with 7543.2456 Accumulation Units each having a
value of $15.432655. Accordingly, P's Account Value at that Date is equal to
7543.2456 X $15.432655 = $116,412.31. There are no premium tax charges payable
upon annuitization. Assume also that the Annuity Unit Value for the Subaccount
at that same Date is $132.56932, and that the Annuity Unit Value on the
Valuation Date immediately prior to the second annuity payment date is
$133.27695.
P's first Variable Annuity payment is determined from the annuity rate tables in
P's Contract, using the information assumed above. The tables supply monthly
annuity payments for each $1,000 of applied Contract Value. Accordingly, P's
first Variable Annuity payment is determined by multiplying the monthly
installment of $5.44 by the result of dividing P's Account Value by $1,000:
First Payment = $5.44 X ($116,412.31/$1,000) = $633.28
The number of P's Annuity Units is also determined at this time. It is equal to
the amount of the first Variable Annuity payment divided by the value of an
Annuity Unit at the Valuation Date immediately prior to annuitization:
Annuity Units = $633.28 DIVIDED BY $132.56932 = 4.77697
P's second Variable Annuity payment is determined by multiplying the number of
Annuity Units by the Annuity Unit value as of the Valuation Date immediately
prior to the second payment due date:
Second Payment = 4.77697 X $133.27695 = $636.66
P's third and subsequent Variable Annuity payments are computed in the same
manner.
The amount of the first Variable Annuity payment depends on the Contract Value
in the relevant Subaccount on the Annuity Date. Thus, it reflects the investment
performance of the Subaccount net of fees and charges during the Accumulation
Period. The amount of the first Variable Annuity payment determines the number
of Annuity Units allocated to P's Contract for the Annuity Period. That number
will remain constant throughout the Annuity Period, unless the Contract owner
makes a transfer. The amount of the second and subsequent Variable Annuity
payments depends on changes in the Annuity Unit Value, which will continuously
reflect changes in the net investment performance of the Subaccount during the
Annuity Period.
ADDITIONAL FEDERAL INCOME TAX INFORMATION
Introduction
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. LINCOLN
BENEFIT MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax
consequences of ownership or receipt of distributions under an annuity contract
depend on the individual circumstances of each person. If you are concerned
about any tax consequences with regard to your individual circumstances, you
should consult a competent tax adviser.
Taxation of Lincoln Benefit Life Company
Lincoln Benefit is taxed as a life insurance company under Part I of Subchapter
L of the Internal Revenue Code. The Separate Account is not an entity separate
from Lincoln Benefit, and its operations form a part of the Company. As a
consequence, the Separate Account will not be taxed separately as a "Regulated
Investment Company" under Subchapter M of the Code. Investment income and
realized capital gains of the Separate Account are automatically applied to
increase reserves under the contract. Under current federal tax law, Lincoln
Benefit believes that the Separate Account investment income and capital gains
will not be taxed to the extent that such income and gains are applied to
increase the reserves under the Contract. Generally, reserves are amounts that
Lincoln Benefit is legally required to accumulate and maintain in order to meet
future obligations under the Contracts. Lincoln Benefit does not anticipate that
it will incur any federal income tax liability attributable to the Separate
Account. Therefore, we do not intend to make provisions for any such taxes. If
we are taxed on investment income or capital gains of the Separate Account, then
we may impose a charge against the Separate Account in order to make provision
for such taxes.
Exceptions to the Non-natural Owner Rule
Generally, Contracts held by a non-natural owner are not treated as annuity
contracts for federal income tax purposes, unless one of several exceptions
applies. Contracts will generally be treated as held by a natural person if the
nominal owner is a trust or other entity that holds the Contract for the benefit
of a natural person. However, this special exception will not apply in the case
of an employer who is the nominal owner of a Contract under a non-qualified
deferred compensation arrangement for employees. Other exceptions to the
non-natural owner rule are:
(1) Contracts acquired by an estate of a decedent by reason of the death of the
decedent;
(2) certain qualified Contracts;
(3) Contracts purchased by employers upon the termination of certain qualified
plans;
(4) certain Contracts used in connection with structured settlement agreements,
and
(5) Contracts purchased with a single premium when the annuity starting date is
no later than a year from date of purchase of the annuity and substantially
equal periodic payments are made, not less frequently than annually, during
the annuity period.
IRS Required Distribution at Death Rules
To qualify as an annuity contract for federal income tax purposes, a
nonqualified Contract must provide:
(1) if any owner dies on or after the annuity start date, but before the entire
interest in the Contract has been distributed, the remaining portion of
such interest must be distributed at least as rapidly as under the method
of distribution being used as of the date of the owner's death;
(2) if any owner dies prior to the annuity start date, the entire interest in
the Contract must be distributed within five years after the date of the
owner's death.
The five year requirement is satisfied if:
(1) any portion of the owner's interest which is payable to a designated
beneficiary is distributed over the life of such beneficiary (or over
a period not extending beyond the life expectancy of the beneficiary),
and
(2) the distributions begin within one year of the owner's death.
If the owner's designated beneficiary is a surviving spouse, the Contract may be
continued with the surviving spouse as the new owner. If the owner of the
Contract is a non-natural person, the annuitant is treated as the owner for
purposes of applying the distribution at death rules. In addition, a change in
the annuitant on a Contract owned by a non-natural person is treated as the
death of the owner.
Qualified Plans
This Contract may be used with several types of Qualified Plans. The tax rules
applicable to participants in Qualified Plans vary according to the type of Plan
and the terms and conditions of the Plan. Qualified Plan participants, and
owners, annuitants and beneficiaries under the Contract may be subject to the
terms and conditions of the Qualified Plan regardless of the terms of the
Contract.
Types of Qualified Plans
IRAs. Section 408 of the Code permits eligible individuals to contribute to an
individual retirement plan known as an IRA. IRAs are subject to limitations on
the amount that can be contributed and on the time when distributions may
commence. Certain distributions from other types of qualified plans may be
"rolled over" on a tax-deferred basis into an IRA. An IRA generally may not
provide life insurance, but it may provide a Death Benefit that equals the
greater of the premiums paid or the Contract value. The Contract provides a
Death Benefit that in certain situations, may exceed the greater of the payments
or the contract value. If the IRS treats the Death Benefit as violating the
prohibition on investment in life insurance contracts, the Contract would not
qualify as an IRA.
Roth IRAs. Section 408A of the Code permits eligible individuals to make
nondeductible contributions to an individual retirement plan known as a Roth
IRA. Roth IRAs are subject to limitations on the amount that can be contributed.
In certain instances, distributions from Roth IRAs are excluded from gross
income. Subject to certain limits, a traditional Individual Retirement Account
or Annuity may be converted or "rolled over" to a Roth IRA. The taxable portion
of a conversion or rollover distribution is included in gross income, but is
exempt from the 10% penalty tax on premature distributions
Simplified Employee Pension Plans. Section 408(k) of the Code allows employers
to establish simplified employee pension plans for their employees using the
employees' IRAs if certain criteria are met. Under these plans the employer may,
within limits, make deductible contributions on behalf of the employees to their
individual retirement annuities. Employers intending to use the contract in
connection with such plans should seek competent advice
Savings Incentive Match Plans for Employees (SIMPLE Plans). Sections 408(p) and
401(k) of the Tax Code allow employers with 100 or fewer employees to establish
SIMPLE retirement plans for their employees. SIMPLE plans may be structured as a
SIMPLE retirement account using an employee's IRA to hold the assets, or as a
Section 401(k) qualified cash or deferred arrangement. In general, a SIMPLE plan
consists of a salary deferral program for eligible employees and matching or
nonelective contributions made by employers. Employers intending to use the
Contract in conjunction with SIMPLE plans should seek competent tax and legal
advice.
Tax Sheltered Annuities. Section 403(b) of the Tax Code permits public school
employees and employees of certain types of tax-exempt organizations (specified
in Section 501(c)(3) of the Code) to have their employers purchase Contracts for
them. Subject to certain limitations, a Section 403(b) plan allows an employer
to exclude the purchase payments from the employees' gross income. A Contract
used for a Section 403(b) plan must provide that distributions attributable to
salary reduction contributions made after 12/31/88, and all earnings on salary
reduction contributions, may be made only on or after:
- the date the employee attains age 59 1/2,
- separates from service,
- dies,
- becomes disabled, or
- on the account of hardship (earnings on salary reduction contributions
may not be distributed for hardship).
These limitations do not apply to withdrawals where Lincoln Benefit is directed
to transfer some or all of the Contract Value to another 403(b) plan.
Corporate and Self-Employed Pension and Profit Sharing Plans. Sections 401(a)
and 403(a) of the Tax Code permit corporate employers to establish various types
of tax favored retirement plans for employees. The Tax Code permits
self-employed individuals to establish tax favored retirement plans for
themselves and their employees. Such retirement plans may permit the purchase of
Contracts to provide benefits under the plans.
State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans. Section 457 of the Code permits employees of state and local governments
and tax-exempt organizations to defer a portion of their compensation without
paying current income taxes. The employees must be participants in an eligible
deferred compensation plan. Employees with Contracts under the plan are
considered general creditors of the employer. The employer, as owner of the
Contract, has the sole right to the proceeds of the Contract. Generally, under
the non-natural owner rules, Contracts are not treated as annuity contracts for
federal income tax purposes. Under these plans, contributions made for the
benefit of the employees will not be included in the employees' gross income
until distributed from the plan. However, all compensation deferred under a 457
plan must remain the sole property of the employer. As property of the employer,
the assets of the plan are subject only to the claims of the employer's general
creditors, until such time as the assets become available to the employee or a
beneficiary.
SEPARATE ACCOUNT PERFORMANCE
Performance data for the various Subaccounts are computed in the manner
described below.
PIMCO MONEY MARKET SUBACCOUNT
The current yield is the annual yield on the PIMCO Money Market Subaccount
assuming no reinvestment of dividends and excluding all realized or unrealized
capital gains. We compute current yield by first determining the Base Period
Return on a hypothetical Contract having a balance of one Accumulation Unit at
the beginning of a 7 day period using the formula:
Base Period Return = (EV-SV)/(SV)
where:
SV = value of one Accumulation Unit at the start of a 7 day period
EV = value of one Accumulation Unit at the end of the 7 day period
We determine the value of the Accumulation Unit at the end of the period (EV)
by:
(1) adding, to the value of the Unit at the beginning of the period (SV),
the investment income from the underlying Variable Insurance Products
Fund Money Market Portfolio attributed to the Unit over the period;
and
(2) subtracting, from the result, the sum of:
(a) the portion of the annual Mortality and Expense Risk and
Administrative Expense Charges allocable to the 7 day period (obtained by
multiplying the annually-based charges by the fraction 7/365); and
(b) a prorated portion of the annual contract maintenance charge of
$35 per Contract. The contract maintenance charge is allocated among the
Subaccounts in proportion to the total Contract Values similarly allocated.
The charge is further reduced, for purposes of the yield computation, by
multiplying it by the ratio that the value of the hypothetical Contract
bears to the value of an account of average size for Contracts funded by
the Fidelity Money Market Subaccount. The Charge is then multiplied by the
fraction 7/365 to arrive at the portion attributable to the 7 day period.
The current yield is then obtained by annualizing the Base Period Return:
Current Yield = (Base Period Return) X (365/7)
The PIMCO Money Market Subaccount also quotes an "effective yield". Effective
yield differs from current yield in that effective yield takes into account the
effect of dividend reinvestment. The effective yield, like the current yield, is
derived from the Base Period Return over a 7 day period. However, the effective
yield accounts for the reinvestment of dividends in the PIMCO Variable Insurance
Trust IIby compounding the current yield according to the formula:
Effective Yield = [(Base Period Return + 1)to the power of 365/7 - 1].
Net investment income for yield quotation purposes will not include either
realized capital gains and losses or unrealized appreciation and depreciation,
whether reinvested or not. The yield quotations also do not reflect any impact
of premium tax charges, transfer fees, or Withdrawal Charges.
The yields quoted do not represent the yield of the PIMCO Money Market
Subaccount in the future, because the yield is not fixed. Actual yields will
differ depending on the type, quality and maturities of the investments held by
the PIMCO Money Market Portfolio and changes in interest rates on those
investments. In addition, your yield also will be affected by factors specific
to your Contract. For example, if your account is smaller than average, your
yield will be lower, because the fixed dollar expense charges will affect the
yield on small accounts more than they will affect the yield on larger accounts.
Yield information may be useful in reviewing the performance of the PIMCO Money
Market Subaccount and for providing a basis for comparison with other investment
alternatives. However, the PIMCO Money Market Subaccount's yield may vary on a
daily basis, unlike bank deposits or other investments that typically pay a
fixed yield for a stated period of time.
The PIMCO Money Market Portfolio's yield for the seven-day period ended December
31, 1999 was [ ]% and the effective yield for the same seven day period was [
]%.
OTHER SUBACCOUNTS
We compute the performance of the other Subaccounts in terms of an annualized
"yield" and/or as "total return".
YIELD
Yield will be expressed as an annualized percentage based on the Subaccount's
performance over a stated 30-day (or one month) period. The annualized yield
figures will reflect all recurring Contract charges and will not reflect
Withdrawal Charges, transfer fees or premium tax charges. To arrive at the yield
percentage over the 30-day (or one month) period, the net income per
Accumulation Unit of the Subaccount during the period is divided by the value of
an Accumulation Unit as of the end of the period. The yield figure is then
annualized by assuming monthly compounding of the 30-day (or one month) figure
over a six-month period and then doubling the result.
The formula used in computing the yield figure is:
Yield = 2 X ( ((a-b) + 1)to the power of 6 - 1)
---
cd
where:
a = net investment income earned during the period by the underlying
Portfolio attributable to its shares held in the Subaccount;
b = expenses accrued for the period (net of reimbursements);
c = average daily number of Accumulation Units outstanding during the
period; and
d = the net asset value of an Accumulation Unit on the last day of the
period.
These yield figures reflect all recurring Contract charges, as described in the
explanation of the yield computation for the PIMCO Money Market Subaccount. Like
the PIMCO Money Market Subaccount's yield figures, the yield figures for the
other Subaccounts are based on past performance and should not be taken as
predictive of future results.
STANDARDIZED TOTAL RETURN
Standardized total return for a Subaccount represents a single computed annual
rate of return that, when compounded annually over a specified time period (one,
five, and ten years, or since inception) and applied to a hypothetical initial
investment in a Contract funded by that Subaccount made at the beginning of the
period, will produce the same Contract Value at the end of the period that the
hypothetical investment would have produced over the same period. The
standardized total rate of return (T) is computed so that it satisfies the
following formula:
P(1+T)to the power of n = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one, five, or ten year period as of the end of the
period (or fractional portion thereof).
The standardized total return figures reflect the effect of both non-recurring
and recurring charges, as discussed herein. Recurring charges are taken into
account in a manner similar to that used for the yield computations for the
PIMCO Money Market Subaccount, described above. The applicable Withdrawal Charge
(if any) is deducted as of the end of the period, to reflect the effect of the
assumed complete redemption. The effect of the contract maintenance charge on
your account usually will differ from that assumed in the computation, due to
differences between most actual allocations and the assumed one, as well as
differences due to varying account sizes. Accordingly, your total return on an
investment in the Subaccount over the same time periods usually would have
differed from those produced by the computation. As with the PIMCO Money Market
and other Subaccount yield figures, standardized total return figures are based
on historical data and are not intended to be a projection of future
performance.
NON-STANDARDIZED TOTAL RETURN
Non-standardized total return for a Subaccount represents a single computed
annual rate of return that, when compounded annually over a specified time
period (one, five, and ten years, or since inception) and applied to a
hypothetical initial investment in a Contract funded by that Subaccount made at
the beginning of the period, will produce the same Contract Value at the end of
the period that the hypothetical investment would have produced over the same
period. The total rate of return (T) is computed so that it satisfies the
formula:
P(1+T)to the power of n = ERV
where:
P = a hypothetical initial payment of $50,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $50,000 payment made at
the beginning of the one, five, or ten year period as of the end of
the period (or fractional portion thereof).
Our non-standardized total return differs from standardized total return in that
in calculating non-standardized total return, we assumed an initial hypothetical
investment of $50,000. We chose $50,000, because it is closer to the average
Purchase Payment of a Contract that we expect to write. For standardized total
return, we used an initial hypothetical investment of $1,000, as required by SEC
regulations. The non-standardized total return figures reflect the effect of
recurring charges, as discussed herein. Because the impact of the contract
maintenance charge on your account will usually differ from that assumed in the
computation, due to differences between most actual allocations and the assumed
one, as well as differences due to varying account sizes, your total return on
an investment in the Subaccount over the same time periods usually would have
differed from those produced by the computation. As with the standardized total
return figures, non-standardized total return figures are based on historical
data and are not intended to be a projection of future performance.
Non-standardized total return may reflect the addition of a Credit Enhancement
of 4%. The impact of the Credit Enhancement on total return is particularly
pronounced for the shorter durations for which total return is measured, such as
one and three years. You should take this into consideration in any comparison
of total return between the Sub-accounts and investment options offered pursuant
to other annuities.
TIME PERIODS BEFORE THE DATE THE SEPARATE ACCOUNT COMMENCED OPERATIONS
The Separate Account may also disclose yield and non-standardized total return
for time periods before the Separate Account commenced operations. This
performance data is based on the actual performance of the Portfolios since
their inception, adjusted to reflect the effect of the recurring Contract
charges at the rates currently charged against the Subaccounts.
TABLES OF TOTAL RETURN QUOTATIONS
The following tables include average annual total return and non-standardized
total return for various periods as of December 31, 1998.
<TABLE>
<CAPTION>
STANDARDIZED TOTAL RETURN AS OF DECEMBER 31, 1998
ASSUMING CONTRACT SURRENDERED
AVERAGE ANNUAL TOTAL RETURN (3)
---------------------------------------------
SINCE
INCEPTION 5 YEAR 10 YEAR INCEPTION
DATE (2) 1 YEAR (%) (%) (%) (%)
----------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
GOLDMAN SACHS VARIABLE INSURANCE TRUST
CORE Small Cap Equity (4)
International Equity (4) (To be provided by Pre-Effective
Amendment)
J.P. MORGAN SERIES TRUST II
Small Company (4)
LAZARD RETIREMENT SERIES, INC.
Emerging Markets
International Equity
LSA VARIABLE SERIES TRUST
Aggressive Equity (4)
Balanced (4)
Growth Equity (4)
Structured Equity (4)
Value Equity (4)
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS
Mid-Cap Growth
Mid-Cap Value
High Yield Bond
OCC ACCUMULATION TRUST
Equity
Small Cap
PIMCO VARIABLE INSURANCE TRUST StocksPLUS Growth and Income (4) Foreign Bond (4)
Total Return Bond (4) Money Market (1)(4)
SALOMON BROTHERS VARIABLE SERIES FUNDS
Capital
</TABLE>
- ------------------------
(1) An investment in PIMCO Money Market is neither insured nor guaranteed by
the U.S. Government and there can be no assurance that PIMCO Money Market
will maintain a stable $1.00 share price. The PIMCO Money Market Fund does
not advertise total return.
(2) The Separate Account was established on approximately January 2, 1994.
Lincoln Benefit did not start offering the Contracts until [ ], although it
has offered other annuity contracts that are not offered by the prospectus
to which this Statement of Additional Information relates. Accordingly,
this table reflects hypothetical performance for the periods covered,
applying the contract charges under the Contract to the investment
performance of the underlying Portfolios. Standardized performance data for
periods after the inception of Contract sales will reflect the actual
performance of the Contracts.
(3) Total return includes changes in share price, reinvestment of dividends,
and capital gains. The performance figures: (1) represent past performance
and neither guarantee nor predict future investment results; (2) assume an
initial hypothetical investment of $1,000, as required by the SEC; and (3)
reflect the deduction of 1.40% annual asset charges, a $35 annual contract
maintenance charge, and a maximum 8% contingent deferred sales charge
(declining after the first year). The investment return and value of a
Contract will fluctuate so that a Contract, when surrendered, may be worth
more or less than the amount of the Purchase Payments.
(4) Total returns reflect that the investment adviser waived all or part of its
fee or reimbursed the Portfolio for a portion of its expenses. Otherwise,
total returns would have been lower.
N/A Certain recently established subaccounts do not yet have meaningful
standardized return data. In the future, as such data becomes available,
standardized total return will be calculated as described above.
<TABLE>
<CAPTION>
NON-STANDARDIZED TOTAL RETURN AS OF DECEMBER 31, 1998
ASSUMING CONTRACT NOT SURRENDERED
AVERAGE ANNUAL TOTAL RETURN (3)
---------------------------------------------
PORTFOLIO MONTHLY TOTAL SINCE
INCEPTION RETURN RETURN 1 YEAR 5 YEAR 10 YEAR INCEPTION
DATE (2) (%) YTD (%) (%) (%) (%) (%)
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
GOLDMAN SACHS VARIABLE INSURANCE TRUST (To be provided by Pre-Effective
Amendment)
CORE Small Cap Equity (4)
International Equity (4)
J.P. MORGAN SERIES TRUST II
Small Company (4)
LAZARD RETIREMENT SERIES, INC.
Emerging Markets
International Equity
LSA VARIABLE SERIES TRUST
Aggressive Equity (4)
Balanced (4)
Growth Equity (4)
Structured Equity (4)
Value Equity (4)
MORGAN STANLEY DEAN WITTER UNIVERSAL
FUNDS
Mid-Cap Growth
Mid-Cap Value
High Yield Bond
OCC ACCUMULATION TRUST
Equity
Small Cap
PIMCO VARIABLE INSURANCE TRUST
Stocks PLUS Growth and
Income (4)
Foreign Bond (4)
Total Return Bond (4)
Money Market (1)(4)
SALOMON BROTHERS VARIABLE SERIES FUNDS
Capital
</TABLE>
- ------------------------
(1) An investment in PIMCO Money Market is neither insured nor guaranteed by
the U.S. Government and there can be no assurance that PIMCO Money Market
will maintain a stable $1.00 share price. The PIMCO Money Market Fund does
not advertise total return.
(2) The Separate Account was established on approximately January 2, 1994.
Lincoln Benefit did not start offering the Contracts until [ ], 1998,
although it has offered other annuity contracts that are not offered by the
prospectus to which this Statement of Additional Information relates.
Accordingly, this table reflects hypothetical performance for the periods
covered, applying the contract charges under the Contract to the investment
performance of the underlying Portfolios since their inception.
Nonstandardized performance data for periods after the inception of
Contract sales will reflect the actual performance of the Contracts.
(3) Total return includes changes in share price, reinvestment of dividends,
and capital gains. The performance figures: (1) represent past performance
and neither guarantee nor predict future investment results; (2) assume an
initial hypothetical investment of $[ ], since this is closer to the
average Purchase Payment of a contract expected to be written, rather than
the $1,000 required by the SEC for the standardized returns shown in the
table on pages [ ]; and (3) reflect the deduction of 1.40% annual asset
charges, but do not reflect the applicable contingent deferred sales
charge. The investment return and value of a Contract will fluctuate so
that a Contract, when surrendered, may be worth more or less than the
amount of the Purchase Payments.
(4) Total returns reflect that the investment adviser waived all or part of its
fee or reimbursed the Portfolio for a portion of its expenses. Otherwise,
total returns would have been lower.
N/A Certain Portfolios do not have meaningful performance for the periods
indicated. In the future, as such data becomes available, total return will be
calculated as described above.
<TABLE>
<CAPTION>
NON-STANDARDIZED TOTAL RETURN AS OF DECEMBER 31, 1998
ASSUMING CONTRACT NOT SURRENDERED
CUMULATIVE
TOTAL
RETURN
PORTFOLIO SINCE CALENDAR YEAR RETURN (3)
INCEPTION INCEPTION ------------------------------------
DATE (2) (%) (3) 1996 (%) 1997 (%) 1998 (%)
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
GOLDMAN SACHS VARIABLE INSURANCE TRUST
CORE Small Cap Equity (4)
International Equity (4) (To be provided by Pre-Effective
Amendment)
J.P. MORGAN SERIES TRUST II
Small Company (4)
LAZARD RETIREMENT SERIES, INC.
Emerging Markets
International Equity
LSA VARIABLE SERIES TRUST
Aggressive Equity (4)
Balanced (4)
Growth Equity (4)
Structured Equity (4)
Value Equity (4)
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS
Mid-Cap Growth
Mid-Cap Value
High Yield Bond
OCC ACCUMULATION TRUST
Equity
Small Cap
PIMCO VARIABLE INSURANCE TRUST
Stocks PLUS Growth and Income
(4)
Foreign Bond (4)
Total Return Bond (4)
Money Market (1)(4)
SALOMON BROTHERS VARIABLE SERIES FUNDS
Capital
</TABLE>
- ------------------------
(1) An investment in PIMCO Money Market is neither insured nor guaranteed by
the U.S. Government and there can be no assurance that PIMCO Money Market
will maintain a stable $1.00 share price. The PIMCO Money Market Fund does
not advertise total return.
(2) The Separate Account was established on approximately January 2, 1994.
Lincoln Benefit did not start offering the Contracts until [ ], although it
has offered other annuity contracts that are not offered by the prospectus
to which this Statement of Additional Information relates. Accordingly,
this table reflects hypothetical performance for the periods covered,
applying the contract charges under the Contract to the investment
performance of the underlying Portfolios since their inception.
Nonstandardized performance data for periods after the inception of
Contract sales will reflect the actual performance of the Contracts.
(3) Total return includes changes in share price, reinvestment of dividends,
and capital gains. The performance figures: (1) represent past performance
and neither guarantee nor predict future investment results; (2) assume an
initial hypothetical investment of $50,000, since this is closer to the
average Purchase Payment of a contract expected to be written, rather than
the $1,000 required by the SEC for the standardized returns shown in the
table on pages [ ]; and (3) reflect the deduction of 1.40% annual asset
charges, but do not reflect the applicable contingent deferred sales
charge. The impact of the contract maintenance charge on investment returns
will vary depending on the size of the Contract. The investment return and
value of a Contract will fluctuate so that a Contract, when surrendered,
may be worth more or less than the amount of the Purchase Payments.
(4) Total returns reflect that the investment adviser waived all or part of its
fee or reimbursed the Portfolio for a portion of its expenses. Otherwise,
total returns would have been lower.
N/A Certain Portfolios do not have meaningful performance for the periods
indicated. In the future, as such data becomes available, total return will be
calculated as described above.
EXPERTS
The financial statements of Lincoln Benefit Life Variable Annuity Account as of
December 31, 1998, and for each of the two years ended December 31, 1998,
included in this statement of additional information have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein, and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
FINANCIAL STATEMENTS
This Statement of Additional Information contains financial statements for the
Separate Account which reflect assets attributable to other variable annuity
contracts offered by Lincoln Benefit through the Separate Account. * These
financial statements do not reflect assets attributable to the Contracts,
because as of the date of the financial statements we had not yet begun to sell
the Contracts. In addition, the financial statements for the Separate Account
reflect Subaccounts that are not available under the Contract.
* To be provided by Pre-effective Amendment.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The following financial statements are included in Part A of the Registration
Statement:
None - to be added by Pre-Effective Amendment
The following financial statements are included in Part B of the Registration
Statement:
None - to be added by Pre-Effective Amendment
The following financial statements are included in Part C of the Registration
Statement:
None
(b) Exhibits
(1) Resolution of the Board of Directors of Lincoln Benefit Life Company
authorizing the establishment of the Lincoln Benefit Life Variable
Annuity Account**
(2) Custody Agreements (not applicable)
(3) (a) Form of Principal Underwriting Agreement****
(b) Form of Selling Agreement *****
(4) Variable Annuity Contract (filed herewith)
(5) Application for Contract (filed herewith)
(6) Depositor--Corporate Documents
(a) Articles of Incorporation of Lincoln Benefit Life Company, as
amended*
(b) By-Laws of Lincoln Benefit Life Company*
(7) Reinsurance Contract**
(8) Participation Agreements:
(a) Form of Participation Agreement among Lincoln Benefit Life
Company and J.P. Morgan Series Trust II (filed herewith)
(b) Form of Participation Agreement among Lincoln Benefit Life
Company, Morgan Stanley Dean Witter Universal Funds Inc., and
Miller Anderson & Sherrerd, LLP (filed herewith)
(c) Form of Participation Agreement among PIMCO Variable Insurance
Trust, Lincoln Benefit Life Company and PIMCO Funds Distributor
LLC (filed herewith)
(d) Form of Participation Agreement between Salomon Brothers Variable
Series Fund Inc., and Salomon Brothers Asset Management Inc.
(filed herewith)
(e) Form of Participation Agreement among Lincoln Benefit Life
Company, Lazard Asset Management, and Lazard Retirement Series,
Inc. (filed herewith)
(f) Form of Participation Agreement between Goldman Sachs Variable
Insurance Trust and Lincoln Benefit Life Company (filed herewith)
(g) Form of Participation Agreement between Lincoln Benefit Life
Company and LSA Variable Series Trust (to be filed by
pre-effective amendment)
(h) Form of Participation Agreement between Lincoln Benefit Life
Company and OCC Accumulation Trust (filed herewith)
(9) Opinion and Consent of Counsel (to be filed with pre-effective
amendment)
(10) (a) Consent of Independent Auditors (to be filed with pre-effective
amendment)
(b) Consent of Attorneys (to be filed with pre-effective amendment)
(11) Financial Statements Omitted from Item 23 (not applicable)
(12) Initial Capitalization Agreement (not applicable)
(13) Performance Computations (to be filed with pre-effective amendment)
(27) Financial Data Schedules (not applicable)
------------------------
* Registration Statement on Form S-6 for Lincoln Benefit Life Variable Life
Account, File No. 333-47717, filed March 11, 1998
** Registration Statement on Form N-4 for Lincoln Benefit Life Variable
Annuity Account, File No. 333-50545, 811-7924, filed April 21, 1998.
*** Pre-Effective Amendment No. 1 to Registration Statement on Form N-4 for
Lincoln Benefit Life Variable Annuity Account, File No. 333-50545 filed
July 24, 1998.
****Post-Effective Amendment No. 1 to Registration Statement on Form N-4 for
Lincoln Benefit Life Variable Annuity Account, File No. 333-50545, 811-7924
filed January 28, 1998.
*****Post-Effective Amendment No. 3 to Registration statement on Form N-4 for
Lincoln Benefit Life Variable Annuity Account, File No. 333-50545, 811-7924
filed April 1, 1999.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The directors and principal officers of Lincoln Benefit Life Company are
listed below. Their principal business address is 206 South 13th Street,
Lincoln, Nebraska 68508.
<TABLE>
<CAPTION>
NAME POSITION/OFFICE WITH DEPOSITOR
- -------------------------- -----------------------------------------------------------
<S> <C>
Peter H. Heckman Chairman of the Board of Directors, Chief Executive Officer
B. Eugene Wraith Director, President and Chief Operating Officer
Douglas F. Gaer Director, Executive Vice President
Janet P. Anderbery Vice President and Controller
John H. Coleman III Director, Senior Vice President
Lawrence W. Dahl Director, Executive Vice President
Marvin P. Ehly Director, Senior Vice President and Treasurer
Louis G. Lower Director
John J. Morris Director, Senior Vice President and Secretary
Robert E. Rich Director, Executive Vice President
Kevin R. Slawin Director
Michael J. Velotta Director and Assistant Secretary
Carol S. Watson Director, Senior Vice President, General Counsel, and Assistant Secretary
Dean M. Way Director, Senior Vice President
Patricia W. Wilson Director
Tom Wilson Director
Thomas R. Ashley Senior Vice President and Medical Director
Thomas J. Berney Senior Vice President
Rodger A. Hergenrader Senior Vice President
J. Scott Taylor Senior Vice President
Bob W. Birman Vice President
Kenny L. Gettman Vice President
Thomas S. Holt Vice President
Sharyn L. Jensen Vice President
Maxine Payton Vice President
Gregory C. Sernett Vice President
Stanley G. Shelley Vice President
Randy E. Tillis Vice President
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR
REGISTRANT
See Annual Report on Form 10-K of The Allstate Corporation, File No. 1-11840,
filed March 26, 1999.
ITEM 27. NUMBER OF CONTRACT OWNERS
Not applicable.
ITEM 28. INDEMNIFICATION
The Articles of Incorporation of Lincoln Benefit Life Company (Depositor)
provide for the indemnification of its directors and officers against expenses,
judgments, fines and amounts paid in settlement as incurred by such person, so
long as such person shall not have been adjudged to be liable for negligence or
misconduct in the performance of a duty to the Company. This right of indemnity
is not exclusive of other rights to which a director or officer may otherwise be
entitled.
The By-Laws of Allstate Life Financial Services, Inc. (Distributor) provide that
the corporation will indemnify a director, officer, employee or agent of the
corporation to the full extent of Delaware law. In general, Delaware law
provides that a corporation may indemnify a director, officer, employee or agent
against expenses, judgments, fines and amounts paid in settlement if that
individual acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation, and with respect
to any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. No indemnification shall be made for expenses,
including attorney's fees, if the person shall have been judged to be liable to
the corporation unless a court determines such person is entitled to such
indemnity. Expenses incurred by such individual in defending any action or
proceeding may be advanced by the corporation so long as the individual agrees
to repay the corporation if it is later determined that he or she is not
entitled to such indemnification.
Under the terms of the form of Underwriting Agreement, the Depositor agrees to
indemnify the Distributor for any liability that the latter may incur to a
Contract owner or party-in-interest under a Contract, (a) arising out of any act
or omission in the course of or in connection with rendering services under such
Agreement, or (b) arising out of the purchase, retention or surrender of a
Contract; provided, that the Depositor will not indemnify the Distributor for
any such liability that results from the latter's willful misfeasance, bad faith
or gross negligence, or from the reckless disregard by the latter of its duties
and obligations under the Underwriting Agreement.
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 forgoing provisions, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Allstate Life Financial Services ("ALFS") serves as distributor for the
Registrant. ALFS also serves as distributor for the Lincoln Benefit Life
Variable Life Account, which is another separate account of Lincoln Benefit. The
following are the directors and officers of Allstate Life Financial Services,
Inc. Their principal business address is 3100 Sanders Road, Northbrook, IL
60062.
NAME AND PRINCIPAL BUSINESS
ADDRESS OF EACH SUCH PERSON ALLSTATE LIFE FINANCIAL SERVICES
- --------------------------- ------------------------------------------------
Thomas J. Wilson, II Director
Louis G. Lower, II Director
Kevin R. Slawin Director
Michael J. Velotta Director and Secretary
John Hunter Director, President and Chief Executive Officer
Janet Albers Vice President and Controller
Brent H. Hamann Vice President
Andrea J. Schur Vice President
James P. Zils Treasurer
Terry R. Young General Counsel and Assistant Secretary
Lisa A. Burnell Assistant Vice President and Compliance Officer
Robert N. Roeters Assistant Vice President
Emma M. Kalaidjian Assistant Secretary
Gregory C. Sernett Assistant Secretary
Brenda D. Sneed Assistant Secretary
Nancy M. Bufalino Assistant Treasurer
(b) The following commissions and other compensation were received by each
principal underwriter, directly or indirectly, from the Registrant during the
Registrant's last fiscal year:
<TABLE>
<CAPTION>
(2)
(1) NET UNDERWRITING (3) (4)
NAME OF PRINCIPAL DISCOUNTS AND COMPENSATION BROKERAGE (5)
UNDERWRITER COMMISSIONS ON REDEMPTION COMMISSIONS COMPENSATION
<S> <C> <C> <C> <C>
Lincoln Benefit Financial Services, Inc. 0 0 13,057,265.48 0
Allstate Life Financial Services, Inc. 0 0 0 0
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The Depositor, Lincoln Benefit Life Company, is located at 206 South 13th
Street, Lincoln, Nebraska 68508.
The Principal Underwriter, Allstate Life Financial Services, Inc., is located at
3100 Sanders Road, Northbrook, Illinois 60062.
Each company maintains those accounts and records required to be maintained
pursuant to Section 31(a) of the Investment Company Act and the rules
promulgated thereunder.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
Registrant undertakes (1) to file post-effective amendments to this Registration
Statement as frequently as is necessary to ensure that the audited financial
statements in the Registration Statement are never more than 16 months old for
so long as payments under the variable annuity contracts may be accepted; (2) to
include either (A) as part of any application to purchase a Contract offered by
the prospectus forming part of this Registration Statement, a space that an
applicant can check to request a Statement of Additional Information, or (B) 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, and (3) to deliver any Statement of Additional Information and any
financial statements required to be made available under this Form N-4 promptly
upon written or oral request.
REPRESENTATIONS
The Company hereby represents that it is relying upon a No Action Letter issued
to the American Council of Life Insurance dated November 28, 1988 (Commission
ref. IP-6-88) and that the following provisions have been complied with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection with
the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by Section
403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b) annuity
contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (a) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment alternatives
available under the employer's Section 403(b) arrangement to which the
participant may elect to transfer his contract value.
SECTION 26(e) REPRESENTATIONS
The Company further represents that 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 the Company.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has duly caused this Registration Statement and
Post-Effective Amendment to be signed on its behalf, in the City of Lincoln, and
the State of Nebraska, on this 7th day of July, 1999.
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
(Registrant)
By: LINCOLN BENEFIT LIFE COMPANY
------------------------------------------
(DEPOSITOR)
By: /s/ B. EUGENE WRAITH
------------------------------------------
B. Eugene Wraith
PRESIDENT AND CHIEF OPERATING OFFICER
As required by the Securities Act of 1933, this Registration Statement and
Post-Effective Amendment has been signed by the following persons in the
capacities and on the 7th day of July, 1999.
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ B. EUGENE WRAITH
- ------------------------------ President, Chief Operating
B. Eugene Wraith Officer and Director
(PRINCIPAL EXECUTIVE OFFICER)
/s/ Lawrence W. Dahl
- ------------------------------ Executive Vice President
Lawrence W. Dahl and Director
/s/ ROBERT E. RICH
- ------------------------------ Executive Vice President
Robert E. Rich and Director
/s/ MARVIN P. EHLY
- ------------------------------ Senior Vice President
MARVIN P. EHLY Treasurer and Director
(PRINCIPAL FINANCIAL OFFICER)
/s/ JANET P. ANDERBERY
- ------------------------------ Vice President and
Janet P. Anderbery Controller
(PRINCIPAL ACCOUNTING OFFICER)
- ------------------------------ Chairman of the Board and
Peter H. Heckman Chief Executive Officer
- ------------------------------ Director
Louis G. Lower, II
/s/ JOHN H. COLEMAN III
- ------------------------------ Director
John H. Coleman III
/s/ JOHN J. MORRIS
- ------------------------------ Director
John J. Morris
/s/ DOUGLAS F. GAER
- ------------------------------ Director
Douglas F. Gaer
- ------------------------------ Director
Kevin Slawin
- ------------------------------ Director
Michael J. Velotta
/s/ CAROL S. WATSON
- ------------------------------ Director
Carol S. Watson
/s/ DEAN M. WAY
- ------------------------------ Director
Dean M. Way
- ------------------------------ Director
Patricia W. Wilson
- ------------------------------
Thomas J. Wilson, II Director
INDEX TO EXHIBITS
FOR
REGISTRATION STATEMENT ON FORM N-4
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
EXHIBIT NO. SEQUENTIAL PAGE NO.
- ----------- -----------------------------------------
4 Variable Annuity Contract
5 Application for Contract
8(a) J.P. Morgan Series Trust II Participation Agreement
8(b) Morgan Stanley Dean Witter Universal Funds Inc. Participation
Agreement
8(c) PIMCO Variable Insurance Trust Participation Agreement
8(d) Salomon Brothers Variable Series Fund Inc. Participation Agreement
8(e) Lazard Asset Management Participation Agreement
8(f) Goldman Sachs Variable Insurance Trust Participation Agreement
8(g) OCC Accumulation Trust Participation Agreement
<TABLE>
<CAPTION>
Exhibit 4
- --------------------------------------------------------------------------------
APPLICATION for PREMIER PLANNER VARIABLE ANNUITY
Lincoln Benefit Life Company, P.O. Box 82532, Lincoln, NE 68501-2532
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C>
A. ANNUITANT B. OWNER (if other than annuitant)
- --------------------------------------- ---------------------------------------
Name Name
----------------------------- ---------------------------
Address Address
----------------------------- ---------------------------
City State City State
--------------- ------ -------------- -----
Zip Phone # ( ) Zip Phone # ( )
--------- ------------- --------- -------------
Sex: Male Female Date of Birth: Sex: Male Female Date of Birth:
--- --- ----- --- --- ----
Age: Social Security Number: Age: Social Security Number:
--- ------- --- -------
- --------------------------------------------------------------------------------
C. PRIMARY BENEFICIARY D. CONTINGENT BENEFICIARY
- --------------------------------------------------------------------------------
Name Name
------------------------------ ----------------------------
Address Address
------------------------------ ----------------------------
City City
------------------------------ ----------------------------
State Zip State Zip
----- -------------------- ----- ------------------
Date of Birth: Soc. Sec. #: Date of Birth: Soc. Sec. #:
------- ------- ------- --------
Relationship: Relationship:
------------------------- -----------------------
- --------------------------------------------------------------------------------
PURCHASE PAYMENT INFORMATION: First Purchase Payment of $ [ ] submitted herewith
(Check or Money Order should be payable to Lincoln Benefit Life Company). A copy
of this application duly signed by the agent will constitute receipt for such
amount. If this application is declined, there will be no liability on the part
of the Company, and any sums submitted with this application will be refunded.
The Contract Owner intends to make subsequent purchase payments of $ [ ] on a
[ ] monthly(PAM) [ ] quarterly [ ] semi-annually [ ] annual basis [ ] single payment.
- --------------------------------------------------------------------------------
Plan Name/ Form Number: Enhanced Death Benefit: [ ] Yes [ ] No
(If not marked, no Enhanced Death Benefit will apply)
- --------------------------------------------------------------------------------
PURCHASE PAYMENT ALLOCATION: (whole percentages only and must equal 100%)
- --------------------------------------------------------------------------------
{LSA Variable Series Trust} {Goldman Sachs Variable Insurance Trust}
________%{Aggressive Equity} ________%{CORE Small Cap Equity}
________%{Balanced} ________%{International Equity}
________%{Growth Equity} {OpCap Advisors}
________%{Structured Equity} ________%{Equity}
________%{Value Equity} ________%{Small Cap}
{Lazard} {PIMCO}
________%{Emerging Markets} ________%{Stocks Plus Growth and Income}
________%{International Equity} ________%{Foreign Bond}
{J.P. Morgan Series Trust II} ________%{Total Return Bond}
________%{Small Company} ________%{Money Market}
{Morgan Stanley Dean Witter} {Guaranteed Maturity Fixed Account}
________%{Mid-Cap Growth} (If available in your state)
________%{Mid-Cap Value} ________% {1 year in Guarantee Period}
________%{High Yield Bond} ________% {3 year in Guarantee Period}
{Salomon Brothers} ________% {5 year in Guarantee Period}
________%{Capital} ________% {7 year in Guarantee Period}
{Dollar Cost Averaging Fixed Account} ________% {10 year in Guarantee Period}
________% (If available in Your State)
- --------------------------------------------------------------------------------
TAX QUALIFICATION STATUS:
- --------------------------------------------------------------------------------
[ ] IRA [ ] SEP-IRA [ ] SAR-SEP [ ] Prototype-SEP
[ ] SIMPLE IRA [ ] Roth IRA [ ] Roth Conversion [ ] TSA/403(b)
[ ] 401 - Funding Vehicle [ ] 401 -- LBL Prototype (Attach Adoption Agreement)
[ ] Non-Qualified [ ] Other
------------------
Tax year for which contribution is to be applied
------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PAM (Pre-Authorized Method) I authorize the Company to collect $[ ], on the due
date specified, by initiating electronic debit entries to my account. A balance
must exist before the program can commence. ATTACH VOIDED CHECK. (Credit unions
and savings accounts are not eligible.)
Signature of Authorized Account Owner _____________________ Date _______________
- --------------------------------------------------------------------------------
Will this annuity replace or change any existing policy? [ ] Yes [ ] No If Yes,
give name of company, policy issue date, policy number and cost
basis.____________________________________
- --------------------------------------------------------------------------------
For Applicants in Arkansas, Kentucky, and Ohio: Any person who, with intent to
defraud or knowing that he is facilitating a fraud against an insurer, submits
an application or files a claim containing a false or deceptive statement is
guilty of insurance fraud. For Applicants in New Jersey: Any person who includes
any false or misleading information on an application for an insurance policy is
subject to criminal or civil penalties. For Applicants in Colorado: It is
unlawful to knowingly provide false, incomplete or misleading facts or
information to an insurance company for the purpose of defrauding or attempting
to defraud the Company. Penalties may include imprisonment, fines, denial of
insurance, or civil damages. Any insurance company or agent of an insurance
company who knowingly provides false, incomplete, or misleading facts or
information to a policyholder or claimant for the purpose of defrauding or
attempting to defraud the policy holder or claimant with regard to a settlement
or award payable from insurance proceeds shall be reported to the Colorado
division of insurance within the department of regulatory agencies.
I declare: To the best of my knowledge and belief, all statements and answers
are true, complete and correctly reported. Lincoln Benefit Life may correct or
endorse this application. No change shall be made in the annuity amount or plan
or issue age by such endorsement or correction. Under penalties of perjury, I
certify that the Social Security Number stated herein is my correct taxpayer ID
number, and I am not subject to backup withholding. I UNDERSTAND THAT ANY
DISTRIBUTION FROM A FIXED ACCOUNT PRIOR TO THE END OF A RATE GUARANTEE PERIOD
MAY BE SUBJECT TO A MARKET VALUE ADJUSTMENT. I UNDERSTAND THAT ANNUITY PAYMENTS
AND SURRENDER VALUES PROVIDED UNDER THE SEPARATE ACCOUNT ARE VARIABLE AND ARE
NOT GUARANTEED AS TO A FIXED DOLLAR AMOUNT. RECEIPT OF A CURRENT VARIABLE
ANNUITY PROSPECTUS IS HEREBY ACKNOWLEDGED.
[ ] Please send me a copy of the Statement of Additional
Information to the Prospectus.
Signed at ___________________________ On (date) _________-________-________
City/State Month Day Year
Owner's Signature ___________________________________________________
- --------------------------------------------------------------------------------
TO THE AGENT: To the best of your knowledge will this annuity replace or change
any existing life insurance or annuity in this or any other company?
[ ] Yes [ ] No
Agent Name __________________ Agent's Signature ________________________________
Agent Number ________________ Agent's Phone No. ________________________________
- --------------------------------------------------------------------------------
TO THE REGISTERED REPRESENTATIVE/BROKER-DEALER: CHOOSE OPTION:
[ ] OPTION A [ ] OPTION B [ ] OPTION C
Broker/Dealer __________________________ Telephone _____________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRANSFER AUTHORIZATION:
- --------------------------------------------------------------------------------
[ ] I authorize Lincoln Benefit Life Company ("LBL") to act upon the
written or telephone instructions from the person named below to 1) change
the allocation of payments and deductions between and among the
subaccounts; and 2) transfer amounts among the subaccounts. Neither LBL nor
any person authorized by us will be responsible for any claim, loss,
liability, or expense in connection with such transfer authorization if
LBL, or its employees, acts upon transfer instructions in good faith. LBL
may establish procedures to determine the proper identification of the
person requesting the transfer.
Name and Relationship of Authorized Person:
Name____________________Relationship__________________SS#_______________________
- --------------------------------------------------------------------------------
Signature of Owner____________________________________Date______________________
</TABLE>
Exhibit 5
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
OWNER: [JOHN DOE]
ANNUITANT: [JOHN DOE]
CONTRACT NUMBER: [SPECIMEN]
ANNUITY DATE: [03/01/2028]
ISSUE AGE: [35]
ISSUE DATE: [03/01/1998]
THIS IS A LEGAL CONTRACT - READ IT CAREFULLY
LINCOLN BENEFIT LIFE COMPANY promises to pay to you a monthly annuity starting
on the annuity date stated on Page 3. If you die prior to the annuity date, we
will pay a death benefit to the beneficiary, upon receipt of due proof of death.
PLEASE EXAMINE THE APPLICATION. We issued this contract based upon the answers
in the application. If all answers are not complete and true, the contract may
be affected.
RIGHT TO CANCEL YOUR CONTRACT. If you are not satisfied with this contract for
any reason, you may return it to Lincoln Benefit Life Company, PO Box 82532,
Lincoln, NE 68501-2532, or our agent within 10 days after you receive it. We
will refund any purchase payments allocated to the separate account, adjusted to
reflect investment gain or loss from the date of allocation to the date of
cancellation, plus any purchase payments allocated to the fixed account. If this
contract is qualified under Section 408 of the Internal Revenue code, you will
not receive less than your original purchase payments. READ YOUR CONTRACT
CAREFULLY.
Executed for the company at its home office in Lincoln, Nebraska on its issue
date.
John J. Morris B. Eugene Wraith
Vice President and Secretary President
LINCOLN BENEFIT LIFE COMPANY
Lincoln Benefit Life Centre
Lincoln, NE 68501
800-525-9287
A Legal Reserve Stock Life Insurance Company
Nonparticipating
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
Flexible Premium Payments
Benefit Paid in the Event of Death Prior to the Annuity Date
Withdrawal and Surrender Rights
The dollar amount of annuity payments or other values provided by this contract,
when based on the investment experience of the separate account, will vary to
reflect the performance of the separate account. For amounts in the Guaranteed
Maturity Fixed Account, the withdrawal benefit, the death benefit, transfers to
other investment alternatives and any periodic annuity payments may be subject
to a market value adjustment which may result in an upward or downward
adjustment of the amount distributed.
SUMMARY OF CONTRACT
This flexible premium deferred variable annuity provides a monthly annuity which
will be paid to you starting on the annuity date. If you die before the annuity
date, a death benefit will be paid to the beneficiary.
The premium for this contract is flexible and may be established by you subject
to the terms of this contract.
During the lifetime of the annuitant, and prior to the annuity date, you may:
... withdraw any portion of the surrender value (a withdrawal charge and
market value adjustment may apply);
... change the beneficiary;
... assign an interest in the contract;
... change the annuity date;
... exercise the other rights provided, subject to the rights of any
irrevocable beneficiary or assignee.
This is only a summary of the contract terms. The detailed provisions of this
contract will control. The provisions are set forth in the following sections:
Annuity Data Page 3
Definitions Page 4
Annuity Benefit Page 5
Purchase Payments Page 8
Contract Value Page 9
Surrender Value Page 12
Death Benefit Page 13
Beneficiary Page 15
Ownership Page 15
Other Terms of your Contract Page 15
ANNUITY DATA
OWNER: [JOHN DOE]
ANNUITANT: [JOHN DOE]
CONTRACT NUMBER: [SPECIMEN]
ANNUITY DATE: [03/01/2033]
ISSUE AGE: [35]
ISSUE DATE: [03/01/1998]
Initial Purchase Payment: [$10,000.00]
Tax Qualification: [IRA]
Credit Enhancement
Matching Benefit: [4%]
Initial Allocation of Purchase Payment:
Allocated
Variable Sub-Accounts Amount (%)
[Sub-account A] [10%]
[Sub-account B] [10%]
[Sub-account C] [10%]
[Sub-account D] [10%]
<TABLE>
<CAPTION>
Allocated Guaranteed Rate
Guaranteed Maturity Fixed Account Amount (%) Interest Rate Guaranteed Through
<S> <C> <C> <C>
[1 Year Guarantee Period] [10%] [4.25%] [03/01/1999]
[3 Year Guarantee Period] [10%] [4.45%] [03/01/2001]
[5 Year Guarantee Period] [10%] [5.00%] [03/01/2003]
[7 Year Guarantee Period] [10%] [5.20%] [03/01/2005]
[10 Year Guarantee Period] [10%] [5.45%] [03/01/2008]
Dollar Cost Averaging Fixed Account
1 Year Guarantee Period [10%] [7.00%] [03/01/1999]
</TABLE>
Minimum Guaranteed Rate
Dollar Cost Averaging Fixed Account 3.00%
Beneficiary
Relationship
Beneficiary To Owner Percentage
[Jane Doe] [Wife] [100%]
DEFINITIONS
When these words are used in this contract, they have the meaning stated:
"accumulation unit"
A unit of measurement which we use to calculate the value of a subaccount before
annuity payments begin.
"annuitant"
The natural person named on Page 3 whose life determines the annuity payment
made under this contract.
"annuitized value"
The amount applied to purchase annuity payments under the contract, equal to the
contract value adjusted by any market value adjustment and less any applicable
taxes.
"annuity date"
The date on which annuity payments are scheduled to begin.
"annuity unit"
A unit of measurement which we use to calculate the amount of variable annuity
payments.
"app"
The application which you completed requesting this policy
"beneficiary(ies)"
The person(s) designated to receive any death benefit under the contract.
"contract anniversary"
The anniversary of the issue date in subsequent years.
"contract value"
The sum of the values of your interests in the subaccounts of the Separate
Account and the Fixed Account.
"contract year"
A period of twelve months beginning on the issue date or any contract
anniversary.
"contribution year"
A twelve month period beginning on the date a purchase payment is applied to the
contract value, or an anniversary of that date.
"credit enhancement"
The amount we add to your contract value whenever a purchase payment is
received. This is equal to the matching benefit stated on Page 3 multiplied by
the applicable purchase payment.
"due proof of death"
(1) A certified copy of a death certificate; or
(2) a certified copy of a decree of a court of competent jurisdiction as to the
finding of death; or
(3) a written statement by a medical doctor who attended the deceased at the
time of death; or
(4) any other proof satisfactory to us.
"fixed account"
The portion of contract value allocated to our general account.
"fixed annuity"
Annuity payments that are fixed in amount.
"investment alternative"
A subaccount of the separate account, a guarantee period of the Guaranteed
Maturity Fixed Account, and the Dollar Cost Averaging Fixed Account.
"issue age"
The age of the annuitant at the time this contract was issued (issue date)
determined by the annuitant's last birthday.
"issue date"
The date when this contract becomes effective if the annuitant is then living
and the initial premium has been paid. The issue date is shown on Page 3.
"natural person"
A living individual or trust entity that is treated as an individual for Federal
Income Tax purposes under the Internal Revenue Code.
"net investment factor"
An index applied to measure the net investment performance of a subaccount from
one valuation date to the next. It is used to determine the value of an
accumulation unit and annuity unit in any valuation period.
"portfolio(s)"
The underlying mutual fund(s) (or investment series thereof) in which the
subaccounts invest.
"purchase payments"
Amounts paid to us in the form of a premium for the contract by or on behalf of
an owner.
"separate account"
A segregated investment account of the Company entitled Lincoln Benefit Life
Separate Variable Annuity Account.
"subaccount"
A subdivision the Separate account invested wholly in shares of one of the
portfolios.
"surrender value"
The amount you would receive upon surrender of this contract, equal to the
contract value adjusted by any market value adjustment, less any applicable
taxes and withdrawal charges.
"valuation date"
Each day the New York Stock Exchange ("NYSE") is open for business.
"valuation period"
The period commencing at the close of normal trading on the NYSE (currently 4:00
p.m. Eastern time) on each valuation date and ending at the close of the NYSE on
the next succeeding valuation date.
"variable annuity"
Annuity payments which vary in accordance with the investment experience of the
subaccounts to which contract values have been allocated.
""we", "us", "our""
Our Company, Lincoln Benefit Life Company.
"you"
The owner of the contract.
ANNUITY BENEFIT
annuitant
The annuitant is the person named on Page 3. The annuitant must be a living
individual. If the annuitant dies prior to the annuity date, the new annuitant
will be:
- - the youngest owner; otherwise,
- - the youngest beneficiary.
annuity date
The monthly annuity will begin on the annuity date. The annuity date must always
be the business day on or immediately following the tenth calendar day of a
month. The annuity date is the date the annuitized value is applied to an
annuity option. The anticipated annuity date is shown on Page 3. You may change
the annuity date by writing us at least 30 days prior to this date.
The annuity date must be on or before the later of:
- - the annuitant's 90th birthday; or
- - the 10th anniversary of the contract issue date.
The initial payment purchased by each $1000 of annuitized value depends upon the
annuity option selected and the age and sex of the annuitant on the annuity
date. The payments are based upon the 1983a Annuity Mortality table and 3.5%
interest.
annuity options
The following annuity options are available under the contract. Each is
available in the form of either a fixed annuity or a variable annuity (or a
combination of both fixed and variable annuity). Fixed account contract values
will be applied to provide a fixed annuity
Option A, Life Annuity with Payments Guaranteed for 5 to 20 years
Monthly payments are made beginning on the annuity date. Payment will continue
as long as the annuitant lives. If the annuitant dies before all of the
guaranteed payments have been made, we will continue installments of the
guaranteed payments to the beneficiary.
Option B, Joint and Survivor Annuity with Payments Guaranteed for 5 to 20 years
Monthly payments are made beginning with the annuity date. Payments will
continue as long as either the annuitant or the joint annuitant is alive.
If both the annuitant and the joint annuitant die before all of the guaranteed
payments have been made, we will continue installments of the guaranteed
payments to the beneficiary.
Option C, Payments for a Specified Period Certain of 5 to 30 years
Monthly payments are made starting on the annuity date and continuing for the
specified period of time as elected. If the annuitant dies before all of the
guaranteed payments have been made, we will continue installments of the
guaranteed payments to the beneficiary. Payments for less than 120 months may be
subject to a withdrawal charge.
We reserve the right to make available other annuity options.
No lump sum settlement option is available under the contract. You may surrender
the contract prior to the annuity date; however, any applicable withdrawal
charges will be deducted from the contract value.
The initial monthly payments purchased per $1000 applied for Option A, with 120
months guaranteed are shown below. The factors for other options will be
calculated using the same basis as those shown and are available by writing to
us.
Monthly Annuity
Payment for 120
Annuitant's Age on Months & Lifetime
Annuity Date For Each $1,000.00
Male Female
50 4.53 4.19
51 4.60 4.25
52 4.67 4.31
53 4.75 4.38
54 4.84 4.45
55 4.93 4.52
56 5.02 4.60
57 5.12 4.68
58 5.22 4.77
59 5.33 4.86
60 5.44 4.95
61 5.56 5.05
62 5.69 5.16
63 5.82 5.27
64 5.96 5.39
65 6.11 5.52
66 6.26 5.65
67 6.41 5.79
68 6.57 5.94
69 6.74 6.10
70 6.91 6.26
71 7.08 6.43
72 7.25 6.61
73 7.43 6.79
74 7.61 6.98
75 7.78 7.18
76 7.96 7.38
77 8.13 7.58`
78 8.29 7.79
79 8.45 7.98
80 8.61 8.17
81 8.75 8.36
82 8.89 8.54
83 9.01 8.71
84 9.13 8.86
85 or over 9.23 9.01
annuity payments
The contract provides for two types of annuity payments. "Variable annuity
payments" vary in amount based on changes in the subaccounts that you have
selected. "Fixed annuity payments" do not vary in amount and are paid in an
amount determined when you annuitize. Your annuity payments may consist of a
mixture of the two types of payments or may be entirely one or the other. The
method of calculating the initial payment is different for the two accounts. The
contract maintenance charge will be deducted in equal payments from each annuity
payment. The contract maintenance charge will be waived if the contract value on
the annuity date is $50,000 or more or if all payments are fixed amount annuity
payments.
payment terms and conditions
The annuity payments are subject to the following terms and conditions:
If the contract value is less than $5,000, or not enough to provide an initial
payment of at least $50, and state law permits, we reserve the right to:
- - change the payment frequency to make the payment at least $50 or
- - terminate the contract and pay you the contract value adjusted by any
market value adjustment and less any applicable taxes in a lump sum.
If we do not receive a written choice of an annuity option from you at least 30
days before the annuity date, the income plan will be Life Income with
Guaranteed Payments for 120 months.
If you choose an annuity option which depends on any person's life, we may
require:
- - proof of age and sex before income payments begin; and
- - proof that the annuitant or joint annuitant is still alive before we make
each payment.
After the annuity date, the annuity option cannot be changed and withdrawals
cannot be made unless annuity payments are being made from the separate account
under annuity Option C. You may terminate annuity payments being made from the
separate account under annuity Option C at any time and withdraw their value,
subject to withdrawal charges.
If any owner dies before all annuity payments have been made, the remaining
annuity payments will be paid to the successor owner as scheduled.
fixed annuity
You may choose to apply a portion of your annuitized value to purchase a fixed
annuity. You must notify us, within 30 days of the annuity date, of that portion
of your annuitized value with which you wish to purchase a fixed annuity. Any
annuitized value in the fixed account will be automatically applied to provide a
fixed annuity. We will reduce your interest in the subaccounts on the annuity
date to reflect your choice.
The initial annuity payment for any portion of the annuitized value applied to
purchase a fixed annuity is determined by applying it to the per $1000 payment
factors for the annuity option selected. Subsequent payments will be fixed in
amount, equal to the initial payment, and paid according to the annuity option
selected.
variable annuity and annuity units
The initial annuity payment attributable to a subaccount is determined by
applying the annuitized value attributable to that subaccount on the annuity
date to the annuity option selected. The initial annuity payment for a
subaccount is divided by the subaccount's annuity unit value on the annuity date
to determine the number of annuity units purchased. Subsequent annuity payments
attributable to a subaccount will be equal to the number of annuity units for
the subaccount multiplied by the annuity unit value for the subaccount on the
payment date. The total variable annuity payment will be the sum of the payments
attributable to each subaccount in which you have an interest.
annuity unit value
The annuity unit value of a subaccount for any valuation period is calculated by
multiplying the annuity unit value at the end of the immediately preceding
valuation period by the subaccount's net investment factor for the valuation
period and dividing this product by 1.000 plus the assumed investment rate for
the period. The assumed investment rate is an effective annual rate of 3.5%. The
net investment factor is described in detail on page 10.
PURCHASE PAYMENTS
Purchase payments for this contract are flexible. The initial purchase payment
shown on Page 3 must be paid on the issue date. Thereafter, you may make
payments of at least $500 at any time prior to the annuity date. We may limit
the maximum amount of premium payments we will accept.
Purchase payments are payable to us at our home office. We will supply a receipt
if you ask us.
allocation of purchase payments
We will invest the purchase payments in the investment alternatives as you have
selected. You may allocate any portion of your purchase payment, in whole
percents from 0% to 100%, or in exact dollar amounts to any of the subaccounts
or the fixed account options. The total allocation must equal 100%. The
allocation of the initial purchase payment is shown on page 3. Allocation of
each subsequent purchase payment will be the same as the allocation for the most
recent purchase payment unless you change the allocation. You may change the
allocation percentages at any time by writing us. Any change will be effective
when we receive it.
credit enhancement
A credit enhancement will be allocated to the investment alternatives you have
selected at the time of any purchase payment. It will be allocated among the
investment alternatives in the same ratio as the appropriate purchase payment.
fixed account options
The fixed account options are the Dollar Cost Averaging Fixed Account Option and
the Guaranteed Maturity Fixed Account.
Dollar Cost Averaging Fixed Account
Money allocated to the Dollar Cost Averaging Fixed Account option will earn
interest for one year at the current rate in effect at the time of allocation.
Each purchase payment and associated interest in the Dollar Cost Averaging Fixed
Account option must be transferred to other investment alternatives in equal
monthly installments. The number of monthly installments must be no more than
12. At the end of 12 months from the date of a purchase payment allocation to
the Dollar Cost Averaging Fixed Account, any remaining portion of the purchase
payment and interest in the Dollar Cost Averaging Fixed Account will be
allocated to other investment alternatives as defined by the current Dollar Cost
Averaging Fixed Account allocation. You may only allocate money to the Dollar
Cost Averaging Fixed Account option by allocating a portion of a purchase
payment. No amount may be transferred into the Dollar Cost Averaging Fixed
Account.
Guaranteed Maturity Fixed Account Option
We will pay a specified interest rate for a specified Guarantee Period on each
amount allocated to the Guaranteed Maturity Fixed Account Option. You choose the
applicable Guarantee Period from among the choices that we make available at our
discretion. Each Guarantee Period we offer may have a different interest rate.
We may change the rate we offer for new Guarantee Periods at any time at our
discretion.
New Guarantee Periods begin when:
- - you make a purchase payment; or
- - you select a new Guarantee Period after the prior Guarantee Period expires;
or
- - you transfer an amount from an existing subaccount of the separate account,
from the Dollar Cost Averaging Fixed Account option, or you allocate funds
in the fixed account to a new Guarantee Period before the end of the
existing Guarantee Period.
You must select the Guarantee Period for all purchase payments and transfers
allocated to the Guaranteed Maturity Fixed Account option. If you do not select
a Guarantee Period for a purchase payment or transfer, we will assign the same
period(s) as used for the most recent purchase payment.
We will mail you a notice prior to the expiration of a Guarantee Period
outlining the options available at the end of the Guarantee Period. During the
30 day period after a Guarantee Period expires you may:
- - take no action and we will automatically apply the relevant amount to a new
Guarantee Period of the same duration as the expiring Guarantee Period
beginning on the day the previous guarantee period expired. The interest
rate will be the rate we are then offering for Guarantee Periods of that
duration, or
- - notify us to allocate the relevant amount to one or more new Guarantee
Periods beginning on the day the previous guarantee period expired; or
- - notify us to allocate the relevant amount to one or more subaccounts on the
day we receive the notification; or
- - withdraw all or a portion of the relevant amount through a partial
withdrawal. You may be required to pay a withdrawal charge, but we will not
adjust the amount withdrawn to include a Market Value Adjustment. In this
case, the amount withdrawn will be deemed to have been withdrawn on the day
the guarantee period expired.
crediting interest
We credit interest daily to money allocated to the fixed account options at a
rate which compounds over one year to the interest rate we guaranteed when the
money was allocated. We will credit interest on the initial purchase payment
plus any credit enhancement from the issue date. We will credit interest to
subsequent purchase payments from the date we receive them. We will credit
interest to transfers from the date the transfer is made. The interest rate for
the Dollar Cost Averaging Fixed Account will never be less than the minimum
guaranteed rate shown on Page 3.
We will credit interest on any credit enhancement from the day the appropriate
purchase payment is credited interest.
CONTRACT VALUE
On the issue date of the contract, the contract value is equal to the initial
purchase payment, plus any credit enhancement. After the issue date, the
contract value is equal to the sum of:
- - the number of accumulation units you hold in each subaccount of the
separate account multiplied by the accumulation unit value for that
subaccount on the most recent valuation date; plus
- - the total value you have in the Dollar Cost Averaging Fixed Account Option;
plus
- - the total values you have in the Guaranteed Maturity Fixed Account Option.
If you withdraw the entire contract value, you may receive an amount greater or
less than the contract value because a market value adjustment, a withdrawal
charge, income tax withholding, and a premium tax charge may apply.
subaccount values
The value of a subaccount is equal to the number of accumulation units you hold
for that subaccount multiplied by the accumulation unit value for that
subaccount on the most recent valuation date.
accumulation units and accumulation unit values
Amounts which are allocated to a subaccount are used to purchase accumulation
units in that subaccount. The number of accumulation units purchased is
determined by dividing the amount allocated by the subaccount's accumulation
unit value as of the end of the valuation period when the allocation occurs.
Accumulation unit value is determined Monday through Friday on each day that the
New York Stock Exchange is open for business. A separate accumulation unit value
is determined for each subaccount. The accumulation unit value for each
subaccount will vary with the price of a share in the portfolio the subaccount
invests in, and in accordance with the mortality and expense risk charge,
administrative expense charge, and any provision for taxes. Assessments of
withdrawal charges, transfers and contract maintenance charges are done
separately for each contract. They are made by redemption of accumulation units
and do not affect accumulation unit value.
The accumulation unit value of a subaccount for any valuation period equals the
accumulation unit value as of the immediately preceding valuation period,
multiplied by the net investment factor for that subaccount for the current
valuation period.
net investment factor
The net investment factor for any subaccount of the separate account for any
valuation period is (1) divided by (2) minus (3) where:
1. is the net result of:
- the net asset value of a portfolio share held in the the mutual
fund underlying the subaccount determined at the end of the
valuation period, plus
- the per share amount of any dividend or capital gain
distributions declared by the portfolio underlying the subaccount
during the current valuation period, plus or minus
- a per share credit or charge with respect to any taxes which we
paid or for which we reserved during the valuation period which
are determined by us to be attributable to the operation of the
subaccount (no federal income taxes are applicable under present
law).
2. is the net asset value per share of a portfolio share held in the
subaccount as of the end of the immediately preceding valuation period; and
3. is the sum of the annualized mortality and expense risk charge and the
annualized administrative expense charge divided by the number of days in
the current calendar year and then multiplied by the number of calendar
days in the current valuation period.
The net investment factor may be greater or less than or equal to one;
therefore, the value of an accumulation unit may increase, decrease, or remain
the same.
mortality and expense risk charge
Both before and after the annuity date, we deduct a mortality and expense risk
charge from each subaccount during the valuation period. The annualized
aggregate mortality and expense risk charge is equal to 1.40% of the net asset
value of each subaccount. Our expense and mortality experience will not
adversely affect the dollar amount of variable benefits or other contractual
payments or values under this contract.
administrative expense charge
Both before and after the annuity date, we deduct an administrative expense
charge from each subaccount during the valuation period. The annualized
administrative expense charge is .10% of the net asset value of the subaccount.
This charge compensates us for the cost of administering the contracts and the
separate account.
contract maintenance charge
Prior to the annuity date, a contract maintenance charge will be deducted from
your contract value on each contract anniversary. The charge is only deducted
from the subaccounts. The charge will be deducted on a pro-rata basis from each
subaccount of the separate account in the proportion that your value in each
bears to your total value in all subaccounts. A full contract maintenance charge
will be deducted if the contract is terminated on any date other than a contract
anniversary. The annualized charge will never be greater than $35 per contract
year. The contract maintenance charge will be waived if total purchase payments
are $50,000 or more or if all money is allocated to the fixed account options on
the contract anniversary.
After the annuity date the contract maintenance charge will be deducted in equal
parts from each annuity payment. The contract maintenance charge will be waived
if the contract value on the annuity date is $50,000 or more or if all payments
are fixed amount annuity payments.
transfers and transfer fee
You may transfer amounts between investment alternatives prior to the annuity
date. We reserve the right to impose a $10 transfer fee on the second transfer
within a calendar month, and to impose a minimum size on transfer amounts.
Transfers are subject to the following restrictions:
- Any transfer from a Fixed Account will be subject to a Market
Value adjustment unless:
- the transfer occurs during the 30 day period after the applicable
guarantee period expires; or
- the transfer is made as part of a dollar cost averaging program.
- At the end of 12 months from the date of a purchase payment
allocation to the dollar cost averaging fixed account, any
remaining portion of the purchase payment and interest in the
dollar cost averaging fixed account will be allocated to other
investment alternatives as defined by the current dollar cost
averaging fixed account allocation.
- No amount may be transferred into the dollar cost averaging fixed
account.
We reserve the right to waive the transfer fees and restrictions contained in
this contract.
annuity transfers
After the annuity date, no transfers may be made from the fixed amount annuity
payment. Transfers between subaccounts, or from the variable amount annuity
payment to the fixed amount annuity payment may not be made for six months after
the annuity date.
Transfers may be made once every six months thereafter.
taxes
Any premium taxes or income tax withholding relating to the contract may be
deducted from purchase payments or the contract value when the tax is incurred
or at a later time.
SURRENDER VALUE
surrender
You may surrender this contract before the annuity date. We will pay you the
surrender value upon surrender.
The surrender value is equal to the contract value, adjusted by any market value
adjustment, less any applicable taxes and withdrawal charges.
A surrender stops coverage under this contract.
withdrawal
You have the right to withdraw part or all of your surrender value before the
annuity date. You must specify the investment alternative(s) from which you wish
to make a withdrawal. When you make a withdrawal, your contract value will be
reduced by the amount paid to you and any applicable withdrawal charge, market
value adjustment, and taxes. A contract maintenance charge will also be deducted
if the contract is terminated. Any withdrawal charge will be waived on
withdrawals taken to satisfy IRS minimum distribution rules. This waiver is
permitted only for withdrawals which satisfy distributions resulting from this
contract.
Each withdrawal must be at least $50. If any withdrawal reduces the contract
value to less than $500, we will treat the request as a withdrawal of the entire
contract value. If you withdraw the entire contract value, the contract will
terminate.
withdrawal charge
A withdrawal charge may be imposed on certain withdrawals. The withdrawal charge
is a percentage of purchase payments withdrawn that are less than seven years
old and not eligible for a free withdrawal, in accordance with the table shown
below:
Contribution Withdrawal Charge
Year Percentage
First 8
Second and Third 7
Fourth and Fifth 6
Sixth 5
Seventh 4
Eighth 3
Ninth and Later 0
The withdrawal charge is deducted from remaining contract value so that the
actual reduction in contract value as a result of the withdrawal will be greater
than the withdrawal amount requested and paid.
For purposes of determining the withdrawal charge, the contract value is deemed
to be withdrawn in the following order:
First. Earnings--The amount of contract value in excess of all purchase payments
and purchase payment matches that have not previously been withdrawn;
Second. Old Purchase Payments--Purchase payments received by us more than eight
years prior to the date of withdrawal, and their associated purchase payment
matches, which have not been previously withdrawn;
Third. Any additional amounts available as a free withdrawal, as described
below; and
Fourth. New Purchase Payments--Purchase payments received by us less than eight
years prior to the date of withdrawal, and their associated purchase payment
matches. These amounts are deemed to be withdrawn on a first-in, first-out
basis.
The contribution year for purchase payments and their associated purchase
payment matches is measured from the date we received the purchase payment. The
withdrawal charge is determined by multiplying the percentage corresponding to
the contribution year times that part of each purchase payment withdrawal that
is in excess of the free withdrawal amount.
free withdrawal
Withdrawals of the following amounts are never subject to the withdrawal charge:
a. In any contract year, the greater of earnings not previously withdrawn, or
15 percent of new purchase payments; and
b. Any old purchase payments which have not been previously withdrawn.
The withdrawal charge will be waived if a settlement option is selected which
provides for payments over at least 5 years or over the annuitant's lifetime.
market value adjustment
Activities in the Fixed Account that may be subject to a market value adjustment
are withdrawals in excess of the free withdrawal amount, transfers, death
benefits, and amounts applied to an annuity option. Any activity from the fixed
account will be subject to a market value adjustment unless:
- - it occurs during the 30 day period after the applicable guarantee period
expires; or
- - it is a transfer that is part of a dollar cost averaging program.
A market value adjustment is an increase or decrease in the amount reflecting
changes in the level of interest rates since the beginning of the applicable
Guarantee Period. As used in this provision, `treasury rate' means the U.S.
Treasury Note Constant Maturity yield as reported in Federal Reserve Bulletin
Release H.15. The market value adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the guarantee period for the week
preceding the beginning of the Guarantee Period;
J = the Treasury Rate for a maturity equal to the guarantee period for the week
preceding the receipt of the withdrawal request, death benefit request, transfer
request, or annuity option request.
N = the number of whole and partial years from the date we receive the
withdrawal, transfer, or death benefit request, or from the annuity date, to the
end of the guarantee period.
An adjustment factor is determined from the following formula:
.9 x (I - J) x N
The amount subject to a market value adjustment that is deducted from the
guaranteed maturity fixed account is multiplied by the adjustment factor to
determine the amount of the market value adjustment.
Any market value adjustment will be waived on withdrawals taken to satisfy IRS
minimum distribution rules. This waiver is permitted only for withdrawals which
satisfy distributions resulting from this contract.
DEATH BENEFIT
death of owner or annuitant
We will pay the death benefit when we receive due proof of death while this
contract is in force and before the annuity date, if
- -- any owner dies; or
- -- the annuitant dies and the owner is not a natural person.
If the owner eligible to receive a benefit is not a natural person, the owner
may elect to receive the benefit in one or more distributions. Otherwise, if the
owner is a living individual, the owner may elect to receive a benefit either in
one or more distributions or by annuity payments through an annuity option.
A death benefit will be paid if:
- - the owner elects to receive the death benefit within 180 days of the date
of death, and
- - payment is made as of the date we determine the value of the death benefit,
as defined at the end of the death benefit provision.
Otherwise, the settlement value will be paid. In any event, the entire value of
the contract must be distributed within five (5) years after the date of death
unless an annuity option is elected or a surviving spouse continues the contract
in accordance with the following provisions. We reserve the right to extend the
180 day period when we will pay the death benefit.
If an annuity option is elected, payments from the annuity option must begin
within one year of the date of death and must be payable throughout:
- - the life of the owner; or
- - a period not to exceed the life expectancy of the owner, or
- - the life of the owner with payments guaranteed for a period not to exceed
the life expectancy of the owner.
If the beneficiary is your spouse, and death occurs prior to the annuity date,
then the contract can continue as if death had not occurred. If the contract is
continued the surviving spouse may make a single withdrawal of any amount within
one year of the date of death without incurring a withdrawal charge or a market
value adjustment.
If there is no annuitant at that time, the new annuitant will be the surviving
spouse. The surviving spouse may also select one of the annuity options listed
above.
If the beneficiary is not a natural person, then the beneficiary must receive
the death benefit in a lump sum, and the options listed above are not available.
death benefit
Prior to the annuity date, the death benefit is equal to the greatest of the
following death benefit alternatives:
- - the sum of all purchase payments reduced by a withdrawal adjustment, as
defined below; or
- - the contract value on the date we determine the death benefit; or
- - the amount that would have been payable in the event of a full withdrawal
of the contract value on the date we determine the death benefit; or
- - the amount that would have been payable in the event of a full withdrawal
of the contract value on the date we determine the death benefit; or
- - the contract value on each death benefit anniversary prior to the date we
determine the death benefit, increased by any purchase payments made since
that death benefit anniversary and reduced by a withdrawal adjustment, as
defined below.
The first death benefit anniversary is the 8th contract anniversary. Subsequent
death benefit anniversaries are those contract anniversaries that are multiples
of 8 contract years, beginning with the 16th contract anniversary. For example,
the 8th, 16th, and 24th contract anniversaries are the first three death benefit
anniversaries.
The withdrawal adjustment is equal to (a) divided by (b), with the result
multiplied by (c) where:
(a) equals the withdrawal amount.
(b) equals the contract value immediately prior to the withdrawal.
(c) equals the value of the applicable death benefit alternative immediately
prior to the withdrawal.
We will determine the value of the death benefit as of the end of the valuation
period during which we receive a complete request for payment of the death
benefit. A complete request includes due proof of death.
settlement value
The settlement value is the same amount that would be paid in the event of a
full withdrawal of the contract value. We will calculate the settlement value at
the end of the valuation period coinciding with the requested distribution date
for payment or on the mandatory distribution date of 5 years after the date of
death, whichever is earlier.
BENEFICIARY
The beneficiary will receive the death benefit when any owner dies. The
beneficiaries are as stated in the app unless changed.
If you do not name a beneficiary or if the beneficiary named is no longer
living, the beneficiary will be:
...your spouse if living, otherwise;
...your children equally if living, otherwise;
...your estate.
We will pay the death benefit to the beneficiaries according to the most recent
written instruction we have received from you. If we do not have any written
instructions, we will pay the death benefit in equal shares to the beneficiaries
who are to share the funds. If there is more than one beneficiary in a class and
one of the beneficiaries predeceases you, the death benefit will be paid to the
surviving beneficiaries in that class.
You may name new beneficiaries. We will provide a form to be signed. You must
file it with us. Upon receipt, it is effective as of the date you signed the
form, subject to any action we have taken before we received it.
OWNERSHIP
The annuitant is the owner if no other person is named in the app as owner.
Unless you provide otherwise, as owner, you may exercise all rights granted by
the contract, subject to the rights of any irrevocable beneficiary, without the
consent of anyone else.
You may name a new annuitant before the annuity date. You may also name a new
owner. We will provide a form to be signed to request these changes. You must
file it with us. Upon receipt, it is effective as of the date you signed the
form. We are not liable for any payment we make or other action we take before
receiving any written request for a change from you.
You may assign this contract or an interest in it to another. You must do so in
writing and file the assignment with us. No assignment is binding on us until we
receive it. When we receive it your rights and those of the beneficiary will be
subject to the assignment. We are not responsible for the validity of any
assignment you make.
OTHER TERMS OF YOUR CONTRACT
our contract with you
These pages, including any endorsements and any riders are your entire contract
with us. We issued it based upon your app and the payment of the purchase
payment by you.
We will not use any statements, except those made in the app to challenge any
claim or to avoid any liability under this contract. The statements made in the
app will be treated as representations and not as warranties.
Only our officers have authority to change this contract. No agent may do this.
Any change must be written.
incontestability
This contract will be incontestable after its issue date. This means that we
cannot use any misstatement by you in the application to challenge any claim or
to avoid liability under this contract after this time.
misstatement of age or sex
If any age or sex has been misstated, we will pay the amounts which would have
been paid at the correct age and sex.
conformity with state law
This contract is subject to the laws of the state in which it is delivered. If
any part of the contract does not comply with the law, it will be treated by us
as if it did.
nonparticipating
This policy does not participate in our earnings.
evidence of survival
We may require evidence of the survival of the annuitant.
settlements
We may require that this contract be returned to us prior to any settlement. We
must receive due proof of death of the owner or annuitant prior to settlement of
death claim.
Any surrender or death benefit under this contract will not be less than the
minimum benefits required by the statute of the state in which the contract is
delivered.
deferment of payments
We will pay any amounts due under the separate account under this contract
within seven days, unless:
- - The New York Stock Exchange is closed for other than usual weekends or
holiday, or trading on such exchange is restricted;
- - An emergency exists as defined by the Securities and Exchange Commission;
or
- - The Securities and Exchange Commission permits delay for the protection of
contract holders.
In addition, we may defer payment or transfers from the fixed account options
for up to 6 months after you ask for it. If we defer payment from the fixed
account for more than 30 days we will pay interest as required by applicable
law. Any interest would be payable from the date the withdrawal request is
received by us to the date the payment is made.
annual report
At least once a year, prior to the annuity date, we will send you a statement
containing contract information. We will provide you with contract value
information at any time upon request. The information presented will comply with
any applicable law.
separate account modifications
We reserve the right, subject to applicable law, to make additions to, deletions
from, or substitutions for the mutual fund shares underlying the subaccounts. We
will not substitute any share attributable to your interest in a subaccount
without notice to you and prior approval of the Securities and Exchange
Commission, to the extend required by the Investment Company Act of 1940, as
amended.
We reserve the right to establish additional subaccounts each of which would
invest in shares of another mutual fund. You may then instruct us to allocate
purchase payments or transfers to such subaccounts, subject to any terms set by
us or the mutual fund.
In the event of any such substitution or change, we may by endorsement make sure
changes as may be necessary or appropriate to reflect such substitution or
change.
If we deem it to be in the best interests of the persons having voting rights
under the contracts, the separate account may be operated as a management
company under the Investment Company Act of 1940, as amended or it may be
deregistered under such Act in the event such registration is no longer
required.
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
Flexible Premium Payments
Benefit Paid in the Event of Death Prior to the Annuity Date
Withdrawal and Surrender Rights
The dollar amount of annuity payments or other values provided by this contract,
when based on the investment experience of the separate account, will vary to
reflect the performance of the separate account. For amounts in the Guaranteed
Maturity Fixed Account, the withdrawal benefit, the death benefit, transfers to
other investment alternatives and any periodic annuity payments may be subject
to a market value adjustment which may result in an upward or downward
adjustment of the amount distributed.
LINCOLN BENEFIT LIFE COMPANY
ENHANCED DEATH BENEFIT RIDER
This rider was issued because you selected the Enhanced Death Benefit at the
time you applied for this annuity.
Enhanced Death Benefit
The Death Benefit provision of your Contract is modified as follows:
The Death Benefit will be the greater of the values stated in your contract, or
the value of the Enhanced Death Benefit.
The Enhanced Death Benefit is equal to the greater of the Enhanced Death Benefit
A or Enhanced Death Benefit B. The Enhanced Death Benefit will cease on the date
we determine the value of the Death Benefit.
Enhanced Death Benefit A
At issue, the Enhanced Death Benefit A is equal to the initial purchase payment.
After issue, the Enhanced Death Benefit A is recalculated when a purchase
payment or withdrawal is made or on a contract anniversary as follows:
1. For purchase payments, the Enhanced Death Benefit A is equal to the most
recently calculated Enhanced Death Benefit A plus the purchase payment.
2. For withdrawals, the Enhanced Death Benefit A is equal to the most recently
calculated Enhanced Death Benefit A reduced by a withdrawal adjustment
defined below.
3. On each contract anniversary, the Enhanced Death Benefit A is equal to the
greater of the contract value or the most recently calculated Enhanced
Death Benefit A.
In the absence of any withdrawals or purchase payments, the Enhanced Death
Benefit A will be the greatest of all contract anniversary contract values on or
prior to the date we calculate the death benefit.
The Enhanced Death Benefit A will be recalculated for purchase payments,
with-drawals and on contract anniversaries until the oldest owner or the
annuitant, if the owner is not a living individual, attains age 85.
After age 85, the Enhanced Death Benefit A will be recalculated only for
purchase payments and withdrawals.
Enhanced Death Benefit B
The Enhanced Death Benefit B is equal to total purchase payments made reduced by
a withdrawal adjustment defined below. Each purchase payment and each withdrawal
adjustment will accumulate daily at a rate equivalent to 5% per year until the
earlier of:
1. the date we determine the death benefit, or
2. the first day of the month following the oldest owner's or, if the owner is
not a living individual, the annuitant's 85th birthday.
The Enhanced Death Benefit B will never be greater than the maximum death
benefit allowed by any nonforfeiture laws which govern the contract.
Withdrawal Adjustment
The withdrawal adjustment is equal to (a) divided by (b), with the result
multiplied by (c) where:
(a) equals the withdrawal amount.
(b) equals the contract value immediately prior to the withdrawal.
(c) equals the most recently calculated Enhanced Death Benefit A or B, as
applicable.
Mortality and Expense Risk Charge
The Mortality and Expense Risk Charge provision of your contract is modified as
follows:
The annualized mortality and expense risk charge of 1.40% is changed to 1.60%.
Except as amended in this rider, the contract remains unchanged.
B. Eugene Wraith
President
LINCOLN BENEFIT LIFE COMPANY
CONTRACT AMENDMENT FOR WAIVER OF CHARGES
The following provisions are added to your contract:
The benefits provided by this contract amendment do not impact any tax
liabilities or IRS penalties incurred as a result of a withdrawal. You are
responsible for all such liabilities and penalties.
Waiver for Confinement in Long Term Care Facility or Hospital
We will waive any withdrawal charge and market value adjustment prior to the
annuity date if at least 30 days after the issue date any owner, or, if the
owner is not a living individual, the annuitant is first confined to a Long Term
Care Facility or Hospital under the following conditions:
- - confinement is for at least 90 consecutive days;
- - confinement is prescribed by a physician;
- - confinement is medically necessary; and
- - the request for a withdrawal and due proof of confinement are received by
us no later than 90 days after discharge.
"Physician"
A licensed medical doctor (M.D.) or a licensed doctor of osteopathy (D.O.)
practicing within the scope of his or her license. Physician does not include
the individual, a spouse, children, parents, grandparents, grandchildren,
siblings, or in-laws.
"Due Proof"
Includes, but is not limited to, a letter signed by a Physician stating the
dates the owner or annuitant was confined, the name and location of the Long
Term Care Facility or Hospital, a statement that the confinement was Medically
Necessary, and, if released, the date the owner or annuitant was released from
the Long Term Care Facility or Hospital.
"Medically Necessary"
Confinement, care or treatment which is appropriate and consistent with the
diagnosis in accord with accepted standards of practice, and which could not
have been omitted without adversely affecting the individual's condition.
"Long Term Care Facility"
A facility which:
1. is located in the United States or its territories;
2. is licensed by the jurisdiction in which it is located;
3. provides custodial care under the supervision of a registered nurse (R.N.);
and
4. can accommodate three or more persons.
"Hospital"
A facility which:
1. is licensed as a hospital by the jurisdiction in which it is located;
2. is supervised by a staff of licensed physicians;
3. provides nursing services 24 hours a day by or under the supervision of a
registered nurse (R.N.);
4. operates primarily for the care and treatment of sick or injured persons as
inpatients for a charge; and
5. has access to medical, diagnostic and major surgical facilities.
Waiver for Terminal Illness
We will waive any withdrawal charge and market value adjustment prior to the
annuity date if at least 30 days after the issue date any owner, or, if the
owner is not a living individual, the annuitant is first diagnosed by a
Physician as having a terminal illness. The request for the withdrawal must be
received by us at least 30 days after the issue date. Due proof of the diagnosis
must be given to us prior to, or at the time of, the withdrawal request. We may
require a second opinion at our expense by a Physician chosen by us. In the
event that the first and second Physicians disagree, we will require a third
opinion at our expense by a Physician chosen by us. We will honor a consensus of
any two of the three Physicians.
"Physician"
A licensed medical doctor (M.D.) or a licensed doctor of osteopathy (D.O.)
practicing within the scope of his or her license. Physician does not include
the individual, a spouse, children, parents, grandparents, grandchildren,
siblings, or in-laws.
"Due Proof"
Includes, but is not limited to, a letter signed by a Physician stating the
owner or annuitant has a Terminal Illness and the date the Terminal Illness was
first diagnosed.
"Terminal Illness"
A condition which is expected to result in death within one year from the date
of onset for 80% of the diagnosed cases.
B. Eugene Wraith
President
Exhibit 8(a)
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the ___ day of _____, 199_, between
___________________________________________ ("Insurance Company"), a life
insurance company organized under the laws of the State of ________, and J.P.
Morgan Series Trust II ("Fund"), a business trust organized under the laws of
Delaware, with respect to the Fund's portfolio or portfolios set forth on
Schedule 1 hereto, as such Schedule may be revised from time to time (the
"Series"; if there are more than one Series to which this Agreement applies, the
provisions herein shall apply severally to each such Series).
ARTICLE I 1.
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 calculates net 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 or variable life insurance
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. "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 an agreement
with the Fund for the purpose of making Fund shares available to serve as
the underlying investment medium for the aforesaid Contracts.
1.9. "Plans" shall mean qualified pension and retirement benefit plans.
1.10."Prospectus" shall mean the Fund's current prospectus and statement of
additional information, as most recently filed with the Commission, with
respect to the Series.
1.11."Separate Account" shall mean _____________________ Company Variable
Annuity Separate Account, a separate account established by Insurance
Company in accordance with the laws of the State of ----------.
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.
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 2.
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 __________ Insurance Code 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; (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; and (e) each Separate
Account shall comply with all applicable legal requirements.
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 compliance 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 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 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 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
or the liabilities of any companies affiliated with Insurance Company.
2.4 Fund represents that the Fund is registered with the Commission under
the Act as an open-end management investment company and possesses, and
shall maintain, all legal and regulatory licenses, approvals, consents
and/or exemptions required for the Fund to operate and offer its shares
as an underlying investment medium for Participating Companies. The
Fund has established five portfolios and may in the future establish
other portfolios.
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 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 or 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
its investment adviser immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future. Insurance 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, 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 and to Plans.
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 blanket fidelity bond or similar coverage
for the benefit of the Fund in an amount not less than 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 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.
2.11 Insurance Company agrees that the Fund's investment adviser 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 3.
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 of
those Participating Companies and their affiliates and to Plans. 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 7:00 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 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 8:30 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 8:30 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 above and 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 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. 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 any 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 may 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 4.
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
Prospectuses, proxy materials, notices, periodic reports and other
printed materials (which the Fund customarily provides to its
shareholders) in quantities as Insurance 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 5.
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 production expenses of any Fund materials,
including the cost of printing the Fund's Prospectus, or
marketing materials for prospective Insurance Company
Contractholders and Participants as the Fund's investment
adviser and Insurance Company shall agree from time to time.
b. Distribution expenses of any Fund materials or marketing
materials for prospective Insurance Company Contractholders
and Participants.
c. Distribution expenses of Fund materials or marketing materials
for Insurance Company Contractholders and Participants.
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 1996
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. 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 7.
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
shareholders 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 Contractholders or Participants
on a timely basis and in accordance with applicable law;
(b) vote the Series shares in accordance with instructions received
from Contractholders or Participants; and
(c) vote Series shares for which no instructions have been received
in the same proportion as Series shares for which instructions
have been received.
Insurance Company agrees at all times to votes 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
Series 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 its investment adviser, solicit, induce or
encourage Contractholders to (a) change or supplement the Fund's
current investment adviser or (b) change, modify, substitute, add to or
delete the Fund from the current investment media for the Contracts.
ARTICLE VIII 8.
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
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 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 the 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 its 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 receipt of such 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 or
supplemented 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, market letters, form letters, seminar texts, or reprints or
excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications
distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, statements of
additional information, shareholder reports and proxy materials, and
any other material constituting sales literature or advertising under
National Association of Securities Dealers, Inc. rules, the Act or the
1933 Act.
ARTICLE IX 9.
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless the Fund, its
investment adviser, any sub-investment adviser of a Series, and their
affiliates, 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 of 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 alleged untrue statement of any
material fact contained in information furnished by Insurance Company
for use in the registration statement or 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 a material fact required to be stated
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 advertisements 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 conformity with written information furnished to
Insurance Company by the Fund specifically for use therein; and
provided, further, that Insurance Company shall not be liable for
special, consequential or incidental damages. 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 within the meaning of the 1933 Act
against any losses, claims, damages or liabilities to which 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 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 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 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, 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, Prospectus, sales
literature or advertisements in conformity with written information
furnished to the Fund by Insurance Company specifically for use
therein; and provided, further, that the Fund shall not be liable for
special, consequential or incidental damages. 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, damages, 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 this Agreement by Insurance Company; and
provided, further, that the Fund shall not be liable for special,
consequential or incidental damages.
9.4 Promptly after receipt by an 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 party
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
reasonably 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.
Notwithstanding 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 mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent.
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, its investment
adviser 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 redemptions by Insurance Company's General
Accounts or the account of its affiliates.
ARTICLE X 10.
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 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, judgment 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;
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 or 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 its investment adviser, 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 its investment adviser 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 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;
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 of 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 its investment adviser 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 this Agreement (hereinafter referred
to as "Existing Contracts"). Specifically, without limitation, if the
Fund so elects to make additional Series shares available, the owners
of the Existing Contracts or Insurance Company, whichever shall have
legal authority to do so, 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, as promptly as is practicable under the
circumstances, shall notify Insurance Company whether 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 11.
AMENDMENTS
11.1 Any other changes in the terms of this Agreement shall be made by agreement
in writing between Insurance Company and Fund.
ARTICLE XII 12.
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:
Fund:
J.P. Morgan Series Trust II
c/o Morgan Guaranty Trust Company
522 Fifth Avenue
New York, New York 10036
Attention: Kathleen H. Tripp
Notice shall be deemed to be given on the date of receipt by the
addresses as evidenced by the return receipt.
ARTICLE XIII 13.
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.
ARTICLE XIV 14.
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.
INSURANCE COMPANY
By:_______________________________
Its:
J.P.MORGAN SERIES TRUST II
By:
Its:
SCHEDULE 1
Name of Series
Exhibit 8(b)
THIS AGREEMENT, made and entered into as of the day of ________, 1999
by and among LINCOLN BENEFIT LIFE COMPANY (hereinafter the "Company"), a
Nebraska corporation, on its own behalf and on behalf of each separate account
of the Company set forth on Schedule A hereto as may be amended from time to
time (each such account hereinafter referred to as the "Account"), and MORGAN
STANLEY DEAN WITTER UNIVERSAL FUNDS, INC. (hereinafter the "Fund"), a Maryland
corporation, and MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC. and
MILLER ANDERSON & SHERRERD, LLP (hereinafter collectively the "Advisers" and
individually the "Adviser"), a Delaware corporation and a Pennsylvania limited
liability partnership, respectively.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation and/or
pay-out provisions (hereinafter referred to individually and/or collectively as
"Variable Insurance Products") and (ii) the investment vehicle for certain
qualified pension and retirement plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Contracts enter into
participation agreements with the Fund and the Advisers (the "Participating
Insurance Companies");
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available under this
Agreement, as may be amended from time to time by mutual agreement of the
parties hereto (each such series hereinafter referred to as a "Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 19, 1996 (File No. 812-10118), granting
Participating Insurance Companies and Variable Insurance Product 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 Product separate accounts of both affiliated and unaffiliated life
insurance companies and Qualified Plans (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, each Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
WHEREAS, each Adviser manages certain Portfolios of the Fund; and
WHEREAS, Morgan Stanley & Co. Incorporated (the "Underwriter") is
registered as a broker/dealer under the Securities Exchange Act of 1934, as
amended (hereinafter the "1934 Act"), is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD") and serves
as principal underwriter of the shares of the Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority 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
Insurance Product; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase, on behalf of each Account, shares
in the Portfolios set forth in Schedule B attached to this Agreement, to fund
certain of the aforesaid Variable Insurance Products and the Underwriter is
authorized to sell such shares to each such 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. Purchase of Fund Shares
1.1. The Fund agrees to make available for purchase by the Company
shares of the Fund and shall execute orders placed for each Account on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of such order. For purposes of this Section 1.1, the Company shall be
the designee of the Fund for receipt of such orders from each Account and
receipt by such designee shall constitute receipt by the Fund; provided that the
Fund receives notice of such order by 10:00 a.m. Eastern time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund, so long as this Agreement is in effect, 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 Directors of the Fund (hereinafter
the "Board") may refuse to permit the Fund to sell shares of any Portfolio to
any person, or suspend or terminate the offering of shares of any Portfolio if
such action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.3. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts and to certain
Qualified Plans. No shares of any Portfolio will be sold to the general public.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund, provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Variable Insurance
Products issued by the Company, under which amounts may be invested in the Fund
(hereinafter the "Contracts"), are listed on Schedule A attached hereto and
incorporated herein by reference, as such Schedule A may be amended from time to
time by mutual written agreement of all of the parties hereto. The Company will
give the Fund and the Adviser 45 days written notice of its intention to make
available in the future, as a funding vehicle under the Contracts, any other
investment company.
1.6. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purposes of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.7. 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.
1.8. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.9. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Eastern time) and shall use its best efforts to make such net asset value
per share available by 7:00 p.m.
Eastern time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established each
Account prior to any issuance or sale thereof as a segregated asset account
under Section [Citation of state separate account law] and has registered or,
prior to any issuance or sale of the Contracts, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts.
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 Maryland and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify.
2.4. The Company 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 or that they might not be so
treated in the future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Maryland and the Fund represents that their respective operations are
and shall at all times remain in material compliance with the laws of the State
of Maryland to the extent required to perform this Agreement.
2.7. 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 1940 Act.
2.8. Each Adviser represents and warrants that it is and shall remain
duly registered in all material respects under all applicable federal and state
securities laws and that it will perform its obligations for the Fund in
compliance in all material respects with the laws of its state of domicile and
any applicable state and federal securities laws.
2.9. The Fund represents and warrants that its directors, officers,
employees, and other individuals/entities dealing with the money and/or
securities of the Fund are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Fund in an
amount not less than the minimal coverage as required currently by Rule 17g-(1)
of the 1940 Act or related provisions as may be promulgated from time to time.
The aforesaid blanket fidelity bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.10. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage, in an amount not less $5 million. The aforesaid
includes coverage for larceny and embezzlement is issued by a reputable bonding
company. The Company agrees to make all reasonable efforts to see that this bond
or another bond containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such coverage no longer
applies.
ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting
3.1. The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus and statement of additional
information as the Company may reasonably request. If requested by the Company,
in lieu of providing printed copies the Fund shall provide camera-ready film or
computer diskettes containing the Fund's prospectus and statement of additional
information, and such other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus and/or
statement of additional information for the Fund is amended during the year) to
have the prospectus for the Contracts and the Fund's prospectus printed together
in one document, and to have the statement of additional information for the
Fund and the statement of additional information for the Contracts printed
together in one document. Alternatively, the Company may print the Fund's
prospectus and/or its statement of additional information in combination with
other fund companies' prospectuses and statements of additional information.
3.2. Except as provided in this Section 3.2., all expenses of
preparing, setting in type and printing and distributing Fund prospectuses and
statements of additional information shall be the expense of the Company. For
prospectuses and statements of additional information provided by the Company to
its existing owners of Contracts who currently own shares of one or more of the
Fund's Portfolios, in order to update disclosure as required by the 1933 Act
and/or the 1940 Act, the cost of printing shall be borne by the Fund. If the
Company chooses to receive camera-ready film or computer diskettes in lieu of
receiving printed copies of the Fund's prospectus, the Fund shall bear the cost
of typesetting to provide the Fund's prospectus to the Company in the format in
which the Fund is accustomed to formatting prospectuses, and the Company shall
bear the expense of adjusting or changing the format to conform with any of its
prospectuses. In such event, the Fund will reimburse the Company in an amount
equal to the product of x and y where x is the number of such prospectuses
distributed to owners of the Contracts who currently own shares of one or more
of the Fund's Portfolios, and y is the Fund's per unit cost of typesetting and
printing the Fund's prospectus. The same procedures shall be followed with
respect to the Fund's statement of additional information. The Company agrees to
provide the Fund or its designee with such information as may be reasonably
requested by the Fund to assure that the Fund's expenses do not include the cost
of printing, typesetting, and distributing any prospectuses or statements of
additional information other than those actually distributed to existing owners
of the Contracts who currently own shares of one or more of the Fund's
Portfolios.
3.3. The Fund's statement of additional information shall be obtainable
from the Fund, the Company or such other person as the Fund may designate, as
agreed upon by the parties.
3.4. The Fund, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications (except
for prospectuses and statements of additional information, which are covered in
section 3.1) to shareholders in such quantity as the Company shall reasonably
require for distributing to Contract owners.
3.5. 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 1940 Act to require
pass-through voting privileges for variable contract owners.
The Company reserves the right to vote Fund shares held in
any segregated asset account in its own right, to the extent
permitted by law. The Fund and the Company shall follow the
procedures, and shall have the corresponding
responsibilities, for the handling of proxy and voting
instruction solicitations, as set forth in Schedule C
attached hereto and incorporated herein by reference.
Participating Insurance Companies shall be responsible for
ensuring that each of their separate accounts participating
in the Fund calculates voting privileges in a manner
consistent with the standards set forth on Schedule C, which
standards will also be provided to the other Participating
Insurance Companies.
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 Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the Commission may promulgate with respect thereto.
3.7. The Fund shall use reasonable efforts to provide Fund
prospectuses, reports to shareholders, proxy materials and other Fund
communications (or camera-ready equivalents) to the Company sufficiently in
advance of the Company's mailing dates to enable the Company to complete, at
reasonable cost, the printing, assembling and/or distribution of the
communications in accordance with applicable laws and regulations.
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 the Adviser(s) is named, at least ten Business
Days prior to its use. No such material shall be used if the Fund or its
designee reasonably objects 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, except with the permission of the Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its separate account(s)
is named at least ten Business Days prior to its use. No such material shall be
used if the Company or its designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.4. The Fund and the Advisers shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, which are relevant
to the Company or the Contracts.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the investment
in the Fund under the Contracts.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund shall pay no fee or other compensation to the Company
under this Agreement, except that if the Fund or any Portfolio adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
the Underwriter may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Underwriter in writing.
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. Except as otherwise
set forth in the Section 3.2 of this Agreement, 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, 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, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the Contracts in such
a manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will at all times comply with Section 817(h) of the
Code and Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications to such Section or Regulations. In the
event of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify Company of such breach and (b) to adequately diversify the
Fund so as to achieve compliance within the grace period afforded by Regulation
817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by Variable Insurance Product owners; or (f) a decision by a Participating
Insurance Company to disregard the voting instructions of contract owners. The
Board shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested 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 directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any 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 policy
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); 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.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.5 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a) The Company agrees to indemnify and hold harmless the Fund and
each member of the Board and officers, and each Adviser and each director and
officer of each Adviser, and each person, if any, who controls the Fund or the
Adviser within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" and individually, "Indemnified Party," for purposes of
this Section 8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact
contained in the registration statement or prospectus for the
Contracts or contained in the Contracts or sales literature
for the Contracts (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the
Fund for use in the registration statement or prospectus for
the Contracts or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature of the Fund not supplied by the Company, or persons
under its control and other than statements or representations
authorized by the Fund or an Adviser) or unlawful conduct of
the Company or persons under its control, with respect to the
sale or distribution of the Contracts or Fund shares; or
(iii) arise out of or as a result of any untrue
statement or alleged untrue statement of a material fact
contained in a registration statement, prospectus, or sales
literature of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement
or omission was made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of the
Company; or
(iv) arise as a result of any failure by the Company
to provide the services and furnish the materials under the
terms of this Agreement; or
(v) arise out of or result from any material breach
of any representation and/or warranty made by the Company in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Company, as limited
by and in accordance with the provisions of Sections 8.1(b)
and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
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.
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 Advisers
8.2(a). Each Adviser agrees, with respect to each Portfolio that it
manages, 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"
and individually, "Indemnified Party," 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 Adviser) 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 shares of the Portfolio
that it manages or the Contracts and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the registration statement or prospectus or sales
literature of the Fund (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with
information furnished to the 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 Portfolio 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 Fund or
persons under its control and other than statements or
representations authorized by the Company) or unlawful conduct
of the Fund, Adviser(s) or Underwriter or persons under their
control, with respect to the sale or distribution of the
Contracts or Portfolio shares; or
(iii) arise out of or as a result 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; or
(v) arise out of or result from any material breach
of any representation and/or warranty made by the Adviser in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Adviser; as limited
by and in accordance with the provisions of Sections 8.2(b)
and 8.2(c) hereof.
8.2(b). An Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
8.2(c). An Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Adviser will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
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 (hereinafter
collectively, the "Indemnified Parties" and individually, "Indemnified Party,"
for purposes of this Section 8.3) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Fund) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to
provide the services and furnish the materials under the terms
of this Agreement; 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;
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company agrees promptly to notify the Fund of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of either Account, or
the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by sixty (60) days advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio is not reasonably
available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in accordance
with applicable state and/or federal law or such law precludes the use
of such shares as the underlying investment media of the Contracts
issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company under Subchapter M
of the Code or under any successor or similar provision, or if the
Company reasonably believes that the Fund may fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event that such Portfolio
falls to meet the diversification requirements specified in Article VI
hereof; or
(f) termination by the Fund by written notice to the Company if the Fund
shall determine, in its sole judgment exercised in good faith, that
the Company and/or its affiliated companies has suffered a material
adverse change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject of
material adverse publicity, or
(g) termination by the Company by written notice to the Fund and the
Adviser, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Adviser has
suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or
is the subject of material adverse publicity; or
(h) termination by the Fund or the Adviser by written notice to the
Company, if the Company gives the Fund and the Adviser the written
notice specified in Section 1.5 hereof and at the time such notice was
given there was no notice of termination outstanding under any other
provision of this Agreement; provided, however any termination under
this Section 10.1(h) shall be effective forty five (45) days after the
notice specified in Section 1.5 was given; or
(i) termination at the option of the Fund, an Adviser or the Company upon
another party's material breach of any provision of this Agreement.
10.2. Notwithstanding any termination of this Agreement, the Fund 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 direct
reallocation of investments in the Fund, redemption of investments in the Fund
and/or investment in the Fund upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the Securities and Exchange Commission pursuant to
Section 26(b) of the 1940 Act. Upon request, the Company will promptly furnish
to the Fund the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund) 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 90 days
prior written 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:
Morgan Stanley Dean Witter Universal Funds, Inc.
c/o Morgan Stanley Dean Witter
Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Harold J. Schaaff, Jr., Esq.
If to Adviser:
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Harold J. Schaaff, Jr., Esq.
If to Adviser:
Miller Anderson & Sherrerd, LLP
One Tower Bridge
West Conshohocken, Pennsylvania 19428
Attention: Lorraine Truten
If to the Company:
Lincoln Benefit Life Company
206 South 13th Street, Suite 100
Lincoln, Nebraska 68508
Attention: Gregory C. Sernett, Esq.
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
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 National Association of Securities
Dealers and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that an Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Adviser, if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement.
12. 9 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under
statutory accounting principles) and annual report (prepared
under generally accepted accounting principles ("GAAP"), if
any), as soon as practical and in any event within 90 days
after the end of each fiscal year;
(b) the Company's quarterly statements (statutory)
(and GAAP, if any), as soon as practical and in any event
within 45 days after the end of each quarterly period:
(c) any financial statement, proxy statement, notice
or report of the Company sent to stockholders and/or
policyholders, as soon as practical after the delivery thereof
to stockholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the Securities and
Exchange Commission or any state insurance regulator, as soon
as practical after the filing thereof;
(e) any other report submitted to the Company by
independent accountants in connection with any annual, interim
or special audit made by them of the books of the Company, as
soon as practical after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
LINCOLN BENEFIT LIFE COMPANY
By: ______________________________
Name:
Title:
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
By: ______________________________
Name:
Title:
MORGAN STANLEY DEAN WIITTER
INVESTMENT MANAGEMENT INC.
By: ______________________________
Name:
Title:
MILLER ANDERSON & SHERRERD, LLP
By: ______________________________
Name:
Title:
<TABLE>
<CAPTION>
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
Name of Separate Account and Form Number and Name of Contract
Date Established by Board of Directors Funded by Separate Account
- -------------------------------------- --------------------------------
<S> <C>
Lincoln Benefit Life Variable Annuity Account 1940 Act Separate
Registration Number: 811-7924
Established: August 3, 1992 Contract Name: Consultant 100
Variable Annuity
Contract Form Number: VAP9950
</TABLE>
A-1
<PAGE>
SCHEDULE B
PORTFOLIOS OF MORGAN STANLEY
UNIVERSAL FUNDS, INC.
B-1
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates.
This will be done verbally approximately two months before meeting.
. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to
call in the number of Customers to the Fund , as soon as possible, but
no later than two weeks after the Record Date.
. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting,
instruction solicitation material. The Fund will provide the last
Annual Report to the Company pursuant to the terms of Section 3.3 of
the Agreement to which this Schedule relates.
. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Fund or its affiliate must approve the Card before it is printed.
Allow approximately 2-4 business days for printing information on the
Cards. Information commonly found on the Cards includes:
C-1
. name (legal name as found on account registration)
. address
. fund or account number
. coding to state number of units
. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
. During this time, the Fund will develop, produce and pay for the
Notice of Proxy and the Proxy Statement (one document). Printed and
folded notices and statements will be sent to Company for insertion
into envelopes (envelopes and return envelopes are provided and paid
for by the Company). Contents of envelope sent to Customers by the
Company will include:
. Voting Instruction Card(s)
. One proxy notice and statement (one document)
. return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
. "urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Fund.)
. cover letter - optional, supplied by Company and reviewed and approved
in advance by the Fund.
. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company
reviews and approves the contents of the mailing package to ensure
correctness and completeness. Copy of this approval sent to the Fund.
. Package mailed by the Company. * The Fund must allow at least a 15-day
solicitation time to the Company as the shareowner. (A 5-week period
is recommended.) Solicitation time is calculated as calendar days from
(but not including,) the meeting, counting backwards.
. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
C-2
Note: Postmarks are not generally needed. A need for postmark information would
be due to an insurance company's internal procedure and has not been required by
the Fund in the past.
. Signatures on Card checked against legal name on account
registration which was printed on the Card. Note: For Example, if
the account registration is under "John A. Smith, Trustee," then
that is the exact legal name to be printed on the Card and is the
signature needed on the Card.
. If Cards are mutilated, or for any reason are illegible or are
not signed properly, they are sent back to Customer with an
explanatory letter and a new Card and return envelope. The
mutilated or illegible Card is disregarded and considered to be
not received for purposes of vote tabulation. Any Cards that have
been "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not
complete the system. Any questions on those Cards are usually
remedied individually.
. There are various control procedures used to ensure proper
tabulation of votes and accuracy of that tabulation. The most
prevalent is to sort the Cards as they first arrive into
categories depending upon their vote; an estimate of how the vote
is progressing may then be calculated. If the initial estimates
and the actual vote do not coincide, then an internal audit of
that vote should occur. This may entail a recount.
. The actual tabulation of votes is done in units which is then
converted to shares. (It is very important that the Fund receives
the tabulations stated in terms of a percentage and the number of
shares.) The Fund must review and approve tabulation format.
. Final tabulation in shares is verbally given by the Company to
the Fund on the morning of the meeting not later than 10:00 a.m.
Eastern time. The Fund may request an earlier deadline if
reasonable and if required to calculate the vote in time for the
meeting.
. A Certification of Mailing and Authorization to Vote Shares will
be required from the Company as well as an original copy of the
final vote. The Fund will provide a standard form for each
Certification.
C-3
. The Company will be required to box and archive the Cards
received from the Customers. In the event that any vote is
challenged or if otherwise necessary for legal, regulatory, or
accounting purposes, the Fund will be permitted reasonable access
to such Cards.
. All approvals and "signing-off' may be done orally, but must
always be followed up in writing.
PartLincoln1
C-4
Draft
PARTICIPATION AGREEMENT
Among
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.,
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
MILLER ANDERSON & SHERRERD, LLP
and
LINCOLN BENEFIT LIFE COMPANY
DATED AS OF
____________, 1999
TABLE OF CONTENTS
Page
ARTICLE I. Purchase of Fund Shares 2
ARTICLE II Representations and Warranties 4
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements, Voting 6
ARTICLE IV. Sales Material and Information 8
ARTICLE V Fees and Expenses 9
ARTICLE VI. Diversification 10
ARTICLE VII. Potential Conflicts 10
ARTICLE VIII. Indemnification 12
ARTICLE IX. Applicable Law 18
ARTICLE X. Termination 18
ARTICLE XI. Notices 21
ARTICLE XII. Miscellaneous 21
SCHEDULE A Separate Accounts and Contracts A-1
SCHEDULE B Portfolios of Morgan Stanley Dean Witter
Universal Funds, Inc. B-1
SCHEDULE C Proxy Voting Procedures C-1
Exhibit 8(c)
PARTICIPATION AGREEMENT
Among
[INSURANCE COMPANY],
PIMCO VARIABLE INSURANCE TRUST,
and
PIMCO FUNDS DISTRIBUTORS LLC
THIS AGREEMENT, dated as of the ___ day of , 199__ by and among
__________________, (the "Company"), an [insert state] life insurance company,
on its own behalf and on behalf of each segregated asset account of the Company
set forth on Schedule A hereto as may be amended from time to time (each account
hereinafter referred to as the "Account"), PIMCO Variable Insurance Trust (the
"Fund"), a Delaware business trust, and PIMCO Funds Distributors LLC (the
"Underwriter"), a Delaware limited liability company.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance and variable annuity contracts (the
"Variable Insurance Products") to be offered by insurance companies which have
entered into participation agreements with the Fund and Underwriter
("Participating Insurance Companies");
WHEREAS, the shares of beneficial interest of the Fund are divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission (the "SEC") granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from the
provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, if and to the extent necessary to permit shares of
the Fund to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
(the "Mixed and Shared Funding Exemptive Order");
WHEREAS, the Fund is registered as an open-end management investment company
under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (the "1933 Act"); WHEREAS, Pacific Investment
Management Company (the "Adviser"), which serves as investment adviser to the
Fund, is duly registered as an investment adviser under the federal Investment
Advisers Act of 1940, as amended;
WHEREAS, the Company has issued or will issue certain variable life insurance
and/or variable annuity contracts supported wholly or partially by the Account
(the "Contracts"), and said Contracts are listed in Schedule A hereto, as it may
be amended from time to time by mutual written agreement;
WHEREAS, the Account is duly established and maintained as a segregated asset
account, duly established by the Company, on the date shown for such Account on
Schedule A hereto, to set aside and invest assets attributable to the aforesaid
Contracts;
WHEREAS, the Underwriter, which serves as distributor to the Fund, is registered
as a broker dealer with the SEC under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares in the Portfolios listed in Schedule A
hereto, as it may be amended from time to time by mutual written agreement (the
"Designated Portfolios") on behalf of the Account to fund the aforesaid
Contracts, and the Underwriter is authorized to sell such shares to the Account
at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund
and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
The Fund has granted to the Underwriter exclusive authority to distribute the
Fund's shares, and has agreed to instruct, and has so instructed, the
Underwriter to make available to the Company for purchase on behalf of the
Account Fund shares of those Designated Portfolios selected by the Underwriter.
Pursuant to such authority and instructions, and subject to Article X hereof,
the Underwriter agrees to make available to the Company for purchase on behalf
of the Account, shares of those Designated Portfolios listed on Schedule A to
this Agreement, such purchases to be effected at net asset value in accordance
with Section 1.3 of this Agreement. Notwithstanding the foregoing, (i) Fund
series (other than those listed on Schedule A) in existence now or that may be
established in the future will be made available to the Company only as the
Underwriter may so provide, and (ii) the Board of Trustees of the Fund (the
"Board") may suspend or terminate the offering of Fund shares of any Designated
Portfolio or class thereof, if such action is required by law or by regulatory
authorities having jurisdiction or if, in the sole discretion of the Board
acting in good faith and in light of its fiduciary duties under federal and any
applicable state laws, suspension or termination is necessary in the best
interests of the shareholders of such Designated Portfolio.
The Fund shall redeem, at the Company's request, any full or fractional
Designated Portfolio shares held by the Company on behalf of the Account, such
redemptions to be effected at net asset value in accordance with Section 1.3 of
this Agreement. Notwithstanding the foregoing, (i) the Company shall not redeem
Fund shares attributable to Contract owners except in the circumstances
permitted in Section 10.3 of this Agreement, and (ii) the Fund may delay
redemption of Fund shares of any Designated Portfolio to the extent permitted by
the 1940 Act, and any rules, regulations or orders thereunder.
Purchase and Redemption Procedures
The Fund hereby appoints the Company as an agent of the Fund for the limited
purpose of receiving purchase and redemption requests on behalf of the Account
(but not with respect to any Fund shares that may be held in the general account
of the Company) for shares of those Designated Portfolios made available
hereunder, based on allocations of amounts to the Account or subaccounts thereof
under the Contracts and other transactions relating to the Contracts or the
Account. Receipt of any such request (or relevant transactional information
therefor) on any day the New York Stock Exchange is open for trading and on
which the Fund calculates its net asset value pursuant to the rules of the SEC
(a "Business Day") by the Company as such limited agent of the Fund prior to the
time that the Fund ordinarily calculates its net asset value as described from
time to time in the Fund Prospectus (which as of the date of execution of this
Agreement is 4:00 p.m. Eastern Time) shall constitute receipt by the Fund on
that same Business Day, provided that the Fund receives notice of such request
by 9:00 a.m. Eastern Time on the next following Business Day.
The Company shall pay for shares of each Designated Portfolio on the same day
that it notifies the Fund of a purchase request for such shares. Payment for
Designated Portfolio shares shall be made in federal funds transmitted to the
Fund by wire to be received by the Fund by 4:00 p.m. Eastern Time on the day the
Fund is notified of the purchase request for Designated Portfolio shares (unless
the Fund determines and so advises the Company that sufficient proceeds are
available from redemption of shares of other Designated Portfolios effected
pursuant to redemption requests tendered by the Company on behalf of the
Account). If federal funds are not received on time, such funds will be
invested, and Designated Portfolio shares purchased thereby will be issued, as
soon as practicable and the Company shall promptly, upon the Fund's request,
reimburse the Fund for any charges, costs, fees, interest or other expenses
incurred by the Fund in connection with any advances to, or borrowing or
overdrafts by, the Fund, or any similar expenses incurred by the Fund, as a
result of portfolio transactions effected by the Fund based upon such purchase
request. Upon receipt of federal funds so wired, such funds shall cease to be
the responsibility of the Company and shall become the responsibility of the
Fund.
Payment for Designated Portfolio shares redeemed by the Account or the Company
shall be made in federal funds transmitted by wire to the Company or any other
designated person on the next Business Day after the Fund is properly notified
of the redemption order of such shares (unless redemption proceeds are to be
applied to the purchase of shares of other Designated Portfolios in accordance
with Section 1.3(b) of this Agreement), except that the Fund reserves the right
to redeem Designated Portfolio shares in assets other than cash and to delay
payment of redemption proceeds to the extent permitted under Section 22(e) of
the 1940 Act and any Rules thereunder, and in accordance with the procedures and
policies of the Fund as described in the then current prospectus. The Fund shall
not bear any responsibility whatsoever for the proper disbursement or crediting
of redemption proceeds by the Company; the Company alone shall be responsible
for such action.
Any purchase or redemption request for Designated Portfolio shares held or to be
held in the Company's general account shall be effected at the net asset value
per share next determined after the Fund's receipt of such request, provided
that, in the case of a purchase request, payment for Fund shares so requested is
received by the Fund in federal funds prior to close of business for
determination of such value, as defined from time to time in the Fund
Prospectus.
The Fund shall use its best efforts to make the net asset value per share for
each Designated Portfolio available to the Company by 7:00 p.m. Eastern Time
each Business Day, and in any event, as soon as reasonably practicable after the
net asset value per share for such Designated Portfolio is calculated, and shall
calculate such net asset value in accordance with the Fund's Prospectus. Neither
the Fund, any Designated Portfolio, the Underwriter, nor any of their affiliates
shall be liable for any information provided to the Company pursuant to this
Agreement which information is based on incorrect information supplied by the
Company or any other Participating Insurance Company to the Fund or the
Underwriter.
The Fund shall furnish notice (by wire or telephone followed by written
confirmation) to the Company as soon as reasonably practicable of any income
dividends or capital gain distributions payable on any Designated Portfolio
shares. The Company, on its behalf and on behalf of the Account, hereby elects
to receive all such dividends and distributions as are payable on any Designated
Portfolio shares in the form of additional shares of that Designated Portfolio.
The Company reserves the right, on its behalf and on behalf of the Account, to
revoke this election and to receive all such dividends and capital gain
distributions in cash. The Fund shall notify the Company promptly of the number
of Designated Portfolio shares so issued as payment of such dividends and
distributions.
Issuance and transfer of Fund shares shall be by book entry only. Stock
certificates will not be issued to the Company or the Account. Purchase and
redemption orders for Fund shares shall be recorded in an appropriate ledger for
the Account or the appropriate subaccount of the Account.
(a) The parties hereto acknowledge that the arrangement contemplated by this
Agreement is not exclusive; the Fund's shares may be sold to other insurance
companies (subject to Section 1.8 hereof) and the cash value of the Contracts
may be invested in other investment companies, provided, however, that until
this Agreement is terminated pursuant to Article X, the Company shall promote
the Designated Portfolios on the same basis as other funding vehicles available
under the Contracts. Funding vehicles other than those listed on Schedule A to
this Agreement may be available for the investment of the cash value of the
Contracts, provided, however, (i) any such vehicle or series thereof, has
investment objectives or policies that are substantially different from the
investment objectives and policies of the Designated Portfolios available
hereunder; (ii) the Company gives the Fund and the Underwriter 45 days written
notice of its intention to make such other investment vehicle available as a
funding vehicle for the Contracts; and (iii) unless such other investment
company was available as a Funding vehicle for the Contracts prior to the date
of this Agreement and the Company has so informed the Fund and the Underwriter
prior to their signing this Agreement, the Fund or Underwriter consents in
writing to the use of such other vehicle, such consent not to be unreasonably
withheld.
The Company shall not, without prior notice to the Underwriter (unless
otherwise required by applicable law), take any action to operate the Account as
a management investment company under the 1940 Act.
The Company shall not, without prior notice to the Underwriter (unless
otherwise required by applicable law), induce Contract owners to change or
modify the Fund or change the Fund's distributor or investment adviser.
(d) The Company shall not, without prior notice to the Fund, induce
Contract owners to vote on any matter submitted for consideration by the
shareholders of the Fund in a manner other than as recommended by the Board of
Trustees of the Fund.
The Underwriter and the Fund shall sell Fund shares only to Participating
Insurance Companies and their separate accounts and to persons or plans
("Qualified Persons") that communicate to the Underwriter and the Fund that they
qualify to purchase shares of the Fund under Section 817(h) of the Internal
Revenue Code of 1986, as amended (the "Code") and the regulations thereunder
without impairing the ability of the Account to consider the portfolio
investments of the Fund as constituting investments of the Account for the
purpose of satisfying the diversification requirements of Section 817(h). The
Underwriter and the Fund shall not sell Fund shares to any insurance company or
separate account unless an agreement complying with Article VI of this Agreement
is in effect to govern such sales, to the extent required. The Company hereby
represents and warrants that it and the Account are Qualified Persons. The Fund
reserves the right to cease offering shares of any Designated Portfolio in the
discretion of the Fund.
ARTICLE II. Representations and Warranties
The Company represents and warrants that the Contracts (a) are, or prior to
issuance will be, registered under the 1933 Act, or (b) are not registered
because they are properly exempt from registration under the 1933 Act or will be
offered exclusively in transactions that are properly exempt from registration
under the 1933 Act. The Company further represents and warrants that the
Contracts will be issued and sold in compliance in all material respects with
all applicable federal securities and state securities and insurance laws and
that the sale of the Contracts shall comply in all material respects with state
insurance suitability requirements. The Company further represents and warrants
that it is an insurance company duly organized and in good standing under
applicable law, that it has legally and validly established the Account prior to
any issuance or sale thereof as a segregated asset account under [insert state]
insurance laws, and that it (a) has registered or, prior to any issuance or sale
of the Contracts, will register the Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts, or alternatively (b) has not registered
the Account in proper reliance upon an exclusion from registration under the
1940 Act. The Company shall register and qualify the Contracts or interests
therein as securities in accordance with the laws of the various states only if
and to the extent deemed advisable by the Company.
The Fund represents and warrants that Fund shares sold pursuant to this
Agreement shall be registered under the 1933 Act, duly authorized for issuance
and sold in compliance with applicable state and federal securities laws and
that the Fund is and shall remain registered under the 1940 Act. The Fund shall
amend the registration statement for its shares under the 1933 Act and the 1940
Act from time to time as required in order to effect the continuous offering of
its shares. The Fund shall register and qualify the shares for sale in
accordance with the laws of the various states only if and to the extent deemed
advisable by the Fund or the Underwriter.
The Fund may make payments to finance distribution expenses pursuant to Rule
12b-1 under the 1940 Act. Prior to financing distribution expenses pursuant to
Rule 12b-1, the Fund will have the Board, a majority of whom are not interested
persons of the Fund, formulate and approve a plan pursuant to Rule 12b-1 under
the 1940 Act to finance distribution expenses.
The Fund makes no representations as to whether any aspect of its operations,
including, but not limited to, investment policies, fees and expenses, complies
with the insurance and other applicable laws of the various states.
The Fund represents that it is lawfully organized and validly existing under the
laws of the State of Delaware and that it does and will comply in all material
respects with the 1940 Act.
The Underwriter represents and warrants that it is a member in good standing of
the NASD and is registered as a broker-dealer with the SEC. The Underwriter
further represents that it will sell and distribute the Fund shares in
accordance with any applicable state and federal securities laws.
The Fund and the Underwriter represent and warrant that all of their
trustees/directors, officers, employees, investment advisers, and other
individuals or entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimum coverage as required currently by Rule 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.
The Company represents and warrants that all of its directors, officers,
employees, and other individuals/entities employed or controlled by the Company
dealing with the money and/or securities of the Account are covered by a blanket
fidelity bond or similar coverage for the benefit of the Account, in an amount
not less than $5 million. The aforesaid bond includes coverage for larceny and
embezzlement and is issued by a reputable bonding company. The Company agrees to
hold for the benefit of the Fund and to pay to the Fund any amounts lost from
larceny, embezzlement or other events covered by the aforesaid bond to the
extent such amounts properly belong to the Fund pursuant to the terms of this
Agreement. The Company agrees to make all reasonable efforts to see that this
bond or another bond containing these provisions is always in effect, and agrees
to notify the Fund and the Underwriter in the event that such coverage no longer
applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
The Underwriter shall provide the Company with as many copies of the Fund's
current prospectus (describing only the Designated Portfolios listed on Schedule
A) or, to the extent permitted, the Fund's profiles as the Company may
reasonably request. The Company shall bear the expense of printing copies of the
current prospectus and profiles for the Contracts that will be distributed to
existing Contract owners, and the Company shall bear the expense of printing
copies of the Fund's prospectus and profiles that are used in connection with
offering the Contracts issued by the Company. If requested by the Company in
lieu thereof, the Fund shall provide such documentation (including a final copy
of the new prospectus on diskette at the Fund's expense) and other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus for the Fund is amended) to have the prospectus for
the Contracts and the Fund's prospectus or profile printed together in one
document (such printing to be at the Company's expense).
The Fund's prospectus shall state that the current Statement of Additional
Information ("SAI") for the Fund is available, and the Underwriter (or the
Fund), at its expense, shall provide a reasonable number of copies of such SAI
free of charge to the Company for itself and for any owner of a Contract who
requests such SAI.
The Fund shall provide the Company with information regarding the Fund's
expenses, which information may include a table of fees and related narrative
disclosure for use in any prospectus or other descriptive document relating to a
Contract. The Company agrees that it will use such information in the form
provided. The Company shall provide prior written notice of any proposed
modification of such information, which notice will describe in detail the
manner in which the Company proposes to modify the information, and agrees that
it may not modify such information in any way without the prior consent of the
Fund.
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.
The Company shall:
solicit voting instructions from Contract owners; vote the Fund shares in
accordance with instructions received from Contract owners; and 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 owners or to the extent
otherwise required by law. The Company will vote Fund shares held in any
segregated asset account in the same proportion as Fund shares of such portfolio
for which voting instructions have been received from Contract owners, to the
extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each of
their separate accounts participating in a Designated Portfolio calculates
voting privileges as required by the Shared Funding Exemptive Order and
consistent with any reasonable standards that the Fund may adopt and provide in
writing.
ARTICLE IV. Sales Material and InformationThe Company shall furnish, or shall
cause to be furnished, to the Fund or its designee, each piece of sales
literature or other promotional material that the Company develops and in which
the Fund (or a Designated Portfolio thereof) or the Adviser or the Underwriter
is named. No such material shall be used until approved by the Fund or its
designee, and the Fund will use its best efforts for it or its designee to
review such sales literature or promotional material within ten Business Days
after receipt of such material. The Fund or its designee reserves the right to
reasonably object to the continued use of any such sales literature or other
promotional material in which the Fund (or a Designated Portfolio thereof) or
the Adviser or the Underwriter is named, and no such material shall be used if
the Fund or its designee so object.
The Company shall not give any information or make any representations or
statements on behalf of the Fund or concerning the Fund or the Adviser or the
Underwriter in connection with the sale of the Contracts other than the
information or representations contained in the registration statement or
prospectus or SAI for the Fund shares, as such registration statement and
prospectus or SAI may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in sales literature or other
promotional material approved by the Fund or its designee or by the Underwriter,
except with the permission of the Fund or the Underwriter or the designee of
either.
The Fund and the Underwriter, or their designee, shall furnish, or cause to be
furnished, to the Company, each piece of sales literature or other promotional
material that it develops and in which the Company, and/or its Account, is
named. No such material shall be used until approved by the Company, and the
Company will use its best efforts to review such sales literature or promotional
material within ten Business Days after receipt of such material. The Company
reserves the right to reasonably object to the continued use of any such sales
literature or other promotional material in which the Company and/or its Account
is named, and no such material shall be used if the Company so objects.
The Fund and the Underwriter shall not give any information or make any
representations on behalf of the Company or concerning the Company, the Account,
or the Contracts other than the information or representations contained in a
registration statement, prospectus (which shall include an offering memorandum,
if any, if the Contracts issued by the Company or interests therein are not
registered under the 1933 Act), or SAI for the Contracts, as such registration
statement, prospectus, or SAI may be amended or supplemented from time to time,
or in published reports for the Account which are in the public domain or
approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, SAIs, 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, promptly after the filing of such document(s)
with the SEC or other regulatory authorities.
The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses (which shall include an offering
memorandum, if any, if the Contracts issued by the Company or interests therein
are not registered under the 1933 Act), SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Contracts or the Account, promptly after the filing of
such document(s) with the SEC or other regulatory authorities. The Company shall
provide to the Fund and the Underwriter any complaints received from the
Contract owners pertaining to the Fund or the Designated Portfolio.
The Fund will provide the Company with as much notice as is reasonably
practicable of any proxy solicitation for any Designated Portfolio, and of any
material change in the Fund's registration statement, particularly any change
resulting in a change to the registration statement or prospectus for any
Account. The Fund will work with the Company so as to enable the Company to
solicit proxies from Contract owners, or to make changes to its prospectus or
registration statement, in an orderly manner. The Fund will make reasonable
efforts to attempt to have changes affecting Contract prospectuses become
effective simultaneously with the annual updates for such prospectuses.
For purposes of this Article IV, the phrase "sales literature and other
promotional materials" includes, but is not limited to, any of the following
that refer to the Fund or any affiliate of the Fund: advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, reports, market
letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Fund.
ARTICLE V. Fees and Expenses
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 12b-1 to finance distribution expenses,
then the Fund or Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing, and such payments will be made out of existing fees otherwise payable
to the Underwriter, past profits of the Underwriter, or other resources
available to the Underwriter. Currently, no such payments are contemplated.
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.
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
The Fund will invest its assets in such a manner as to ensure that the Contracts
will be treated as annuity or life insurance contracts, whichever is
appropriate, under the Code and the regulations issued thereunder (or any
successor provisions). Without limiting the scope of the foregoing, each
Designated Portfolio has complied and will continue to comply with Section
817(h) of the Code and Treasury Regulation ss.1.817-5, and any Treasury
interpretations thereof, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts, and any amendments or
other modifications or successor provisions to such Section or Regulations. In
the event of a breach of this Article VI by the Fund, it will take all
reasonable steps (a) to notify the Company of such breach and (b) to adequately
diversify the Fund so as to achieve compliance within the grace period afforded
by Regulation 1.817-5.
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.
The Company represents that the Contracts are currently, and at the time of
issuance shall be, treated as life insurance or annuity insurance contracts,
under applicable provisions of the Code, and that it will make every effort to
maintain such treatment, and that it will notify the Fund and the Underwriter
immediately upon having a reasonable basis for believing the Contracts have
ceased to be so treated or that they might not be so treated in the future. The
Company agrees that any prospectus offering a contract that is a "modified
endowment contract" as that term is defined in Section 7702A of the Code (or any
successor or similar provision), shall identify such contract as a modified
endowment contract.
ARTICLE VII. Potential Conflicts
The following provisions shall apply only upon issuance of the Mixed and Shared
Funding Order and the sale of shares of the Fund to variable life insurance
separate accounts, and then only to the extent required under the 1940 Act.
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.
The Company will report any potential or existing conflicts of which it is aware
to the Board. The Company will assist the Board in carrying out its
responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an obligation
by the Company to inform the Board whenever Contract owner voting instructions
are disregarded.
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.
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.
If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account within six months after the Board informs the Company in writing
that it has determined that such decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Until the
end of the foregoing six month period, the Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
For purposes of Section 7.3 through 7.6 of this Agreement, a majority of the
disinterested members of the Board shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Fund be required to establish a new funding medium for the Contracts. The
Company shall not be required by Section 7.3 to establish a new funding medium
for the Contract if an offer to do so has been declined by vote of a majority of
Contract owners materially adversely affected by the irreconcilable material
conflict. In the event that the Board determines that any proposed action does
not adequately remedy any irreconcilable material conflict, then the Company
will withdraw the Account's investment in the Fund and terminate this Agreement
within six (6) months after the Board informs the Company in writing of the
foregoing determination; provided, 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.
If and to the extent the Mixed and Shared Funding Exemption Order or any
amendment thereto contains terms and conditions different from Sections 3.4,
3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement, then the Fund and/or
the Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with the Mixed and Shared Funding Exemptive Order,
and Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in the Mixed and Shared Funding
Exemptive Order or any amendment thereto. If and to the extent that Rule 6e-2
and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive
relief from any provision of the 1940 Act or the rules promulgated thereunder
with respect to mixed or shared funding (as defined in the Mixed and Shared
Funding Exemptive Order) on terms and conditions materially different from those
contained in the Mixed and Shared Funding Exemptive Order, then (a) the Fund
and/or the Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and
Rule 6e-3, as adopted, to the extent such rules are applicable; and (b) Sections
3.5, 3.6, 7.1., 7.2, 7.3, 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
Indemnification By the Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
the Underwriter and each of its trustees/directors and officers, and each
person, if any, who controls the Fund or Underwriter within the meaning of
Section 15 of the 1933 Act or who is under common control with the Underwriter
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute or regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements: arise out of or are based upon any untrue statement or alleged
untrue statements of any material fact contained in the registration statement,
prospectus (which shall include a written description of a Contract that is not
registered under the 1933 Act), or SAI for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Fund for use in the registration statement, prospectus or SAI for the
Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the Contracts or
Fund shares; or arise out of or as a result of statements or representations
(other than statements or representations contained in the registration
statement, prospectus, SAI, or sales literature of the Fund not supplied by the
Company or persons under its control) or wrongful conduct of the Company or its
agents or persons under the Company's authorization or control, with respect to
the sale or distribution of the Contracts or Fund Shares; or arise out of any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, SAI, or sales literature of the Fund or any
amendment thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement or omission was made
in reliance upon information furnished to the Fund by or on behalf of the
Company; or 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 arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Company; or as limited by and in accordance with the provisions of Sections
8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of its obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
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.
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 or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements: arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the registration
statement or prospectus or SAI or sales literature of the Fund (or any amendment
or supplement to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company for use in the registration
statement, prospectus or SAI for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or arise out of or as a result of statements or
representations (other than statements or representations contained in the
registration statement, prospectus, SAI or sales literature for the Contracts
not supplied by the Underwriter or persons under its control) or wrongful
conduct of the Fund or Underwriter or persons under their control, with respect
to the sale or distribution of the Contracts or Fund shares; or arise out of any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, SAI or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished to the
Company by or on behalf of the Fund or the Underwriter; or arise as a result of
any failure by the Fund or the Underwriter to provide the services and furnish
the materials under the terms of this Agreement (including a failure of the
Fund, whether unintentional or in good faith or otherwise, to comply with the
diversification and other qualification requirements specified in Article VI of
this Agreement); or arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this Agreement or
arise out of or result from any other material breach of this Agreement by the
Underwriter; as limited by and in accordance with the provisions of Sections
8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance or such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Party, the Underwriter will be entitled to participate,
at its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Underwriter will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
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, 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: 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 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 participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
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
This Agreement shall be construed and the provisions hereof interpreted under
and in accordance with the laws of the State of California.
This Agreement shall be subject to the provisions of the 1933, 1934 and 1940
Acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, any Mixed and Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in accordance therewith.
If, in the future, the Mixed and Shared Funding Exemptive Order should no longer
be necessary under applicable law, then Article VII shall no longer apply.
ARTICLE X. Termination
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 three (3) months advance written notice delivered to
the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter based upon the Company's determination that shares of the Fund
are not reasonably available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter in the event any of the Designated Portfolio's shares are not
registered, issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by the Company; or
(d) termination by the Fund or Underwriter in the event that formal
administrative proceedings are instituted against the Company by the NASD,
the SEC, the Insurance Commissioner or like official of any state or any
other regulatory body regarding the Company's duties under this Agreement
or related to the sale of the Contracts, the operation of any Account, or
the purchase of the Fund's shares; provided, however, that the Fund or
Underwriter determines in its sole judgment exercised in good faith, that
any such administrative proceedings will have a material adverse effect
upon the ability of the Company to perform its obligations under this
Agreement; or
(e) termination by the Company in the event that formal administrative
proceedings are instituted against the Fund or Underwriter by the NASD, the
SEC, or any state securities or insurance department or any other
regulatory body; provided, however, that the Company determines in its sole
judgment exercised in good faith, that any such administrative proceedings
will have a material adverse effect upon the ability of the Fund or
Underwriter to perform its obligations under this Agreement; or
(f) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Designated Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M or fails to comply with the Section 817(h) diversification
requirements specified in Article VI hereof, or if the Company reasonably
believes that such Portfolio may 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, Adviser, or the Underwriter has suffered a
material adverse change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject of material
adverse publicity; or
(j) termination by the Fund or the Underwriter by written notice to the
Company, if the Company gives the Fund and the Underwriter the written
notice specified in Section 1.7(a)(ii) hereof and at the time such notice
was given there was no notice of termination outstanding under any other
provision of this Agreement; provided, however, any termination under this
Section 10.1(j) shall be effective forty-five days after the notice
specified in Section 1.7(a)(ii) was given; or
(k) termination by the Company upon any substitution of the shares of another
investment company or series thereof for shares of a Designated Portfolio
of the Fund in accordance with the terms of the Contracts, provided that
the Company has given at least 45 days prior written notice to the Fund and
Underwriter of the date of substitution; or
(l) termination by any party in the event that the Fund's Board of Trustees
determines that a material irreconcilable conflict exists as provided in
Article VII.
Notwithstanding any termination of this Agreement, the Fund and the Underwriter
shall, at the option of the Company, continue to make available additional
shares of the Fund pursuant to the terms and conditions of this Agreement, for
all Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"), unless the Underwriter
requests that the Company seek an order pursuant to Section 26(b) of the 1940
Act to permit the substitution of other securities for the shares of the
Designated Portfolios. The Underwriter agrees to split the cost of seeking such
an order, and the Company agrees that it shall reasonably cooperate with the
Underwriter and seek such an order upon request. Specifically, the owners of the
Existing Contracts may be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts (subject to any such
election by the Underwriter). The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement. The parties
further agree that this Section 10.2 shall not apply to any terminations under
Section 10.1(g) of this Agreement.
The Company shall not redeem Fund shares attributable to the Contracts (as
opposed to Fund shares attributable to the Company's assets held in the Account)
except (i) as necessary to implement Contract owner initiated or approved
transactions, (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"), (iii) upon 45 days prior written notice
to the Fund and Underwriter, as permitted by an order of the SEC pursuant to
Section 26(b) of the 1940 Act, but only if a substitution of other securities
for the shares of the Designated Portfolios is consistent with the terms of the
Contracts, or (iv) as permitted under the terms of the Contract. Upon request,
the Company will promptly furnish to the Fund and the Underwriter reasonable
assurance that any redemption pursuant to clause (ii) above is a Legally
Required Redemption. Furthermore, except in cases where permitted under the
terms of the Contacts, the Company shall not prevent Contract owners from
allocating payments to a Portfolio that was otherwise available under the
Contracts without first giving the Fund or the Underwriter 45 days notice of its
intention to do so.
Notwithstanding any termination of this Agreement, each party's obligation under
Article VIII to indemnify the other parties shall survive.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth below or at such other
address as such party may from time to time specify in writing to the other
party.
If to the Fund: PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
If to the Company:
If to Underwriter: PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
ARTICLE XII. Miscellaneous
All persons dealing with the Fund must look solely to the property of the Fund,
and in the case of a series company, the respective Designated Portfolios listed
on Schedule A hereto as though each such Designated Portfolio had separately
contracted with the Company and the Underwriter for the enforcement of any
claims against the Fund. The parties agree that neither the Board, officers,
agents or shareholders of the Fund assume any personal liability or
responsibility for obligations entered into by or on behalf of the Fund.
Subject to the requirements of legal process and regulatory authority, each
party hereto shall treat as confidential the names and addresses of the owners
of the Contracts and all information reasonably identified as confidential in
writing by any other party hereto and, except as permitted by this Agreement,
shall not disclose, disseminate or utilize such names and addresses and other
confidential information without the express written consent of the affected
party until such time as such information has come into the public domain.
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.
This Agreement may be executed simultaneously in two or more counterparts, each
of which taken together shall constitute one and the same instrument.
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.
Each party hereto shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD, and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the [insert state] 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
[insert state] variable annuity laws and regulations and any other applicable
law or regulations.
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.
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.
The Company shall furnish, or shall cause to be furnished, to the Fund or its
designee copies of the following reports: (a) the Company's annual statement
(prepared under statutory accounting principles) and annual report (prepared
under generally accepted accounting principles) filed with any state or federal
regulatory body or otherwise made available to the public, as soon as
practicable and in any event within 90 days after the end of each fiscal year;
and
(b) any registration statement (without exhibits) and financial reports of the
Company filed with the Securities and Exchange Commission or any state
insurance regulatory, as soon as practicable after the filing thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date specified below. COMPANY:
By its authorized officer
By:
Name:
Title:
Date:
PIMCO VARIABLE INSURANCE TRUST
By its authorized officer
By:
Name: Brent R. Harris
Title: Chairman
Date:
PIMCO FUNDS DISTRIBUTORS LLC
By its authorized officer
By:
Name: Newton B. Schott, Jr.
Title: Executive Vice President
Date:
12/31/97
Schedule A
PIMCO Variable Insurance Trust Portfolios:
Segregated Asset Accounts:
Dated _________________, 199___.
Exhibit 8(d)
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of __________, 1998
("Agreement"), by and among Salomon Brothers Variable Series Funds Inc, a
Maryland corporation (the "Fund"), Salomon Brothers Asset Management Inc, a
Delaware Corporation (the "Adviser") and ____________________________________,a
[STATE) life insurance company ("LIFE COMPANY"), on behalf of itself and each of
its segregated asset accounts listed in Schedule A hereto, as the parties hereto
may amend from time to time (each, an "Account," and collectively, the
"Accounts").
WITNESSETH THAT:
WHEREAS, the Fund is registered with the Securities and
Exchange Commission ("SEC") as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Fund is available to the extent set forth herein
to act as the investment vehicle for separate accounts established for variable
life insurance policies and variable annuity contracts to be offered by
insurance companies which have entered into participation agreements with the
Fund and ("Participating Insurance Companies");
WHEREAS, the Fund currently consists of seven separate
investment portfolios, shares ("Shares") of each of which are registered under
the Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, the Fund will make Shares of each investment
portfolio of the Fund listed on Schedule A hereto (each, a "Portfolio" and
collectively, the "Portfolios") as the Parties hereto may amend from time to
time available for purchase by the Accounts;
WHEREAS, the Fund has applied for an order (the "Order") from
the SEC to permit 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 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;
WHEREAS, LIFE COMPANY will be the issuer of certain variable
annuity contracts and variable life insurance policies (collectively, the
"Contracts") as set forth on Schedule A hereto, as the Parties hereto may amend
from time to time, which Contracts, if required by applicable law, will be
registered under the 1933 Act;
WHEREAS, LIFE COMPANY will, to the extent set forth herein,
fund the variable life insurance policies and variable annuity contracts through
the Accounts, each of which may be divided into two or more subaccounts
("Subaccounts"; reference herein to an "Account" includes reference to each
Subaccount thereof to the extent the context requires);
WHEREAS, LIFE COMPANY will serve as the depositor of the
Accounts, each of which is registered as a unit investment trust under the 1940
Act (or exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Contracts will be registered as securities under the 1933 Act
(or exempt therefrom);
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, LIFE COMPANY intends to purchase Shares in one or more of the
Portfolios on behalf of the Accounts to fund the Contracts; and
NOW, THEREFORE, in consideration of the mutual benefits and
promises contained herein, the Parties hereto agree as follows:
Section 1. Available Portfolios
1.1 Available Portfolios
The Fund will make Shares of each Portfolio listed on Schedule
A available to LIFE COMPANY for purchase and redemption at net asset value next
computed after the Fund's receipt of a purchase or redemption order and with no
sales charges, in accordance with the Fund's then current prospectus and subject
to the terms and conditions of this Agreement. The Board of Directors of the
Fund may refuse to sell Shares of any Portfolio to any person, or suspend or
terminate the offering of Shares of any Portfolio if such action is required by
law or by regulatory authorities having jurisdiction or if, in the sole
discretion of the Directors acting in good faith and in light of their fiduciary
duties under federal and any applicable state laws, such action is deemed in the
best interests of the shareholders of such Portfolio.
1.2 Addition, Deletion or Modification of Portfolios.
The Parties hereto may agree, from time to time, to add other
Portfolios to provide additional funding alternatives for the Contracts, or to
delete or modify existing Portfolios, by amending Schedule A hereto. Upon such
amendment to Schedule A, any applicable reference to a Portfolio, the Fund, or
its Shares herein shall include a reference to all Portfolios set forth on
Schedule A as then amended. Schedule A, as amended from time to time, is
incorporated herein by reference and is a part hereof.
1.3 No Sales to the General Public.
The Fund represents that shares of the Portfolios will be sold
only to Participating Insurance Companies, their separate accounts and qualified
pension and retirement plans ("Plans") and that no Shares of any Portfolio have
been or will be sold to the general public.
Section 2. Processing Transactions
2.1 Placing Orders.
(a) The Fund or its designated agent will use its best effort
to provide LIFE COMPANY with the net asset value per Share for each Portfolio by
6:30 p.m. Eastern Time on each Business Day. As used herein, "Business Day"
shall mean any day on which (i) the New York Stock Exchange is open for regular
trading, and (ii) the Fund calculates the Portfolios' net asset value.
(b) LIFE COMPANY will use the data provided by the Fund each
Business Day pursuant to paragraph (a) immediately above to calculate Account
unit values and to process transactions that receive that same Business Day's
Account unit values. LIFE COMPANY will perform such Account processing the same
Business Day, and will place corresponding orders to purchase or redeem Shares
with the Fund by 9:00 a.m. Eastern Time the following Business Day.
(c) With respect to payment of the purchase price by LIFE
COMPANY and of redemption proceeds by the Fund, LIFE COMPANY and the Fund shall
net purchase and redemption orders with respect to each Portfolio and shall
transmit one net payment per Portfolio in accordance with Section 2.2, below.
(d) If the Fund provides materially incorrect Share net asset
value information (as determined under SEC guidelines), LIFE COMPANY shall be
entitled to an adjustment to the number of Shares purchased or redeemed to
reflect the correct net asset value per Share. Any material error in the
calculation or reporting of net asset value per Share, dividend or capital gain
information shall be reported promptly upon discovery to LIFE COMPANY.
2.2 Payments
(a) LIFE COMPANY shall pay for Shares of each Portfolio on the
same day that it notifies the Fund of a purchase request for such Shares.
Payment for Shares shall be made in federal funds transmitted to the Fund by
wire to be received by the Fund by 1:00 P.M. Eastern Time on the day the Fund is
notified of the purchase request for Shares. If payment in federal funds for any
purchase is not received, or is received by the Fund after 1:00 p.m. Eastern
Time on such Business Day, LIFE COMPANY shall promptly, upon the Fund's request
in writing, 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 non-payment or late payment.
(b) The Fund will wire payment in federal funds for net
redemptions to an account designated by LIFE COMPANY by 1:00 p.m. Eastern Time
on the business day succeeding the day the order is placed, to the extent
practicable, but in any event within five (5) calendar days after the date the
order is placed in order to enable LIFE COMPANY to pay redemption proceeds
within the time specified in Section 22(e) of the 1940 Act. The Fund shall not
bear any responsibility whatsoever for the proper disbursement or crediting of
redemption proceeds by LIFE COMPANY.
2.3 Applicable Price
(a) Share purchase payments and redemption orders that result
from purchase payments, premium payments, surrenders and other transactions
under Contracts (collectively, "Contract transactions") and that LIFE COMPANY
receives prior to the close of regular trading on the New York Stock Exchange on
a Business Day will be executed at the net asset values of the appropriate
Portfolios next computed after receipt by the Fund or its designated agent of
the orders. For purposes of this Section 2.3(a), LIFE COMPANY shall be the
designated agent of the Fund for receipt of orders relating to Contract
transactions on each Business Day and receipt by such designated agent shall
constitute receipt by the Fund; provided that the Fund receives notice of such
orders by 9:00 a.m. Eastern Time on the following Business Day.
(b) All other Share purchases and redemptions by LIFE COMPANY
will be effected at the net asset values of the appropriate Portfolios next
computed after receipt by the Fund or its designated agent of the order
therefor, and such orders will be irrevocable.
2.4 Dividends and Distributions
The Fund will furnish notice by wire or telephone (followed by
written confirmation) on or prior to the payment date to LIFE COMPANY of any
income dividends or capital gain distributions payable on the Shares of any
Portfolio. LIFE COMPANY hereby elects to reinvest all dividends and capital
gains distributions in additional Shares of the corresponding Portfolio at the
ex-dividend date net asset values until LIFE COMPANY otherwise notifies the Fund
in writing, it being agreed by the Parties that the ex-dividend date and the
payment date with respect to any dividend or distribution will be the same
Business Day. LIFE COMPANY reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. Any
such revocation will take effect with respect to the next income dividend or
capital gain distribution following receipt by the Fund of such notification
from LIFE COMPANY.
2.5 Book Entry
Issuance and transfer of Portfolio Shares will be by book
entry only. Stock certificates will not be issued to LIFE COMPANY. Shares
ordered from the Fund will be recorded in an appropriate title for LIFE COMPANY,
on behalf of its Accounts.
Section 3. Costs and Expenses
3.1 General
(a) Except as otherwise specifically provided herein, each
party will bear all expenses incident to its performance under this Agreement.
(b) The Fund shall pay no fee or other compensation to the
LIFE 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 Fund may make payments to the LIFE COMPANY or to the
underwriter for the Contracts if and in amounts agreed to by the Fund in
writing. Presently, no such payments are contemplated.
3.2 Registration
(a) The Fund will bear the cost of its registering as a
management investment company under the 1940 Act and registering its Shares
under the 1933 Act, and keeping such registrations current and effective;
including, without limitation, the preparation of and filing with the SEC of
Forms N-SAR and Rule 24f-2 Notices with respect to the Fund and its Shares and
payment of all applicable registration or filing fees with respect to any of the
foregoing.
(b) LIFE COMPANY will bear the cost of registering, to the
extent required, each Account as a unit investment trust under the 1940 Act and
registering units of interest under the Contracts under the 1933 Act and keeping
such registrations current and effective; including, without limitation, the
preparation and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices with
respect to each Account and its units of interest and payment of all applicable
registration or filing fees with respect to any of the foregoing.
3.3 Distribution Expenses
LIFE COMPANY will bear the expenses of distribution. These
expenses would include by way of illustration, but are not limited to, the costs
of distributing to Contract owners, annuitants, insureds or participants (as
appropriate) under the Contracts (collectively, "Participants") the following
documents, whether they relate to the Account or the Fund: prospectuses,
statements of additional information, proxy materials and periodic reports.
These costs would also include the costs of preparing, printing, and
distributing sales literature and advertising relating to the Portfolios (all of
which require the prior written consent of the Fund) to the extent such
materials are distributed in connection with the Contracts, as well as filing
such materials with, and obtaining approval from, the SEC, NASD, any state
insurance regulatory authority, and any other appropriate regulatory authority,
to the extent required by law.
3.4 Other Expenses
(a) The Fund will bear, or arrange for others to bear, the
costs of preparing, filing with the SEC and setting for printing the Fund's
prospectus, statement of additional information and any amendments or
supplements thereto (collectively, the "Fund Prospectus"), periodic reports to
shareholders, the Fund proxy material and other shareholder communications to
the extent required by law or as deemed appropriate by the Fund.
(b) LIFE COMPANY will bear the costs of preparing, filing with
the SEC and printing each Account's prospectus, statement of additional
information and any amendments or supplements thereto (collectively, the
"Account Prospectus"), any periodic reports to Participants, voting instruction
solicitation material and the Fund prospectus, and other Participant
communications to the extent required by law or as deemed appropriate by LIFE
COMPANY.
(c) LIFE COMPANY will, to the extent required by law, print in
quantity and deliver to existing Participants the documents described in Section
3.4(b) above and will deliver to such Participants the prospectuses as provided
by the Fund. LIFE COMPANY may elect to receive such prospectuses in camera ready
or computer diskette format. The Fund will print the Fund statement of
additional information, proxy materials relating to the Fund and periodic
reports of the Fund.
3.5 Parties To Cooperate
Each party agrees to cooperate with the other, in arranging to
print, mail and/or deliver, in a timely manner, combined or coordinated
prospectuses or other materials of the Fund and the Accounts.
Section 4. Legal Compliance
4.1 Tax Laws
(a) The Fund represents and warrants that it will elect to be
qualified as a regulated investment company ("RIC") under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), and represents that it
will qualify and maintain its qualification as a RIC and to comply with the
diversification requirements set forth in Section 817(h) of the Code and the
regulations thereunder. The Fund will notify LIFE COMPANY immediately upon
having a reasonable basis for believing that it has ceased to so qualify or so
comply, or that it might not so qualify or so comply in the future.
(b) LIFE COMPANY represents and warrants that the Contracts
currently are and will be treated as annuity contracts or life insurance
contracts under applicable provisions of the Code and that it will maintain such
treatment; LIFE COMPANY will notify the Fund immediately upon having a
reasonable basis for believing that any of the Contracts have ceased to be so
treated or that they might not be so treated in the future.
(c) LIFE COMPANY represents and warrants that each Account is
a "segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable contract,"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. LIFE COMPANY will continue to meet such definitional
requirements, and it will notify the Fund immediately upon having a reasonable
basis for believing that such requirements have ceased to be met or that they
might not be met in the future.
4.2 Insurance and Certain Other Laws
(a) LIFE COMPANY represents and warrants that (i) it is an
insurance company duly organized, validly existing and in good standing under
all applicable laws and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under all applicable laws and regulations,
and (iii) the Contracts comply in all material respects with all applicable
federal and state laws and regulations.
(b) The Fund represents and warrants that it is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Maryland and has full corporate power, authority, and legal right to
execute, deliver, and perform its duties and comply with its obligations under
this Agreement. Notwithstanding the foregoing, the Fund, makes no
representations as to whether any aspect of its operations (including, but not
limited to, fees and expenses and investment policies) otherwise complies with
the insurance laws or regulations of any state.
(c) The Adviser represents that it is and warrants that it
shall remain duly registered as an investment adviser under all applicable
federal and state securities laws and agrees that it shall perform its
obligations to the Fund in accordance in all material respects with such laws.
(d) LIFE COMPANY acknowledges and agrees that it is the
responsibility of LIFE COMPANY and other Participating Insurance Companies to
determine investment restrictions under state insurance law applicable to any
Portfolio, and that the Fund shall bear no responsibility to LIFE COMPANY, for
any such determination or the correctness of such determination. LIFE COMPANY
has determined that the investment restrictions set forth in the current Fund
Prospectus are sufficient to comply with all investment restrictions under state
insurance laws that are currently applicable to the Portfolios as a result of
the Accounts' investment therein. LIFE COMPANY shall inform the Fund of any
additional investment restrictions imposed by state insurance law after the date
of this agreement that may become applicable to the Fund or any Portfolio from
time to time as a result of the Accounts' investment therein. Upon receipt of
any such information from LIFE COMPANY or any other Participating Insurance
Company, the Fund shall determine whether it is in the best interests of
shareholders to comply with any such restrictions. If the Fund determines that
it is not in the best interests of shareholders to comply with a restriction
determined to be applicable by the LIFE COMPANY, the Fund shall so inform LIFE
COMPANY, and the Fund and LIFE COMPANY shall discuss alternative accommodations
in the circumstances.
4.3 Securities Laws
(a) LIFE COMPANY represents and warrants that (i) interests in
each Account pursuant to the Contracts will be registered under the 1933 Act to
the extent required by the 1933 Act, (ii) the Contracts will be duly authorized
for issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and
applicable state law, (iii) each Account is and will remain registered under the
1940 Act, to the extent required by the 1940 Act, (iv) each Account does and
will comply in all material respects with the requirements of the 1940 Act and
the rules thereunder, to the extent required, (v) each Account's 1933 Act
registration statement relating to the Contracts, together with any amendments
thereto, will at all times comply in all material respects with the requirements
of the 1933 Act and the rules thereunder, (vi) LIFE COMPANY will amend the
registration statement for its Contracts under the 1933 Act and for its Accounts
under the 1940 Act from time to time as required in order to effect the
continuous offering of its Contracts or as may otherwise be required by
applicable law, (vii) each Account Prospectus will at all times comply in all
material respects with the requirements of the 1933 Act and the rules
thereunder, (viii) all of its directors, officers, employees, investment
advisers, and other individuals/entities having access to the funds and/or
securities of any Portfolio are and continue to be at all times covered by a
blanket fidelity bond or similar coverage covering such risks and in such amount
as is customary for companies engaged in similar businesses in similar
industries. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
(b) The Fund represents and warrants that (i) Shares sold
pursuant to this Agreement will be registered under the 1933 Act to the extent
required by the 1933 Act and will be duly authorized for issuance and sold in
compliance with Maryland law, (ii) the Fund is and will remain registered under
the 1940 Act to the extent required by the 1940 Act, (iii) the Fund will amend
the registration statement under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its Shares, (iv) the
Fund does and will comply in all material respects with the requirements of the
1940 Act and the rules thereunder, (v) the Fund's 1933 Act registration
statement, together with any amendments thereto, will at all times comply in all
material respects with the requirements of the 1933 Act and rules thereunder,
(vi) the Fund's Prospectus will at all times comply in all material respects
with the requirements of the 1933 Act and the rules thereunder and (vii) all of
its directors, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of any
Portfolio are and continue to be at all times covered by a blanket fidelity bond
or similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid bond
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company.
(c) The Fund will at its expense register and qualify its
Shares for sale in accordance with the laws of any state or other jurisdiction
if and to the extent reasonably deemed advisable by the Fund.
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) The Fund will immediately notify LIFE COMPANY of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to the Fund's registration statement
under the 1933 Act or the Fund Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or the Fund Prospectus that may affect
the offering of Shares of any Portfolio, (iii) the initiation of any proceedings
for that purpose or for any other purpose relating to the registration or
offering of Shares of any Portfolio, or (iv) any other action or circumstances
that may prevent the lawful offer or sale of Shares of any Portfolio in any
state or jurisdiction, including, without limitation, any circumstances in which
such Shares are not registered and are not, in all material respects, issued and
sold in accordance with applicable state and federal law. The Fund will make
every reasonable effort to prevent the issuance of any such stop order, cease
and desist order or similar order and, if any such order is issued, to obtain
the lifting thereof at the earliest possible time.
(b) LIFE COMPANY will immediately notify the Fund of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to each Account's registration
statement under the 1933 Act relating to the Contracts or each Account
Prospectus, (ii) any request by the SEC for any amendment to such registration
statement or Account Prospectus that may affect the offering of Shares of any
Portfolio, (iii) the initiation of any proceedings for that purpose or for any
other purpose relating to the registration or offering of each Account's
interests pursuant to the Contracts, or (iv) any other action or circumstances
that may prevent the lawful offer or sale of said interests in any state or
jurisdiction, including, without limitation, any circumstances in which said
interests are not registered and are not, in all material respects, issued and
sold in accordance with applicable state and federal law. LIFE COMPANY will make
every reasonable effort to prevent the issuance of any such stop order, cease
and desist order or similar order and, if any such order is issued, to obtain
the lifting thereof at the earliest possible time.
4.5 Documents Provided by LIFE COMPANY
(a) LIFE COMPANY will provide to the Fund or its designated
agent at least one (1) complete copy of all SEC registration statements, Account
Prospectuses, reports, any preliminary and final voting instruction solicitation
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) LIFE COMPANY will provide to the Fund or its designated
agent at least one (1) complete copy of each piece of sales literature or other
promotional material in which any Portfolio, the Fund or any of its affiliates
is named, at least ten (10) Business Days prior to its use or such shorter
period as the Parties hereto may, from time to time, agree upon. No such
material shall be used if the Fund or its designated agent objects to such use
within ten (10) Business Days after receipt of such material or such shorter
period as the Parties hereto may, from time to time, agree upon.
(c) Neither LIFE COMPANY nor any of its affiliates, will give
any information or make any representations or statements on behalf of or
concerning any Portfolio, the Fund or its affiliates in connection with the sale
of the Contracts other than (i) the information or representations contained in
the then current registration statement, including the Fund Prospectus contained
therein, relating to Shares, as such registration statement and the Fund
Prospectus may be amended from time to time; (ii) in reports or proxy materials
for the Fund; (iii) in published reports for the Fund that are in the public
domain and approved by the Fund for distribution by LIFE COMPANY; or (iv) in
sales literature or other promotional material approved by the Fund for use by
LIFE COMPANY, except with the express written permission of the Fund.
(d) LIFE COMPANY shall adopt and implement procedures
reasonably designed to ensure that information concerning the Fund and its
affiliates that is intended for use only by brokers or agents selling the
Contracts (i.e., information that is not intended for distribution to
Participants) ("broker only materials") is so used, and neither the Fund nor any
of its affiliates shall be liable for any losses, damages or expenses relating
to the improper use of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales
literature or other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public media
(e.g., on-line networks such as the Internet or other electronic messages)),
sales literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 Documents Provided by Fund; Information About LIFE COMPANY.
(a) The Fund will provide to LIFE COMPANY at least one (1)
complete copy of all SEC registration statements, Fund Prospectuses, reports,
any preliminary and final proxy material, applications for exemptions, requests
for no-action letters, and all amendments to any of the above, that relate to
the Fund or the Shares of a Portfolio, contemporaneously with the filing of such
document with the SEC or other regulatory authorities.
(b) The Fund will provide to LIFE COMPANY copies of all Fund
prospectuses, and printed copies of all statements of additional information,
proxy materials, periodic reports to shareholders and other materials required
by law to be sent to Participants who have allocated any Contract value to a
Portfolio. The Fund will provide such copies to LIFE COMPANY in a timely manner
so as to enable LIFE COMPANY to print and distribute such materials within the
time required by law to be furnished to Participants.
(c) The Fund will provide to LIFE COMPANY or its designated
agent at least one (1) complete copy of each piece of sales literature or other
promotional material in which LIFE COMPANY, or any of its respective affiliates
is named, or that refers to the Contracts, at least ten (10) Business Days prior
to its use or such shorter period as the Parties hereto may, from time to time,
agree upon. No such material shall be used if LIFE COMPANY or its designated
agent reasonably objects to such use within ten (10) Business Days after receipt
of such material or such shorter period as the Parties hereto may, from time to
time, agree upon.
(d) Neither the Fund nor any of its affiliates will give any
information or make any representations or statements on behalf of or concerning
LIFE COMPANY, each Account, or the Contracts other than (i) the information or
representations contained in the registration statement, including each Account
Prospectus contained therein, relating to the Contracts, as such registration
statement and Account Prospectus may be amended from time to time; (ii) in
published reports for the Account or the Contracts that are in the public domain
and approved by LIFE COMPANY for distribution; or (iii) in sales literature or
other promotional material approved by LIFE COMPANY or its affiliates, except
with the express written permission of LIFE COMPANY.
(e) The Fund shall cause its principal underwriter to adopt
and implement procedures reasonably designed to ensure that information
concerning LIFE COMPANY, and its respective affiliates that is intended for use
only by brokers or agents selling the Contracts (i.e., information that is not
intended for distribution to Participants) ("broker only materials") is so used,
and neither LIFE COMPANY, nor any of its respective affiliates shall be liable
for any losses, damages or expenses relating to the improper use of such broker
only materials.
(f) For purposes of this Section 4.6, the phrase "sales
literature or other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public media
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, prospectuses,
statements of additional information, shareholder reports, and proxy materials
and any other material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 1940 Act.
Section 5. Mixed and Shared Funding
LIFE COMPANY acknowledges that the Fund has filed an
application with the SEC to request an order granting relief from various
provisions of the 1940 Act and the rules thereunder to the extent necessary to
permit Fund shares to be sold to and held by variable annuity and variable life
insurance separate accounts of both affiliated and unaffiliated Participating
Insurance Companies, as well as by Plans. Any conditions or undertakings that
may be imposed on LIFE COMPANY and the Fund by virtue of such order shall be
incorporated herein by reference, as of the date such order is granted, as
though set forth herein in full, and the parties to this Agreement shall comply
with such conditions and undertakings to the extent applicable to each such
party.
Section 6. Termination
6.1 Events of Termination
Subject to Section 6.4 below, this Agreement will terminate as
to a Portfolio:
(a) at the option of any party, with or without cause, upon one (1)
year advance written notice to the other parties; or
(b) at the option of LIFE Company if shares of a Portfolio are not
reasonably available to meet the requirements of the Contracts as
determined by LIFE COMPANY provided, however, that such a termination shall
apply only to the Portfolio(s) not available. Prompt written notice of the
election to terminate for such cause shall be furnished by LIFE COMPANY to
the Fund;
(c) at the option of the Fund upon institution of formal processing
against LIFE COMPANY or its affiliates by the NASD, the SEC, any state
insurance regulator or any other regulatory body regarding LIFE COMPANY's
obligations under this Agreement or related to the sale of the Contracts,
the operation of each Account, or the purchase of Shares, if, in each case,
the Fund reasonably determines that such proceedings, or the facts on which
such proceedings would be based, have a material likelihood of imposing
material adverse consequences on the Portfolio with respect to which the
Agreement is to be terminated; or
(d) at the option of LIFE COMPANY upon institution of formal
proceedings against the Fund, its principal underwriter, or its investment
adviser by the NASD, the SEC, or any state insurance regulator or any other
regulatory body regarding the Fund's obligations under this Agreement or
related to the operation or management of the applicable Portfolio or the
purchase of the applicable Portfolios, if, in each case, LIFE COMPANY
reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on LIFE COMPANY, or the Subaccount corresponding to
the Portfolio with respect to which the Agreement is to be terminated; or
(e) at the option of any party in the event that (i) a Portfolio's
Shares are not registered and, in all material respects, issued and sold in
accordance with any applicable federal or state law, or (ii) such law
precludes the use of such Shares as an underlying investment medium of the
Contracts issued or to be issued by LIFE COMPANY; or
(f) at the option of LIFE COMPANY if the applicable Portfolio ceases
to qualify as a RIC under Subchapter M of the Code or under successor or
similar provisions or fails to comply with the diversification requirements
of Section 817(h) of the Code or such requirements under successor or
similar provisions or if Life Company reasonably believes the applicable
Portfolio may so cease to qualify or comply and, in each case, the Fund
upon written request fails to provide reasonable assurance that it will
take action to cure or correct such failure; or
(g) at the option of the Fund if the Contracts issued by LIFE COMPANY
cease to qualify as annuity contracts or life insurance contracts under the
Code or if Fund reasonably believes the applicable Contracts may so cease
to qualify, or if interests in an Account under the Contracts are not
registered, where required, and, in all material respects, are not issued
or sold in accordance with any applicable federal or state law and, in each
case, LIFE COMPANY upon written request fails to provide reasonable
assurance that it will take action to cure or correct such failure; or
(h) at the option of the Fund by written notice to LIFE COMPANY, if
the Fund shall determine in its sole judgment exercised in good faith, that
LIFE COMPANY and/or its affiliated companies has suffered a material
adverse change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject of material
adverse publicity; or
(i) at the option of LIFE COMPANY by written notice to the Fund, if
LIFE COMPANY shall determine in its sole judgment exercised in good faith,
that the Fund and/or its affiliated companies has suffered a material
adverse change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject of material
adverse publicity; or
(j) at the option of LIFE COMPANY by written notice to the Fund, if
LIFE COMPANY shall determine in its sole judgment exercised in good faith,
that the Adviser and/or its affiliated companies has suffered a material
adverse change in its business operations, financial condition or prospects
since the date of this Agreement or is the subject of material adverse
publicity; or
(k) at the option of either party upon a determination by a majority
of the Fund's Board of Directors, or a majority of the Fund's disinterested
directors, that an irreconcilable material conflict exists among the
interests of: (1) all contract owners of variable insurance products of all
separate accounts; or (2) the interests of the Participating Insurance
Companies investing in the Fund; or
(l) at the option of any party upon another party's material breach of
any provision of this Agreement; or
(m) with respect to any Account, upon requisite vote of the Contract
owners having an interest in that Account (or any subaccount) or upon the
receipt of a substitution order by the SEC to substitute the shares of
another investment company for the corresponding Fund shares in accordance
with the terms of the Contracts for which those Fund shares had been
selected to serve as the underlying investment media. LIFE COMPANY will
give at least 30 days' prior written notice to the Fund of the date of any
proposed vote to replace the Fund's shares; or
(n) at the option of the Fund if it suspends or terminates the
offering of Shares of the applicable Portfolio to all Participating
Insurance Companies or only designated Participating Insurance Companies,
if such action is required by law or by regulatory authorities having
jurisdiction or if, in the sole discretion of the Fund acting in good
faith, suspension or termination is necessary in the best interests of the
shareholders of the applicable Portfolio (it being understood that
"shareholders" for this purpose shall mean Participants), such notice
effective immediately upon receipt of written notice, it being understood
that a lack Participating Insurance Companies interest in the applicable
Portfolio may be grounds for a suspension or termination as to such
Portfolio.
6.2 Notice Requirement for Termination
No termination of this Agreement will be effective unless and
until the party terminating this Agreement gives prior written notice to the
other party to this Agreement of its intent to terminate, and such notice shall
set forth the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the
provisions of Section 6.1(a) hereof, such prior written notice shall be given at
least one (1) year in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the
provisions of Section 6.1(b), 6.1(c), 6.1(d), 6.1(e), 6.1(f), 6.1(g), 6.1(h),
6.1(i), 6.1(j), 6.1(k), 6.1(l), 6.1(m), or 6.1(n) hereof, such prior written
notice shall be given at least 30 days in advance of the effective date of
termination unless a shorter time is agreed to by the Parties hereto; and
6.3 Fund To Remain Available
Notwithstanding any termination of this Agreement, the Fund
will, at the option of LIFE COMPANY, continue to make available additional
shares of a Portfolio pursuant to the terms and conditions of this Agreement,
for all Contracts in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, the owners of the Existing Contracts will be permitted to
reallocate investments in Portfolios of the Fund (as in effect on such date),
redeem investments in Portfolios of the Fund and/or invest in Portfolios of the
Fund upon the making of additional purchase payments under the Existing
Contracts. Notwithstanding any termination of this Agreement, LIFE COMPANY
agrees to distribute to holders of Existing Contracts all materials required by
law to be distributed to such holders (including, without limitation,
prospectuses, statements of additional information, proxy materials and periodic
reports). The parties agree that this Section 6.3 will not apply to any
terminations under the conditions of the Order and the effect of such
terminations will be governed by the Order.
6.4 Survival of Warranties and Indemnifications
All warranties and indemnifications will survive the
termination of this Agreement.
Section 7. Parties To Cooperate Respecting Termination
Subject to the provisions of Section 6.3 hereof, the Parties
hereto agree to cooperate and give reasonable assistance to one another in
taking all necessary and appropriate steps for the purpose of ensuring that an
Account owns no Shares of the applicable Portfolio after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Portfolio, or otherwise
terminating participation by the Contracts in such Portfolio.
Section 8. Assignment
This Agreement may not be assigned by any party, except with
the prior written consent of all the Parties.
Section 9. Notices
Notices and communications required or permitted by Section 9
hereof will be given by means mutually acceptable to the Parties concerned. Each
other notice or communication required or permitted by this Agreement will be
given to the following persons at the following addresses and facsimile numbers,
or such other persons, addresses or facsimile numbers as the party receiving
such notices or communications may subsequently direct in writing:
<PAGE>
[Name of LIFE COMPANY]
Street Address
City, State Zip Code
Facsimile:
Attn.:
Salomon Brothers Variable Series Inc.
7 World Trade Center
New York, New York 10048
Facsimile: (212) 783-3357
Attn.: Mitch Schulman
Section 10. Voting Procedures
Subject to the cost allocation procedures set forth in Section
3 hereof, LIFE COMPANY will distribute all proxy material furnished by the Fund
to Participants to whom pass-through voting privileges are required to be
extended and will solicit voting instructions from Participants. LIFE COMPANY
will vote Shares in accordance with timely instructions received from
Participants. LIFE COMPANY will vote Shares that are (a) not attributable to
Participants to whom pass-through voting privileges are extended, or (b)
attributable to Participants, but for which no timely instructions have been
received, in the same proportion as Shares for which said instructions have been
received from Participants, so long as and to the extent that the SEC continues
to interpret the 1940 Act to require pass through voting privileges for
Participants. Neither LIFE COMPANY nor any of its affiliates will in any way
recommend action in connection with or oppose or interfere with the solicitation
of proxies for the Shares held for such Participants. LIFE COMPANY reserves the
right to vote shares held in any Account in its own right, to the extent
permitted by law. LIFE COMPANY shall be responsible for assuring that each of
its Accounts holding Shares calculates voting privileges in the manner required
by the Order obtained by the Fund. The Fund will notify LIFE COMPANY of any
amendments to the Order it has obtained.
Section 11. Indemnification
11.1 Of the Fund by LIFE COMPANY
(a) Except to the extent provided in Sections 11.1(b) and
11.1(c), below, LIFE COMPANY agrees to indemnify and hold harmless the Fund, its
affiliates, and each person, if any, who controls the Fund or its affiliates
within the meaning of Section 15 of the 1933 Act and each of their respective
directors and officers (collectively, the "Indemnified Parties" for purposes of
this Section 11.1) against any and all losses, claims, damages, costs, expenses,
liabilities (including amounts paid in settlement with the written consent of
LIFE COMPANY)or actions in respect thereof (including, to the extent reasonable,
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise insofar as such
losses, claims, damages, costs, expenses, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's 1933 Act
registration statement, any Account Prospectus, the Contracts, or sales
literature or advertising for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with written
information furnished to LIFE COMPANY by or on behalf of the Fund for use
in any Account's 1933 Act registration statement, any Account Prospectus,
the Contracts, or sales literature or advertising (or any amendment or
supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained in the
Fund's 1933 Act registration statement, the Fund Prospectus, sales
literature or advertising of the Fund, or any amendment or supplement to
any of the foregoing, not supplied for use therein by or on behalf of LIFE
COMPANY, or its affiliates and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent conduct of LIFE COMPANY, or
its respective affiliates or persons under their control (including,
without limitation, their employees and "Associated Persons," as that term
is defined in paragraph (m) of Article I of the NASD's By-Laws) or subject
to its authorization, including without limitation, broker-dealers or
agents authorized to sell the Contracts, in connection with the sale,
marketing or distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Fund's 1933 Act
registration statement, the Fund Prospectus, sales literature or
advertising of the Fund, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was made in reliance
upon and in conformity with information furnished to the Fund or its
affiliates by or on behalf of LIFE COMPANY or its affiliates for use in the
Fund's 1933 Act registration statement, the Fund Prospectus, sales
literature or advertising of the Fund, or any amendment or supplement to
any of the foregoing; or
(iv) arise as a result of any failure by LIFE COMPANY or persons under
its control (or subject to its authorization) to perform the obligations,
provide the services and furnish the materials required under the terms of
this Agreement, or any material breach of any representation and/or
warranty made by LIFE COMPANY in this Agreement or arise out of or result
from any other material breach of this Agreement by LIFE COMPANY or persons
under its control (or subject to its authorization); or
(v) arise as a result of failure to transmit a request for purchase or
redemption of Shares or payment therefor within the time period specified
herein and otherwise in accordance with the procedures set forth in this
Agreement; or
(vi) arise as a result of any unauthorized use of the trade names of
the Fund to the extent such use is not required by applicable law or
regulation.
(b) This indemnification is in addition to any liability that
LIFE COMPANY may otherwise have. LIFE COMPANY shall not be liable under this
Section 11.1 with respect to any losses, claims, damages, costs, expenses,
liabilities or actions to which an Indemnified Party would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance by that Indemnified Party of its duties or by reason of that
Indemnified Party's reckless disregard of obligations or duties (i) under this
Agreement, or (ii) to the Fund.
(c) LIFE COMPANY shall not be liable under this Section 11.1
with respect to any action against an Indemnified Party unless the Fund shall
have notified LIFE COMPANY in writing promptly after the summons or other first
legal process giving information of the nature of the action shall have been
served upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but LIFE COMPANY shall
be relieved of liability under this Section 11.1 only to the extent the
indemnifying party is damaged solely by reason of such party's failure to so
notify and failure to notify LIFE COMPANY of any such action shall not relieve
LIFE COMPANY from any liability which they may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
11.1. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, LIFE COMPANY shall be entitled to participate, at
its own expense, in the defense of such action and also shall be entitled to
assume the defense thereof, with counsel approved by the Indemnified Party named
in the action, which approval shall not be unreasonably withheld. After notice
from LIFE COMPANY to such Indemnified Party of LIFE COMPANY's election to assume
the defense thereof, the Indemnified Party will cooperate fully with LIFE
COMPANY and shall bear the fees and expenses of any additional counsel retained
by it, and LIFE COMPANY will not be liable to such Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such
Indemnified Party independently in connection with the defense thereof, other
than reasonable costs of investigation.
11.2 Of LIFE COMPANY by the Fund
(a) Except to the extent provided in Sections 11.2(b), 11.2(c)
and 11.2(d), below, the Fund agrees to indemnify and hold harmless LIFE COMPANY,
its affiliates, and each person, if any, who controls LIFE COMPANY or its
affiliates within the meaning of Section 15 of the 1933 Act and each of their
respective directors and officers (collectively, the "Indemnified Parties" for
purposes of this Section 11.2) against any and all losses, claims, damages,
costs, expenses, liabilities (including amounts paid in settlement with the
written consent of the Fund) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses), to which the Indemnified Parties
may become subject under any statute, regulation, at common law, or otherwise;
insofar as such losses, claims, damages, costs, expenses, liabilities or
actions:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Fund's 1933 Act
registration statement, Prospectus or sales literature or advertising 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 to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and in conformity with written information furnished to the Fund or its
affiliates by or on behalf of LIFE COMPANY or its affiliates for use in the
Fund's 1933 Act registration statement, the Fund Prospectus, or in sales
literature or advertising or otherwise for use in connection with the sale
of Contracts or Shares (or any amendment or supplement to any of the
foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained in any
Account's 1933 Act registration statement, any Account Prospectus, sales
literature or advertising for the Contracts, or any amendment or supplement
to any of the foregoing, not supplied for use therein by or on behalf of
the Fund or its affiliates and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent conduct of the Fund or its
affiliates or persons under its control (including, without limitation,
their employees and "Associated Persons" as that Term is defined in Section
(n) of Article 1 of the NASD By-Laws), in connection with the sale,
marketing or distribution of Fund Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's 1933 Act
registration statement, any Account Prospectus, sales literature or
advertising covering the Contracts, or any amendment or supplement to any
of the foregoing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission was made
in reliance upon and in conformity with written information furnished to
LIFE COMPANY, or its affiliates by or on behalf of the Fund for use in any
Account's 1933 Act registration statement, any Account Prospectus, sales
literature or advertising covering the Contracts, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by the Fund to perform the
obligations, provide the services and furnish the materials required of it
under the terms of this Agreement, including, without limitation, any
failure of the Fund or its designated agent to inform LIFE COMPANY of the
correct net asset values per share for each Portfolio on a timely basis
sufficient to ensure the timely execution of all purchase and redemption
orders at the correct net asset value per share, or 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.
(b) This indemnification is in addition to any liability that
the Fund may otherwise have. The Fund shall not be liable under this Section
11.2 with respect to any losses, claims, damages, costs, expenses, liabilities
or actions to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of such Indemnified Party's
reckless disregard of its obligations and duties (i) under this Agreement, or
(ii) to LIFE COMPANY, each Account or Participants.
(c) The Fund shall not be liable under this Section 11.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified the Fund in writing promptly after the summons or other
first legal process giving information of the nature of the action shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but the Fund
shall be relieved of liability under this Section 11.2 only to the extent the
indemnifying party is damaged solely by reason of such party's failure to so
notify and failure to notify the Fund of any such action 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 Section 11.2. Except as
otherwise provided herein, in case any such action is brought against an
Indemnified Party, the Fund will be entitled to participate, at its own expense,
in the defense of such action and also shall be entitled to assume the defense
thereof (which shall include, without limitation, the conduct of any ruling
request and closing agreement or other settlement proceeding with the IRS), with
counsel approved by the Indemnified Party named in the action, which approval
shall not be unreasonably withheld. After notice from the Fund to such
Indemnified Party of the Fund's election to assume the defense thereof, the
Indemnified Party will cooperate fully with the Fund and shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof, other than reasonable costs of
investigation.
11.3 Of LIFE COMPANY by the Adviser
(a) Except to the extent provided in Sections 11.3(b), 11.3(c)
and 1.3(d), below, the Adviser agrees to indemnify and hold harmless LIFE
COMPANY, its affiliates, and each person, if any, who controls LIFE COMPANY or
its affiliates within the meaning of Section 15 of the 1933 Act and each of
their respective directors and officers (collectively, the "Indemnified Parties"
for purposes of this Section 11.2) against any and all losses, claims, damages,
costs, expenses, liabilities (including amounts paid in settlement with the
written consent of the Fund) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses), to which the Indemnified Parties
may become subject under any statute, regulation, at common law, or otherwise;
insofar as such losses, claims, damages, costs, expenses, liabilities or
actions:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Fund's 1933 Act
registration statement, Prospectus or sales literature or advertising 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 to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and in conformity with written information furnished to the Adviser, the
Fund or their affiliates by or on behalf of LIFE COMPANY or its affiliates
for use in the Fund's 1933 Act registration statement, the Fund Prospectus,
or in sales literature or advertising or otherwise for use in connection
with the sale of Contracts or Shares (or any amendment or supplement to any
of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained in any
Account's 1933 Act registration statement, any Account Prospectus, sales
literature or advertising for the Contracts, or any amendment or supplement
to any of the foregoing, not supplied for use therein by or on behalf of
the Adviser, the Fund or their affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent conduct of the
Adviser, the Fund or their affiliates or persons under their control
(including, without limitation, their employees and "Associated Persons" as
that Term is defined in Section (n) of Article 1 of the NASD By-Laws), in
connection with the sale, marketing or distribution of Fund Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's 1933 Act
registration statement, any Account Prospectus, sales literature or
advertising covering the Contracts, or any amendment or supplement to any
of the foregoing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission was made
in reliance upon and in conformity with written information furnished to
LIFE COMPANY, or its affiliates by or on behalf of the Adviser or the Fund
for use in any Account's 1933 Act registration statement, any Account
Prospectus, sales literature or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by the Adviser or the Fund to
perform the obligations, provide the services and furnish the materials
required of it under the terms of this Agreement, including, without
limitation, any failure of the Fund or its designated agent to inform LIFE
COMPANY of the correct net asset values per share for each Portfolio on a
timely basis sufficient to ensure the timely execution of all purchase and
redemption orders at the correct net asset value per share, or any material
breach of any representation and/or warranty made by the Adviser or the
Fund in this Agreement or arise out of or result from any other material
breach of this Agreement by the Adviser.
(b) This indemnification is in addition to any liability that
the Adviser may otherwise have. The Adviser shall not be liable under this
Section 11.3 with respect to any losses, claims, damages, costs, expenses,
liabilities or actions to which an Indemnified Party would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance by that Indemnified Party of its duties or by reason of such
Indemnified Party's reckless disregard of its obligations and duties (i) under
this Agreement, or (ii) to LIFE COMPANY, each Account or Participants.
(c) The Adviser shall not be liable under this Section 11.3
with respect to any action against an Indemnified Party unless the Indemnified
Party shall have notified the Adviser in writing promptly after the summons or
other first legal process giving information of the nature of the action shall
have been served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent), but the
Adviser shall be relieved of liability under this Section 11.3 only to the
extent the indemnifying party is damaged solely by reason of such party's
failure to so notify and failure to notify the Adviser of any such action shall
not relieve the Adviser from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
Section 11.3. Except as otherwise provided herein, in case any such action is
brought against an Indemnified Party, the Adviser will be entitled to
participate, at its own expense, in the defense of such action and also shall be
entitled to assume the defense thereof (which shall include, without limitation,
the conduct of any ruling request and closing agreement or other settlement
proceeding with the IRS), with counsel approved by the Indemnified Party named
in the action, which approval shall not be unreasonably withheld. After notice
from the Adviser to such Indemnified Party of the Adviser's election to assume
the defense thereof, the Indemnified Party will cooperate fully with the Fund
and shall bear the fees and expenses of any additional counsel retained by it,
and the Adviser will not be liable to such Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such
Indemnified Party independently in connection with the defense thereof, other
than reasonable costs of investigation.
11.4 Effect of Notice
Any notice given by the indemnifying party to an Indemnified
Party referred to in Sections 11.1(c), 11.2(c) or 11.3(c) above of participation
in or control of any action by the indemnifying party will in no event be deemed
to be an admission by the indemnifying party of liability, culpability or
responsibility, and the indemnifying party will remain free to contest liability
with respect to the claim among the Parties or otherwise.
11.5 Successors
A successor by law of any party shall be entitled to the
benefits of the indemnification contained in this Section 11.
11.6 Obligations of the Fund.
All persons dealing with the Fund must look solely to the
property of the applicable Portfolio 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.
Section 12. Applicable Law
(a) This Agreement will be construed and the provisions hereof
interpreted under and in accordance with New York law, without regard for that
state's principles of conflict of laws.
(b) This Agreement shall be subject to the provisions of the
1933 Act, 1934 and 1940 acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and regulations
as the SEC may grant (including, but not limited to, the Order) and the terms
hereof shall be interpreted and construed in accordance therewith.
Section 13. Execution in Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together with constitute one and the same
instrument.
Section 14. Severability
If any provision of this Agreement is held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
will not be affected thereby.
Section 15. Rights Cumulative
The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, that the Parties are entitled to under federal
and state laws.
Section 16. Headings
The Table of Contents and headings used in this Agreement are
for purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
Section 17. Confidentiality
Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of customers of the other party and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not, without the express written consent of the affected
party, disclose, disseminate or utilize such names and addresses and other
confidential information until such time as it may come into the public domain.
Section 18. Trademarks and Fund Names
(a) Salomon Brothers Asset Management Inc, the adviser to the
Fund and its affiliates, own all right, title and interest in and to the names,
trademarks and service marks "Salomon" and "Salomon Brothers" and such other
tradenames, trademarks and service marks as may be identified to LIFE COMPANY
from time to time (the "Salomon licensed marks"). Upon termination of this
Agreement LIFE COMPANY and its affiliates shall cease to use the Salomon
licensed marks, except to the extent required by law or regulation.
(b) Name of LIFE COMPANY and its affiliates, own all right,
title and interest in and to the names, trademarks and service marks
"__________" and such other tradenames, trademarks and service marks as may be
identified to the Adviser and/or the Fund from time to time (the "__________"
licensed marks). Upon termination of this Agreement the Fund, the Adviser and
their affiliates shall cease to use the __________ licensed marks, except to the
extent required by law or regulation.
Section 19. Parties to Cooperate
Each party to this Agreement will cooperate with each other
party and all appropriate governmental authorities (including, without
limitation, the SEC, the NASD and state insurance regulators) and will permit
each other and such authorities reasonable access to its books and records
(including copies thereof) in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
IN WITNESS WHEREOF, the Parties have caused this Agreement to
be executed in their names and on their behalf by and through their duly
authorized officers signing below.
SALOMON BROTHERS VARIABLE SERIES FUNDS INC
Attest: __________________ By: ________________________
Name: __________________ Name: ________________________
Title: __________________ Title:________________________
SALOMON BROTHERS ASSET
MANAGEMENT INC
Attest: __________________ By: ________________________
Name: __________________ Name: ________________________
Title: __________________ Title:________________________
[Name OF LIFE COMPANY]
on behalf of itself and its separate accounts
Attest: __________________ By: ________________________
Name: __________________ Name: ________________________
Title: __________________ Title:________________________
SCHEDULE A
PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
SEPARATE ACCOUNTS UTILIZING THE FUNDS
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
PARTICIPATION AGREEMENT
BY AND AMONG
[Name of LIFE COMPANY]
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS
AND
SALOMON BROTHERS ASSET MANAGEMENT INC
AND
SALOMON BROTHERS VARIABLE SERIES FUNDS INC
Exhibit 8(e)
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the ___ day of ___________, 1999,
by and among _________________________ ("Insurer"), a life insurance company
organized under the laws of the State of ____________________,
__________________ a _____________ corporation ("Contract Distributor"), LAZARD
ASSET MANAGEMENT ("LAM"), a division of Lazard Freres & Co. LLC, a New York
limited liability company ("LF & Co."), and LAZARD RETIREMENT SERIES, INC.
("Fund"), a Maryland corporation (collectively, the "Parties").
ARTICLE I.
DEFINITIONS
The following terms used in this Agreement shall have the meanings set
out below:
1.1. "Act" shall mean the Investment Company Act of 1940, as amended.
1.2. "Board" shall mean the Fund's Board of Directors having the responsibility
for management and control of Fund.
1.3. "Business Day" shall mean any day for which Fund calculates net asset value
per share as described in a Portfolio Prospectus.
1.4. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.5. "Commission" shall mean the Securities and Exchange Commission.
1.6. "Contract" shall mean a variable annuity or variable life insurance
contract that uses a Portfolio or Fund as an underlying investment medium
and that is named on Schedule 1 hereto, as the Parties may amend in writing
from time to time by mutual agreement ("Schedule 1").
1.7. "Contract Prospectus" shall mean the prospectus and, if applicable,
statement of additional information, as currently in effect with the
Commission, with respect to the Contracts, including any supplements or
amendments thereto. All references to "Contract Prospectuses" shall be
deemed to also include all offering documents and other materials relating
to any Contract that is not registered under the Securities Act of 1933, as
amended ("1933 Act").
1.8. "Contractholder" shall mean any person that is a party to a Contract with a
Participating Company. Individuals who participate under a group Contract
are "Participants."
1.9. "Disinterested Board Members" shall mean those members of the Board that
are not deemed to be "interested persons" of Fund, as defined by the Act.
1.10. "General Account" shall mean the general account of Insurer.
1.11."Participating Company" shall mean any insurance company, including
Insurer, that offers variable annuity and/or variable life insurance
contracts to the public and that has entered into an agreement with Fund
for the purpose of making Fund shares available to serve as the underlying
investment medium for Contracts.
1.12. "Portfolio" shall mean each series of Fund named on Schedule 1.
1.13."Portfolio Prospectus" shall mean the prospectus and statement of
additional information, as currently in effect with the Commission, with
respect to the Portfolios, including any supplements or amendments thereto.
1.14."Separate Account" shall mean a separate account duly established by
Insurer in accordance with the laws of the State of ___________ and named
on Schedule 1.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1. Insurer represents and warrants that:
(a) it is an insurance company duly organized and in good standing under
____________ law;
(b) it has legally and validly established and shall maintain each Separate
Account pursuant to the insurance laws and regulations of the State of
___________;
(c) it has registered and shall maintain the registration of each Separate
Account as a unit investment trust under the Act, to the extent required by
the Act, to serve as a segregated investment account for the Contracts;
(d) each Separate Account is and at all times shall be eligible to invest in
shares of Fund without such investment disqualifying Fund as an investment
medium for insurance company separate accounts supporting variable annuity
contracts and/or variable life insurance contracts;
(e) each Separate Account is and at all times shall be a "segregated asset
account," and interests in each Separate Account that are offered to the
public shall be issued exclusively through the purchase of a Contract that
is and at all times shall be a "variable contract" within the meaning of
such terms under Section 817 of the Code and the regulations thereunder.
Insurer agrees to notify Fund and LAM immediately upon having a reasonable
basis for believing that such requirements have ceased to be met or that
they might not be met in the future;
(f) the Contracts are and at all times shall be treated as life insurance,
endowment or annuity contracts under applicable provisions of the Code, and
it shall notify Fund immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future; and
(g) all of its employees and agents who deal with the money and/or securities
of Fund are and at all times shall be covered by a blanket fidelity bond or
similar coverage in an amount not less than the coverage required to be
maintained by Fund. The aforesaid bond shall include coverage for larceny
and embezzlement and shall be issued by a reputable bonding company.
2.2. Insurer and Distributor represent and warrant that (a) units of interest in
each Separate Account available through the purchase of Contracts are registered
under the 1933 Act, to the extent required thereby; (b) the Contracts shall 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
material respects with state insurance law requirements. Insurer agrees to
inform Fund promptly of any investment restrictions imposed by state insurance
law and applicable to Fund.
2.3 Distributor represents and warrants that it is and at all times shall be:
(a) registered with the Commission as a broker-dealer, (b) a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD"); and
(c) a ___________ corporation duly organized, validly existing, and in good
standing under the laws of the State of _________________, with full power,
authority, and legal right to execute, deliver, and perform its duties and
comply with its obligations under this Agreement.
A. Fund represents and warrants that:
(a) it is and shall remain registered with the Commission as an open-end,
management investment company under the Act to the extent required thereby;
(b) its shares are registered under the 1933 Act to the extent required
thereby;
(c) it possesses, and shall maintain, all legal and regulatory licenses,
approvals, consents and/or exemptions required for it to operate and offer
its shares as an underlying investment medium for the Contracts;
(d) each Portfolio is qualified as a regulated investment company under
Subchapter M of the Code, it shall make every effort to maintain such
qualification, and it shall notify Insurer immediately upon having a
reasonable basis for believing that any Portfolio invested in by the
Separate Account has ceased to so qualify or that it might not so qualify
in the future;
(e) each Portfolio's assets shall be managed and invested in a manner that
complies with the requirements of Section 817(h) of the Code and the
regulations thereunder, to the extent applicable; and
(f) all of its directors, officers, employees, investment advisers, and other
individuals/entities who deal with the money and/or securities of Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of Fund in an amount not less than 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.
2.5 LAM represents and warrants that LF & Co., the principal underwriter of each
Portfolio's shares, that it is and at all times shall be: (a) registered with
the Commission as a broker-dealer, (b) a member in good standing of the NASD;
and (c) a New York limited liability company duly organized, validly existing,
and in good standing under the laws of the State of New York, with full power,
authority, and legal right to execute, deliver, and perform its duties and
comply with its obligations under this Agreement. LAM further represents and
warrants that it shall sell the shares of the Portfolios to Insurer in
compliance in all material respects with all applicable federal and state
securities laws.
ARTICLE III.
FUND SHARES
3.2. Fund agrees to make the shares of each Portfolio available for purchase by
Insurer and each Separate Account at net asset value and without sales charge,
subject to the terms and conditions of this Agreement. Fund may refuse to sell
the shares of any Portfolio to any person, or suspend or terminate the offering
of the shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Board, 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 Portfolio.
3.3. Fund agrees that it shall sell shares of the Portfolios only to persons
eligible to invest in the Portfolios in accordance with Section 817(h) of the
Code and the regulations thereunder, to the extent such Section and regulations
are applicable.
3.4. Except as noted in this Article III, Fund and Insurer agree that orders and
related payments to purchase and redeem Portfolio shares shall be processed in
the manner set out in Schedule 2 hereto, as the Parties may amend in writing
from time to time by mutual agreement.
3.11. Fund shall confirm each purchase or redemption order made by Insurer.
Transfer of Portfolio shares shall be by book entry only. No share certificates
shall be issued to Insurer. Shares ordered from Fund shall be recorded in an
appropriate title for Insurer, on behalf of each Separate or General Account.
3.13. Fund shall promptly notify Insurer of the amount of dividend and capital
gain, if any, per share of each Portfolio to which Insurer is entitled. Insurer
hereby elects to reinvest all dividends and capital gains of any Portfolio in
additional shares of that Portfolio at the applicable net asset value, until
Insurer otherwise notifies Fund in writing. Insurer reserves the right to revoke
this election and to receive all such income dividends and capital gain
distributions in cash.
ARTICLE IV.
STATEMENTS AND REPORTS
4.1. Fund shall provide Insurer with monthly statements of account by the
fifteenth (15th) Business Day of the following month.
4.2. At least annually, Fund or its designee shall provide Insurer, free of
charge, with as many Portfolio Prospectuses as Insurer may reasonably request
for distribution by Insurer to existing Contractholders and Participants that
have invested in that Portfolio. Fund or its designee shall provide Insurer, at
Insurer's expense, with as many Portfolio Prospectuses as Insurer may reasonably
request for distribution by Insurer to prospective purchasers of Contracts. If
requested by Insurer in lieu thereof, Fund or its designee shall provide such
documentation (including a "camera ready" copy of each Portfolio Prospectus as
set in type or, at the request of Insurer, as a diskette in the form sent to the
financial printer) and other assistance as is reasonably necessary in order for
the Parties once a year (or more frequently if the Portfolio Prospectuses are
supplemented or amended) to have the Contract Prospectuses and the Portfolio
Prospectuses printed together in one document.
4.3. Fund shall provide Insurer with copies of each Portfolio's proxy materials,
notices, periodic reports and other printed materials (which the Portfolio
customarily provides to its shareholders) in quantities as Insurer may
reasonably request for distribution by Insurer to each Contractholder and
Participant that has invested in that Portfolio.
4.4. Fund shall provide to Insurer at least one complete copy of all
registration statements, Portfolio 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 Fund or its shares, contemporaneously with the filing of such document
with the Commission or other regulatory authorities.
4.5. Insurer shall provide to Fund at least one copy of all registration
statements, Contract Prospectuses, reports, proxy statements, sales literature
and other promotional materials, applications for exemptions, requests for
no-action letters, and all amend-ments to any of the above, that relate to the
Contracts or a Separate Account, contemp-oraneously with the filing of such
document with the Commission or the NASD.
ARTICLE V.
EXPENSES
5.1. Except as otherwise specifically provided herein, each Party will bear all
expenses incident to its performance under this Agreement.
ARTICLE VI.
EXEMPTIVE RELIEF
6.1. Insurer acknowledges that it has reviewed a copy of Fund's mixed and shared
funding exemptive order ("Order") and, in particular, has reviewed the
conditions to the relief set forth in the related notice ("Notice"). As required
by the conditions set forth in the Notice, Insurer shall report any potential or
existing conflicts promptly to the Board. In addition, Insurer shall be
responsible for assisting the Board in carrying out its responsibilities under
the Order by providing the Board with all information necessary for the Board to
consider any issues raised, including, without limitation, information whenever
Contract voting instructions are disregarded. Insurer, at least annually, shall
submit to the Board such reports, materials, or data as the Board may reasonably
request so that the Board may carry out fully the obligations imposed upon it by
the Order. Insurer 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 Fund, the Board shall give prompt notice to all
Participating Companies. If the Board determines that Insurer is a Participating
Insurance Company for whom the conflict is relevant, Insurer 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 some or all Separate Accounts from Fund
or any Portfolio 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. variable annuity or
variable life insurance contract owners) that votes in favor of such
segregation; 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
Insurer to disregard Contractholder voting instructions and that decision
represents a minority position or would preclude a majority vote by all
Contractholders having an interest in Fund, Insurer may be required, at the
Board's election, to withdraw the investments of its Separate Accounts in Fund.
6.4. For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether any proposed action adequately remedies any
material irreconcilable conflict. In no event shall Fund or LAM or any other
investment adviser of Fund be required to bear the expense of establishing a new
funding medium for any Contract. Insurer 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 and adversely
affected by the material irreconcilable conflict.
6.5. No action by Insurer taken or omitted, and no action by the Separate
Account or Fund taken or omitted as a result of any act or failure to act by
Insurer pursuant to this Article VI shall relieve Insurer of its obligations
under or otherwise affect the operation of Article V.
ARTICLE VII.
VOTING OF FUND SHARES
7.1. Insurer shall provide pass-through voting privileges to all Contractholders
or Participants as long as the Commission continues to interpret the Act as
requiring pass-through voting privileges for Contractholders or Participants.
Accordingly, Insurer, where applicable, shall vote shares of a Portfolio held in
each Separate Account in a manner consistent with voting instructions timely
received from its Contractholders or Participants. Insurer shall be responsible
for assuring that the Separate Account calculates voting privileges in a manner
consistent with other Participating Companies. Insurer shall vote shares for
which it has not received timely voting instructions, as well as shares it owns,
in the same proportion as it votes those shares for which it has received voting
instructions.
7.2. If and to the extent Rule 6e-2 and Rule 6e-3(T) under the Act are amended,
or if Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the Act or the rules thereunder with respect to mixed and shared funding on
terms and conditions materially different from any exemptions granted in the
Order, then Fund, and/or the Participating Companies, as appropriate, shall take
such steps as may be necessary to comply with Rule 6e-2 and Rule 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such Rules are applicable.
ARTICLE VIII.
MARKETING
8.1. Fund or LF & Co. shall periodically furnish Insurer with Portfolio
Prospectuses and sales literature or other promotional materials for each
Portfolio, in quantities as Insurer may reasonably request for distribution to
prospective purchasers of Contract. Expenses for the printing and distribution
of such documents shall be borne by Insurer.
8.2. Insurer shall designate certain persons or entities that shall have the
requisite licenses to solicit applications for the sale of Contracts. Insurer
shall make reasonable efforts to market the Contracts and shall comply with all
applicable federal and state laws in connection therewith.
8.3. Insurer shall furnish, or shall cause to be furnished, to Fund, each piece
of sales literature or other promotional material in which Fund, LAM, LF & Co.,
Fund's administrator is named, at least fifteen (15) Business Days prior to its
use. No such material shall be used unless Fund or its designee approves such
material. Such approval (if given) must be in writing and shall be presumed not
given if not received within ten (10) Business Days after receipt of such
material. Fund shall use all reasonable efforts to respond within ten days of
receipt.
8.4. Insurer shall not give any information or make any representations or
statements on behalf of Fund, LAM, LF & Co., or concerning Fund or any Portfolio
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or a Portfolio
Prospectus, as the same may be amended or supplemented from time to time, or in
reports or proxy statements for each Portfolio, or in sales literature or other
promotional material approved by Fund.
8.5. Fund shall furnish, or shall cause to be furnished, to Insurer, each piece
of the Fund's sales literature or other promotional material in which Insurer or
a Separate Account is named, at least fifteen (15) Business Days prior to its
use. No such material shall be used unless Insurer approves such material. Such
approval (if given) must be in writing and shall be presumed not given if not
received within ten (10) Business Days after receipt of such material. Insurer
shall use all reasonable efforts to respond within ten days of receipt.
8.6. Fund shall not, in connection with the sale of Portfolio shares, give any
information or make any representations on behalf of Insurer or concerning
Insurer, a Separate Account, or the Contracts other than the information or
representations contained in a registration statement for the Contracts or the
Contract Prospectus, as the same may be amended or supplemented from time to
time, or in published reports for each Separate Account that are in the public
domain or approved by Insurer for distribution to Contractholders or
Participants, or in sales literature or other promotional material approved by
Insurer.
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, market letters, form letters, seminar texts, or reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, prospectuses, statements
of additional information, shareholder reports and proxy materials, and any
other material constituting sales literature or advertising under the rules of
the National Association of Securities Dealers, Inc. ("NASD"), the Act or the
1933 Act.
ARTICLE IX.
INDEMNIFICATION
9.1. Insurer and Distributor each agree to indemnify and hold harmless Fund,
LAM, any sub-investment adviser of a Portfolio, and their affiliates, and each
of their respective directors, trustees, general members, officers, employees,
agents and each person, if any, who controls or is associated with any of the
foregoing entities or persons within the meaning of the 1933 Act (collectively,
the "Indemnified Parties" for purposes of this Section), 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) (collectively, "Losses") for which the Indemnified Parties may
become subject, under the 1933 Act or otherwise, insofar as such Losses (or
actions in respect to thereof):
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact (collectively "materially untrue statement")
contained in any registration statement, Contract Prospectus, Contract, or sales
literature or other promotional material relating to a Separate Account or the
Contracts (collectively, "Account documents"), 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
(collectively "material omission");
(b) arise out of or are based upon any materially untrue statement or material
omission made in any registration statement, Portfolio Prospectus, or sales
literature or other promotional material relating to Fund or a Portfolio
(collectively, "Portfolio documents"), provided such statement or omission was
made in reliance upon and in conformity with information provided in writing to
Fund by or on behalf of Insurer specifically for use therein;
(c) arise out of or as a result of statements or representations (other than
statements or representations contained in any Portfolio document on which
Insurer or Distributor have reasonably relied) or wrongful conduct of Insurer,
Distributor, their respective agents, and persons under their respective
control, with respect to the sale and distribution of Contracts or Portfolio
shares;
(d) arise out of any material breach of any representation and/or warranty made
by Insurer or Distributor in this Agreement, or arise out of or result from any
other material breach of this Agreement by Insurer or Distributor; or
(e) arise out of Insurer's incorrect calculation and/or untimely reporting of
net purchase or redemption orders.
Insurer and Distributor shall reimburse any Indemnified Party in connection with
investigating or defending any Loss (or actions in respect to thereof);
provided, however, that with respect to clause (a) above neither Insurer nor
Distributor shall be liable in any such case to the extent that any Loss arises
out of or is based upon any materially untrue statement or material omission
made in any Account documents, which statement or omission was made in reliance
upon and in conformity with written information furnished to Insurer by or on
behalf of Fund specifically for use therein. This indemnity agreement shall be
in addition to any liability that Insurer or Distributor may otherwise have.
9.2. Fund and LAM each agree to indemnify and hold harmless Insurer and
Distributor and each of their respective directors, officers, employees, agents
and each person, if any, who controls Insurer or Distributor (collectively,
"Indemnified Parties" for purposes of this Section) within the meaning of the
1933 Act against any Losses to which they or any Indemnified Party may become
subject, under the 1933 Act or otherwise, insofar as such Losses (or actions in
respect thereof):
(a) arise out of or are based upon any materially untrue statement or any
material omission made in any Portfolio document;
(b) arise out of or are based upon any materially untrue statement or any
material omission made in any Account document, provided such statement or
omission was made in reliance upon and in conformity with information provided
in writing to Insurer by or on behalf of Fund specifically for use therein;
(c) arise out of or as a result of statements or representations (other than
statements or representations contained in any Account document on which Fund or
LAM have reasonably relied) or wrongful conduct of Fund, LAM, their respective
agents, and persons under their respective control, with respect to the sale of
Portfolio Shares; or
(d) arise out of any material breach of any representation and/or warranty made
by Fund or LAM in this Agreement, or arise out of or result from any other
material breach of this Agreement by Fund or LAM.
Fund and LAM shall reimburse any legal or other expenses reasonably incurred by
any Indemnified Party in connection with investigating or defending any such
Loss; provided, however, that with respect to clause (a) above neither Fund nor
LAM shall be liable in any such case to the extent that any such Loss arises out
of or is based upon an materially untrue statement or material omission made in
any Portfolio document, which statement or omission was made in reliance upon
and in conformity with written information furnished to Fund by or on behalf of
Insurer specifically for use therein. This indemnity agreement shall be in
addition to any liability that Fund or LAM may otherwise have.
9.3. Fund and LAM shall indemnify and hold Insurer harmless against any Loss
that Insurer may incur, suffer or be required to pay due to Fund's incorrect
calculation of the daily net asset value, dividend rate or capital gain
distribution rate of a Portfolio or incorrect or untimely reporting of the same;
provided, however, that Fund shall have no obligation to indemnify and hold
harmless Insurer if the incorrect calculation or incorrect or untimely reporting
was the result of incorrect or untimely information furnished by or on behalf of
Insurer or otherwise as a result of or relating to Insurer's breach of this
Agreement. In no event shall Fund be liable for any consequential, incidental,
special or indirect damages resulting to Insurer hereunder.
Notwithstanding anything herein to the contrary, in no event shall Fund or LAM
be liable to any individual or entity, including without limitation, Insurer, or
any Participating Insurance Company or any Contractholder, with respect to any
Losses that arise out of or result from:
(a) a breach of any representation, warranty, and/or covenant made by Insurer
hereunder or by any Participating Insurance Company under an agreement
containing substantially similar representations, warranties and covenants;
(b) the failure by Insurer or any Participating Insurance Company to maintain
its separate account (which invests in any Portfolio) as a legally and validly
established segregated asset account under applicable state law and as a duly
registered unit investment trust under the provisions of the Act (unless exempt
therefrom); or
(c) the failure by Insurer or any Participating Insurance Company to maintain
its variable annuity and/or variable life insurance contracts (with respect to
which any Portfolio serves as an underlying funding vehicle) as life insurance,
endowment or annuity contracts under applicable provisions of the Code.
A. Further, neither Fund nor LAM shall have any liability for any failure or
alleged failure to comply with the diversification requirements of Section
817(h) of the Code or the regulations thereunder if Insurer fails to comply with
any of the following clauses, and such failure could be shown to have materially
contributed to the liability:
(a) In the event the Internal Revenue Service ("IRS") asserts in writing in
connection with any governmental audit or review of Insurer or, to Insurer's
knowledge, of any Contractholder, that any Portfolio has failed or allegedly
failed to comply with the diversification requirements of Section 817(h) of the
Code or the regulations thereunder or Insurer otherwise becomes aware of any
facts that could give rise to any claim against Fund or its affiliates as a
result of such a failure or alleged failure,
(i) Insurer shall promptly notify Fund of such assertion or potential
claim;
(ii) Insurer shall consult with Fund as to how to minimize any
liability that may arise as a result of such failure or alleged
failure;
(iii)Insurer shall use its best efforts to minimize any liability of
Fund or its affiliates resulting from such failure, including,
without limitation, demonstrating, pursuant to Treasury
Regulations Section 1.817-5(a)(2), to the Commissioner of the IRS
that such failure was inadvertent;
(iv) Insurer shall permit Fund, its affiliates and their legal and
accounting advisors to participate in any conferences, settlement
discussions or other administrative or judicial proceeding or
contests (including judicial appeals thereof) with the IRS, any
Contractholder or any other claimant regarding any claims that
could give rise to liability to Fund or its affiliates as a
result of such a failure or alleged failure;
(v) any written materials to be submitted by Insurer to the IRS, any
Contractholder or any other claimant in connection with any of
the foregoing proceedings or contests (including, without
limitation, any such materials to be submitted to the IRS
pursuant to Treasury Regulations Section 1.817-5(a)(2)), shall be
provided by Insurer to Fund (together with any supporting
information or analysis) at least ten (10) Business Days prior to
the day on which such proposed materials are to be submitted and
shall not be submitted by Insurer to any such person without the
express written consent of Fund which shall not be unreasonably
withheld;
(vi) Insurer shall provide Fund or its affiliates and their accounting
and legal advisors with such cooperation as Fund shall reasonably
request (including, without limitation, by permitting Fund and
its accounting and legal advisors to review the relevant books
and records of Insurer) in order to facilitate review by Fund or
its advisors of any written submissions provided to it pursuant
to the preceding clause or its assessment of the validity or
amount of any claim against its arising from such a failure or
alleged failure; and
(vii)Insurer shall not with respect to any claim of the IRS or any
Contractholder that would give rise to a claim against Fund or
its affiliates compromise or settle any claim, accept any
adjustment on audit, or forego any allowable judicial appeals,
without the express written consent of Fund or its affiliates,
which shall not be unreasonably withheld, provided that Insurer
shall not be required to appeal any adverse judicial decision
unless Fund or its affiliates shall have provided an opinion of
independent counsel to the effect that a reasonable basis exists
for taking such appeal.
Promptly after receipt by an indemnified party under this Article of notice of
the commencement of any action, such indemnified party shall, 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 failure to so
notify the indemnifying party shall 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
party 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 shall 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. Notwithstanding 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 (a) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(b) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent.
A successor by law of any Party to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article IX,
which shall survive any termination of this Agreement.
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
Portfolios:
(a) At the option of Insurer, Distributor, Fund, or LAM 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 Insurer if it determines that shares of any Portfolio are
not reasonably available to meet the requirements of the Contracts. Insurer
shall furnish prompt notice of election to terminate and termination shall be
effective ten days after receipt of notice unless Fund makes available a
sufficient number of shares to meet the requirements of the Contracts within
such ten day period;
(c) At the option of Insurer or Fund, upon the institution of formal proceedings
against the other or their respective affiliates by the Commission, the NASD or
any other regulatory body, the expected or anticipated ruling, judgment or
outcome of which would, in the Insurer's or Fund's reasonable judgment,
materially impair the other's ability to meet and perform its obligations and
duties hereunder. Prompt notice of election to terminate shall be furnished by
Insurer or Fund, as the case may be, with termination to be effective upon
receipt of notice;
(d) At the option of Insurer or Fund, if either shall determine, in its sole
judgment reasonably exercised in good faith, that the other 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 is likely to have a material adverse impact upon the business
and operation of the Insurer, Fund or LAM, as the case may be. Insurer or Fund
shall notify the other in writing of any such determination and its intent to
terminate this Agreement, which termination shall be effective on the sixtieth
(60th) day following the giving of such notice, provided the determination of
Insurer or Fund, as the case may be, continues to apply on that date.
(e) Upon termination of the Investment Management Agreement between Fund, on
behalf of its Portfolios, and LAM or its successors unless Insurer specifically
approves the selection of a new investment adviser for the Portfolios. Fund
shall promptly furnish notice of such termination to Insurer;
(f) In the event Portfolio 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 Insurer. Termination shall be effective immediately upon such occurrence
without notice;
(g) At the option of Fund upon a determination by the Board in good faith that
it is no longer advisable and in the best interests of shareholders for Fund to
continue to operate pursuant to this Agreement. Termination shall be effective
upon notice by Fund to Insurer of such termination;
(h) At the option of Fund if the Contracts cease to qualify as annuity contracts
or life insurance policies, as applicable, under the Code, or if Fund reasonably
believes that the Contracts may fail to so qualify. Termination shall be
effective immediately upon such occurrence or reasonable belief without notice;
(i) At the option of any Party, upon another's breach of any material provision
this Agreement, which breach has not been cured to the satisfaction of the
non-breaching Parties within ten days after written notice of such breach is
delivered to the breaching Party;
(j) At the option of Fund, if the Contracts are not registered, issued or sold
in accordance with applicable federal and/or state law. Termination shall be
effective immediately upon such occurrence without notice;
(k) Upon assignment of this Agreement, unless made with the written consent of
the non-assigning Parties.
Any such termination pursuant to this Article X shall not affect the
operation of Articles V or IX of this Agreement. The Parties agree that any
termination pursuant to Article VI shall be governed by that Article.
10.3. Notwithstanding any termination of this Agreement pursuant to Section 10.2
hereof, Fund and LAM may, at the option of Fund, continue to make available
additional Portfolio shares for so long as 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 this Agreement (hereinafter referred to
as "Existing Contracts"). Specifically, without limitation, if Fund so elects to
make additional Portfolio shares available, the owners of the Existing Contracts
or Insurer, whichever shall have legal authority to do so, shall be permitted to
reallocate investments among the Portfolios, redeem investments in the
Portfolios and/or invest in the Portfolios 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, Fund, as promptly as is
practicable under the circumstances, shall notify Insurer whether Fund shall
continue to make Portfolio shares available after such termination. If Portfolio
shares continue to be made available after such termination, the provisions of
this Agreement shall remain in effect and thereafter either Fund or Insurer may
terminate the Agreement, as so continued pursuant to this Section 10.3, upon
prior written notice to the other Parties, such notice to be for a period that
is reasonable under the circumstances but, if given by Fund, need not be for
more than six months.
10.1. In the event of any termination of this Agreement pursuant to Section 10.2
hereof, the Parties agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that a Separate Account owns no shares of a Portfolio beyond six months
from the date of termination. Such steps may include, without limitation,
substituting other mutual fund shares for those of the affected Portfolio.
ARTICLE XI.
AMENDMENTS
11.1. Any changes in the terms of this Agreement shall be made by agreement in
writing by the Parties hereto.
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:
Insurer:
Distributor:
Fund: Lazard Retirement Series, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attention: Steven Swain
LAM: Lazard Asset Management
30 Rockefeller Plaza
New York, New York 10112
Attention: William Butterly
with copies to: Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
Attn: 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 Parties by the
undersigned duly authorized officers in their capacities as officers of Insurer,
Distributor, LAM, and Fund.\
13.1. If any provision of this Agreement is held or made invalid by a court
decision, statute, rule, or otherwise, the remainder of this Agreement will not
be affected thereby.
13.1. The rights, remedies, and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
13.1. This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
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.
[NAME OF INSURANCE COMPANY]
By:
Attest:_____________________
[NAME OF DISTRIBUTOR]
By:
Attest:_____________________
LAZARD RETIREMENT SERIES, INC.
By:
Attest:_____________________
LAZARD ASSET MANAGEMENT, LLC
a division of Lazard Freres & Co., LLC
By:
Attest:______________________
<PAGE>
SCHEDULE 1
Portfolios
Lazard Retirement Emerging Markets Portfolio Lazard Retirement Equity Portfolio
Lazard Retirement Global Equity Portfolio Lazard Retirement International Equity
Portfolio Lazard Retirement International Fixed-Income Portfolio Lazard
Retirement International Small Cap Portfolio Lazard Retirement Small Cap
Portfolio Lazard Retirement Strategic Yield Portfolio
Separate Accounts and Contracts
SCHEDULE 2
PORTFOLIO SHARE ORDER PROCESSING
Timely Pricing and Orders
1. Each Business Day, Fund shall use its best efforts to make each Portfolio's
closing net asset value per share ("NAV") on that Day available to Insurer by
6:30 p.m. New York time.
2. At the end of each Business Day, Insurer shall use the information described
above to calculate each Separate Account's unit values for that Day. Using this
unit value, Insurer shall process that Day's Contract and Separate Account
transactions to determine the net dollar amount of each Portfolio's shares to be
purchased or redeemed.
3. Insurer shall transmit net purchase or redemption orders to Fund or its
designee by 9:00 a.m. New York time on the Business Day next following Insurer's
receipt of the information relating to such orders in accordance with paragraph
1 above; provided, however, that Fund shall provide additional time to Insurer
in the event Fund is unable to meet the 6:30 p.m. deadline stated above. Such
additional time shall be equal to the additional time that Fund takes to make
the net asset values available to Insurer. For informational purposes, Insurer
shall separately describe the amount of shares of each Portfolio that is being
purchased, redeemed, or exchanged from one Portfolio to the other. In addition,
Insurer shall use its best efforts to notify Fund in advance of any unusually
large purchase or redemption orders.
Timely Payments
4. Insurer shall pay for any net purchase order by wiring Federal Funds to Fund
or its designated custodial account by 12:00 noon New York time on the same
Business Day it transmits the order to Fund pursuant to paragraph 3 above.
5. Fund shall pay for any net redemption order by wiring the redemption proceeds
to Insurer, except as provided below, within three (3) Business Days or, upon
notice to Insurer, such longer period as permitted by the Act or the rules,
orders or regulations thereunder. In the case of any net redemption order valued
at or greater than $1 million, Fund shall wire such amount to Insurer within
seven days of the order. In the case of any net redemption order requesting the
application of proceeds from the redemption of one Portfolio's shares to the
purchase of another Portfolio's shares, Fund shall so apply such proceeds the
same Business Day that Insurer transmits such order to Fund.
Applicable Price
9. If Fund provides Insurer with materially incorrect net asset value per share
information through no fault of Insurer, Insurer, on behalf of the Separate
Account, shall be entitled to an adjustment to the number of shares purchased or
redeemed to reflect the correct net asset value per share in accordance with
Fund's current policies for correcting pricing errors. Any material error in the
calculation of net asset value per share, dividend or capital gain information
shall be reported promptly upon discovery to Insurer.
Exhibit 8(f)
FORM OF PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into this __ day of ________, 1998 by
and between GOLDMAN SACHS VARIABLE INSURANCE TRUST, an unincorporated business
trust formed under the laws of Delaware (the "Trust"), GOLDMAN, SACHS & CO., a
New York limited partnership (the "Distributor"), and _________________ LIFE
INSURANCE COMPANY, a ________ life insurance company (the "Company"), on its own
behalf and on behalf of each separate account of the Company identified herein.
WHEREAS, the Trust is a series-type mutual fund offering shares of
beneficial interest (the "Trust shares") consisting of one or more separate
series ("Series") of shares, each such Series representing an interest in a
particular investment portfolio of securities and other assets (a "Fund"), and
which Series may be subdivided into various classes ("Classes") with each such
Class supporting a distinct charge and expense arrangement; and
WHEREAS, the Trust was established for the purpose of serving as an
investment vehicle for insurance company separate accounts supporting variable
annuity contracts and variable life insurance policies to be offered by
insurance companies and may also be utilized by qualified retirement plans; and
WHEREAS, the Distributor has the exclusive right to distribute Trust shares
to qualifying investors; and
WHEREAS, the Company desires that the Trust serve as an investment
vehicle for a certain separate account(s) of the Company and the Distributor
desires to sell shares of certain Series and/or Class(es) to such separate
account(s);
NOW, THEREFORE, in consideration of their mutual promises, the Trust,
the Distributor and the Company agree as follows:
ARTICLE I
Additional Definitions
1.1. "Account" -- the separate account of the Company described more
specifically in Schedule 1 to this Agreement. If more than one separate account
is described on Schedule 1, the term shall refer to each separate account so
described.
1.2. "Business Day" -- each day that the Trust is open for business as
provided in the Trust's Prospectus.
1.3. "Code" -- the Internal Revenue Code of 1986, as amended, and any
successor thereto.
1.4. "Contracts" -- the class or classes of variable annuity contracts
and/or variable life insurance policies issued by the Company and described more
specifically on Schedule 2 to this Agreement.
1.5. "Contract Owners" -- the owners of the Contracts, as distinguished
from all Product Owners.
1.6. "Participating Account" -- a separate account investing all or a
portion of its assets in the Trust, including the Account.
1.7. "Participating Insurance Company" -- any insurance company investing
in the Trust on its behalf or on behalf of a Participating Account, including
the Company.
1.8. "Participating Plan" -- any qualified retirement plan investing in the
Trust.
1.9. "Participating Investor" -- any Participating Account, Participating
Insurance Company or Participating Plan, including the Account and the Company.
1.10. "Products" -- variable annuity contracts and variable life insurance
policies supported by Participating Accounts, including the Contracts.
1.11."Product Owners" -- owners of Products, including Contract Owners.
1.12. "Trust Board" -- the board of trustees of the Trust.
1.13. "Registration Statement" -- with respect to the Trust shares or a
class of Contracts, the registration statement filed with the SEC to register
such securities under the 1933 Act, or the most recently filed amendment
thereto, in either case in the form in which it was declared or became
effective. The Contracts' Registration Statement for each class of Contracts is
described more specifically on Schedule 2 to this Agreement. The Trust's
Registration Statement is filed on Form N-1A (File No. 333-35883).
1.14. "1940 Act Registration Statement" -- with respect to the Trust or the
Account, the registration statement filed with the SEC to register such person
as an investment company under the 1940 Act, or the most recently filed
amendment thereto. The Account's 1940 Act Registration Statement is described
more specifically on Schedule 2 to this Agreement. The Trust's 1940 Act
Registration Statement is filed on Form N-1A (File No. 811-08361).
1.15. "Prospectus" -- with respect to shares of a Series (or Class) of the
Trust or a class of Contracts, each version of the definitive prospectus or
supplement thereto filed with the SEC pursuant to Rule 497 under the 1933 Act.
With respect to any provision of this Agreement requiring a party to take action
in accordance with a Prospectus, such reference thereto shall be deemed to be to
the version for the applicable Series, Class or Contracts last so filed prior to
the taking of such action. For purposes of Article IX, the term "Prospectus"
shall include any statement of additional information incorporated therein.
1.16. "Statement of Additional Information" -- with respect to the shares
of the Trust or a class of Contracts, each version of the definitive statement
of additional information or supplement thereto filed with the SEC pursuant to
Rule 497 under the 1933 Act. With respect to any provision of this Agreement
requiring a party to take action in accordance with a Statement of Additional
Information, such reference thereto shall be deemed to be the last version so
filed prior to the taking of such action.
1.17. "SEC" -- the Securities and Exchange Commission.
1.18. "NASD" -- The National Association of Securities Dealers, Inc.
1.19. "1933 Act" -- the Securities Act of 1933, as amended.
1.20. "1940 Act" -- the Investment Company Act of 1940, as amended.
ARTICLE II
Sale of Trust Shares
2.1. Availability of Shares
(a) The Trust has granted to the Distributor exclusive
authority to distribute the Trust shares and to select which Series or
Classes of Trust shares shall be made available to Participating
Investors. Pursuant to such authority, and subject to Article X hereof,
the Distributor shall make available to the Company for purchase on
behalf of the Account, shares of the Series and Classes listed on
Schedule 3 to this Agreement, such purchases to be effected at net
asset value in accordance with Section 2.3 of this Agreement. Such
Series and Classes shall be made available to the Company in accordance
with the terms and provisions of this Agreement until this Agreement is
terminated pursuant to Article X or the Distributor suspends or
terminates the offering of shares of such Series or Classes in the
circumstances described in Article X.
(b) Notwithstanding clause (a) of this Section 2.1, Series or
Classes of Trust shares in existence now or that may be established in
the future will be made available to the Company only as the
Distributor may so provide, subject to the Distributor's rights set
forth in Article X to suspend or terminate the offering of shares of
any Series or Class or to terminate this Agreement.
(c) The parties acknowledge and agree that: (i) the Trust may
revoke the Distributor's authority pursuant to the terms and conditions
of its distribution agreement with the Distributor; and (ii) the Trust
reserves the right in its sole discretion to refuse to accept a request
for the purchase of Trust shares.
2.2. Redemptions. The Trust shall redeem, at the Company's request, any
full or fractional Trust shares held by the Company on behalf of the Account,
such redemptions to be effected at net asset value in accordance with Section
2.3 of this Agreement. Notwithstanding the foregoing, (i) the Company shall not
redeem Trust shares attributable to Contract Owners except in the circumstances
permitted in Article X of this Agreement, and (ii) the Trust may delay
redemption of Trust shares of any Series or Class to the extent permitted by the
1940 Act, any rules, regulations or orders thereunder, or the Prospectus for
such Series or Class.
2.3. Purchase and Redemption Procedures
(a) The Trust hereby appoints the Company as an agent of the
Trust for the limited purpose of receiving purchase and redemption
requests on behalf of the Account (but not with respect to any Trust
shares that may be held in the general account of the Company) for
shares of those Series or Classes made available hereunder, based on
allocations of amounts to the Account or subaccounts thereof under the
Contracts, other transactions relating to the Contracts or the Account
and customary processing of the Contracts. Receipt of any such requests
(or effectuation of such transaction or processing) on any Business Day
by the Company as such limited agent of the Trust prior to the Trust's
close of business as defined from time to time in the applicable
Prospectus for such Series or Class (which as of the date of execution
of this Agreement is defined as the close of regular trading on the New
York Stock Exchange (normally 4:00 p.m. New York Time)) shall
constitute receipt by the Trust on that same Business Day, provided
that the Trust receives actual and sufficient notice of such request by
8:00 a.m. New York Time on the next following Business Day. Such notice
may be communicated by telephone to the office or person designated for
such notice by the Trust, and shall be confirmed by facsimile.
(b) The Company shall pay for shares of each Series or Class
on the same day that it provides actual notice to the Trust of a
purchase request for such shares. Payment for Series or Class shares
shall be made in Federal funds transmitted to the Trust by wire to be
received by the Trust by 12:00 noon New York Time on the day the Trust
receives actual notice of the purchase request for Series or Class
shares (unless the Trust determines and so advises the Company that
sufficient proceeds are available from redemption of shares of other
Series or Classes effected pursuant to redemption requests tendered by
the Company on behalf of the Account). In no event may proceeds from
the redemption of shares requested pursuant to an order received by the
Company after the Trust's close of business on any Business Day be
applied to the payment for shares for which a purchase order was
received prior to the Trust's close of business on such day. If the
issuance of shares is canceled because Federal funds are not timely
received, the Company shall indemnify the respective Fund and
Distributor with respect to all costs, expenses and losses relating
thereto. Upon the Trust's receipt of Federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become
the responsibility of the Trust. If Federal funds are not received on
time, such funds will be invested, and Series or Class shares purchased
thereby will be issued, as soon as practicable after actual receipt of
such funds but in any event not on the same day that the purchase order
was received.
(c) Payment for Series or Class shares redeemed by the Account
or the Company shall be made in Federal funds transmitted by wire to
the Company or any other person properly designated in writing by the
Company, such funds normally to be transmitted by 6:00 p.m. New York
Time on the next Business Day after the Trust receives actual notice of
the redemption order for Series or Class shares (unless redemption
proceeds are to be applied to the purchase of Trust shares of other
Series or Classes in accordance with Section 2.3(b) of this Agreement),
except that the Trust reserves the right to redeem Series or Class
shares in assets other than cash and to delay payment of redemption
proceeds to the extent permitted by the 1940 Act, any rules or
regulations or orders thereunder, or the applicable Prospectus. The
Trust shall not bear any responsibility whatsoever for the proper
disbursement or crediting of redemption proceeds by the Company; the
Company alone shall be responsible for such action.
(d) Any purchase or redemption request for Series or Class
shares held or to be held in the Company's general account shall be
effected at the net asset value per share next determined after the
Trust's actual receipt of such request, provided that, in the case of a
purchase request, payment for Trust shares so requested is received by
the Trust in Federal funds prior to close of business for determination
of such value, as defined from time to time in the Prospectus for such
Series or Class.
(e) Prior to the first purchase of any Trust shares hereunder,
the Company and the Trust shall provide each other with all information
necessary to effect wire transmissions of Federal funds to the other
party and all other designated persons pursuant to such protocols and
security procedures as the parties may agree upon. Should such
information change thereafter, the Trust and the Company, as
applicable, shall notify the other in writing of such changes,
observing the same protocols and security procedures, at least three
Business Days in advance of when such change is to take effect. The
Company and the Trust shall observe customary procedures to protect the
confidentiality and security of such information, but the Trust shall
not be liable to the Company for any breach of security.
(f) The procedures set forth herein are subject to any
additional terms set forth in the applicable Prospectus for the Series
or Class or by the requirements of applicable law.
2.4. Net Asset Value. The Trust shall use its best efforts to inform the
Company of the net asset value per share for each Series or Class available to
the Company as soon as reasonably practicable after the net asset value per
share for such Series or Class is calculated. The Trust shall calculate such net
asset value in accordance with the Prospectus for such Series or Class.
2.5. Dividends and Distributions. The Trust shall furnish notice to the
Company as soon as reasonably practicable of any income dividends or capital
gain distributions payable on any Series or Class shares. The Company, on its
behalf and on behalf of the Account, hereby elects to receive all such dividends
and distributions as are payable on any Series or Class shares in the form of
additional shares of that Series or Class. The Company reserves the right, on
its behalf and on behalf of the Account, to revoke this election and to receive
all such dividends and capital gain distributions in cash; to be effective, such
revocation must be made in writing and received by the Trust at least ten
Business Days prior to a dividend or distribution date. The Trust shall notify
the Company promptly of the number of Series or Class shares so issued as
payment of such dividends and distributions.
2.6. Book Entry. Issuance and transfer of Trust shares shall be by book
entry only. Stock certificates will not be issued to the Company or the Account.
Purchase and redemption orders for Trust shares shall be recorded in an
appropriate ledger for the Account or the appropriate subaccount of the Account.
2.7. Pricing Errors. Any material errors in the calculation of net asset
value, dividends or capital gain information shall be reported immediately upon
discovery to the Company. An error shall be deemed "material" based on our
interpretation of the SEC's position and policy with regard to materiality, as
it may be modified from time to time. Neither the Trust, any Fund, the
Distributor, nor any of their affiliates shall be liable for any information
provided to the Company pursuant to this Agreement which information is based on
incorrect information supplied by or on behalf of the Company or any other
Participating Company to the Trust or the Distributor.
2.8. Limits on Purchasers. The Distributor and the Trust shall sell Trust
shares only to insurance companies and their separate accounts and to persons or
plans ("Qualified Persons") that qualify to purchase shares of the Trust under
Section 817(h) of the Code and the regulations thereunder without impairing the
ability of the Account to consider the portfolio investments of the Trust as
constituting investments of the Account for the purpose of satisfying the
diversification requirements of Section 817(h). The Distributor and the Trust
shall not sell Trust shares to any insurance company or separate account unless
an agreement complying with Article VIII of this Agreement is in effect to
govern such sales. The Company hereby represents and warrants that it and the
Account are Qualified Persons.
ARTICLE III
Representations and Warranties
3.1. Company. The Company represents and warrants that: (i) the Company is
an insurance company duly organized and in good standing under [______________]
insurance law; (ii) the Account is a validly existing separate account, duly
established and maintained in accordance with applicable law; (iii) the
Account's 1940 Act Registration Statement has been filed with the SEC in
accordance with the provisions of the 1940 Act and the Account is duly
registered as a unit investment trust thereunder; (iv) the Contracts'
Registration Statement has been declared effective by the SEC; (v) the Contracts
will be issued in compliance in all material respects with all applicable
Federal and state laws; (vi) the Contracts have been filed, qualified and/or
approved for sale, as applicable, under the insurance laws and regulations of
the states in which the Contracts will be offered; (vii) the Account will
maintain its registration under the 1940 Act and will comply in all material
respects with the 1940 Act; (viii) the Contracts currently are, and at the time
of issuance and for so long as they are outstanding will be, treated as annuity
contracts or life insurance policies, whichever is appropriate, under applicable
provisions of the Code; and (ix) the Company's entering into and performing its
obligations under this Agreement does not and will not violate its charter
documents or by-laws, rules or regulations, or any agreement to which it is a
party. The Company will notify the Trust promptly if for any reason it is unable
to perform its obligations under this Agreement.
3.2. Trust. The Trust represents and warrants that: (i) the Trust is an
unincorporated business trust duly formed and validly existing under the
Delaware law; (ii) the Trust's 1940 Act Registration Statement has been filed
with the SEC in accordance with the provisions of the 1940 Act and the Trust is
duly registered as an open-end management investment company thereunder; (iii)
the Trust's Registration Statement has been declared effective by the SEC; (iv)
the Trust shares will be issued in compliance in all material respects with all
applicable federal laws; (v) the Trust will remain registered under and will
comply in all material respects with the 1940 Act during the term of this
Agreement; (vi) each Fund of the Trust intends to qualify as a "regulated
investment company" under Subchapter M of the Code and to comply with the
diversification standards prescribed in Section 817(h) of the Code and the
regulations thereunder; and (vii) the investment policies of each Fund are in
material compliance with any investment restrictions set forth on Schedule 4 to
this Agreement. The Trust, however, makes no representation as to whether any
aspect of its operations (including, but not limited to, fees and expenses and
investment policies) otherwise complies with the insurance laws or regulations
of any state.
3.3. Distributor. The Distributor represents and warrants that: (i) the
Distributor is a limited partnership duly organized and in good standing under
New York law; (ii) the Distributor is registered as a broker-dealer under
federal and applicable state securities laws and is a member of the NASD; and
(iii) the Distributor is registered as an investment adviser under federal
securities laws.
3.4. Legal Authority. Each party represents and warrants that the execution
and delivery of this Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all necessary corporate,
partnership or trust action, as applicable, by such party, and, when so executed
and delivered, this Agreement will be the valid and binding obligation of such
party enforceable in accordance with its terms.
3.5. Bonding Requirement. Each party represents and warrants that all of
its directors, officers, partners and employees dealing with the money and/or
securities of the Trust are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Trust in an
amount not less than the amount required by the applicable rules of the NASD and
the federal securities laws. The aforesaid bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company. All
parties shall make all reasonable efforts to see that this bond or another bond
containing these provisions is always in effect, shall provide evidence thereof
promptly to any other party upon written request therefor, and shall notify the
other parties promptly in the event that such coverage no longer applies.
ARTICLE IV
Regulatory Requirements
4.1. Trust Filings. The Trust shall amend the Trust's Registration
Statement and the Trust's 1940 Act Registration Statement from time to time as
required in order to effect the continuous offering of Trust shares in
compliance with applicable law and to maintain the Trust's registration under
the 1940 Act for so long as Trust shares are sold.
4.2. Contracts Filings. The Company shall amend the Contracts'
Registration Statement and the Account's 1940 Act Registration Statement from
time to time as required in order to effect the continuous offering of the
Contracts in compliance with applicable law or as may otherwise be required by
applicable law, but in any event shall maintain a current effective Contracts'
Registration Statement and the Account's registration under the 1940 Act for so
long as the Contracts are outstanding unless the Company has supplied the Trust
with an SEC no-action letter or opinion of counsel satisfactory to the Trust's
counsel to the effect that maintaining such Registration Statement on a current
basis is no longer required. The Company shall be responsible for filing all
such Contract forms, applications, marketing materials and other documents
relating to the Contracts and/or the Account with state insurance commissions,
as required or customary, and shall use its best efforts: (i) to obtain any and
all approvals thereof, under applicable state insurance law, of each state or
other jurisdiction in which Contracts are or may be offered for sale; and (ii)
to keep such approvals in effect for so long as the Contracts are outstanding.
4.3. Voting of Trust Shares. With respect to any matter put to vote by
the holders of Trust shares ("Voting Shares"), the Company will provide
"pass-through" voting privileges to owners of Contracts registered with the SEC
as long as the 1940 Act requires such privileges in such cases. In cases in
which "pass-through" privileges apply, the Company will (i) solicit voting
instructions from Contract Owners of SEC-registered Contracts; (ii) vote Voting
Shares attributable to Contract Owners in accordance with instructions or
proxies timely received from such Contract Owners; and (iii) vote Voting Shares
held by it that are not attributable to reserves for SEC-registered Contracts or
for which it has not received timely voting instructions in the same proportion
as instructions received in a timely fashion from Owners of SEC-registered
Contracts. The Company shall be responsible for ensuring that it calculates
"pass-through" votes for the Account in a manner consistent with the provisions
set forth above and with other Participating Insurance Companies. Neither the
Company nor any of its affiliates will in any way recommend action in connection
with, or oppose or interfere with, the solicitation of proxies for the Trust
shares held for such Contract Owners, except with respect to matters as to which
the Company has the right under Rule 6e-2 or 6e-3(T) under the 1940 Act, to vote
Voting Shares without regard to voting instructions from Contract Owners.
4.4. State Insurance Restrictions. The Company acknowledges and agrees
that it is the responsibility of the Company and other Participating Insurance
Companies to determine investment restrictions and any other restrictions,
limitations or requirements under state insurance law applicable to any Fund or
the Trust or the Distributor, and that neither the Trust nor the Distributor
shall bear any responsibility to the Company, other Participating Insurance
Companies or any Product Owners for any such determination or the correctness of
such determination. Schedule 4 sets forth the investment restrictions that the
Company and/or other Participating Insurance Companies have determined are
applicable to any Fund and with which the Trust has agreed to comply as of the
date of this Agreement. The Company shall inform the Trust of any investment
restrictions imposed by state insurance law that the Company determines may
become applicable to the Trust or a Fund from time to time as a result of the
Account's investment therein, other than those set forth on Schedule 4 to this
Agreement. Upon receipt of any such information from the Company or any other
Participating Insurance Company, the Trust shall determine whether it is in the
best interests of shareholders to comply with any such restrictions. If the
Trust determines that it is not in the best interests of shareholders (it being
understood that "shareholders" for this purpose shall mean Product Owners) to
comply with a restriction determined to be applicable by the Company, the Trust
shall so inform the Company, and the Trust and the Company shall discuss
alternative accommodations in the circumstances. If the Trust determines that it
is in the best interests of shareholders to comply with such restrictions, the
Trust and the Company shall amend Schedule 4 to this Agreement to reflect such
restrictions, subject to obtaining any required shareholder approval thereof.
4.5. Compliance. Under no circumstances will the Trust, the Distributor
or any of their affiliates (excluding Participating Investors) be held
responsible or liable in any respect for any statements or representations made
by them or their legal advisers to the Company or any Contract Owner concerning
the applicability of any federal or state laws, regulations or other authorities
to the activities contemplated by this Agreement.
4.6. Drafts of Filings. The Trust and the Company shall provide to each
other copies of draft versions of any Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or Contract
Owner reports, proxy statements, solicitations for voting instructions,
applications for exemptions, requests for no-action letters, and all amendments
or supplements to any of the above, prepared by or on behalf of either of them
and that mentions the other party by name. Such drafts shall be provided to the
other party sufficiently in advance of filing such materials with regulatory
authorities in order to allow such other party a reasonable opportunity to
review the materials.
4.7. Copies of Filings. The Trust and the Company shall provide to each
other at least one complete copy of all Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or Contract
Owner reports, proxy statements, solicitations of voting instructions,
applications for exemptions, requests for no-action letters, and all amendments
or supplements to any of the above, that relate to the Trust, the Contracts or
the Account, as the case may be, promptly after the filing by or on behalf of
each such party of such document with the SEC or other regulatory authorities
(it being understood that this provision is not intended to require the Trust to
provide to the Company copies of any such documents prepared, filed or used by
Participating Investors other than the Company and the Account).
4.8. Regulatory Responses. Each party shall promptly provide to all
other parties copies of responses to no-action requests, notices, orders and
other rulings received by such party with respect to any filing covered by
Section 4.7 of this Agreement.
4.9. Complaints and Proceedings
(a) The Trust and/or the Distributor shall immediately notify
the Company of: (i) the issuance by any court or regulatory body of any
stop order, cease and desist order, or other similar order (but not
including an order of a regulatory body exempting or approving a
proposed transaction or arrangement) with respect to the Trust's
Registration Statement or the Prospectus of any Series or Class; (ii)
any request by the SEC for any amendment to the Trust's Registration
Statement or the Prospectus of any Series or Class; (iii) the
initiation of any proceedings for that purpose or for any other
purposes relating to the registration or offering of the Trust shares;
or (iv) any other action or circumstances that may prevent the lawful
offer or sale of Trust shares or any Class or Series in any state or
jurisdiction, including, without limitation, any circumstance in which
(A) such shares are not registered and, in all material respects,
issued and sold in accordance with applicable state and federal law or
(B) such law precludes the use of such shares as an underlying
investment medium for the Contracts. The Trust will make every
reasonable effort to prevent the issuance of any such stop order, cease
and desist order or similar order and, if any such order is issued, to
obtain the lifting thereof at the earliest possible time.
(b) The Company shall immediately notify the Trust and the
Distributor of: (i) the issuance by any court or regulatory body of any
stop order, cease and desist order, or other similar order (but not
including an order of a regulatory body exempting or approving a
proposed transaction or arrangement) with respect to the Contracts'
Registration Statement or the Contracts' Prospectus; (ii) any request
by the SEC for any amendment to the Contracts' Registration Statement
or Prospectus; (iii) the initiation of any proceedings for that purpose
or for any other purposes relating to the registration or offering of
the Contracts; or (iv) any other action or circumstances that may
prevent the lawful offer or sale of the Contracts or any class of
Contracts in any state or jurisdiction, including, without limitation,
any circumstance in which such Contracts are not registered, qualified
and approved, and, in all material respects, issued and sold in
accordance with applicable state and federal laws. The Company will
make every reasonable effort to prevent the issuance of any such stop
order, cease and desist order or similar order and, if any such order
is issued, to obtain the lifting thereof at the earliest possible time.
(c) Each party shall immediately notify the other parties when
it receives notice, or otherwise becomes aware of, the commencement of
any litigation or proceeding against such party or a person affiliated
therewith in connection with the issuance or sale of Trust shares or
the Contracts.
(d) The Company shall provide to the Trust and the Distributor
any complaints it has received from Contract Owners pertaining to the
Trust or a Fund, and the Trust and Distributor shall each provide to
the Company any complaints it has received from Contract Owners
relating to the Contracts.
4.10. Cooperation. Each party hereto shall cooperate with the other
parties and all appropriate government authorities (including without limitation
the SEC, the NASD and state securities and insurance regulators) and shall
permit such authorities reasonable access to its books and records in connection
with any investigation or inquiry by any such authority relating to this
Agreement or the transactions contemplated hereby. However, such access shall
not extend to attorney-client privileged information.
ARTICLE V
Sale, Administration and Servicing of the Contracts
5.1. Sale of the Contracts. The Company shall be fully responsible as
to the Trust and the Distributor for the sale and marketing of the Contracts.
The Company shall provide Contracts, the Contracts' and Trust's Prospectuses,
Contracts' and Trust's Statements of Additional Information, and all amendments
or supplements to any of the foregoing to Contract Owners and prospective
Contract Owners, all in accordance with federal and state laws. The Company
shall ensure that all persons offering the Contracts are duly licensed and
registered under applicable insurance and securities laws. The Company shall
ensure that each sale of a Contract satisfies applicable suitability
requirements under insurance and securities laws and regulations, including
without limitation the rules of the NASD. The Company shall adopt and implement
procedures reasonably designed to ensure that information concerning the Trust
and the Distributor that is intended for use only by brokers or agents selling
the Contracts (i.e., information that is not intended for distribution to
Contract Owners or offerees) is so used.
5.2. Administration and Servicing of the Contracts. The Company shall
be fully responsible as to the Trust and the Distributor for the underwriting,
issuance, service and administration of the Contracts and for the administration
of the Account, including, without limitation, the calculation of performance
information for the Contracts, the timely payment of Contract Owner redemption
requests and processing of Contract transactions, and the maintenance of a
service center, such functions to be performed in all respects at a level
commensurate with those standards prevailing in the variable insurance industry.
The Company shall provide to Contract Owners all Trust reports, solicitations
for voting instructions including any related Trust proxy solicitation
materials, and updated Trust Prospectuses as required under the federal
securities laws.
5.3. Customer Complaints. The Company shall promptly address all
customer complaints and resolve such complaints consistent with high ethical
standards and principles of ethical conduct.
5.4. Trust Prospectuses and Reports. In order to enable the Company to
fulfill its obligations under this Agreement and the federal securities laws,
the Trust shall provide the Company with a copy, in camera-ready form or form
otherwise suitable for printing or duplication of: (i) the Trust's Prospectus
for the Series and Classes listed on Schedule 3 and any supplement thereto; (ii)
each Statement of Additional Information and any supplement thereto; (iii) any
Trust proxy soliciting material for such Series or Classes; and (iv) any Trust
periodic shareholder reports. The Trust and the Company may agree upon alternate
arrangements, but in all cases, the Trust reserves the right to approve the
printing of any such material. The Trust shall provide the Company at least 10
days advance written notice when any such material shall become available,
provided, however, that in the case of a supplement, the Trust shall provide the
Company notice reasonable in the circumstances, it being understood that
circumstances surrounding such supplement may not allow for advance notice. The
Company may not alter any material so provided by the Trust or the Distributor
(including without limitation presenting or delivering such material in a
different medium, e.g., electronic or Internet) without the prior written
consent of the Distributor.
5.5. Trust Advertising Material. No piece of advertising or sales
literature or other promotional material in which the Trust or the Distributor
is named (including, without limitation, material for prospects, existing
Contract Owners, brokers, rating or ranking agencies, or the press, whether in
print, radio, television, video, Internet, or other electronic medium) shall be
used by the Company or any person directly or indirectly authorized by the
Company, including without limitation, underwriters, distributors, and sellers
of the Contracts, except with the prior written consent of the Trust or the
Distributor, as applicable, as to the form, content and medium of such material.
Any such piece shall be furnished to the Trust for such consent prior to its
use. The Trust or the Distributor shall respond to any request for written
consent on a prompt and timely basis, but failure to respond shall not relieve
the Company of the obligation to obtain the prior written consent of the Trust
or the Distributor. After receiving the Trust's or Distributor's consent to the
use of any such material, no further changes may be made without obtaining the
Trust's or Distributor's consent to such changes. The Trust or Distributor may
at any time in its sole discretion revoke such written consent, and upon
notification of such revocation, the Company shall no longer use the material
subject to such revocation. Until further notice to the Company, the Trust has
delegated its rights and responsibilities under this provision to the
Distributor.
5.6. Contracts Advertising Material. No piece of advertising or sales
literature or other promotional material in which the Company is named shall be
used by the Trust or the Distributor, except with the prior written consent of
the Company. Any such piece shall be furnished to the Company for such consent
prior to its use. The Company shall respond to any request for written consent
on a prompt and timely basis, but failure to respond shall not relieve the
Company of the obligation to obtain the prior written consent of the Company.
The Company may at any time in its sole discretion revoke any written consent,
and upon notification of such revocation, neither the Trust nor the Distributor
shall use the material subject to such revocation. The Company, upon prior
written notice to the Trust, may delegate its rights and responsibilities under
this provision to the principal underwriter for the Contracts.
5.7. Trade Names. No party shall use any other party's names, logos,
trademarks or service marks, whether registered or unregistered, without the
prior written consent of such other party, or after written consent therefor has
been revoked. The Company shall not use in advertising, publicity or otherwise
the name of the Trust, Distributor, or any of their affiliates nor any trade
name, trademark, trade device, service mark, symbol or any abbreviation,
contraction or simulation thereof of the Trust, Distributor, or their affiliates
without the prior written consent of the Trust or the Distributor in each
instance.
5.8. Representations by Company. Except with the prior written consent
of the Trust, the Company shall not give any information or make any
representations or statements about the Trust or the Funds nor shall it
authorize or allow any other person to do so except information or
representations contained in the Trust's Registration Statement or the Trust's
Prospectuses or in reports or proxy statements for the Trust, or in sales
literature or other promotional material approved in writing by the Trust or its
designee in accordance with this Article V, or in published reports or
statements of the Trust in the public domain.
5.9. Representations by Trust. Except with the prior written consent of
the Company, the Trust 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 the
Contracts' Registration Statement or Contracts' Prospectus or in published
reports of the Account which are in the public domain or in sales literature or
other promotional material approved in writing by the Company in accordance with
this Article V.
5.10. Advertising. For purposes of this Article V, the phrase "sales
literature or other promotional material" includes, but is not limited to, any
material constituting sales literature or advertising under the NASD rules, the
1940 Act or the 1933 Act.
ARTICLE VI
Compliance with Code
6.1. Section 817(h). Each Fund of the Trust shall comply with Section
817(h) of the Code and the regulations issued thereunder to the extent
applicable to the Fund as an investment company underlying the Account, and the
Trust shall notify the Company immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so qualify
in the future.
6.2. Subchapter M. Each Fund of the Trust shall maintain the
qualification of the Fund as a regulated investment company (under Subchapter M
or any successor or similar provision), and the Trust shall notify the Company
immediately upon having a reasonable basis for believing that a Fund has ceased
to so qualify or that it might not so qualify in the future.
6.3. Contracts. The Company shall ensure the continued treatment of the
Contracts as annuity contracts or life insurance policies, whichever is
appropriate, under applicable provisions of the Code and shall notify the Trust
and the Distributor 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.
ARTICLE VII
Expenses
7.1. Expenses. All expenses incident to each party's performance under this
Agreement (including expenses expressly assumed by such party pursuant to this
Agreement) shall be paid by such party to the extent permitted by law.
7.2. Trust Expenses. Expenses incident to the Trust's performance of its
duties and obligations under this Agreement include, but are not limited to, the
costs of:
(a) registration and qualification of the Trust shares under the federal
securities laws;
(b) preparation and filing with the SEC of the Trust's Prospectuses,
Trust's Statement of Additional Information, Trust's Registration
Statement, Trust proxy materials and shareholder reports, and
preparation of a camera-ready copy of the foregoing;
(c) preparation of all statements and notices required by any Federal or
state securities law;
(d) all taxes on the issuance or transfer of Trust shares;
(e) payment of all applicable fees relating to the Trust, including,
without limitation, all fees due under Rule 24f-2 in connection with
sales of Trust shares to qualified retirement plans, custodial,
auditing, transfer agent and advisory fees, fees for insurance
coverage and Trustees' fees; and
(f) any expenses permitted to be paid or assumed by the Trust pursuant to
a plan, if any, under Rule 12b-1 under the 1940 Act.
7.3. Company Expenses. Expenses incident to the Company's performance of
its duties and obligations under this Agreement include, but are not limited to,
the costs of:
(a) registration and qualification of the Contracts under the
federal securities laws;
(b) preparation and filing with the SEC of the Contracts'
Prospectus and Contracts' Registration Statement;
(c) the sale, marketing and distribution of the Contracts,
including printing and dissemination of Contracts'
Prospectuses and compensation for Contract sales;
(d) administration of the Contracts;
(e) payment of all applicable fees relating to the Contracts,
including, without limitation, all fees due under Rule 24f-2;
(f) preparation, printing and dissemination of all statements and
notices to Contract Owners required by any Federal or state
insurance law other than those paid for by the Trust; and
(g) preparation, printing and dissemination of all marketing
materials for the Contracts and Trust except where other
arrangements are made in advance.
7.4. 12b-1 Payments. The Trust shall pay no fee or other compensation
to the Company under this Agreement, except that if the Trust or any Series or
Class adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act to
finance distribution expenses, then payments may be made to the Company in
accordance with such plan. The Trust currently does not intend to make any
payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940
Act or in contravention of such rule, although it may make payments pursuant to
Rule 12b-1 in the future. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1 and such formulation is required by the 1940 Act
or any rules or order thereunder, the Trust undertakes to have a Board of
Trustees, a majority of whom are not interested persons of the Trust, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
ARTICLE VIII
Potential Conflicts
8.1. Exemptive Order. The parties to this Agreement acknowledge that
the Trust has received an exemptive order from the SEC (the "Exemptive Order")
granting relief from various provisions of the 1940 Act and the rules thereunder
to the extent necessary to permit Trust shares to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated Participating Insurance Companies and other
Qualified Persons (as defined in Section 2.8 hereof). The Exemptive Order
requires the Trust and each Participating Insurance Company to comply with
conditions and undertakings substantially as provided in this Article VIII. The
Trust will not enter into a participation agreement with any other Participating
Insurance Company unless it imposes the same conditions and undertakings on that
company as are imposed on the Company pursuant to this Article VIII.
8.2. Company Monitoring Requirements. The Company will monitor its
operations and those of the Trust for the purpose of identifying any material
irreconcilable conflicts or potential material irreconcilable conflicts between
or among the interests of Participating Plans, Product Owners of variable life
insurance policies and Product Owners of variable annuity contracts.
8.3. Company Reporting Requirements. The Company shall report any
conflicts or potential conflicts to the Trust Board and will provide the Trust
Board, at least annually, with all information reasonably necessary for the
Trust Board to consider any issues raised by such existing or potential
conflicts or by the conditions and undertakings required by the Exemptive Order.
The Company also shall assist the Trust Board in carrying out its obligations
including, but not limited to: (a) informing the Trust Board whenever it
disregards Contract Owner voting instructions with respect to variable life
insurance policies, and (b) providing such other information and reports as the
Trust Board may reasonably request. The Company will carry out these obligations
with a view only to the interests of Contract Owners.
8.4. Trust Board Monitoring and Determination. The Trust Board shall
monitor the Trust for the existence of any material irreconcilable conflicts
between or among the interests of Participating Plans, Product Owners of
variable life insurance policies and Product Owners of variable annuity
contracts and determine what action, if any, should be taken in response to
those conflicts. A majority vote of Trustees who are not interested persons of
the Trust as defined in the 1940 Act (the "disinterested trustees") shall
represent a conclusive determination as to the existence of a material
irreconcilable conflict between or among the interests of Product Owners and
Participating Plans and as to whether any proposed action adequately remedies
any material irreconcilable conflict. The Trust Board shall give prompt written
notice to the Company and Participating Plan of any such determination.
8.5. Undertaking to Resolve Conflict. In the event that a material
irreconcilable conflict of interest arises between Product Owners of variable
life insurance policies or Product Owners of variable annuity contracts and
Participating Plans, the Company will, at its own expense, take whatever action
is necessary to remedy such conflict as it adversely affects Contract Owners up
to and including (1) establishing a new registered management investment
company, and (2) withdrawing assets from the Trust attributable to reserves for
the Contracts subject to the conflict and reinvesting such assets in a different
investment medium (including another Fund of the Trust) or submitting the
question of whether such withdrawal should be implemented to a vote of all
affected Contract Owners, and, as appropriate, segregating the assets supporting
the Contracts of any group of such owners that votes in favor of such
withdrawal, or offering to such owners the option of making such a change. The
Company will carry out the responsibility to take the foregoing action with a
view only to the interests of Contract Owners.
8.6. Withdrawal. If a material irreconcilable conflict arises because
of the Company's decision to disregard the voting instructions of Contract
Owners of variable life insurance policies and that decision represents a
minority position or would preclude a majority vote at any Fund shareholder
meeting, then, at the request of the Trust Board, the Company will redeem the
shares of the Trust to which the disregarded voting instructions relate. No
charge or penalty, however, will be imposed in connection with such a
redemption.
8.7. Expenses Associated with Remedial Action. In no event shall the
Trust be required to bear the expense of establishing a new funding medium for
any Contract. The 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 Contract Owners materially adversely affected by the
irreconcilable material conflict.
8.8. Successor Rules. 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 provisions of the 1940 Act or the rules promulgated thereunder with respect
to mixed and shared funding on terms and conditions materially different from
those contained in the Exemptive Order, then (i) the Trust and/or the Company,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, or Rule 6e-3, as adopted, as applicable, to the
extent such rules are applicable, and (ii) Sections 8.2 through 8.5 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 IX
Indemnification
9.1. Indemnification by the Company. The Company hereby agrees to, and
shall, indemnify and hold harmless the Trust, the Distributor and each person
who controls or is affiliated with the Trust or the Distributor within the
meaning of such terms under the 1933 Act or 1940 Act (but not any Participating
Insurance Companies or Qualified Persons) and any officer, trustee, partner,
director, employee or agent of the foregoing, 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), to
which they or any of them may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact contained in the Contracts Registration
Statement, Contracts Prospectus, sales literature or other
promotional material for the Contracts or the Contracts
themselves (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission
to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were
made; provided that this obligation to indemnify shall not
apply if such statement or omission was made in reliance
upon and in conformity with information furnished in writing
to the Company by the Trust or the Distributor for use in
the Contracts Registration Statement, Contracts Prospectus
or in the Contracts or sales literature or promotional
material for the Contracts (or any amendment or supplement
to any of the foregoing) or otherwise for use in connection
with the sale of the Contracts or Trust shares; or
(b) arise out of any untrue statement of a material fact contained
in the Trust Registration Statement, any Prospectus for Series
or Classes or sales literature or other promotional material
of the Trust (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made, if such statement or
omission was made in reliance upon and in conformity with
information furnished to the Trust or Distributor in writing
by or on behalf of the Company; or
(c) arise out of or are based upon any wrongful conduct of, or
violation of federal or state law by, the Company or persons
under its control or subject to its authorization, including
without limitation, any broker-dealers or agents authorized to
sell the Contracts, with respect to the sale, marketing or
distribution of the Contracts or Trust shares, including,
without limitation, any impermissible use of broker-only
material, unsuitable or improper sales of the Contracts or
unauthorized representations about the Contracts or the Trust;
or
(d) arise as a result of any failure by the Company or persons
under its control (or subject to its authorization) to provide
services, furnish materials or make payments as required under
this Agreement; or
(e) arise out of any material breach by the Company or persons
under its control (or subject to its authorization) of this
Agreement; or
(f) any breach of any warranties contained in Article III hereof,
any failure to transmit a request for redemption or purchase
of Trust shares or payment therefor on a timely basis in
accordance with the procedures set forth in Article II, or any
unauthorized use of the names or trade names of the Trust or
the Distributor.
This indemnification is in addition to any liability that the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is caused by the
willful misfeasance, bad faith, gross negligence or reckless disregard of duty
by the party seeking indemnification.
9.2. Indemnification by the Trust. The Trust hereby agrees to, and
shall, indemnify and hold harmless the Company and each person who controls or
is affiliated with the Company within the meaning of such terms under the 1933
Act or 1940 Act and any officer, director, employee or agent of the foregoing,
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), to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact contained in the Trust Registration Statement,
any Prospectus for Series or Classes or sales literature or
other promotional material of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or
omission was made in reliance upon and in conformity with
information furnished in writing by the Company to the Trust
or the Distributor for use in the Trust Registration
Statement, Trust Prospectus or sales literature or
promotional material for the Trust (or any amendment or
supplement to any of the foregoing) or otherwise for use in
connection with the sale of the Contracts or Trust shares;
or
(b) arise out of any untrue statement of a material fact contained
in the Contracts Registration Statement, Contracts Prospectus
or sales literature or other promotional material for the
Contracts (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made, if such statement or
omission was made in reliance upon information furnished in
writing by the Trust to the Company; or
(c) arise out of or are based upon wrongful conduct of the Trust
or its Trustees or officers with respect to the sale of Trust
shares; or
(d) arise as a result of any failure by the Trust to provide
services, furnish materials or make payments as required under
the terms of this Agreement; or
(e) arise out of any material breach by the Trust of this
Agreement (including any breach of Section 6.1 of this
Agreement and any warranties contained in Article III hereof);
it being understood that in no way shall the Trust be liable to the Company with
respect to any violation of insurance law, compliance with which is a
responsibility of the Company under this Agreement or otherwise or as to which
the Company failed to inform the Trust in accordance with Section 4.4 hereof.
This indemnification is in addition to any liability that the Trust may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is caused by the
willful misfeasance, bad faith, gross negligence or reckless disregard of duty
by the party seeking indemnification.
9.3. Indemnification by the Distributor. The Distributor hereby agrees
to, and shall, indemnify and hold harmless the Company and each person who
controls or is affiliated with the Company within the meaning of such terms
under the 1933 Act or 1940 Act and any officer, director, employee or agent of
the foregoing, 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), to which they or any of them may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact contained in the Trust Registration Statement,
any Prospectus for Series or Classes or sales literature or
other promotional material of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or
omission was made in reliance upon and in conformity with
information furnished in writing by the Company to the Trust
or Distributor for use in the Trust Registration Statement,
Trust Prospectus or sales literature or promotional material
for the Trust (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale
of the Contracts or Trust shares; or
(b) arise out of any untrue statement of a material fact contained
in the Contracts Registration Statement, Contracts Prospectus
or sales literature or other promotional material for the
Contracts (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made, if such statement or
omission was made in reliance upon information furnished in
writing by the Distributor to the Company; or
(c) arise out of or are based upon wrongful conduct of the
Distributor or persons under its control with respect to the
sale of Trust shares; or
(d) arise as a result of any failure by the Distributor or persons
under its control to provide services, furnish materials or
make payments as required under the terms of this Agreement;
or
(e) arise out of any material breach by the Distributor or persons
under its control of this Agreement (including any breach of
Section 6.1 of this Agreement and any warranties contained in
Article III hereof);
it being understood that in no way shall the Distributor be liable to the
Company with respect to any violation of insurance law, compliance with which is
a responsibility of the Company under this Agreement or otherwise or as to which
the Company failed to inform the Distributor in accordance with Section 4.4
hereof. This indemnification is in addition to any liability that the
Distributor may otherwise have; provided, however, that no party shall be
entitled to indemnification if such loss, claim, damage or liability is caused
by the willful misfeasance, bad faith, gross negligence or reckless disregard of
duty by the party seeking indemnification.
9.4. Rule of Construction. It is the parties' intention that, in the
event of an occurrence for which the Trust has agreed to indemnify the Company,
the Company shall seek indemnification from the Trust only in circumstances in
which the Trust is entitled to seek indemnification from a third party with
respect to the same event or cause thereof.
9.5. Indemnification Procedures. After receipt by a party entitled to
indemnification ("indemnified party") under this Article IX of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article IX ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party will
not relieve it 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 party is damaged solely as a result of the failure
to give such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the reasonable fees and disbursements
of such counsel related to such proceeding. 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 mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such consent
or if there be a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article IX. The
indemnification provisions contained in this Article IX shall survive any
termination of this Agreement.
ARTICLE X
Relationship of the Parties; Termination
10.1. Relationship of Parties. The Company is to be an independent
contractor vis-a-vis the Trust, the Distributor, or any of their affiliates for
all purposes hereunder and will have no authority to act for or represent any of
them (except to the limited extent the Company acts as agent of the Trust
pursuant to Section 2.3(a) of this Agreement). In addition, no officer or
employee of the Company will be deemed to be an employee or agent of the Trust,
Distributor, or any of their affiliates. The Company will not act as an
"underwriter" or "distributor" of the Trust, as those terms variously are used
in the 1940 Act, the 1933 Act, and rules and regulations promulgated thereunder.
10.2. Non-Exclusivity and Non-Interference. The parties hereto
acknowledge that the arrangement contemplated by this Agreement is not
exclusive; the Trust shares may be sold to other insurance companies and
investors (subject to Section 2.8 hereof) and the cash value of the Contracts
may be invested in other investment companies, provided, however, that until
this Agreement is terminated pursuant to this Article X:
(a) the Company shall promote the Trust and the Funds made
available hereunder on the same basis as other funding
vehicles available under the Contracts;
(b) the Company shall not, without prior notice to the Distributor
(unless otherwise required by applicable law), take any action
to operate the Account as a management investment company
under the 1940 Act;
(c) the Company shall not, without the prior written consent of
the Distributor (unless otherwise required by applicable law),
solicit, induce or encourage Contract Owners to change or
modify the Trust to change the Trust's distributor or
investment adviser, to transfer or withdraw Contract Values
allocated to a Fund, or to exchange their Contracts for
contracts not allowing for investment in the Trust;
(d) the Company shall not substitute another investment company
for one or more Funds without providing written notice to the
Distributor at least 60 days in advance of effecting any such
substitution; and
(e) the Company shall not withdraw the Account's investment in the
Trust or a Fund of the Trust except as necessary to facilitate
Contract Owner requests and routine Contract processing.
10.3. Termination of Agreement. This Agreement shall not terminate
until (i) the Trust is dissolved, liquidated, or merged into another entity, or
(ii) as to any Fund that has been made available hereunder, the Account no
longer invests in that Fund and the Company has confirmed in writing to the
Distributor, if so requested by the Distributor, that it no longer intends to
invest in such Fund. However, certain obligations of, or restrictions on, the
parties to this Agreement may terminate as provided in Sections 10.4 through
10.6 and the Company may be required to redeem Trust shares pursuant to Section
10.7 or in the circumstances contemplated by Article VIII. Article IX and
Sections 5.7, 10.8 and 10.9 shall survive any termination of this Agreement.
10.4. Termination of Offering of Trust Shares. The obligation of the
Trust and the Distributor to make Trust shares available to the Company for
purchase pursuant to Article II of this Agreement shall terminate at the option
of the Distributor upon written notice to the Company as provided below:
(a) upon institution of formal proceedings against the Company, or
the Distributor's reasonable determination that institution of
such proceedings is being considered by the NASD, the SEC, the
insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related to
the sale of the Contracts, the operation of the Account, the
administration of the Contracts or the purchase of Trust shares,
or an expected or anticipated ruling, judgment or outcome which
would, in the Distributor's reasonable judgment exercised in good
faith, materially impair the Company's or Trust's ability to meet
and perform the Company's or Trust's obligations and duties
hereunder, such termination effective upon 15 days prior written
notice;
(b) in the event any of the Contracts are not registered, issued or
sold in accordance with applicable federal and/or state law, such
termination effective immediately upon receipt of written notice;
(c) if the Distributor shall determine, in its sole judgment
exercised in good faith, that either (1) the Company shall have
suffered a material adverse change in its business or financial
condition or (2) the Company shall have been the subject of
material adverse publicity which is likely to have a material
adverse impact upon the business and operations of either the
Trust or the Distributor, such termination effective upon 30 days
prior written notice;
(d) if the Distributor suspends or terminates the offering of Trust
shares of any Series or Class to all Participating Investors or
only designated Participating Investors, if such action is
required by law or by regulatory authorities having jurisdiction
or if, in the sole discretion of the Distributor acting in good
faith, suspension or termination is necessary in the best
interests of the shareholders of any Series or Class (it being
understood that "shareholders" for this purpose shall mean
Product Owners), such notice effective immediately upon receipt
of written notice, it being understood that a lack of
Participating Investor interest in a Series or Class may be
grounds for a suspension or termination as to such Series or
Class and that a suspension or termination shall apply only to
the specified Series or Class;
(e) upon the Company's assignment of this Agreement (including,
without limitation, any transfer of the Contracts or the Account
to another insurance company pursuant to an assumption
reinsurance agreement) unless the Trust consents thereto, such
termination effective upon 30 days prior written notice;
(f) if the Company is in material breach of any provision of this
Agreement, which breach has not been cured to the satisfaction of
the Trust within 10 days after written notice of such breach has
been delivered to the Company, such termination effective upon
expiration of such 10-day period; or
(g) upon the determination of the Trust s Board to dissolve,
liquidate or merge the Trust as contemplated by Section 10.3(i),
upon termination of the Agreement pursuant to Section 10.3(ii),
or upon notice from the Company pursuant to Section 10.5 or 10.6,
such termination pursuant hereto to be effective upon 15 days
prior written notice.
Except in the case of an option exercised under clause (b), (d) or (g), the
obligations shall terminate only as to new Contracts and the Distributor shall
continue to make Trust shares available to the extent necessary to permit owners
of Contracts in effect on the effective date of such termination (hereinafter
referred to as "Existing Contracts") to reallocate investments in the Trust,
redeem investments in the Trust and/or invest in the Trust upon the making of
additional purchase payments under the Existing Contracts.
10.5. Termination of Investment in a Fund. The Company may elect to
cease investing in a Fund, promoting a Fund as an investment option under the
Contracts, or withdraw its investment or the Account's investment in a Fund,
subject to compliance with applicable law, upon written notice to the Trust
within 15 days of the occurrence of any of the following events (unless provided
otherwise below):
(a) if the Trust informs the Company pursuant to Section 4.4 that it
will not cause such Fund to comply with investment restrictions
as requested by the Company and the Trust and the Company are
unable to agree upon any reasonable alternative accommodations;
(b) if shares in such Fund are not reasonably available to meet the
requirements of the Contracts as determined by the Company
(including any non-availability as a result of notice given by
the Distributor pursuant to Section 10.4(d)), and the
Distributor, after receiving written notice from the Company of
such non-availability, fails to make available, within 10 days
after receipt of such notice, a sufficient number of shares in
such Fund or an alternate Fund to meet the requirements of the
Contracts;
(c) if such Fund fails to meet the diversification requirements
specified in Section 817(h) of the Code and any regulations
thereunder and the Trust, upon written request, fails to provide
reasonable assurance that it will take action to cure or correct
such failure; or
(d) if such Fund ceases to qualify as a regulated investment company
under Subchapter M of the Code, as defined therein, or any
successor or similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify, and the Trust,
upon written request, fails to provide reasonable assurance that
it will take action to cure or correct such failure within 30
days; or
Such termination shall apply only as to the affected Fund and shall not apply to
any other Fund in which the Company or the Account invests.
10.6. Termination of Investment by the Company. The Company may elect
to cease investing in all Series or Classes of the Trust made available
hereunder, promoting the Trust as an investment option under the Contracts, or
withdraw its investment or the Account s investment in the Trust, subject to
compliance with applicable law, upon written notice to the Trust within 15 days
of the occurrence of any of the following events (unless provided otherwise
below):
(a) upon institution of formal proceedings against the Trust or
the Distributor (but only with regard to the Trust) by the
NASD, the SEC or any state securities or insurance commission
or any other regulatory body; or
(b) if the Trust or Distributor is in material breach of a
provision of this Agreement, which breach has not been cured
to the satisfaction of the Company within 10 days after
written notice of such breach has been delivered to the Trust
or the Distributor, as the case may be.
10.7. Company Required to Redeem. The parties understand and
acknowledge that it is essential for compliance with Section 817(h) of the Code
that the Contracts qualify as annuity contracts or life insurance policies, as
applicable, under the Code. Accordingly, if any of the Contracts cease to
qualify as annuity contracts or life insurance policies, as applicable, under
the Code, or if the Trust reasonably believes that any such Contracts may fail
to so qualify, the Trust shall have the right to require the Company to redeem
Trust shares attributable to such Contracts upon notice to the Company and the
Company shall so redeem such Trust shares in order to ensure that the Trust
complies with the provisions of Section 817(h) of the Code applicable to
ownership of Trust shares. Notice to the Company shall specify the period of
time the Company has to redeem the Trust shares or to make other arrangements
satisfactory to the Trust and its counsel, such period of time to be determined
with reference to the requirements of Section 817(h) of the Code. In addition,
the Company may be required to redeem Trust shares pursuant to action taken or
request made by the Trust Board in accordance with the Exemptive Order described
in Article VIII or any conditions or undertakings set forth or referenced
therein, or other SEC rule, regulation or order that may be adopted after the
date hereof. The Company agrees to redeem shares in the circumstances described
herein and to comply with applicable terms and provisions. Also, in the event
that the Distributor suspends or terminates the offering of a Series or Class
pursuant to Section 10.4(d) of this Agreement, the Company, upon request by the
Distributor, will cooperate in taking appropriate action to withdraw the
Account's investment in the respective Fund.
10.8. Confidentiality. The Company will keep confidential any
information acquired as a result of this Agreement regarding the business and
affairs of the Trust, the Distributor, and their affiliates.
ARTICLE XI
Applicability to New Accounts and New Contracts
The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect, as appropriate, changes in or relating to the
Contracts, any Series or Class, additions of new classes of Contracts to be
issued by the Company and separate accounts therefor investing in the Trust.
Such amendments may be made effective by executing the form of amendment
included on each schedule attached hereto. The provisions of this Agreement
shall be equally applicable to each such class of Contracts, Series, Class or
separate account, as applicable, effective as of the date of amendment of such
Schedule, unless the context otherwise requires. The parties to this Agreement
may amend this Agreement from time to time by written agreement signed by all of
the parties.
ARTICLE XII
Notice, Request or Consent
Any notice, request or consent to be provided pursuant to this
Agreement is to be made in writing and shall be given:
If to the Trust:
Douglas C. Grip
President
Goldman Sachs Variable Insurance Trust
One New York Plaza
New York, NY 10004
If to the Distributor:
Douglas C. Grip
Vice President
Goldman Sachs & Co.
One New York Plaza
New York, NY 10004
If to the Company:
[Name]
[Title]
________________ Life Insurance Company
[Street Address]
[City, State]
or at such other address as such party may from time to time specify in writing
to the other party. Each such notice, request or consent to a party shall be
sent by registered or certified United States mail with return receipt requested
or by overnight delivery with a nationally recognized courier, and shall be
effective upon receipt. Notices pursuant to the provisions of Article II may be
sent by facsimile to the person designated in writing for such notices.
ARTICLE XIII
Miscellaneous
13.1. Interpretation. This Agreement shall be construed and the
provisions hereof interpreted under and in accordance with the laws of the state
of Delaware, without giving effect to the principles of conflicts of laws,
subject to the following rules:
(a) This Agreement shall be subject to the provisions of the 1933
Act, 1940 Act and Securities Exchange Act of 1934, as amended,
and the rules, regulations and rulings thereunder, including
such exemptions from those statutes, rules, and regulations as
the SEC may grant, and the terms hereof shall be limited,
interpreted and construed in accordance therewith.
(b) 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.
(c) 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.
(d) The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all
rights, remedies and obligations, at law or in equity, which
the parties hereto are entitled to under state and federal
laws.
13.2.Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which together shall constitute one and the same
instrument.
13.3. No Assignment. Neither this Agreement nor any of the rights and
obligations hereunder may be assigned by the Company, the Distributor or the
Trust without the prior written consent of the other parties.
13.4.Declaration of Trust. A copy of the Declaration of Trust of the Trust
is on file with the Secretary of State of the State of Delaware, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as trustees, and is not binding upon any of the Trustees, officers or
shareholders of the Trust individually, but binding only upon the assets and
property of the Trust. No Series of the Trust shall be liable for the
obligations of any other Series of the Trust.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized officer
on the date specified below.
GOLDMAN SACHS VARIABLE INSURANCE TRUST
(Trust)
Date: ___________ By:
Name:
Title:
GOLDMAN, SACHS & CO.
(Distributor)
Date: ___________ By:
Name:
Title:
__________________ LIFE INSURANCE COMPANY
(Company)
Date: ___________ By:
Name:
Title:
Schedule 1
Accounts of the Company
Investing in the Trust
Effective as of the date the Agreement was executed, the following separate
accounts of the Company are subject to the Agreement:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- ---------------------------- ============================
<S> <C> <C> <C>
Date Established by
Name of Account and Board of Directors of the SEC 1940 Act Registration Type of Product Supported
Subaccounts Company Number by Account
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
[Form of Amendment to Schedule 1]
Effective as of , the following separate accounts of the Company are hereby
added to this Schedule 1 and made subject to the Agreement:
- ----------------------------- ----------------------------- ---------------------------- ============================
<S> <C> <C> <C>
Date Established by
Name of Account and Board of Directors of the SEC 1940 Act Registration Type of Product Supported
Subaccounts Company Number by Account
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
</TABLE>
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 1 in accordance with Article XI of the Agreement.
Goldman Sachs Variable Insurance Trust [ ]
Life Insurance Company
Goldman, Sachs & Co.
Schedule 2
Classes of Contracts
Supported by Separate Accounts
Listed on Schedule 1
Effective as of the date the Agreement was executed, the following classes of
Contracts are subject to the Agreement:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- ---------------------------- ============================
<S> <C> <C> <C>
SEC 1933 Act Registration
Policy Marketing Name Number Contract Form Number Annuity or Life
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
</TABLE>
[Form of Amendment to Schedule 2]
Effective as of _______, the following classes of Contracts are hereby added to
this Schedule 2 and made subject to the Agreement:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- ---------------------------- ============================
<S> <C> <C> <C>
SEC 1933 Act Registration Name of Supporting Account
Policy Marketing Name Number Annuity or Life
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
- ----------------------------- ----------------------------- ---------------------------- ============================
</TABLE>
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 2 in accordance with Article XI of the Agreement.
Goldman Sachs Variable Insurance Trust [ ]
Life Insurance Company
Goldman, Sachs & Co.
Schedule 3
Trust Classes and Series
Available Under
Each Class of Contracts
Effective as of the date the Agreement was executed, the following Trust Classes
and Series are available under the Contracts:
<TABLE>
<CAPTION>
-------------------------------------------------------- ===============================================
<S> <C>
Contracts Marketing Name Trust Classes and Series
-------------------------------------------------------- ===============================================
-------------------------------------------------------- ===============================================
-------------------------------------------------------- ===============================================
-------------------------------------------------------- ===============================================
-------------------------------------------------------- ===============================================
-------------------------------------------------------- ===============================================
</TABLE>
[Form of Amendment to Schedule 3]
Effective as of __________________, this Schedule 3 is hereby amended to reflect
the following changes in Trust Classes and Series:
<TABLE>
<CAPTION>
-------------------------------------------------------- ===============================================
<S> <C>
Contracts Marketing Name Trust Classes and Series
-------------------------------------------------------- ===============================================
-------------------------------------------------------- ===============================================
-------------------------------------------------------- ===============================================
-------------------------------------------------------- ===============================================
-------------------------------------------------------- ===============================================
-------------------------------------------------------- ===============================================
</TABLE>
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 3 in accordance with Article XI of the Agreement.
Goldman Sachs Variable Insurance Trust [ ]
Life Insurance Company
Goldman, Sachs & Co.
Schedule 4
Investment Restrictions
Applicable to the Trust
Effective as of the date the Agreement was executed, the following investment
restrictions are applicable to the Trust:
[Form of Amendment to Schedule 4]
Effective as of ___________________, this Schedule 4 is hereby amended to
reflect the following changes:
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 4 in accordance with Article XI of the Agreement.
Goldman Sachs Variable Insurance Trust [ ]
Life Insurance Company
Goldman, Sachs & Co.
Exhibit 8(g)
PARTICIPATION AGREEMENT
By and Among
OCC ACCUMULATION TRUST
And
[INSURANCE COMPANY]
And
OCC DISTRIBUTORS
THIS AGREEMENT, made and entered into this day of _________ 199_ by and
among [INSURANCE COMPANY], a ________ Corporation (hereinafter the "Company"),
on its own behalf and on behalf of each separate account of the Company named in
Schedule 1 to this Agreement, as may be amended from time to time (each account
referred to as the "Account"), OCC ACCUMULATION TRUST, an open-end diversified
management investment company organized under the laws of the State of
Massachusetts (hereinafter the "Fund") and OCC DISTRIBUTORS, a Delaware general
partnership (hereinafter the "Underwriter").
WHEREAS, the Fund engages in business as an open-end diversified,
management investment company and was established for the purpose of serving as
the investment vehicle for separate accounts established for variable life
insurance contracts and variable annuity contracts to be offered by insurance
companies which have entered into participation agreements substantially
identical to this Agreement (hereinafter "Participating Insurance Companies");
and
WHEREAS, beneficial interests in the Fund are divided into several series
of shares, each representing the interest in a particular managed portfolio of
securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has obtained an order from the Securities & Exchange
Commission (alternatively referred to as the "SEC" or the "Commission"), dated
February 22, 1995 (File No. 812-9290), granting Participating Insurance
Companies and variable annuity separate accounts and variable life insurance
separate accounts relief from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity separate accounts and variable life insurance separate accounts of both
affiliated and unaffiliated Participating Insurance Companies and qualified
pension and retirement plans (hereinafter the "Mixed and Shared Funding
Exemptive Order");and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
annuity contracts (the "Contracts") under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of the Company
under the insurance laws of the State of _________, to set aside and invest
assets attributable to the Contracts; and
WHEREAS, the Company has registered the Account as a unit investment trust
under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios named in
Schedule 2 on behalf of the Account to fund the Contracts and the Underwriter is
authorized to sell such shares to unit investment trusts such as the Account at
net asset value; NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of the Fund
which the Company orders on behalf of the Account, executing such orders on a
daily basis at the net asset value next computed after receipt and acceptance by
the Fund or its agent of the order for the shares of the Fund. For purposes of
this Section 1.1, the Company shall be the designee of the Fund for receipt of
such orders from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives notice of such order by
10:00 a.m. Eastern Time on the next following Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which the Fund calculates its net asset value pursuant to the rules of the SEC.
1.2. The Company shall pay for Fund shares on the next Business Day after
it places an order to purchase Fund shares in accordance with Section 1.1
hereof. Payment shall be in federal funds transmitted by wire.
1.3. The Fund agrees to make its shares available indefinitely for purchase
at the applicable net asset value per share by Participating Insurance Companies
and their separate accounts on those days on which the Fund calculates its net
asset value pursuant to rules of the SEC; provided, however, that the Board of
Trustees of the Fund (hereinafter the "Directors") may refuse to sell shares of
any Portfolio to any person, or suspend or terminate the offering of shares of
any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Directors, acting in
good faith and in light of their fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the shareholders of
any Portfolio.
1.4. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts,
qualified pension and retirement plans or such other persons as are permitted
under applicable provisions of the Internal Revenue Code of 1986, as amended,
(the "Internal Revenue Code"), and regulations promulgated thereunder, the sale
to which will not impair the tax treatment currently afforded the contracts. No
shares of any Portfolio will be sold to the general public.
1.5. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, and VII of this Agreement are in
effect to govern such sales. The Fund shall make available upon written request
from the Company (i) a list of all other Participating Insurance Companies and
(ii) a copy of the Participation Agreement executed by any other Participating
Insurance Company.
1.6. The Fund agrees to redeem for cash, upon the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the request for redemption. For purposes
of this Section 1.6, the Company shall be the designee of the Fund for receipt
of requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided the Fund receives notice of request for
redemption by 10:00 a.m. Eastern Time on the next following Business Day.
Payment shall be in federal funds transmitted by wire to the Company's account
as designated by the Company in writing from time to time, on the same Business
Day the Fund receives notice of the redemption order from the Company except
that the Fund reserves the right to delay payment of redemption proceeds, but in
no event may such payment be delayed longer than the period permitted under
Section 22(e) of the 1940 Act. Neither the Fund nor the Underwriter shall bear
any responsibility whatsoever for the proper disbursement or crediting of
redemption proceeds; the Company alone shall be responsible for such action. If
notification of redemption is received after 10:00 a.m. Eastern Time, payment
for redeemed shares will be made on the next following Business Day.
1.7. The Company agrees to purchase and redeem the shares of the Portfolios
named in Schedule 2 offered by the then current prospectus of the Fund in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available under the Contracts shall be invested in the Fund, or in
the Company's general account; provided that such amounts may also be invested
in an investment company other than the Fund if (a) such other investment
company, or series thereof, has investment objectives or policies that are
substantially different from the investment objectives and policies of the
Portfolios of the Fund named in Schedule 2; or (b) the Company gives the Fund
and the Underwriter 45 days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c) such
other investment company was available as a funding vehicle for the Contracts
prior to the date of this Agreement and the Company so informs the Fund and
Underwriter prior to their signing this Agreement; or (d) the Fund or
Underwriter consents in writing to the use of such other investment company.
1.8. Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account. Purchase
and redemption orders for Fund shares will be recorded in an appropriate title
for each Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish notice as soon as reasonably practicable to the
Company of any income, dividends or capital gain distributions payable on the
Fund's shares. The Company hereby elects to receive all such dividends and
distributions as are payable on the Portfolio shares in the form of additional
shares of that Portfolio. The Company reserves the right to revoke this election
and to receive all such dividends and distributions in cash. The Fund shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.10. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 5:30 p.m., Eastern Time, each
business day.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act and that the Contracts will be issued and sold in
compliance with all applicable federal and state laws. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account as a segregated asset account under applicable state
law and has registered each Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as segregated investment accounts
for the Contracts, and that it will maintain such registration for so long as
any Contracts are outstanding. The Company shall amend the registration
statement under the 1933 Act for the Contracts and the registration statement
under the 1940 Act for the Account from time to time as required in order to
effect the continuous offering of the Contracts or as may otherwise be required
by applicable law. The Company shall register and qualify the Contracts for sale
in accordance with the securities laws of the various states only if and to the
extent deemed necessary by the Company.
2.2. The Company represents that it believes that the Contracts are
currently and at the time of issuance will be treated as annuity contracts under
applicable provisions of the Internal Revenue Code and that it will make every
effort to maintain such treatment and that it will notify the Fund and the
Underwriter immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.3. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for as long as the Fund shares are sold. The Fund
shall amend the registration statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.4. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code, and that it
will make every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the Company immediately
upon having a reasonable basis for believing that it has ceased to so qualify or
that it might not so qualify in the future.
2.5. The Fund represents that its investment objectives, policies and
restrictions comply with applicable state investment laws as they may apply to
the Fund. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws and regulations of any state. The
Company alone shall be responsible for informing the Fund of any insurance
restrictions imposed by state insurance laws which are applicable to the Fund.
To the extent feasible and consistent with market conditions, the Fund will
adjust its investments to comply with the aforementioned state insurance laws
upon written notice from the Company of such requirements and proposed
adjustments, it being agreed and understood that in any such case the Fund shall
be allowed a reasonable period of time under the circumstances after receipt of
such notice to make any such adjustment.
2.6. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to
have its Board of Trustees, a majority of whom are not interested persons of the
Fund, formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.7. The Underwriter represents and warrants that it is a member in good
standing of the National Association of Securities Dealers, Inc., ("NASD") and
is registered as a broker-dealer with the SEC. The Underwriter further
represents that it will sell and distribute the Fund shares in accordance with
all applicable federal and state securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly existing
under the laws of Massachusetts and that it does and will comply with applicable
provisions of the 1940 Act.
2.9. The Underwriter represents and warrants that the Fund's Adviser, OpCap
Advisors, is and shall remain duly registered under all applicable federal and
state securities laws and that the Adviser will perform its obligations to the
Fund in accordance with the laws of Massachusetts and any applicable state and
federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of the Fund
are and continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, in an amount not less than
$5 million. The aforesaid includes coverage for larceny and embezzlement and is
issued by a reputable bonding company. The Company agrees to make all reasonable
efforts to see that this bond or another bond containing these provisions is
always in effect, and agrees to notify the Fund and the Underwriter in the event
that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company, at the Company's expense,
with as many copies of the Fund's current prospectus as the Company may
reasonably request for use with prospective contractowners and applicants. The
Underwriter shall print and distribute, at the Fund's or Underwriter's expense,
as many copies of said prospectus as necessary for distribution to existing
contractowners or participants. If requested by the Company in lieu thereof, the
Fund shall provide such documentation including a final copy of a current
prospectus set in type at the Fund's expense and other assistance as is
reasonably necessary in order for the Company at least annually (or more
frequently if the Fund prospectus is amended more frequently) to have the new
prospectus for the Contracts and the Fund's new prospectus printed together in
one document. In such case the Fund shall bear its share of expenses as
described above.
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter or alternatively from
the Company (or, in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund), and the Underwriter (or the Fund) shall
provide such Statement, at its expense, to the Company and to any owner of or
participant under a Contract who requests such Statement or, at the Company's
expense, to any prospective contractowner and applicant who requests such
statement.
3.3. The Fund, at its expense, shall provide the Company with copies of its
proxy material, if any, reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require and shall
bear the costs of distributing them to existing contractowners or participants.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contractowners or participants;
(ii) vote the Fund shares held in the Account in accordance with
instructions received from contractowners or participants; and
(iii)vote Fund shares held in the Account for which no timely
instructions have been received, in the same proportion as Fund
shares of such Portfolio for which instructions have been
received from the Company's contractowners or participants;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass through voting privileges for variable contractowners. The Company
reserves the right to vote Fund shares held in any segregated asset account in
its own right, to the extent permitted by law. Participating Insurance Companies
shall be responsible for assuring that each of their separate accounts
participating in the Fund calculates voting privileges in a manner consistent
with other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular as required, the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
the Fund will act in accordance with the SEC interpretation of the requirements
of Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the Fund
or the Underwriter, each piece of sales literature or other promotional material
in which the Fund or the Fund's adviser or the Underwriter is named, at least
fifteen business days prior to its use. No such material shall be used if the
Fund or the Underwriter reasonably objects in writing to such use within fifteen
business days after receipt of such material.
4.2. The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus for the Fund shares, as
such registration statement and prospectus may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or by the
Underwriter, except with the permission of the Fund or the Underwriter. The Fund
and the Underwriter agree to respond to any request for approval on a prompt and
timely basis.
4.3. The Fund or the Underwriter shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or its separate account is
named, at least fifteen business days prior to its use. No such material shall
be used if the Company reasonably objects in writing to such use within fifteen
business days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to contractowners or participants,
or in sales literature or other promotional material approved by the Company,
except with the permission of the Company. The Company agrees to respond to any
request for approval on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the SEC or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Contracts or
each Account, contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, prospectuses,
statements of additional information, shareholder reports, and proxy materials
and any other material constituting sales literature or advertising under NASD
rules, the 1940 Act or the 1933 Act.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other compensation to the
Company under this Agreement, except that if the Fund or any Portfolio adopts
and implements a plan pursuant to Rule 12b-1 to finance distribution expenses,
then, subject to obtaining any required exemptive orders or other regulatory
approvals, the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund of this Agreement
shall be paid by the Fund to the extent permitted by law. All Fund shares will
be duly authorized for issuance and registered in accordance with applicable
federal law and to the extent deemed advisable by the Fund, in accordance with
applicable state law, prior to sale. The Fund shall bear the expenses for the
cost of registration and qualification of the Fund's shares, preparation and
filing of the Fund's prospectus and registration statement, Fund proxy materials
and reports, setting in type, printing and distributing the prospectuses, the
proxy materials and reports to existing shareholders and contractowners, the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Fund's shares, and any expenses
permitted to be paid or assumed by the Fund pursuant to a plan, if any, under
Rule 12b-1 under the 1940 Act.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Internal Revenue Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will comply with Section 817(h) of
the Internal Revenue Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations in accordance with guidelines provided by the Company prior to the
execution of this Agreement and as necessary thereafter. In the event of a
breach of this Article VI by the Fund, it will take all reasonable steps (a) to
notify the Company of such breach and (b) to adequately diversify the Fund so as
to achieve compliance with the grace period afforded by Treasury Regulation
1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board of Trustees of the Fund (the "Fund Board") will monitor the
Fund for the existence of any material irreconcilable conflict among the
interests of the contractowners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by
Participating Insurance Companies or by variable annuity contract and variable
life insurance contractowners; or (f) a decision by an insurer to disregard the
voting instructions of contractowners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications thereof. A majority of the Fund Board shall consist of persons who
are not "interested" persons of the Fund.
7.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth therein. As set forth in the Mixed and Shared Funding Exemptive
Order, the Company will report any potential or existing conflicts of which it
is aware to the Fund Board. The Company agrees to assist the Fund Board in
carrying out its responsibilities under the Mixed and Shared Funding Exemptive
Order, by providing the Fund Board with all information reasonably necessary for
the Fund Board to consider any issues raised. This includes, but is not limited
to, an obligation by the Company to inform the Fund Board whenever contractowner
voting instructions are disregarded. The Fund Board shall record in its minutes
or other appropriate records, all reports received by it and all action with
regard to a conflict.
7.3. If it is determined by a majority of the Fund Board, or a majority of
its disinterested Directors, that an irreconcilable material conflict exists,
the Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested Directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contractowners and, as appropriate, segregating the assets of
any appropriate group (i.e., variable annuity contractowners or variable life
insurance contractowners, of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected contractowners
the option of making such a change; and (2) establishing a new registered
management investment company or managed separate account.
7.4. If the Company's disregard of voting instructions could conflict with
the majority of contractowner voting instructions, and the Company's judgment
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the Account's investment in
the Fund and terminate this Agreement with respect to such Account. Any such
withdrawal and termination must take place within 60 days after the Fund gives
written notice to the Company that this provision is being implemented. Until
the end of such 60 day period the Underwriter and Fund shall continue to accept
and implement orders by the Company for the purchase (and redemption) of shares
of the Fund.
7.5. If a particular state insurance regulator's decision applicable to the
Company conflicts with the majority of other state insurance regulators, then
the Company will withdraw the Account's investment in the Fund and terminate
this Agreement with respect to such Account. Any such withdrawal and termination
must take place within 60 days after the Fund gives written notice to the
Company that this provision is being implemented. Until the end of such 60 day
period the Underwriter and Fund shall continue to accept and implement orders by
the Company for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Fund Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund or Quest Advisors be required to establish a new funding
medium for the Contracts. The Company shall not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of contractowners materially adversely affected
by the irreconcilable material conflict.
7.7. The Company shall at least annually submit to the Fund Board such
reports, materials or data as the Fund Board may reasonably request so that the
Fund Board may fully carry out the duties imposed upon it as delineated in the
Mixed and Shared Funding Exemptive Order, and said reports, materials and data
shall be submitted more frequently if deemed appropriate by the Fund Board.
7. 8. If and to the extent that Rule 6e-2 and Rule 6e-3 (T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Mixed and Shared Funding
Exemptive Order, (a) the Fund and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rules 6e-2
and 6e-3 (T), as amended, and Rule 6e-3, as adopted, to the extent such rules
are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this
Agreement shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company (a) The Company agrees to indemnify and
hold harmless the Fund, the Underwriter, and each of the Fund's or the
Underwriter's directors, officers, employees or agents and each person, if any,
who controls or is associated with the Fund or the Underwriter within the
meaning of such terms under the federal securities laws (collectively, the
"indemnified parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including reasonable legal
and other expenses), to which the indemnified parties may become subject under
any statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Contracts or contained in the Contracts or
sales literature or other promotional material for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this agreement to indemnify shall not apply as to
any indemnified party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on
behalf of the Fund for use in the registration statement,
prospectus or statement of additional information for the
Contracts or in the Contracts or sales literature or other
promotional material for the Contracts (or any amendment or
supplement) or otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations by
or on behalf of the Company (other than statements or
representations contained in the Fund registration statement,
Fund prospectus, Fund statement of additional information or
sales literature or other promotional material of the Fund not
supplied by the Company or persons under its control) or wrongful
conduct of the Company or persons under its control, with respect
to the sale or distribution of the Contracts or Fund shares; or
(iii)arise out of any untrue statement or alleged untrue statement of
a material fact contained in the Fund registration statement,
Fund prospectus, statement of additional information or sales
literature or other promotional material of the Fund or any
amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made,
if such a statement or omission was made in reliance upon and in
conformity with information furnished to the Fund by or on behalf
of the Company or persons under its control; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials or to make any payments under
the terms of this Agreement; or
(v) arise out of any material breach of any representation and/or
warranty made by the Company in this Agreement or arise out of or
result from any other material breach by the Company of this
Agreement;
except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
(b) No party shall be entitled to indemnification if such
loss, claim, damage, liability or litigation is due to the willful misfeasance,
bad faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the Company
of the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Contracts or the operation
of the Fund.
8.2. Indemnification By the Underwriter
(a) The Underwriter, on its own behalf and on behalf of the
Fund, agrees to indemnify and hold harmless the Company and each of its
directors, officers, employees or agents and each person, if any, who controls
or is associated with the Company within the meaning of such terms under the
federal securities laws (collectively, the "indemnified parties" for purposes of
this Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Underwriter) or litigation (including reasonable legal and other expenses) to
which the indemnified parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Fund or sales literature or other promotional
material of the Fund (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this agreement to indemnify shall not apply as to
any indemnified party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Underwriter or Fund
by or on behalf of the Company for use in the registration
statement, prospectus or statement of additional information for
the Fund or in sales literature or other promotional material of
the Fund (or any amendment or supplement thereto) or otherwise
for use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Contracts or in the Contract or Fund registration statement, the
Contract or Fund prospectus, statement of additional information,
or sales literature or other promotional material for the
Contracts or of the Fund not supplied by the Underwriter or the
Fund or persons under the control of the Underwriter or the Fund
respectively) or wrongful conduct of the Underwriter or the Fund
or persons under the control of the Underwriter or the Fund
respectively, with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii)arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement,
prospectus, statement of additional information or sales
literature or other promotional material covering the Contracts
(or any amendment thereof or supplement thereto), or the omission
or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement or
statements therein not misleading in light of the circumstances
in which they were made, if such statement or omission was made
in reliance upon and in conformity with information furnished to
the Company by or on behalf of the Underwriter or the Fund or
persons under the control of the Underwriter or the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements and procedures related thereto specified in Article
VI of this Agreement except if such failure is a result of the
Company's failure to comply with the notification procedures
specified in Article VI); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter or the
Fund in this Agreement or arise out of or result from any other
material breach of this Agreement by the Underwriter or the Fund;
except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Underwriter may
otherwise have.
(b) No party shall be entitled to indemnification if such
loss, claim, damage, liability or litigation is due to the willful misfeasance,
bad faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the
Underwriter of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Contracts or the operation of the
Account.
8.3. Indemnification Procedure
Any person obligated to provide indemnification under this
Article VIII ("indemnifying party" for the purpose of this Section 8.3) shall
not be liable under the indemnification provisions of this Article VIII with
respect to any claim made against a party entitled to indemnification under this
Article VIII ("indemnified party" for the purpose of this Section 8.3) unless
such indemnified party shall have notified the indemnifying party in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
indemnified party (or after such party shall have received notice of such
service on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve the indemnifying party from any liability
which it may have to the indemnified party against whom such action is brought
under the indemnification provision of this Article VIII, except to the extent
that the failure to notify results in the failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result of
failure to give such notice. In case any such action is brought against the
indemnified party, the indemnifying party will be entitled to participate, at
its own expense, in the defense thereof. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the indemnifying party to the indemnified
party of the indemnifying party's election to assume the defense thereof, the
indemnified party shall bear the fees and expenses of any additional counsel
retained by it, and the indemnifying party will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation, unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written consent
but if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this Article VIII.
The indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
8.4. Contribution
In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Article VIII is
due in accordance with its terms but for any reason is held to be unenforceable
with respect to a party entitled to indemnification ("indemnified party" for
purposes of this Section 8.4) pursuant to the terms of this Article VIII, then
each party obligated to indemnify pursuant to the terms of this Article VIII
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and litigations in such
proportion as is appropriate to reflect the relative benefits received by the
parties to this Agreement in connection with the offering of Fund shares to the
Account and the acquisition, holding or sale of Fund shares by the Account, or
if such allocation is not permitted by applicable law, in such proportions as is
appropriate to reflect the relative net benefits referred to above but also the
relative fault of the parties to this Agreement in connection with any actions
that lead to such losses, claims, damages, liabilities or litigations, as well
as any other relevant equitable considerations.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to the Mixed and Shared Funding Exemptive Order) and
the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one-year advance written notice
to the other parties unless otherwise agreed in a separate
written agreement among the parties; or
(b) at the option of the Company if shares of the Portfolios
delineated in Schedule 2 are not reasonably available to meet the
requirements of the Contracts as determined by the Company; or
(c) at the option of the Fund upon institution of formal proceedings
against the Company by the NASD, the SEC, the insurance
commission of any state or any other regulatory body regarding
the Company's duties under this Agreement or related to the sale
of the Contracts, the administration of the Contracts, the
operation of the Account, or the purchase of the Fund shares,
which would have a material adverse effect on the Company's
ability to perform its obligations under this Agreement; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund or the Underwriter by the NASD, the
SEC, or any state securities or insurance department or any other
regulatory body, which would have a material adverse effect on
the Fund's or the Underwriter's ability to perform its
obligations under this Agreement; or
(e) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the
contractowners having an interest in the Account (or any
subaccount) to substitute the shares of another investment
company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those
Portfolio shares had been selected to serve as the underlying
investment media. The Company will give 30 days prior written
notice to the Fund of the date of any proposed vote or other
action taken to replace the Fund's shares; or
(f) at the option of the Company or the Fund upon a determination by
a majority of the Fund Board, or a majority of the disinterested
Fund Board members, that an irreconcilable material conflict
exists among the interests of (i) all contractowners of variable
insurance products of all separate accounts or (ii) the interests
of the Participating Insurance Companies investing in the Fund as
delineated in Article VII of this Agreement; or
(g) at the option of the Company if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Internal
Revenue Code, or under any successor or similar provision, or if
the Company reasonably believes that the Fund may fail to so
qualify; or
(h) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Article VI hereof; or
(i) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(j) at the option of the Company, if the Company determines in its
sole judgment exercised in good faith, that either the Fund or
the Underwriter has suffered a material adverse change in its
business, operations or financial condition since the date of
this Agreement or is the subject of material adverse publicity
which is likely to have a material adverse impact upon the
business and operations of the Company; or
(k) at the option of the Fund or Underwriter, if the Fund or
Underwriter respectively, shall determine in its sole judgment
exercised in good faith, that the Company has suffered a material
adverse change in its business, operations or financial condition
since the date of this Agreement or is the subject of material
adverse publicity which is likely to have a material adverse
impact upon the business and operations of the Fund or
Underwriter; or
(l) at the option of the Fund in the event any of the Contracts are
not issued or sold in accordance with applicable federal and/or
state law. Termination shall be effective immediately upon such
occurrence without notice.
10.2. Notice Requirement
(a) In the event that any termination of this Agreement is based upon
the provisions of Article VII, such prior written notice shall be
given in advance of the effective date of termination as required
by such provisions.
(b) In the event that any termination of this Agreement is based upon
the provisions of Sections 10.1(b) - (d) or 10.1(g) - (i), prompt
written notice of the election to terminate this Agreement for
cause shall be furnished by the party terminating the Agreement
to the non-terminating parties, with said termination to be
effective upon receipt of such notice by the non-terminating
parties.
(c) In the event that any termination of this Agreement is based upon
the provisions of Sections 10.1(j) or 10.1(k), prior written
notice of the election to terminate this Agreement for cause
shall be furnished by the party terminating this Agreement to the
non-terminating parties. Such prior written notice shall be given
by the party terminating this Agreement to the non-terminating
parties at least 30 days before the effective date of
termination.
10.3. It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
10.4. Effect of Termination
(a) Notwithstanding any termination of this Agreement pursuant to
Section 10.1 of this Agreement, and subject to Section 1.3 of
this Agreement, the Company may require the Fund and the
Underwriter to, continue to make available additional shares of
the Fund for so long after the termination of this Agreement as
the Company desires pursuant to the terms and conditions of this
Agreement as provided in paragraph (b) below, for all Contracts
in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making
of additional purchase payments under the Existing Contracts. The
parties agree that this Section 10.4 shall not apply to any
terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
(b) If shares of the Fund continue to be made available after
termination of this Agreement pursuant to this Section 10.4, the
provisions of this Agreement shall remain in effect except for
Section 10.1(a) and thereafter the Fund, the Underwriter, or the
Company may terminate the Agreement, as so continued pursuant to
this Section 10.4, upon written notice to the other party, such
notice to be for a period that is reasonable under the
circumstances but, if given by the Fund or Underwriter, need not
be for more than 90 days.
10.5. Except as necessary to implement contractowner initiated or approved
transactions, or as required by state insurance laws or regulations, the Company
shall not redeem Fund shares attributable to the Contracts (as opposed to Fund
shares attributable to the Company's assets held in the Account), and the
Company shall not prevent contractowners from allocating payments to a Portfolio
that was otherwise available under the Contracts, until 90 days after the
Company shall have notified the Fund or Underwriter of its intention to do so.
ARTICLE XI. Notices
Any notice shall be deemed duly given only if sent by hand, evidenced
by written receipt or by certified mail, return receipt requested, to the other
party at the address of such party set forth below or at such other address as
such party may from time to time specify in writing to the other party. All
notices shall be deemed given three business days after the date received or
rejected by the addressee.
If to the Fund:
Mr. Bernard H. Garil
President
OpCap Advisors
200 Liberty Street
New York, NY 10281
If to the Company:
[Name]
[Title]
[Co. Name]
[Address]
If to the Underwriter:
Deborah Kaback, Esq.
Secretary
OCC Distributors
200 Liberty Street
New York, NY 10281
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither the
Directors, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party hereto shall
treat as confidential all information reasonably identified as such in writing
by any other party hereto (including without limitation the names and addresses
of the owners of the Contracts) and, except as contemplated by this Agreement,
shall not disclose, disseminate or utilize such confidential information until
such time as it may come into the public domain without the express prior
written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6. This Agreement shall not be assigned by any party hereto without the
prior written consent of all the parties.
12.7. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit each other and such
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
12.9. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the Contracts,
the Accounts or the Portfolios of the Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed in its name and behalf by its duly authorized
representative as of the date and year first written above.
Company:
[NAME OF INSURANCE COMPANY]
SEAL By: ______________________________
Fund:
OCC ACCUMULATION TRUST
SEAL By: ______________________________
Underwriter:
OCC DISTRIBUTORS
By: ______________________________
Schedule 1
Participation Agreement
Among
OCC Accumulation Trust, [Insurance Company]
and
OCC Distributors
The following separate accounts of [Insurance Company] are permitted in
accordance with the provisions of this Agreement to invest in Portfolios of the
Fund shown in Schedule 2:
[name of Separate Account(s)]
[Date]
Schedule 2
Participation Agreement
Among
OCC Accumulation Trust, [Insurance Company]
and
OCC Distributors
The Separate Account(s) shown on Schedule 1 may invest in the following
Portfolios of the OCC Accumulation Trust:
[Date]
