<PAGE>
As filed with the Securities and Exchange Commission on March [2], 1998.
Registration No. 333-xxxxx
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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LINCOLN BENEFIT LIFE VARIABLE LIFE ACCOUNT
(Exact Name of Trust)
LINCOLN BENEFIT LIFE COMPANY
(Name of Depositor)
206 South 13th Street
Lincoln, Nebraska 68508
(Complete Address of Depositor's Principal Executive Offices)
John Morris
LINCOLN BENEFIT LIFE COMPANY
206 South 13th Street
Lincoln, Nebraska 68508
(Name and Complete Address of Agent for Service)
Copy to:
Joan E. Boros, Esquire
Jordan Burt Boros Cicchetti Berenson & Johnson
1025 Thomas Jefferson Street, N.W.
Washington, D.C. 20007-5201
Securities being offered -- flexible premium variable universal life insurance
policies.
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Approximate date of proposed public offering: as soon as practicable after the
effective date of this registration statement.
The registrant hereby declares that it is registering an indefinite amount of
securities pursuant to Rule 24f-2 under 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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<PAGE>
CROSS REFERENCE SHEET TO PROSPECTUS
Cross reference sheet pursuant to Rule 404(c) showing location in Prospectus of
information required by Items of Form N-8B-2.
Item Number in Form N-8B-2 Caption in Prospectus
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ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of trust . . . . . . . . . . . . . . . Cover, Definitions
(b) Title of each class of securities issued . Cover, Purchase of
Policy and Allocation
of Premiums
2. Name & address of each depositor . . . . . . . . Cover, Lincoln Benefit
Life Company
3. Name & address of custodian . . . . . . . . . . Separate Account
4. Name & address of principal underwriter . . . . Distribution of
Policies
5. State in which organized . . . . . . . . . . . . Separate Account
6. Date of organization . . . . . . . . . . . . . . Separate Account
9. Material litigation . . . . . . . . . . . . . . Legal Proceedings
GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
GENERAL INFORMATION CONCERNING SECURITIES AND RIGHTS OF HOLDERS
10. (a), (b)Type of Securities . . . . . . . . . . . Cover, Purchase of
Policy and Allocation
of Premiums
(c) Rights of securityholders . . . . . . . . . Cover, Amount Payable
re: withdrawal or redemption on Surrender of the
Policy, Policy Loans,
Cancellation and
Exchange Rights
(d) Rights of securityholders . . . . . . . . . Cover, Cancellation
re: conversion, transfer or partial and Exchange Rights,
withdrawal Amount Payable on
Surrender of the
Policy, Partial
Withdrawals,
Allocation Of
Premiums, Transfer of
Policy Value
(e) Rights of securityholders . . . . . . . . . Lapse and
re: lapses, default, & reinstatement Reinstatement
(f) Provisions re: voting rights . . . . . . . Voting Rights
(g) Notice to securityholders . . . . . . . . . Statements to Policy
Owners
(h) Consent of Securityholders . . . . . . . . Additions, Deletions
or Substitutions of
Securities, Allocation
of Premiums
(i) Other principal features . . . . . . . . . Deductions and
Charges, Policy
Benefits and Rights,
Policy Value
<PAGE>
INFORMATION CONCERNING SECURITIES UNDERLYING TRUST'S SECURITIES
11. Unit of specified securities in which security
holders have an interest . . . . . . . . . . . . Cover, Portfolios
12. (a)-(d) Name of company, name & address of its
custodian . . . . . . . . . . . . . . . . . . . Cover, Portfolios
INFORMATION CONCERNING LOADS, FEES, CHARGES & EXPENSES
13. (a) With respect to each load, fee, charge &
expense . . . . . . . . . . . . . . . . . . Deductions and Charges
(b) Deductions for sales charges . . . . . . . Premium Tax Charge and
Premium Expense
Charge, Surrender
Charge
(c) Sales load as percentage
of amount invested. . . . . . . . . . . . . Premium Tax Charge and
Premium Expense
Charge, Surrender
Charge
(d)-(g) Other loads, fees & expenses . . . . . . Monthly Deduction,
Premium Tax Charge and
Premium Expense
Charge, Mortality and
Expense Risk Charge,
Transfer Fee, Policy
Fee, Portfolio
Expenses
INFORMATION CONCERNING OPERATION OF TRUST
14. Procedure for applications for & issuance of
trust's securities . . . . . . . . . . . . . . . Application for a
Policy, Allocation of
Premiums, Distribution
of Policies
15. Procedure for receipt of payments from purchases
of trust's securities . . . . . . . . . . . . . Application for a
Policy, Allocation of
Premiums, Premiums,
Safety Net Premium,
Transfer of Policy
Value
16. Acquisition and disposition of underlying
securities . . . . . . . . . . . . . . . . . . . Cover, Portfolios
17. (a) Procedure for withdrawal . . . . . . . . . Cover, Amount Payable
on Surrender of the
Policy, Partial
Withdrawals,
Cancellation and
Exchange Rights
(b) Redemption or repurchase . . . . . . . . . Cover, Amount Payable
on Surrender of the
Policy, Partial
Withdrawals,
Cancellation and
Exchange Rights
(c) Cancellation or resale . . . . . . . . . . Not Applicable
18. (a) Income of the Trust . . . . . . . . . . . . Portfolios, Allocation
of Premiums
19. Procedure for keeping records & furnishing
information to securityholders . . . . . . . . . Portfolios, Statements
to Policy Owners
<PAGE>
21. (a) & (b) Loans to securityholders . . . . . . . Policy Loans
23. Bonding arrangements for depositor . . . . . . . Safekeeping of the
Separate Account's
Assets
24. Other material provisions . . . . . . . . . . . General Policy
Provisions
ORGANIZATION, PERSONNEL & AFFILIATED PERSONS OF DEPOSITOR
ORGANIZATION & OPERATIONS OF DEPOSITOR
25. Form, state & date of organization
of depositor . . . . . . . . . . . . . . . . . . Lincoln Benefit Life
Company
27. General character of business of depositor . . . Lincoln Benefit Life
Company
28. (a) Officials and affiliates of the depositor . Lincoln Benefit Life
Company, Executive
Officers and Directors
of Lincoln Benefit
(b) Business experience of officers and
directors of the depositor . . . . . . . . Executive Officers and
Directors of Lincoln
Benefit
COMPANIES OWNING SECURITIES OF DEPOSITOR
29. Each company owning 5% of voting securities of
depositor . . . . . . . . . . . . . . . . . . . Lincoln Benefit Life
Company
CONTROLLING PERSONS
30. Control of depositor . . . . . . . . . . . . . . Lincoln Benefit Life
Company
DISTRIBUTION & REDEMPTIONS OF SECURITIES
DISTRIBUTION OF SECURITIES
35. Distribution . . . . . . . . . . . . . . . . . . Lincoln Benefit Life
Company, Distribution
of Policies
38. (a) General description of method of
distribution of securities . . . . . . . . Distribution of
Policies
(b) Selling agreement between trust or depositor
& underwriter . . . . . . . . . . . . . . . Distribution of
Policies
(c) Substance of current agreements . . . . . . Distribution of
Policies
PRINCIPAL UNDERWRITER
39. (a) & (b) Principal Underwriter . . . . . . . . Distribution of
Policies
41. Character of Underwriter's business . . . . . . Distribution of
Policies
OFFERING PRICE OR ACQUISITION VALUE OF SECURITIES OF TRUST
44. Information concerning offering price or
acquisition valuation of securities of trust.
(All underlying securities are shares in
registered investment companies.) . . . . . . . Portfolios, Policy
Value, Net Investment
Factor
REDEMPTION VALUATION OF SECURITIES OF TRUST
46. Information concerning redemption valuation of Portfolios, Policy
securities of trust. (All underlying securities Value, Net Investment
are shares in a registered investment company.) Factor
<PAGE>
PURCHASE & SALE OF INTERESTS IN UNDERLYING SECURITIES
47. Maintenance of Position . . . . . . . . . . . . Cover, Separate
Account, Portfolios,
Allocation of Premiums
INFORMATION CONCERNING TRUSTEE OR CUSTODIAN
48. Custodian of trust . . . . . . . . . . . . . . . Separate Account
50. Lien on trust assets . . . . . . . . . . . . . . Separate Account
INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. (a) Name & address of insurer . . . . . . . . . Cover, Lincoln Benefit
Life Company
(b) Types of policies . . . . . . . . . . . . . Cover, Purchase of
Policy and Allocation
of Premiums, Federal
Tax Considerations
(c) Risks insured & excluded . . . . . . . . . Death Benefit, Other
Insurance Benefits,
Misstatements as to
Age and Sex, Suicide
(d) Coverage . . . . . . . . . . . . . . . . . Cover, Purchase of
Policy and Allocation
of Premiums
(e) Beneficiaries . . . . . . . . . . . . . . . Death Benefit,
Beneficiary
(f) Terms of cancellations & reinstatement . . Lapse and Reinstatement
(g) Method of determining amount of premium paid
by holder . . . . . . . . . . . . . . . . . Purchase of Policy and
Allocation of Premiums
POLICY OF REGISTRANT
52. (a) & (c) Selection of Portfolio securities . . Additions, Deletions
or Substitutions of
Securities
REGULATED INVESTMENT COMPANY
53. (a) Taxable status of trust . . . . . . . . . . Taxation of Lincoln
Benefit and the
Separate Account
FINANCIAL AND STATISTICAL INFORMATION
59. Financial Statements . . . . . . . . . . . . . . Financial Statements
*Items not listed are not applicable to this Registration Statement.
<PAGE>
PROSPECTUS
FLEXIBLE PREMIUM
VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
ISSUED BY
LINCOLN BENEFIT LIFE COMPANY
IN CONNECTION WITH
LINCOLN BENEFIT LIFE VARIABLE LIFE ACCOUNT
STREET ADDRESS: 206 SOUTH 13TH ST., LINCOLN, NE 68508-1993
MAILING ADDRESS: P. O. BOX 82532, LINCOLN, NE 68501-2532
TELEPHONE NUMBER: 1-800-865-5237
This prospectus describes a Flexible Premium Variable Universal Life Insurance
Policy (the "Policy") offered by Lincoln Benefit Life Company ("us" or "Lincoln
Benefit"). Lincoln Benefit is owned by Allstate Life Insurance Company.
The Policy is designed to provide both life insurance protection and flexibility
in connection with premium payments and death benefits. The Policy is designed
for prospective insured persons age 0-80. Subject to certain restrictions, you
may vary the frequency and amount of the premium payments and increase or
decrease the level of life insurance benefits payable under the Policy. This
flexibility allows you to provide for your changing insurance needs within the
confines of a single insurance contract.
When the Insured dies, we will pay a Death Benefit to a Beneficiary specified by
you. We will reduce the amount of the Death Benefit payment by any unpaid Policy
loans and any unpaid Policy charges. You may choose one of two Death Benefit
options: (1) a level amount, which generally equals the Face Amount of the
Policy; or (2) a variable amount, which generally equals the Face Amount plus
the Policy Value. While the Policy remains in force, the Death Benefit will not
be less than the maximum of the current Face Amount of the Policy or the Policy
Value multiplied by the applicable corridor percentage specified in the Policy.
The minimum Face Amount of the Policy is $100,000.
We allocate your Premium to the investment options under the Policy and our
Fixed Account in the proportions that you choose. The Policy currently offers
thirty-seven investment options, each of which is a Subaccount of the Lincoln
Benefit Life Variable Life Account (the "Separate Account"). Each Subaccount
invests exclusively in shares of one of the following Portfolios:
JANUS ASPEN SERIES: Flexible Income Portfolio, Balanced Portfolio, Growth
Portfolio, Aggressive Growth Portfolio, Worldwide Growth Portfolio
FEDERATED INSURANCE MANAGEMENT SERIES: Utility Fund II, Fund for U.S. Government
Securities II, High Income Bond Fund II
FIDELITY VARIABLE INSURANCE PRODUCTS FUND: Money Market Portfolio, Equity-Income
Portfolio, Growth Portfolio, Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II: Asset Manager Portfolio,
Contrafund Portfolio, Index 500 Portfolio
THE ALGER AMERICAN FUND: Income and Growth Portfolio, Small Capitalization
Portfolio, Growth Portfolio, MidCap Growth Portfolio, Leveraged AllCap Portfolio
SCUDDER VARIABLE LIFE INVESTMENT FUND: Bond Portfolio, Balanced Portfolio,
Growth and Income Portfolio, Global Discovery Portfolio, International Portfolio
STRONG VARIABLE INSURANCE FUNDS, INC.: Discovery Fund II, Opportunity Fund II,
Growth Fund II
T. ROWE PRICE INTERNATIONAL SERIES, INC.: International Stock Portfolio
T. ROWE PRICE EQUITY SERIES, INC.: New America Growth Portfolio, Mid-Cap Growth
Portfolio, Equity Income Portfolio
MFS VARIABLE INSURANCE TRUST: Growth with Income Series, Research Series,
Emerging Growth Series, Total Return Series, New Discovery Series
We may make other investment options available in the future.
The Policy does not have a guaranteed minimum Policy Value. Your Policy Value
will rise and fall, depending on the investment performance of the Portfolios
underlying the Subaccounts to which you allocate your Premiums. 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
prospectus for the Portfolios. The Policy Value will also reflect Premiums,
amounts withdrawn, and any insurance or other charges.
(continued on next page)
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 9, 1998.
1
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The Policy will remain in force as long as the Net Surrender Value is sufficient
to pay the monthly charges under the Policy. In addition, during the first ten
Policy Years, or until the Policy Anniversary after the Insured's 80th birthday,
if earlier, we guarantee that the Policy will remain in effect regardless of
changes in the Policy Value, as long as your total Premiums (less partial
withdrawals and Policy Debt) at least equal the applicable Safety Net Premiums,
as described on pages 9.
We will not accept any Premium which would cause the Policy not to qualify as a
life insurance contract under the Internal Revenue Code of 1986 (the "Tax
Code").
You may cancel the Policy by returning it to us within 10 days after you receive
it, or after whatever longer period may be permitted by state law. We will
refund the Policy Value as of the date we receive your Policy, plus any charges
previously deducted, unless your state requires a refund of Premium.
IT MAY NOT BE ADVANTAGEOUS FOR YOU TO REPLACE EXISTING INSURANCE COVERAGE OR BUY
ADDITIONAL INSURANCE IF YOU ALREADY OWN A VARIABLE LIFE INSURANCE POLICY.
THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR THE
PORTFOLIOS LISTED ABOVE. IF ANY OF THE PROSPECTUSES ARE 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.
This Policy may not be available in all states.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
DEFINITIONS................................... 4
QUESTIONS AND ANSWERS ABOUT YOUR POLICY....... 5
PURCHASE OF POLICY AND ALLOCATION OF
PREMIUMS...................................... 8
Application for a Policy...................... 8
Premiums...................................... 8
Premium Limits................................ 8
Modified Endowment Contracts.................. 8
Safety Net Premium............................ 9
Allocation of Premiums........................ 9
Policy Value.................................. 9
Accumulation Unit Value....................... 10
Transfer of Policy Value...................... 10
Transfers Authorized by Telephone............. 10
Dollar Cost Averaging......................... 11
Portfolio Rebalancing......................... 11
Specialized Uses of the Policy................ 11
THE INVESTMENT AND FIXED ACCOUNT OPTIONS...... 12
Separate Account Investments.................. 12
Portfolios.................................... 12
Voting Rights................................. 15
Additions, Deletions, and Substitutions of
Securities................................... 16
The Fixed Account............................. 16
POLICY BENEFITS AND RIGHTS.................... 16
Death Benefit................................. 16
Death Benefit Options......................... 17
Change in Face Amount......................... 17
Optional Insurance Benefits................... 18
Policy Loans.................................. 18
Amount Payable on Surrender of the Policy..... 19
Partial Withdrawals........................... 19
Settlement Options............................ 20
Maturity...................................... 20
Lapse and Reinstatement....................... 20
Cancellation and Exchange Rights.............. 20
Postponement of Payments...................... 21
DEDUCTIONS AND CHARGES........................ 21
Premium Tax Charge and Premium Expense
Charge....................................... 21
Monthly Deduction............................. 21
Policy Fee.................................... 21
Mortality and Expense Risk Charge............. 21
Cost of Insurance Charge...................... 22
Deduction for Separate Account Income Taxes... 22
Portfolio Expenses............................ 22
Surrender Charge.............................. 23
Transfer Fee.................................. 24
GENERAL POLICY PROVISIONS..................... 24
Statements to Policy Owners................... 24
Limit on Right to Contest..................... 24
Suicide....................................... 24
Misstatement as to Age and Sex................ 24
Beneficiary................................... 24
Assignment.................................... 24
Dividends..................................... 24
FEDERAL TAX CONSIDERATIONS.................... 24
Taxation of Lincoln Benefit and the Separate
Account...................................... 25
Taxation of Policy Benefits................... 25
Modified Endowment Contracts.................. 25
Diversification Requirements.................. 26
Owner Control................................. 26
Policy Loan Interest.......................... 26
Qualified Plans............................... 26
Tax Advice.................................... 27
DESCRIPTION OF LINCOLN BENEFIT LIFE COMPANY
AND THE SEPARATE ACCOUNT...................... 27
Lincoln Benefit Life Company.................. 27
Executive Officers and Directors of Lincoln
Benefit....................................... 27
Financial Information Concerning Lincoln
Benefit....................................... 28
Separate Account.............................. 28
Safekeeping of the Separate Account's
Assets........................................ 29
State Regulation of Lincoln Benefit........... 29
DISTRIBUTION OF POLICIES...................... 29
LEGAL PROCEEDINGS............................. 29
LEGAL MATTERS................................. 29
REGISTRATION STATEMENT........................ 29
EXPERTS....................................... 29
FINANCIAL STATEMENTS.......................... 29
APPENDIX...................................... A-1
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. LINCOLN BENEFIT DOES NOT AUTHORIZE ANY
INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
3
<PAGE>
DEFINITIONS
Please refer to this list for the meaning of the following terms:
ACCUMULATION UNIT - An accounting unit of measurement which we use to calculate
the value of a Subaccount.
AGE - The Insured's age at his or her last birthday.
BENEFICIARY(IES) - The person(s) named by you to receive the Death Benefit under
the Policy.
DEATH BENEFIT - The amount payable to the Beneficiary under the Policy upon the
death of the Insured, before payment of any unpaid Policy Debt or Policy
Charges.
FACE AMOUNT - The initial amount of insurance under your Policy, adjusted for
any changes in accordance with the terms of your Policy.
FIXED ACCOUNT - The portion of the Policy Value allocated to our general
account.
GRACE PERIOD - A 61-day period during which the Policy will remain in force so
as to permit you to pay sufficient additional Premium to keep the Policy from
lapsing.
INSURED - The person whose life is insured under the Policy.
ISSUE DATE - The date on which the Policy is issued. It is used to determine
Policy Anniversaries, Policy Years and Policy Months.
LOAN ACCOUNT - An account established for amounts transferred from the
Subaccounts or the Fixed Account as security for outstanding Policy loans.
MONTHLY AUTOMATIC PAYMENT - A method of paying a Premium each month
automatically, for example by bank draft or salary deduction.
MONTHLY DEDUCTION - The amount deducted from Policy Value on each Monthly
Deduction Day for the policy fee, mortality and expense risk charge, cost of
insurance charge, and the cost of any benefit riders.
MONTHLY DEDUCTION DAY - The same day in each month as the Issue Date. The day of
the month on which Monthly Deductions are taken from your Policy Value.
NET DEATH BENEFIT - The Death Benefit, less any Policy Debt.
NET INVESTMENT FACTOR - The factor we use to determine the change in value of an
Accumulation Unit in any Valuation Period. We determine the Net Investment
Factor separately for each Subaccount.
NET POLICY VALUE - The Policy Value, less any Policy Debt.
NET PREMIUM - The Premium less the premium tax and the premium expense charges.
NET SURRENDER VALUE - The Policy Value less any applicable surrender charges and
less any unpaid Policy Debt. The Net Surrender Value must be positive for the
Policy to remain in effect, unless the Safety Net Premium feature is in effect.
POLICY ANNIVERSARY - The same day and month as the Issue Date for each
subsequent year the Policy remains in force.
POLICY DEBT - The sum of all unpaid Policy loans and accrued loan interest.
POLICY OWNER ("YOU") - The person(s) having the privileges of ownership defined
in the Policy. The Policy Owner may or may not be the same person as the
Insured. If your Policy is issued pursuant to a retirement plan, your ownership
privileges may be modified by the plan.
POLICY VALUE - The sum of the values of your interests in the Subaccounts of the
Separate Account, the Fixed Account and the Loan Account. The amount from which
the Monthly Deductions are made and the Death Benefit is determined.
POLICY YEAR - Each twelve-month period beginning on the Issue Date and each
Policy Anniversary.
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.
PREMIUM - Amounts paid to us as premium for the Policy by you or on your behalf.
QUALIFIED PLAN - A pension or profit-sharing plan established by a corporation,
partnership, sole proprietor, or other eligible organization that is qualified
for favorable tax treatment under Section 401(a) or 403(b) of the Tax Code.
SEPARATE ACCOUNT - The Lincoln Benefit Life Variable Life Account, which is a
segregated investment account of Lincoln Benefit.
SUBACCOUNT - A subdivision of the Separate Account, which invests wholly in
shares of one of the Portfolios.
SURRENDER VALUE - The Policy Value less any applicable surrender charges.
TAX CODE - The Internal Revenue Code of 1986, as amended.
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. 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.
4
<PAGE>
QUESTIONS AND ANSWERS
ABOUT YOUR POLICY
These are answers to questions that you may have about some of the most
important features of your Policy. The Policy is more fully described in the
remainder of the Prospectus. Please read the Prospectus carefully.
1. WHAT IS A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY?
The Policy has a Death Benefit, Policy Value, and other features of life
insurance providing fixed benefits. It is a "flexible premium" policy because
you have a great amount of flexibility in determining when and how much premium
you want to pay. It is a "variable" policy because the Death Benefit and Policy
Value vary according to the investment performance of the Portfolios to which
you have allocated your Premiums. The Policy Value is not guaranteed. Payment of
the Death Benefit may be guaranteed under the Safety Net Premium provision. This
Policy provides you with the opportunity to take advantage of any increase in
your Policy Value, but you also bear the risk of any decrease.
2. WHAT ARE THE DEATH BENEFIT OPTIONS?
While the Policy is in force, we will pay a Death Benefit to the Beneficiary
upon the death of the Insured. The Policy provides for two Death Benefit
options. Under Option 1, the Death Benefit is equal to the greater of your
Policy's Face Amount and the Policy Value multiplied by a specified percentage.
Under Option 2, the Death Benefit is equal to the greater of your Policy's Face
Amount plus the Policy Value on the Insured's date of death or the Policy Value
multiplied by a specified percentage. Decreases in the Policy Value will never
cause the Death Benefit to be less than the Face Amount. Before we pay the Death
Benefit to the Beneficiary, however, we will subtract an amount sufficient to
repay any outstanding Policy Debt and to pay any due and unpaid charges.
3. WHAT IS THE SAFETY NET PREMIUM FEATURE?
Unless otherwise required by your state, we agree to keep the Policy in force
for a specified period, regardless of the investment performance of the
Portfolios, as long as your total Premiums paid (as reduced to reflect
withdrawals and Policy Debt) at least equals the cumulative Safety Net Premium
amount shown in your Policy. If the Insured is age 70 or less at the Issue Date,
the specified period will be the first ten Policy Years. Otherwise, it will run
from the Issue Date until the next Policy Anniversary after the Insured's 80th
birthday.
To keep the Safety Net Premium feature in effect, on each Monthly Deduction Day
your total Premiums (less withdrawals and Policy Debt) must at least equal the
total amount you would have paid if you had paid the Safety Net Premium each
month. If you have not paid sufficient Premiums, we will notify you and give you
61 days to remedy the shortfall. If you do not pay enough additional Premium
within this 61-day period, the Safety Net Premium feature will terminate and may
not be reinstated, even if you make up the shortfall after the end of the 61-day
period.
When the Safety Net Premium feature is not in effect, your Policy will remain in
force as long as the Net Surrender Value is large enough to pay the Monthly
Deductions on your Policy as they come due. If on any Monthly Deduction Day the
Net Surrender Value is less than the Monthly Deduction due, your Policy will
enter the Grace Period. If you do not pay sufficient additional Premium, at the
end of the Grace Period your Policy will end.
4. HOW WILL MY POLICY VALUE BE DETERMINED?
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. Your Policy Value
is the sum of the values of your interests in the Subaccounts of the Separate
Account, plus the values in the Fixed Account and the Loan Account. Your Policy
Value will depend on the investment performance of the Subaccounts and the
amount of interest we credit to the Fixed Account, as well as the Net Premiums
paid, partial withdrawals, and charges assessed. We do not guarantee a minimum
Policy Value.
5. WHAT ARE THE PREMIUMS FOR THIS POLICY?
You have considerable flexibility as to the timing and amount of your Premiums.
You have a required Premium in your Policy, which is based on your Policy's Face
Amount and the Insured's age, sex, and risk class. You do not have to pay the
required Premium after the first Policy Year. To take advantage of the Safety
Net Premium feature, you must pay the cumulative Safety Net Premiums due.
Otherwise, you may pay any level of Premium, as long as the Premium would not
cause your Policy to lose its status as a life insurance contract under the Tax
Code. Your Policy also has a planned periodic Premium. You establish a planned
periodic Premium when you purchase a Policy. You are not required to pay the
planned periodic Premium, and we will not terminate your Policy merely because
you did not pay a planned periodic Premium.
6. CAN I INCREASE OR DECREASE MY POLICY'S FACE AMOUNT?
Yes, you have considerable flexibility to increase or decrease your Policy's
Face Amount. You may request an increase and/or a decrease after the first
Policy Year by sending us a written request. Your requested increase must be at
least $10,000. If you request an increase in Face Amount, you must provide us
with evidence of insurability that meets our underwriting standards. An increase
in the Face Amount of your Policy will increase the charges deducted from your
Policy Value. We will not decrease the Face Amount of your Policy below $50,000.
For more detail, see "Change in Face Amount", on page 17.
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7. HOW ARE MY PREMIUMS ALLOCATED?
Before your Premiums are allocated to the Policy Value, we deduct a premium tax
charge of 2.5% of each Premium and a premium expense charge. The premium expense
charge will be 3.5% of each Premium for the first ten Policy Years and 1.5%
thereafter. For more detail, see "Premium Tax Charge and Premium Expense Charge"
on page 21. The remaining amount is called the Net Premium.
When you apply for the Policy, you specify in your application how to allocate
your Net Premiums among the Subaccounts and the Fixed Account. You must use
whole number percentages and the total allocations must equal 100%. You may
change your allocation percentages at any time by notifying us in writing.
Generally, we will allocate your Premiums to the Subaccounts and the Fixed
Account as of the date your Premiums are received in our home office. If a
Premium requires an underwriting, the Premium will not be allocated nor will it
earn interest prior to the Issue Date. Once underwriting approval and Premium is
received, we will allocate that Premium in accordance with your most recent
instructions. In addition, if you live in certain states, we may allocate your
Premiums to the Fixed Account until the end of the cancellation period described
in the answer to Question 13 below.
You may transfer Policy Value among the Subaccounts and the Fixed Account while
the Policy is in force, by writing to us or calling us at 1-800-865-5237. While
we currently are not charging a transfer fee, the Policy gives us the right to
impose a transfer fee of up to $10 upon the second and each subsequent transfer
in a single calendar month. While you may also transfer amounts from the Fixed
Account, certain restrictions may apply. For more detail, see "Transfer of
Policy Value" and "Transfers Authorized by Telephone", on page 10.
You may also use our automatic Dollar Cost Averaging program or our Portfolio
Rebalancing program. 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
may be made monthly, quarterly, or annually. For more detail, see "Dollar Cost
Averaging", on pages 20-21.
Under the Portfolio Rebalancing program, you can maintain the percentage of your
Policy Value allocated to each Subaccount at a pre-set level. Investment results
will shift the balance of your Policy Value allocations. If you elect
rebalancing, we will automatically transfer your Policy Value back to the
specified percentages at the frequency (monthly, quarterly, semiannually,
annually) that you specify. For more detail, see "Portfolio Rebalancing", on
pages 11.
8. WHAT ARE MY INVESTMENT CHOICES UNDER THE POLICY?
You can allocate and reallocate your Policy Value among the Subaccounts, each of
which in turn invests in a single Portfolio. Under the Policy, the Separate
Account currently invests in the following Portfolios:
<TABLE>
<CAPTION>
Fund Portfolio(s)
- ----------------------------- -----------------------------
<S> <C>
- ------------------------------------------------------------
Janus Aspen Series Flexible Income Portfolio
Balanced Portfolio
Growth Portfolio
Aggressive Growth Portfolio
Worldwide Growth Portfolio
- ------------------------------------------------------------
Federated Insurance Utility Fund II
Management Series Fund for U.S. Government
Securities II
High Income Bond Fund II
- ------------------------------------------------------------
Fidelity Variable Insurance Money Market Portfolio
Products Fund Equity-Income Portfolio
Growth Portfolio
Overseas Portfolio
- ------------------------------------------------------------
Fidelity Variable Insurance Asset Manager Portfolio
Products Fund II Contrafund Portfolio
Index 500 Portfolio
- ------------------------------------------------------------
The Alger American Fund Income and Growth Portfolio
Small Capitalization
Portfolio
Growth Portfolio
MidCap Growth Portfolio
Leveraged AllCap Portfolio
- ------------------------------------------------------------
Scudder Variable Life Bond Portfolio
Investment Fund Balanced Portfolio
Growth and Income Portfolio
Global Discovery Portfolio
International Portfolio
- ------------------------------------------------------------
Strong Variable Insurance Discovery Fund II
Funds, Inc. Opportunity Fund II
Growth Fund II
- ------------------------------------------------------------
T. Rowe Price International International Stock Portfolio
Series, Inc.
- ------------------------------------------------------------
T. Rowe Price Equity Series, New America Growth Portfolio
Inc. Mid-Cap Growth Portfolio
Equity Income Portfolio
- ------------------------------------------------------------
MFS Variable Insurance Trust Growth with Income Series
Research Series
Emerging Growth Series
Total Return Series
New Discovery Series
- ------------------------------------------------------------
</TABLE>
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.
In addition, the Fixed Account is available in most states.
9. MAY I TAKE OUT A POLICY LOAN?
Yes, you may borrow money from us using your Policy as security for the loan.
The maximum loan amount is equal to
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90% of the Surrender Value. Other restrictions may apply if your Policy is
issued in connection with a Qualified Plan. For more detail, see "Policy Loans",
on pages 18.
10. WHAT ARE THE CHARGES DEDUCTED FROM MY POLICY VALUE?
As noted above, when we receive a Premium from you, we will deduct a premium tax
charge and a premium expense charge, before we allocate your Net Premium to the
Policy Value. The combined premium tax and premium expense charges will be 6% of
your Premium for the first ten Policy Years and 4% of your Premium thereafter.
We also will take a Monthly Deduction from your Policy Value. The Monthly
Deduction consists of the following charges:
(a) A monthly policy fee of $7.50;
(b) A monthly mortality and expense risk charge;
(c) A cost of insurance charge; and
(d) The cost of any additional benefits provided to you by rider.
The mortality and expense risk charge for the first fourteen Policy Years will
be 0.72% (on an annual basis) of the Policy Value allocated to the Subaccounts.
Thereafter, we intend to charge an annual rate of 0.36%, and we guarantee that
we never charge more than 0.48%.
The cost of insurance charge covers our anticipated mortality costs. We
determine it separately for the initial Face Amount of your Policy and each
subsequent increase in Face Amount.
The monthly mortality and expense risk charge is deducted pro rata from your
interest in the Subaccounts. The other parts of the Monthly Deduction are
deducted pro rata from your interest in the Subaccounts and the Fixed Account.
We impose a surrender charge to cover a portion of the sales expenses we incur
in distributing the Policies. These expenses include agents' commissions,
advertising, and the printing of Prospectuses. The surrender charge is described
in the answer to Question 11 below and in "Surrender Charge", on page 23.
The charges assessed under the Policy are described in more detail in
"Deductions and Charges", beginning on page 39.
In addition to our charges under the Policy, each Portfolio deducts amounts from
its assets to pay its investment advisory fee and other expenses. Your should
refer to the Prospectuses for the Portfolios for more information concerning
their respective charges and expenses.
If we ever charge you a cost of insurance rate during the first five Policy
Years which is greater than the rate provided by the rate scale in effect on the
Issue Date, we will notify you. For 60 days after we mail that notice to you,
you may surrender your Policy without paying any surrender charge.
11. DO I HAVE ACCESS TO THE VALUE OF MY POLICY?
While the Policy is in force, you may surrender your Policy for the Net
Surrender Value. Upon surrender, life insurance coverage under the Policy will
end. You may also withdraw part of your Policy Value through a partial
withdrawal. A partial withdrawal must equal at least $500. For more detail, see
"Amount Payable on Surrender of the Policy" and "Partial Withdrawals", on pages
19.
We may deduct a surrender charge on a surrender. The surrender charge is a
contingent deferred sales charge. Generally, the amount of the surrender charge
is based on the initial Face Amount of your Policy. Beginning in the sixth
Policy Year, the surrender charge reduces gradually until it reaches $0 at the
beginning of the fifteenth Policy Year. If you increase the Face Amount of your
Policy, however, your maximum surrender charge also will increase. The increase
in the surrender charge will be based solely on the amount of the increase and
the Insured's age at the time of the increase. Beginning in the sixth year after
the increase in Face Amount, the additional surrender charge reduces gradually
until it reaches $0 at the beginning of the fifteenth year after the increase in
Face Amount. For more detail, see "Surrender Charges", on pages 23.
In addition, each time you take a partial withdrawal, we may deduct a partial
withdrawal service fee of $10 from the amount withdrawn.
12. WHAT ARE THE TAX CONSEQUENCES OF BUYING THIS POLICY?
Your Policy is structured to meet the definition of a life insurance contract
under the Tax Code. We may need to limit the amount of Premiums you pay under
the Policy to ensure that your Policy continues to meet that definition.
Current federal tax law generally excludes all death benefits from the gross
income of the beneficiary of a life insurance policy. In addition, you generally
are not subject to taxation on any increase in the Policy Value until it is
withdrawn. Generally, you will be taxed on surrender proceeds and the proceeds
of any partial withdrawals only if those amounts, when added to all previous
distributions, exceed the total Premiums paid. Amounts received upon surrender
or withdrawal in excess of Premiums paid will be treated as ordinary income.
Special rules govern the tax treatment of life insurance policies which meet the
federal definition of a modified endowment contracts. Depending on the amount
and timing of your Premiums, your Policy may meet that definition. Under current
tax law, death benefit payments under modified endowment contract, like death
benefit payments under life insurance contracts, generally are excluded from the
gross income of the beneficiary. Withdrawals and policy loans, however, are
treated differently. Amounts withdrawn and policy loans are treated first as
income, to the extent of any gain, and then as a return of premium. The income
portion of the distribution is includable in your taxable
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income. Also, an additional 10% penalty tax is generally imposed on the taxable
portion of amounts received before age 59 1/2. For more information on the tax
treatment of the Policy, see "Federal Tax Considerations", beginning on page 24.
13. CAN I RETURN THIS POLICY AFTER IT HAS BEEN DELIVERED?
You may cancel your Policy by returning it to us within ten days after you
receive it, or after whatever longer period may be permitted by state law. If
you return your Policy, the Policy terminates and, in most states, we will pay
you an amount equal to your Policy Value on the date we receive the Policy from
you, plus any charges previously deducted. In some states, we are required to
send you the amount of your Premiums. In those states, we may hold all of your
Premiums in the Money Market Fund until the end of the cancellation period.
Since state laws differ as to the consequences of returning a Policy, you should
refer to your Policy for specific information about your circumstances.
In addition, during the first two Policy Years or the first two years after an
increase in the Face Amount, if the Policy is in force you may convert it into a
non-variable universal life insurance policy. We will accomplish this by
transferring all of your Policy Value to the Fixed Account and ending your right
under the Policy to allocate Policy Value to the Subaccounts. We will not charge
you to perform this amendment.
PURCHASE OF POLICY AND ALLOCATION OF PREMIUMS
APPLICATION FOR A POLICY. You may apply to purchase a Policy by submitting a
written application to us at our home office. We generally will not issue
Policies to insure people who are older than age 80. The minimum Face Amount for
a Policy is $100,000. Before we issue a Policy, we will require you to submit
evidence of insurability satisfactory to us. Acceptance of your application is
subject to our underwriting rules. We reserve the right to reject your
application for any lawful reason. If we do not issue a Policy to you, we will
return your Premium to you. We reserve the right to change the terms or
conditions of your Policy to comply with changes in the applicable law.
We will issue your Policy when we have determined that your application meets
our underwriting requirements. We will apply our customary underwriting
standards to the proposed Insured. The Issue Date will be the date we received
the final requirement for issue.
We will commence coverage of the Insured under the Policy, as of the Issue Date
or the date that we receive your first Premium, whichever is later. If you pay a
Premium with your application and your requested Face Amount is less than
$500,000, we will provide the Insured with temporary conditional insurance only
if you meet all of the terms of a conditional receipt. The Issue Date determines
Monthly Deduction Days, Policy months, and Policy Years.
PREMIUMS. During the first Policy Year, you must pay an amount at least equal to
the required Premium shown in your Policy. We will send you a reminder notice if
you pay annually, semi-annually, or quarterly. You may also make a Monthly
Automatic Payment.
After the first Policy Year, you may pay additional Premium at any time, and in
any amount, as long as your Premium would not cause your Policy to lose its
status as a life insurance contract under the Tax Code, as explained below.
While your Policy also will show a planned periodic Premium amount, you are not
required to pay planned periodic Premiums. The planned periodic Premium is set
by you when you purchase your Policy. Your Policy will not lapse, however,
merely because you did not pay a planned periodic Premium.
Even if you pay all of the planned periodic Premiums, however, your Policy
nevertheless may enter the Grace Period and thereafter lapse if you have not
paid the required Safety Net Premium amount and the Net Surrender Value is no
longer enough to pay the Monthly Deductions. However, paying planned periodic
Premiums will generally provide greater benefits than if a lower amount of
Premium is paid. Paying planned periodic Premiums can also help to keep your
Policy in force if your payments are greater than the Safety Net Premium amount.
Premiums must be sent to us at our home office. Unless you request otherwise in
writing, we will treat all payments received while a Policy loan exists as new
Premium.
PREMIUM LIMITS. Before we will accept any Premium that would require an increase
in the net amount at risk under the Policy, you first must provide us with
evidence of insurability. The Tax Code imposes limits on the amount of Premium
that can be contributed under a life insurance contract. If you exceed this
limit, your Policy would lose its favorable federal income tax treatment under
the Tax Code. Accordingly, we will not accept any Premium which would cause your
Policy to exceed this limit, unless you increase the Face Amount of your Policy
appropriately. To obtain this increase, you must submit a written request to us
and provide evidence of insurability meeting our then current underwriting
standards. Otherwise, we will only accept the portion of your Premium that would
cause your total Premiums to equal the maximum permitted amount and we will
return the excess to you. In addition, we will not accept any additional Premium
from you until we can do so without exceeding the limit set by the Tax Code.
MODIFIED ENDOWMENT CONTRACTS. Under certain circumstances, a Policy could be
classified as a "modified endowment contract", a category of life insurance
contract defined in the Tax Code. If your Policy were to become a modified
endowment contract, distributions and loans from the Policy could result in
current taxable income for you, as well as other adverse tax consequences. These
tax consequences are described in more detail in "Federal Tax Considerations--
Modified Endowment Contracts", on pages 25-26.
8
<PAGE>
Your Policy could be deemed to be a modified endowment contract if, among other
things, you pay too much Premium or the Death Benefit is reduced. We will
monitor the status of your Policy and advise you if you need to take action to
prevent the Policy from being deemed to be a modified endowment contract. If you
pay a Premium that would result in your Policy being deemed a modified endowment
contract, we will notify you and allow you to request a refund of the excess
Premium, or other action, to avoid having your Policy being deemed a modified
endowment contract. If, however, you choose to have your Policy deemed a
modified endowment contract, we will not refund the Premium.
If you replace a modified endowment contract issued by another insurer with a
Policy, your Policy will also be deemed to be a modified endowment contract. Our
ability to determine whether a replaced policy issued by another insurer is a
modified endowment contract is based solely on the sufficiency of the policy
data we receive from the other insurer. We do not consider ourselves to be
liable to you if that data is insufficient to accurately determine whether the
replaced policy is a modified endowment contract. You should discuss this issue
with your tax adviser if it pertains to your situation. Based on the information
provided to us, we will notify you as to whether you can contribute more Premium
to your Policy without causing it to become a modified endowment contract.
SAFETY NET PREMIUM. The Safety Net Premium feature is intended to enable you to
ensure that your Policy will remain in force during a specified period
regardless of changes in the Policy Value. If the Insured is age 70 or under at
the Issue Date, the specified period is the first ten Policy Years. Otherwise,
the specified period runs until the Policy Anniversary after the Insured's 80th
birthday.
As a general rule, your Policy will enter the Grace Period, and may lapse, if
the Net Surrender Value is not sufficient to pay a Monthly Deduction when it is
due. Under the Safety Net Premium feature, however, we guarantee that regardless
of declines in your Policy Value, your Policy will not enter the Grace Period as
long as your total Premiums paid since the Issue Date, less partial withdrawals
and outstanding Policy loans, are greater than the monthly Safety Net Premium
amount times the number of months since the Issue Date.
During the first Policy Year, the Safety Net Premium amount will equal the
required Premium. As a result, if you pay your required Premium on a timely
basis, the Safety Net Premium feature will remain in effect.
If at any time your total Premiums, less partial withdrawals and Policy Debt,
are less than the product of the monthly Safety Net Premium times the number of
Policy Months since the Issue Date, we will let you know and you will have 61
days to satisfy the shortfall. If you do not, the Safety Net Premium guarantee
will end and it cannot be reinstated. After the Safety Net Premium guarantee is
no longer in effect, the Policy will stay in force only as long as the Net
Surrender Value is sufficient to pay the Monthly Deductions. For more detail
about the circumstances in which the Policy will lapse, see "Lapse and
Reinstatement", on page 20.
ALLOCATION OF PREMIUMS. Your Net Premiums are allocated to the Subaccount(s) and
the Fixed Account in the proportions that you have selected. You must specify
your allocation percentages in your Policy application. Percentages must be in
whole numbers and the total allocation must equal 100%. We will allocate your
subsequent Net Premiums in those percentages, until you give us new allocation
instructions.
You initially may allocate your Policy Value to up to twenty-one options,
counting each Subaccount and the Fixed Account as one option. You may add or
delete Subaccounts and/or the Fixed Account from your allocation instructions,
but we will not execute instructions that would cause you to have Policy Value
in more than twenty-one options. In the future we may waive this limit.
Usually, we will allocate your initial Net Premium to the Subaccounts and the
Fixed Account, as you have instructed us, on the Issue Date If you do not pay
first Premium until after the Issue Date, we will allocate your initial Net
Premium to the Subaccounts on the date we receive it. In addition, In some
states we are required to return at least your Premium if you cancel your Policy
during the "free-look" period. In those states, we will allocate all Net
Premiums received during the "free-look" period to the Money Market Subaccount
for twenty days following the Issue Date, or longer if required by state law. At
the end of that period, we will allocate your Net Premium (plus earnings and
less monthly deductions) to the Subaccounts or Fixed Account as you have chosen.
No earnings or interest will be credited before the Issue Date.
We will make all valuations in connection with the Policy on the date a Premium
is received or your request for other action is received, if that date is a
Valuation Date and a date that we are open for business. Otherwise we will make
that determination on the next succeeding day which is a Valuation Date and a
date on which we are open for business.
POLICY VALUE. Your Policy Value is the sum of the value of your Accumulation
Units in the Subaccounts you have chosen, plus the value of your interest in the
Fixed Account, plus your Loan Account. Your Policy Value will change daily to
reflect the performance of the Subaccounts you have chosen, the addition of
interest credited to the Fixed Account, the addition of net Premiums, and the
subtraction of partial withdrawals and charges assessed. There is no minimum
guaranteed Policy Value.
On the Issue Date or, if later, the date your first Premium is received, your
Policy Value will equal the Net Premium less the Monthly Deduction for the first
Policy Month.
On each Valuation Date, the portion of your Policy Value in a particular
Subaccount will equal: (1) The total value of your Accumulation Units in the
Subaccount; plus (2) Any
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<PAGE>
Net Premium received from you and allocated to the Subaccount during the current
Valuation Period; plus (3) Any Policy Value transferred to the Subaccount during
the current Valuation Period; minus (4) Any Policy Value transferred from the
Subaccount during the current Valuation Period; minus (5) Any amounts withdrawn
by you (plus the applicable withdrawal charge) from the Subaccount during the
current Valuation Period; minus (6) The portion of any Monthly Deduction
allocated to the Subaccount during the current Valuation Period for the Policy
Month following the Monthly Deduction Day.
On each Valuation Date, the portion of your Policy Value in the Fixed Account
will equal: (1) Any Net Premium allocated to it, plus (2) Any Policy Value
transferred to it from the Subaccounts; plus (3) Interest credited to it; minus
(4) Any Policy Value transferred out of it; minus (5) Any amounts withdrawn by
you (plus the applicable withdrawal charge); minus (6) The portion of any
Monthly Deduction allocated to the Fixed Account.
All Policy Values equal or exceed those required by law. Detailed explanations
of methods of calculation are on file with the appropriate regulatory
authorities.
ACCUMULATION UNIT VALUE. The Accumulation Unit Value for each Subaccount will
vary to reflect the investment experience of the corresponding Portfolio. We
will determine the Accumulation Unit Value for each Subaccount on each Valuation
Day. A Subaccount's Accumulation Unit Value for a particular Valuation Day will
equal the Subaccount's Accumulation Unit Value on the preceding Valuation Day
multiplied by the Net Investment Factor for that Subaccount for the Valuation
Period then ended. The Net Investment Factor for each Subaccount is (1) divided
by (2), where: (1) is the sum of (a) the asset value per share of the
corresponding Portfolio at the end of the current Valuation Period and (b) the
per share amount of any dividend or capital gains distribution by that Portfolio
if the ex-dividend date occurs in that Valuation Period; and (2) is the net
asset value per share of the corresponding Portfolio at the end of the
immediately preceding Valuation Period.
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 Net Investment Factor of
the corresponding Subaccount and, therefore, your Policy Value. For more detail,
see "Policy Value", on pages 9-10.
TRANSFER OF POLICY VALUE. While the Policy is in force, you may transfer Policy
Value among the Fixed Account and Subaccounts in writing or by telephone.
Currently, there is no minimum transfer amount, except in states where a minimum
transfer amount is required by law. We may set a minimum transfer amount in the
future.
You currently may not have Policy Value in more than twenty-one options,
counting each Subaccount and the Fixed Account as one option. Accordingly, we
will not perform a transfer that would cause your Policy to exceed that limit.
We may waive this limit in the future.
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. Otherwise, we will make the transfer on the first subsequent
day on which we and the NYSE are open.
We have established special requirements for transfers from the Fixed Account.
You may make a lump sum transfer from the Fixed Account to the Subaccounts only
during the 60 day period beginning on the Issue Date and each Policy
Anniversary. We will not process transfer requests received at any other time.
Transfers pursuant to a Dollar Cost Averaging or Portfolio Rebalancing program
may occur at any time at the intervals you have selected.
The maximum amount which may be transferred as a lump sum or as portfolio
rebalancing transfers from the Fixed Account during a Policy Year usually is:
- - 30% of the Fixed Account balance on the most recent Policy Anniversary; or
- - the largest total amount transferred from the Fixed Account in any prior
Policy Year.
This limit also applies to transfers under a Dollar Cost Averaging program,
unless you choose to transfer your entire Fixed Account balance to Subaccounts.
In that case, your maximum monthly transfer amount may not be more than 1/36th
of your Fixed Account balance on the day of the first transfer. We may waive or
modify these restrictions on transfers from the Fixed Account. You may not
transfer Policy Value or allocate new Premiums into the Fixed Account, if
transfers are being made out under the Dollar Cost Averaging program.
In addition, you may transfer 100% of the Fixed Account balance in a lump sum to
the Subaccount(s), if on any Policy Anniversary the interest rate on the Fixed
Account is lower than it was on the Policy Anniversary one year previously or if
on the first Policy Anniversary that interest rate is lower than it was on the
Issue Date. We will notify you by mail if this occurs. You may request a
transfer for 60 days following the date we mail notification to you.
The Policy permits us to defer transfers from the Fixed Account for up to six
months from the date you ask us. Also, we may restrict transfers from the
Subaccounts to the Fixed Account in each Policy Year to no more than 30% of the
total Subaccount balances as of the most recent Policy Anniversary. We currently
are not imposing this restriction on transfers from the Subaccounts.
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
10
<PAGE>
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.
In the future, we may charge you the transfer fee described on page 44, although
currently we 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.
DOLLAR COST AVERAGING. Under our automatic Dollar Cost Averaging program, while
the Policy is in force you may authorize us to transfer a fixed dollar amount at
fixed intervals from the Fixed Account or a Subaccount of your choosing to up to
eight options, including other Subaccounts or the Fixed Account. The interval
between transfers 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. We may change this minimum or grant
exceptions. If you elect this program, the first transfer will occur one
interval after your Issue Date.
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 Purchase Payments under
a Dollar Cost Averaging program. Special restrictions apply to transfers from
the Fixed Account. They are explained on page 10.
The theory of dollar cost averaging is that you will purchase more 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 Policy Value allocated to each Subaccount and/or the Fixed
Account at a pre-set level. For example, you could specify that 30% of your
Policy Value should be in the Balanced Portfolio, 40% in the Growth
Portfolio-Janus Aspen Series and 30% in the Fidelity VIP II Contrafund
Portfolio. Over time, the variations in each Subaccount's investment results
will shift the balance of your Policy Value allocations. Under the portfolio
rebalancing feature, if the changes from your desired percentages exceed 1% of
your Policy Value, we will automatically transfer your Policy Value, including
new Premiums (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
Policy Value allocated to the better performing segments.
You may choose to have rebalances made monthly, quarterly, semi-annually, or
annually. We will not charge a transfer fee for portfolio rebalancing. No more
than eight Subaccounts, or seven Subaccounts and the Fixed Account, can be
included in a Portfolio Rebalancing program at one time.
Transfers from the Fixed Account under a Portfolio Rebalancing program are
subject to the overall limit on transfers from the Fixed Account. Accordingly,
if the total amount transferred from the Fixed Account in any Policy Year
reaches that limit before the end of the year, we will not transfer additional
amounts from the Fixed Account for portfolio rebalancing purposes until the next
Policy Year.
You may request Portfolio Rebalancing at any time by submitting a completed
written request to us at the address 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. The date of your rebalancing
must coincide with the same day of the month as your Issue Date. If you request
rebalancing on your Policy application but do not specify a date for your first
rebalancing, it will occur one period after the 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
Issue Date.
Generally, you may change the allocation percentages, frequency, or choice of
Subaccounts at any time. If you include the Fixed Account in a Portfolio
Rebalancing program, however, in any consecutive twelve months you may not
change the allocation percentages more than twice and the total change to the
Fixed Amount allocation may not exceed 20%. We may waive this restriction.
If your total Policy 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.
SPECIALIZED USES OF THE POLICY. Because the Policy provides for an accumulation
of Policy Value as well as a Death Benefit, you may wish to use it for various
individual and business financial planning purposes. Purchasing the Policy in
part for
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such purposes involves certain risks. For example, if the investment performance
of the Subaccounts is poorer than expected or if sufficient Premiums are not
paid, the Policy may lapse or may not accumulate sufficient Policy Value to fund
the purpose for which you purchased the Policy. Withdrawals and Policy loans may
significantly affect current and future Policy Value, Surrender Value, or Death
Benefit proceeds. Depending upon the investment performance of the Portfolios in
which the Subaccounts invest and the amount of a Policy loan, a Policy loan may
cause your Policy to lapse. Because the Policy is designed to provide benefits
on a long-term basis, before purchasing a Policy for a specialized purpose, you
should consider whether the long-term nature of the Policy is consistent with
the purpose for which it is being considered. In addition, using a Policy for a
specialized purpose may have tax consequences. (See "Federal Tax
Considerations," beginning on page 24.)
THE INVESTMENT AND FIXED ACCOUNT OPTIONS
SEPARATE ACCOUNT INVESTMENTS
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 read the current Prospectuses
for the Portfolios for more detailed and complete information concerning the
Portfolios, their investment objectives and strategies, and the investment risks
associated with the Portfolios. If you do not have a Prospectus for a Portfolio,
contact us and we will send you a copy.
Each Portfolio holds its assets separate from the assets of the other
Portfolios, and each Portfolio has its own distinct investment objective and
policies. Each Portfolio operates as a separate investment fund, and the income,
gains, and losses of one Portfolio generally have no effect on the investment
performance of any other Portfolio.
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 THE PORTFOLIOS' PROSPECTUSES BEFORE ALLOCATING AMOUNTS TO THE
SUBACCOUNTS OF THE SEPARATE ACCOUNT.
JANUS ASPEN SERIES (investment adviser: Janus Capital Corporation)
FLEXIBLE INCOME PORTFOLIO seeks to maximize total return from a combination of
current income and capital appreciation, with an emphasis on current income.
This Portfolio invests in all types of income-producing securities. This
Portfolio may have substantial holdings of debt securities rated below
investment grade. Investments in such securities present special risks; you are
urged to carefully read the risk disclosure in the accompanying Prospectus for
the Portfolio before allocating amounts to the Janus Flexible Income Subaccount.
BALANCED PORTFOLIO seeks both growth of capital and current income. This
Portfolio usually invests 40-60% of its assets in securities selected primarily
for their growth potential and 40-60% of its assets in securities selected
primarily for their income potential.
GROWTH PORTFOLIO seeks long-term growth of capital by investing primarily in a
diversified portfolio of common stocks of a large number of issuers of any size.
Generally, this Portfolio emphasizes issuers with larger market capitalizations.
AGGRESSIVE GROWTH PORTFOLIO seeks long-term growth of capital. It is a
non-diversified fund. It usually invests at least 50% of its equity assets in
securities issued by medium-sized companies, which are companies whose market
capitalizations at the time of purchase by the Portfolio fall within the same
range as companies in the S&P MidCap 400 Index. This range is expected to change
on a regular basis. This Portfolio may invest its remaining assets in smaller or
larger issuers.
WORLDWIDE GROWTH PORTFOLIO seeks long-term growth of capital by investing in a
diversified portfolio of common stocks of foreign and domestic issuers of any
size. This Portfolio usually invests in issuers from at least five different
countries including the United States.
FEDERATED INSURANCE MANAGEMENT SERIES (investment adviser: Federated Advisers)
FEDERATED UTILITY FUND II'S investment objective is to achieve high current
income and moderate capital appreciation. The Portfolio invests primarily in
equity and debt securities of utility companies that produce, transmit, or
distribute gas and electric energy, as well as those companies that provide
communications facilities, such as telephone and telegraph companies.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II'S investment objective is to
provide current income. The Portfolio invests in direct obligations of the U.S.
Government or its agencies or instrumentalities, and securities guaranteed by
the U.S. Government, its agencies, or instrumentalities. This Portfolio may also
invest in certain collateralized mortgage obligations and repurchase agreements.
FEDERATED HIGH INCOME BOND FUND II'S investment objective is to seek high
current income. This Portfolio invests at least 65% of its assets in lower rated
corporate debt obligations, such as preferred stocks, bonds, debentures, notes,
equipment lease certificates and equipment trust certificates. Some of these
fixed income securities may involve equity features. Under normal circumstances,
this Portfolio will not invest more than 10% of the value of its total assets in
equity securities.
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FIDELITY VARIABLE INSURANCE PRODUCTS FUND (investment adviser: Fidelity
Management & Research Company)
MONEY MARKET PORTFOLIO seeks to obtain as high a level of current income as is
consistent with preserving capital and providing liquidity. This Portfolio will
limit its investments to securities with remaining maturities of 397 days or
less.
EQUITY-INCOME PORTFOLIO seeks reasonable income by investing primarily in
income-producing equity securities. The goal is to achieve a higher yield than
the composite yield of the S&P 500 Composite Stock Price Index. At least 65% of
this Portfolio's assets will be invested in income producing common or preferred
stock. The remainder will usually be invested in convertible and non-convertible
debt obligations.
GROWTH PORTFOLIO seeks to achieve capital appreciation. This Portfolio usually
purchases common stocks, although its investments are not restricted to any one
type of security.
OVERSEAS PORTFOLIO seeks long-term growth of capital primarily through
investments in foreign securities. At least 65% of this Portfolio's assets will
be invested in securities of issuers outside of North America. Most issuers will
be located in developed countries in the Americas, the Far East and Pacific
Basin, Scandinavia and Western Europe.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II (investment adviser: Fidelity
Management & Research Company)
ASSET MANAGER PORTFOLIO seeks to obtain high total return with reduced risk over
the long term by allocating its assets among domestic and foreign stocks, bonds,
and short-term fixed-income securities. Usually, this Portfolio's assets will be
allocated within the following guidelines: 30-70% in stocks (equities); 20-60%
in bonds (intermediate to long-term); and 0-50% in short-term instruments.
CONTRAFUND PORTFOLIO seeks capital appreciation by investing mainly in equity
securities of companies that the Portfolio's adviser believes to be undervalued
due to an overly pessimistic appraisal by the public. This Portfolio usually
invests primarily in common stock and securities convertible into common stock,
but it may invest in any type of security that may produce capital appreciation.
INDEX 500 PORTFOLIO seeks long-term capital growth through the purchase of a
portfolio of securities that broadly represents the U.S. stock market, as
measured by the S&P 500. By investing to match the return of the S&P 500, the
Portfolio seeks to keep expenses low. The Portfolio does not expect to achieve
potentially greater results than could be obtained by a fund that aggressively
seeks growth.
THE ALGER AMERICAN FUND (investment adviser: Fred Alger Management)
INCOME AND GROWTH PORTFOLIO seeks primarily to provide a high level of dividend
income. Capital appreciation is a secondary objective of the Portfolio. It is a
fundamental policy of the Portfolio to invest at least 65% of its total assets
in dividend paying equity securities, under normal circumstances. The Portfolio
usually attempts to invest 100% of its assets in dividend paying equity
securities.
SMALL CAPITALIZATION PORTFOLIO seeks long-term capital appreciation. Under
normal circumstances, the Portfolio invests at least 65% of its total assets in
equity securities of companies that at the time of purchase have total market
capitalization within the range of companies included in the Russell 2000 Growth
Index or the S&P SmallCap 600 Index. The Portfolio may invest its remaining
assets in larger or smaller issuers.
GROWTH PORTFOLIO seeks long-term capital appreciation. Under normal
circumstances, the Portfolio invests at least 65% of its total assets in equity
securities of companies that have total market capitalization of $1 billion or
greater. The Portfolio may invest up to 35% of its total assets in equity
securities of companies that have total market capitalization of less than $1
billion.
MIDCAP GROWTH PORTFOLIO seeks long-term capital appreciation. Under normal
circumstances, the Portfolio invests at least 65% of its total assets in equity
securities of companies that have total market capitalization within the range
of companies included in the S&P MidCap 400 Index.
LEVERAGED ALLCAP PORTFOLIO seeks long-term capital appreciation. Except during
temporary defensive periods, the Portfolio invests at least 85% of its net
assets in equity securities of companies of any size. The Portfolio may purchase
put and call options and sell (write) covered call and put options on securities
and securities indexes to increase gain and to hedge against the risk of
unfavorable price movements, and may enter into futures contracts on securities
indexes and purchase and sell call and put options on these futures contracts.
The Portfolio may also borrow money for the purchase of additional securities.
SCUDDER VARIABLE LIFE INVESTMENT FUND (investment adviser: Scudder, Stevens &
Clark, Inc.) The Scudder Variable Life Investment Fund has two classes of
shares. The Subaccounts invest in Class A shares, which do not impose
distribution fees.
BOND PORTFOLIO seeks high income from a high quality portfolio of debt
securities. Under normal circumstances, this Portfolio invests at least 65% of
its assets in bonds including those of the U.S. Government and its agencies and
those of corporations and other notes and bonds paying high current income. This
Portfolio can invest in a broad range of short, intermediate and long-term
securities.
BALANCED PORTFOLIO seeks a balance of growth and income from a diversified
portfolio of equity and fixed income securities. The Portfolio also seeks
long-term preservation of capital through a quality-oriented investment approach
that is designed to reduce risk. The Portfolio will invest its assets in equity
securities, debt securities with maturities generally exceeding one year, and
money market instruments and other debt securities with maturities generally not
exceeding
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thirteen months. Not more than 75% of this Portfolio's net assets may be
invested in stocks or other equity investments. Generally, 25%-50% of the
Portfolio's net assets are invested in bonds.
GROWTH AND INCOME PORTFOLIO seeks long-term growth of capital, current income
and growth of income. In pursuing these three objectives, the Portfolio invests
primarily in common stocks, preferred stocks, and securities convertible into
common stocks of companies which offer the prospect for growth of earnings while
paying higher than average current dividends. The Portfolio allocates its
investments among different industries and companies, and changes its portfolio
securities for investment considerations and not for trading purposes.
GLOBAL DISCOVERY PORTFOLIO seeks above-average capital appreciation over the
long term by investing primarily in the equity securities of small companies
located throughout the world. The Portfolio is designed for investors looking
for above-average appreciation potential (when compared with the overall
domestic stock market as reflected by the S&P 500 Stock Composite Price Index)
and the benefits of investing globally, but who are willing to accept
above-average stock market risk, the impact of currency fluctuation, and little
or no current income. The Portfolio generally invests in small, rapidly growing
companies that offer the potential for above-average returns relative to larger
companies, yet are frequently overlooked and thus undervalued by the market.
INTERNATIONAL PORTFOLIO seeks long-term growth of capital primarily through
diversified holdings of marketable foreign equity investments. The Portfolio
invests in companies, wherever organized, which do business primarily outside
the United States. The Portfolio intends to diversify investments among several
countries and to have represented in its holdings business activities in not
less than three different countries, excluding the United States. The Portfolio
invests primarily in equity securities of established companies, listed on
foreign exchanges, which its adviser believes have favorable characteristics. It
may also invest in fixed income securities of foreign governments and companies.
STRONG VARIABLE INSURANCE FUNDS, INC. (investment adviser: Strong Capital
Management, Inc.)
DISCOVERY FUND II seeks capital growth. The Portfolio usually emphasizes equity
investments, although it has the flexibility to invest in any security the
adviser believes has the potential for capital appreciation. The Portfolio's
strategy is to invest in a blend of small, mid- and large-cap companies that are
in good businesses, are headed by capable and motivated management, and trade at
attractive valuations.
OPPORTUNITY FUND II seeks capital growth. The Portfolio currently emphasizes
medium-sized companies that the adviser believes are under-researched and
attractively valued. To achieve its investment goals, the Portfolio seeks to
find well-managed companies that have sustainable growth prospects but that are
selling at prices below their private market values.
GROWTH FUND II seeks capital growth. The Portfolio invests primarily in equity
securities that the adviser believes have above-average growth prospects and are
selling at reasonable valuations. The Portfolio generally has over half of its
assets in small- and mid-cap issues as these companies tend to have the highest
growth rates.
T. ROWE PRICE INTERNATIONAL SERIES, INC. (investment adviser: Rowe Price-Fleming
International, Inc., a joint venture between T. Rowe Price & Associates, Inc.
and Robert Fleming Holdings, Ltd.)
INTERNATIONAL STOCK PORTFOLIO seeks long-term growth of capital through
investments primarily in common stocks of established, non-U.S. companies. The
Portfolio invests substantially all of its assets outside the United States and
broadly diversifies its investments among countries throughout the
world--developed, newly industrialized and emerging.
T. ROWE PRICE EQUITY SERIES, INC. (investment adviser: T. Rowe Price Associates,
Inc.)
NEW AMERICA GROWTH PORTFOLIO seeks long-term growth of capital through
investment primarily in the common stocks of U.S. growth companies which operate
in service industries. The Portfolio will invest most of its assets in service
companies, regardless of size, that the adviser believes to be above average
performers in their fields. The Portfolio may invest up to 25% of its assets
outside the service sector.
MID-CAP GROWTH PORTFOLIO seeks long-term growth of capital by investing
primarily in the common stocks of companies with medium-sized market
capitalizations and the potential for above-average earnings growth. Most of the
assets will be invested in U.S. common stocks, but the Portfolio also may invest
in other types of securities, such as foreign securities, when consistent with
the Portfolio's investment objective.
EQUITY INCOME PORTFOLIO seeks to provide high current dividend income as well as
long term capital appreciation by investing primarily in common stocks of
established companies. Under normal circumstances, the Portfolio usually will
invest at least 65% of its assets in common stocks of established companies
paying above-average dividends which are expected to have favorable prospects
for dividend growth and capital appreciation. The Portfolio may also invest in
other securities such as fixed income and convertible securities.
MFS VARIABLE INSURANCE TRUST (investment adviser: Massachusetts Financial
Services)
GROWTH WITH INCOME SERIES seeks reasonable current income, as well as long-term
growth of capital and income. The Portfolio invests in stocks of companies that
the adviser considers to be of high or improving investment quality. The
Portfolio has the flexibility to invest in derivative securities
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when its managers believe such securities can provide better value relative to
direct investments in stocks and bonds.
RESEARCH SERIES seeks to provide long-term growth of capital and future income.
The Portfolio invests in the common stocks of companies the adviser believes
possess better-than-average prospects for long-term growth. The Portfolio may
invest up to 20% of its net assets in foreign and emerging market securities.
Investing in foreign and emerging market securities involves special risks and
may increase share price volatility. The Portfolio has the flexibility to invest
in derivative securities when its adviser believes such securities can provide
better value relative to direct investments in stocks and bonds.
EMERGING GROWTH SERIES seeks to provide long-term growth of capital. The
Portfolio invests primarily in common stocks of companies that are early in
their life cycles but which have the potential to become major enterprises. The
Portfolio may also invest in more established companies whose earnings growth
the adviser expects to accelerate because of special factors. Investing in
emerging growth companies involves greater risk than is customarily associated
with more established companies. The Portfolio also may invest up to 25% of its
net assets in foreign and emerging market securities. The Portfolio has the
flexibility to invest in derivative securities when its adviser believes such
securities can provide better value relative to direct investments in stocks or
bonds.
TOTAL RETURN SERIES seeks to provide above-average current income (compared to a
portfolio invested entirely in equity securities) consistent with the prudent
employment of capital. The Portfolio also seeks to provide reasonable
opportunity for growth of capital and income. The Portfolio invests in both
equities and fixed income securities. The equity segment is actively managed
with a value-oriented style of investing. The fixed income segment is actively
managed through shifts in maturity, duration, and sector components. The
Portfolio may invest up to 20% of its assets in foreign and emerging market
securities. The Portfolio has the flexibility to invest in derivative securities
when its adviser believes such securities can provide better value relative to
direct investments in stocks or bonds.
NEW DISCOVERY SERIES seeks capital appreciation. This Portfolio seeks to achieve
its objective by investing under normal market conditions at least 65% of its
total assets in companies that its adviser believes offer superior prospects for
growth. Those securities may either be listed on securities exchanges or traded
in the over-the-counter markets and may be U.S. or foreign companies.
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 Premiums you
allocate to a Subaccount to purchase shares in the corresponding Portfolio and
will redeem shares in the Portfolios to meet Policy 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.
Certain of the Portfolios sell their shares to Separate Accounts underlying both
variable life insurance and variable annuity contacts. 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 Policy 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 and will provide proxy materials or other
information to assist you in understanding the matter at issue. We will
determine the number of votes 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, you are the person entitled to give voting instructions.
However, if you assign your Policy, the assignee may be entitled to give voting
instructions. Retirement plans 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 Policy. If you do not send us
written instructions, we will vote the shares attributable to your Policy in the
same proportions as we vote the shares for which we have received instructions
from other Policy 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 Policy owners.
We may, when required by state insurance regulatory authorities, disregard
Policy 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
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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 Policy 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
Policy 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 Policy,
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 Premiums
under the Policy. We may not make a substitution of securities without the prior
approval of the Securities and Exchange Commission. The Commission may impose
conditions on its approval.
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 amount currently charged the Separate Account and the
Portfolios in connection with the Policies.
If we take any of these actions, we will comply with the then applicable legal
requirements.
THE FIXED ACCOUNT. THE PORTION OF THE POLICY RELATING TO THE FIXED ACCOUNT IS
NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940.
ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS IN THE FIXED ACCOUNT
ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT,
AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE
STAFF OF THE SEC. THE STATEMENTS ABOUT THE FIXED ACCOUNT IN THIS PROSPECTUS MAY
BE SUBJECT TO GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS
REGARDING ACCURACY AND COMPLETENESS.
You may allocate part or all of your Premiums to the Fixed Account in states
where it is available. The Fixed Account is not available in some states.
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.
We will credit interest to amounts allocated to the Fixed Account. We guarantee
that the interest rate credited to the Fixed Account will be at least 4%. We may
credit interest at a higher rate, but we are not obligated to do so. You assume
the risk that interest credited to the Fixed Account may be no higher than the
minimum guaranteed rate.
Transfers from the Fixed Account are subject to the limitations described on
page 10 above. Also, as described on page 21 above, we may delay payment of
partial withdrawals or Surrender Value from the Fixed Account for up to 6
months.
POLICY BENEFITS AND RIGHTS
DEATH BENEFIT. While your Policy is in force, we will pay the Death Benefit
proceeds upon the death of the Insured. We will pay the Death Benefit proceeds
to the named Beneficiary(ies) or contingent Beneficiary(ies). As described below
in "Settlement Options", on page 20, we will pay the Death Benefit proceeds in a
lump sum or under an optional payment plan.
The Death Benefit proceeds payable to the Beneficiary equal the applicable Death
Benefit, less any Policy Debt and less any due and unpaid charges. The proceeds
may be increased, if you have added a rider that provides an additional benefit.
We will determine the amount of the Death Benefit proceeds as of the end of the
Valuation Period during which the Insured dies. We will usually pay the Death
Benefit proceeds within seven days after we have received due proof of death and
all other requirements we deem necessary have been satisfied.
The amount of the Death Benefit will be based on the Death Benefit Option you
have selected, any increases or decreases in the Face Amount, and in some
instances your Policy Value.
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DEATH BENEFIT OPTIONS. You may choose one of two Death Benefit options:
(1) If you select Option 1, the Death Benefit will be the greater of: (a) the
Face Amount of the Policy or (b) the Policy Value multiplied by the applicable
corridor percentage as described below.
(2) If you select Option 2, the Death Benefit will be the greater of: (a) the
Face Amount plus the Policy Value, or (b) the Policy Value multiplied by the
applicable corridor percentage as described below.
While your Policy remains in force, we guarantee that the Death Benefit will not
be less than the greater of the current Face Amount of the Policy or the Policy
Value multiplied by the applicable corridor percentage. We have set forth the
applicable corridor percentages in the Policy. They vary according to the age of
the Insured. We set the corridor percentages so as to seek to ensure that the
Policies will qualify for favorable federal income tax treatment. An increase in
Policy Value due to favorable investment experience may therefore increase the
Death Benefit above the Face Amount, and a decrease in Policy Value due to
unfavorable investment experience may decrease the Death Benefit (but not below
the Face Amount).
EXAMPLES:
<TABLE>
<S> <C> <C>
Face Amount $ 100,000 $ 100,000
Death Benefit Option 1 1
Insured's Age 45 45
Policy Value on Date of
Death $ 48,000 $ 34,000
Applicable Corridor
Percentage 215% 215%
Death Benefit $ 103,200 $ 100,000
</TABLE>
In Example A, the Death Benefit equals $103,200, I.E., the greater of $100,000
(the Face Amount) and $103,200 (the Policy Value at the Date of Death of
$48,000, multiplied by the corridor percentage of 215%). This amount, less any
Policy Debt and unpaid charges, constitutes the Death Benefit proceeds that we
would pay to the Beneficiary.
In Example B, the Death Benefit is $100,000, i.e., the greater of $100,000 (the
Face Amount) or $73,100 (the Policy Value of $34,000 multiplied by the corridor
percentage of 215%).
Option 1 is designed to provide a specific amount of Death Benefit that does not
vary with changes in the Policy Value. Therefore, under Option 1, as your Policy
Value increases, the net amount at risk under your Policy will decrease. Under
Option 2, on the other hand, the amount of the Death Benefit generally increases
to reflect increases in the Policy Value. Therefore, if you select Option 2,
your Policy generally will involve a constant net amount at risk. Since the cost
of insurance charge on your Policy is based upon the net amount at risk, the
cost of insurance charge will generally be less under a Policy with an Option 1
Death Benefit than under a similar Policy with an Option 2 Death Benefit. As a
result, if the Subaccounts you select experience favorable investment results,
your Policy Value will tend to increase faster under Option 1 than under Option
2, but the total Death Benefit under Option 2 will increase or decrease directly
with changes in Policy Value. Thus, you may prefer Option 1 if you are more
interested in the possibility of increasing your Policy Value based upon
favorable investment experience, while you may prefer Option 2 if you are
seeking to increase total Death Benefits.
You may change the Death Benefit option by writing to us at the address given on
the first page of this Prospectus. If you ask to change from Option 2 to Option
1, we will increase the Face Amount of your Policy by the amount of the Policy
Value. If you ask to change from Option 1 to Option 2, we will decrease the Face
Amount of your Policy by the amount of the Policy Value. The change will take
effect on the Monthly Deduction Day on or immediately following the date we
receive your written request.
We do not currently require you to prove insurability for a change in Death
Benefit options. We will not permit you to change the Death Benefit option under
your Policy if afterward the Face Amount remaining in force would be less than
$50,000.
CHANGE IN FACE AMOUNT. You may change the Face Amount after the first Policy
Year. You may request the change by writing to us at the address shown on the
first page of this Prospectus. You should be aware that a change in the Face
Amount will change the net amount at risk and, therefore, the cost of insurance
charges on your Policy. The change will take effect on the Monthly Deduction Day
after we approve the request.
If you request a decrease in Face Amount, we will first apply it to coverage
provided by the most recent increase in Face Amount, then to the next most
recent increase successively and finally to the coverage under the original
application. We will not permit a decrease in the Face Amount of your Policy if
afterward the Face Amount remaining in force would be less than $50,000.
To apply for an increase in the Face Amount, you must submit to us a
supplemental application, accompanied by satisfactory evidence that the Insured
is insurable. We will not permit any increase in Face Amount after the Insured's
80th birthday. The minimum amount of a Face Amount increase is $10,000. You may
not increase the Face Amount of your Policy more often than once every twelve
months.
You should be aware that an increase in the Face Amount of your Policy will
affect the cost of insurance charges applicable to your Policy. As noted above,
we will deduct a larger amount of cost of insurance charges, because an increase
in the Face Amount also will increase the net amount at risk under your Policy.
We will not approve a request for a Face Amount increase if the Net Surrender
Value is too small to pay the Monthly Deduction for the Policy Month following
the increase. As described in "Surrender Charge" on page 23 of this Prospectus,
if you increase the Face Amount of your Policy, your maximum surrender charge
also will increase.
17
<PAGE>
Finally, increases in the Face Amount of your Policy will also increase the
Safety Net Premium amount.
OPTIONAL INSURANCE BENEFITS. You may ask to add one or more riders to your
Policy to provide additional optional insurance benefits. We will require
evidence of insurability before we issue a rider to you. We will deduct the cost
of any riders as part of the Monthly Deduction. The riders we currently offer
are described below. In our discretion we may offer additional riders or stop
offering a rider.
CHILDREN'S LEVEL TERM RIDER: This rider provides for level term insurance on the
Insured's children, as defined in the rider. We will provide coverage until the
earlier of the child's 25th birthday or the Insured's age 65. We will pay the
death benefit to the person designated by you. If the Insured dies while the
rider is in effect, we will convert the coverage on each child to paid-up term
insurance that will remain in force until the child reaches age 25. The rider
may be exchanged for a new Policy on the earlier of each child's 25th birthday,
or the Insured's age 65. We will not require evidence of insurability to
exchange the rider.
ACCIDENTAL DEATH BENEFIT: Under this rider, we will provide additional insurance
if the Insured dies from accidental bodily injury as defined in the rider. This
rider ends when one of the following occurs: (1) the Policy terminates; (2) the
next Policy Anniversary after the Insured's 70th birthday; or (3) you ask to end
the rider.
CONTINUATION OF PREMIUM: Under this rider, we will contribute a monthly amount
to the Policy Value if the Insured becomes totally disabled as defined in the
rider. This rider ends when one of the following occurs: (1) the Policy
terminates; (2) the Insured reaches age 60; or (3) you ask to end the rider.
ADDITIONAL INSURED RIDER: This rider provides life insurance coverage on an
additional Insured. We will pay the Face Amount of the rider to the named
Beneficiary when we receive due proof that the additional Insured died while the
rider was in force. You may renew the coverage until the additional Insured
reaches age 99. Until the additional Insured's 75th birthday, you may exchange
the rider for a new Policy on the additional Insured's life, subject to certain
conditions as defined in the rider. We will not require evidence of insurability
to exchange the rider.
PRIMARY INSURED RIDER: This rider provides additional term life insurance
coverage on the primary Insured. You may renew this coverage until you reach age
99. Until you reach age 75, you may exchange the rider for a new Policy. In
addition, after the fifth Policy Year and until you reach age 75, you may
convert the rider to the base Policy. We will not require evidence of
insurability to exchange or convert the Policy.
If your Policy was issued in connection with a Qualified Plan, we may not be
able to offer you some of the benefits provided by these riders.
POLICY LOANS. While the Policy is in force, you may borrow money from us using
the Policy as the only security for your loan. Loans have priority over the
claims of any assignee or any other person. The maximum amount available for a
loan is 90% of the Surrender Value of your Policy at the end of the Valuation
Period in which we receive your loan request. Other restrictions may apply if
your Policy was issued in connection with a Qualified Plan. In addition, if you
have named an irrevocable Beneficiary, you must also obtain his or her written
consent before we make a Policy loan to you.
We will ordinarily disburse your loan to you within seven days after we receive
your loan request at our home office. We may, however, postpone payment in the
circumstances described in "Postponement of Payments" on page 39. While the
Policy remains in force, you may repay the loan in whole or in part without any
penalty at any time while the Insured is living.
When we make a Policy loan to you, we will transfer to the Loan Account a
portion of the Policy Value equal to the loan amount. We will also transfer in
this manner Policy Value equal to any due and unpaid loan interest. We will
usually take the transfers from the Subaccounts and the Fixed Account in the
percentages that you specified for the allocation of Premiums. However, we will
not withdraw amounts from the Fixed Account equaling more than the total loan
multiplied by the ratio of the Fixed Account to the Policy Value immediately
preceding the loan. The amounts allocated to the Loan Account will be credited
with interest at the Loan Credited Rate stated in your Policy.
You may borrow an amount equal to your Policy Value, less all Premiums paid, as
a Preferred Loan. The interest rate charged for Preferred Loans is 4.0% per
year. We will treat any other loan as a Standard Loan. The interest rate on
Standard Loans is 6.0% per year.
Interest on Policy loans accrues daily and is due at the end of each Policy
Year. If you do not pay the interest on a Policy loan when due, the unpaid
interest will become part of the Policy loan and will accrue interest at the
same rate. In addition, we will transfer the difference between the value of the
Loan Account and the Policy Debt on a pro-rata basis from the Subaccounts and
the Fixed Account to the Loan Account.
If you have a loan with another insurance company, and you are terminating that
policy to buy one from us, usually you would repay the old loan during the
process of surrendering the old policy. Income taxes on the interest earned may
be due. We permit you to carry this old loan over to your new Policy through a
Tax Code Section 1035 tax-free exchange, up to certain limits. The use of a
Section 1035 tax-free exchange may avoid any income tax liability that would be
due if the old loan was extinguished.
If you transfer a Policy loan from another insurer as part of Section 1035
tax-free exchange, we will treat a loan of up to 20% of your Policy Value as a
Preferred Loan. If the amount
18
<PAGE>
due is more than 20% of your Policy Value, we will treat the excess as a
Standard Loan. The treatment of transferred Policy loans is illustrated in the
following example:
<TABLE>
<S> <C>
Transferred Policy
Value $ 190,000
Transferred Policy
Loan 40,000
--------
Surrender Value $ 150,000
20% of Policy Value $ 38,000
Preferred Loan $ 38,000
Standard Loan $ 2,000
</TABLE>
If the total outstanding loan(s) and loan interest exceeds the surrender value
of your Policy, we will notify you and any assignee in writing. To keep the
Policy in force, we will require you to pay a Premium sufficient to keep the
Policy in force for at least three more months. If you do not pay us sufficient
Premium within the 61-day Grace Period, your Policy will lapse and terminate
without value. As explained in the section entitled "Lapse and Reinstatement" on
page 38, however, you may subsequently reinstate the Policy. Before we will
permit you to reinstate the Policy, we will require either repayment or
reimbursement of any Policy Debt that was outstanding at the end of the Grace
Period. If your Policy lapses while a Policy loan is outstanding, you may owe
taxes or suffer other adverse tax consequences. Please consult a tax adviser for
details.
All or any part of any Policy loan may be repaid while the Policy is still in
effect. If you have a Policy loan outstanding, we will assume that any payment
we receive from you is to be applied as Premium to your Policy Value, unless you
tell us to treat your payment as a loan repayment. If you designate a payment as
a loan repayment or interest payments, your payment will be allocated among the
Subaccounts and the Fixed Account using the same percentages used to allocate
Net Premiums, and an amount equal to the payment will be deducted from the Loan
Account.
A Policy loan, whether or not repaid, will have a permanent effect on the Policy
Value because the investment results of each Subaccount and the Fixed Account
will apply only to the amount remaining in that account. The longer a loan is
outstanding, the greater the effect is likely to be. The effect could be
favorable or unfavorable. If the Subaccounts and/or Fixed Account earn more than
the annual interest rate for amounts held in the Loan Account, your Policy Value
will not increase as rapidly as it would if you had not taken a Policy loan. If
the Subaccounts and/or Fixed Account earn less than that rate, then your Policy
Value will be greater than it would have been if you had not taken a Policy
loan. Also, if your do not repay a Policy loan, total outstanding Policy Debt
will be subtracted from the Death Benefit and Surrender Value otherwise payable.
AMOUNT PAYABLE ON SURRENDER OF THE POLICY. While your Policy is in force, you
may fully surrender your Policy. Upon surrender, we will pay you the Net
Surrender Value determined as of the day we receive your written request. Your
Policy will terminate on the day we receive your written request, or the date
requested by you, whichever is later. We may require that you give us your
Policy document before we pay you the surrender proceeds.
The Net Surrender Value equals the Policy Value, minus any applicable surrender
charge, minus any Policy Debt. We will determine the Net Surrender Value as of
the end of the Valuation Period during which we received your request for
surrender. We will pay you the Net Surrender Value of the Policy within seven
days of our receiving your complete written request or on the effective
surrender date you have requested, whichever is later.
You may receive the surrender proceeds in a lump sum or under any of the
settlement options described in "Settlement Options" on page 20.
The tax consequences of surrendering the Policy are discussed in "Federal Tax
Considerations," beginning on page 24.
PARTIAL WITHDRAWALS. While the Policy is in force after the first Policy Year,
you may receive a portion of the Net Surrender Value by making a partial
withdrawal from your Policy. You must request the partial withdrawal in writing.
Your request will be effective on the date received. Before we pay any partial
withdrawal, you must provide us with a completed withholding form.
The minimum partial withdrawal amount is $500. We will subtract the partial
withdrawal service fee of $10 from your withdrawal proceeds. You may not make a
partial withdrawal that would reduce the Net Surrender Value to less than $500.
You may specify how much of your partial withdrawal you wish taken from each
Subaccount or from the Fixed Account. You may not, however, withdraw from the
Fixed Account more than the total withdrawal amount times the ratio of the Fixed
Account to your total Policy Value immediately prior to the withdrawal.
If you have selected Death Benefit Option 1, a partial withdrawal will reduce
the Face Amount of your Policy as well as the Policy Value. We will reduce the
Face Amount by the amount of the partial withdrawal. The Face Amount after a
partial withdrawal may not be less than $50,000. If you have previously
increased the Face Amount of your Policy, your partial withdrawals will first
reduce the Face Amount of the most recent increase, then the most recent
increases successively, then the coverage under the original Policy.
Under Option 2, a reduction in Policy Value as a result of a partial withdrawal
will typically result in a dollar for dollar reduction in the life insurance
proceeds payable under the Policy.
The tax consequences of partial withdrawals are discussed in "Federal Tax
Considerations" beginning page 24.
19
<PAGE>
SETTLEMENT OPTIONS. We will pay the surrender proceeds or Death Benefit proceeds
under the Policy in a lump sum or under one of the settlement options that we
then offer. You may request a settlement option by notifying us in writing at
the address given on the first page of this Prospectus. We will transfer to our
Fixed Account any amount placed under a settlement option and it will not be
affected by the investment performance of the Separate Account.
You may request that the proceeds of the Policy be paid under a settlement
option by submitting a request to us in writing before the death of the Insured.
If at the time of the Insured's death no settlement option is in effect, the
Beneficiary may choose a settlement option not more than 12 months after the
Death Benefit is payable and before it is paid. If you change the Beneficiary,
the existing choice of settlement option will become invalid and you may either
notify us that you wish to continue the pre-existing choice of settlement option
or select a new one.
The amount applied to a settlement option must include at least $5,000 of Policy
Value and result in installment payments of not less than $50. We will not
permit surrenders or partial withdrawals after payments under a settlement
option commence.
We currently offer the five settlement options described below:
OPTION a - INTEREST. We will hold the proceeds, credit interest to them, and pay
out the funds when the person entitled to them requests.
OPTION b - FIXED PAYMENTS. We will pay a selected monthly income until the
proceeds, and any interest credits, are exhausted.
OPTION c - LIFE INCOME - GUARANTEED PERIOD CERTAIN. We will pay the proceeds in
a monthly income for as long as the payee lives. You may also select a guarantee
period of between five and twenty years. If a guarantee period is selected, we
will make monthly payments at least until the payee dies. If the payee dies
before the end of the guarantee period, we will continue payments to a successor
payee until the end of the guarantee period. If no guarantee period is selected
or if the payee dies after the end of the guarantee period, we will stop
payments when the payee dies. It is possible for the payee to receive only one
payment under this option, if the payee dies before the second payment is due
and you did not choose a guarantee period.
OPTION d - JOINT AND SURVIVOR. We will pay the proceeds in a monthly income to
two payees for as long as either payee is alive. Payments will stop when both
payees have died. It is possible for the payees to receive only one payment, if
both payees die before the second payment is due.
OPTION e - PERIOD CERTAIN. We will pay the proceeds in monthly installments for
a specified number of years, from five to twenty-five years. If the payee dies
before the end of the specified period, we will pay the remaining guaranteed
payments to a successor payee.
In addition, we may agree to other settlement option plans. Write or call us to
obtain information about them.
When the proceeds are payable, we will inform you concerning the rate of
interest we will credit to funds left with us. We guarantee that the rate of
interest will be at least 3.5%. We may pay interest in excess of the guaranteed
rate.
MATURITY. The Policies have no maturity date. Your Policy will continue as long
as Net Surrender Value is sufficient to cover Monthly Deductions.
LAPSE AND REINSTATEMENT. If the Net Surrender Value is less than the Monthly
Deduction due on a Monthly Deduction Day and the Safety Net Premium feature is
not in effect, your Policy may lapse. You will be given a 61-day Grace Period in
which to pay enough additional Premium to keep the Policy in force after the end
of the Grace Period.
At least 30 days before the end of the Grace Period, we will send you a notice
telling you that you must pay the amount shown in the notice by the end of the
Grace Period to prevent your Policy from terminating. The amount shown in the
notice will be sufficient to cover the Monthly Deduction(s) due and unpaid. You
may pay additional Premium if you wish.
The Policy will continue in effect through the Grace Period. If the Insured dies
during the Grace Period, we will pay a Death Benefit in accordance with your
instructions. However, we will reduce the proceeds by an amount equal to Monthly
Deduction(s) due and unpaid. See "Death Benefit," on page 16. If you do not pay
us the amount shown in the notice before the end of the Grace Period, your
Policy will end at the end of the Grace Period.
If the Policy lapses, you may apply for reinstatement of the Policy by paying us
the reinstatement Premium and any applicable charges required under the Policy.
You must request reinstatement within five years of the date the Policy entered
a Grace Period. The reinstatement Premium is equal to an amount sufficient to
(1) cover all unpaid Monthly Deductions for the Grace Period, and (2) keep your
Policy in force for three months. If a Policy loan was outstanding at the time
of lapse, you must either repay or reinstate the loan before we will reinstate
your Policy. In addition, we may require you to provide evidence of insurability
satisfactory to us. The Face Amount upon reinstatement cannot exceed the Face
Amount of your Policy at its lapse. The Policy Value on the reinstatement date
will reflect the Policy Value at the time of termination of the Policy plus the
Premium paid at the time of reinstatement. All Policy charges will continue to
be based on your original Issue Date.
CANCELLATION AND EXCHANGE RIGHTS. You may cancel your Policy by returning it to
us within ten days after you receive it, or after whatever longer period may be
permitted by state law. If you return your Policy, the Policy terminates and, in
most
20
<PAGE>
states, we will pay you an amount equal to your Policy Value on the date we
receive the Policy from you, plus any charges previously deducted. Your Policy
Value usually will reflect the investment experience of the Subaccounts and the
Fixed Account as you have allocated your Net Premium. In some states, we are
required to send you the amount of your Premiums. In those states, we may hold
all Premiums received from you in the Money Market Subaccount until the end of
the cancellation period. Since state laws differ as to the consequences of
returning a Policy, you should refer to your Policy for specific information
about your circumstances.
In addition, during the first two Policy Years or the first two years after an
increase in the Face Amount, if the Policy is in force you may amend the Policy
to convert it into a non-variable universal life insurance policy. We will
accomplish this by transferring all of your Policy Value to the Fixed Account
and ending your right under the Policy to allocate Policy Value to the
Subaccounts. We will not require evidence of insurability. We will not charge
you to perform this amendment.
The net amount at risk (I.E., the difference between the Death Benefit and the
Policy Value) under the amended policy will be equal to or less than the net
amount at risk under the previous coverage. Premiums and charges under the
amended policy will be based on the same risk classification as the previous
coverage.
POSTPONEMENT OF PAYMENTS. We may defer for up to fifteen days the payment of any
amount attributable to a Premium paid by check to allow the check a reasonable
time to clear. We may postpone paying any amount for a total surrender or a
partial withdrawal, the disbursement of a Policy loan, or the payment of the
Death Benefit Proceeds, 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 the value of its net assets is not reasonable 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 six months or a shorter period if required by law. If we defer payment
for more than 30 days we will add interest at our current rate from the time you
asked for the Surrender Value.
DEDUCTIONS AND CHARGES
PREMIUM TAX CHARGE AND PREMIUM EXPENSE CHARGE. Before we allocate a Premium to
the Policy Value, we will subtract the premium tax charge and the premium
expense charge. The premium tax charge will equal 2.5% of your Premiums. This
charge is intended to help us pay state premium taxes and other related state
and local taxes. State premium tax rates currently range up to 4.0%.
Accordingly, the 2.5% deducted from your Premium may be more or less than the
taxes assessed in your state. We will subtract this charge from amounts
transferred from other policies issued by other insurers or by us, if state law
imposes a premium tax on transferred amounts.
The premium expense charge will be 3.5% of each Premium for the first ten Policy
Years and 1.5% of each Premium thereafter. 2.0% of the 3.5% charge during the
first ten Policy Years is intended to help compensate us for our actual sales
expenses, which include agents' sales commissions and other sales and
distribution expenses. The remainder of this charge is intended to help
compensate us for certain Federal taxes and other expenses related to the
receipt of Premiums.
MONTHLY DEDUCTION. On each Monthly Deduction Day, we will deduct from your
Policy Value a Monthly Deduction to cover certain charges and expenses in
connection with the Policy. The Monthly Deduction is intended to compensate us
for expenses incurred in connection with the issuance of a Policy, the cost of
life insurance, the cost of any optional insurance benefits and certain
administrative expenses. The administrative expenses include salaries, postage,
telephone, office equipment and periodic reports.
The Monthly Deduction is the sum of the following four items: (1) the policy
fee; (2) the mortality and expense risk charge; (3) the cost of insurance charge
for your Policy; and (4) the cost of any benefit rider.
We will allocate the mortality and expense risk charge pro rata among the
Subaccounts in proportion to the amount of your Policy Value in each Subaccount.
We will allocate the remainder of the Monthly Deduction pro rata among the
Subaccounts and the Fixed Account.
POLICY FEE: The monthly policy fee will be $7.50 per month. This charge
compensates us for administrative expenses such as salaries, postage, telephone,
office equipment and periodic reports.
MORTALITY AND EXPENSE RISK CHARGE: For the first fourteen Policy Years, the
monthly mortality and expense risk charge will be calculated at an annual rate
equivalent to 0.72% of the net Policy Value allocated to the Subaccounts.
Thereafter, we intend to charge an annual rate of 0.36%, and we guarantee that
we will not charge more than 0.48%. The mortality and expense risk charge is not
assessed against your Policy Value in the Fixed Account. This charge compensates
us for the mortality and expense risks that we assume in relation to the
Policies. The mortality risk assumed includes the risk that the cost of
insurance charges specified in the Policy will be insufficient to meet claims.
We also assume a risk that, on the Monthly Deduction Day preceding the death of
an Insured, the Death Benefit will exceed the amount on which the cost of
insurance charges were based. The expense risk assumed is that expenses incurred
in issuing
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<PAGE>
and administering the Policies will exceed the administrative charges set in the
Policy.
COST OF INSURANCE CHARGE: The cost of insurance is determined monthly. The cost
of insurance charge is determined by multiplying the applicable current cost of
insurance rate per $1,000 by the net amount risk for each Policy Month. The net
amount at risk is (a) - (b), where: (a) is the Death Benefit as of the prior
Monthly Deduction Day divided by 1.0032737; and (b) is the Policy Value as of
the prior Monthly Deduction Day.
EXAMPLE:
<TABLE>
<S> <C>
Face Amount $ 100,000
Death Benefit Option 1
Policy Value on the Prior Monthly Deduction Day $ 30,000
Insured's Attained Age 45
Corridor Percentage 215%
Death Benefit $ 100,000
</TABLE>
On the Monthly Deduction Day in this example, the Death Benefit as then computed
would be $100,000, because the Face Amount ($100,000) is greater than the Policy
Value multiplied by the applicable corridor percentage ($30,000 x 215% =
$64,500). Since the Policy Value on that date is $30,000, the cost of insurance
charges per $1000 are applied to the difference in the net amount at risk of
$69,674 (($100,000/1.00327374) - $30,000).
Assume that the Policy Value in the above example was $50,000. The Death Benefit
would then be $107,500 (215% x $50,000), since this is greater than the Face
Amount ($100,000). The cost of insurance rates in this case would be applied to
the net amount at risk of $57,149 (($107,500/1.00327374) - $50,000).
Because the Policy Value and, as a result, the amount for which we are at risk
under your Policy may vary monthly, your cost of insurance charge probably will
be different each month.
We determine the cost of insurance charge separately for the initial Face Amount
and each subsequent increase. The cost of insurance charge covers our
anticipated mortality costs for standard and substandard risks. We determine the
current cost of insurance rates, but we guarantee that we will never charge you
a cost of insurance rate higher than the guaranteed cost of insurance rates
shown in the Policy. We base the cost of insurance rate on the sex, issue age,
Policy Year, and premium rating class of the Insured. However, we issue unisex
policies in Montana and in connection with Qualified Plans. Although we will
base the current cost of insurance rate on our expectations as to future
mortality experience, that rate will never exceed a maximum cost of insurance
rate based on the 1980 Commissioners Standard Ordinary ("1980 CSO") Smoker and
Non-Smoker Mortality Table based on the Insured's sex and age last birthday. Our
cost of insurance rates for unisex Policies will never exceed a maximum based on
the 1980 CSO Table B assuming a blend of 80% male and 20% female lives.
If we ever charge you a cost of insurance rate during the first five Policy
Years that is greater than the rate provided by the rate scale in effect on the
Issue Date we will notify you. For 60 days after we mail that notice, you may
surrender your Policy without paying any surrender charge.
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 on page 25 below.
PORTFOLIO EXPENSES. You indirectly bear the charges and expenses of the
Portfolios whose shares are held by the Subaccounts to which you allocate your
Policy Value. The table below contains a summary of current estimates of those
charges and expenses. 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.
PORTFOLIO EXPENSES
(AS A PERCENTAGE OF PORTFOLIO ASSETS)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES
<S> <C> <C> <C>
Janus Flexible Income Portfolio [to be provided by pre-effective amendment]
Janus Balanced Portfolio
Janus Growth Portfolio
Janus Aggressive Growth Portfolio
Janus Worldwide Growth Portfolio
Federated Utility Fund II
Federated Fund for U.S. Government Securities
II
Federated High Income Bond Fund II
Fidelity VIP Money Market Portfolio
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES
<S> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP Overseas Portfolio
Fidelity VIP II Asset Manager Portfolio
Fidelity VIP II Contrafund Portfolio
Fidelity VIP II Index 500 Portfolio
The Alger Income and Growth Portfolio
The Alger Small Capitalization Portfolio
The Alger Growth Portfolio
The Alger MidCap Growth Portfolio
The Alger Leveraged AllCap Portfolio
Scudder Bond Portfolio
Scudder Balanced Portfolio
Scudder Growth and Income Portfolio
Scudder Global Discovery Portfolio
Scudder International Portfolio
Strong Discovery Fund II
Strong Opportunity Fund II
Strong Growth Fund II
T. Rowe Price International Stock Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price Equity Income Portfolio
MFS Growth with Income Series
MFS Research Series
MFS Emerging Growth Series
MFS Total Return Series
MFS New Discovery Series
[footnotes to be added by pre-effective amendment]
</TABLE>
SURRENDER CHARGE. If you surrender your Policy, we may subtract a surrender
charge from the surrender proceeds. The surrender charge will equal the amount
shown in the surrender charge table in your Policy, plus any additional
surrender charge due to increases in the Face Amount of your Policy. The
surrender charge is based on the Face Amount of your Policy, and also depends on
the Issue Age, premium class and sex of the Insured. After the fifth Policy
Year, the initial surrender charge gradually declines until it decreases to $0
after the end of the fourteenth Policy Year.
The premium expense charge and the surrender charge are imposed to cover our
actual sales expenses, which include agents' sales commissions and other sales
and distribution expenses. We expect to recover total sales expenses of the
Policies over the life of the Policies. However, the premium expense charge and
surrender charge paid with respect to a particular Policy may be higher or lower
than the distribution expenses we incurred in connection with that Policy. To
the extent distribution costs are not recovered by the surrender charge, we may
make up any shortfall from the assets of our general account, which includes
funds derived from the mortality and expense charge on the Separate Account
assets.
If you increase the Face Amount of your Policy, an additional surrender charge
will apply for fourteen years from the effective date of the increase. We will
determine the additional surrender charge separately for each increase in the
Face Amount of your Policy. The additional surrender charge will equal: (a) the
amount of the increase in Face Amount, in thousands, times (b) the applicable
surrender charge rate shown in your Policy for the Insured's attained age at the
time of the increase, times (c) the applicable surrender percentage shown in
your Policy for the number of years elapsed since the increase.
The surrender percentages start at 100%, begin to decline at the end of five
years after the effective date of the increase, and decrease to 0% at the end of
fourteen years.
If you decrease the Face Amount, the applicable surrender charge will remain the
same.
We will not subtract any portion of the then applicable surrender charge from a
partial withdrawal. We will, however, subtract a partial withdrawal service fee
of $10 from the amount withdrawn, to cover our expenses relating to the partial
withdrawal.
We will not assess a surrender charge on surrenders under Policies issued to
employees of Lincoln Benefit or its affiliates or issued to spouses or minor
children of those employees.
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<PAGE>
TRANSFER FEE. We currently are not charging a transfer fee. The Policy, 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.
The transfer fee will be deducted from the Policy 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.
GENERAL POLICY PROVISIONS
STATEMENTS TO POLICY OWNERS. We will maintain all records relating to the
Separate Account and the Subaccounts. Each year we will send you a report
showing information concerning your Policy transactions in the past year and the
current status of your Policy. The report will include information such as the
Policy Value as of the end of the current and the prior year, the current Death
Benefit, Surrender Value, Policy Debt, partial withdrawals, earnings, Premiums
paid, and deductions made since the last annual report. We will also include any
information required by state law or regulation. If you ask us, we will send you
an additional report at any time. We may charge you up to $25 for this extra
report. We will tell you the current charge before we send you the report.
In addition, we will send you the reports required by the 1940 Act. We will mail
you confirmation notices or other appropriate notices of Policy transactions
quarterly or more frequently if required by law. You should therefore give us
prompt written notice of any address change. You should read your statements and
confirmations carefully and verify their accuracy. You should contact us
promptly with any questions.
LIMIT ON RIGHT TO CONTEST. We may not contest the insurance coverage under the
Policy after the Policy has been in force for two years while the Insured is
alive. If the Policy has lapsed and been reinstated, we may not contest the
reinstatement after two years from the date of the reinstatement while the
Insured is alive. We may not contest any increase in the Face Amount of the
Policy after the increase has been in effect for two years while the Insured is
alive.
SUICIDE. If the Insured commits suicide while sane or kills him- or herself
while insane within two years of the Issue Date or within two years of any
increase in the Face Amount, we are not required to pay the full Death Benefit
that would otherwise be payable. Instead, if within two years of the Issue Date
the Insured commits suicide while sane or kills him- or herself while insane, we
will not pay the Death Benefit and instead will pay you an amount equal to the
Policy Value less any Policy Debt and the Policy will stop. If within two years
of the effective date of any increase in the Face Amount the Insured commits
suicide while sane or kills him- or herself while insane, we will pay the
Beneficiary a Death Benefit based on the Face Amount prior to the increase and
we will pay you an amount equal to the total cost of insurance charges for the
increase.
MISSTATEMENT AS TO AGE AND SEX. If the age or sex of the Insured is incorrectly
stated in the application, we will adjust the Death Benefit appropriately as
specified in the Policy.
BENEFICIARY. You name the original Beneficiary(ies) and Contingent
Beneficiary(ies) in the application for the Policy. You may change the
Beneficiary or Contingent Beneficiary at any time, except irrevocable
Beneficiaries and Contingent Beneficiaries may not be changed without their
consent.
You must request a change of Beneficiary in writing. We will provide a form to
be signed and filed with us. Your request for a change in Beneficiary or
Contingent Beneficiary will take effect when we receive it, 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. Accordingly, we
are not liable for making a payment to the person shown in our files as the
Beneficiary or treating that person in any other respect as the Beneficiary,
even if instructions that we subsequently receive from you seek to change your
Beneficiaries effective as of a date before we made the payment or took the
action in question.
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 if your Policy was issued in connection with a
Qualified Plan.
ASSIGNMENT. You may assign your Policy as collateral security, unless it was
issued in connection with a Qualified Plan. You must notify us in writing if you
assign the Policy. Until we receive notice from you, we are not liable for any
action we may take or payments we may make that may be contrary to the terms of
your assignment. We are not responsible for the validity of an assignment. Your
rights and the rights of the Beneficiary may be affected by an assignment.
DIVIDENDS. We will not pay any dividend under the Policies.
FEDERAL TAX CONSIDERATIONS
NOTE: We based the following discussion upon our understanding of current
federal income tax law applicable to life insurance policies in general. We
cannot predict the probability that any changes in those laws will be made.
Also, we do not guarantee the tax status of the Policies. You bear the complete
risk that the Policies may not be treated as "life insurance policies" under
federal income tax laws. You should seek tax advice concerning the effect on
your personal tax liability of the transactions permitted under the
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Policies, as well as any other questions you may have concerning the tax status
of the Policy or the possibility of changes in the tax law.
TAXATION OF LINCOLN BENEFIT AND THE SEPARATE ACCOUNT. We are taxed as a life
insurance company under Part I of Subchapter L of the Tax Code. The operations
of the Separate Account are taxed as part of the operations of Lincoln Benefit.
Investment income and realized capital gains are automatically applied to
increase reserves under the Policies. Under existing federal income tax law, we
believe that the Separate Account investment income and realized net capital
gains will not be taxed to the extent that they are applied to increase the
reserves under the Policies.
Accordingly, we do not anticipate that Lincoln Benefit will incur any federal
income tax liability attributable to the Separate Account. Therefore, we are not
making any charge or provision for federal income taxes. However, if the tax
treatment of the Separate Account is changed, we may charge the Separate Account
for its share of the resulting federal income tax.
In several states we may incur state and local taxes on the operations of the
Separate Account. We currently are not making any charge or provision for them
against the Separate Account. We do, however, use part of the premium tax charge
to offset these taxes. If these taxes should be increased, we may make a charge
or provision for them against the Subaccounts. If we do so, the performance of
the Subaccounts will be reduced.
TAXATION OF POLICY BENEFITS. The Policy is structured to satisfy the definition
of a life insurance contract under the Tax Code. As a result, the Death Benefit
ordinarily will be fully excluded from the gross income of the Beneficiary. The
Death Benefit will be included in your gross estate for Federal estate tax
purposes if the proceeds are payable to your estate. The Death Benefit will also
be included in your estate, if the Beneficiary is not your estate but you
retained incidents of ownership in the Policy. Examples of incidents of
ownership include the right to change Beneficiaries, to assign the Policy or
revoke an assignment, and to pledge the Policy or obtain a Policy loan. If you
own and are the Insured under a Policy and if you transfer all incidents of
ownership in the Policy more than three years before your death, the Death
Benefit will not be included in your gross estate. State and local estate and
inheritance tax consequences may also apply.
Under the Tax Code, if you borrow a Policy loan, the loan usually is not treated
as income to you. Similarly, if you take a partial withdrawal of Policy Value,
the withdrawal usually is treated as income to you only to the extent the amount
withdrawn exceeds the Premiums paid. However, as discussed immediately below, if
your Policy is deemed to be a "modified endowment contract", you may receive
less favorable tax treatment of pre-death distributions and Policy loans.
Finally, in the absence of final regulations or other pertinent interpretations
of the Tax Code, some uncertainty exists as to whether a substandard risk Policy
will meet the statutory definition of a life insurance contract. If a Policy
were deemed not to be a life insurance contract for tax purposes, it would not
provide most of the tax advantages usually provided by a life insurance
contract. We reserve the right to amend the Policies to comply with any future
changes in the Tax Code any regulations or rulings under the Tax Code and any
other requirements imposed by the Internal Revenue Service.
In addition, you may use the Policy in various arrangements, including
non-qualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary depending on the particular
facts and circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
adviser regarding the tax treatment of the proposed arrangement.
MODIFIED ENDOWMENT CONTRACTS. A tax law amendment in 1988 changed the federal
income tax treatment of pre-death withdrawals from a class of life insurance
contracts referred to as modified endowment contracts. Unlike other life
insurance contracts, amounts received before death from a modified endowment
contract, including partial withdrawals and Policy loans, are treated first as
income (to the extent of gain) and then as return of Premium. If your Policy
were deemed to be a modified endowment contract, all modified endowment
contracts issued by Lincoln or its affiliates to you during any calendar year
would be treated as one contract in determining the amount to be treated as
income. Finally, an additional 10% income tax is generally imposed on the
taxable portion of amounts received before age 59 1/2.
In general, a modified endowment contract is a life insurance contract entered
into or materially changed after June 20, 1988 that fails to meet a "7-pay
test". Under the 7-pay test, if the amount of Premiums paid under the life
insurance contract at any time during the first seven Policy Years exceeds the
sum of the net level premiums which would have been paid if the contract
provided for paid-up future benefits after the payment of seven level annual
payments, the contract is a modified endowment contract. A Policy may have to be
reviewed under the 7-pay test even after the first seven Policy Years in the
case of certain events such as a material modification of the Policy as
discussed below. If there is a reduction in the benefits under the contract
during any 7-pay testing period, the 7-pay test is applied using the reduced
benefits level.
Any distribution made within two years before a Policy fails the 7-pay test is
treated as made in anticipation of such failure. Whether or not a particular
Policy meets these definitional requirements is dependent on the date the
contract
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was entered into, premiums paid and the periodic Premiums to be paid, the level
of Death Benefits, any changes in the level of Death Benefits, the extent of any
prior cash withdrawals, and other factors. A life insurance policy which is
issued in exchange for a modified endowment contract will also be treated as a
modified endowment contract. If action is required to be taken in order to
prevent your Policy from being deemed to be a modified endowment contract, we
will advise you.
You should consult with counsel and other tax advisers to determine how these
rules apply to your individual situation and before paying unscheduled Premiums,
increasing or decreasing the specified Face Amount, adding or removing a rider,
or making any other significant change to your Policy. Our annual statement to
you will indicate whether your Policy may be deemed a modified endowment
contract.
DIVERSIFICATION REQUIREMENTS. Section 817(h) of the Tax Code requires that the
underlying assets of variable life insurance contracts be diversified. The Tax
Code provides that a variable life insurance contract will not be treated as a
life insurance contract for federal income tax purposes for any period and any
subsequent period for which the investments are not adequately diversified. If
the Policy were disqualified for this reason, you would lose the tax deferral
advantages of the Policy and would be subject to current federal income taxes on
all earnings allocable to the Policy.
The Tax Code provides that variable life insurance contracts such as the Policy
meet the diversification requirements if, as of the close of each quarter, the
underlying assets meet the diversification standards for a regulated investment
company, and no more than 55% of the total assets consist of cash, cash items,
U.S. Government securities and securities of other regulated investment
companies. For purposes of determining whether or not the diversification
standards of Section 817(h) of the Tax Code have been met, each United States
government agency or instrumentality is treated as a separate issuer.
The United States Treasury Department (the "Treasury Department") also has
issued regulations that establish diversification requirements for the
investment accounts underlying variable contracts such as the Policies. These
regulations amplify the diversification requirements set forth in the Tax Code
and provide an alternative to the provision described above. Under these
regulations, an investment account will be deemed adequately diversified if: (1)
no more than 55% of the value of the total assets of the account is represented
by any one investment; (2) no more than 70% of the value of the total assets of
the account is represented by any two investments; (3) no more than 80% of the
value of the total assets of the account is represented by any three
investments; and (4) no more than 90% of the value of the total assets of the
account is represented by any four investments.
These diversification standards are applied to each Subaccount of the Separate
Account by applying them to the investments of the Portfolio underlying the
Subaccount. One of our criteria in selecting the Portfolios is that their
investment managers intend to manage them in compliance with these
diversification requirements.
OWNER CONTROL. In certain circumstances, variable life insurance contract owners
will be considered the owners, for tax purposes, of separate account assets
underlying their contracts. In those circumstances, the contract owners could be
subject to taxation on the income and gains from the separate account assets.
In published rulings, the Internal Revenue Service has stated that a variable
insurance contract owner will be considered the owner of separate account
assets, if the owner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets. When the
diversification regulations were issued, the Treasury Department announced that
in the future it would provide guidance on the extent to which variable contract
owners could direct their investments among Subaccounts without being treated as
owners of the underlying assets of the Separate Account. As of the date of this
Prospectus, no such guidance has been issued.
The ownership rights under the Policy are similar in many respects to those
described in IRS rulings in which the contract owners were not deemed to own the
separate account assets. In some respects, however, they differ. For example,
under the Policy you have many more investment options to choose from than were
available under the contracts involved in the published rulings, and you may be
able to transfer Policy Value among the investment options more frequently than
in the published rulings. Because of these differences, it is possible that you
could be treated as the owner, for tax purposes, of the Portfolio shares
underlying your Policy and therefore subject to taxation on the income and gains
on those shares. Moreover, it is possible that the Treasury's position, when
announced, may adversely affect the tax treatment of existing Policies. We
therefore reserve the right to modify the Policy as necessary to attempt to
prevent you from being considered the owner for tax purposes of the underlying
assets.
POLICY LOAN INTEREST. Interest paid on loans against a Policy is generally not
deductible.
QUALIFIED PLANS. The Policy may be suitable for purchase by Qualified Plans,
which are pension and profit-sharing plans established by corporations,
partnerships, sole proprietors and other eligible organizations which are
qualified for favorable tax treatment under Section 401(a) and 403(b) of the Tax
Code. The primary purpose of a Qualified Plan is to provide retirement benefits
for the participants and any pre-retirement benefit, such as life insurance
protection, must be incidental to this primary purpose or the plan risks
disqualification. Unisex cost of insurance rates apply to Policies issued
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in connection with Qualified Plans. The tax treatment of "qualified" life
insurance policies differs from traditional life insurance; tax advice on these
matters should be sought from competent tax counsel.
The rules regarding the use of life insurance in connection with Qualified Plans
are complex. Special limitations may apply if you purchase a Policy as
"qualified" life insurance. These limitations may restrict, among other things,
your ability to transfer your Policy and assign your Policy or Policy benefits.
In addition, these tax rules govern certain incidental life insurance provisions
such as premium limitations, joint and survivor annuity provisions, spousal
rights, required minimum distributions, eligibility for plan distributions, and
supplemental benefit restrictions.
TAX ADVICE. This summary is not a complete discussion of the tax treatment of
the Policy. You should seek tax advice from an attorney who specializes in tax
issues.
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"), 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 ("Allstate"), a stock property-
liability insurance company incorporated under the laws of Illinois. All
outstanding capital stock of Allstate is owned by the Allstate Corporation.
We are authorized to conduct life insurance and annuity business in the District
of Columbia, Guam and all states except New York. We intend to market the Policy
everywhere we conduct variable life insurance business. The Policies offered by
this Prospectus are issued by us and will be funded in the Separate Account
and/or the Fixed Account.
Through our reinsurance agreement with Allstate Life, 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. While the
reinsurance agreement provides us with financial backing from Allstate Life, it
does not create a direct contractual relationship between Allstate Life and you.
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.
The Company also acts as the sponsor for one other of its Separate Accounts that
is a registered investment company: Lincoln Benefit Life Variable Annuity
Account. The officers and employees of the Company are covered by a fidelity
bond in the amount of $5,000,000. No person beneficially owns more than 5% of
the outstanding voting stock of The Allstate Corporation, of which the Company
is an indirect wholly-owned subsidiary.
EXECUTIVE OFFICERS AND DIRECTORS OF LINCOLN BENEFIT. Our directors and executive
officers are listed below, together with information as to their 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 and Controller, 5/93-present, Lincoln Benefit Financial Services, Inc.
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, Director, 1981-present, Lincoln Benefit Life Company;
Senior Vice President and Treasurer, 1/94-present, Director, 6/95-present,
Surety Life Insurance Company; Director, 5/93-present, Lincoln Benefit Financial
Services, Inc.
PETER H. HECKMAN; VICE CHAIRMAN OF THE BOARD, 1996; DIRECTOR, 1990; Vice
President, Director, 4/92-present, Glenbrook Life & Annuity Company; Vice
President, 11/90-12/97, Director, 9/90-12/97, 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, 12/88-present, Director,
12/88-present, Northbrook Life Insurance Company; Director, 5/90-present, Surety
Life Insurance Company; Director, 5/90-present, Lincoln Benefit Life Company;
Director 5/91-9/93, Allstate Life Financial Services.
WILLIAM F. KRUEGER; SENIOR VICE PRESIDENT, 1994; DIRECTOR, 1987; Senior Vice
President, 4/94-present, Vice President 1/84-4/94, Director, 1987-present,
Lincoln Benefit Life Company; Senior Vice President, 9/96-present, Director,
6/95-present, Surety Life Insurance Company; Vice President, Director,
5/93-present, Lincoln Benefit Financial Services, Inc.
LOUIS G. LOWER, II; CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER, 1989;
DIRECTOR, 1989; Chairman of the Board and President, 4/92-6/95, Chairman of the
Board and Chief Executive Officer, 6/95-present, Glenbrook Life and Annuity
Company; Chairman of the Board and President, 1/91-12/95, Chairman of the Board
and Chief Executive Officer, 12/95-12/97, Director, 9/90-12/97, Glenbrook Life
Insurance Company; President, 1/90-present, Executive Vice President, 1/89-1/90,
Senior Vice President and Treasurer, 10/86-12/88, Director, Allstate Life
Insurance Company; Chairman of the
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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,
Northbrook Life Insurance Company; Chairman of the Board and President,
6/90-present, Vice President and Treasurer 12/86-6/90, Director, Allstate Life
Insurance Company of New York; Chairman of the Board and Chief Executive
Officer, Director, 5/90-present, Lincoln Benefit Life Company; Chairman of the
Board and Chief Executive Officer, 3/90-present, Director, 5/89-present, Surety
Life Insurance Company; Group Vice President, 1976-1989, Director, 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; Senior
Vice President and Secretary, 4/94-present, Vice President and Secretary,
8/85-4/94, Director, 1987-present, Lincoln Benefit Life Company; Senior Vice
President, 9/96-present, Director, 6/95-present, Surety Life Insurance Company;
Vice President and Secretary, Director, 5/93-present, 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, 1/84-4/94,
Director, 1987-present, Lincoln Benefit Life Company; Executive Vice President,
7/96-present, Senior Vice President and Chief Actuary, 1/94-6/96, Director,
9/93-present, Surety Life Insurance Company; Director, 5/93-present, Lincoln
Benefit Financial Services, Inc.
KEVIN R. SLAWIN; DIRECTOR, 1996; Director and Vice President-Finance and
Planning, 1996-present, Allstate Life Insurance Company; Director, 1996-present,
Allstate Life Insurance Company of New York; Director, 1996-present, Laughlin
Group Holdings, Inc.; Director, 1996-present, Northbrook Life Insurance Company;
Director, 1996-12/97, Surety Life Insurance Company; Director, 1996-present,
Glenbrook Life Insurance Company; Assistant Vice President, Assistant Treasurer,
Allstate Insurance Company, 1995-1996.
MICHAEL J. VELOTTA; DIRECTOR, 1992; Vice President, Secretary and General
Counsel, 1/93-present, Director, 12/92-present, Allstate Life Insurance Company;
Vice President, Secretary and General Counsel, 1/93-12/97, Director,
12/92-12/97, Glenbrook Life Insurance Company; Vice President, Secretary and
General Counsel, 1/93-present, Director, 12/92-present, Glenbrook Life and
Annuity Company; Vice President, Secretary and General Counsel, 1/93-present,
Director, 12/92-present, Allstate Life Insurance Company of New York; Vice
President, Secretary and General Counsel, 1/93-present, Director, 12/92-present,
Northbrook Life Insurance Company; Vice President, Secretary and General
Counsel, 1/93-present, Director, 12/92-present, Surety Life Insurance Company;
Assistant Vice President and Assistant General Counsel, 1989, Allstate Insurance
Company; Director, 12/92-present, Lincoln Benefit Life Company.
RANDY J. VON FUMETTI; SENIOR VICE PRESIDENT, 1996; DIRECTOR, 1996; Senior Vice
President, 9/96-present, Director, 9/96-present; Surety Life Insurance Company;
Senior Actuary and Director, 8/87-9/96, Allstate Life Insurance Company.
CAROL S. WATSON; SENIOR VICE PRESIDENT/GENERAL COUNSEL, 1994; DIRECTOR, 1992;
Senior Vice President and General Counsel, 4/94-present, Vice President and
General Counsel, 7/91-4/94, Director, 5/92-present, Lincoln Benefit Life
Company; Senior Vice President, Corporate Secretary and General Counsel,
1/98-present, Senior Vice President, Assistant Secretary and General Counsel,
Director, 6/95-present, Surety Life Insurance Company; President, 12/96-present,
Vice President and General Counsel, 5/93-11/96, Director, 5/93-present, Lincoln
Benefit Financial Services, Inc.
PATRICIA W. WILSON, DIRECTOR, 1997; 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, 7/97-12/97, Glenbrook Life Insurance Company;
Assistant Treasurer, 7/97-present, Glenbrook Life and 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, Vice President, 12/81-4/94, Director, 1984-present, 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, 1/97-present, Director, 5/93-present, President,
5/93-11/96, Lincoln Benefit Financial Services, Inc.
FINANCIAL INFORMATION CONCERNING LINCOLN BENEFIT. You should consider the
financial statements for Lincoln Benefit that are attached to the end of this
Prospectus only as bearing on the Company'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.
SEPARATE ACCOUNT. Lincoln Benefit Life Variable Life Account was originally
established in 1990, 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 Policy
Value of the Policies
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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 Policies 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 will rise and fall with the
values of shares of the Portfolios and are also reduced by Policy charges. We
use the Separate Account to fund our other variable universal life insurance
policies. We will account separately for each type of variable life insurance
policy funded by the Separate Account.
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS. We hold the assets of the Separate
Account. We keep those assets physically segregated and held separate and apart
from our general account assets. We maintain records of all purchases and
redemptions of shares of the Portfolios.
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 National
Association of Insurance Commissioners. 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.
DISTRIBUTION OF POLICIES
The Policies 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.
Lincoln Benefit Financial Services, Inc. ("LBFS") serves as distributor of the
Policies. LBFS is located at 206 South 13th Street, Lincoln, Nebraska
68508-1993. LBFS is our wholly-owned subsidiary. It is registered as a
broker-dealer under the Securities Exchange Act of 1934, and is a member of the
National Association of Securities Dealers, Inc.
Registered representatives of LBFS who sell the Policy will be paid a maximum
sales commission of approximately 70% of all Premiums up to the commissionable
first year premium plus 2.50% of any additional Premiums in the first year. In
addition, certain bonuses and managerial compensation may be paid. We pay all
such commissions and incentives.
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 Policy, including the validity of
the Policy and our right to issue the Policy under Nebraska law, have been
passed upon Carol S. Watson, Senior Vice President and General Counsel of
Lincoln Benefit. Legal matters relating to the federal securities laws in
connection with the Policies described in this prospectus are being passed upon
by the law firm of Jordan Burt Boros Cicchetti Berenson & Johnson, 1025 Thomas
Jefferson St., East Lobby, Washington, D.C. 20007-5201.
REGISTRATION STATEMENT
We have filed a registration statement with the SEC, Washington, D.C., under the
Securities Act of 1933 as amended, with respect to the Policies 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
Policies. The descriptions in this Prospectus of the Policies and other legal
instruments are summaries. You should refer to those instruments as filed for
their precise terms.
EXPERTS
The financial statements of the Company and the Separate Account and
consolidated financial statements for Lincoln Benefit Life Company as of
December 31, 1997 and 1996 and for each of the three years in the period ended
December 31, 1997 and the related financial statement schedule included in this
Prospectus have been audited by Deloitte & Touche LLP, Two Prudential Plaza, 180
North Stetson Avenue, Chicago, IL 60601-6779, independent auditors, as stated in
their reports. We have included those financial statements and the supplemental
schedule in reliance upon the reports of Deloitte & Touche LLP, given upon their
authority as experts in accounting and auditing. Actuarial matters included in
this Prospectus, including the hypothetical Policy illustrations, have been
examined by Dean M. Way, Vice President and Actuary of the Company, and are
included in reliance upon his opinion as to their reasonableness. [Illustrations
to be provided by pre-effective amendment].
FINANCIAL STATEMENTS
[to be added by pre-effective amendment]
29
<PAGE>
APPENDIX
ILLUSTRATIONS OF SURRENDER VALUES AND DEATH BENEFITS
The following tables illustrate how the Surrender Values and Death Benefits of a
Policy change with the investment experience of the Portfolios. The tables show
how the Surrender Values and Death Benefits of a Policy issued to an Insured of
a given age and underwriting risk classification who pays the specified annual
Premium would vary over time if the investments return on the assets held in the
underlying Portfolio(s) was a uniform, gross, after-tax annual rate of 0%, 6%,
or 12%. The tables on pages A-2 and A-3 illustrate a Policy issued to a [male,
age 45, $150,000] Face Amount, under a preferred nonsmoker risk classification
and Death Benefit Option 1.
The illustrations assume annual payment of $[ ], which is the Safety Net
Premium (see Safety Net Premium, page ). Payment of this Premium each year
would guarantee Death Benefit coverage for ten years, regardless of investment
performance, assuming no loans or withdrawals are taken.
The illustration on page A-2 assumes current charges and cost of insurance
rates, while the illustration on page A-3 assumes maximum guaranteed charges and
cost of insurance rates (based on the 1980 Commissioners Standard Ordinary
Mortality Table).
The amounts shown for the Death Benefit, Policy Value and Surrender Value
reflect the fact that the net investment return of the Subaccounts is lower than
the gross, after-tax return on the assets held in the Portfolios as a result of
expenses paid by the Portfolios and charges levied against the Subaccounts. The
values shown take into account the average daily investment advisory fees paid
by the Portfolios, which is equivalent to an average annual rate of [xx%] of the
average daily net assets of the Funds, and the average of other daily Portfolio
expenses, which is equivalent to an average annual rate of [xx%] of the average
daily net assets of the Funds. Also reflected is our monthly charge to the
Policy Value for assuming mortality and expense risks. The current charge for
the first fourteen Policy Years is an annual rate of 0.72% of the average net
assets of the Subaccounts, with a maximum charge of 0.48% of average daily net
assets thereafter. The illustrations also reflect the deduction from Premiums
for premium tax of 2.5% of Premium, the premium expense charge of 3.5% of
Premium for the first ten years and 1.5% thereafter, and the monthly Policy fee
of $7.50. After deduction of these amounts, the illustrated gross annual
investment rates of return of 0%, 6%, and 12%, "Assuming Current Costs"
correspond to approximate net annual rates of [x.xx%, x.xx%, and x.xx%],
respectively. The illustrated gross annual investment rates of return of 0%, 6%,
and 12%, "Assuming Guaranteed Costs" correspond to approximate net annual rates
of return of [x.xx%, x.xx%, and x.xx%], respectively.
The hypothetical values shown in the tables do not reflect any charges for
Federal income taxes against the Separate Account, since we are not currently
making this charge. However, this charge may be made in the future and, in that
event, the gross annual investment rate of return would have to exceed 0%, 6%,
and 12% by an amount sufficient to cover the tax charge in order to produce the
Death Benefits, Policy Values and Surrender Values illustrated (see "Federal Tax
Considerations," page 24).
The tables illustrate the Policy Values, Surrender Values and Death Benefits
that would result based upon the hypothetical investment rates of return if
Premiums are paid as indicated, if all net Premiums are allocated to the
Separate Account, and if no Policy loans are taken. The tables also assume that
you have not requested an increase or decrease in the face amount of the Policy
and that no partial surrenders or transfers have been made.
Upon request, we will provide a comparable illustration based upon the proposed
Insured's actual age, sex and underwriting classification, the Face Amount,
Death Benefit option, the proposed amount and frequency of Premiums paid and any
available riders requested.
A-1
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
MALE ISSUE AGE 45
Face Amount [$150,000]
Annual Premium [$xxxx]
Preferred Non-Smoker Class
Death Benefit Option 1
Current Cost of Insurance Rates
<TABLE>
<CAPTION>
DEATH BENEFIT
Assuming Hypothetical Gross and
Net Annual Investment Return of
Policy 0% Gross 6% Gross 12% Gross
Year x.xx% Net x.xx% Net x.xx% Net
<S> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20 (age 65)
30 (age 75)
40 (age 85)
54 (age 99)
</TABLE>
<TABLE>
<CAPTION>
POLICY VALUE SURRENDER VALUE
Assuming Hypothetical Gross and Assuming Hypothetical Gross and
Net Annual Investment Return of Net Annual Investment Return of
Policy 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year x.xx% Net x.xx% Net x.xx% Net x.xx% Net x.xx% Net x.xx% Net
<S> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20 (age 65)
30 (age 75)
40 (age 85)
54 (age 99)
</TABLE>
Assumes the Premium shown is paid at the beginning of each Policy Year. Values
would be different if Premiums are paid with a different frequency or in
different amounts.
Assumes that no Policy loans or withdrawals have been made. An * indicates lapse
in the absence of additional Premium.
The hypothetical investment rates of return shown above and elsewhere in this
Prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual investment rates of return may
be more or less than those shown and will depend on a number of different
factors, including the investment allocations by the Policy owner and different
investment rates of return for the Portfolios. The Death Benefit, Policy Value,
and surrender value for a Policy would be different from those shown if the
actual investment rates of return averaged the rates shown above over a period
of years, but fluctuated above or below those averages for individual Policy
Years. No representation can be made by the Company or any Portfolio that this
assumed investment rate of return can be achieved for any one year or sustained
over a period of time.
A-2
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
MALE ISSUE AGE 45
Face Amount [$150,000]
Annual Premium [$xxxx]
Preferred Non-Smoker Class
Death Benefit Option 1
Guaranteed Cost of Insurance Rates
<TABLE>
<CAPTION>
DEATH BENEFIT
Assuming Hypothetical Gross and
Net Annual Investment Return of
Policy 0% Gross 6% Gross 12% Gross
Year x.xx% Net x.xx% Net x.xx% Net
<S> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20 (age 65)
30 (age 75)
40 (age 85)
54 (age 99)
</TABLE>
<TABLE>
<CAPTION>
POLICY VALUE SURRENDER VALUE
Assuming Hypothetical Gross and Assuming Hypothetical Gross and
Net Annual Investment Return of Net Annual Investment Return of
Policy 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year x.xx% Net x.xx% Net x.xx% Net x.xx% Net x.xx% Net x.xx% Net
<S> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
15
20 (age 65)
30 (age 75)
40 (age 85)
54 (age 99)
</TABLE>
Assumes the Premium shown is paid at the beginning of each Policy Year. Values
would be different if Premiums are paid with a different frequency or in
different amounts.
Assumes that no Policy loans or withdrawals have been made. An * indicates lapse
in the absence of additional Premium.
The hypothetical investment rates of return shown above and elsewhere in this
Prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual investment rates of return may
be more or less than those shown and will depend on a number of different
factors, including the investment allocations by the Policy owner and different
investment rates of return for the Portfolios. The Death Benefit, Policy Value,
and surrender value for a Policy would be different from those shown if the
actual investment rates of return averaged the rates shown above over a period
of years, but fluctuated above or below those averages for individual Policy
Years. No representation can be made by the Company or any Portfolio that this
assumed investment rate of return can be achieved for any one year or sustained
over a period of time.
Assumes the Premium shown is paid at the beginning of each Policy Year. Values
would be different if Premiums are paid with a different frequency or in
different amounts.
A-3
<PAGE>
PART II - OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, as amended, the undersigned registrant hereby undertakes
to file with the Securities and Exchange Commission such supplementary and
periodic information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
REPRESENTATION AS TO FEES AND CHARGES
Lincoln Benefit Life Company hereby represents that the fees and charges
deducted under the Flexible Premium Variable Universal Life Insurance Policy
hereby registered by this Registration Statement in the aggregate are reasonable
in relation to the services rendered, the expenses expected to be incurred, and
the risks assumed by Lincoln Benefit Life Company.
REPRESENTATION PURSUANT TO RULE 6e-3(T)
This filing is made pursuant to Rule 6e-3(T) under the Investment Company
Act of 1940, as amended (the "1940 Act").
UNDERTAKING AS TO INDEMNIFICATION
Insofar as indemnification for liability arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Registrant, the Registrant has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-1
<PAGE>
CONTENTS OF THIS REGISTRATION STATEMENT
This Registration Statement consists of the following papers and documents:
Facing Sheet
Cross-Reference Sheet
Prospectus consisting of ___ pages
Undertaking to File Reports
Undertaking As To Indemnification
Representation As To Fees and Charges
Representation Pursuant to Rule 6e-3(T)
Signature Pages
Exhibits
EXHIBIT LIST
1. Exhibits required by paragraph A of the instructions as to Exhibits of Form
N-8B-2
(1) Resolution of the Board of Directors of Lincoln Benefit Life Company
authorizing establishment of the Lincoln Benefit Life Variable Life
Account (filed herewith)
(2) Custodian Agreement (not applicable)
(3) (a) Form of Principal Underwriting Agreement (filed herewith)
(b) Form of Selling Agreement (filed herewith)
(c) Schedule of Sales Commissions (filed herewith)
(4) Other Agreements between the depositor, principal underwriter, and
custodian with respect to Registrant or its securities (not
applicable)
(5) Specimen Policy (filed herewith)
(6) (a) Articles of Incorporation of Lincoln Benefit Life Company, as
amended (filed herewith)
(b) By-laws of Lincoln Benefit Life Company (filed herewith)
(7) Insurance Company Blanket Bond (filed herewith)
II-2
<PAGE>
(8) Participation Agreements
(a) Fund Participation Agreement between Janus Aspen Series and
Lincoln Benefit Life Company (filed herewith)
(b) Participation Agreement among Lincoln Benefit Life Company and
Variable Insurance Products Fund and Fidelity Distributors
Corporation (filed herewith)
(c) Participation Agreement among Lincoln Benefit Life Company and
Variable Insurance Products Fund II and Fidelity Distributors
Corporation (filed herewith)
(d) (1) Participation Agreement among The Alger American Fund,
Lincoln Benefit Life Company and Fred Alger and Company,
Incorporated (filed herewith)
(2) Service Agreement between Fred Alger Management, Inc. and
Lincoln Benefit Life Company (filed herewith)
(e) (1) Participation Agreement between Scudder Variable Life
Investment Fund and Lincoln Benefit Life Company (filed
herewith)
(2) Reimbursement Agreement by and between Scudder, Stevens &
Clark, Inc. and Lincoln Benefit Life Company (filed
herewith)
(3) Participating Contract and Policy Agreement between Scudder
Investor Services, Inc. and Lincoln Benefit Financial
Services. (filed herewith)
(f) Form of Participation Agreement among Lincoln Benefit Life
Company, Strong Variable Insurance Funds, Inc., Strong
Opportunity Fund II, Inc., Strong Capital Management, Inc., and
Strong Funds Distributors, Inc. (filed herewith)
(g) Form of Participation Agreement among T. Rowe Price Equity
Series, Inc., T. Rowe Price International Series, Inc., T. Rowe
Price Investment Services, Inc., and Lincoln Benefit Life Company
(filed herewith)
II-3
<PAGE>
(h) Form of Participation Agreement among MFS Variable Insurance
Trust, Lincoln Benefit Life Company, and Massachusetts Financial
Services Company (filed herewith)
(i) Fund Participation Agreement between Lincoln Benefit Life
Company, Insurance Management Series and Federated Securities
Corp. (filed herewith)
(9) Other Material Contracts (not applicable)
(10) Form of Application for Policy (to be filed by pre-effective
amendment)
2. Opinion and Consent of Counsel (to be filed by pre-effective amendment)
3. All financial statements omitted from the prospectus (not applicable)
4. Not applicable
5. Financial Data Schedule (to be filed by pre-effective amendment)
6. Procedures memorandum pursuant to Rule 6e-3(T)(b)(12)(ii) (to be filed by
pre-effective amendment)
7. Actuarial Opinion and Consent (to be filed by pre-effective amendment)
8. Consent of Independent Accountants (to be filed by pre-effective amendment)
II-4
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the registrant has duly caused this Registration Statement to be
signed on its behalf in the City of Lincoln, State of Nebraska, on the __th day
of March, 1998.
LINCOLN BENEFIT LIFE VARIABLE LIFE ACCOUNT
(Registrant)
BY: LINCOLN BENEFIT LIFE COMPANY
(Depositor)
By:
--------------------------------------------------------
B. Eugene Wraith
President and Chief Operating Officer
As required by the Securities Act of 1933, this Registration Statement has
been signed below by the following persons in the capacities and on the dates
indicated:
- -------------------------
B. Eugene Wraith President, Chief Operating March __, 1998
(Principal Executive Officer and Director
Officer)
- -------------------------
Robert E. Rich Executive Vice President March __, 1998
and Director
- -------------------------
Randy J. Von Fumetti Senior Vice President, March __, 1998
(Principal Financial Treasurer and Director
Officer)
II-5
<PAGE>
- -------------------------
Janet P. Anderbery Vice President March __, 1998
(Principal Accounting and Controller
Officer)
- -------------------------
Peter H. Heckman Director March __, 1998
- -------------------------
William F. Krueger Director March __, 1998
- -------------------------
Louis G. Lower, II Director March __, 1998
- -------------------------
John J. Morris Director March __, 1998
- -------------------------
Douglas F. Gaer Director March __, 1998
- -------------------------
Kevin Slawin Director March __, 1998
- -------------------------
Michael J. Velotta Director March __, 1998
- -------------------------
Carol S. Watson Director March __, 1998
- -------------------------
Patricia W. Wilson Director March __, 1998
II-6
<PAGE>
INDEX TO EXHIBITS
FOR
REGISTRATION STATEMENT ON FORM S-6
LINCOLN BENEFIT LIFE VARIABLE LIFE ACCOUNT
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
(1) Resolution of Board of Directors
(3)(a) Underwriting Agreement
(b) Selling Agreement
(c) Schedule of Commissions
(5) Specimen Policy
(6) Articles of Incorporation
(7) Insurance Company Blank Bond
(8) Fund Participation Agreement
(a) -- Janus Aspen Series
(b) -- Fidelity Variable Insurance Products Fund
(c) -- Fidelity Variable Insurance Products Fund II
(d)(1) -- The Alger American Fund
(2) -- Service Agreement
(e)(1) -- Scudder Variable Life Investment Fund
(2) -- Reimbursement Agreement
(3) -- Participating Contract and Policy Agreement
(f) -- Strong Variable Insurance Funds
(g) -- T. Rowe Price Equity Series, Inc.
(h) -- MFS Variable Insurance Trust
(i) -- Federated Insurance Management Series
</TABLE>
<PAGE>
SECRETARY'S CERTIFICATE
I, John J. Morris, Secretary of Lincoln Benefit Life Company, a Nebraska
corporation (this "Company"), do hereby certify that the following is a true,
complete, and correct copy of the resolution of the Board of Directors of
this Corporation adopted at a meeting held May 17, 1990, at which a quorum
was present and that said resolution is in full force and effect:
BE IT RESOLVED, That the Company, pursuant to the provisions of
Section 402.01 of the Nebraska Insurance Code, hereby establishes a
separate account designated Lincoln Benefit Life Variable Life Account
(hereinafter "Variable Life Account") for the following use and
purposes, and subject to such conditions as hereinafter set forth.
BE IT FURTHER RESOLVED, That Variable Life Account shall be
established for the purpose of providing for the issuance by the
Company of such variable life or such other contracts ("Contracts") as
the President may designate for such purpose and shall constitute a
separate account into which are allocated amounts paid to or held by
the Company under such Contracts; and
BE IT FURTHER RESOLVED, That the income, gains and losses,
whether or not realized, from assets allocated to Variable Life
Account shall, in accordance with the Contracts be credited to or
charged against such account without regard to other income, gains, or
losses of the Company; and
BE IT FURTHER RESOLVED, That the fundamental investment policy of
Variable Life Account shall be to invest or reinvest the assets of
Variable Life Account in securities issued by investment companies
registered under the Investment Company Act of 1940, as amended, as
the Finance Committee may designate pursuant to the provisions of the
Contracts; and
BE IT FURTHER RESOLVED, That five investment divisions be, and
hereby are, established within Variable Life Account to which net
payments under the Contracts will be allocated in accordance with
instructions received from contractholders, and that the President be,
and hereby is, authorized to increase or decrease the number of
investment divisions in Variable Life Account as deemed necessary or
appropriate; and
BE IT FURTHER RESOLVED, That each such investment division shall
invest only in the shares of a single mutual fund or a single mutual
fund portfolio of an investment company organized as a series fund
pursuant to the Investment Company Act of 1940; and
BE IT FURTHER RESOLVED, That the President and Treasurer be and
they hereby are, authorized to deposit such amount in Variable Life
Account or in each investment division thereof as may be necessary or
appropriate to facilitate the commencement of the Account's
operations; and
BE IT FURTHER RESOLVED, That the President of the Company be, and
is hereby, authorized to change the designation of Variable Life
Account to such other designation as it may deem necessary or
appropriate; and
BE IT FURTHER RESOLVED, That the appropriate officers of the
Company, with such assistance from the Company's auditors, legal
counsel and independent consultants or others as
<PAGE>
they may require, be, and they hereby are, authorized and directed to
take all action necessary to: (a) register Variable Life Account as a
unit investment trust under the Investment Company Act of 1940, as
amended; (b) register the Contracts in such amounts, which may be an
indefinite amount, as the officers of the Company shall from time to
time deem appropriate under the Securities Act of 1933; and (c) take
all other actions which are necessary in connection with the offering
of said Contracts for sale and the operation of Variable Life Account
in order to comply with the Investment Company Act of 1940, the
Securities Exchange Act of 1934, the Securities Act of 1933, and other
applicable federal laws, including the filing of any amendments to
registration statements, any undertakings, and any applications for
exemptions from the Investment Company Act of 1940 or other applicable
federal laws as the officers of the Company shall deem necessary or
appropriate; and
BE IT FURTHER RESOLVED, That the President and the General
Counsel, and either of them with full power to act without the other,
hereby are severally authorized and empowered to prepare, execute and
cause to be filed with the Securities and Exchange Commission on
behalf of Variable Account and by the Company as sponsor and
depositor, a Form of Notification of Registration, a Registration
Statement registering Variable Life Account as an investment company
under the Investment Company Act of 1940, and a Registration Statement
registering the variable life insurance contracts under the Securities
Act of 1933; and
BE IT FURTHER RESOLVED, That the appropriate officers of the
Company be, and they hereby are, authorized on behalf of Variable Life
Account and on behalf of the Company to take any and all action that
they may deem necessary or advisable in order to sell the Contracts,
including any registrations, filings and qualifications of the
Company, its officers, agents and employees, and the Contracts under
the insurance and securities laws of any of the states of the United
States of America or other jurisdictions, and in connection therewith,
to prepare, execute, deliver and file all such applications, reports,
covenants, resolutions, applications for exemptions, consents to
service of process and other papers and instruments as may be required
under such laws, and to take any and all further action which said
officers or counsel of the Company may deem necessary or desirable
(including entering into whatever agreements and contracts may be
necessary) in order to maintain such registrations or qualifications
for as long as said officers or counsel deem them to be in the best
interests of Variable Life Account and the Company; and
BE IT FURTHER RESOLVED, That the General Counsel of the Company
be, and hereby is, authorized in the names and on behalf of Variable
Life Account and the Company to execute and file irrevocable written
consents on the part of Variable Life Account and of the Company to be
used in such states wherein such consents to service of process may be
requisite under the insurance or securities laws therein in connection
with said registration or qualification of Contracts and to appoint
the appropriate state official, or such other person as may be allowed
by said insurance or securities laws, agent of Variable Life Account
and of the Company for the purpose of receiving and accepting process;
and
BE IT FURTHER RESOLVED, That the President of the Company be, and
hereby is, authorized to establish criteria by which the Company shall
institute procedures to provide for a pass-through of voting rights to
the owners of such Contracts as required by the applicable laws with
respect to securities owned by Variable Life Account; and
BE IT FURTHER RESOLVED, That the President of the Company is
hereby authorized to execute such agreement or agreements on such
terms and subject to such modifications as
<PAGE>
deemed necessary or appropriate (i) with a qualified entity that will
be appointed principal underwriter and distributor for the Contracts
and (ii) with one or more qualified banks or other qualified entities
to provide administrative and/or custodial services in connection with
the establishment and maintenance of Variable Life Account and the
design, issuance, and administration of the Contracts; and
BE IT FURTHER RESOLVED, That since it is expected that Variable
Life Account will invest in the securities issued by one or more
investment companies, the appropriate officers of the Company are
hereby authorized to execute whatever agreement or agreements as may
be necessary or appropriate to enable such investments to be made; and
BE IT FURTHER RESOLVED, That the appropriate officers of the
Company, and each of them, are hereby authorized to execute and
deliver all such documents and papers and to do or cause to be done
all such acts and things as they may deem necessary or desirable to
carry out the foregoing resolutions and the intent and purposes
thereof.
BE IT FURTHER RESOLVED, That the Company intends to issue
variable life insurance contracts in certain states which require that
the Company adopt, by formal action of the Board of Directors, written
statements specifying the Company's Standards of Suitability and the
Company's Standards of Conduct with regard to the issuance and sale of
such variable life insurance contracts.
BE IT FURTHER RESOLVED, That neither the Company nor its agents
shall make a recommendation to an applicant to purchase variable life
insurance contracts or issue variable life insurance contracts in the
absence of reasonable grounds to believe the purchase of such contract
is not unsuitable for such applicant on the basis of information
furnished after reasonable inquiry of such applicant concerning the
applicant's insurance and investment objectives, financial situation
and needs and any other information known to the insured or to the
agent making the recommendation;
BE IT FURTHER RESOLVED, That neither the Company, its officers,
directors, nor employees will engage in any act, practice or course of
business in connection with the purchase or sale, directly or
indirectly, by such person of any security held or to be acquired by
the variable life separate account or any separate account of the
Company, in contravention of such rules and regulations as the
Securities and Exchange Commission may adopt to define and prescribe
means reasonably necessary to prevent, such acts, practices, or
courses of business conduct as are fraudulent, deceptive or
manipulative, including requirements for the adoption of codes of
ethics by registered investment companies and investment advisers of
and principal underwriters for, such investment companies establishing
such standards as are reasonably necessary to prevent such acts,
practices or courses of business as are fraudulent, deceptive or
manipulative.
IN WITNESS WHEREOF, I have hereunto set my hand as Secretary of the
Company and affixed the corporate seal this 7th day of February, 1994.
/s/John J. Morris
--------------------------------------
John J. Morris, Secretary
(SEAL)
<PAGE>
UNDERWRITING AGREEMENT
THIS AGREEMENT, is entered into on this 3rd day of January, 1994, by
and among LINCOLN BENEFIT LIFE COMPANY, ("LBL" or "COMPANY") a life insurance
company organized under the laws of the State of Nebraska on its own and on
behalf of the LINCOLN BENEFIT LIFE VARIABLE LIFE ACCOUNT, ("Separate
Account") a separate account established pursuant to the insurance laws of
the State of Nebraska, and LINCOLN BENEFIT FINANCIAL SERVICES, INC.,
("Principal Underwriter"), a corporation organized under the laws of the
State of Delaware.
RECITALS
WHEREAS, the Company proposes to issue to the public certain variable
life contracts identified in the Attachment A ("Policies"); and
WHEREAS, Company, by resolution adopted on May 17, 1990, established
the Separate Account for the purpose of issuing the Policies; and
WHEREAS, the Policies to be issued by Company are registered with the
Commission under the Securities Act of 1933 (File No. 33-67226) for offer and
sale to the public and otherwise are in compliance with all applicable laws;
and
WHEREAS, Principal Underwriter, a broker/dealer registered under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. ("NASD"), proposes to act as principal underwriter
on an agency (best efforts) basis in the marketing and distribution of said
Policies; and
1
<PAGE>
WHEREAS, Company desires to obtain the services of Principal
Underwriter as an underwriter and distributor of said Policies issues by
Company through the Separate Account;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other goods and valuable
considerations the Company, the Separate Account, and the Principal
Underwriter hereby agree as follows:
1. AUTHORITY AND DUTIES
(a) Principal Underwriter will serve as an underwriter and distributor
on an agency basis for the Policies which will be issued by the
Company through the Separate Account.
(b) Principal Underwriter will use its best efforts to provide
information and marketing assistance to licensed insurance agents
and broker/dealers on a continuing basis. However, Principal
Underwriter shall be responsible for compliance with the
requirements of state broker/dealer regulations and the Securities
Exchange Act of 1934 as each applies to Principal Underwriter in
connection with its duties as distributor of said Policies.
Moreover, Principal Underwriter shall conduct its affairs in
accordance with the Rules of Fair Practice of the NASD.
(c) Subject to agreement with the Company, Principal Underwriter may
enter into selling agreements with broker/dealers which are
registered under the Securities Exchange Act of 1934 and authorized
by applicable law to sell variable life policies issued by Company
through the Separate
2
<PAGE>
Account. Any such contractual arrangement is expressly made subject
to this Agreement, and Principal Underwriter will at all times be
responsible to Company for supervision of compliance with the
federal securities laws regarding distribution of Policies.
2. WARRANTIES
(a) The Company represents and warrants to Principal Underwriter that:
(i) Registration Statements on Form S-6 for each of the Policies
identified in Attachment A have been filed with the Commission
in the form previously delivered to Principal Underwriter and
that copies of any and all amendments thereto will be
forwarded to Principal Underwriter at the time that they are
filed with Commission;
(ii) The Registration Statement and any further amendments or
supplements thereto will, when they become effective,
conform in all material respects to the requirements of the
Securities Act of 1933 and the Investment Company Act of
1940, and the rules and regulations of the Commission under
such Acts, and will not contain any untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein not misleading; provided, however, that this
representation and warranty shall not apply to any statement
or omission made in reliance upon and in conformity with
information furnished in writing to Company by Principal
Underwriter expressly for use therein;
3
<PAGE>
(iii) The Company is validly existing as a stock life insurance
company in good standing under the laws of the State of
Nebraska, with power to own its properties and conduct its
business as described in the Prospectus, and has been duly
qualified for the transaction of business and is in good
standing under the laws of each other's jurisdiction in
which it owns or leases properties, or conducts any business;
(iv) The Policies to be issued through the Separate Account and
offered for sale by Principal Underwriter on behalf of the
Company hereunder have been duly and validly authorized and,
when issued and delivered with payment therefore as provided
herein, will be duly and validly issued and will conform to
the description of such Policies contained in the
Prospectuses relating thereto;
(v) Those persons who offer and sell the Policies are to be
appropriately licensed or appointed to comply with the state
insurance laws;
(vi) The performance of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result
in a violation of any of the provisions of or default under
any statute, indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which Company
is a party or by Company is bound (including Company's
Charter of By-laws as a stock life insurance company, or any
order, rule or regulation of any court of governmental
agency or body having jurisdiction over Company or any of
its properties);
4
<PAGE>
(vii) There are no material legal or governmental proceedings
pending to which Company or the Separate Account is a party
or of which any property of Company or the Separate Account
is the subject (other than as set forth in the Prospectus
relating to the Policies, or litigation incident of the kind
of business conducted by the Company) which, if determined
adversely to Company, would individually or in the aggregate
have a material adverse effect on the financial position,
surplus or operations of Company.
(b) Principal Underwriter represents and warrants to Company that:
(i) It is a broker/dealer duly registered with the Commission
pursuant to the Securities Exchange Act of 1934, is a member
in good standing of the NASD, and is in compliance with the
securities laws in those states in which it conducts
business as a broker/dealer.
(ii) As a principal underwriter, it shall permit the offer and sale
of Policies to the public only by and through persons who
are appropriately licensed under the securities laws and who
are appointed in writing by the Company to be authorized
insurance agents;
(iii) The performance of this Agreement and the consummation of
the transactions herein contemplated will not result in a
breach or violation of any of the terms or provisions of or
constitute a default under any stature, indenture, mortgage,
deed of trust, note agreement or other agreement or
instrument to which Principal Underwriter is a party or by
which Principal Underwriter is bound
5
<PAGE>
(including the Certificate of Incorporation or Bylaws of
Principal Underwriter or any order, rule or regulation of
any court or governmental agency or body having jurisdiction
over either Principal Underwriter or its property); and
(iv) To the extent that any statements made in the Registration
Statement or any amendment or supplement thereto, are made
in reliance upon and in conformity with written information
furnished to Company by Principal Underwriter expressly for
use therein, such statements will, when they become
effective or are filed with the Commission, as the case may
be, conform in all material respects to the requirements of
the Securities Act of 1933 and the rules and regulations of
the Commission thereunder, and will not contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading.
3. BOOKS AND RECORDS
(a) Principal Underwriter shall keep, in a manner and form approved by
Company and in accordance with Rules 17a-3 and 17a-4 under the
Securities Exchange Act of 1934, correct records and books or
account as required to be maintained by a registered broker/dealer,
acting as principal underwriter, of all transactions entered into
on behalf of Company with respect to its activities under this
Agreement. Principal Underwriter shall make such records and books
of account available for inspection by the Commission, and Company
shall have the right to
6
<PAGE>
inspect, make copies of or take possession of such records and
books of account at any time upon demand.
(b) Subject to applicable Commission of NASD restrictions, Company
will send confirmation of Policy transactions to Policy
Owners. Company will make sure confirmations and records of
transactions available to Principal Underwriter upon request.
4. SALES MATERIALS
(a) After authorization to commence the activities contemplated
herein, Principal Underwriter will utilize the currently
effective prospectus relating to the subject Policies in
connection with its underwriting, marketing and distribution
efforts. As to other types of sales material, Principal
Underwriter hereby agrees and will require any participating
or selling broker/dealers to agree that they will use only
sales material which have been authorized for use by
Company, which conform to the requirements of federal and
state laws and regulations, and which have been filed where
necessary with the appropriate regulatory authorities,
including the NASD.
(b) Principal Underwriter will not distribute any prospectus, sales
literature or any other printed matter or material in the
underwriting and distribution of any Policy if, to the
knowledge of Principal Underwriter, any of the foregoing
misstates the duties, obligation or liabilities of Company
or Principal Underwriter.
7
<PAGE>
5. COMPENSATION
Principal Underwriter shall be entitled to such remuneration for its services
and reimbursement for its fees, charges and expenses as will be determined
between the parties.
6. PURCHASE PAYMENTS
Principal Underwriter shall arrange that all purchase payments collected on the
sale of the Policies are promptly and properly transmitted to Company for
immediate allocation to the Separate Account in accordance with the procedures
of Company and the directions furnished by the purchasers of such Policies at
the time of purchase.
7. UNDERWRITING TERMS
(a) Principal Underwriter makes no representations or warranties
regarding the number of Policies to be sold by licensed
broker/dealers and registered representatives of broker/dealers
or the amount to be paid thereunder. Principal Underwriter does,
however, represent that it will actively engage in its duties
under this Agreement on a continuous basis while there is an
effective registration statement with the Commission.
(b) Principal Underwriter will use its best efforts to ensure that the
Policies shall be offered for sale by registered broker/dealers and
registered representatives (who are duly licensed as insurance
agents) on the terms described in the currently effective prospectus
describing such Policies.
(c) It is understood and agreed that Principal Underwriter may render
similar services to other companies in the distribution of other
variable contracts.
8
<PAGE>
(d) The Company will use its best efforts to assure that the Policies
are continuously registered under the Securities Act of 1933 (and
under any applicable state "blue sky" laws) and to file for
approval under state insurance laws when necessary.
(e) The Company reserves the right at any time to suspend or limit the
public offering of the subject Policies upon one day's written
notice to Principal Underwriter.
8. LEGAL AND REGULATORY ACTIONS
(a) The Company agrees to advise Principal Underwriter immediately of:
(i) any request by the Commission for amendment of the Registration
Statement or for additional information relating to the
Policies;
(ii) the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement relating to the
Policies or the initiation of any proceedings for that purpose;
and
(iii) the happening of any known material even which makes untrue
any statement made in the Registration Statement relating to
the Policies or which requires the making of a change therein
in order to make any statement made therein not misleading.
(b) Each of the undersigned parties agrees to notify the other in
writing upon being apprised of the institution of any proceeding,
investigation or hearing involving the offer or sale of the subject
Policies.
(c) During any legal action or inquiry, Company will furnish to
Principal Underwriter such information with respect to the Separate
Account and Policies in such form and signed by such of its officers
as Principal
9
<PAGE>
Underwriter may reasonably request and will warrant that the
statements therein contained when so signed are true and correct.
9. TERMINATION
(a) This Agreement will terminate automatically upon its assignment;
(b) This Agreement shall terminate without the payment of any penalty by
either party upon sixty (60) days' advance written notice.
(c) This Agreement shall terminate at the option of the Company upon
institution of formal proceedings against Principal Underwriter by
the NASD or by the Commission, or if Principal Underwriter or any
representative thereof at any time:
(i) employs any device, scheme, artifice, statement or omission to
defraud any person;
(ii) fails to account and pay over promptly to the Company money due
it according to the Company's records; or
(iii) violates the conditions of this Agreement.
10. INDEMNIFICATION
The Company agrees to indemnify Principal Underwriter for any liability that it
may incur to a Policy owner or party-in-interest under a Policy:
(a) arising out of any act or omission in the course of or in connection
with rendering services under this Agreement; or
(b) arising out of the purchase, retention or surrender of a contract;
provided, however, that the Company will not indemnify Principal
Underwriter for any such liability that results from the willful
misfeasance, bad faith or
10
<PAGE>
gross negligence of Principal Underwriter or from the reckless
disregard by such Principal Underwriter of its duties and
obligations arising under this Agreement.
11. GENERAL PROVISION
(a) This Agreement shall be subject to the laws of the State of
Nebraska.
(b) This Agreement, along with any Schedules attached hereto and
incorporated herein by reference, may be amended from time to time
by the mutual agreement and consent of the undersigned parties.
(c) In case any provision in this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the
remaining provision shall not in any way be affected or impaired
thereby.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
to be duly executed, to be effective as of January 3, 1994.
LINCOLN BENEFIT LIFE COMPANY
(and LINCOLN BENEFIT LIFE VARIABLE LIFE ACCOUNT)
BY: /s/Fred H. Jonske 1/3/94
------------------------------ -------------------------
President Date
LINCOLN BENEFIT FINANCIAL SERVICES, INC.
By: /s/B. E. Wraith 1/3/94
------------------------------ -------------------------
President Date
11
<PAGE>
Attachment A
UNDERWRITING AGREEMENT
"POLICIES" Form #
- ----------- --------
INVESTORS SELECT VARIABLE UNIVERSAL LIFE VUL 9390
12
<PAGE>
AMENDMENT #1 TO THE
UNDERWRITING AGREEMENT
(HEREINAFTER "AGREEMENT")
BETWEEN
LINCOLN BENEFIT LIFE COMPANY
(HEREINAFTER "LBL")
ON BEHALF OF THE
LINCOLN BENEFIT LIFE VARIABLE LIFE ACCOUNT
(HEREINAFTER "SEPARATE ACCOUNT")
AND
LINCOLN BENEFIT FINANCIAL SERVICES
(HEREINAFTER "LBFS")
IT IS HEREBY AGREED, that the Underwriting Agreement effective January 3, 1994,
between LBL and LBFS, is amended as provided below.
Paragraph 5, "COMPENSATION" is hereby amended by deleting said Paragraph in its
entirety, and replacing it with the following new Paragraph 5:
5. COMPENSATION
Principal Underwriter shall be entitled to remuneration of its
services in the amount of 105% of the target premium received for all
variable life premiums received on policies by the Company. Such
remuneration shall be reduced by the amount of commissions payable to
broker/dealers receiving compensation pursuant to selling agreements
with Company and Principal Underwriter, or registered representatives
affiliated with Principal Underwriter.
Page 1 of 2
<PAGE>
This Amendment shall be effective as of January 3, 1994. Except as amended
hereby, the Agreement shall remain unchanged.
IN WITNESS HEREOF, the parties to the Agreement have caused this Amendment to be
duly executed in duplicate by their duly authorized officers on the dates shown
below.
LINCOLN BENEFIT LIFE COMPANY
By: /s/Fred H. Jonske Attested
----------------------------
Title: President By: /s/Carol S. Watson
---------------------------- ---------------------------------
Date: February 19, 1996 Date: February 19, 1996
---------------------------- ---------------------------------
LINCOLN BENEFIT FINANCIAL SERVICES, INC.
By: /s/B. E. Wraith Attested
----------------------------
Title: President By: /s/Carol S. Watson
---------------------------- ---------------------------------
Date: February 19, 1996 Date: February 19, 1996
---------------------------- ---------------------------------
Page 2 of 2
<PAGE>
AMENDMENT #2 TO THE
UNDERWRITING AGREEMENT
(HEREINAFTER "AGREEMENT")
BETWEEN
LINCOLN BENEFIT LIFE COMPANY
(HEREINAFTER "LBL")
ON BEHALF OF THE
LINCOLN BENEFIT LIFE VARIABLE LIFE ACCOUNT
(HEREINAFTER "SEPARATE ACCOUNT")
AND
LINCOLN BENEFIT FINANCIAL SERVICES, INC.
(HEREINAFTER "LBFS")
IT IS HEREBY AGREED, that the Underwriting Agreement effective January 3, 1994
between LBL and LBFS is hereby amended as provided below:
Effective March 1, 1998, in addition to those contracts identified in Attachment
A, the contracts listed in the attached Attachment A are hereby incorporated and
subject to the terms of the Agreement.
Paragraph 5, "COMPENSATION" is hereby amended by adding the following:
Principal Underwriter shall be entitled to remuneration of its
services in the amount of 110% of the target premium received for all
variable universal life premiums received on Form VUL 9800 policies issued
by Company. Such remuneration shall be reduced by the amount of
commissions payable to brokers/dealers receiving compensation pursuant to
selling agreements with Company and Principal Underwriter, or registered
representatives affiliated with Principal Underwriter.
Except as amended hereby, the Agreement shall remain unchanged.
<PAGE>
IT WITNESS HEREOF, the parties to the Agreement have caused this Amendment to be
duly executed in duplicate by their respective officers on the dates shown
below.
LINCOLN BENEFIT LIFE COMPANY
By: /s/B. E. Wraith Attested
----------------------------
Title: President By: /s/John J. Morris
---------------------------- -----------------------------
Date: March 1, 1998 Date: March 1, 1998
---------------------------- -----------------------------
LINCOLN BENEFIT FINANCIAL SERVICES, INC.
By: /s/Carol S. Watson Attested
----------------------------
Title: President By: /s/John J. Morris
---------------------------- -----------------------------
Date: March 1, 1998 Date: March 1, 1998
---------------------------- -----------------------------
<PAGE>
ATTACHMENT A
UNDERWRITING AGREEMENT
"CONTRACTS" FORM #
- --------------------- --------
(To be Determined) VUL 9800
<PAGE>
SELLING AGREEMENT
Agreement, made this____________________________ day of _______________ 199_,
by and between Lincoln Benefit Life Company ("LBL"), a Nebraska Corporation;
Lincoln Benefit Financial Services ("LBFS"), a Delaware Corporation, and
_________________________________________________("BD"),
a ________________________________________ Corporation. This Agreement will be
construed in accordance with the laws of the State of Nebraska.
LINCOLN BENEFIT LIFE COMPANY
BY:
LINCOLN BENEFIT FINANCIAL SERVICES, INC.
BY:
Effective Date
BROKER DEALER:
(Street Address)
(City, State, Zip)
BY:
Title:
Whereas, LBL issues certain variable insurance contracts/policies
("Contracts") described in this Agreement, which are deemed securities under
the Securities Act of 1933 ("1933 Act"); and
Whereas, LBFS is duly licensed as a Broker/Dealer with the National
Association of Securities Dealers, Inc. ("NASD") and the Securities and
Exchange Commission ("SEC"); and
Whereas, BD is duly licensed as a Broker/Dealer with the NASD and the SEC, and
Whereas, LBL has appointed LBFS as the Underwriter of the Contracts, and
Whereas, LBL and LBFS propose to have BD's representatives
("Representatives") who are also duly licensed insurance agents solicit sales
of the Contracts, and
Whereas, LBFS delegates to BD, to the extent legally permitted, training and
certain administrative responsibilities and duties in connection with sales
of the Contracts.
NOW THEREFORE, in consideration of the premises and mutual promises contained
herein, the parties hereto agree as follows:
<PAGE>
1. APPOINTMENT
LBL and LBFS hereby appoint BD to supervise solicitations of the Contracts,
and to facilitate solicitations of sales of the Contracts which are described
in the Schedule(s) of Commissions attached hereto.
2. REPRESENTATIONS
a. LBL, LBFS and BD each represents to the other that it and the above
signed officers have full power and authority to enter into this Agreement.
b. LBFS represents to BD that it is registered as a Broker/Dealer under the
Securities Exchange Act of 1934 ("1934 Act") and under the Blue Sky Laws of
each jurisdiction in which such registration is required for the sale of the
Contracts and that LBFS is a member of the NASD.
c. BD represents to LBFS that it is registered as a Broker/Dealer under the
1934 Act and under the Blue Sky Laws of each jurisdiction in which such
registration is required for the sale of the Contracts, and that the BD is a
member of the NASD.
d. LBL represents to BD that the Contracts, including related separate
accounts, shall comply with the registration and all other applicable
requirements of the 1933 Act and the Investment Company Act of 1940, and the
rules and regulations thereunder, including the terms of any order of the SEC
with respect thereto.
e. LBL represents to BD that the Contracts it issues have been duly filed
and approved by the state insurance departments in such jurisdictions where
it is authorized to transact business.
f. LBL represents to BD that the Contract prospectuses included in LBL's
Registration Statement and in post-effective amendments thereto, and any
supplements thereto, as filed or to be filed with the SEC, as of their
respective effective dates, contain or will contain, all statements and
information which are required to be stated therein by the 1933 Act and in
all respects conform or will conform, to the requirements thereof.
3. COMPLIANCE WITH NASD RULES OF FAIR PRACTICE AND FEDERAL AND STATE
SECURITIES AND STATE INSURANCE LAWS
BD agrees to abide by all rules and regulations of the NASD, including its
Rules of Fair Practice, and to comply with all applicable state and federal
laws and the rules and regulations of authorized regulatory agencies
affecting the sale of the Contracts.
4. LICENSING AND/OR APPOINTMENT
OF REPRESENTATIVES
BD shall assist LBL and LBFS in the licensing and/or appointment of
Representatives under applicable insurance laws to sell the Contracts. BD
understands that LBL reserves the right to refuse to appoint any
Representative or, once appointed, to thereafter terminate the same. BD
shall notify LBFS if any Representative ceases to be a registered
representative of BD.
5. SUPERVISION OF REPRESENTATIVES
BD shall have full responsibility for training and supervision of all
Representatives associated with BD who are engaged directly or indirectly in the
offer or sale of the Contracts and all such persons shall be subject to the
control of BD with respect to such persons' activities in connection with the
sale of the Contracts. BD shall comply with the administrative procedures of
LBL and LBFS involving federal securities law and state insurance law.
Before Representatives engage in the solicitation of applications for the
Contracts, BD will cause (1) the Representatives to be registered
representatives of BD; (2) the Representatives to qualify under applicable
federal and state laws to engage in the sale of the Contracts; (3) the
Representatives to be trained in the sale of the Contracts; and (4) such
Representatives to limit solicitation of applications for the Contracts to
jurisdictions where LBL has authorized such solicitation.
BD is specifically charged with the responsibility of supervising and
reviewing its Representatives' use of sales literature and advertising and
<PAGE>
including the delivery of supplemental sales literature or other such
materials, shall occur, be delivered to, or used with a prospective purchaser
unless accompanied or preceded by appropriate then current prospectus(es).
In the event a Representative fails to meet the BD's rules and standards, BD
shall notify LBL and shall act to terminate the sales activities of such
Representative relating to the Contracts.
Upon request by LBL, BD shall furnish appropriate records or other
documentation to evidence BD's diligent supervision.
6. SALES PROMOTION MATERIAL AND ADVERTISING
No sales promotion materials or advertising relating to the Contracts shall
be used by BD unless the specific item has been approved in writing by LBL.
7. SECURING APPLICATIONS
All applications for Contracts shall be made on application forms supplied by
LBL. BD will review all sales for suitability and all applications for
completeness and correctness as to form. BD will promptly, but in no case
later than the end of the next business day following receipt by BD, forward
to LBL all complete and correct applications for suitable transactions,
together with any payments received with the applications, without deduction
for compensation. LBL reserves the right to reject any Contract application
and return any payment made in connection with an application which is
rejected. Contracts issued on accepted applications will be forwarded to BD
or its Representatives for delivery to the Contract Owner.
8. PAYMENTS RECEIVED BY BD
All premium payments (hereinafter collectively referred to as "Payments") are
the property of LBL and shall be transmitted to LBL by BD immediately in
accordance with the administrative procedures of LBL, without any deduction
or offset for any reason, including by example but not limitation, any
deduction or offset for compensation claimed by BD. CUSTOMER CHECKS SHALL BE
MADE PAYABLE TO THE ORDER OF "LINCOLN BENEFIT LIFE COMPANY."
9. COMMISSIONS PAYABLE
Commissions payable in connection with the contracts shall be paid to BD
according to the Commission Schedule(s) relating to this Agreement as they
may be amended from time to time and in effect at the time the Contract
Payments are received by LBL. LBL reserves the right to revise the
Commission Schedules at any time upon at least thirty (30) days prior written
notice to BD. Compensation to the BD's Representatives for Contracts
solicited by the Representatives and issued by LBL will be governed by
agreement between BD and its Representatives and its payment will be the BD's
responsibility.
10. CANCELLATION OF POLICY
If LBL is required to refund premiums or return contract values and waive
surrender charges on any Contract for any reason, then no commission will be
payable with respect to said premiums and any commission previously paid for
said premiums must be refunded to LBFS. LBFS agrees to notify BD within
thirty (30) days after it receives notice from LBL of any premium refund or a
commission chargeback.
11. ADDITIONAL PARTY TO THIS AGREEMENT
In the event that BD is not licensed as an insurance agency in any state
where it wishes to solicit contracts, but utilizes an affiliated entity to
satisfy state insurance laws, such affiliated entity shall sign this
Agreement and BD shall countersign this Agreement, and BD and its affiliated
entity shall be duly bound thereby.
12. HOLD HARMLESS AND INDEMNIFICATION
PROVISIONS
No party to this Agreement will be liable for any obligation, act or omission
of the other. Each party to this Agreement will hold harmless and indemnify
LBL, LBFS, and BD, as appropriate, for any loss or expense suffered as a
result of the violation or noncompliance by that party or the Associated
Persons of that party by any applicable law or regulation. The term
"Associated Person" as used herein shall be defined consistently with the
definition of such term as contained in Article I of the NASD By-Laws.
13. NON-ASSIGNABILITY PROVISION
This Agreement may not be assigned by any party except by mutual consent.
<PAGE>
14. NON-WAIVER PROVISION
Failure of any party to terminate the Agreement for any of the causes set
forth in this Agreement will not constitute a waiver of the right to
terminate this Agreement at a later time for any of these causes.
15. AMENDMENTS
Except as stated in Paragraph 9, no amendment to this Agreement will be
effective unless it is in writing and signed by all the parties hereto.
16. INDEPENDENT CONTRACTORS
BD and its Representatives are independent contractors with respect to LBL
and LBFS.
17. NOTIFICATION OF DISCIPLINARY PROCEEDINGS
BD agrees to notify LBFS in a timely fashion of any disciplinary proceedings
against any of BD's Representatives soliciting sales of the Contracts or any
threatened or filed arbitration action or civil litigation arising out of
BD's solicitation of the Contracts.
18. BOOK AND RECORDS
LBL, LBFS and BD agree to maintain the books, accounts and records so as to
clearly and accurately disclose the nature and details of transactions and to
assist each other in the timely preparation of records. LBFS and BD shall
each submit such records to the regulatory and administrative bodies which
have jurisdiction over LBL or the underlying mutual fund shares.
Each party to this Agreement shall promptly furnish to the other party any
reports and information which the other party may request for the purpose of
meeting its reporting and recordkeeping requirements under the insurance laws
of any state, and under the federal and state securities laws or the rules of
the NASD.
19. LIMITATIONS
No party other than LBL shall have the authority on behalf of LBL to make,
alter, or discharge any Contract issued by LBL, to waive any forfeiture or to
grant, permit, or to extend the time of making any Payments, or to alter the
forms which LBL may prescribe or substitute other forms in place of
prescribed by LBL; or to enter into any proceeding in a court of law or
before a regulatory agency in the name of or on behalf of LBL.
20. TERMINATION
This Agreement may be terminated at the option of any party upon ten (10)
days written notice to the other parties, or at the option of any party
hereto upon the breach by any party of the covenants and terms of this
Agreement.
21. NOTICE
All notices to LBL and LBFS relating to this Agreement should be sent to
Lincoln Benefit Life Centre, Lincoln, Nebraska 68501-0469. All notices to BD
will be duly given if mailed to the address shown above.
22. SEVERABILITY
Should any provision of this Agreement be held unenforceable, those
provisions not affected by the determination of unenforceability shall remain
in full force and effect.
<PAGE>
SCHEDULE OF COMMISSIONS
Subject to terms and conditions of the Selling Agreement, the BD shall be
compensated according to the following schedule of the policy forms shown. The
payment of commissions is subject to the rules and practices of LBL and LBFS.
VARIABLE UNIVERSAL LIFE COMMISSIONS
You, the BD, may elect to receive commissions pursuant to either Option A or
Option B as described below.
% OF
PREMIUM RENEWAL
PLAN PLAN # RECEIVED (% OF PREMIUM)
COMMISSIONS
OPTION A
Variable Universal Life VUL 9800
- First Year Target Premium*: 95 3
- Excess (All Years):
Issue Age 0-59 3.0 3.0
Issue Age 60 & above 2.0 2.0
- Trails (Years 6+) .25
* For issue ages 0-69, the target premium is equal to the "safety net"
premium for the minimum guaranteed death benefit. For issue ages 70+,
the target is frozen at the age 69 level.
(a) All premium paid into the policy during the first 12 months will
be credited to the first year target premium until the full first year
target premium has been paid. Any excess first year premium and all
renewal premium will be commissioned as stated in the table.
(b) Increase in face amount after issue will result in an increase in target
premium based on insured's attained age at time of increase.
(c) If a term plan is exchanged for a variable universal life policy,
full first year commissions will be paid on the premium actually paid by
the policy owner. No commission will be payable on premiums which are
paid by applying a premium exchange allowance.
(d) No first year commission will be paid on any additional target premium
resulting from a temporary substandard extra premium.
(e) If the withdrawal charges are waived by the COMPANY when an existing
policy value is rolled over to a new policy, commissions on the new policy
will be reduced in accordance with the Company's published rules. The
COMPANY's procedures determine if and when withdrawal charges are waived.
(f) Renewal commissions will not be paid on premiums paid under a continuation
of premium rider.
<PAGE>
(g) Additional policies and supplements which may be developed by the COMPANY
from time to time may be added to the Schedule of Life Commissions by
addendum and shall be subject to the same conditions as are set forth in this
agreement.
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
INSURED: [JOHN DOE]
PAYMENT CLASS: [STANDARD NON-SMOKER]
POLICY NUMBER: [SPECIMEN] ISSUE AGE: [35]
FACE AMOUNT: [$100,000} ISSUE DATE: [03/01/1997]
THIS IS A LEGAL CONTRACT - READ IT CAREFULLY
LINCOLN BENEFIT LIFE COMPANY promises to pay the death benefit to the
beneficiary on death of the insured upon receipt of due proof of death of the
insured.
PLEASE EXAMINE THE APPLICATION. We issued this contract based upon the answers
in the application (copy included) and receipt of your initial premium. If all
answers are not complete and true, the contract may be affected.
RIGHT TO CANCEL YOUR CONTRACT. YOU MAY CANCEL THIS CONTRACT BY RETURNING IT
LINCOLN BENEFIT LIFE COMPANY, PO BOX 82532, LINCOLN, NE 68501-2532, OR OUR
AGENT, BEFORE MIDNIGHT OF THE 10TH DAY AFTER THE DAY YOU RECEIVE THE POLICY.
RETURN OF THE CONTRACT BY MAIL IS EFFECTIVE ON BEING POSTMARKED, PROPERLY
ADDRESSED AND POSTAGE PREPAID. WE WILL REFUND ANY PREMIUMS ALLOCATED TO THE
SEPARATE ACCOUNT, ADJUSTED TO REFLECT INVESTMENT GAIN OR LOSS FROM THE DATE OF
ALLOCATION TO THE DATE OF CANCELLATION, IN ADDITION TO ANY PREMIUM ALLOCATED TO
THE FIXED ACCOUNT.
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
FLEXIBLE PREMIUM VARIABLE LIFE POLICY
Minimum Premium Required in the First Year
Death Benefit Payable on the Insured's Death
Flexible Premiums Payable for Life
THE DEATH BENEFIT AND OTHER VALUES PROVIDED BY THIS CONTRACT ARE
BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, THE
FIXED ACCOUNT EARNINGS, AND OTHER FLEXIBLE FACTORS. THESE
VALUES MAY VARY BASED ON INVESTMENT AND EARNINGS
EXPERIENCE AND ARE NOT GUARANTEED AS TO A
FIXED DOLLAR AMOUNT.
Nonparticipating
Page 1
<PAGE>
SUMMARY OF POLICY
This policy insures the life of the insured. If the insured dies while this
policy is in force, the death benefit will be paid to the beneficiary.
Payments for this contract are flexible. They may be made during the lifetime
of the insured.
During the lifetime of the insured, you may:
...change the planned payments and time between payments;
...obtain policy loans;
...change the beneficiary;
...change the death benefit option;
...surrender the policy for its net surrender value;
...exercise the other rights provided.
This is only a summary of the contract terms. The detailed provisions of the
policy will control.
The provisions are set forth in the following sections:
Policy Data Page 3
Definitions Page X
Death Benefit Page X
Beneficiary Page X
Ownership Page X
Premium Payments Page X
Policy Value Page X
Surrender Value Page X
Loans Page X
Other Terms of your Contract Page X
Exchange of Plan Page X
Application Insert
Benefit Riders (if any) Insert
READ YOUR POLICY CAREFULLY
Page 2
<PAGE>
POLICY DATA
INSURED: [JOHN DOE]
PAYMENT CLASS: [STANDARD NON-SMOKER]
POLICY NUMBER: [SPECIMEN] ISSUE AGE: [35]
FACE AMOUNT: [$100,000} ISSUE DATE: [03/01/1997]
MONTHLY DEDUCTION DAY [01]
BENEFIT DESCRIPTION
Year of Expiry
or Maturity
Flexible Premium Variable Life Life
Insurance - (Death Benefit Option 1)
PAYMENT INFORMATION
Required Payment [XXXX]
Planned Payment [XXXX]
Initial Payment [XXXX]
The payment of a monthly {SAFETY NET} premium of {XXX.XX} is guaranteed to keep
this policy in force for {10} years, assuming no loans or withdrawals are taken.
See {SAFETY NET} Premium Provision on Page XX for details.
Page 3
<PAGE>
ALLOCATIONS
SEPARATE ACCOUNT: LINCOLN BENEFIT LIFE VARIABLE LIFE ACCOUNT
<TABLE>
<CAPTION>
Monthly
Payment Deduction
Subaccount Allocation% Allocation%
---------- ----------- ----------
<S> <C> <C>
{Janus Worldwide Subaccount} {20} {30}
{Fidelity VIPFII Asset Manager Subaccount} {75} {60}
{Fixed Account} {5} {10}
<CAPTION>
FIXED ACCOUNT
-------------
<S> <C>
Minimum Guaranteed Annual Interest Rate {4.00%}
Minimum Guaranteed Monthly Interest Rate {.327374%}
Minimum Withdrawal Amount {$500}
Minimum Transfer Amount {$100}
Loan Credited Rate {4.00%}
Maximum Loan Interest Rate Charged:
On preferred loans {4.00%}
On standard loans {6.00%}
<CAPTION>
EXPENSE DEDUCTIONS AND CHARGES
------------------------------
<S> <C>
Annual Mortality and Expense Risk Charge
Contract Years 1-14 {0.72%}
Contract Years 15+ Current {0.36%}
Guaranteed 0.48%
Monthly Policy Fee {$7.50}
Premium Tax Charge {2.5%}
Premium Expense Charge {3.5% for 1st 10
policy years, 1.5%
thereafter}
Partial Withdrawal Service Fee {$10}
</TABLE>
Page 3A
<PAGE>
SURRENDER CHARGE SCHEDULE
SURRENDER CHARGES FOR INITIAL FACE AMOUNT
The following represents the maximum surrender charges which may be assessed
against your policy, assuming no elective increases in face amount.
<TABLE>
<CAPTION>
Policy Amount of Policy Amount of
Year Charge Year Charge
<S> <C> <C> <C>
1 $XXXX 9 $XXX
2 XXXX 10 XXX
3 XXXX 11 XXX
4 XXXX 12 XXX
5 XXXX 13 XXX
6 XXXX 14 XXX
7 XXXX 15 0
8 XXXX
<CAPTION>
SURRENDER CHARGE PERCENTAGES
Male Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year
Age 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-43 XX XX XX XX XX XX XX XX XX XX XX XX XX XX 0
44-55 XX XX XX XX XX XX XX XX XX XX XX XX XX XX 0
56-65 XX XX XX XX XX XX XX XX XX XX XX XX XX XX 0
66-70 XX XX XX XX XX XX XX XX XX XX XX XX XX XX 0
71-80 XX XX XX XX XX XX XX XX XX XX XX XX XX XX 0
<CAPTION>
Female Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year
Age 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-45 XX XX XX XX XX XX XX XX XX XX XX XX XX XX 0
46-55 XX XX XX XX XX XX XX XX XX XX XX XX XX XX 0
56-65 XX XX XX XX XX XX XX XX XX XX XX XX XX XX 0
66-70 XX XX XX XX XX XX XX XX XX XX XX XX XX XX 0
71-80 XX XX XX XX XX XX XX XX XX XX XX XX XX XX 0
</TABLE>
Page 4
<PAGE>
SURRENDER CHARGE FACTORS
<TABLE>
<CAPTION>
Issue Male Non Male Female Non Female Issue Male Non Male Female Non Female
Age Smoker Smoker Smoker Smoker Age Smoker Smoker Smoker Smoker
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 XXXX XXXX XXXX XXXX 41 XXXX XXXX XXXX XXXX
1 XXXX XXXX XXXX XXXX 42 XXXX XXXX XXXX XXXX
2 XXXX XXXX XXXX XXXX 43 XXXX XXXX XXXX XXXX
3 XXXX XXXX XXXX XXXX 44 XXXX XXXX XXXX XXXX
4 XXXX XXXX XXXX XXXX 45 XXXX XXXX XXXX XXXX
5 XXXX XXXX XXXX XXXX 46 XXXX XXXX XXXX XXXX
6 XXXX XXXX XXXX XXXX 47 XXXX XXXX XXXX XXXX
7 XXXX XXXX XXXX XXXX 48 XXXX XXXX XXXX XXXX
8 XXXX XXXX XXXX XXXX 49 XXXX XXXX XXXX XXXX
9 XXXX XXXX XXXX XXXX 50 XXXX XXXX XXXX XXXX
10 XXXX XXXX XXXX XXXX 51 XXXX XXXX XXXX XXXX
11 XXXX XXXX XXXX XXXX 52 XXXX XXXX XXXX XXXX
12 XXXX XXXX XXXX XXXX 53 XXXX XXXX XXXX XXXX
13 XXXX XXXX XXXX XXXX 54 XXXX XXXX XXXX XXXX
14 XXXX XXXX XXXX XXXX 55 XXXX XXXX XXXX XXXX
15 XXXX XXXX XXXX XXXX 56 XXXX XXXX XXXX XXXX
16 XXXX XXXX XXXX XXXX 57 XXXX XXXX XXXX XXXX
17 XXXX XXXX XXXX XXXX 58 XXXX XXXX XXXX XXXX
18 XXXX XXXX XXXX XXXX 59 XXXX XXXX XXXX XXXX
19 XXXX XXXX XXXX XXXX 60 XXXX XXXX XXXX XXXX
20 XXXX XXXX XXXX XXXX 61 XXXX XXXX XXXX XXXX
21 XXXX XXXX XXXX XXXX 62 XXXX XXXX XXXX XXXX
22 XXXX XXXX XXXX XXXX 63 XXXX XXXX XXXX XXXX
23 XXXX XXXX XXXX XXXX 64 XXXX XXXX XXXX XXXX
24 XXXX XXXX XXXX XXXX 65 XXXX XXXX XXXX XXXX
25 XXXX XXXX XXXX XXXX 66 XXXX XXXX XXXX XXXX
26 XXXX XXXX XXXX XXXX 67 XXXX XXXX XXXX XXXX
27 XXXX XXXX XXXX XXXX 68 XXXX XXXX XXXX XXXX
28 XXXX XXXX XXXX XXXX 69 XXXX XXXX XXXX XXXX
29 XXXX XXXX XXXX XXXX 70 XXXX XXXX XXXX XXXX
30 XXXX XXXX XXXX XXXX 71 XXXX XXXX XXXX XXXX
31 XXXX XXXX XXXX XXXX 72 XXXX XXXX XXXX XXXX
32 XXXX XXXX XXXX XXXX 73 XXXX XXXX XXXX XXXX
33 XXXX XXXX XXXX XXXX 74 XXXX XXXX XXXX XXXX
34 XXXX XXXX XXXX XXXX 75 XXXX XXXX XXXX XXXX
35 XXXX XXXX XXXX XXXX 76 XXXX XXXX XXXX XXXX
36 XXXX XXXX XXXX XXXX 77 XXXX XXXX XXXX XXXX
37 XXXX XXXX XXXX XXXX 78 XXXX XXXX XXXX XXXX
38 XXXX XXXX XXXX XXXX 79 XXXX XXXX XXXX XXXX
39 XXXX XXXX XXXX XXXX 80 XXXX XXXX XXXX XXXX
40 XXXX XXXX XXXX XXXX
</TABLE>
Page 4A
<PAGE>
GUARANTEED MONTHLY COST OF INSURANCE
<TABLE>
<CAPTION>
Policy Rate Policy Rate
Year Per $1000 Year Per $1000
---- --------- ---- ---------
<S> <C> <C> <C>
1 0.14 34 2.49
2 0.15 35 2.74
3 0.16 36 3.03
4 0.17 37 3.36
5 0.18 38 3.74
6 0.19 39 4.17
7 0.21 40 4.64
8 0.22 41 5.15
9 0.24 42 5.68
10 0.26 43 6.24
11 0.28 44 6.82
12 0.31 45 7.46
13 0.33 46 8.15
14 0.36 47 8.93
15 0.39 48 9.81
16 0.42 49 10.79
17 0.46 50 11.84
18 0.51 51 12.95
19 0.56 52 14.09
20 0.62 53 15.26
21 0.68 54 16.44
22 0.75 55 17.65
23 0.82 56 18.92
24 0.91 57 20.26
25 1.00 58 21.73
26 1.10 59 23.47
27 1.22 60 25.81
28 1.35 61 29.32
29 1.50 62 35.08
30 1.67 63 45.08
31 1.85 64 62.09
32 2.05
33 2.26
</TABLE>
Page 5
<PAGE>
DEFINITIONS
When these words are used in this contract, they have the meaning stated:
"APP"
The application which you completed requesting this policy.
"BENEFIT RIDER"
An additional benefit we are providing.
"DUE PROOF OF DEATH"
(1)a certified original copy of the 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 the company.
"FACE AMOUNT"
The initial death benefit, shown on page 3, adjusted for any changes in
accordance with the terms of this policy.
"FIXED ACCOUNT"
The portion of policy value invested in our general account.
"FUND"
A series mutual fund.
"IN FORCE"
A term used to describe when the insured's life is covered under the terms of
this contract.
"INCREASE AGE"
The age of the insured as of the effective date of an increase in face amount,
determined by the insured's last birthday.
"INCREASE YEAR"
A twelve month period beginning on the effective date of an increase in face
amount.
"INSURED"
The person upon whose life is covered by this policy as shown on Page 3.
"ISSUE AGE"
The age of the insured at the time this policy was issued (issue date)
determined by the insured's last birthday.
"ISSUE DATE"
The date the policy is issued, as shown on Page 3. It is used to determine
policy years and policy months in the policy.
"LOAN ACCOUNT"
An account established for amounts transferred from the subaccounts and the
fixed account as security for outstanding policy loans.
"MONTHLY-AUTOMATIC PAYMENT"
A method of making payments each month automatically; for example, by bank draft
or salary deduction.
"MONTHLY DEDUCTION DAY"
The same day in each month, as shown on Page 3, as the issue date. The day of
the month on which deductions are made.
"NET"
Used in reference to the death benefit, policy value or surrender value. This
means that this item has been reduced by any policy debt.
"NET DEATH BENEFIT"
The death benefit less any policy debt.
Page 6
<PAGE>
"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 policy value of a
subaccount in any valuation period.
"NET POLICY VALUE"
The policy value less any policy debt.
"NET PREMIUM"
The gross premium less the sum of the premium expense charge and the premium tax
charge.
"NET SURRENDER VALUE"
The amount you would receive upon surrender of this contract, equal to the
surrender value less any policy debt.
"PAYMENT CLASS"
The class into which the insured is placed, determined by our rules for
providing insurance coverage.
"POLICY ANNIVERSARY"
The same day and month as your issue date for each subsequent year your policy
remains in force.
"POLICY DATA"
The pages of this policy which identify specific information about the insured
and the benefits.
"POLICY DEBT"
The sum of all unpaid policy loans and accrued interest thereon.
"POLICY MONTH"
A one month period beginning on the same day of the month as the issue date of
the policy.
"POLICY VALUE"
The sum of the values of your interests in the subaccounts of the separate
account plus the value of the fixed account and the loan account. The amount
from which monthly deductions are made and the death benefit is determined.
"POLICY YEAR"
A twelve month period beginning on an anniversary of the issue date.
"PORTFOLIO(S)"
The underlying mutual fund(s) (or investment series thereof) in which the
subaccounts invest.
"REQUIRED PAYMENT"
The minimum premium which must be paid to keep the policy in force for the first
year.
"SEPARATE ACCOUNT"
A segregated investment account of the Company entitled Lincoln Benefit Life
Variable Life Account.
"SUBACCOUNT"
A subdivision of the separate account invested wholly in shares of one of the
portfolios.
"SURRENDER VALUE"
The policy value less any applicable surrender 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.
""WE", "US", "OUR""
Our Company, Lincoln Benefit Life Company.
Page 7
<PAGE>
"YOU"
The person(s) having the privilege of ownership defined in the policy.
DEATH BENEFIT
If the insured dies while this policy is in force, we will pay the death benefit
when we have received due proof of death. The death benefit will be based on:
1. The death benefit option in effect on the date of death;
2. Any increases or decreases to the face amount.
The death benefit will be reduced by any policy debt less any unpaid monthly
deduction amounts occurring during a grace period. If the proceeds are not paid
within 30 days after we receive due proof of the death of the insured, we will
pay interest on the proceeds. Interest will accrue at the legal rate of
interest and will accrue from the date of death until the claim is paid.
DEATH BENEFIT OPTION
While the insured is alive you may choose between two death benefit options:
If you select Option 1, the death benefit will be the greater of:
a. The face amount on the date of death; or
b. The percentage of the policy value shown in the Compliance with Federal
Laws Provision.
If you select Option 2, the death benefit will be the greater of:
a. The face amount plus the policy value on the date of death; or
b. The percentage of the policy value shown in the Compliance with Federal
Laws Provision.
The initial death benefit option selected by you is stated in the app.
CHANGE OF DEATH BENEFIT OPTION
At any time after the first policy year, you may request us to change the death
benefit option by writing to us. If you ask to change from Option 2 to Option
1, the face amount will be increased by the amount of the policy value. If you
ask to change from Option 1 to Option 2, the face amount will be decreased by
the amount of the policy value.
The change will take effect on the monthly deduction day on or following the
date we receive the written request. We will provide to you an endorsement
showing the actual start date of the death benefit option change and the new
face amount. We reserve the right to limit the frequency of the death benefit
option changes made under this policy.
CHANGE OF FACE AMOUNT
At any time after the first policy year, you may request either of the
following changes by writing us. The request will take effect on the
monthly deduction day on or following the date we approve the request:
1. Increasing the face amount. You must submit a new app for an increase
in face amount. We will require due proof that the insured is still
insurable. We reserve the right to limit the amount of any increases
made under this policy. The face amount may not be increased more
than once in any 12 month period.
Page 8
<PAGE>
2. Decreasing the face amount. A decrease in face amount will first be
applied against the most recent increase, then to the next most recent
increase successively, and finally to the initial face amount. The
face amount in effect after any decrease may not be less than $50,000.
We will provide you an endorsement showing the start date of any increase or
decrease and the new face amount. We reserve the right to limit the amount and
frequency of any increase or decrease in face amount.
BENEFICIARY
The beneficiary will receive the death benefit when the insured dies and we have
received due proof of death. The beneficiary is as stated in the app unless
changed.
The beneficiaries will receive the death benefit in the following order:
...Primary beneficiary, who will receive the death benefit if living when the
insured dies.
...Contingent beneficiary, who will receive the death benefit if the primary
beneficiary dies before the insured.
If a beneficiary dies at the same time as the insured or within fifteen days
thereafter, we will pay the death benefit as if that beneficiary were not living
when the insured died. If none of the named beneficiaries are living when the
insured dies, the death benefit will be paid to you.
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.
If you name one or more irrevocable beneficiaries, no change in the
beneficiaries and no changes which affect policy values may be made without
their consent. No beneficiary has any rights in this policy until the insured
dies.
OWNERSHIP
The insured is the owner if no other person is named in the app as owner. The
owner controls the policy during the lifetime of the insured. Unless you
provide otherwise, as owner, you may exercise all rights granted by the policy
without the consent of anyone else. If the named owner dies before the insured,
then the contingent owner named in the app is the new owner. If no owner named
in this policy is living, then the owner will be the estate of the last named
owner.
You may name a new owner. 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.
You may assign this policy 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
Page 9
<PAGE>
rights and those of the beneficiary will be subject to the assignment.
We are not responsible for the validity of any assignment you make.
PREMIUM PAYMENTS
PAYMENTS
Premiums for this policy are referred to as payments. The planned payment,
required payment and the time between payments are shown on Page 3.
Payments are flexible. This means you may change the amount of planned payments
and the time between payments. During the first year, you must pay an amount at
least as great as the required payment.
We must have received the first payment on or before the issue date. This
policy will not be in effect before this amount is received.
We will send you a reminder notice if you pay annually, semi-annually or
quarterly. You may also make a monthly-automatic payment. We may establish
limits on both the amount of payment and the time between payments.
Payments must be sent to our home office. The amount you pay will affect the
policy value. If you pay too little, the policy will stop subject to the grace
period.
ALLOCATION OF PREMIUM PAYMENTS
We will invest the net premium payments in the fixed account and the subaccounts
you select. You must specify your allocations on the app, in whole percents
from 0% to 100%. The total allocation must equal 100%. You initially may
allocate your policy value to up to twenty-one options, counting each subaccount
and the fixed account as one option. All net premium payments not requiring
underwriting will be allocated to the subaccounts and fixed account as of the
date payments are received at our home office. Premium payments requiring
underwriting will not be credited with interest or earnings prior to the issue
date. We will allocate such net premium payments, plus earnings and less
monthly deductions, once underwriting approval is received, to the subaccounts
and fixed account specified on the app or your most recent instructions. You
may change the allocation percentages at any time by writing us. Any change
will be effective when we receive it.
We reserve the right to allocate premium payments to the fixed account during
the Right To Cancel Your Policy period described on Page 1 of this policy.
Transfer of premiums from the fixed account at the end of the Right To Cancel
Your Policy period will not be considered one of your free transfers.
GRACE PERIOD
Except as provided in the safety net premium provision below, if on any monthly
deduction day the net surrender value is determined to be less than the monthly
deduction for the current policy month, you will be given a grace period of 61
days. This policy will be in force during the grace period. If you do not make
sufficient payment by the end of the grace period, the policy will stop. If the
insured dies during the grace period, we will deduct any monthly deductions from
the amounts we pay.
We will send a written notice to the most recent address we have for you and any
assignee at least 30 days prior to the day coverage stops.
Page 10
<PAGE>
SAFETY NET PREMIUMS
If total payments, less partial withdrawals and policy debt are greater
than or equal to the sum of monthly safety net premium times the number of
months elapsed since the issue date, then the policy is guaranteed to stay in
force for a predetermined time period as shown on Page 3, even if the net
surrender value becomes insufficient to cover monthly deductions. The safety
net premium is equal to the required payment for the first policy year.
If, at any time the total payments, less partial withdrawals and policy debt,
are less than the monthly safety net premium times the number of months elapsed,
we will let you know and you will be given 61 days to satisfy any shortfall. If
such payments are not made during this period, the safety net premium provision
will no longer be in effect. Once it is not is effect, it cannot be
reinstated, and the policy will continue in force only so long as its net
surrender value is sufficient to pay the monthly deductions and for any
corresponding grace period.
Increases, decreases, partial withdrawals, death benefit option changes, and
additions or deletions of benefit riders, may affect the monthly safety net
premium.
REINSTATEMENT
Prior to the death of the insured and if this contract has not been surrendered,
this policy may be reinstated provided you:
1. Make your request within five years of the date the policy entered the
grace period;
2. Give us the proof we require that the insured is still insurable in
the same payment class that the policy was issued;
3. Pay an amount large enough to cover the unpaid monthly deductions for
the grace period;
4. Make a payment sufficient to keep the policy in force for 3 policy
months; and
5. Repay or ask us to reinstate any loan.
The policy value on the reinstatement date will reflect the policy value at the
time of termination and premiums applied at the time of reinstatement.
Surrender charges will continue to be based on the original policy date.
When this policy is reinstated, a new two year contestable period will apply
with respect to statements made in the application for reinstatement. The
contestable period is explained in the incontestability provision on Page xx.
ACCOUNT PROVISIONS
ASSETS OF THE SEPARATE ACCOUNT
The separate account, shown on page 3, is a separate investment account to which
we allocate assets contributed under this and certain other life insurance
contracts. We will have exclusive and absolute ownership and control of the
assets of our separate accounts. The assets of the separate account will be
available to cover the liabilities of our general account only to the extent
those assets exceed the liabilities of that separate account arising under the
variable life policies supported by that separate account.
The assets of the separate account will be valued at least as often as any
contract benefits vary, but at least
Page 11
<PAGE>
monthly. Our determination of the value of an accumulation unit by the method
described in this policy will be conclusive.
ASSETS OF THE FIXED ACCOUNT
At any time while this contract is in force, you may allocate premiums, or
transfer from an existing subaccount, to a fixed account. The fixed account
will earn interest at the current rate declared by us, on the monthly deduction
day. The rates we declare are effective annual interest rates. This means we
credit interest at a rate which compounds over one year to the interest rate we
declare. The minimum guaranteed monthly interest rate used to compute policy
values in the fixed account is shown on page 3A. Compounded monthly, this is
the same as the minimum guaranteed annual interest rate shown on page 3A. We
may use an interest rate greater than the minimum guaranteed interest rate, but
are not obligated to do so.
TRANSFERS AND TRANSFER FEES
You may transfer amounts between subaccounts and/or the fixed account. We
reserve the right to impose a $10 transfer fee on the second and subsequent
transfers within a calendar month, and to impose a minimum size on transfer
amounts as shown on page 3A. Additional restrictions apply to transfers from/to
the fixed account as discussed below.
Transfers from the fixed account to the subaccounts may only be made during the
60 day period beginning on the issue date or the policy anniversary. Transfer
requests received at any other time will not be processed. The maximum amount
which may be transferred from the fixed account during a policy year is the
greater of:
1. 30% of the fixed account balance as of the last policy anniversary; or
2. the greatest amount of any prior transfer from the fixed account.
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 of
the separate account. 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 extent required by the Investment
Company Act of 1940, and the Nebraska Insurance Commissioner. The approval
process is on file with the insurance commissioner of the state where this
policy is delivered.
We reserve the right to establish additional subaccounts of the separate
account, each of which would invest in shares of another portfolio of the mutual
fund or another mutual fund. You may then instruct us to allocate premium
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 such
changes as may be necessary or appropriate to reflect such substitution or
change.
If we deem it to be in the best interests of persons having voting rights under
the contracts, the separate account may be operated as a management company
under the Investment Company Act of 1940 or it may be deregistered under such
Act in the event such registration is no longer required.
Page 12
<PAGE>
POLICY VALUE
On the issue date or, if later, the date the first premium is received, the
policy value is the net premium less the monthly deduction for the first policy
month.
On any other day, the policy value is the sum of the values in each subaccount,
plus the value of the fixed account and the loan account.
On each valuation date, the value in a subaccount is:
1. The value of the subaccount of the preceding valuation date,
multiplied by the net investment factor for the subaccount for the
current valuation period, plus
2. Any net premium received and allocated to the subaccount during the
current valuation period, plus
3. Any policy value transferred to the subaccount during the current
valuation period, minus
4. Any policy value transferred from the subaccount during the current
valuation period, minus
5. Any partial withdrawals from the subaccount during the current
valuation period, minus
6. The portion of any monthly deduction allocated to the subaccount
during the current valuation period for the policy month following the
monthly deduction day.
The value in the fixed account equals:
1. Any net premiums allocated to it, plus
2. Any policy value transferred to it from the subaccounts, plus
3. Interest credited to it, minus
4. Any policy value transferred out of it, minus,
5. Any partial withdrawals taken from it, minus
6. Any monthly deduction taken from it.
All policy values equal or exceed those required by law. Detailed explanations
of methods of calculation are on file with appropriate regulatory authorities.
NET INVESTMENT FACTOR
The net investment factor measures investment performance of a subaccount during
a valuation period. The net investment factor is (1) divided by (2) where:
1. is the net result of:
a. the net asset value per share of the portfolio held in the
subaccount at the end of the current valuation period, plus
b. the per share amount of any dividend or capital gain distribution
made by the portfolio during the current valuation period, plus
or minus
c. 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 the portfolio held in the
subaccount at the end of the last prior valuation period.
Page 13
<PAGE>
PREMIUM TAX CHARGE
Upon receipt of each payment and before allocation of the payment to the
subaccounts or fixed account, we will deduct a premium tax charge. This charge,
shown on Page 3A, is a percentage of the premium received.
PREMIUM EXPENSE CHARGE
Upon receipt of each payment and before allocation of the payment to the
subaccounts or fixed account, we will deduct a premium expense charge. This
charge, shown on Page 3A, is a percentage of the premium received.
MONTHLY DEDUCTIONS
The monthly deduction is the sum of:
1. A policy fee as shown on Page 3A;
2. Monthly mortality and expense risk charge;
3. The cost of insurance for the policy; and
4. The cost of any benefit riders attached to the policy.
RISK CHARGE
The monthly mortality and expense risk charge is equal to the annual mortality
and expense risk rate shown on Page 3A for the appropriate policy year, divided
by 12, times the total value in the subaccount on the monthly deduction day.
Specifically, we bear the risk that the total amount of death benefit payable
will be greater than anticipated, and we also assume the risk that the actual
cost we incur to administer the policy will not be covered by administrative
charges assessed.
COST OF INSURANCE
The cost of insurance is determined as follows:
1. Divide the death benefit as of the prior monthly deduction day by
1.00327374;
2. Subtract the policy value as of the prior monthly deduction day, and
divide the result by 1,000;
3. Multiply the results by the current cost of insurance rate. The cost
of insurance rate is based on the insured's sex, issue age, policy
year, and payment class. The rates will be determined by us, but they
will never be more than the guaranteed rates shown on Page 5.
SURRENDER VALUE
You may terminate your policy for its net surrender value, which may be paid in
cash or under an income plan.
The net surrender value of this policy is the amount we will pay you if you ask
us to stop this policy. It is equal to the policy value less the surrender
charge less any policy debt. If the surrender charge is greater than the policy
value, the surrender value is zero
Termination will be effective on the date we receive your written request. We
may require that your policy accompany your written request before making any
payment.
SURRENDER CHARGE
The maximum surrender charges we will assess, based on the face amount at issue,
are shown in the Surrender Charge Schedule on Page 4. An additional layer of
surrender charge will apply to an elective increase in face amount. The new
layer of surrender charge will be positive for fourteen years from the effective
date of the increase. The initial surrender charge on an increase is an amount
per thousand of
Page 14
<PAGE>
increase which varies by increase age, as shown in the Table on page 4. The
charge for any increase year can be calculated from the Table on Page 4 as
follows: [Amount per $1000 of increase] times [increase amount divided by 1000]
times Surrender Percentage.
CONTINUATION OF COVERAGE
If you stop making payments, this policy and any riders will remain in effect as
long as the net surrender value covers the monthly deductions or the policy is
still in force as defined in the monthly guarantee premiums provision. This
provision does not continue any riders beyond their normal termination dates.
PARTIAL WITHDRAWAL
You may request a partial withdrawal of your net surrender value once each year
after the first policy year by writing to us. Your partial withdrawal will be
effective on the next valuation date. You may specify how much of your partial
withdrawal you wish taken from each subaccount or from the fixed account.
However, you may not withdraw from the fixed account more than the total
withdrawal times the ratio of the fixed account to your total policy value
immediately prior to the withdrawal. The partial withdrawal service fee, as
shown on Page 3A, may be deducted from the subaccounts and fixed accounts in the
same proportion as the partial withdrawal.
The policy value will be reduced by the amount of any partial withdrawal. Any
policy with Death Benefit Option 1 will also have a reduction in the face
amount. The minimum partial withdrawal amount is shown on Page 3A and the
maximum partial withdrawal amount may not reduce the net surrender value below
$500.
BASIS OF VALUES
Minimum surrender values are based on the 1980 CSO Mortality Table, age last
birthday, male or female, smoker or nonsmoker, as appropriate. The minimums are
not less than those required by the state in which the app is signed.
LOANS
You may have a loan if you assign this contract to us as sole security. The
total amount of your loan and loan interest may not exceed 90% of the surrender
value.
We will ordinarily disburse proceeds of policy loans within seven days from the
date of receipt of a request for a loan at our home office, although payments
may be postponed under certain circumstances as detailed in the "deferment of
payments" section on Page XX. As long as the policy remains in force, the loan
may be repaid in whole or in part without penalty at any time while the insured
is living.
LOAN INTEREST
An amount equal to your policy value less all premiums paid may be taken as a
preferred loan. The annual loan interest rate charged for preferred loans is
shown on Page 3A. A standard loan is the amount that may be borrowed from the
sum of premiums paid. The annual loan interest rate for standard loans is shown
on Page 3A.
Interest on policy loans accrues daily and is due at the end of each policy
year. Any interest not paid when due becomes part of the policy loan and will
bear interest at the rates described in this provision.
Page 15
<PAGE>
When a policy loan is made, a portion of the policy value sufficient to secure
the loan will be transferred to the loan account reducing the policy value in
the separate account. Any loan interest that is due and unpaid will also be so
transferred. All loan amounts will be transferred from the subaccounts and the
fixed account to the loan account in the same allocation percentages as
specified for premium payments. However, we will not withdraw loan amounts from
the fixed account equaling more than the total loan multiplied by the ratio of
the fixed account to your total policy value immediately prior to the loan.
Amounts transferred to the loan account will no longer be affected by the
investment experience of the separate account and will instead accrue interest
at the annual loan credited rate as shown on Page 3A.
LOAN REPAYMENT
You may pay back your loan and loan interest at any time. If you do not, we
will deduct the loan and loan interest from the amounts we pay.
If your loan and loan interest exceed the surrender value, this contract will
stop except as provided in the grace period section. We must mail a notice to
you and all assignees at least 30 days before the contract stops.
OTHER TERMS OF YOUR POLICY
OUR CONTRACT WITH YOU
These pages and the signed app are your entire contract with us. We issued it
based upon your app and the payment made by you. A copy of the app is included.
Any supplemental app will also be attached to and made a part of the contract.
We will not use any statements, except those made in the app and any
supplemental app, to challenge any claim or to avoid any liability under this
policy. 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.
WHEN PROTECTION STARTS
The issue date is the date when this policy becomes effective if the insured is
then living and the first payment has been made.
TERMINATION
This policy will terminate upon the earliest of the following events:
1. Surrender of the policy; or
2. End of the grace period; or
3. Death of the insured.
MISSTATEMENT OF AGE OR SEX
If the insured's age or sex shown on the app has been misstated, any proceeds
will be adjusted to the amount which the initial target premium would have
purchased at the correct age and sex.
INCONTESTABILITY
Except as provided in the next provision or in any attached rider with an
incontestability provision, we may not contest this contract once it has been in
force while the insured is alive for 2 years from its issue date except for
failure to make payments that cause the net surrender value to be too small to
cover the monthly deductions required to keep this contract and its riders in
force.
We may not contest any increase in face amount once it has been in force while
the insured is alive for 2 years from the effective date of the increase.
Page 16
<PAGE>
We may not contest any reinstatement of this policy or any benefit riders after
they have been in force while the insured is alive for two years from the
reinstatement date.
SUICIDE OR SELF-DESTRUCTION
If the insured dies by suicide while sane or self destruction while insane
within 2 years from the issue date of the contract:
1. We will only pay an amount equal to the policy value less any policy
debt; and
2. The policy will stop.
If the insured dies by suicide while sane or self-destruction while insane
within two years of the effective date of any increase in face amount, our
liability with respect to the increase will be limited to the cost of insurance
for the increase.
ANNUAL REPORT
Each year we will send you an annual report following the policy anniversary.
Each report will provide information on various transaction that took place
during the policy year just completed, as well as information on the current
status of the policy. This information will include items such as:
1. The policy value as of the end of the current and prior year.
2. Payments and withdrawals made during the year.
3. The monthly deductions and expense charges made during the year.
4. Earnings during the year.
5. The current death benefit.
6. The current surrender charges and surrender value.
7. The amount of policy debt.
8. Such additional information as required by applicable law and regulation.
If you ask us, we will send you an additional report, at any time during the
policy year. We may charge you for this extra report, but the charge will be no
more than $25. We will tell you what the current charge is before sending the
report.
CONFORMITY WITH STATE LAW
This policy is subject to the laws of the state where the app was signed. If
any part of the policy does not comply with the law, it will be treated by us as
if it did.
NONPARTICIPATING
This policy in nonparticipating. It does not share in our profits or surplus
earnings. We will pay no dividends on this policy.
COMPLIANCE WITH FEDERAL LAWS
The two requirements below are intended to maintain the status of this policy as
life insurance under the current Internal Revenue Code:
First, the amount of payments that you may pay is limited by law. We will
conduct a test no less frequently than annually, and return any excess payments.
Second, the death benefit payable may not be less than the applicable percentage
of your policy value. This percentage is based on the attained age as shown in
the table below:
<TABLE>
<CAPTION>
Attained Applicable
Age Percentage
--- ----------
<S> <C> <C>
0 to 40 250
41 243
42 236
43 229
44 222
45 215
46 209
47 203
48 197
49 191
50 185
</TABLE>
Page 17
<PAGE>
<TABLE>
<CAPTION>
Attained Applicable
Age Percentage
--- ----------
<S> <C> <C>
51 178
52 171
53 164
54 157
55 150
56 146
57 142
58 138
59 134
60 130
61 128
62 126
63 124
64 122
65 120
66 119
67 118
68 117
69 116
70 115
71 113
72 111
73 109
74 107
75 to 90 105
91 104
92 103
93 102
94 and above 101
</TABLE>
We will conduct a test monthly and increase the death benefit, subject to our
then current underwriting limits, to be equal to the applicable percentage of
your policy value, if necessary. The death benefit will remain at that level
unless it has to be increased again. If we cannot increase the death benefit
due to underwriting limits, we will return the amount of policy value necessary
so that the death benefit will be equal to the applicable percentage of your
policy value after returning the amount.
We will perform any necessary action within 60 days of the end of the policy
year in which the requirement has not been met.
We reserve the right to amend the policy to comply with:
1. Future changes in the Internal Revenue Code;
2. Any regulations or rulings issued under the code; and
3. Any other requirements imposed by the Internal Revenue Service.
We will give you a copy of any such amendment.
PAYMENT OF PROCEEDS
The net death benefit, or the net surrender value in the event you withdraw it,
will be paid in one sum or applied to any settlement option we then provide.
When we pay the proceeds, we may ask that you give this policy back to us. No
surrenders or partial withdrawals are permitted after payments under a
settlement option have started.
Settlement options will include:
1. We will hold the proceeds at interest, and pay out the funds when the
person entitled to them requests.
2. We will pay a selected monthly income until the proceeds, with interest,
are exhausted.
3. We will pay a monthly income, based upon the amount of proceeds, interest
rate and the age and sex of the person or persons receiving the funds, for
a selected period or the lifetime of the person or persons to whom the
funds are being paid.
At the time the proceeds are payable, we will inform you concerning the rate of
interest to be paid on funds left with us. We guarantee that the rate of
interest
Page 18
<PAGE>
will not be less than 3-1/2%. We may pay interest in excess of the guaranteed
rate. We will issue a supplementary contract setting forth the benefits to be
paid and the rights of the beneficiary. Each election must include at least
$5,000.00 of policy proceeds and must result in installment payments of not less
then $50.00.
DEFERMENT OF PAYMENTS
We will pay any amounts due under the separate account of 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 of any net surrender value in the fixed
account for up to 6 months after you ask for it. If we defer payment for more
than 30 days we will add interest at our current rate from the time you asked
for such surrender value.
EXCHANGE OF PLAN
If this policy is in force, you may exchange it during the first two years after
the policy date or within two years of an increase in face amount, for a policy
in which values do not vary with the investment experience of the separate
account. This exchange will be implemented by transferring your policy value to
the fixed account and removing your future right to allocate funds to the
separate account. We may require you to return this contract to us for us to
amend before this exchange will be processed. This transfer will not be subject
to the excess transfer fee.
Page 19
<PAGE>
FLEXIBLE PREMIUM ADJUSTABLE LIFE INSURANCE POLICY
POLICY AMENDMENT
This amendment is hereby added to the policy as of its issue date. It amends
the Surrender Value provision of the policy.
We agree to waive the surrender charge defined in the policy, subject to the
provisions of this amendment if at any time during the first five policy years,
the actual cost of insurance rate charged is greater than the rate provided by
the rate scale in effect on the issue date for the issue age, sex, and payment
class of the insured.
The cost of insurance rate can never be greater than those shown on Page 5.
The offer to waive surrender charges will expire 60 days after we notify you
that the above has occurred. If you ask to surrender the policy for its
surrender value before this offer expires, we will pay you the policy value less
any loan and accrued loan interest but we will not deduct the surrender charge.
If you ask to surrender the policy more than 60 days after the offer to waive
surrender charges is made, we will deduct the surrender charge as shown in the
policy.
LINCOLN BENEFIT LIFE COMPANY
B. EUGENE WRAITH
PRESIDENT
<PAGE>
ADDITIONAL INSURED TERM INSURANCE RIDER
BENEFIT
We will pay the amount insured provided by this rider when we receive proof that
the additional insured died while this rider was in force. The additional
insured and the death benefit for this rider are shown in the Policy Data.
BENEFICIARY
Any amount payable under this rider upon the death of the additional insured
will be paid to you, unless otherwise provided. If you are deceased, payment
will be made to the estate of such additional insured.
EXCHANGE OF THIS RIDER
Prior to the additional insured's 75th birthday, you may exchange this rider for
a policy insuring the life of the additional insured. The exchange will be made
on the following conditions:
1. This rider must be in force when you make the exchange.
2. The request for exchange must be written.
3. The new policy selected by you must be a whole life plan, or flexible
premium adjustable life plan, then sold by us.
4. The death benefit of the new policy will not be greater than the death
benefit of this rider on the date of exchange, but never less than $10,000.
5. The issue date of the new policy will be the date of exchange.
6. The premium for the new policy will be based on the insured's sex, attained
age and the payment class applicable to this rider. No new evidence of
insurability will be required.
7. Any benefit riders providing additional benefits in the event of disability
or death will be made a part of the new policy only with our consent.
In addition, a special exchange provision will be allowed to any additional
insured if the policy stops due to the death of the insured or because the
insured reached age 99. This special exchange will be allowed regardless of the
age of the additional insured. All other conditions listed above will still
apply.
WHEN THIS RIDER STOPS
This rider will stop:
1. on the monthly activity day next following the insured's 99th birthday; or
2. when this rider is exchanged as provided ;or
3. on the monthly activity day after you make a written request; or
4. when the policy stops.
BASIS OF COMPUTATIONS
The reserves for this rider are computed upon the Commissioners 1980 Standard
Ordinary Mortality Table, interest as prescribed in the Standard Valuation Law,
the insured's age last birthday, and the assumption that deaths occur at the end
of policy years.
OTHER TERMS OF THIS RIDER
1. This rider is made a part of the policy on the issue date, and except as
provided is subject to all terms of the policy.
2. The cost of this rider is included in the monthly deductions. The amount
of deductions required will never exceed the rates shown in the Policy
Data.
The issue date of this rider is the issue date of the policy unless a later date
is stated here:
LINCOLN BENEFIT LIFE COMPANY
B. EUGENE WRAITH
PRESIDENT
<PAGE>
PRIMARY INSURED
TERM INSURANCE
RIDER
BENEFIT
We will pay the death benefit provided by this rider if we pay the policy death
benefit and this rider was in force when the insured died. The death benefit
for this rider is shown in the Policy Data.
BENEFICIARY
You may name a different beneficiary to receive the benefit for this rider.
Otherwise we will pay it to the beneficiary for the policy death benefit.
WHEN THIS RIDER STOPS
This rider will stop:
1. on the monthly activity day next following the insured's 99th birthday; or
2. when this rider is exchanged as provided; or
3. on the monthly activity day after you make a written request; or
4. when the policy stops.
EXCHANGE OF THIS RIDER
Prior to the insured's 75th birthday, you may exchange this rider for a new
policy. The date of exchange is the next monthly activity day after we receive
your request. The exchange will be made on the following conditions:
1. This rider must be in force when you make the exchange.
2. The request for exchange must be written.
3. The new policy selected by you must be a whole life plan, or flexible
premium adjustable life plan, then sold by us.
4. The death benefit of the new policy will not be greater than the death
benefit of this rider on the date of exchange, but never less than $10,000.
5. The issue date of the new policy will be the date of exchange.
6. The premium for the new policy will be based on the insured's sex, attained
age and the payment class applicable to this rider. No new evidence of
insurability will be required.
7. Any benefit riders providing additional benefits in the event of disability
or death will be made a part of the new policy only with our consent.
In addition, on or after the 1st policy anniversary and prior to the insured's
75th birthday, you may exchange this rider to the base policy for permanent
coverage. Conditions 1 and 2 above apply together with the following:
- - The face amount of the policy will be increased by an amount you choose,
but not greater than the benefit provided by this rider.
- - The start date of the increase in face amount will be the date of exchange.
The rider will stop at that time.
- - The required premium, additional surrender charge and cost of insurance
deduction for the increase in face amount will be based on the insured's
sex, attained age and payment class applicable to this rider. No new
evidence of insurability will be required.
BASIS OF COMPUTATIONS
The reserves for this rider are computed upon the Commissioners 1980 Standard
Ordinary Mortality Table, interest as prescribed in the Standard Valuation Law,
the insured's age last birthday, and the assumption that deaths occur at the end
of policy years.
OTHER TERMS OF THIS RIDER
1. This rider is made a part of the policy on the issue date, and except as
provided is subject to all terms of the policy.
2. The cost of this rider is included in the monthly deductions. The amount
of deductions required will never exceed the rates shown in the Policy
Data.
The issue date of this rider is the issue date of the policy unless a later date
is stated here:
LINCOLN BENEFIT LIFE COMPANY
B. EUGENE WRAITH
PRESIDENT
<PAGE>
STATE OF NEBRASKA
DEPARTMENT OF INSURANCE
CERTIFICATION
April 22, 1997
I, Robert G. Lange, Director of Insurance of the State of Nebraska, do
hereby certify that the attached is a full and correct copy of
ARTICLES OF AMENDMENT TO THE ARTILES OF INCORPORATION
OF THE
LINCOLN BENEFIT LIFE COMPANY
DOMICILED IN THE STATE OF NEBRASKA
Now on file and forming a part of the records of this Department.
I hereto subscribe my name under the seal of my office, at Lincoln, Nebraska.
/s/ Robert G. Lange
---------------------------------
Director of Insurance
<PAGE>
ARTICLES OF INCORPORATION OF
LINCOLN BENEFIT LIFE COMPANY
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, do hereby associate ourselves together for the
purpose of being and becoming a corporation under and pursuant to the laws of
the State of Nebraska and for that purpose do hereby adopt the following
articles of incorporation, to-wit:
ARTICLE I.
The name of this corporation shall be Lincoln Benefit Life Company.
ARTICLE II.
The principal place of business of this corporation shall be in the City of
Lincoln, Lancaster County, Nebraska.
ARTICLE III.
The objects, purposes, and general nature of the business of this
corporation shall be to transact the business of a burial association as
provided for in Chapter 24, Article 18 of the Compiled Statutes of Nebraska
for 1929, as amended; to that end this corporation shall have power to do and
perform all such acts and things as may be necessary or convenient to carry
out the purposes intended by the organization of this corporation, and not
inconsistent with law; to acquire, own, buy, sell, mortgage, encumber, and
convey real estate necessary or incident to such business and to lease or
sublet the same; to acquire, buy, sell, assign, deal in and with, pledge, and
encumber securities, including stocks of corporations including the stock of
this corporation, choses in action, and personal property of all kinds
necessary, convenient, or incident to the prosecution and maintenance of its
said business; to borrow and loan money and to incur indebtedness; to execute
any and all contracts necessary or incidental to the continuance and
management of a general burial association business; through its authorized
officers, to do and perform all and every lawful set, convenient or
expedient, or necessary, or incidental to the execution and performance of
all kinds of legally authorized contracts, and for the maintenance,
perpetuity, and prosperity of this corporation; to establish agencies,
branches or branch offices at such places as it may deem proper and to
appoint such agents and agencies as are, in the discretion of the Board of
Directors, advantageous or necessary in the promotion of the business of the
corporation; this corporation accepts for its government the lawful
requirements and obligations imposed upon burial associations by the laws of
the State of Nebraska, and this corporation accepts and shall have all such
powers, rights, privileges, and
<PAGE>
immunities as are granted by the laws of the State of Nebraska to such
companies; this corporation shall have a corporate seal bearing the words
"Lincoln Benefit Life Company-corporate seal".
ARTICLE IV.
The amount of the authorized capital stock of this corporation shall be
One Hundred Thousand Dollars ($100,000) divided into On Hundred Thousand
(100,000) shares of the par value of One Dollar each, which shall be sold at
not less than par, and paid for in such lawful manner and on such lawful
terms as may be provided by the Board of Directors; fully paid-up shares of
the capital stock shall be issued for the amount so fully paid; such fully
paid stock shall be forever non-assessable.
ARTICLE V.
Each share of stock shall be entitled to one vote at all meetings of the
stockholders and may be voted in person or by proxy. Proxies must be in
writing, must bear the date executed and state the number of shares
represented thereby, must name the person or persons who are to act as proxy,
and must be filed with the secretary at least 5 days prior to the meeting at
which they are to be voted. Proxies may be voted at any regular or special
meeting and upon all matters both usual and unusual coming before such
meeting.
ARTICLE VI.
The affairs and business of this corporation shall be conducted by a
Board of Directors consisting of not less than five nor more than twenty-one
directors as may be provided by the by-laws; the Board of Directors shall be
elected by the stockholders from among their number at the annual meeting
thereof and shall hold office for the time provided by the by-laws and until
their successors are elected and qualified; in the event of any vacancy
occurring in the number of directors prior to the date of a stockholders'
meeting, the remaining directors shall have the power to fill such vacancy or
vacancies and elect directors for the unexpired term; the directors may elect
from among their number an Executive Finance Committee to have active charge
of the affairs and finances and investments of the corporation and such other
powers as may be granted by the by-laws not inconsistent with the law.
ARTICLE VII.
The officers of this corporation shall consist of a President, Vice
President, Secretary, and Treasurer who shall be elected by the Board of
Directors from among their number; such officers shall receive such lawful
remuneration as may be prescribed by the Board of Directors and shall hold
<PAGE>
office as prescribed by the by-laws and until their successors are elected
and qualified; any person may hold any number of offices except that of
President and Vice President as may be provided by the by-laws; the Board of
Directors shall have power to appoint such other subordinate officers and
agents as they may think proper in their lawful discretion, and shall fix the
reasonable compensation and tenure of office thereof.
ARTICLE VIII.
The undersigned incorporators shall constitute the first Board of
Directors of this corporation to hold office until the first annual meeting
of the stockholders of the corporation as hereafter specified. The first
Board of Directors shall elect officers from among their own number to hold
office until their successors shall be elected and qualified; the
incorporators, immediately upon the organization of this corporation, shall
meet for the purpose of electing such officers and to transact such other
business as may be necessary or proper.
ARTICLE IX.
This corporation shall commence business when these Articles of
Incorporation are executed and filed as required by law, and when Ten
Thousand Dollars ($10,000) of the capital stock has been fully paid in, and
shall thereafter continue for a period of one hundred years unless sooner
dissolved as provided by law.
ARTICLE X.
The Directors shall have the power and authority to make all by-laws and
rules for the management and control of the affairs of the corporation and
they may alter and amend the same at pleasure.
ARTICLE XI.
These articles may be amended at any annual or special meeting of the
stockholders called for that purpose provided notice of the proposed
amendment shall have been mailed to each stockholder not less than ten days
prior to said meeting; if such amendment shall be approved by lawful
authority and by the holders of a majority of the capital stock, the same
shall take effect as an amendment of these articles and the Board of
Directors shall thereupon cause the proper officers to subscribe,
acknowledge, record, and publish the same as amendments to these Articles, as
required by law.
ARTICLE XII.
<PAGE>
The total amount of the indebtedness to which this corporation shall at
any time be subject shall in no case, except the liability to the
policyholders, exceed at any one time in the aggregate two-thirds of the
capital stock actually paid in.
ARTICLE XIII
The individual property of the holders of the capital stock of this
corporation shall be exempt from liability for any debts of the corporation,
and this article shall never be altered or repealed.
ARTICLE XIV.
The annual meeting of the stockholders of this corporation shall be held
on the third Monday in January of each year commencing with the year 1939.
Special meetings of the stockholders may be held at any time upon direction
of the Board of Directors or at the request of the holders of a majority of
the capital stock of this corporation, but notice of such special meeting
stating the general nature of the business to be transacted thereat shall be
mailed to each stockholder of record not less than 30 days prior to the date
of such special meeting; at such special meeting the stockholders may
transact such business as specified in such notice and none other; at the
annual meeting the stockholders shall receive reports of the officers, elect
directors, and transact such other business as may properly come before them.
IN WITNESS WHEREOF, the undersigned have hereto subscribed their names
this 11th day of October, 1938.
Witness: /s/ Charles H. Sharrick
/s/ Zella Ginsburg -------------------------
/s/ J. S. Jones
-------------------------
/s/ Oren S. Copeland
-------------------------
/s/ H.W. Orr
-------------------------
/s/ Herman Ginsburg
-------------------------
/s/ Joseph Ginsburg
-------------------------
/s/ E. A. Kremer
-------------------------
/s/ B. M. Murdock
-------------------------
/s/ A. A. Ashworth
-------------------------
<PAGE>
STATE OF NEBRASKA (
(SS
LANCASTER COUNTY (
On this 11th day of October, 1938, before me, the undersigned, a notary
public duly commissioned and qualified for and residing within said state and
county personally came Charles H. Sharrick, J. S. Jones, Oren S. Copeland, H.
W. Orr, Herman Ginsburg, Joseph Ginsburg, E. A. Kremer, B. M. Murdock, A. A.
Ashworth to me personally known to be the identical persons who signed and
executed the foregoing articles of incorporation and they severally
acknowledged the execution thereof to be their voluntary act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
/s/ Charles Ledwrith
------------------------------
Notary Public
My commission expires
July 2, 1942
- --------------
<PAGE>
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
OF
LINCOLN BENEFIT LIFE COMPANY
The undersigned president and secretary respectively of Lincoln Benefit
Life Company, a corporation, do hereby certify that at a special meeting of
the stockholders of said corporation duly and legally held at the home office
of the company at 1229 N. Street, Lincoln, Nebraska on the 29th day of
August, 1949 at 11 o'clock A. M. At this meeting all of the capital stock of
said corporation was present, the Articles of Incorporation of said
corporation were amended by unanimous vote to read as follows, to-wit:
ARTICLE I
The name of this corporation shall be Lincoln Benefit Life Company.
ARTICLE II
The principal place of business of this corporation shall be in the City
of Lincoln, in Lancaster County, Nebraska. The resident agent of the
corporation shall be Charles H. Sharrick, 1229 N Street, Lincoln, Nebraska.
ARTICLE III
The object, purposes and general nature of the business of this
corporation shall be to make insurance upon the lives of persons and every
assurance pertaining thereto or connected therewith, and to grant purchase
and dispose of annuities and endowments of every kind and description
whatsoever, and to provide an indemnity against death and for weekly or other
periodic indemnities for disability occasioned by accident or sickness to the
person of the assured, pursuant to the provision of Article II of Chapter 44
of the Revised Statutes of the State of Nebraska for 1933, as amended; to
that end this corporation shall have power to do and perform all such acts
and things as may be necessary or convenient to carry out the purposes
intended by the organization of this corporation and not inconsistent with
law; to acquire, own, buy, sell, mortgage, encumber and convey real estate
necessary or incident to such business and to cease or sublet the same; to
acquire, buy, sell, assign, deal in and with, pledge and encumber securities
including stocks of corporations and of this corporation, choses in action,
and personal property of all kinds, necessary, convenient or incident to the
prosecution and maintenance of the said business; to borrow and loan money;
and to incur indebtedness; to execute any and all contracts necessary or
incidental to the continuance and management of a general life and disability
insurance business; to do and perform all and every lawful act convenient or
expedient or necessary or incidental to the execution and performance of all
kinds of legally authorized
<PAGE>
contracts; to establish agencies, branches or branch offices at such places
as it may deem proper, and to appoint such agents and agencies as re, in the
discretion of the board of directors, advantageous or necessary in the
promotion of the business of the corporation; this corporation accepts for
its government the lawful requirements and obligations imposed upon the
insurance companies by the laws of the State of Nebraska; and this
corporation accepts and shall have all such powers, rights, privileges and
immunity as are granted by the laws of the State of Nebraska to said
companies; and this corporation shall have all such powers as provided by the
general incorporation laws of the State of Nebraska.
ARTICLE IV
The amount of the authorized capital stock of this corporation shall be
$200,000.00 divided into the 200,000 shares at a par value of $1.00 each;
which shall be sold at not less than par value and paid for in such lawful
manner and on such lawful terms as may be provided by the board of directors;
fully paid shares of the stock of the corporation shall be issued for the
amount so fully paid; such fully paid stock shall be forever nonassessible.
ARTICLE V
The affairs and business of this corporation shall be conducted by a
board of directors consisting of not less than five nor more than twenty-one
directors as may be provided in the bylaws; the board of directors shall be
elected by the stockholders from among their number at the annual meeting
thereof, and shall hold office for the time provided by the bylaws and until
their successors are elected and qualified, in the event of any vacancy
occurring in the number of directors prior to the date of the stockholders'
meeting, the remaining directors shall have the power to fill such vacancy or
vacancies and elect directors for the unexpired term; the directors may elect
from among their number an executive committee to have active charge of the
affairs and the finance and investments of the corporation and such other
powers as may be granted by the bylaws not inconsistent with law.
ARTICLE VI
The officers of this corporation shall consist of a president, one or
more vice presidents, a secretary, one or more assistant secretaries, a
treasurer and one or more assistant treasurers, who shall be elected by the
board of directors; such officers shall receive such lawful remuneration as
may be prescribed by the board of directors and shall hold office as
prescribed by the bylaws and until their successors are elected and
qualified; and person may hold any number of offices except that of president
and vice president as may be provided by the bylaws; the board of directors
shall have power to appoint such other
<PAGE>
subordinate officers and agents as to them may seem proper in their lawful
discretion and shall fix a reasonable compensation and tenure of office
thereof; the board of directors shall prescribe the compensation and duties
of all officers, subject to the provision of the bylaws.
ARTICLE VII
The corporation shall have perpetual existence.
ARTICLE VIII
The minimum amount of capital with which this corporation shall commence
business is $100,000.00.
ARTICLE IX
The directors shall have the power and authority to make all bylaws and
rules for the management and control of the affairs of the corporation and
they may alter and amend the same at pleasure.
ARTICLE X
These articles may be amended at any annual or special meeting of the
stockholders called for that purpose, provided that a notice of the proposed
amendment shall have been mailed to each stockholder not less than ten days
prior to said meeting; if such amendment shall be approved by lawful
authority and by the holders of the majority of the capital stock, the same
shall take effect as an amendment to these articles; and the board of
directors shall thereupon cause the proper officers to subscribe,
acknowledge, record and publish the same as amendments to these articles as
required by law.
ARTICLE XI
The individual and private property of the holders of the capital stock
of this corporation shall be forever exempt from liability for any of the
debts of this corporation.
ARTICLE XII
The annual meeting of the stockholders of this corporation shall be held
on the second Monday in January of each year and no notice of such annual
meeting need be given. Special meetings of the stockholders may be held at
any time upon direction of the board of directors or at the request of the
holders of the majority of the capital stock of this corporation, but notice
of such special meeting, stating the general nature of the business to be
transacted thereat shall
<PAGE>
be mailed to each stockholder of record not less than ten days prior to the
date of said special meeting; at such special meeting the stockholders may
transact such business as specified in such notice and none other; at the
annual meeting the stockholders shall receive reports of the officers, elect
directors and transact such other business as would properly come before them.
Articles V and XII of the original articles of incorporation are hereby
repealed.
We further certify that said amended articles of incorporation are duly
adopted in accordance with the provisions of sections 44-231 and 21-151 of
the Revised Statutes of Nebraska for 1943; and that said amended articles of
incorporation have been duly approved by the Department of Insurance of the
State of Nebraska.
<PAGE>
IN WITNESS WHEREOF, This certificate has been duly executed by the said
Lincoln Benefit Life Company, a corporation, by its president and secretary
respectively under the corporate seal this 29th day of August, 1949.
LINCOLN BENEFIT LIFE COMPANY,
A Corporation,
Witness By /s/ Charles H Sharrick
-----------------------------------
Herman Ginsburg President
- -----------------------
/s/ John S Jones
----------------------------------
Secretary
STATE OF NEBRASKA )
)SS.
LANCASTER COUNTY )
On this 29th day of August, 1949 before me the undersigned, a notary
public duly commissioned and qualified for and residing in said state and
county, personally came Charles H. Sharrick, president and J. S. Jones,
secretary respectively of Lincoln Benefit Life Company, a corporation to me
personally known to be the identical persons who signed the foregoing
certificate of amendments to the Articles of Incorporation of said
corporation as president and secretary respectively; and they severally
acknowledge the execution thereof to be their voluntary act and deed as such
officers and the voluntary act and deed of the said Lincoln Benefit Life
Company, a corporation and the corporate seal of said corporation is
thereunto affixed by lawful authority; and the statements contained in said
certified are therein truly set forth.
In witness whereof I have hereunto set my hand and affixed my official
seal the day and year last above written.
/s/ Herman Ginsburg
-----------------------------------
Notary Public
Commission Expires February 25, 1955
-------------------
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
LINCOLN BENEFIT LIFE COMPANY
The undersigned president and secretary respectively of Lincoln Benefit
Life Company, a Nebraska corporation, do hereby certify that at a special
meeting of the stockholders of said corporation duly and legally held at the
Lincoln Building in Lincoln, Nebraska on the 8th day of October 1962 at 2
o'clock P.M., at which the holders of all of the outstanding stock of the
corporation were present, the following resolution was unanimously adopted.
"RESOLVED, by the Stockholders of Lincoln Benefit Life Company, a Nebraska
corporation that the resolution of the Board of Directors of the corporation
pertaining to the amendment of Article IV of the Articles of Incorporation of
the company be and the same is hereby adopted and approved, and the form and
contents of same also be adopted and approved, to-wit:
ARTICLE IV
The amount of the authorized capital stock of this
corporation will be $350,000 divided into the 350,000 shares
at a par value of $1.00 each; which shall be sold at not
less than par value and paid for in such lawful manner and
on such lawful terms as may be provided by the Board of
Directors; fully paid shares of stock of the corporation
shall be issued for the amount so fully paid; such fully
paid stock shall be forever non-assessable.
And that the proper officers of the corporation be and they hereby are
authorized and directed to execute and file such amendment in the manner and
with the effect contemplated thereby, and that such officers be further
authorized to take such further action as may be necessary and proper in
furtherance of the consummation of all matters contemplated by such
amendment."
That Article IV of the Articles of Incorporation of the Lincoln Benefit
Life Company was thereby amended to read as follows:
ARTICLE IV
The amount of the authorized capital stock of this
corporation will be $350,000 divided into the 350,000 shares
at a par value of $1.00 each; which shall be sold at not
less than par value and paid for in such lawful manner and
on such lawful terms as may be provided by the Board of
Directors; fully paid shares
<PAGE>
of stock of the corporation shall be issued for the amount
so fully paid; such fully paid stock shall be forever
non-assessable.
IN WITNESS WHEREOF; this certificate has been duly executed by the
Lincoln Benefit Life Company, a corporation, by its president and secretary
respectively, under the corporate seal this 17th day of October 1962.
LINCOLN BENEFIT LIFE COMPANY
A Corporation,
By /s/ Samuel E Orebaugh
-----------------------------------
President
/s/ Dale C Tinstman
-----------------------------------
Secretary
<PAGE>
STATE OF NEBRASKA )
) ss
LANCASTER COUNTY )
On this 17th day of October, 1962 before me the undersigned, a notary
public duly commissioned and qualified for and residing in said state and
county, personally came Samuel E. Orebaugh, president and Dale C. Tinstman,
Secretary respectively of Lincoln Benefit Life Company, a corporation to me
personally known to be the identical persons who signed the foregoing
certificate of amendments to the Articles of Incorporation of said
corporation as president and secretary respectively; and they severally
acknowledge the execution thereof to be their voluntary act and deed as such
officers and the voluntary act and deed of the said Lincoln Benefit Life
Company, a corporation and the corporate seal of said corporation is
thereunto affixed by lawful authority; and the statements contained in said
certified are therein truly set forth.
In Witness Whereof I have hereunto set my hand and affixed my official
seal the day and year last above written.
/s/ Oscar F Humble
-----------------------------------
Notary Public
My commission expires March 5, 1965
--------------
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
FEDERAL SECURITIES BUILDING
LINCOLN, NEBRASKA
EXECUTIVE OFFICES
CERTIFICATION
I, R. A. McDaniel, the duly elected and acting Administrative Vice-President of
the Lincoln Benefit Life Company, a Nebraska corporation, do hereby certify:
That, at a Special Meeting of the stockholders of Lincoln Benefit Life
Company, held on March 22, 1968, the attached Amended Articles of
Incorporation were adopted by an unanimous vote of all shares of stock
outstanding;
That such meeting was called pursuant to Waiver of all Notice as
required by law of such Special Meeting, such Waiver having been executed by
all of the outstanding stockholders of record;
That such Articles of Incorporation had been previously unanimously
recommended by a vote of all Directors of Lincoln Benefit Life Company and
had previously been approved by the Director of Insurance, Department of
Insurance of the State of Nebraska.
/s/ R. A. McDaniel
-----------------------------------
R. A. McDaniel
ATTEST:
/s/ H.A. Zethren
- ------------------------------
H. A. Zethren, Secretary
<PAGE>
AMENDED
ARTICLES OF INCORPORATION
OF
LINCOLN BENEFIT LIFE COMPANY
ARTICLE I
NAME, LOCATION AND RESIDENT AGENT
SECTION 1. The name of this corporation shall be Lincoln Benefit Life
Company, and its principal place of business shall be in the City of Lincoln,
Lancaster County, Nebraska.
SECTION 2. The registered agent of said corporation is Robert B.
Crosby, 1107 Federal Securities Building, Lincoln Nebraska, which is also the
registered office of the corporation.
ARTICLE II
NATURE OF BUSINESS
SECTION 1. The nature of the business to be transacted, and the objects
and purposes of the company are:
(a) To make insurance upon the lives of persons, including endowments and
annuities and every insurance pertaining thereto and disability
benefits.
(b) To make insurance against loss or expense resulting from the sickness
of the insured, or from bodily injury or death of the insured by
accident, or both, and every insurance pertaining thereto, including
quarantine.
SECTION 2. The Company may issue every kind of insurance permitted by
the Statutes of the State of Nebraska, and any amendments thereto.
SECTION 3. The Company may issue all types of life insurance and
sickness and accident insurance permitted by the laws of the State of
Nebraska, and any amendments thereto, to individuals, to "groups of persons"
and to "groups of insureds."
<PAGE>
SECTION 4. The company, in addition to the powers herein conferred,
shall have all the privileges and powers, and may engage in any activity,
permitted insurance corporations organized under the laws of the State of
Nebraska; and may do and perform all and every lawful act required as deemed
expedient for the conduct of its business, the ownership of its property, or
the maintenance, perpetuity, prosperity or welfare of the company.
SECTION 5. The company shall be authorized to establish separate
accounts for amounts which, pursuant to applicable contracts, are paid to the
company in connection with pension, retirement or profit-sharing plans or
annuities. The income, if any, and the gains or losses, realized, or
unrealized, on each such account may be credited to or charged against the
amount allocated to such account in accordance with such contract without
regard to other income, gains or losses of the company.
ARTICLE III
INVESTMENTS
The company shall be authorized to invest its funds in a manner not
prohibited by the laws of the State of Nebraska.
ARTICLE IV
ADDITIONAL POWERS
SECTION 1. The Board of Directors may from time to time vote to
indemnify and reimburse any director or officer or former director or officer
of the corporation, or any person who may have served at its request as a
director or officer of another corporation in which it owns shares of capital
stock or of which it is a creditor, his or her heirs, estate or personal
representatives, for any loss, cost or expense he or she may suffer,
including court costs, attorneys' fees and incidental expenses, and further
including the amount of any payment properly made to settle or compromise any
proceedings in which such director or officer is made a party to any legal
proceedings, including appeals therefrom, because of his or her being or
having been a director or officer of the company. Provided, however, the
directors shall have no power to indemnify or reimburse a director or officer
or former director or officer of the corporation in any cause in which he or
she shall finally be adjudged in such proceedings to be liable for negligence
or misconduct in the performance of his or her duties as such officer or
director or former director or officer. The foregoing right of indemnity and
reimbursement shall not be exclusive of other rights to which a director or
officer may be entitled by law, agreement, vote of stockholders, or otherwise.
<PAGE>
ARTICLE V
PLAN AND CAPITAL STOCK
SECTION 1. This company shall do business upon the stock legal reserve
plan.
SECTION 2. The authorized capital stock of the company shall be in the
amount of Five Hundred Fifty Thousand (550,000) shares of par value of One
Dollar ($1.00) each, and said company shall maintain a capital account of not
less than Five Hundred Thousand Dollars ($500,000.00). At the time the
company commences doing business, it shall hold surplus funds in an amount in
excess of the initial paid-in capital.
The Board of Directors after an affirmative vote at an annual or special
shareholders meeting of at least one-half of the outstanding shares, shall be
authorized and empowered to issue and dispose of all or any of the authorized
but unissued shares of the capital stock of the company, at not less than
par, from time to time as it may determine to be in the best interests of the
company and the stockholders thereof.
SECTION 3. The stock shall be transferable only by the actual delivery
of the stock certificate or certificates properly endorsed, and the transfer
duly recorded on the stock transfer books of the company.
ARTICLE VI
TIME OF COMMENCEMENT
The corporation shall begin transacting of business under these articles
when the same have been filed and approved according to the laws of the State
of Nebraska, and shall have perpetual existence, unless sooner dissolved by
or in accordance with the laws of the State of Nebraska.
ARTICLE VII
PROPERTY OF SHAREHOLDERS
The private property of the shareholders shall not be subject to the
debts of the corporation. The shares of the corporation shall be fully paid
and nonassessable.
<PAGE>
ARTICLE VIII
OFFICERS AND DIRECTORS
SECTION 1. The Board of Directors shall consist of not less than five
(5) nor more than twenty-one (21) persons. At each annual meeting of the
stockholders the number to be elected and their election shall take place as
provided by the By-Laws of the company. The personnal of the directors shall
be made up of qualified persons, as provided under the laws of the State of
Nebraska.
SECTION 2. The Board of Directors shall have the general management and
control of the business of the company.
SECTION 3. The officers of the company shall consist of a President,
one or more Vice Presidents, a Secretary, one or more Assistant Secretaries,
a Treasurer, one or more Assistant Treasurers, and such other officers as may
be provided for in the By-Laws, and all the officers shall be elected by the
Board of Directors in such manner and for such terms as the By-Laws may
prescribe.
ARTICLE IX
ANNUAL MEETING OF THE STOCKHOLDERS
SECTION 1. The stockholders shall meet annually on a date prescribed in
the By-Laws at the home office of the company for the purpose of electing
directors and transacting such other business as may properly come before the
stockholders.
SECTION 2. Each stockholder shall have the right to vote in person or
by proxy, and shall be entitled to one vote for each share of stock held by
him or her according to the stock transfer books of the company at all annual
meetings and at all special meetings legally called. The By-Laws of the
Company shall provide a date when the stock transfer books of the company
shall be closed for the purposes of determining the stockholders of record
for the annual or special meeting to be held.
ARTICLE X
AMENDMENTS
Amendments to these Articles of Incorporation shall be adopted by
two-thirds vote of all the directors, thereafter approved by the Department
of Insurance, and thereafter approved by two-thirds vote of all the stock
voting in person or by proxy at that annual or legally called special
meeting. Notice of
<PAGE>
such proposed amendments to these Articles of Incorporation shall be sent to
all stockholders of record as required in the By-Laws of the Company.
ARTICLE XI
CORPORATE SEAL
The corporate seal of the company shall contain the words, "Lincoln
Benefit Life Company", surrounding the words "Corporate Seal".
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
LINCOLN BENEFIT LIFE COMPANY
Pursuant to the provisions of Section 21-2060 of the Nebraska Business
Corporation Act, R.R.S. 1943, the undersigned corporation adopts the
following Articles of Amendment to the Articles of Incorporation:
1. The name of the corporation is Lincoln Benefit Life Company.
2. At a Special Meeting of the Company's stockholders, held in
the manner prescribed by the Nebraska Insurance Code and the Nebraska
Business Corporation Act, the following amendment to the Articles of
Incorporation was adopted:
ARTICLE V.
PLAN AND AUTHORIZED CAPITAL
SECTION 1. The Company shall do business upon the stock
legal reserve plan.
SECTION 2. The authorized capital of the Company shall
be Seven Hundred Fifty Thousand Dollars ($750,000)
consisting of Seven Hundred Fifty Thousand (750,000) shares
of common stock of a par value of One Dollar ($1.00) per
share.
SECTION 3. The stock shall be transferable only by the
actual delivery of the stock certificate or certificates
properly endorsed, and the transfer duly recorded on the
stock transfer books of the Company.
The Board of Directors, after an affirmative vote at an
annual or special shareholders' meeting of at least one-half
of the outstanding shares, shall be authorized and empowered
to issue and dispose of all or any of the authorized but
unissued shares of the capital stock of the Company, at not
less than par, from time to time as it may determine to be
in the best
<PAGE>
interests of the Company and the shareholders thereof.
3. The amendment does NOT provide for an exchange,
reclassification or cancellation of issued shares.
4. On May 31, 1973, the Board of Directors unanimously approved
this amendment to the Company's Articles of Incorporation.
5. The sole shareholder of the Company has executed his written
consent to this amendment to the Company's Articles of Incorporation, dated
May 31, 1973.
6. This amendment will have the following effect:
<TABLE>
<CAPTION>
BEFORE AFTER
- --------------------------------------------------------------------------------
<S> <C>
NUMBER OF SHARES AUTHORIZED
Common - 550,000 - $1 par 750,000 - $1 par
CAPITAL AUTHORIZED
$550,000 $750,000
SHARES ISSUED AND OUTSTANDING
Common - 550,000 - $1 par 550,000 - $1 par
CAPITAL ISSUED AND OUTSTANDING
$550,000 $550,000
- --------------------------------------------------------------------------------
</TABLE>
LINCOLN BENEFIT LIFE COMPANY
Attest:
/s/D. H. Pinkerton By /s/Robert H. Rydman
- ---------------------------- --------------------------------
Secretary President
May 31, 1973
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
LINCOLN BENEFIT LIFE COMPANY
Pursuant to the provisions of Section 21-2060 of the Nebraska Business
Corporation Act, R.R.S. 1943, the undersigned corporation adopts the
following Articles of Amendment to the Articles of Incorporation:
1. The name of the corporation is Lincoln Benefit Life Company.
2. At a special meeting of the Company's stockholder, held on April
20, 1978 in the manner prescribed by the Nebraska Insurance Code and the
Nebraska Business Corporation Act, the following amendment to the Articles of
Incorporation was adopted:
ARTICLE V.
PLAN AND AUTHORIZED CAPITAL
Section 1. The Company shall do business upon the stock
legal reserve plan.
Section 2. The authorized capital of the company shall
be One Million Dollars ($1,000,000),consisting of One
Million (1,000,000) shares of common stock of a par value of
One Dollar ($1.00) per share.
Section 3. The stock shall be transferable only by the
actual delivery of the stock certificate or certificates
properly endorsed, and the transfer duly recorded on the
stock transfer books of the Company.
The Board of Directors, after an affirmative vote at an
annual or special shareholders' meeting of at least one-half
of the outstanding shares, shall be authorized and empowered
to issue and dispose of all or any of the authorized but
unissued shares of the capital stock of the Company, at not
less than par, from time to time as it may determine to be
in the best
<PAGE>
interests of the Company and the shareholders thereof.
3. The amendment does NOT provide for an exchange,
reclassification or cancellation of issued shares.
4. On April 20, 1978, the Board of Directors unanimously approved
this amendment to the Company's Articles of Incorporation.
5. The sole shareholder of the Company has approved this
amendment to the Company's Articles of Incorporation, dated April 20, 1978.
6. This Amendment will have the following effect:
<TABLE>
<CAPTION>
BEFORE AFTER
- --------------------------------------------------------------------------------
<S> <C>
NUMBER OF SHARES AUTHORIZED
Common - 750,000 - $1 par 1,000,000 - $1 par
CAPITAL AUTHORIZED
$750,000 $1,000,000
SHARES ISSUED AND OUTSTANDING
Common - 750,000 - $1 par 750,000 - $1 par
CAPITAL ISSUED AND OUTSTANDING
$750,000 $750,000
- --------------------------------------------------------------------------------
</TABLE>
LINCOLN BENEFIT LIFE COMPANY
Attest:
/s/Evelyn A. Rauch By /s/C. T. Young
- ----------------------------- ---------------------------------
Secretary President
20 April 1978
<PAGE>
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
LINCOLN BENEFIT LIFE COMPANY
The undersigned, President and Secretary of the Lincoln Benefit Life
Company, a domestic insurance company, organized under the laws of the State
of Nebraska, state the following:
1. The name of the corporation is: Lincoln Benefit Life Company.
2. With the consent of the sole shareholder of the Company and
pursuant to approval of the Department of Insurance, State of Nebraska,
Section 2 of Article V of the Articles of Incorporation is amended to provide
as follows:
Section 2. The authorized capital stock of the company
shall be $2,000,000.00, divided into 20,000 share of a par value
of $100.00 each.
3. By this amendment, the stated capital of the Company is increased
from $1,000,000.00 to $2,000,000.00.
This amendment to the Articles of Incorporation was adopted November 7,
1983, with the unanimous approval of the Board of Directors and the consent
of the sole shareholder.
November 7, 1983.
LINCOLN BENEFIT LIFE COMPANY
By /s/Fred H. Jonske
---------------------------
Fred H. Jonske, President
Attest:
/s/Evelyn A. Rauch
- ------------------------------
Evelyn A. Rauch, Secretary
<PAGE>
Articles of Amendment
of
Articles of Incorporation
of
Lincoln Benefit Life Company
The undersigned, President and Secretary of the Lincoln Benefit Life
Company, a domestic insurance company, organized under the laws of the State
of Nebraska, state the following:
1. The name of the corporation is: Lincoln Benefit Life Company.
2. With the consent of the sole shareholder of the company and
pursuant to approval of the Department of Insurance, State of Nebraska,
Section 2 of Article V of the Articles of Incorporation is amended to provide
as follows:
Section 2. The authorized capital stock of the company
shall be $3,000,000, divided into 30,000 shares of a par value
of $100 each.
By this amendment, the stated capital of the Company is increased from
$2,000,000 to $3,000,000.
This amendment to the Articles of Incorporation was adopted May 25, 1988
with the unanimous approval of the Board of Directors and the consent of the
sole shareholder.
May 25, 1988
LINCOLN BENEFIT LIFE COMPANY
By /s/Fred H. Jonske
----------------------------
Fred H. Jonske, President
Attest:
/s/John J. Morris
- ---------------------------------
John J. Morris
Vice President and Secretary
<PAGE>
AMENDED AND RESTATED BY-LAWS OF
LINCOLN BENEFIT LIFE COMPANY
JULY 23, 1997
ARTICLE I
DIRECTORS
SECTION 1. The property, business and affairs of the Company shall
be managed and controlled by a Board of Directors composed of no less than five
(5) nor more than twenty-one (21) members. The Directors shall be elected at
each annual meeting of the shareholders of the Company for a term of one year.
Each Director shall hold office for the term for which he or she was elected and
until the election and qualification of his or her successor.
SECTION 2. In the event of a vacancy occurring in the Board of
Directors, the shareholders of the Company shall, by a majority vote at a
special meeting called for that purpose or at the next annual meeting of
shareholders, elect a Director to fill such vacancy, who shall hold office
during the unexpired portion of the term of the Director whose place he or she
was elected to fill.
SECTION 3. The Board of Directors may declare dividends payable
out of the surplus funds of the Company when warranted by law.
SECTION 4. The Board of Directors shall elect all the general
officers of the Company hereafter provided and may prescribe additional
descriptive titles for any such officers.
The Board of Directors may from time to time appoint an Actuary, Assistant
Vice Presidents, Assistant Secretaries, Assistant Treasurers, Assistant
Actuaries and other officers of the Company. The Board of Directors may
prescribe the duties and fix the compensation of any elected or appointed
officer and may require from any officer security for his or her faithful
service and for his or her proper accounting for monies and property from time
to time in his or her possession.
All officers of the Company shall hold office at the will of the Board of
Directors.
SECTION 5. The Board of Directors shall designate in what bank or
banks the funds of the Company shall be deposited and the person or persons who
may sign, on behalf of the Company, checks or drafts against such deposits.
Such designations may also be made by such person or persons as shall be
appointed for that purpose by the Board of Directors.
SECTION 6. The Board of Directors shall have the power to make
rules
1
<PAGE>
and regulations not inconsistent with the laws of this State, the Articles
of Incorporation of the Company, or these By-Laws, for the conduct of its own
meetings and the management of the affairs of the Company.
SECTION 7. The Board of Directors may authorize payment of
compensation to Directors for their services as Directors, and fix the amount
thereof.
SECTION 8. The Board of Directors shall have the power to appoint
committees and to grant them powers not inconsistent with the laws of this
State, the Articles of Incorporation of the Company, or these By-Laws.
SECTION 9. An annual meeting of the Board of Directors shall be
held each year immediately after the adjournment of the annual meeting of the
shareholders. Other meetings of the Board of Directors may be held at such
time, as the Board of Directors may determine or when called by the President or
by a majority of the Board of Directors.
Notice of every meeting of the Directors other than the stated annual
meeting shall be given by letter or telegraph sent to each Director at his
business address, not less than three days prior to the meeting. Any Director
may, in writing, waive notice of any meeting, and the presence of a Director at
any meeting shall be considered a waiver by him or her of notice of such
meeting, except as otherwise provided by law.
Any action required or permitted to be taken at any meeting of the Board of
Directors, or of any Committee thereof, may be taken without a meeting if all
members of the Board or such Committee, as the case may be, consent thereto in
writing. Such writing or writings shall be filed with the minutes of
proceedings of the Board or such Committee.
SECTION 10. A majority of the whole Board of Directors shall
constitute a quorum for the transaction of business, but if at any meeting of
the Board of Directors there shall be less than a quorum present, a majority of
those present may adjourn the meeting, from time to time, until a quorum shall
have been obtained.
ARTICLE II
OFFICERS
SECTION 1. The general officers of the Company shall consist of a
Chairman of the Board of Directors, a President, two or more Vice Presidents, a
Secretary, and a Treasurer, who shall be elected annually by the Board of
Directors at the stated annual meeting held upon adjournment of the annual
shareholders' meeting, and if not elected at such meeting, such officers may be
elected at any meeting of the Board of Directors held thereafter. Such officers
shall be elected by a majority of the Directors, and
2
<PAGE>
shall hold office for one year and until their respective successors are
elected and qualified, subject to removal at will by the Board of Directors.
In case of a vacancy in any of the general offices of the Company, such
vacancy may be filled by the vote of a majority of the Board of Directors.
Any two of the aforesaid offices may be filled by the same person, with the
exception of the offices of President and Vice President, or President and
Secretary.
SECTION 2. The Chairman of the Board of Directors shall preside at
all meetings of the shareholders and of the Board of Directors. He or she shall
be the Chief Executive Officer of the Company, shall have general management of
the business of the Company subject to the supervision of the Board of
Directors, and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
SECTION 3. The President shall be the Chief Operating Officer of
the Company and shall have general and active management of the business of the
Company subject to the supervision of the Board of Directors. He or she shall
execute bonds, mortgages and other contracts requiring a seal, under the seal of
the corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the corporation. He or she shall also perform such other duties as may properly
belong to his or her office or as shall be prescribed from time to time by the
Chief Executive Officer.
SECTION 4. Each Vice President shall have such powers and shall
perform such duties as may be assigned to him or her by the President or by the
Board of Directors. In the absence or in the case of the inability of the
President to act, the Board of Directors may designate which one of the Vice
Presidents shall be the acting Chief Operating Officer of the Company during
such absence or inability, whereupon such acting Chief Operating Officer shall
have all the powers and perform all of the duties incident to the office of the
President during the absence or inability of the President to act.
SECTION 5. The Secretary shall keep the minutes of all meetings of
the Board of Directors, and of all meetings of the shareholders, in books
provided by the Company for such purpose. He or she shall attend to the giving
of all notices of meetings of the Board of Directors or shareholders. He or she
may sign with the President or a Vice President in the name of the Company when
authorized by the Board of Directors so to do, all contracts and other
instruments requiring the seal of the Company and may affix the seal thereto.
He or she shall, in general, perform all of the duties which are incident to the
office of Secretary and such other duties as the Board of Directors or President
may from time to time prescribe.
SECTION 6. The Treasurer shall deposit the monies of the Company
in the Company's name in depositories designated by the Board of Directors, or
by such person
3
<PAGE>
or persons as shall be appointed for that purpose by the Board of
Directors. He or she shall, in general, perform all of the duties which are
incident to the office of Treasurer and such other duties as the Board of
Directors or President may from time to time prescribe. The Board of Directors
may, in its discretion, require him or her to give bond for the faithful
discharge of his or her duties.
ARTICLE III
SHAREHOLDERS' MEETING
SECTION 1. The annual meeting of the shareholders shall be held or
at such location within or without the State of Nebraska as may be set forth in
the notice of call, prior to June 30 of each year. The President or the Board
of Directors may at any time call a special meeting of the shareholders, and the
President shall call such special meeting when requested, in writing, so to do
by the owners of not less than one-fifth of the outstanding share of the
Company.
SECTION 2. Notice of every meeting of the shareholders shall be
given by mailing notice thereof at least ten days before such meeting to all the
shareholders at their respective post office addresses last furnished by them,
respectively, to the Company. The shareholders may waive notice of any such
meeting, in writing, and the presence of a shareholder, either in person or by
proxy, shall be considered a waiver of notice, except as otherwise provided by
law.
SECTION 3. The presence at such meeting in person or by proxy of
shareholders of the Company representing at least fifty-one percent of the then
outstanding shares of the Company shall be necessary to constitute a quorum for
the purpose of transacting business, except as otherwise provided by law, but a
smaller number may adjourn the meeting from time to time until a quorum shall be
obtained. Each shareholder shall be entitled to cast one vote in person or by
proxy for each share of stock of the Company held and of record in his or her
name on the books of the Company.
SECTION 4. A shareholder may vote at any meeting of the
shareholders either in person or by proxy duly constituted in writing. No
special form of proxy shall be necessary.
ARTICLE IV
SHARES
SECTION 1. Share certificates shall be signed by the President or
a Vice President and countersigned by the Secretary, shall be sealed with the
corporate seal of the Company, and shall be registered upon the Share Register
of the Company. Each
4
<PAGE>
certificate shall express on its face the name of the
Company, the number of the certificate, the number of shares for which it is
issued, the name of the person to whom it is issued, the par value of each of
said shares, and the amount actually received by the Company for each share
represented by said certificate.
SECTION 2. Transfer of shares of the Company shall be made only on
the books of the Company by the holder thereof in person or by his or her
attorney duly authorized, in writing, and upon the surrender of the certificates
or certificate for the share transfer, upon which surrender and transfer new
certificates will be issued. The Board of Directors may, by resolution, close
the share transfer books of the Company for a period not exceeding ten days
before the holding of any annual or special meeting of the shareholders. The
Board of Directors may, by resolution, also close the transfer books of the
Company for a period not exceeding ten days before the payment of any dividends
which may be declared upon the shares of the Company.
ARTICLE V
INSURANCE POLICIES
SECTION 1. All policies of insurance issued by this Company shall
comply with the laws of the respective states or territories in which the
policies are issued. All policies of insurance issued by this Company shall be
signed, either manually or by facsimile, by the President and the Secretary or
by such officer or officers as the President may designate, and shall be
countersigned by a duly licensed resident agent where so required by law or
regulation.
ARTICLE VI
MISCELLANEOUS
SECTION 1.
(a) As used in this Section:
(i) "acted properly" as to any person shall mean that such person
(A) acted in good faith;
(B) acted in a manner which he or she reasonably believed to be
in or not opposed to the best interests of the corporation;
and
(C) with respect to any criminal action or proceeding, had no
reasonable cause to believe that his or her conduct was
unlawful.
5
<PAGE>
The termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act properly.
(ii) "covered person" shall mean an Indemnitee (as defined below)
or an Employee Indemnitee (as defined below).
(iii) "Employee Indemnitee" shall mean any non-officer employee of
the corporation (but not subsidiaries of the corporation).
(iv) "expenses" shall include attorneys' fees and expenses and
any attorneys' fees and expenses of establishing a right to
indemnification under this Section.
(v) "Indemnitee" shall mean any person who is or was
(A) a director or officer of the corporation and/or
any subsidiary;
(B) a trustee or a fiduciary under any employee
pension, profit sharing, welfare or similar plan
or trust of the corporation and/or any
subsidiary; or
(C) serving at the request of the corporation as a
director or officer of or in a similar capacity
in another corporation, partnership, joint
venture, trust or other enterprise, (which shall,
for the purpose of this Section be deemed to
include not-for-profit or for-profit entities of
any type), whether acting in such capacity or in
any other capacity including, without limitation,
as a trustee or fiduciary under any employee
pension, profit sharing, welfare or similar plan
of trust.
(vi) "proceeding" shall mean any threatened, pending or completed
action or proceeding, whether civil or criminal, and
whether judicial, legislative or administrative and shall
include investigative action by any person or body.
(vii) "subsidiary" shall mean a corporation, 50% or more of the
shares of which at the time outstanding having voting power
for the election of directors are owned directly or
indirectly by the corporation or by one or more subsidiaries
or by the corporation and one or more subsidiaries.
(b) The corporation shall indemnify any Indemnitee to the fullest extent
permitted under law (as the same now or hereafter exists), who was or
is a
6
<PAGE>
party or is threatened to be made a party to any proceeding by
reason of the fact that such person is or was an Indemnitee against
liabilities, expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her.
(c) The corporation shall indemnify any Employee Indemnitee who was or is
a party or is threatened to be made a party to any proceeding (other
than an action by or in the right of the corporation) by reason of the
fact that such person is or was an employee against liabilities,
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such proceeding
if such person acted properly.
(d) The corporation shall indemnify any Employee Indemnitee who was or is
a party or is threatened to be made a party to any proceeding by or in
the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was an employee against
amounts paid in settlement and against expenses actually and
reasonably incurred by him or her in connection with the defense or
settlement of such proceeding if he or she acted properly, except that
no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his or her duty to
the corporation unless and only to the extent that the court in which
such action or suit was brought shall determine upon application that,
despite the adjudication or liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem
proper.
(e) Expense incurred in defending a proceeding shall be paid by the
corporation to or on behalf of a covered person in advance of the
final disposition of such proceeding if the corporation shall have
received an undertaking by or on behalf of such person to repay such
amounts unless it shall ultimately be determined that he or she is
entitled to be indemnified by the corporation as authorized in this
Section.
(f) Any indemnification or advance under this Section (unless ordered by a
court) shall be made by the corporation only as authorized in the
specific proceeding upon a determination that indemnification or
advancement to a covered person is proper in the circumstances. Such
determination shall be made:
(i) by the Board of Directors, by a majority vote of a quorum
consisting of directors who were not made parties to such
proceedings, or
(ii) if such a quorum is not obtainable, or, even if obtainable
and a
7
<PAGE>
quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or
(iii) in the absence of a determination made under (i) or (ii), by
the stockholders.
(g) The corporation shall indemnify or advance funds to any Indemnitee
described in Section (a)(v)(C), only after such person shall have
sought indemnification or an advance from the corporation,
partnership, joint venture, trust or other enterprise in which he or
she was serving at the corporation's request, shall have failed to
receive such indemnification or advance and shall have assigned
irrevocably to the corporation any right to receive indemnification
which he or she might be entitled to assert against such other
corporation, partnership, joint venture, trust or other enterprise.
(h) The indemnification provided to a covered person by this Section:
(i) shall not be deemed exclusive of any other rights to which such
person may be entitled by law or under any articles of
incorporation, by-law, agreement, vote of shareholders or
disinterested directors or otherwise;
(ii) shall inure to the benefit of the legal representatives of such
person or his or her estate, whether such representatives are
court appointed or otherwise designated, and to the benefit of
the heirs of such person; and
(iii) shall be a contract right between the corporation and each
such person who serves in any such capacity at any time while
this Section 1 of Article VII is in effect, and any repeal or
modification of this Section shall not affect any rights or
obligations then existing with respect to any state of facts or
any proceedings then existing.
(i) The indemnification and advances provided to a covered person by this
Section shall extend to and include claims for such payments arising
out of any proceeding commenced or based on actions of such person
taken prior to the effective date of this Section; provided that
payment of such claims had not been agreed to or denied by the
corporation at the effective date.
(j) The corporation shall have power to purchase and maintain insurance on
behalf of any covered person against any liability asserted against
him or her and incurred by him or her as a covered person or arising
out of his or her status of such, whether or not the corporation would
have the power to indemnify him or her against such liability under
the provisions of this
8
<PAGE>
Section. The corporation shall also have power to purchase and
maintain insurance to indemnify the corporation for any obligation
which it may incur as a result of the indemnification of covered
persons under the provisions of this Section.
(k) The invalidity or unenforceability of any provision in this Section
shall not affect the validity or enforceability of the remaining
provisions of this Section.
SECTION 2. The fiscal year of the Company shall begin in each year
on the first day of January, and end on the thirty-first day of the December
following.
SECTION 3. The common seal of the Company shall be circular in
form and shall contain the name of the Company and the words: "CORPORATE SEAL"
and "NEBRASKA".
SECTION 4. These By-Laws may be amended or repealed by the vote of
a majority of the Directors present at any meeting at which a quorum is present.
9
<PAGE>
<TABLE>
<S> <C>
__________________________________________________________________________________________________________________________________
ACORD[client to clarify] CERTIFICATE OF INSURANCE ISSUE DATE(MM/DD/YY)
/ / 1/13/98
__________________________________________________________________________________________________________________________________
PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF INFOMRATION ONLY AND CONFERS
NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND,
Near North Ins Brokerage, Inc. EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
875 North Michigan Avenue ___________________________________________________________________________________
Suites 18, 19, & 20 COMPANIES AFFORDING COVERAGE
Chicago, IL 60611 ___________________________________________________________________________________
SLO COMPANY
CODE SUBCODE 104362 LETTER A Reliance Surety Company
___________________________________________________________________________________
Stacey L. Owens (312) 280-5661 COMPANY
_____________________________________________LETTER B
INSURED ___________________________________________________________________________________
COMPANY
ALLSTATE LETTER C
3075 Sanders Rd. So. Plaza H2A ___________________________________________________________________________________
Northbrook, IL 60062 COMPANY
LETTER D
___________________________________________________________________________________
COMPANY
LETTER E
___________________________________________________________________________________________________________________________________
COVERAGES
___________________________________________________________________________________________________________________________________
THIS IS TO CERTIFY THAT POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD
INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS
CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS,
EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
___________________________________________________________________________________________________________________________________
CO
LTR TYPE OF INSURANCE POLICY NUMBER POLICY EFFECTIVE POLICY EXPIRATION ALL LIMITS IN THOUSANDS
DATE(MM/DD/YY) DATE(MM/DD/YY) -------------
___________________________________________________________________________________________________________________________________
GENERAL LIABILITY GENERAL AGGREGATE $
__ COMMERCIAL GENERAL LIABILITY ____________________________________________
__ CLAIMS MADE __OCCUR. PRODUCTS-COMP/OPS AGGREGATE $
__ OWNER'S & CONTRACTOR'S PROT. ____________________________________________
__ __________________________ PERSONAL & ADVERTISING INJURY $
____________________________________________
EACH OCCURRENCE $
____________________________________________
FIRE DAMAGE (Any one fire) $
____________________________________________
MEDICAL EXPENSE (Any one person)$
___________________________________________________________________________________________________________________________________
AUTOMOBILE LIABILITY COMBINED
__ ANY AUTO SINGLE $
__ ALL OWNED AUTOS LIMIT
__ SCHEDULED AUTOS _________________________________
__ HIRED AUTOS BODILY
__ NON-OWNED AUTOS INJURY $
__ GARAGE LIABILITY (Per Person)
__ _________________________________
BODILY
INJURY $
(Per Accident)
_________________________________
PROPERTY
DAMAGE $
________________________________________________________________________________________________________________________
EXCESS LIABILITY EACH AGGREGATE
___ OCCURRENCE
___ OTHER THAN UMBRELLAFORM $ $
________________________________________________________________________________________________________________________
WORKER'S COMPENSATION STATUTORY
AND $ (EACH ACCIDENT)
EMPLOYERS' LIABILITY $ (DISEASE-POLICY LIMIT)
$ (DISEASE-EACH EMPLOYEE)
________________________________________________________________________________________________________________________
OTHER
A Form 25
Financial
Institution B2710270 12/01/97 12/01/98 $5,000,000 Limit
___________________________________________________________________________________________________________________________________
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/RESTRICTIONS/SPECIAL ITEMS
___________________________________________________________________________________________________________________________________
CERTIFICATE HOLDER 00001 CANCELLATION
___________________________________________________________________________________________________________________________________
SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE
Lincoln Benefit Life Company EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO
134 South 13th MAIL 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE
Lincoln, NE 68508 LEFT, BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR
LIABILITY OF ANY KIND UPON THE COMPANY, ITS AGENTS OR REPRESENTATIVES.
___________________________________________________________________________
AUTHORIZED REPRESENTATIVE
/s/ Michael Segal
___________________________________________________________________________________________________________________________________
ACORD 25-S (3/88) ACORD CORPORATION 1988
___________________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 16th day of December, 1993, between
JANUS ASPEN SERIES, an open-end management investment company organized as a
Delaware business trust (the "Trust"), and LINCOLN BENEFIT LIFE COMPANY, a
life insurance company organized under the laws of the State of Nebraska (the
"Company"), on its own behalf and on behalf of each segregated asset account
of the Company set forth on Schedule A, as may be amended from time to time
(the "Accounts").
WITNESSETH:
WHEREAS, the Trust has filed a registration statement with the
Securities and Exchange Commission to register itself as an open-end
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and to register the offer and sale of its shares
under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for
separate accounts established for variable life insurance policies and
variable annuity contracts to be offered by insurance companies that have
entered into participation agreements with the Trust (the "Participating
Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into
several series of shares, each series representing an interest in a
particular managed portfolio of securities and other assets (the
"Portfolios"); and
WHEREAS, the Trust has applied for an order from the Securities
and Exchange Commission granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of sections 9(a), 15(a), and
15(b) of the 1940 Act, and rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
to the extent necessary to permit shares of the Trust to be sold to and held
by variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Shared Trust Exemptive Order"); and
WHEREAS, the Company has registered or will register certain
variable life insurance policies and/or variable annuity contracts under the
1933 Act (the "Contracts"); and
WHEREAS, the Company has registered or will register each Account
as a unit investment trust under the 1940 Act; and
WHEREAS, the Company desires to utilize shares of one or more
Portfolios as an investment vehicle of the Accounts;
1
<PAGE>
NOW THEREFORE, in consideration of their mutual promises, the
parties agree as follows:
ARTICLE I.
SALE OF TRUST SHARES
1.1 The Trust shall make shares of its Portfolios available to
the Accounts at the net asset value next computed after receipt of such
purchase order by the Trust (or its agent), as established in accordance with
the provisions of the then current prospectus of the Trust. Shares of a
particular Portfolio of the Trust shall be ordered in such quantities and at
such times as determined by the Company to be necessary to meet the
requirements of the Contracts. The Trustees of the Trust (the "Trustees")
may refuse to sell shares of any Portfolio to any person, or suspend or
terminate the offering of shares of any Portfolio if such action is required
by law or by regulatory authorities having jurisdiction or is, in the sole
discretion of the Trustees acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.2 The Trust will redeem any full or fractional shares of any
Portfolio when requested by the Company on behalf of an Account at the net
asset value next computed after receipt by the Trust (or its agent) of the
request for redemption, as established in accordance with the provisions of
the then current prospectus of the Trust. The Trust shall make payment for
such shares in the manner established from time to time by the Trust, but in
no event shall payment be delayed for a greater period than is permitted by
the 1940 Act.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby
appoints the Company as its agent for the limited purpose of receiving and
accepting purchase and redemption orders resulting from investment in and
payments under the Contracts. Receipt by the Company shall constitute
receipt by the Trust provided that i) such orders are received by the Company
in good order prior to the time the net asset value of each Portfolio is
priced in accordance with its prospectus and ii) the Trust receives notice of
such orders by 12:00 p.m. New York time on the next following Business Day.
"Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Trust calculates its net asset value
pursuant to the rules of the Securities and Exchange Commission.
1.4 Purchase orders that are transmitted to the Trust in
accordance with Section 1.3 shall be paid for on the same Business Day that
the Trust receives notice of the order. Payments shall be made in federal
funds transmitted by wire.
1.5 Issuance and transfer of the Trust's shares will be by book
entry only. Stock certificates will not be issued to the Company of the
Account. Shares ordered
2
<PAGE>
from the Trust will be recorded in the appropriate title for each Account or
the appropriate subaccount of each Account.
1.6 The Trust shall furnish same day notice to the Company of
any income dividends or capital gain distributions payable on the Trust's
shares. The Company hereby elects to receive all such income dividends and
capital gain distributions as are payable on a Portfolio's shares in
additional shares of that Portfolio. The Trust shall notify the Company of
the number of shares so issued as payment of such dividends and distributions.
1.7 The Trust shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonable
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6 p.m. New
York time.
1.8 The Trust agrees that its shares will be sold only to
Participating Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans to the extent permitted by the Shared
Trust Exemptive Order. No shares of any Portfolio will be sold directly to
the general public. The Company agrees that Trust shares will be used only
for the purposes of funding the Contracts and Accounts listed in Schedule A,
as amended from time to time.
1.9 The Trust agrees that all Participating Insurance Companies
shall have the obligations and responsibilities regarding pass-through voting
and conflicts of interest corresponding to those contained in section 2.8 and
Article IV of this Agreement.
ARTICLE II.
OBLIGATIONS OF THE PARTIES
2.1 The Trust shall prepare and be responsible for filing with
the Securities and Exchange Commission and any state regulators requiring
such filing all shareholder reports, notices, proxy materials (or similar
materials such as voting instruction solicitation materials), prospectuses
and statements of additional information of the Trust. The Trust shall bear
the costs of registration and qualification of its shares, preparation and
filing of the documents listed in this section 2.1, and all taxes to which an
issuer is subject on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust shall either (a)
provide the Company (at the Company's expense) with as many copies of the
Trust's current prospectus, annual report, semi-annual report and other
shareholder communications, including any amendments or supplements to any of
the foregoing, as the Company shall reasonably request; or (b) provide the
Company with a camera ready copy of such documents in a form suitable for
printing. The Trust shall provide the Company with a copy of its statement
of additional information in a form suitable for duplication by the Company.
The Trust (at its expense) shall provide the Company with copies of any
Trust-sponsored proxy materials in such quantity as the Company shall
reasonably require for distribution to Contract owners.
3
<PAGE>
2.3 The Company shall bear the costs of printing and
distributing the Trust's prospectus, statement of additional information,
shareholder reports and other shareholder communications to owners of and
applicants for policies for which the Trust is serving or is to serve as an
investment vehicle. The Company shall bear the costs of distributing proxy
materials (or similar materials such as voting solicitation instructions) to
Contract owners. The Company assumes sole responsibility for ensuring that
such materials are delivered to Contract owners in accordance with applicable
federal and state securities laws.
2.4 The Company agrees and acknowledges that the Trust's
adviser, Janus Capital Corporation ("Janus Capital"), is the sold owner of
the name and mark "Janus" and that all use of any designation comprised in
whole or part of Janus (a "Janus Mark") under this Agreement shall inure to
the benefit of Janus Capital. Except as provided in section 2.5, the Company
shall not use any Janus Mark on its own behalf or on behalf of the Accounts
or Contracts in any registration statement, advertisement, sales literature
or other materials relating to the Accounts or Contracts without the prior
written consent of Janus Capital. Upon termination of this Agreement for any
reason, the Company shall cease all use of any Janus Mark(s) as soon as
reasonably practicable.
2.5 The Company shall furnish, or cause to be furnished, to the
Trust or its designee, a copy of the initial Contract prospectus and
statement of additional information in which the Trust or its investment
adviser is first named prior to the filing of such document with the
Securities and Exchange Commission. The Company shall furnish, or shall
cause to be furnished, to the Trust or its designee, a copy of each
subsequent contract prospectus and statement of additional information in
which the Trust or its investment adviser is named concurrently with the
filing of such document with the Securities and Exchange Commission provided
that there are no material changes in disclosure related to the Trust or its
investment provided that there are no material changes in disclosure related
to the Trust or its investment adviser. The Trust may, in its reasonable
discretion, request that the Company modify any references to the Trust or
its investment adviser in subsequent filings.
2.6 The Company shall furnish, or shall cause to be furnished,
to the Trust or its designee, each piece of sales literature or other
promotional material in which the Trust or its investment adviser is named,
at least fifteen Business Days prior to its use. No such material shall be
used if the Trust or its designee reasonably objects to such use within ten
Business Days after receipt of such material. The Trust shall furnish, or
cause to be furnished, to the Company or it designee, each piece of sales
literature or other material in which the Company or any Contract is named,
at least fifteen Business Days prior to use. No such material shall be used
if the Company reasonably objects to such use within ten Business Days after
receipt of such material.
2.7 The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust
or its investment adviser in connection with the sale of the Contracts other
than information or representations contained in and accurately derived from
the registration statement or prospectus for the Trust shares (as such
registration statement and prospectus may be amended or supplemented from
time to time), reports of the Trust, Trust-sponsored proxy statements, or in
sales literature or other promotional material approved by the Trust or its
designee,
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except as required by legal process or regulatory authorities or with the
written permission of the Trust or its designee.
2.8 The Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Contracts (as such registration statement and
prospectus may be amended or supplemented from time to time), or in materials
approved by the Company for distribution including sales literature or other
promotional materials, except as required by legal process or regulatory
authorities or with the written permission of the Company.
2.9 So long as, and to the extent that the Securities and
Exchange Commission interprets the 1940 Act to require pass-through voting
privileges for variable policyowners, the Company will provide pass-through
voting privileges to owners of policies whose cash values are invested,
through the Accounts, in shares of the Trust. The Trust shall require all
Participating Insurance Companies to calculate voting privileges in the same
manner and the Company shall be responsible for assuring that the Accounts
calculate voting privileges in the manner established by the Trust. With
respect to each Account, the Company will vote shares of the Trust held by
the Account and for which no timely voting instructions from policyowners are
received as well as shares it owns that are held by that Account, in the same
proportion as those shares for which voting instructions are received. The
Company and its agents will in no way recommend or oppose or interfere with
the solicitation of proxies for Trust shares held by Contract owners without
the prior written consent of the Trust, which consent may be withheld in the
Trust's sole discretion.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 The Company represents and warrants that it is an insurance
company duly organized and in good standing under the laws of the State of
Nebraska and that it has legally and validly established each Account as a
segregated asset account under such law on the date set forth in Schedule A.
3.2 The Company represents and warrants that it has registered
or, prior to any issuance or sale of the Contracts, will register each
Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
3.3 The Company represents and warrants that the Contracts will
be registered under the 1933 Act prior to any issuance or sale of the
Contracts; the Contracts will be issued and sold in compliance in all
material respects with all applicable federal and state laws; and the sale of
the Contracts shall comply in all material respects with state insurance
suitability requirements.
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3.4 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Delaware.
3.5 The Trust represents and warrants that the Trust shares
offered and sold pursuant to this Agreement will be registered under the 1933
Act and the Trust shall be registered under the 1940 Act prior to any
issuance or sale of such shares. The Trust shall amend its registration
statement under the 1933 Act and the 1940 Act from time to time as required
in order to effect the continuos offering of its shares. The Trust shall
register and qualify its shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Trust.
3.6 The Trust represents and warrants that the investment of
each Portfolio will comply with the diversification requirements set forth in
Section 817(h) of the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder.
ARTICLE IV.
POTENTIAL CONFLICTS
4.1 The parties acknowledge that the Trust's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any similar
action by insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Portfolio are being managed; (e) a
difference in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by an insurer to
disregard the voting instructions of contract owners. The Trustees shall
promptly inform the Company if they determine that an irreconcilable material
conflict exists and the implications thereof.
4.2. The Company agrees to promptly report any potential or
existing conflicts of which it is aware to the Trustees. The Company will
assist the Trustees in carrying out their responsibilities under the Shared
Trust Exemptive Order by providing the Trustees with all information
reasonably necessary for the Trustees to consider any issues raised
including, but not limited to, information as to a decision by the Company to
disregard Contract owner voting instructions.
4.3 If it is determined by a majority of the Trustees, or a
majority of its disinterested Trustees, that a material irreconcilable
conflict exists that affects the interests of Contract owners, the Company
shall, in cooperation with other Participating Insurance Companies whose
contract owners are also affected, at its expense and to the extent
reasonably practicable (as determined by the Trustees) take whatever steps
are necessary to remedy or eliminate the irreconcilable material conflict,
which steps could include: (a) withdrawing the assets allocable to some or
all of the Accounts from the
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Trust or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Trust, or
submitting the question of whether or not such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (I.E., annuity contract
owners, life insurance contract owners, or variable contract owners of one or
more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contract owners the option of making
such a change; and (b) establishing a new registered management investment
company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and
that decision represents a minority position or would preclude a majority
vote, the Company may be required, at the Trust's election, to withdraw the
affected Account's investment in the Trust and terminate this Agreement with
respect to such Account; provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Any such withdrawal and termination must take place within six (6)
months after the Trust gives written notice that this provision is being
implemented. Until the end of such six (6) month period, the Trust shall
continue to accept and implement orders by the Company for the purchase and
redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account within six (6) months after the
Trustees inform the Company in writing that it has determined that such
decision has created an irreconcilable material conflict; provided, however,
that such withdrawal and termination shall be limited to the extent required
by the foregoing material irreconcilable conflict as determined by a majority
of the disinterested Trustees. Until the end of such six (6) month period,
the Trust shall continue to accept and implement orders by the Company for
the purchase and redemption of shares of the Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement,
a majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Company be required to establish a new funding medium for the
Contracts if an offer to do so has been declined by vote of a majority of
Contract owners materially adversely affected by the irreconcilable material
conflict. In the event that the Trustees determine that any proposed action
does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Trust and terminate
this Agreement within six (6) months after the Trustees inform the Company in
writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any
such material irreconcilable conflict as determined by a majority of the
disinterested Trustees.
4.7 The Company shall at least annually submit to the Trustees
such reports, materials or data as the Trustees may reasonable request so
that the Trustees may fully
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carry out the duties imposed upon them by the Shared Trust Exemptive Order,
and said reports, materials and data shall be submitted more frequently if
deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the 1940 Act or the rules promulgated thereunder with respect to
mixed or shared funding (as defined in the Shared Trust Exemptive Order) on
terms and conditions materially different from those contained in the Shared
Trust Exemptive Order, then the Trust and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to
comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to
the extent such rules are applicable.
ARTICLE V.
INDEMNIFICATION
5.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless the Trust and each of it Trustees, officers,
employees and agents and each person, if any, who controls the Trust within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Article V) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or expenses (including the reasonable costs of
investigating or defending any alleged loss, claim, damage, liability or
expense and reasonable legal fees incurred in connection
therewith)(collectively, "Losses"), to which the Indemnified Parties may
become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in the
Contracts themselves or in sales literature generated or approved
by the Company on behalf of the Contracts or Accounts (or any
amendment or supplement to any of the foregoing) (collectively,
"Company Documents" for the purposes of this Article V), or arise
out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided
that this indemnity shall not apply as to any Indemnified Party
if such statement or omission or such alleged statement or
omission was made in reliance upon and was accurately derived
from written information furnished to the Company by or on behalf
of the Trust for use in Company Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived from Trust Documents as defined in Section
5.2(a)) or wrongful conduct of the Company, its affiliated
principal underwriter of the Contracts or persons under their
control, with respect to the sale or acquisition of the Contracts
or Trust shares; or
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(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission
was made in reliance upon and accurately derived from written
information furnished to the Trust by or on behalf of the
Company; or
(d) arise out of or result from any failure by the Company
to provide the services or furnish the materials required under
the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company.
5.2 INDEMNIFICATION BY THE TRUST. The Trust agrees to indemnify
and hold harmless the Company, its affiliated principal underwriter of the
Contracts and each of their directors, officers, employees and agents and
each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of
this Article V) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Trust)
or expenses (including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal
counsel fees incurred in connection therewith) (collectively, "Losses"), to
which the Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus for the Trust (or any
amendment or supplement thereto) (collectively, "Trust Documents"
for the purposes of this Article V), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this
indemnity shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was
made in reliance upon and was accurately derived from written
information furnished to the Trust by or on behalf of the Company
for use in Trust Documents or otherwise for use in connection
with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or
representations (other than statements or representations
contained in and accurately derived from Company Documents) or
wrongful conduct of the Trust or persons under its control, with
respect to the sale or acquisition of the Contracts or Trust
shares; or
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(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading if such statement or
omission was made in reliance upon and accurately derived from
written information furnished to the Company by or on behalf of
the Trust; or
(d) arise out of or result from any failure by the Trust to
provide the services or furnish that materials required under the
terms of this Agreement, including a failure to comply with the
diversification requirements specified in section 3.6; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Trust.
5.3 Neither the Company nor the Trust shall be liable under the
indemnification provisions of sections 5.1 or 5.2, as applicable, with
respect to any Losses incurred or assessed against an Indemnified Party that
arise from such Indemnified Party's willful misfeasance, bad faith or 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.
5.4 Neither the Company nor the Trust shall be liable under the
indemnification provisions of sections 5.1 or 5.2, as applicable, with
respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the other party in writing within a
reasonable time after the summons, or other first written notification,
giving information of the nature of the claim shall have been served upon or
otherwise received by such Indemnified Party (or after such Indemnified Party
shall have received notice of service upon or other notification to any
designated agent), but failure to notify the party against whom
indemnification is sought of any such claim or shall not relieve that party
from any liability which it may have to the Indemnified Party in the absence
of sections 5.1 and 5.2.
5.5 In case any such action is brought against the Indemnified
Parties, the indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory
to the party named in the action. After notice from the indemnifying party
to the Indemnified Party of an election to assume such defense, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the indemnifying party will not be liable to the
Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
ARTICLE VI.
TERMINATION
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6.1 This Agreement may be terminated by either party for any
reason by ninety (90) days advance written notice delivered to the other
party.
6.2 Notwithstanding any termination of this Agreement, the Trust
shall, at the option of the Company, continue to make available additional
shares of the Trust (or any Portfolio) pursuant to the terms and conditions
of this Agreement for all Contracts in effect on the effective date of
termination of this Agreement, provided that the Company continues to pay the
costs set forth in section 2.3.
6.3 The provisions of Article V shall survive the termination of
this Agreement, and the provisions of Article IV and Section 2.8 shall
survive the termination of this Agreement as long as shares of the Trust are
held on behalf of Contract owners in accordance with section 6.2.
ARTICLE VII.
NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to the Trust:
100 Fillmore Street, Suite 300
Denver, Colorado 80206
Attention: David C. Tucker, Esq.
If to the Company:
134 South 13th Street
Lincoln, Nebraska 68508
Attention: Carol S. Watson, Esq.
ARTICLE VIII.
MISCELLANEOUS
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
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8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of State of Colorado.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this
Agreement, of any and every nature whatsoever, shall be satisfied solely out
of the assets of the Trust and that no Trustee, officer, agent or holder of
shares of beneficial interest of the Trust shall be personally liable for any
such liabilities.
8.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the 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.
8.7 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies
and obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
8.8 The parties to this Agreement acknowledge and agree that
this Agreement shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party without the prior written approval
of the other party.
8.10 No provisions of this Agreement may be amended or modified
in any manner except by a written agreement properly authorized and executed
by both parties.
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IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year
first above written.
LINCOLN BENEFIT LIFE COMPANY
By: /s/Fred H. Jonske
----------------------------
Name: Fred H. Jonske
Title: President and COO
JANUS ASPEN SERIES
By: /s/Jack R. Thompson
----------------------------
Name: Jack R. Thompson
Title: Senior Vice President
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SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
Lincoln Benefit Life Variable Annuity Account Policy # VAP 9330
8/3/92
Lincoln Benefit Life Variable Life Account Policy # VUL 9390
5/17/90
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PARTICIPATION AGREEMENT
-----------------------
AMONG
LINCOLN BENEFIT LIFE COMPANY
AND
VARIABLE INSURANCE PRODUCTS FUND
AND
FIDELITY DISTRIBUTORS CORPORATION
THIS AGREEMENT is entered into this 29th day of November, 1993 by and among
LINCOLN BENEFIT LIFE COMPANY (the "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 such account hereinafter referred to as
the "Account"), the VARIABLE INSURANCE PRODUCTS FUND (the "Fund"), an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts, and FIDELITY DISTRIBUTORS CORPORATION (the "Underwriter").
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation
<PAGE>
agreements substantially identical to this Agreement (hereinafter
"Participating Insurance Companies"); and
2
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WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated October 15, 1985 (File No. 812-6102), granting Participating
Insurance Companies and variable life and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a) and (b)
of the Investment Company Act of 1940, as amended, (hereinafter the "1940 Act")
and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent necessary
to permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies (hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
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WHEREAS, the Company has registered or will register certain variable
annuity and variable life contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable life contracts; and
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission 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 on behalf
of the Account to fund certain of the aforesaid variable life contracts and the
Underwriter is authorized to sell such shares to unit investment trusts such as
the Account at net asset value;
4
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NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Account, the Fund and the Underwriter agree as follows:
5
<PAGE>
ARTICLE I
SALE OF FUND SHARES
1.1 The Underwriter agrees to sell to the Company those shares of the Fund
which the Account orders, executing such orders on a daily basis at the net
asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from
the Account and receipt by such designee shall constitute receipt by the
Fund, provided that the Fund receives notice of such order by 12:00 noon
(Boston time) on the next following Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and
on which the Fund calculates its net asset value pursuant to the rules of
the Securities and Exchange Commission.
1.2 The Fund agrees to make its shares available indefinitely for purchase at
the applicable net asset value per share by the Company and its Account on
those days on which the Fund calculates its net asset value pursuant to
rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the
New York Stock Exchange is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Fund (hereinafter the "Trustees")
may refuse to sell shares of any Portfolio to any person or
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<PAGE>
suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Trustees acting in
good faith and in light of their fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Fund will be sold
only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
1.4 The Fund and the Underwriter will not sell Fund shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of
Article II of this Agreement is in effect to govern such sales.
1.5 The Fund agrees to redeem for cash, on the Company's request, any full or
fractional shares of the Fund held by the Company, executing such requests
on a daily basis at the net asset value next computed after receipt by the
Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from the 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.
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1.6 The Company agrees to purchase and redeem the shares of each Portfolio
offered by the then current prospectus of the Fund and in accordance with
the provisions of such prospectus. The Company agrees that all net amounts
available under the variable life contracts with the form number(s) which
are listed on Schedule A attached hereto and incorporated herein by this
reference, as such Schedule A may be amended from time to time hereafter by
mutual written agreement of the parties hereto (the "Contracts"), shall be
invested in the Fund, in such other Funds advised by the Adviser as may be
mutually agreed to in writing by the parties hereto, or in the Company's
general account, provided that such amounts may also be invested in an
investment company other than the Fund if (a) such other investment
company, or series thereof, has investment objectives or policies that are
substantially different from the investment objectives and policies of all
the Portfolios of the Fund; or (b) the Company gives the Fund and the
Underwriter 45 days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c)
such other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement and the Company so informs
the Fund and Underwriter prior to their signing this Agreement (a list of
such funds appearing on Schedule B to this Agreement); or (d) the Fund or
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<PAGE>
Underwriter consents to the use of such other investment company.
1.7 The Company shall pay for Fund shares on the next Business Day after an
order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by
wire. For purpose of Sections 2.10 and 2.11, upon receipt by the Fund
of the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of
the Fund.
1.8 Issuance and transfer of the Funds' shares will be by book entry only.
Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Fund will be recorded in an appropriate title for
the Account or the appropriate subaccount of the Account.
1.9 The Fund shall furnish same day notice (by wire or telephone, followed by
written confirmation) to the Company of any income, dividends or capital
gain distributions payable on the Fund's shares. The Company hereby elects
to receive all such dividends and 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
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.
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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 bet
efforts to make such net asset value per share available by 7:00 p.m.
(Boston time).
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act, 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 laws and that it has
legally and validly established the Account prior to any issuance or sale
thereof as a segregated asset account under the Nebraska Insurance Code and
has registered or, prior to any issuance or sale of the Contracts, will
register the Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account for
the Contracts.
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2.2 The Fund represents and warrants that Fund shares sold pursuant to this
Agreement shall be registered under the 1933 Act, shall be duly authorized
for issuance and sold in compliance with the laws of the Commonwealth of
Massachusetts and all applicable federal and state securities laws and that
the Fund is and shall remain registered under the 1940 Act. The Fund shall
amend the Registration Statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for
sale in accordance with the laws of the various states only if and to the
extent deemed advisable by the Fund or the Underwriter.
2.3 The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable
basis for believing that it has ceased to so qualify or that it might not
so qualify in the future.
2.4 The Company represents that the Contracts are currently treated as life
insurance 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 and the Underwriter immediately upon having
11
<PAGE>
a reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.5 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes
to have a board of trustees, a majority of whom are not interested persons
of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
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 Nebraska and the Fund and the Underwriter represent that
their respective operations are and shall at all times remain in material
compliance with the laws of the State of Nebraska to the extent required to
perform this Agreement.
2.7 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-
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dealer with the SEC. The Underwriter further represents that it will sell
and distribute the Fund shares in accordance with the laws of the State of
Nebraska and all applicable state and federal securities laws, including
without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.8 The Fund represents that it is lawfully organized and validly existing
under the laws of the Commonwealth of Massachusetts and that it does and
will comply in all material respects with the 1940 Act.
2.9 The Underwriter represents and warrants that the Adviser is and shall
remain duly registered under all applicable federal and state securities
laws and that the Adviser shall perform its obligations for the Fund in
compliance in all material respects with the laws of the State of Nebraska
and any applicable state and federal securities laws.
2.10 The Fund and Underwriter represent and warrant that all of their directors,
officers, employees, investment advisers, and other individuals/entities
dealing with the money and/or securities of the Fund are and shall continue
to be at all times covered by a blanket fidelity bond or similar coverage
for the benefit of the Fund in an amount not less than the minimal coverage
as required currently by Section 17(g) of the Investment Company Act of
1940 or related provisions as may be promulgated from time to time. The
aforesaid Bond shall include coverage for larceny and
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<PAGE>
embezzlement and shall be issued by a reputable bonding company.
2.11 The Company represents and warrants that all of its directors, officers,
employees, and other individuals/entities who are directly dealing with the
money and/or securities of the Fund shall continue to be at all times
covered by a blanket fidelity bond or similar coverage in an amount not
less than the minimal coverage as required currently by Section 17(g) of
the Investment Company 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 bond company.
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. If requested by the Company in lieu thereof, the Fund
shall provide such documentation (including a final copy of the new
prospectus as set in type at the Fund's expense) and other assistance as is
reasonably necessary in order for the Company once each year (or more
frequently if the prospectus for the Fund is amended) to have the
prospectus
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<PAGE>
for the Contracts and the Fund's prospectus printed together in one
document at the Company's expense.
3.2 The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or in the
Fund's discretion, the Prospectus shall state that such Statement is
available from the Fund), and the Underwriter (or the Fund), at its
expense, shall print and provide such statement free of charge to the
Company and to any owner of a Contract or prospective owner who requests
such Statement.
3.3 The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to stockholders and other communications to
stockholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4 If required by current 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, to the extent that the
Securities and Exchange Commission continues to interpret the
Investment Company Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to
vote Fund shares held in any
15
<PAGE>
segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be
responsible for assuring that each of their separate accounts
participating in the Fund calculates voting privileges in a
manner consistent with the standards set forth in Schedule C
hereto, and incorporated herein by this reference, which
standards will also be provided to the other Participating
Insurance Companies.
3.5 The Fund will comply with all provisions of the 1940 Act requiring voting
by shareholders and, in particular, the Fund will either provide for annual
meetings or comply with Section 16(c) of the 1940 Act (although the Fund is
not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund
will act in accordance with the Securities and Exchange Commission's
interpretation of the requirements of Section 16(a) with respect to
periodic elections of trustees and with whatever rules the Commission may
promulgate with respect thereto.
ARTICLE IV
SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the Fund or
its designee, each piece of sales literature or other promotional material
in which the Fund or its
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Investment Adviser or the Underwriter is named, at least fifteen Business
Days prior to its use. No such material shall be used if the Fund or its
designee object to such use within ten Business Days after receipt of such
material.
4.2 The Company shall not give any information or make any representations or
statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus for the Fund shares,
as such documents may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in sales literature or other
promotional material approved by the Fund or its designee or by the
Underwriter, except with the permission of the Fund or the Underwriter or
the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or its separate
account(s) is named at least fifteen Business Days prior to its use. No
such material shall be used if the Company or its designee object to such
use within ten Business Days after receipt of such material.
4.4 The Fund and the Underwriter shall not give any information or make any
representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other
17
<PAGE>
than the information or representations contained in a registration
statement or prospectus for the Contracts, as such registration
statement and prospectus may be amended or supplemented from time
to time, or in published reports for the Account which are in the public
domain or approved by the Company for distribution to Contract owners,
or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, 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
Securities and Exchange Commission or other regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no action letters, and all amendments to any of the above,
that relate to the contracts or the Account, contemporaneously with the
filing of such document with the Securities and Exchange Commission.
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<PAGE>
4.7 For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such
as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media),
sales literature (I.E., any written communication distributed or made
generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other
communications distributed or made generally available to some or all
agents or employees, and registration statements, prospectuses, Statements
of Additional Information, shareholder reports, and proxy materials.
ARTICLE V
FEES AND EXPENSES
5.1 The Fund and Underwriter shall pay no fee or other compensation to the
Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts to the
19
<PAGE>
extent allowed by law and as further agreed in writing. Such payments
will be made out of existing fees otherwise payable to the Underwriter,
past profits of the Underwriter or other resources available to the
Underwriter. No such payment shall be made directly by the Fund.
5.2 All expenses incident to performance by the Fund under this Agreement shall
be paid by the Fund. The Fund shall ensure 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 cost of printing a prospectus that constitutes
an annual report); the preparation of all statements and notices required
by any federal or state law; and all taxes on the issuance or transfer of
the Fund's shares.
5.3 The Company shall bear the expense of printing and distributing the Fund's
prospectus to owners of Contracts issued by the Company and of distributing
the Fund's proxy materials and reports to owners of Contracts issued by the
Company.
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<PAGE>
ARTICLE VI
DIVERSIFICATION
6. 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 at all times comply with
Section 817(h) of the Code and Regulation Section 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such
Section or Regulation.
ARTICLE VII
POTENTIAL CONFLICTS
7.1 The Board of Trustees of the Fund (the "Board") will monitor the Fund for
the existence of any material irreconcilable conflict between the interests
of the contract owners of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise for a variety of reasons,
including:
(i) an action by any state insurance regulatory authority;
(ii) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private
letter ruling, no-action or
21
<PAGE>
interpretative letter, or any similar action by insurance, tax,
or securities regulatory authorities;
(iii) an administrative or judicial decision in any relevant proceeding;
(iv) the manner in which the investments of any Portfolio are being
managed;
(v) a difference in voting instructions given by variable annuity
contract and variable life insurance contract owners; or
(vi) a decision by an insurer to disregard the voting instructions of
contract owners.
The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2 The Company will report any potential or existing conflicts of which it is
aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order by providing the
Board with all information as reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Board whenever contract owner
voting instructions are disregarded.
7.3 If it is determined by a majority of the Board, or a majority of its
disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense
22
<PAGE>
and to the extent reasonably practicable (as determined by a majority of
the disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including:
(i) 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
(ii) establishing a new registered management investment company or
managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision by the
Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the Account's
investment in the Fund and terminate this Agreement provided, however, that
such withdrawal and
23
<PAGE>
termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and termination
must take place within six (6) months after the Fund gives written notice
that this provision is being implemented, and until the end of that six
month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares
of the Fund.
7.5 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators', then the Company will withdraw the
Account's investment in the Fund and terminate this Agreement within six
months after the Board informs the Company in writing that it has
determined that such decision has created an irreconcilable material
conflict, provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the
Board. Until the end of the foregoing six month period, the Underwriter
and Fund shall continue to accept and implement orders by the Company for
the purchase (and redemption) of shares of the Fund.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of
the disinterested members of the Board shall determine whether any proposed
action adequately remedies
24
<PAGE>
any irreconcilable material conflict, but in no event will the Fund be
required to establish a new funding medium for the Contracts. The
Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely
affected by the irreconcilable material conflict. In the event that
the Board determines that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will
withdraw the Account's investment in the Fund and terminate this
Agreement within six (6) months after the Board informs the Company in
writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by
any such material irreconcilable conflict as determined by a majority
of the disinterested members of the Board.
7.7 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or a
subsequent Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the Act or the rules promulgated thereunder with respect to
mixed or shared funding (as defined in the Shared Funding Exemptive Order)
on terms and conditions materially different from those contained in the
Shared Funding Exemptive Order, then (a) the Fund and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be
necessary to comply with Rules 6e-2 and 6e-3(T), and related Rules as
25
<PAGE>
amended, 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 of its Trustees and officers and each person, if
any, who controls the Fund within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Section 8.1) against any 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, or at common law, 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 shares in connection with
Contracts and:
26
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(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 related to the sale of
Fund shares in connection with the Contracts; or
(ii) arise out of or are as a result of untrue statements or
misrepresentations (other than statements or
representations contained in the Registration Statement,
prospectus or sales literature of the Fund not supplied by
the
27
<PAGE>
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
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the Fund or
any amendment thereof or supplement thereto (or the
omission to state therein a material fact required to be
stated therein or necessary to make the statement therein
not misleading) if such a statement or omission was made in
reliance upon information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement;
(vi) 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 provision of Section 8.1(b) and
8.1(c) hereof.
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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 obligations or
duties under this Agreement or to the Fund, whichever is
applicable.
8.1(c) The Company shall not be liable under this Indemnification
provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the
Company in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such
service on any designated agent), but failure to notify the
Company of any such claim shall not relieve the Company from any
liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this
Indemnification provision. In case any such action is brought
against the Indemnified Parties, the
29
<PAGE>
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
expense 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 UNDERWRITER
8.2(a) The Underwriter agrees to indemnify and hold harmless the
Company, its affiliated principal underwriter of the Contracts,
and each of their directors, officers and employees 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
30
<PAGE>
8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of
the Underwriter) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject
under any statute, regulation or common law, insofar as such
losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the Registration Statement or prospectus or sales
literature of the Fund or any amendment or supplement to
any of the foregoing (or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading), provided that
this Agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and
in conformity with information furnished to the Underwriter
or Fund by or on behalf of the Company for use in the
Registration Statement
31
<PAGE>
or prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or
sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful
conduct of the Fund, Adviser or Underwriter or persons
under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto,
(or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statement or statements therein not misleading),
if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the
Underwriter or the Fund; or
32
<PAGE>
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in
this Agreement; or
(vi) arise out of or result from any other material breach of
this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b) The Underwriter shall not be liable under this Indemnification
provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company or the Account,
whichever is applicable.
8.2(c) The Underwriter shall not be liable under this Indemnification
provision with respect to any claim
33
<PAGE>
made against an Indemnified Party unless such Indemnified Party
shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any
designated agent), but failure to notify the Underwriter of any
such claim shall not relieve the Underwriter from any liability
which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this
Indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled
to participate, at its own expense, in the defense thereof. The
Underwriter also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After
notice from the Underwriter to such party of the Underwriter's
election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such
party under this Agreement for any legal or other expenses
subsequently incurred by such party
34
<PAGE>
independently in connection with the defense thereof other than
reasonable costs of investigation.
8.2(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any
of its officers or directors in connection with the issuance or
sale of the Contracts or the operation of the Account.
8.3 INDEMNIFICATION BY THE FUND
8.3(a) The Fund agrees to indemnify and hold harmless the Company, its
affiliated principal underwriter of the Contracts, and each of
their directors, officers and employees and each person, if any,
who controls the Company within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of
this Section 8.3) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of the Fund) or litigation (including legal and
other expenses) to which the Indemnified Parties may become
subject under any statute, regulation or common law, insofar as
such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements are related to the operations
of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials
35
<PAGE>
under the terms of this Agreement (including a failure to
comply with the diversification requirements specified in
Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement; or
(iii) 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
36
<PAGE>
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 proceedings
against them or any of its
37
<PAGE>
respective officers or directors in connection with this
Agreement, the issuance or sale of the Contracts and related
operation of the Account, or the sale or acquisition of shares
of the Fund.
ARTICLE IX
APPLICABLE LAW
9.1 Except as otherwise specifically provided herein, this Agreement shall be
construed in accordance with the laws of the Commonwealth of Massachusetts.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934 and
1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited
to, the Shared Funding Exemptive Order) and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE X
TERMINATION
10.1 TERMINATION - GENERAL
10.1(a) This Agreement shall terminate at the option of any party upon
six (6) months advance written notice to the other parties;
provided, however such notice
38
<PAGE>
shall not be given earlier than eighteen (18) months following
the date of this Agreement; or
10.1(b) This Agreement shall terminate upon any required vote of the
Contract owners having an interest in the Account (or any
subaccount or order of the Commission) 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 thirty
(30) days' prior written notice to the Fund of the date of any
proposed vote to replace the Fund's shares.
39
<PAGE>
10.2 BY THE COMPANY
10.2(1) This Agreement shall terminate at the option of the Company:
(i) in the event that and to the extent that shares of
Portfolios are not reasonably available to meet the
requirements of the Contracts as determined by the Company,
provided, however, that such termination shall apply only
to the Portfolio(s) not reasonably available. Prompt
notice of the election to terminate for such cause shall be
furnished by the Company; or
(ii) in the event formal administrative proceedings are
instituted against the Fund or Underwriter by the NASD, the
Securities and Exchange Commission, or any state securities
or insurance department or any other regulatory body,
provided, however, that the Company determines, in its sole
judgment exercised in good faith, that any such
administrative proceedings will have a material adverse
effect upon the ability of the Fund or Underwriter to
perform its obligations under this Agreement; or
(iii) in the event any of the Fund's shares are not registered,
issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as
40
<PAGE>
the underlying investment media of the contracts issued or
to be issued by the Company; or
(iv) if the Fund ceases to qualify as a Regulated Investment
Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company
reasonably believes that the Fund may fail to so qualify;
or
(v) if the Fund fails to meet the diversification requirements
specified in Article VI hereof.
10.2(b) This Agreement shall terminate at the option of the Company
if, (1) the Company shall determine, in its sole judgment
reasonably exercised in good faith, that either the Fund or the
Underwriter has suffered a material adverse change in its
business or financial condition or is the subject of material
adverse publicity and such material adverse change or material
adverse publicity will have a material adverse impact upon the
business and operations of the Company; and (2) the Company has
notified the Fund and the Underwriter in writing of such
determination and its intent to terminate the Agreement; and (3)
after considering the actions taken by the Fund and/or the
Underwriter and any other changes in circumstances since the
giving of such notice, such determination shall continue to
41
<PAGE>
apply on the sixtieth (60th) day following the giving of such
notice, which sixtieth day shall be the effective date of
termination.
10.3 BY THE FUND OR UNDERWRITER
10.3(a) This Agreement shall terminate at the option of either the
Fund or the Underwriter:
(i) in the event that formal administrative proceedings are
instituted against the Company by the National Association
of Securities Dealers, Inc. ("NASD"), the Securities and
Exchange Commission, the Insurance commissioner 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, or the purchase of the Fund
shares, provided, however, that the Fund determines, in its
sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse
effect upon the ability of the Company to perform its
obligations under this Agreement; or
(ii) if the Company gives the Fund and the Underwriter the
written notice specified in Section 1.6(b) hereof and at
the time such notice was given there was not notice of
termination outstanding under any other provision of this
Agreement; provided, however,
42
<PAGE>
any termination under this Subsection shall be effective
forty five (45) days after the notice specified in section
1.6(b) was given.
10.3(b) This Agreement shall terminate if, (1) the Fund or the
Underwriter, respectively, shall determine, in their sole
judgment reasonably exercised in good faith, that the Company
and/or its affiliated insurance companies has suffered a material
adverse change in its business or financial condition or is the
subject of material adverse publicity and such material adverse
change or material adverse publicity will have a material adverse
impact upon the business and operations of either the Fund or the
Underwriter, and (2) the Fund or the Underwriter has notified the
Company in writing of such determination and its intent to
terminate this Agreement, and (3) after considering the actions
taken by the Company and any other changes in circumstances since
the giving of such notice, such determination of the Fund or the
Underwriter shall continue to apply on the sixtieth (60th) day
following the giving of such notice, which sixtieth day shall be
the effective date of termination.
10.4 NOTICE OF TERMINATION
No termination of this Agreement shall be effective unless and until the
party terminating this Agreement gives prior written notice to all other
parties to this Agreement of
43
<PAGE>
its intent to terminate which notice shall set forth the basis for such
termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Article VII, or the provision of Section 10.1 requiring prior
written notice, such prior written notice shall be given in advance
of the effective date of termination as required by such provisions;
and
(b) in the event that any termination is based upon the provisions of
this Agreement regarding NASD action, such prior written notice
shall be given at least ninety (90) days before the effective date
of termination.
10.5 EFFECT OF TERMINATION
Notwithstanding any termination of this Agreement, the Fund and the
Underwriter shall at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and
conditions of this Agreement for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred
to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts shall be permitted to reallocate
investments in the Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 10.5 shall
not apply to any terminations under Article VII and the effect of such
44
<PAGE>
Article VII terminations shall be governed by Article VII of this
Agreement.
10.6 REDEMPTIONS
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 (a) as necessary to implement Contract Owner initiated
transactions, or (b) 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 pursuant
to the provisions of a Commission order. Upon request, the Company will
promptly furnish to the Fund and the Underwriter the opinion of counsel
for the Company (which counsel shall be reasonably satisfactory to the
Fund and the Underwriter) to the effect that any redemption pursuant to
clause (b) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Contracts, the Company shall
not prevent Contract owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund
or the Underwriter 90 days notice of its intention to do so.
45
<PAGE>
ARTICLE XI
CONFIDENTIALITY
11. Subject to the requirements of legal process and regulatory authority, the
Underwriter and the Fund hereto shall treat as confidential the names and
addresses of the owners of the Contracts. Each party shall also treat as
confidential 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 Contract owner names
and addresses and other confidential information without the express
written consent of the affected party until such time as it may come into
the public domain.
ARTICLE XII
REGULATORY ACTION
12.1 Each party hereto shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Securities and
Exchange Commission, the NASD and state insurance regulators) and shall
permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or
the transactions contemplated hereby.
12.2 The Fund and Underwriter agree that to the extent any advisory or other
fees received by the Fund, the
46
<PAGE>
Underwriter or the Adviser are determined to be unlawful in legal or
administrative proceedings the Underwriter shall indemnify and
reimburse the Company for any out of pocket expenses and actual
damages the Company has incurred as a result of any such proceeding.
Such indemnification and reimbursement obligation shall be in addition
to any other indemnification and reimbursement obligations of the Fund
and/or the Underwriter under this Agreement.
ARTICLE XIII
NOTICES
13. 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: Variable Insurance Products Fund
82 Devonshire Street
Boston, Massachusetts 02109
ATT: Treasurer
If to the Company: Lincoln Benefit Life Company
134 South 13th Street
Lincoln, Nebraska 68508
ATT: Carol S. Watson, Esq.
If to the Underwriter: Fidelity Distributors Corporation
82 Devonshire Street
47
<PAGE>
Boston, Massachusetts 02109
ATT: Treasurer
48
<PAGE>
ARTICLE XIV
MISCELLANEOUS
14.1 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
trustees, officers, agents or shareholders assume any personal liability
for obligations entered into on behalf of the Fund.
14.2 The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
14.3 If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
14.4 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.
14.5 This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
14.6 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,
49
<PAGE>
however, that the Underwriter may assign this Agreement or any rights or
obligations hereunder to any affiliate of or company under common control
with the Underwriter, if such assignee is duly licensed and registered to
perform the obligations of the Underwriter under this Agreement.
14.7 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"), as soon as
practical and in any event within 90 days from the end of each
fiscal year;
(b) the Company's quarterly statements (statutory and GAAP), 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;
50
<PAGE>
(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.
51
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date specified below.
LINCOLN BENEFIT LIFE COMPANY
BY: /s/ Fred H. Jonske
------------------------------------
Fred H. Jonske
President & COO
DATE: November 29, 1993
------------------------------------
VARIABLE INSURANCE PRODUCTS FUND
BY: /s/ J. Gary Burkhead
------------------------------------
DATE: 12/20/93
------------------------------------
FIDELITY DISTRIBUTORS CORPORATION
BY: /s/ Kurt A. Lange
------------------------------------
DATE: 12/3/93
------------------------------------
52
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
NAME OF SEPARATE ACCOUNT CONTRACTS FUNDED
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
- -------------------------------------- -------------------
Lincoln Benefit Life
Variable Annuity Account; VAP 9330
August 3, 1992
Lincoln Benefit Life
Variable Life Account; VUL 9390
May 17, 1990
<PAGE>
SCHEDULE B
Other investment companies currently available under variable products issued by
the Company;
Janus Aspen Series
Federated Insurance Management Series
Scudder Variable life Investment Fund
IAI Retirement Funds, Inc.
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy statement.
Underwriter will provide at least one copy of the last Annual Report to the
Company.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company for
insertion into envelopes (envelopes and
<PAGE>
return envelopes are provided and paid for by the Insurance Company).
Contents of envelope sent to Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Fund.)
e. cover letter - optional, supplied by Company and reviewed and approved
in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
The Fund MUST allow at least a 15-day solicitation time to the Company as
the shareowner. (A 5-week period is recommended.) Solicitation time is
calculated as calendar days from (but NOT including) the meeting, counting
backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For example, if the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on the
Card and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be NOT RECEIVED for purposes of vote tabulation. Any
Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first
<PAGE>
arrive into categories depending upon their vote; an estimate of how the
vote is progressing may then be calculated. If the initial estimates and
the actual vote do not coincide, then an internal audit of that vote should
occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of SHARES.) Fidelity Legal
must review and approve tabulation format.
13. Final tabulations in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the Final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
<PAGE>
AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT AMONG
VARIABLE INSURANCE PRODUCTS FUND
FIDELITY DISTRIBUTORS CORPORATION
and
LINCOLN BENEFIT LIFE COMPANY
WHEREAS, LINCOLN BENEFIT LIFE COMPANY (the "Company"), VARIABLE INSURANCE
PRODUCTS FUND (the "Fund") and FIDELITY DISTRIBUTORS CORPORATION have previously
entered into a Participation Agreement (the "Agreement") containing certain
arrangements concerning prospectus costs; and
WHEREAS, the Trustees of the Fund have approved certain changes to the
expense structure of the Fund; and
NOW, THEREFORE, the parties do hereby agree to amend the Agreement by
substituting the following arrangement in place of any inconsistent language in
the Participation Agreement, wherever found:
1. The Fund will provide to the Company each year, at the Fund's cost,
such number of prospectuses and Statements of Additional Information as are
actually distributed to the Company's then-existing variable life and/or
variable annuity contract owners.
2. If the Company takes camera-ready film or computer diskettes containing
the Fund's prospectus and/or Statement of Additional Information in lieu of
receiving hard copies of these documents, the Fund will reimburse the Company in
an amount computed as follows. The number of prospectuses and Statements of
Additional Information actually distributed to existing contract owners by the
Company will be multiplied by the Fund's actual per-unit cost of printing the
documents.
3. The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund in order to verify that
the prospectuses and Statements of Additional Information provided to the
Company, or the reimbursement made to the Company, are or have been used only
for the purposes set forth hereinabove.
IN WITNESS WHEREOF we have set our hand as of the 15th day of December,
1994.
LINCOLN BENEFIT LIFE COMPANY
By: /s/Fred H. Jonske
----------------------------
Name: Fred H. Jonske
----------------------------
Title: President & COO
----------------------------
VARIABLE INSURANCE PRODUCTS FUND FIDELITY DISTRIBUTORS CORPORATION
By: /s/J. Gary Burkhead By: /s/Kurt A. Lange
---------------------------- -----------------------------
Name: J. Gary Burkhead Name: Kurt A. Lange
---------------------------- -----------------------------
Title: Senior Vice President Title: President
---------------------------- -----------------------------
<PAGE>
ADDENDUM TO PARTICIPATION AGREEMENT
This Addendum to Participation Agreement ("Addendum"), is entered into this
________ day of ________, 1998, by and among Lincoln Benefit Life Company (the
"Company") on its own behalf and on behalf of each segregated asset account of
the Company set forth in Schedule A hereto as may be amended from time to time
(each such account herein after referred to as the "Account"), the Variable
Insurance Products Fund (the "Fund"), and unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, and Fidelity
Distributors Corporation (the "Underwriter").
Whereas, the parties hereto previously entered into a Participation Agreement
dated the 29th day of November, 1993.
Whereas, the parties now desire to amend the terms of that Participation
Agreement as described below:
Now, therefore, in consideration of their mutual promises, the Company, the
Account, the Fund, and the Underwriter agree as follows:
Schedule A and Schedule B to the Participation Agreement are hereby replaced in
entirety by the Schedule A and Schedule B attached hereto.
In witness whereof, each of the parties hereto has caused this Addendum to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be here under affixed hereto as of the dates specified below.
LINCOLN BENEFIT LIFE VARIABLE INS. PRODUCTS FUND
By: By:
------------------------------ -----------------------------
Date: Date:
---------------------------- -----------------------------
FIDELITY DISTRIBUTORS CORPORATION
By:
------------------------------
Date:
----------------------------
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
NAME OF SEPARATE ACCOUNT CONTRACTS FUNDED
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
- -------------------------------------- -------------------
Lincoln Benefit Life
Variable Annuity Account; VAP 9330
August 3, 1992 VAP 9830
VAP 9840
Lincoln Benefit Life
Variable Life Account; VUL 9390
May 17, 1990 VUL 9800
<PAGE>
SCHEDULE B
Other investment companies currently available under variable products issued by
the Company;
Janus Aspen Series
Federated Insurance Management Series
Scudder Variable life Investment Fund
IAI Retirement Funds, Inc.
The Alger American Fund
Strong Variable insurance Funds, Inc.
T. Rowe Price Equity Series, Inc.
MFS Variable Insurance Trust
<PAGE>
PARTICIPATION AGREEMENT
AMONG
LINCOLN BENEFIT LIFE COMPANY
AND
VARIABLE INSURANCE PRODUCTS FUND II
AND
FIDELITY DISTRIBUTORS CORPORATION
THIS AGREEMENT is entered into this 29th day of November, 1993 by and among
LINCOLN BENEFIT LIFE COMPANY (the "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 such account hereinafter referred to as
the "Account"), the VARIABLE INSURANCE PRODUCTS FUND (the "Fund"), an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts, and FIDELITY DISTRIBUTORS CORPORATION (the "Underwriter").
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation
<PAGE>
agreements substantially identical to this Agreement (hereinafter "Participating
Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated September 17, 1986 (File No. 812-6422), granting Participating
Insurance Companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a) and (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 life and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies (hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (the "1933 Act"); and
2
<PAGE>
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
annuity and variable life contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable life contracts; and
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission 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 on behalf
of the Account to fund certain of the
3
<PAGE>
aforesaid variable life 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
Account, the Fund and the Underwriter agree as follows:
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<PAGE>
ARTICLE I
SALE OF FUND SHARES
1.1 The Underwriter agrees to sell to the Company those shares of the Fund
which the Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Fund. For purposes of
this Section 1.1, the Company shall be the designee of the Fund for
receipt of such orders from the Account and receipt by such designee
shall constitute receipt by the Fund, provided that the Fund receives
notice of such order by 12:00 noon (Boston time) on the next following
Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates
its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.2 The Fund agrees to make its shares available indefinitely for purchase
at the applicable net asset value per share by the Company and its
Account on those days on which the Fund calculates its net asset value
pursuant to rules of the Securities and Exchange Commission and the
Fund shall use reasonable efforts to calculate such net asset value on
each day which the New York Stock Exchange is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Fund
(hereinafter the "Trustees") may refuse to sell shares of any
Portfolio to any person or
5
<PAGE>
suspend or terminate the offering of shares of any Portfolio if such action
is required by law or by regulatory authorities having jurisdiction or is,
in the sole discretion of the Trustees acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of such Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate
accounts. No shares of any Portfolio will be sold to the general
public.
1.4 The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing
provisions substantially the same as Articles I, III, V, VII and
Section 2.5 of Article II of this Agreement is in effect to govern
such sales.
1.5 The Fund agrees to redeem for cash, on the Company's request, any full
or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the request for redemption.
For purposes of this Section 1.5, the Company shall be the designee of
the Fund for receipt of requests for redemption from the 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.
6
<PAGE>
1.6 The Company agrees to purchase and redeem the shares of each Portfolio
offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all
net amounts available under the variable life contracts with the form
number(s) which are listed on Schedule A attached hereto and
incorporated herein by this reference, as such Schedule A may be
amended from time to time hereafter by mutual written agreement of the
parties hereto (the "Contracts"), shall be invested in the Fund, in
such other Funds advised by the Adviser as may be mutually agreed to
in writing by the parties hereto, or in the Company's general account,
provided that such amounts may also be invested in an investment
company other than the Fund if (a) such other investment company, or
series thereof, has investment objectives or policies that are
substantially different from the investment objectives and policies of
all the Portfolios of the Fund; or (b) the Company gives the Fund and
the Underwriter 45 days written notice of its intention to make such
other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company was available as a
funding vehicle for the Contracts prior to the date of this Agreement
and the Company so informs the Fund and Underwriter prior to their
signing this Agreement (a list of such funds appearing on Schedule B
to this Agreement); or (d) the Fund or
7
<PAGE>
Underwriter consents to the use of such other investment company.
1.7 The Company shall pay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. For purpose of Sections 2.10 and 2.11, upon
receipt by the Fund of the federal funds so wired, such funds shall
cease to be the responsibility of the Company and shall become the
responsibility of the Fund.
1.8 Issuance and transfer of the Funds' shares will be by book entry only.
Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Fund will be recorded in an appropriate title
for the Account or the appropriate subaccount of the Account.
1.9 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company
hereby elects to receive all such dividends and 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 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.
8
<PAGE>
1.10 The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall
use its bet efforts to make such net asset value per share available
by 7:00 p.m. (Boston time).
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act, 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 laws and that it has legally and validly established the
Account prior to any issuance or sale thereof as a segregated asset
account under the Nebraska Insurance Code and has registered or, prior
to any issuance or sale of the Contracts, will register the Account as
a unit investment trust in accordance with the provisions of the 1940
Act to serve as a segregated investment account for the Contracts.
9
<PAGE>
2.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, shall be duly
authorized for issuance and sold in compliance with the laws of the
Commonwealth of Massachusetts and all applicable federal and state
securities laws and that the Fund is and shall remain registered under
the 1940 Act. The Fund shall amend the Registration Statement for its
shares under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its shares.
The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed
advisable by the Fund or the Underwriter.
2.3 The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code, as
amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar
provision) and that it will notify the Company immediately upon having
a reasonable basis for believing that it has ceased to so qualify or
that it might not so qualify in the future.
2.4 The Company represents that the Contracts are currently treated as
life insurance 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 and the Underwriter
immediately upon having
10
<PAGE>
a reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.5 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund
has adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it
makes no payments for distribution expenses. To the extent that it
decides to finance distribution expenses pursuant to Rule 12b-1, the
Fund undertakes to have a board of trustees, a majority of whom are
not interested persons of the Fund, formulate and approve any plan
under Rule 12b-1 to finance distribution expenses.
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 Nebraska and the
Fund and the Underwriter represent that their respective operations
are and shall at all times remain in material compliance with the laws
of the State of Nebraska to the extent required to perform this
Agreement.
2.7 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-
11
<PAGE>
dealer with the SEC. The Underwriter further represents that it will sell
and distribute the Fund shares in accordance with the laws of the State of
Nebraska and all applicable state and federal securities laws, including
without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.8 The Fund represents that it is lawfully organized and validly existing
under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9 The Underwriter represents and warrants that the Adviser is and shall
remain duly registered under all applicable federal and state
securities laws and that the Adviser shall perform its obligations for
the Fund in compliance in all material respects with the laws of the
State of Nebraska and any applicable state and federal securities
laws.
2.10 The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the
Fund are and shall continue to be at all times covered by a blanket
fidelity bond or similar coverage for the benefit of the Fund in an
amount not less than the minimal coverage as required currently by
Section 17(g) of the Investment Company Act of 1940 or related
provisions as may be promulgated from time to time. The aforesaid
Bond shall include coverage for larceny and
12
<PAGE>
embezzlement and shall be issued by a reputable bonding company.
2.11 The Company represents and warrants that all of its directors,
officers, employees, and other individuals/entities who are directly
dealing with the money and/or securities of the Fund shall continue to
be at all times covered by a blanket fidelity bond or similar coverage
in an amount not less than the minimal coverage as required currently
by Section 17(g) of the Investment Company 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 bond company.
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. If requested by the Company in lieu thereof,
the Fund shall provide such documentation (including a final copy of
the new prospectus as set in type at the Fund's expense) and other
assistance as is reasonably necessary in order for the Company once
each year (or more frequently if the prospectus for the Fund is
amended) to have the prospectus
13
<PAGE>
for the Contracts and the Fund's prospectus printed together in one
document at the Company's expense.
3.2 The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or in the
Fund's discretion, the Prospectus shall state that such Statement is
available from the Fund), and the Underwriter (or the Fund), at its
expense, shall print and provide such statement free of charge to the
Company and to any owner of a Contract or prospective owner who
requests such Statement.
3.3 The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to stockholders and other communications to
stockholders in such quantity as the Company shall reasonably require
for distributing to Contract owners.
3.4 If required by current 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, to
the extent that the Securities and Exchange Commission
continues to interpret the Investment Company Act to
require pass-through voting privileges for variable
contract owners. The Company reserves the right to vote
Fund shares held in any
14
<PAGE>
segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be
responsible for assuring that each of their separate accounts
participating in the Fund calculates voting privileges in a
manner consistent with the standards set forth in Schedule C
hereto, and incorporated herein by this reference, which
standards will also be provided to the other Participating
Insurance Companies.
3.5 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders and, in particular, the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940
Act (although the Fund is not one of the trusts described in Section
16(c) of that Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, the Fund will act in accordance with the
Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with
respect thereto.
ARTICLE IV
SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional
material in which the Fund or its
15
<PAGE>
Investment Adviser or the Underwriter is named, at least fifteen Business
Days prior to its use. No such material shall be used if the Fund or its
designee object to such use within ten Business Days after receipt of such
material.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information
or representations contained in the registration statement or
prospectus for the Fund shares, as such documents may be amended or
supplemented from time to time, or in reports or proxy statements for
the Fund, or in sales literature or other promotional material
approved by the Fund or its designee or by the Underwriter, except
with the permission of the Fund or the Underwriter or the designee of
either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall cause
to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or
its separate account(s) is named at least fifteen Business Days prior
to its use. No such material shall be used if the Company or its
designee object to such use within ten Business Days after receipt of
such material.
4.4 The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the
Company, the Account, or the Contracts other
16
<PAGE>
than the information or representations contained in a registration
statement or prospectus for the Contracts, as such registration statement
and prospectus may be amended or supplemented from time to time, or in
published reports for the Account which are in the public domain or
approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, 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 Securities and Exchange Commission or other
regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for
exemptions, requests for no action letters, and all amendments to any
of the above, that relate to the contracts or the Account,
contemporaneously with the filing of such document with the Securities
and Exchange Commission.
17
<PAGE>
4.7 For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or
other public media), sales literature (I.E., any written communication
distributed or made generally available to customers or the public,
including brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made
generally available to some or all agents or employees, and
registration statements, prospectuses, Statements of Additional
Information, shareholder reports, and proxy materials.
ARTICLE V
FEES AND EXPENSES
5.1 The Fund and Underwriter shall pay no fee or other compensation to the
Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance
distribution expenses, then the Underwriter may make payments to the
Company or to the underwriter for the Contracts to the
18
<PAGE>
extent allowed by law and as further agreed in writing. Such payments will
be made out of existing fees otherwise payable to the Underwriter, past
profits of the Underwriter or other resources available to the Underwriter.
No such payment shall be made directly by the Fund.
5.2 All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall ensure 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 cost of
printing a prospectus that constitutes an annual report); the
preparation of all statements and notices required by any federal or
state law; and all taxes on the issuance or transfer of the Fund's
shares.
5.3 The Company shall bear the expense of printing and distributing the
Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to owners of
Contracts issued by the Company.
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<PAGE>
ARTICLE VI
DIVERSIFICATION
6. 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 at all times comply with Section 817(h) of the Code and
Regulation Section 1.817-5, relating to the diversification
requirements for variable life, endowment, or life insurance contracts
and any amendments or other modifications to such Section or
Regulation.
ARTICLE VII
POTENTIAL CONFLICTS
7.1 The Board of Trustees of the Fund (the "Board") will monitor the Fund
for the existence of any material irreconcilable conflict between the
interests of the contract owners of all separate accounts investing in
the Fund. An irreconcilable material conflict may arise for a variety
of reasons, including:
(i) an action by any state insurance regulatory authority;
(ii) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private
letter ruling, no-action or
20
<PAGE>
interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities;
(iii) an administrative or judicial decision in any relevant
proceeding;
(iv) the manner in which the investments of any Portfolio are being
managed;
(v) a difference in voting instructions given by variable annuity
contract and variable life insurance contract owners; or
(vi) a decision by an insurer to disregard the voting instructions
of contract owners.
The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2 The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in
carrying out its responsibilities under the Shared Funding Exemptive
Order by providing the Board with all information as reasonably
necessary for the Board to consider any issues raised. This includes,
but is not limited to, an obligation by the Company to inform the
Board whenever contract owner voting instructions are disregarded.
7.3 If it is determined by a majority of the Board, or a majority of its
disinterested trustees, that a material irreconcilable conflict
exists, the Company and other Participating Insurance Companies shall,
at their expense
21
<PAGE>
and to the extent reasonably practicable (as determined by a majority of
the disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including:
(i) 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
(ii) establishing a new registered management investment company or
managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority
vote, the Company may be required, at the Fund's election, to withdraw
the Account's investment in the Fund and terminate this Agreement
provided, however, that such withdrawal and
22
<PAGE>
termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and termination
must take place within six (6) months after the Fund gives written notice
that this provision is being implemented, and until the end of that six
month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares
of the Fund.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators', then the
Company will withdraw the Account's investment in the Fund and
terminate this Agreement within six months after the Board informs the
Company in writing that it has determined that such decision has
created an irreconcilable material conflict, provided, however, that
such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and
Fund shall continue to accept and implement orders by the Company for
the purchase (and redemption) of shares of the Fund.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any
proposed action adequately remedies
23
<PAGE>
any irreconcilable material conflict, but in no event will the Fund be
required to establish a new funding medium for the Contracts. The Company
shall not be required by Section 7.3 to establish a new funding medium for
the Contracts if an offer to do so has been declined by vote of a majority
of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any
proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the
Fund and terminate this Agreement within six (6) months after the Board
informs the Company in writing of the foregoing determination, provided,
however, that such withdrawal and termination shall be limited to the
extent required by any such material irreconcilable conflict as determined
by a majority of the disinterested members of the Board.
7.7 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or a
subsequent Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the Act or the rules promulgated thereunder with respect
to mixed or shared funding (as defined in the Shared Funding Exemptive
Order) on terms and conditions materially different from those
contained in the Shared Funding Exemptive Order, then (a) the Fund
and/or the Participating Insurance Companies, as appropriate, shall
take such steps as may be necessary to comply with Rules 6e-2 and
6e-3(T), and related Rules as
24
<PAGE>
amended, 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 of its Trustees and officers and each person, if any, who
controls the Fund within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposes of
this Section 8.1) against any 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, or at common law,
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 shares in
connection with Contracts and:
25
<PAGE>
(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 related to the sale of Fund shares in connection
with the Contracts; or
(ii) arise out of or are as a result of untrue statements or
misrepresentations (other than statements or
representations contained in the Registration Statement,
prospectus or sales literature of the Fund not supplied
by the
26
<PAGE>
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
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the Fund or
any amendment thereof or supplement thereto (or the
omission to state therein a material fact required to be
stated therein or necessary to make the statement therein
not misleading) if such a statement or omission was made
in reliance upon information furnished to the Fund by or
on behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the
terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in
this Agreement;
(vi) 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 provision of Section 8.1(b)
and 8.1(c) hereof.
27
<PAGE>
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 obligations or
duties under this Agreement or to the Fund, whichever is
applicable.
8.1(c) The Company shall not be liable under this Indemnification
provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the
Company in writing within a reasonable time after the summons
or other first legal process giving information of the nature
of the claim shall have been served upon such Indemnified Party
(or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify
the Company of any such claim shall not relieve the Company
from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account
of this Indemnification provision. In case any such action is
brought against the Indemnified Parties, the
28
<PAGE>
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 expense
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 UNDERWRITER
8.2(a) The Underwriter agrees to indemnify and hold harmless the
Company, its affiliated principal underwriter of the Contracts,
and each of their directors, officers and employees 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
29
<PAGE>
8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of
the Underwriter) or litigation (including legal and other expenses)
to which the Indemnified Parties may become subject under any
statute, regulation or common law, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the Registration Statement or prospectus or sales
literature of the Fund or any amendment or supplement to
any of the foregoing (or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary
to make the statements therein not misleading), provided
that this Agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company for
use in the Registration Statement
30
<PAGE>
or prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or
sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful
conduct of the Fund, Adviser or Underwriter or persons
under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement
thereto, (or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading), if such statement or omission was made in
reliance upon information furnished to the Company by or
on behalf of the Underwriter or the Fund; or
31
<PAGE>
(iv) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply
with the diversification requirements specified in
Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in
this Agreement; or
(vi) arise out of or result from any other material breach of
this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b)
and 8.2(c) hereof.
8.2(b) The Underwriter shall not be liable under this Indemnification
provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company or the Account,
whichever is applicable.
8.2(c) The Underwriter shall not be liable under this Indemnification
provision with respect to any claim
32
<PAGE>
made against an Indemnified Party unless such Indemnified Party
shall have notified the Underwriter in writing within a reasonable
time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon
such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but
failure to notify the Underwriter of any such claim shall not
relieve the Underwriter from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than
on account of this Indemnification provision. In case any such
action is brought against the Indemnified Parties, the Underwriter
will be entitled to participate, at its own expense, in the defense
thereof. The Underwriter also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and the Underwriter will not be liable to
such party under this Agreement for any legal or other expenses
subsequently incurred by such party
33
<PAGE>
independently in connection with the defense thereof other than
reasonable costs of investigation.
8.2(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any
of its officers or directors in connection with the issuance or
sale of the Contracts or the operation of the Account.
8.3 INDEMNIFICATION BY THE FUND
8.3(a) The Fund agrees to indemnify and hold harmless the Company, its
affiliated principal underwriter of the Contracts, and each of
their directors, officers and employees and each person, if
any, who controls the Company within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Section 8.3) against any and all losses,
claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified
Parties may become subject under any statute, regulation or
common law, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or
settlements are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials
34
<PAGE>
under the terms of this Agreement (including a failure to
comply with the diversification requirements specified in
Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement; or
(iii) 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
35
<PAGE>
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 proceedings
against them or any of its
36
<PAGE>
respective officers or directors in connection with this Agreement,
the issuance or sale of the Contracts and related operation of the
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX
APPLICABLE LAW
9.1 Except as otherwise specifically provided herein, this Agreement shall
be construed in accordance with the laws of the Commonwealth of
Massachusetts.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations
as the Securities and Exchange Commission may grant (including, but
not limited to, the Shared Funding Exemptive Order) and the terms
hereof shall be interpreted and construed in accordance therewith.
ARTICLE X
TERMINATION
10.1 TERMINATION - GENERAL
10.1(a) This Agreement shall terminate at the option of any party
upon six (6) months advance written notice to the other
parties; provided, however such notice
37
<PAGE>
shall not be given earlier than eighteen (18) months following the
date of this Agreement; or
10.1(b) This Agreement shall terminate upon any required vote of
the Contract owners having an interest in the Account (or any
subaccount or order of the Commission) 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 thirty (30) days' prior written notice to the Fund of the
date of any proposed vote to replace the Fund's shares.
10.2 BY THE COMPANY
10.2(1) This Agreement shall terminate at the option of the
Company:
(i) in the event that and to the extent that shares of
Portfolios are not reasonably available to meet the
requirements of the Contracts as determined by the
Company, provided, however, that such termination shall
apply only to the Portfolio(s) not reasonably available.
Prompt notice of the election to terminate for such cause
shall be furnished by the Company; or
(ii) in the event formal administrative proceedings are
instituted against the Fund or Underwriter by the NASD,
the Securities and Exchange
38
<PAGE>
Commission, or any state securities or insurance department or
any other regulatory body, provided, however, that the Company
determines, in its sole judgment exercised in good faith, that
any such administrative proceedings will have a material
adverse effect upon the ability of the Fund or Underwriter to
perform its obligations under this Agreement; or
(iii) in the event any of the Fund's shares are not registered,
issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares
as the underlying investment media of the contracts
issued or to be issued by the Company; or
(iv) if the Fund ceases to qualify as a Regulated Investment
Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company
reasonably believes that the Fund may fail to so qualify;
or
(v) if the Fund fails to meet the diversification
requirements specified in Article VI hereof.
10.2(b) This Agreement shall terminate at the option of the
Company if, (1) the Company shall determine, in its sole
judgment reasonably exercised in good
39
<PAGE>
faith, that either the Fund or the Underwriter has suffered a
material adverse change in its business or financial condition or is
the subject of material adverse publicity and such material adverse
change or material adverse publicity will have a material adverse
impact upon the business and operations of the Company; and (2) the
Company has notified the Fund and the Underwriter in writing of such
determination and its intent to terminate the Agreement; and (3)
after considering the actions taken by the Fund and/or the
Underwriter and any other changes in circumstances since the giving
of such notice, such determination shall continue to apply on the
sixtieth (60th) day following the giving of such notice, which
sixtieth day shall be the effective date of termination.
10.3 BY THE FUND OR UNDERWRITER
10.3(a) This Agreement shall terminate at the option of either
the Fund or the Underwriter:
(i) in the event that formal administrative proceedings are
instituted against the Company by the National
Association of Securities Dealers, Inc. ("NASD"), the
Securities and Exchange Commission, the Insurance
commissioner or any other regulatory body regarding the
Company's duties under this Agreement or related to the
sale of the Contracts, the
40
<PAGE>
operation of the Account, or the purchase of the Fund shares,
provided, however, that the Fund determines, in its sole
judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the
ability of the Company to perform its obligations under this
Agreement; or
(ii) if the Company gives the Fund and the Underwriter the
written notice specified in Section 1.6(b) hereof and at
the time such notice was given there was not notice of
termination outstanding under any other provision of this
Agreement; provided, however, any termination under this
Subsection shall be effective forty five (45) days after
the notice specified in section 1.6(b) was given.
10.3(b) This Agreement shall terminate if, (1) the Fund or the
Underwriter, respectively, shall determine, in their sole
judgment reasonably exercised in good faith, that the Company
and/or its affiliated insurance companies has suffered a
material adverse change in its business or financial condition
or is the subject of material adverse publicity and such
material adverse change or material adverse publicity will have
a material adverse impact upon the business and operations of
either the Fund or the Underwriter, and (2) the Fund or the
Underwriter
41
<PAGE>
has notified the Company in writing of such determination and its
intent to terminate this Agreement, and (3) after considering the
actions taken by the Company and any other changes in circumstances
since the giving of such notice, such determination of the Fund or
the Underwriter shall continue to apply on the sixtieth (60th) day
following the giving of such notice, which sixtieth day shall be the
effective date of termination.
10.4 NOTICE OF TERMINATION
No termination of this Agreement shall be effective unless and until
the party terminating this Agreement gives prior written notice to all
other parties to this Agreement of its intent to terminate which
notice shall set forth the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions
of Article VII, or the provision of Section 10.1 requiring
prior written notice, such prior written notice shall be given
in advance of the effective date of termination as required by
such provisions; and
(b) in the event that any termination is based upon the provisions
of this Agreement regarding NASD action, such prior written
notice shall be given at least ninety (90) days before the
effective date of termination.
10.5 EFFECT OF TERMINATION
42
<PAGE>
Notwithstanding any termination of this Agreement, the Fund and the
Underwriter shall at the option of the Company, continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts
shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts. The parties
agree that this Section 10.5 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.
10.6 REDEMPTIONS
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 (a) as necessary to implement Contract Owner initiated
transactions, or (b) 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 pursuant to
the provisions of a Commission order. Upon request, the Company will
promptly furnish to the Fund and the Underwriter the opinion of counsel for
the Company (which counsel shall be reasonably
43
<PAGE>
satisfactory to the Fund and the Underwriter) to the effect that any
redemption pursuant to clause (b) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the
Contracts, the Company shall not prevent Contract owners from allocating
payments to a Portfolio that was otherwise available under the Contracts
without first giving the Fund or the Underwriter 90 days notice of its
intention to do so.
44
<PAGE>
ARTICLE XI
CONFIDENTIALITY
11. Subject to the requirements of legal process and regulatory authority,
the Underwriter and the Fund hereto shall treat as confidential the
names and addresses of the owners of the Contracts. Each party shall
also treat as confidential 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 Contract owner names and addresses and other confidential
information without the express written consent of the affected party
until such time as it may come into the public domain.
ARTICLE XII
REGULATORY ACTION
12.1 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance
regulators) and shall permit such authorities reasonable access to its
books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
12.2 The Fund and Underwriter agree that to the extent any advisory or
other fees received by the Fund, the
45
<PAGE>
Underwriter or the Adviser are determined to be unlawful in legal or
administrative proceedings the Underwriter shall indemnify and reimburse
the Company for any out of pocket expenses and actual damages the Company
has incurred as a result of any such proceeding. Such indemnification and
reimbursement obligation shall be in addition to any other indemnification
and reimbursement obligations of the Fund and/or the Underwriter under this
Agreement.
ARTICLE XIII
NOTICES
13. 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: Variable Insurance Products Fund
82 Devonshire Street
Boston, Massachusetts 02109
ATT: Treasurer
If to the Company: Lincoln Benefit Life Company
134 South 13th Street
Lincoln, Nebraska 68508
ATT: Carol S. Watson, Esq.
If to the Underwriter: Fidelity Distributors Corporation
82 Devonshire Street
46
<PAGE>
Boston, Massachusetts 02109
ATT: Treasurer
47
<PAGE>
ARTICLE XIV
MISCELLANEOUS
14.1 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 trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
14.2 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
14.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
14.4 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.
14.5 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and
the same instrument.
14.6 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,
48
<PAGE>
however, that the Underwriter may assign this Agreement or any rights or
obligations hereunder to any affiliate of or company under common control
with the Underwriter, if such assignee is duly licensed and registered to
perform the obligations of the Underwriter under this Agreement.
14.7 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"), as soon as
practical and in any event within 90 days from the end of each
fiscal year;
(b) the Company's quarterly statements (statutory and GAAP), 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;
49
<PAGE>
(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.
50
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date specified below.
LINCOLN BENEFIT LIFE COMPANY
BY: /s/ Fred H. Jonske
-----------------------------------
Fred H. Jonske
President & COO
DATE: November 29, 1993
-----------------------------------
VARIABLE INSURANCE PRODUCTS FUND II
BY: /s/ J. Gary Burkhead
-----------------------------------
DATE: 12/20/93
-----------------------------------
FIDELITY DISTRIBUTORS CORPORATION
BY: /s/ Kurt A. Lange
-----------------------------------
DATE: 12/3/93
-----------------------------------
51
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
NAME OF SEPARATE ACCOUNT CONTRACTS FUNDED
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
- -------------------------------------- -------------------
Lincoln Benefit Life
Variable Annuity Account; VAP 9330
August 3, 1992
Lincoln Benefit Life
Variable Life Account; VUL 9390
May 17, 1990
<PAGE>
SCHEDULE B
Other investment companies currently available under variable products issued by
the Company;
Janus Aspen Series
Federated Insurance Management Series
Scudder Variable life Investment Fund
IAI Retirement Funds, Inc.
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy statement.
Underwriter will provide at least one copy of the last Annual Report to the
Company.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company for
insertion into envelopes (envelopes and
<PAGE>
return envelopes are provided and paid for by the Insurance Company).
Contents of envelope sent to Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Fund.)
e. cover letter - optional, supplied by Company and reviewed and approved
in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
The Fund MUST allow at least a 15-day solicitation time to the Company as
the shareowner. (A 5-week period is recommended.) Solicitation time is
calculated as calendar days from (but NOT including) the meeting, counting
backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For example, if the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on the
Card and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be NOT RECEIVED for purposes of vote tabulation. Any
Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first
<PAGE>
arrive into categories depending upon their vote; an estimate of how the
vote is progressing may then be calculated. If the initial estimates and
the actual vote do not coincide, then an internal audit of that vote should
occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of SHARES.) Fidelity Legal
must review and approve tabulation format.
13. Final tabulations in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the Final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
<PAGE>
ADDENDUM TO PARTICIPATION AGREEMENT
This Addendum to Participation Agreement ("Addendum"), is entered into this
________ day of ________, 1998, by and among Lincoln Benefit Life Company (the
"Company") on its own behalf and on behalf of each segregated asset account of
the Company set forth in Schedule A hereto as may be amended from time to time
(each such account herein after referred to as the "Account"), the Variable
Insurance Products Fund II (the "Fund"), and unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, and Fidelity
Distributors Corporation (the "Underwriter").
Whereas, the parties hereto previously entered into a Participation Agreement
dated the 29th day of November, 1993.
Whereas, the parties now desire to amend the terms of that Participation
Agreement as described below:
Now, therefore, in consideration of their mutual promises, the Company, the
Account, the Fund, and the Underwriter agree as follows:
Schedule A and Schedule B to the Participation Agreement are hereby replaced in
entirety by the Schedule A and Schedule B attached hereto.
In witness whereof, each of the parties hereto has caused this Addendum to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be here under affixed hereto as of the dates specified below.
LINCOLN BENEFIT LIFE VARIABLE INS. PRODUCTS FUND II
By: By:
------------------------------ -----------------------------
Date: Date:
---------------------------- -----------------------------
FIDELITY DISTRIBUTORS CORPORATION
By:
------------------------------
Date:
----------------------------
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
NAME OF SEPARATE ACCOUNT CONTRACTS FUNDED
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
- -------------------------------------- -------------------
Lincoln Benefit Life
Variable Annuity Account; VAP 9330
August 3, 1992 VAP 9830
VAP 9840
Lincoln Benefit Life
Variable Life Account; VUL 9390
May 17, 1990 VUL 9800
<PAGE>
SCHEDULE B
Other investment companies currently available under variable products issued by
the Company;
Janus Aspen Series
Federated Insurance Management Series
Scudder Variable life Investment Fund
IAI Retirement Funds, Inc.
The Alger American Fund
Strong Variable insurance Funds, Inc.
T. Rowe Price Equity Series, Inc.
MFS Variable Insurance Trust
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 1st day of February, 1998, by
and among The Alger American Fund (the "Trust"), an open-end management
investment company organized as a Massachusetts business trust,
Lincoln Benefit Life Company a company organized as a corporation under the
laws of the State of Nebraska, (the "Company"), on its own behalf and on
behalf of each segregated asset account of the Company set forth in Schedule A,
as may be amended from time to time (the "Accounts"), and Fred Alger and
Company, Incorporated, a Delaware corporation, the Trust's distributor
(the "Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and
has an effective registration statement relating to the offer and sale of the
various series of its shares under the Securities Act of 1933, as amended
(the "1933 Act");
WHEREAS, the Trust and the Distributor desire that Trust shares be
used as an investment vehicle for separate accounts established for variable
life insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements
with the Trust (the "Participating Insurance Companies");
WHEREAS, shares of beneficial interest in the Trust are divided
into the following series which are available for purchase by the Company for
the Accounts: Alger American Small Capitalization Portfolio, Alger American
Growth Portfolio, Alger American MidCap Growth Portfolio, and Alger American
Leveraged AllCap Portfolio;
WHEREAS, the Trust has received an order from the Commission, dated
February 17, 1989 (File No. 812-7076), granting Participating Insurance
Companies and their separate accounts exemptions from the provisions of
Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15)
and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of
the Portfolios of the Trust to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies (the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933
Act certain variable life insurance policies and variable annuity contracts
to be issued by the Company under which the Portfolios are to be made
available as investment vehicles (the "Contracts");
WHEREAS, the Company has registered or will register each Account
as a unit investment trust under the 1940 Act unless an exemption from
registration under the 1940 Act is
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available and the Trust has been so advised;
WHEREAS, the Company desires to use shares of the Portfolios
indicated on Schedule A as investment vehicles for the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the
parties agree as follows:
ARTICLE I.
PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
1.1. For purposes of this Article I, the Company shall be the Trust's agent
for the receipt from each account of purchase orders and requests
for redemption pursuant to the Contracts relating to each
Portfolio, provided that the Company notifies the Trust of such
purchase orders and requests for redemption by 9:30 a.m. Eastern
time on the next following Business Day, as defined in Section 1.3.
1.2. The Trust shall make shares of the Portfolios available to the
Accounts at the net asset value next computed after receipt of a
purchase order by the Trust (or its agent), as established in
accordance with the provisions of the then current prospectus of
the Trust describing Portfolio purchase procedures. The Company
will transmit orders from time to time to the Trust for the
purchase and redemption of shares of the Portfolios. The Trustees
of the Trust (the "Trustees") may refuse to sell shares of any
Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole
discretion of the Trustees acting in good faith and in light of
their fiduciary duties under federal and any applicable state
laws, such action is deemed in the best interests of the
shareholders of such Portfolio.
1.3. The Company shall pay for the purchase of shares of a Portfolio on
behalf of an Account with federal funds to be transmitted by wire
to the Trust, with the reasonable expectation of receipt by the
Trust by 2:00 p.m. Eastern time on the next Business Day after the
Trust (or its agent) receives the purchase order. Upon receipt by
the Trust of the federal funds so wired, such funds shall cease to
be the responsibility of the Company and shall become the
responsibility of the Trust for this purpose. "Business Day" shall
mean any day on which the New York Stock Exchange is open for
trading and on which the Trust calculates its net asset value
pursuant to the rules of the Commission.
1.4. The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account,
at the net asset value next computed after receipt by the Trust
(or its agent) of the request for redemption, as established in
accordance with the provisions of the then current prospectus of
the Trust describing Portfolio redemption procedures. The Trust
shall make payment for such shares in the
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manner established from time to time by the Trust. Proceeds of
redemption with respect to a Portfolio will normally be paid to
the Company for an Account in federal funds transmitted by wire to
the Company by order of the Trust with the reasonable expectation
of receipt by the Company by 2:00 p.m. Eastern time on the next
Business Day after the receipt by the Trust (or its agent) of the
request for redemption. Such payment may be delayed if, for
example, the Portfolio's cash position so requires or if
extraordinary market conditions exist, but in no event shall
payment be delayed for a greater period than is permitted by the
1940 Act. The Trust reserves the right to suspend the right of
redemption, consistent with Section 22(e) of the 1940 Act and any
rules thereunder.
1.5. Payments for the purchase of shares of the Trust's Portfolios by
the Company under Section 1.3 and payments for the redemption of
shares of the Trust's Portfolios under Section 1.4 on any Business
Day may be netted against one another for the purpose of
determining the amount of any wire transfer.
1.6. Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company
or the Accounts. Portfolio Shares purchased from the Trust will
be recorded in the appropriate title for each Account or the
appropriate subaccount of each Account.
1.7. The Trust shall furnish, on or before the ex-dividend date, notice to
the Company of any income dividends or capital gain distributions
payable on the shares of any Portfolio of the Trust. The Company
hereby elects to receive all such income dividends and capital
gain distributions as are payable on a Portfolio's shares in
additional shares of that Portfolio. The Trust shall notify the
Company of the number of shares so issued as payment of such
dividends and distributions.
1.8. The Trust shall calculate the net asset value of each Portfolio on
each Business Day, as defined in Section 1.3. The Trust shall make
the net asset value per share for each Portfolio available to the
Company or its designated agent on a daily basis as soon as
reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset
value per share available to the Company by 6:30 p.m. Eastern time
each Business Day or as soon as practicable thereafter. In the
event that the net asset values are not made available to the
Company by such time, the Company agrees to use its best efforts to
include the net asset values when received in its next cycle for
purposes of calculating purchase orders and requests for
redemption. However, if, due to the Trust's failure to fulfill the
above undertaking, net asset values are not available for inclusion
in the next cycle and purchase orders/redemptions are not able to
be calculated and available for the Company to execute within the
time frame described in Section 1.1 despite the Company's best
efforts, the Distributor shall reimburse the Company for any
additional processing costs incurred as a result of such delays.
1.9. The Trust agrees that its Portfolio shares will be sold
only to Participating Insurance Companies and their segregated
asset accounts, to the Fund Sponsor or its affiliates and to such
other entities as may be permitted by Section 817(h) of the Code,
the regulations hereunder, or judicial or administrative
interpretations thereof. No shares of any Portfolio will be sold
directly to the general public. The Company agrees that it will
use Trust shares only for the purposes of funding the Contracts
through the Accounts listed in Schedule A, as amended from time to
time.
1.10. The Trust agrees that all Participating Insurance Companies shall have
the obligations
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and responsibilities regarding pass-through voting and conflicts
of interest corresponding materially to those contained in Section
2.9 and Article IV of this Agreement.
1.11 The Trust will provide notice of any error in its calculation of
net asset value of a Portfolio as soon as reasonably practical
after discovery thereof. Any such notice will state for each
day for which an error occurred the incorrect price, the correct
price and the reason for the price change. The Distributor shall
make the Company and Accounts whole for any payment and adjustments
to the number of shares in the Accounts that are reasonably
demonstrated to be required as a result of pricing errors.
ARTICLE II.
OBLIGATIONS OF THE PARTIES
2.1. The Trust shall prepare and be responsible for filing with the
Commission and any state regulators requiring such filing all
shareholder reports, notices, proxy materials (or similar
materials such as voting instruction solicitation materials),
prospectuses and statements of additional information of the
Trust. The Trust shall bear the costs of registration and
qualification of shares of the Portfolios, preparation and filing
of the documents listed in this Section 2.1 and all taxes to which
an issuer is subject on the issuance and transfer of its shares.
2.2. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Trust to the Contract owners as required to be
distributed to such Contract owners under applicable federal or state
law.
2.3. The Trust shall provide such documentation (including a final copy of
the Trust's prospectus as set in type or in camera-ready copy) and
other assistance as is reasonably necessary in order for the
Company to print together in one document the current prospectus
for the Contracts issued by the Company and the current prospectus
for the Trust. The Trust shall bear the expense of printing
copies of its current prospectus that will be distributed to
existing Contract owners, and the Company shall bear the expense
of printing copies of the Trust's prospectus that are used in
connection with offering the Contracts issued by the Company.
2.4. The Trust and the Distributor shall provide (1) at the Trust's
expense, one copy of the Trust's current Statement of Additional
Information ("SAI") to the Company and to any Contract owner who
requests such SAI, (2) at the Company's expense, such additional
copies of the Trust's current SAI as the Company shall reasonably
request and that the Company shall require in accordance with
applicable law in connection with offering the Contracts issued by
the Company.
2.5. The Trust, at its expense, shall provide the Company with copies of
its proxy material, periodic reports to shareholders and other
communications to shareholders in such quantity as the Company
shall reasonably require for purposes of distributing to Contract
owners. The Trust, at the Company's expense, shall provide the
Company with copies of its periodic reports to shareholders and
other communications to shareholders in such quantity as the
Company shall reasonably request for use in connection with
offering the Contracts issued by the Company. If requested by the
Company in lieu thereof, the Trust shall provide such
documentation (including a final copy of the Trust's proxy
materials, periodic reports to shareholders and other
communications to shareholders, as set in type or in camera-ready
copy) and other assistance as reasonably necessary in order for
the
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Company to print such shareholder communications for distribution to
Contract owners.
2.6. The Company agrees and acknowledges that the Distributor is the sole
owner of the name and mark "Alger" and that all use of any
designation comprised in whole or part of such name or mark under
this Agreement shall inure to the benefit of the Distributor.
Except as provided in Section 2.5, the Company shall not use any
such name or mark on its own behalf or on behalf of the Accounts
or Contracts in any registration statement, advertisement, sales
literature or other materials relating to the Accounts or
Contracts without the prior written consent of the Distributor.
Upon termination of this Agreement for any reason, the Company
shall cease all use of any such name or mark as soon as reasonably
practicable.
2.7. The Company shall furnish, or cause to be furnished, to the Trust or
its designee a copy of each Contract prospectus and/or statement
of additional information describing the Contracts, each report to
Contract owners, proxy statement, application for exemption or
request for no-action letter in which the Trust or the Distributor
is named contemporaneously with the filing of such document with
the Commission. The Company shall furnish, or shall cause to be
furnished, to the Trust or its designee each piece of sales
literature or other promotional material in which the Trust or the
Distributor is named, at least five Business Days prior to its
use. No such material shall be used if the Trust or its designee
reasonably objects to such use within three Business Days after
receipt of such material.
2.8. The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust or
the Distributor in connection with the sale of the Contracts other
than information or representations contained in and accurately
derived from the registration statement or prospectus for the
Trust shares (as such registration statement and prospectus may be
amended or supplemented from time to time), annual and semi-annual
reports of the Trust, Trust-sponsored proxy statements, or in
sales literature or other promotional material approved by the
Trust or its designee, except as required by legal process or
regulatory authorities or with the prior written permission of the
Trust, the Distributor or their respective designees. The Trust
and the Distributor agree to respond to any request for approval
on a prompt and timely basis. The Company shall adopt and
implement procedures reasonably designed to ensure that "broker
only" materials including information therein about the Trust or
the Distributor are not distributed to existing or prospective
Contract owners.
2.9. The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the
Portfolios and the Distributor, in such form as the Company may
reasonably require, as the Company shall reasonably request in
connection with the preparation of registration statements,
prospectuses and annual and semi-annual reports pertaining to the
Contracts.
2.10. The Trust and the Distributor shall not give, and agree that no
affiliate of either of them
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shall give, any information or make any representations or
statements on behalf of the Company or concerning the Company, the
Accounts or the Contracts other than information or
representations contained in and accurately derived from the
registration statement or prospectus for the Contracts (as such
registration statement and prospectus may be amended or
supplemented from time to time), or in materials approved by the
Company for distribution including sales literature or other
promotional materials, except as required by legal process or
regulatory authorities or with the prior written permission of the
Company. The Company agrees to respond to any request for
approval on a prompt and timely basis.
2.11. So long as, and to the extent that, the Commission interprets the 1940
Act to require pass-through voting privileges for Contract owners,
the Company will provide pass-through voting privileges to
Contract owners whose cash values are invested, through the
registered Accounts, in shares of one or more Portfolios of the
Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and
the Company shall be responsible for assuring that the Accounts
calculate voting privileges in the manner established by the
Trust. With respect to each registered Account, the Company will
vote shares of each Portfolio of the Trust held by a registered
Account and for which no timely voting instructions from Contract
owners are received in the same proportion as those shares for
which voting instructions are received. The Company and its
agents will in no way recommend or oppose or interfere with the
solicitation of proxies for Portfolio shares held to fund the
Contacts without the prior written consent of the Trust, which
consent may be withheld in the Trust's sole discretion. The
Company reserves the right, to the extent permitted by law, to
vote shares held in any Account in its sole discretion.
2.12. The Company and the Trust will each provide to the other information
about the results of any regulatory examination relating to the
Contracts or the Trust, including relevant portions of any
"deficiency letter" and any response thereto.
2.13. No compensation shall be paid by the Trust to the
Company, or by the Company to the Trust, under this Agreement
(except for specified expense reimbursements). However, nothing
herein shall prevent the parties hereto from otherwise agreeing to
perform, and arranging for appropriate compensation for, other
services relating to the Trust, the Accounts or both.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. The Company represents and warrants that it is an
insurance company duly organized and in good standing under the
laws of the State of Nebraska and that it has legally and
validly established each Account as a segregated asset account
under such law as of the date set forth in Schedule A, and that
Lincoln Benefit Financial Services, the
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principal underwriter for the Contracts, is registered as a
broker-dealer under the Securities Exchange Act of 1934 and is a
member in good standing of the National Association of Securities
Dealers, Inc.
3.2. The Company represents and warrants that it has
registered or, prior to any issuance or sale of the Contracts,
will register each Account as a unit investment trust in
accordance with the provisions of the 1940 Act and cause each
Account to remain so registered to serve as a segregated asset
account for the Contracts, unless an exemption from registration
is available.
3.3. The Company represents and warrants that the Contracts
will be registered under the 1933 Act unless an exemption from
registration is available prior to any issuance or sale of the
Contracts; the Contracts will be issued and sold in compliance in
all material respects with all applicable federal and state laws;
and the sale of the Contracts shall comply in all material
respects with state insurance law suitability requirements.
3.4. The Trust represents and warrants that it is duly
organized and validly existing under the laws of the Commonwealth
of Massachusetts and that it does and will comply in all material
respects with the 1940 Act and the rules and regulations
thereunder.
3.5. The Trust and the Distributor represent and warrant that
the Portfolio shares offered and sold pursuant to this Agreement
will be registered under the 1933 Act and sold in accordance with
all applicable federal and state laws, and the Trust shall be
registered under the 1940 Act prior to and at the time of any
issuance or sale of such shares. The Trust shall amend its
registration statement under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify its
shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Trust.
3.6. The Trust represents and warrants that the investments
of each Portfolio will comply with the diversification
requirements for variable annuity, endowment or life insurance
contracts set forth in Section 817(h) of the Internal Revenue Code
of 1986, as amended (the "Code"), and the rules and regulations
thereunder, including without limitation Treasury Regulation
1.817-5, and will notify the Company immediately upon having a
reasonable basis for believing any Portfolio has ceased to comply
or might not so comply and will immediately take all reasonable
steps to adequately diversify the Portfolio to achieve compliance
within the grace period afforded by Regulation 1.817-5.
3.7. The Trust represents and warrants that it is currently
qualified as a "regulated investment company" under Subchapter M
of the Code, that it will make every effort to maintain such
qualification and will notify the Company immediately upon having
a reasonable basis for believing it has ceased to so qualify or
might not so qualify in the future.
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3.8. The Trust represents and warrants that it, its
directors, officers, employees and others dealing with the money
or securities, or both, of a Portfolio shall at all times be
covered by a blanket fidelity bond or similar coverage for the
benefit of the Trust in an amount not less than the minimum
coverage required by Rule 17g-1 or other applicable regulations
under the 1940 Act. Such bond shall include coverage for larceny
and embezzlement and be issued by a reputable bonding company.
3.9. The Distributor represents that it is duly organized and
validly existing under the laws of the State of Delaware and that
it is registered, and will remain registered, during the term of
this Agreement, as a broker-dealer under the Securities Exchange
Act of 1934 and is a member in good standing of the National
Association of Securities Dealers, Inc.
ARTICLE IV.
POTENTIAL CONFLICTS
4.1. The parties acknowledge that a Portfolio's shares may be
made available for investment to other Participating Insurance
Companies. In such event, the Trustees will monitor the Trust for
the existence of any material irreconcilable conflict between the
interests of the contract owners of all Participating Insurance
Companies. A material irreconcilable conflict may arise for a
variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal
or state insurance, tax or securities laws or regulations, or a
public ruling, private letter ruling, no-action or interpretative
letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision
in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference
in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by an
insurer to disregard the voting instructions of contract owners.
The Trust shall promptly inform the Company of any determination
by the Trustees that a material irreconcilable conflict exists and
of the implications thereof.
4.2. The Company agrees to report promptly any potential or
existing conflicts of which it is aware to the Trustees. The
Company will assist the Trustees in carrying out their
responsibilities under the Shared Funding Exemptive Order by
providing the Trustees with all information reasonably necessary
for and requested by the Trustees to consider any issues raised
including, but not limited to, information as to a decision by the
Company to disregard Contract owner voting instructions. All
communications from the Company to the Trustees may be made in
care of the Trust.
4.3. If it is determined by a majority of the Trustees, or a
majority of the disinterested Trustees, that a material
irreconcilable conflict exists that affects the interests of
contract owners, the Company shall, in cooperation with other
Participating Insurance Companies whose contract owners are also
affected, at its own expense and to the extent reasonably
practicable (as determined by the Trustees) take whatever steps
are necessary to remedy
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or eliminate the material irreconcilable conflict, which steps
could include: (a) withdrawing the assets allocable to some or
all of the Accounts from the Trust or any Portfolio and
reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Trust, or
submitting the question of whether or not such segregation should
be implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any appropriate group
(i.e., annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to
the affected Contract owners the option of making such a change;
and (b) establishing a new registered management investment
company or managed separate account.
4.4. If a material irreconcilable conflict arises because of
a decision by the Company to disregard Contract owner voting
instructions and that decision represents a minority position or
would preclude a majority vote, the Company may be required, at
the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect
to such Account; provided, however that such withdrawal and
termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust
gives written notice that this provision is being implemented.
Until the end of such six (6) month period, the Trust shall
continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Trust.
4.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the
Company conflicts with the majority of other state regulators,
then the Company will withdraw the affected Account's investment
in the Trust and terminate this Agreement with respect to such
Account within six (6) months after the Trustees inform the
Company in writing that the Trust has determined that such
decision has created a material irreconcilable conflict; provided,
however, that such withdrawal and termination shall be limited to
the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested
Trustees. Until the end of such six (6) month period, the Trust
shall continue to accept and implement orders by the Company for
the purchase and redemption of shares of the Trust.
4.6. For purposes of Section 4.3 through 4.6 of this
Agreement, a majority of the disinterested Trustees shall
determine whether any proposed action adequately remedies any
material irreconcilable conflict, but in no event will the Trust
be required to establish a new funding medium for any Contract.
The Company shall not be required to establish a new funding
medium for the Contracts if an offer to do so has been declined by
vote of a majority of Contract owners materially adversely
affected by the material irreconcilable conflict. In the event
that the Trustees determine that any proposed action does not
adequately remedy any material irreconcilable conflict, then the
Company will withdraw the Account's investment in the Trust and
terminate this Agreement within six (6) months
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after the Trustees inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of
the disinterested Trustees.
4.7. The Company shall at least annually submit to the
Trustees such reports, materials or data as the Trustees may
reasonably request so that the Trustees may fully carry out the
duties imposed upon them by the Shared Funding Exemptive Order,
and said reports, materials and data shall be submitted more
frequently if reasonably deemed appropriate by the Trustees.
4.8. If and to the extent that Rule 6e-3(T) is amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the 1940 Act or the rules promulgated thereunder with
respect to mixed or shared funding (as defined in the Shared
Funding Exemptive Order) on terms and conditions materially
different from those contained in the Shared Funding Exemptive
Order, then the Trust and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be
necessary to comply with Rule 6e-3(T), as amended, or Rule 6e-3,
as adopted, to the extent such rules are applicable.
ARTICLE V.
INDEMNIFICATION
5.1. Indemnification By the Company. The Company agrees to
indemnify and hold harmless the Distributor, the Trust and each of
its Trustees, officers, employees and agents and each person, if
any, who controls the Trust within the meaning of Section 15 of
the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Section 5.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of the Company, which consent shall not be unreasonably
withheld) or expenses (including the reasonable costs of
investigating or defending any alleged loss, claim, damage,
liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as
such Losses are related to the sale or acquisition of the
Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in
the Contracts themselves or in sales literature generated or
approved by the Company on behalf of the Contracts or
Accounts (or any amendment or supplement to any of the
foregoing) (collectively, "Company Documents" for the
purposes of this Article V), or arise out of or are based upon
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the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that
this indemnity shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or
omission was made in reliance upon and was accurately derived
from written information furnished to the Company by or on
behalf of the Trust for use in Company Documents or otherwise
for use in connection with the sale of the Contracts or Trust
shares; or
(b) arise out of or result from statements or representations
( other than statements or representations contained in and
accurately derived from Trust Documents as defined in Section
5.2(a)) or wrongful conduct of the Company or persons under
its control, with respect to the sale or acquisition of the
Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such statement or omission was made in
reliance upon and accurately derived from written information
furnished to the Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the
Company to provide the services or furnish the materials
required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(f) arise out of or result from the provision by the Company to the
Trust of insufficient or incorrect information regarding the
purchase or sale of shares of any Portfolio, or the failure
of the Company to provide such information on a timely basis.
5.2. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor agrees to
indemnify and hold harmless the Company and each of its directors,
officers, employees, and agents and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for the purposes of
this Section 5.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of the Distributor, which consent shall not be
unreasonably withheld) or expenses (including the reasonable costs
of investigating or defending any alleged loss, claim, damage,
liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as
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such Losses are related to the sale or acquisition of the Contracts
or Trust shares and:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
registration statement or prospectus for the Trust (or any
amendment or supplement thereto) (collectively, "Trust
Documents" for the purposes of this Article V), or arise out
of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading,
provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and
was accurately derived from written information furnished to
the Distributor or the Trust by or on behalf of the Company
for use in Trust Documents or otherwise for use in connection
with the sale of the Contracts or Trust shares and; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and
accurately derived form Company Documents) or wrongful
conduct of the Distributor or persons under its control, with
respect to the sale or acquisition of the Contracts or
Portfolio shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if
such statement or omission was made in reliance upon and
accurately derived from written information furnished to the
Company by or on behalf of the Trust; or
(d) arise out of or result from any failure by the Distributor or
the Trust to provide the services or furnish the materials
required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or
the Trust in this Agreement or arise out of or result from
any other material breach of this Agreement by the
Distributor or the Trust.
5.3. None of the Company, the Trust or the Distributor shall be liable
under the indemnification provisions of Sections 5.1 or 5.2, as
applicable, with respect to any Losses incurred or assessed
against an Indemnified Party that arise from such Indemnified
Party's willful misfeasance, bad faith or negligence in the
performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations or
duties under this Agreement.
5.4. None of the Company, the Trust or the Distributor shall be liable
under the indemnification provisions of Sections 5.1 or 5.2, as
applicable, with respect to any claim
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made against an Indemnified party unless such Indemnified Party
shall have notified the other party in writing within a reasonable
time after the summons, or other first written notification,
giving information of the nature of the claim shall have been
served upon or otherwise received by such Indemnified Party (or
after such Indemnified Party shall have received notice of service
upon or other notification to any designated agent), but failure
to notify the party against whom indemnification is sought of any
such claim shall not relieve that party from any liability which
it may have to the Indemnified Party in the absence of Sections
5.1 and 5.2.
5.5. In case any such action is brought against an Indemnified Party, the
indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party
also shall be entitled to assume the defense thereof, with counsel
reasonably satisfactory to the party named in the action. After
notice from the indemnifying party to the Indemnified Party of an
election to assume such defense, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it,
and the indemnifying party will not be liable to the Indemnified
Party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of
investigation.
ARTICLE VI.
TERMINATION
6.1. This Agreement shall terminate:
(a) at the option of any party upon 60 days advance written notice to
the other parties, unless a shorter time is agreed to by the
parties;
(b) at the option of the Trust or the Distributor if the
Contracts issued by the Company cease to qualify as annuity
contracts or life insurance contracts, as applicable, under
the Code or if the Contracts are not registered, issued or
sold in accordance with applicable state and/or federal law;
or
(c) at the option of any party upon a determination by a majority of
the Trustees of the Trust, or a majority of its disinterested
Trustees, that a material irreconcilable conflict exists; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust or the Distributor by the NASD,
the SEC, or any state securities or insurance department or
any other regulatory body regarding the Trust's or the
Distributor's duties under this Agreement or related to the
sale of Trust shares or
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<PAGE>
the operation of the Trust; or
(e) at the option of the Company if the Trust or a Portfolio fails
to meet the diversification requirements specified in Section
3.6 hereof; or
(f) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Variable
Contracts issued by the Company, as determined by the Company,
and upon prompt notice by the Company to the other parties; or
(g) at the option of the Company in the event any of the shares of
the Portfolio are not registered, issued or sold in
accordance with applicable state and/or federal law, or such
law precludes the use of such shares as the underlying
investment media of the Variable Contracts issued or to be
issued by the Company; or
(h) at the option of the Company, if the Portfolio fails to qualify
as a Regulated Investment Company under Subchapter M of the
Code; or
(i) at the option of the Distributor if it shall determine in its
sole judgment exercised in good faith, that the Company
and/or its affiliated companies has suffered a material
adverse change in its business, operations, financial
condition or prospects since the date of this Agreement or is
the subject of material adverse publicity.
6.2. Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional
shares of any Portfolio and redeem shares of any Portfolio
pursuant to the terms and conditions of this Agreement for all
Contracts in effect on the effective date of termination of this
Agreement.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.9 shall
survive the termination of this Agreement as long as shares of the
Trust are held on behalf of Contract owners in accordance with
Section 6.2.
ARTICLE VII.
NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to the Trust or its Distributor:
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Fred Alger Management, Inc.
30 Montgomery Street
Jersey City, NJ 07302
Attn: Gregory S. Duch
If to the Company:
Lincoln Benefit Life Company
206 South 13 Street
Suite 300
Lincoln, NE 68508-1993
Attn: Carol Watson
15
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ARTICLE VIII.
MISCELLANEOUS
8.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
8.2. This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
8.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of
New York. It shall also be subject to the provisions of the
federal securities laws and the rules and regulations thereunder
and to any orders of the Commission granting exemptive relief
therefrom and the conditions of such orders. Copies of any such
orders shall be promptly forwarded by the Trust to the Company.
8.5. All liabilities of the Trust arising, directly or indirectly, under
this Agreement, of any and every nature whatsoever, shall be
satisfied solely out of the assets of the Trust and no Trustee,
officer, agent or holder of shares of beneficial interest of the
Trust shall be personally liable for any such liabilities.
8.6. Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the
Commission, the National Association of Securities Dealers, Inc.
and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
8.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are
entitled to under state and federal laws.
8.8. This Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the
other party.
8.10. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by both parties.
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8.11. Each party hereto shall, except as required by law or otherwise
permitted by this Agreement, treat as confidential the names and
addresses of the owners of the Contracts and all information
reasonably identified as confidential in writing by any other
party hereto, and shall not disclose such confidential information
without the written consent of the affected party unless such
information has become publicly available.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year
first above written.
Fred Alger and Company, Incorporated
By: /s/ Gregory S. Duch
--------------------------------------
Name: Gregory S. Duch
Title: Executive Vice President
The Alger American Fund
By: /s/ Gregory S. Duch
--------------------------------------
Name: Gregory S. Duch
Title: Treasurer
----------------------------------------
By: /s/ David A. Behrens
--------------------------------------
Name: David A. Behrens
Title: Vice President
17
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SCHEDULE A
The Alger American Fund:
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American Small Capitalization Portfolio
Alger American MidCap Growth Portfolio
18
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19
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SERVICE AGREEMENT
AGREEMENT dated as of February 1, 1997, 1998, between Fred Alger
Management, Inc. ("Alger"), a New York Corporation with its principal offices at
75 Maiden Lane, New York, NY 10038, as Investment Adviser for The Alger American
Fund (the "Fund"), and Lincoln Benefit Life (the "Company"), a Nebraska
corporation having its principal office and place of business at 206 South 13
Street, Suite 300, Lincoln, NE 68508.
In consideration of the promises and mutual covenants set forth in this
Agreement, the Parties agree as follows:
1. SERVICES PROVIDED
The Company agrees to provide services to the Fund including the
following:
a) responding to inquiries from the Company Contract owners using one or
more Portfolios of the Fund as an investment vehicle regarding the
services performed by the Company as they relate to the Fund;
b) providing information to Alger and to Contract owners with respect to
shares attributable to Contract owner accounts;
c) printing and mailing of shareholder communications from the Fund
(such as proxies, shareholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) as
may be required;
d) communication directly with Contract owners concerning the Fun's
operations;
e) providing such other similar services as Alger may reasonably request
pursuant to the extent permitted or required
2. EXPENSE ALLOCATION
Subject to Paragraph 3 hereof, the Company or its affiliates shall
initially bear the costs of the following:
a) printing and distributing the Fund's prospectus, statement of
additional information and any amendments or supplements thereto,
periodic reports to shareholders, Fund proxy material for issues
raised by the Company (the costs of printing and distributing proxy
materials for issues raised by the Fund shall be borne by the Fund)
and other shareholder communications (collectively, the "Fund
Materials") to be distributed to prospective Contract owners;
b) printing and distributing all sales literature or promotional
material developed by the Company or its affiliates and relating to
the contracts;
<PAGE>
c) servicing Contract value to a Portfolio, which servicing shall
include, but is not limited to, the items listed in Paragraph 1 of
this Agreement.
3. PAYMENT OF EXPENSES
a) Alger will pay the Company a quarterly fee equal to a percentage of
the average daily net assets of the Portfolios attributable to
Contracts, at the annual rate set forth in the following schedule
("Portfolio Servicing Fee"), in connection with the expenses incurred
by the Company under Paragraph 2 hereof: invested in any Portfolio of
the Fund, of all assets in but less than $1 billion and 0.02% of all
assets in excess of $1 billion. The payment of the Portfolio
Servicing Fee shall commence at the end of the first calendar quarter
in which Contract value has been allocated to a Portfolio.
b) From time to time, the Parties hereto shall review the Portfolio
Servicing Fee to determine whether it reasonably approximates the
incurred and anticipated costs, over time of the Company in
connection with its duties hereunder. The Parties agree to negotiate
in good faith any change to the Portfolio Servicing Fee proposed by a
Party in good faith.
4. TERM OF AGREEMENT
Either Party may terminate this Agreement, without penalty, on 60 days'
written notice to the other Party. Unless so terminated, this Agreement
shall continue in effect for so long as Alger or its successor(s) in
interest, or any affiliate thereof, continues to perform in a similar
capacity for the Fund, and for so long as any Contract value or any monies
attributable to the Company is allocated to a Portfolio.
5. INDEMNIFICATION
a) The Company agrees to indemnify and hold harmless Alger and its
officers, directors and affiliates from any and all loss, liability
and expense resulting from the gross negligence or willful wrongful
act of the Company under this Agreement, except to the extent such
loss, liability or expense is the result of the willful misfeasance,
bad faith or gross negligence of Alger in the performance of its
duties, or by reason of the reckless disregard of its obligations and
duties under this Agreement.
b) Alger agrees to indemnify and hold harmless the Company and its
officers, directors and affiliates from any and all loss, liability
and expense resulting from the gross negligence or willful wrongful
act of Alger under this Agreement, except to the extent such loss,
liability or expense is the result of the willful misfeasance, bad
faith or gross negligence of the Company in the performance of its
duties, or by reason of the reckless disregard of its obligations and
duties under this Agreement.
<PAGE>
6. NOTICE
Notices and communications required or permitted hereby will be given to
the following persons at the following addresses and facsimile numbers, or
such other persons, addresses or facsimile numbers as the Party receiving
such notices or communications may subsequently direct in writing:
Fred Alger Management, Inc.
75 Maiden Lane
New York, NY 10038
Attn: Gregory S. Duch
Fax: (201) 434-1459
Lincoln Benefit Life
206 South 13 Street
Suite 300
Lincoln, NE 68508-1993
Attn: Carol Watson
Fax: (402) 479-7497
7. APPLICABLE LAW
Except insofar as the Investment Company Act of 1940 or other federal laws
and regulations may be controlling, this Agreement will be construed and
the provisions hereof interpreted under and in accordance with New York
law, without regard for that state's principles of conflict of laws.
8. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will
not be affected thereby.
9. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, that the Parties are entitled to under
federal and state laws.
10. ASSIGNMENT
Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written consent of the other
party thereto.
<PAGE>
11. AMENDMENT
This Agreement may be amended or modified in whole or in party only by a
written agreement executed by both parties.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly authorized officers signing below.
FRED ALGER MANAGEMENT, INC.
By: /s/Gregory S. Duch
-----------------------------------
Name: Gregory S. Duch
----------------------------------
Title: Executive Vice President
---------------------------------
By: /s/David Behrens
-----------------------------------
Name: David Behrens
----------------------------------
Title: Vice President
---------------------------------
<PAGE>
PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT (the "Agreement") made by and between SCUDDER
VARIABLE LIFE INVESTMENT FUND (the "Fund"), a Massachusetts business trust
created under a Declaration of Trust dated March 15, 1985, as amended, with a
principal place of business in Boston, Massachusetts and LINCOLN BENEFIT LIFE
COMPANY, a Nebraska corporation (the "Company"), with a principal place of
business in Lincoln, Nebraska on behalf of Lincoln Benefit Life Variable Annuity
Account, a separate account of the Company, and any other separate account of
the Company as designated by the Company from time to time, upon written notice
to the Fund in accordance with Section 10 herein (the "Account").
WHEREAS, the Fund acts as the investment vehicle for the separate
accounts established for variable life insurance policies and variable annuity
contracts (collectively referred to herein as "Variable Insurance Products") to
be offered by insurance companies which have entered into participation
agreements substantially identical to this Agreement ("Participating Insurance
Companies") and their affiliated insurance companies; and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares of beneficial interest ("Shares"), and additional series of
Shares may be established, each designated a "Portfolio" and representing the
interest in a particular managed portfolio of securities; and
WHEREAS, it is in the best interest of Participating Insurance Companies
to make capital contributions if requires so that the annual expenses of each
Portfolio of the Fund in which a Participating Insurance Company is a
shareholder will not exceed a fixed percentage of the Portfolio's average annual
net assets; and
WHEREAS, the Parties desire to evidence their agreement as to certain
other matters,
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. ADDITIONAL DEFINITIONS.
For the purposes of this Agreement, the following definitions shall
apply:
(a) The "expenses of a Portfolio" for any fiscal year shall mean
the expenses for such fiscal year as shown in the Statement of Operations (or
similar report) certified by the Fund's independent public accountants;
(b) A "Portfolio's average daily net assets" for each fiscal year
shall mean the sum of the net asset values determined throughout the year for
the purpose of determining net asset value per Share, divided by the number of
such determinations during such year;
1
<PAGE>
(c) The Company's "Required Contribution" on behalf of the Account
in respect of a Portfolio for any fiscal year shall mean an amount equal to the
expenses of that Portfolio for such year minus the below-indicated percentage of
that Portfolio's average daily net assets for the year:
International Portfolio . . . . . . . . . . . . . . . . . . . . . . 1.50%
Each other Portfolio. . . . . . . . . . . . . . . . . . . . . . . . 0.75%
multiplied by a fraction the denominator of which is the average daily net
assets of that Portfolio and the numerator of which is the average daily net
asset value of the Shares of that Portfolio owned by the Account (referred to
herein as a "Participating Shareholder"). The Company's Required Contribution
in respect of a Portfolio shall be pro-rated based on the number of business
days on which this Agreement is in effect for periods of less than a fiscal
year.
(d) The "average daily net asset value of the Shares of the
Portfolio" owned by the Account for any fiscal year of the Fund shall mean the
greater of (i) $500,000 or (ii) the sum of the aggregate net asset values of the
Shares so owned determined during the fiscal year, as of each determination of
the net asset value per Share, divided by the total number of determinations of
net asset value during such year.
(e) "Shares" means shares of beneficial interest, without par
value, of any Portfolio, now or hereafter created, of the Fund.
2. CAPITAL CONTRIBUTION
The Company on behalf of the Account shall, within sixty days after the
end of each fiscal year of the Fund, make a capital contribution to the Fund in
respect of each Portfolio equal to the Required Contribution for that Portfolio
for such year; provided, however, that in the event that both clauses (i) and
(ii) of paragraph (d) of Section 1 of this Agreement or similar agreements are
applicable to different participating Insurance Companies during the same fiscal
year, there shall be a proportionate reduction of the Required Contribution of
each Participating Insurance Company to which said clause (ii) is applicable so
that the total of all required capital contributions to the Fund on behalf of
any Portfolio is not greater than the excess of the expenses of that Portfolio
for that fiscal year less the percentage of that Portfolio's total expenses set
forth in paragraph (c) of Section 1 of this Agreement for such fiscal year.
3. DUTY OF FUND TO SELL.
The Fund shall make its Shares available for purchase at the applicable
net asset value per Share by participating Insurance Companies and their
affiliates and separate accounts on those days on which the Fund calculates its
net asset value pursuant to rules of the Securities and Exchange Commission;
provided, however, that the Trustees 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 be regulatory authorities
having jurisdiction or is, in the sole discretion of the Trustees, necessary in
the best interest of the shareholders of any Portfolio.
2
<PAGE>
4. REQUIREMENT TO EXECUTE PARTICIPATION AGREEMENT; REQUESTS.
Each Participating Insurance Company shall, prior to purchasing Shares
in the Fund, execute and deliver a participation agreement in a form
substantially identical to this Agreement.
The Fund shall make available, upon written request from the
Participating Insurance Company given in accordance with Paragraph 10, to each
Participating Insurance Company which has executed an Agreement and which
Agreement has not been terminated pursuant to Paragraph 8 (i) a list of all
other Participating Insurance Companies, and (ii) a copy of the Agreement as
executed by any other Participating Insurance Company.
The Fund shall also make available upon request to each Participating
Insurance Company which has executed an Agreement and which Agreement has not
been terminated pursuant to Paragraph 8, the net asset value of any Portfolio of
the Fund as of any date upon which the Fund calculates the net asset value of
its Portfolios for the purpose of purchase and redemption of Shares.
5. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the Fund and
each of its Trustees and officers and each person, if any, who controls the Fund
within the meaning of Section 15 of the Securities Act of 1933 (the "Act")
against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses), arising out of the acquisition of any
Shares by any person, to which the Fund or such Trustees, officers or
controlling person may become subject under the Act, under any other statute, at
common law or otherwise, which (i) may be based upon any wrongful act by the
Company, any of its employees or representatives, any affiliate of or any person
acting on behalf of the Company or a principal underwriter of its insurance
products, or (ii) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in a registration statement or prospectus
covering Shares 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 the Company, or (iii) may be based on any untrue statement or alleged
untrue statement of a material fact contained in a registration statement or
prospectus covering insurance products sold by the Company or any insurance
company which is an affiliate thereof, or any amendments 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, unless such statement or omission was made in reliance upon
information furnished to the Company or such affiliate by or on behalf of the
Fund; provided, however, that in no case (i) is the Company's indemnity in favor
of a Trustee or officer or any other person deemed to protect such Trustee or
officer or other person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his duties or by reason of his reckless
disregard of obligations and duties under this Agreement or (ii) is the Company
to be liable under its indemnity agreement contained in this Paragraph 5 with
respect to any
3
<PAGE>
claim made against the Fund or any person indemnified unless the Fund or such
person, as the case may be, shall have notified the Company in writing pursuant
to Paragraph 10 within a reasonable time after the summons or other first legal
process giving information of the nature of the claims shall have been served
upon the Fund or upon such person (or after the Fund or such person 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 has to the Fund or any person against whom such action is brought
otherwise than on account of its indemnity agreement contained in this Paragraph
5. The Company shall be entitled to participate, at its own expense, in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but, if it elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the Fund,
to its officers and Trustees, or to any controlling person or persons, defendant
or defendants in the suit. In the even t that the Company elects to assume the
defense of any such suit and retain such counsel, the Fund, such officers and
Trustees or controlling person or persons, defendant or defendants in the suit,
shall bear the fees and expenses of any additional counsel retained by them,
but, in case the Company does not elect to assume the defense of any such suit,
the Company will reimburse the Fund, such officers and Trustees or controlling
person or persons, defendant or defendants in such suit, for the reasonable fees
and expenses of any counsel retained by them. The Company agrees promptly to
notify the Fund pursuant to Paragraph 10 or the commencement of any litigation
or proceedings against it in connection with the issue and sale of any Shares.
(b) 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 Act against any and all losses,
claims, damages, liabilities or litigation (including legal and other expenses)
to which it or such directors, officers or controlling person may become
subject under the Act, under any other statute, at common law or otherwise,
arising out of the acquisition of any Shares by any person which (i) may be
based upon any wrongful act by the Fund, any of its employees or representatives
or a principal underwriter of the Fund or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering Shares 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 unless such statement or omission was made in reliance
upon information furnished to the Fund by the Company or (iii) may be based on
any untrue statement or alleged untrue statement of a material fact contained in
a registration statement or prospectus covering insurance products sold y the
Company, or any amendment 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; provided, however, that in no case (i) is
the Fund's indemnity in favor of a director or officer or any other person
deemed to protect such director or officer or other person against any liability
to which any person would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance of his duties or by reason of
his reckless disregard of obligations and duties under this Agreement or (ii) is
the Fund to be liable under its indemnity agreement contained in this Paragraph
5 with respect to any claims made against the Company or any such director,
4
<PAGE>
officer or controlling person unless it or such director, officer or controlling
person, as the case may be, shall have notified the Fund in writing pursuant to
Paragraph 10 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 it or upon such director, officer or controlling person (or after the
Company or such director, officer or controlling person shall have received
notice of such service on any designated agent), but failure to notify the Fund
of any claim shall not relieve it from any liability which it may have to the
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this Paragraph. The Fund will be entitled to
participate at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but if the Fund
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Company, its directors, officers or controlling
person or persons, defendant or defendants, in the suit. In the even the Fund
elects to assume the defense of any such suit. In the event the Fund elects to
assume the defense of any such suit and retain such counsel, the Company, its
directors, officers or controlling person or persons, defendant or defendants in
the suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Fund does not elect to assume the defense of any such
suit, it will reimburse the Company or such directors, officers or controlling
person or persons, defendant or defendants in the suit, for the reasonable fees
and expenses of any counsel retained by them. The Fund agrees promptly to
notify the Company pursuant to Paragraph 10 of the commencement of any
litigation or proceedings against it or any of its officers or Trustees in
connection with the issuance or sale of any Shares.
6. PROCEDURE FOR RESOLVING IRRECONCILABLE CONFLICTS.
(a) The Trustees of the Fund will monitor the operations of the
Fund for the existence of any material irreconcilable conflict among the
interests of all the contract holders and policy owners of Variable Insurance
Products (the "Participants") of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise, among other things, from: (a) an
action by any state insurance regulatory authority; (b) a change in applicable
insurance laws or regulations; (c) a tax ruling or provision of the Internal
Revenue Code or the regulations thereunder: (d) any other development relating
to the tax treatment of insurers, contract holders or policy owners or
beneficiaries of Variable Insurance Products; (e) the manner in which the
investments of any Portfolio are being managed; (f) a difference in voting
instructions given by variable annuity contract holders, on the one hand, and
variable life insurance policy owners, on the other hand, or by the contract
holders or policy owners of different participating insurance companies; or (g)
a decision by an insurer to override the voting instructions of Participants.
(b) The Company will be responsible for reporting any potential or
existing conflicts to the Trustees of the Fund. The Company will be responsible
for assisting the Trustees in carrying our their responsibilities under this
Paragraph 6(b) and Paragraph 6(a), by providing the Trustees with all
information reasonably necessary for the Trustees to consider the issues raised.
The Fund will also request its investment adviser to report to the Trustees any
such conflict which comes to the attention of the adviser.
5
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(c) If it is determined by a majority of the Trustees of the Fund,
or a majority of its disinterested Trustees, that a material irreconcilable
conflict exists involving the Company, the Company shall, at its expense, and to
the extent reasonably practicable (as determined by a majority of the
disinterested Trustees), take whatever steps are necessary to eliminate the
irreconcilable material conflict, including 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 another
Portfolio of the Fund, offering to the affected Participants the option of
making such a change or establishing a new funding medium including a registered
investment company.
For purposes of this Paragraph 6(c), the Trustees, or the disinterested
Trustees, shall determine whether or not any proposed action adequately remedies
any irreconcilable material conflict. In the even of a determination of the
existence of an irreconcilable material conflict, the Trustees shall cause the
Fund to take such action, such as the establishment of one or more additional
Portfolios, as they in their sole discretion determine to be in the interest of
all shareholders and Participants in view of all applicable factors, such as
cost, feasibility, tax, regulatory and other considerations. In no event will
the Fund be required by this Paragraph 6(c) to establish a new funding medium
for any variable contract or policy.
The Company shall not be required by this Paragraph 6(c) to establish a
new funding medium for any variable contract or policy if an offer to do so has
been declined by a vote of a majority of the participants materially adversely
affected by the material irreconcilable conflict. The Company will recommend to
its Participants that they decline an offer to establish a new funding medium
only if the Company believes it is in the best interest of the Participants.
(d) The Trustees' determination of the existence of an
irreconcilable material conflict and its implications promptly shall be
communicated to all participating Insurance Companies by written notice thereof
delivered or mailed, first class postage prepaid.
7. VOTING PRIVILEGES.
The Company shall be responsible for assuring that its separate account
or accounts participating in the Fund shall use a calculation method of voting
procedures substantially the same as the following: those Participants
permitted to give instructions and the number of Shares for which instructions
may be given will be determined as of the record date for the Fund shareholders'
meeting, which shall not e more than 60 days before the date of the meeting.
Whether or not voting instructions are actually given by a particular
Participant, all Fund shares held in any separate account or sub-account thereof
and attributable to policies will be voted for, against, or withheld from voting
on any proportion in the same proportion as (i) the aggregate record date cash
value held in such sub-account for policies giving instructions, respectively,
to vote for, against, or withhold votes on such proposition, bears to (ii) the
aggregate record date cash value held in the sub-account for all policies for
which voting instructions are received. Participants continued in effect under
lapse options will not be permitted to give voting instructions. Shares held in
any other insurance company general or separate account
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or sub-account thereof will be voted in the proportion specified in the second
preceding sentence for shares attributable to policies.
8. DURATION AND TERMINATION.
This agreement shall remain in force for the period ending five years
from the date of its execution (such date and any anniversary of such date being
hereinafter called a "Renegotiation Date"), and from year to year thereafter
provided that neither the Company nor the Fund shall have given written notice
to the other within thirty(30) days prior to a Renegotiation Date that it
desires to renegotiate the amount of contribution to capital due hereunder
("Renegotiation Notice"). If a Renegotiation Notice is properly given as
aforesaid and the Fund and the Company shall fail, within sixty (60) days after
the Renegotiation Date, either to enter into an amendment to this Agreement or a
written acknowledgment that the Agreement shall continue in effect, this
Agreement shall terminate as of the one hundred twentieth day after such
Renegotiation Date. If this Agreement is so terminated, the Fund may, at any
time thereafter, automatically redeem the Shares of any Portfolio held by a
Participating Shareholder. The Fund agrees that it will not effect such
redemption during the period following the Company's filing of a notice with the
Securities and Exchange Commission (the "SEC") to obtain approval to make a
substitution for the Shares, provided, however, the Company has filed such
notice with the SEC promptly following the sixtieth day after the Renegotiation
Date. This Agreement may be terminated at any time, at the option of either of
the Company or the Fund, when neither the Company, any insurance company nor the
separate account or accounts of such insurance company which is an affiliate
thereof which is not a Participating Insurance Company own any Shares of the
Fund or may be terminated by either party to the Agreement upon a determination
by a majority of the Trustees of the Fund, or a majority of its disinterested
Trustees, following certification thereof by a Participating Insurance Company
given in accordance with Paragraph 10 that an irreconcilable conflict exists
among the interest of (i) all contract holders and policyholders of Variable
Insurance Products of all separate accounts or (ii) the interests of the
Participating Insurance Companies investing in the Fund. Notwithstanding
anything to the contrary in this Agreement or its termination as provided
herein, the Company's obligation to make a capital contribution to the Fund in
accordance with this Agreement at the time in effect shall continue (i)
following a properly given Renegotiation Notice, in the absence of agreement
otherwise, until termination of this Agreement, and (ii) (except termination due
to the existence of an irreconcilable conflict or if the Fund fails to meet the
diversification requirements specified in Paragraph 9), following termination of
this Agreement, until the later of the fifth anniversary of the date of this
Agreement or the date on which the Company, its separate account(s) or the
separate account(s) of any affiliated insurance company owns no Shares.
In the event that the Company elects to terminate its obligations under
this Agreement, it may nonetheless elect in writing to continue this Agreement
with respect to those contracts ("Existing Contracts") in effect with respect to
Participants at the time of such termination. If the Company does so elect to
continue this Agreement, the terms of this Agreement and the obligations of the
parties hereto shall continue with respect to existing Contracts. Without
limitation, the Company shall be permitted at the direction of such a
Participant who shall have continuously remained a Participant to (i) maintain,
(ii) reallocate, (iii) redeem, and (iv) invest in the Fund upon the making of
additional
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<PAGE>
purchase payments under an Existing Contract. Any such election made pursuant
to this Paragraph 8 must be made by giving written notice of such election to
the Fund within thirty (30) days prior to a Renegotiation Date. The parties
agree that no such election may be made in the event that a majority of the
Trustees of the Fund, or a majority of the disinterested Trustees, determine
that an irreconcilable conflict exists as further described in this Paragraph 8.
9. COMPLIANCE.
The Fund will comply with the provisions of Section 4240(a) of the New
York Insurance Law.
Each Portfolio of the Fund will comply with the provisions of Section
817(h) of the Internal Revenue Code of 1986, as amended (the "Code"), relating
to diversification requirements for variable annuity, endowment and life
insurance contracts. Specifically, each Portfolio will comply with either (i)
the requirement of Section 817 (h)(1) of the Code that its assets be adequately
diversified, or (ii) the "Safe Harbor for Diversification" specified in Section
817(h)(2) of the Code, or (iii) the diversification requirement of Section
817(h)(1) of the Code by having all or part of its assets invested in U.S.
Treasury securities which qualify for the "Special Rule for Investments in
United States Obligations" specified in Section 817(h)(3) of the Code.
The provisions of Paragraphs 6 and 7 of this Agreement shall be
interpreted in a manner consistent with any Rule or order of the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended,
applicable to the parties hereto.
No Shares of any Portfolio of the Fund may be sold to the general
public.
10. 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:
Scudder Variable Life Investment Fund
175 Federal Street
Boston, Massachusetts 02110
(617) 482-3990
Attn: David B. Watts
If to the Company:
Lincoln Benefit Life Company
134 South 13th Street Suite 300
Lincoln, Nebraska 68508
Attn: Carol S. Watson
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11. MASSACHUSETTS LAW TO APPLY.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
12. MISCELLANEOUS.
The name "Scudder Variable Life Investment Fund" is the designation of
the Trustees for the time being under a Declaration of Trust dated March 15,
1985, as amended, and 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 Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund. No Portfolio
shall be liable for any obligations properly attributable to any other
Portfolio.
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.
13. ENTIRE AGREEMENT.
This Agreement incorporates the entire understanding and agreement among
the parties hereto, and supersedes any and all prior understandings and
agreements between the parties hereto with respect to the subject matter hereof.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the 30th day of December, 1993.
SEAL
SCUDDER VARIABLE LIFE INVESTMENT FUND
By: /s/David B. Watts
------------------------------------
David B. Watts
President
SEAL
LINCOLN BENEFIT LIFE COMPANY
By: /s/Fred H. Jonske
------------------------------------
President and COO
Fred H. Jonske
10
<PAGE>
REIMBURSEMENT AGREEMENT
REIMBURSEMENT AGREEMENT (the "Agreement") made by and between SCUDDER,
STEVENS & CLARK, INC., a Delaware corporation ("SS&C"), with a principal place
of business in Boston, Massachusetts and LINCOLN BENEFIT LIFE COMPANY, a
Nebraska corporation (the "Company"), with a principal place of business in
Lincoln, Nebraska on behalf of the Lincoln Benefit Life Variable Annuity
Account, a separate account of the Company, and any other separate account of
the Company as designated by the Company form time to time, upon written notice
to the Fund in accordance with Section 8 herein (the "Account").
WHEREAS, SS&C has caused to be organized Scudder Variable Life
Investment Fund (the "Fund"), a Massachusetts business trust created under a
Declaration of Trust dated March 15, 1985, as amended, the beneficial interest
in which is divided into several series, each designated a "Portfolio" and
representing the interest in a particular managed portfolio of securities; and
WHEREAS, the purpose of the Fund is to act as the investment vehicle for
the separate accounts established for variable life insurance policies and
variable annuity contracts to be offered by insurance companies which have
entered into reimbursement agreements substantially identical to this Agreement
("Participating Insurance Companies"); and
WHEREAS, it is in the best interest of the parties hereto for
Participating Insurance Companies, including the Company, to assume a portion of
the organization and other expenses incurred by SS&C in connection with the Fund
during the term of this agreement; and
WHEREAS, the parties desire to express their agreement as to certain
other matters;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. ADDITIONAL DEFINITIONS.
For purposes of this Agreement, the following definitions shall apply:
(a) The "average annual net asset value of the Shares of each
Portfolio of the Fund" shall mean the sum of the aggregate net
asset values of the Shares of such Portfolio owned by the
Account (referred to herein as the "Participating
Shareholder") determined as of each determination of the net
asset value per Share of the Fund during the fiscal year,
divided by the number of such determinations during such year.
(b) "Shares" means shares of beneficial interest, without par
value, of any Portfolio, now or hereafter created, of the
Fund.
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2. ACCESS TO OTHER PRODUCTS.
SS&C shall permit a Participating Shareholder to participate in any
registered investment company other than the Fund which is intended as the
funding vehicle for insurance products and for which SS&C or an affiliate of
SS&C acts as investment adviser, on the same basis as other insurance companies
are permitted to participate in such a registered investment company. This
provision shall not require SS&C to make available to the Company shares of any
investment company which is organized solely as the funding vehicle for
insurance products offered by a single insurance company or a group of
affiliated insurance companies.
3. RIGHT TO REVIEW AND APPROVE SALES MATERIALS.
The Company shall furnish, or shall cause to be furnished, to SS&C or
its designee, at least twenty days prior to its intended use, each piece of
promotional material in which SS&C or the Fund is named. No such material shall
be used unless SS&C or its designee shall have approved such use in writing, or
twenty days shall have elapsed without approval, rejection or objection since
receipt by SS&C or its designee of such material.
SS&C shall furnish, or shall cause to be furnished, to the Company or
its designee, at least twenty days prior to its intended use, each piece of
promotional material in which the Company or its separate account(s) is named.
No such material shall be used unless the Company or its designee shall have
approved such use in writing, or twenty days shall have elapsed without
approval, rejection or objection since receipt by the Company or its designee of
such material.
4. SALES ORGANIZATION MEETINGS.
Representatives of SS&C or its designee shall meet with the sales
organizations of the Company at such reasonable times and places as may be
agreed upon by the Company and SS&C or its designee for the purpose of educating
sales personnel about the Fund.
5. DURATION.
This Agreement shall continue in effect as long as the Company owns
Shares of any Portfolio, except that the obligation of each party hereto to
indemnify the other party hereto shall continue with respect to all losses,
claims, damages, liabilities or litigation based upon the acquisition of Shares
purchased as the funding vehicle for any variable life insurance policy or
variable annuity contract issued by the Company or any affiliated insurance
company.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless SS&C and
each of its Directors and officers and each person, if any, who controls SS&C
within the meaning of Section 15 of the Securities Act of 1933 (the "Act") or
any person, controlled
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<PAGE>
by or under common control with SS&C ("affiliate") against any and all losses,
claims, damages, liabilities or litigation (including legal and other expenses)
to which SS&C or such Directors, officers or controlling person may become
subject under the Act, under any other statute, at common law or otherwise,
arising out of the acquisition of any Shares by any person which (i) may be
based upon any wrongful act by the Company, any of its employees or
representatives, any affiliate of or any person acting on behalf of the Company
or a principal underwriter of its insurance products, or (ii) may be based upon
any untrue statement or alleged untrue statement of a material fact contained in
a registration statement or prospectus covering Shares 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 SS&C or the Fund by the Company, provided, however,
that in no case (i) is the Company's indemnity in favor of a Director or officer
or any other person deemed to protect such Director or officer or other person
against any liability to which any such person would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of his duties or by reason of his reckless disregard of obligations and duties
under this Agreement or (ii) is the Company to be liable under its indemnity
agreement contained in this Paragraph 6 with respect to any claim made against
SS&C or any person indemnified unless SS&C or such person, as the case may be,
shall have notified the Company in writing pursuant to Paragraph 8 within a
reasonable time after the summons or other first legal process giving
information of the nature of the claims shall have been served upon SS&C or upon
such person (or after SS&C or such person 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 has to SS&C or
any person against whom such action is brought otherwise than on account of the
indemnity agreement contained in this Paragraph 6. The Company shall be
entitled to participate, at its own expense, in the defense, or, if it so
elects, to assume the defense of any suit brought to enforce any such liability,
but, if it elects to assume the defense, such defense shall be conducted by
counsel chosen by it and satisfactory to SS&C, to its officers and Directors, or
to any controlling person or persons, defendant or defendants in the suit. In
the event that the Company elects to assume the defense of any such suit and
retain such counsel, SS&C, such officers and directors or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them, but, in case the Company does not
elect to assume the defense of any such suit, the Company will reimburse SS&C,
such officers and Directors or controlling person or persons, defendant or
defendants in such suit, for the reasonable fees and expenses of any counsel
retained by them. The Company agrees promptly to notify SS&C pursuant to
Paragraph 8 of the commencement of any litigation or proceedings against it in
connection with the issue and sale of any Shares.
(b) SS&C 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 Act against any and all losses,
claims, damages, liabilities or litigation (including legal and other expenses)
to which it or such directors, officers or controlling persons may become
subject under the Act, under any other statute, at common law or otherwise
arising out of the acquisition of any Shares by any person which (i) may be
based upon any wrongful act by SS&C, any of its employees or
3
<PAGE>
representatives or a principal underwriter of the Fund, or (ii) may be based
upon any untrue statement or alleged untrue statement of a material fact
contained in a registration statement or prospectus covering Shares or any
amendment thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading if such statement or omission was made in
reliance upon information furnished to the Company by SS&C; provided, however,
that in no case (i) is SS&C's indemnity in favor of a director or officer or any
other person deemed to protect such director or officer or other person against
any liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his
duties or by reason of his reckless disregard of obligations and duties under
this Agreement or (ii) is SS&C to be liable under its indemnity agreement
contained in this Paragraph 6 with respect to any claims made against the
Company or any such director, officer or controlling person unless it or such
director, officer or controlling person, as the case may be, shall have notified
SS&C in writing pursuant to Paragraph 8 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 it or upon such director, officer or
controlling person (or after the Company or such director, officer or
controlling person shall have received notice of such service on any designated
agent), but failure to notify SS&C of any claim shall not relieve it from any
liability which it may have to the person against whom such action is brought
otherwise than on account of its indemnity agreement contained in this Paragraph
6. SS&C will be entitled to participate at its own expense in the defense, or,
if it so elects, to assume the defense of any suit brought to enforce any such
liability, but if SS&C elects to assume the defense, such defense shall be
conducted by counsel chosen by it and satisfactory to the Company, its
directors, officers or controlling person or persons, defendant or defendants,
in the suit. In the event SS&C elects to assume the defense of any such suit
and retain such counsel, the Company, its directors, officers or controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case SS&C does not
elect to assume the defense of any such suit, it will reimburse the Company or
such directors, officers or controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. SS&C agrees promptly to notify the Company pursuant to
Paragraph 8 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 any
Shares.
7. MASSACHUSETTS LAW TO APPLY.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
8. 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 SS&C:
4
<PAGE>
Scudder, Stevens & Clark, Inc.
175 Federal Street
Boston, Massachusetts 02110
(617) 482-3990
Attn: David B. Watts
If to the Company:
Lincoln Benefit Life Company
134 South 13th Street
Lincoln, Nebraska 68508
Attn: Carol S. Watson
9. MISCELLANEOUS.
The captions in the 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.
5
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the 30TH day of DECEMBER, 1993.
SEAL
SCUDDER, STEVENS & CLARK, INC.
By: /s/ David S. Lee
------------------------------------
David S. Lee
Authorized Officer
SEAL
LINCOLN BENEFIT LIFE COMPANY
By: /s/Fred H. Jonske
------------------------------------
Fred H. Jonske
President and C.O.O.
6
<PAGE>
Scudder Investor Services, Inc.
175 Federal Street
Boston, Massachusetts 02110
PARTICIPATING CONTRACT AND POLICY AGREEMENT
Ladies and Gentlemen:
We (sometimes hereinafter referred to as "Investor Services") are the
Principal Underwriter of shares of Scudder Variable Life Investment Fund (the
"Fund"), a no-load, open-end, diversified registered management investment
company established in 1985 as a Massachusetts business trust. The Fund is a
series fund consisting of the Balanced Portfolio, Bond Portfolio, Capital Growth
Portfolio, International Portfolio and Money Market Portfolio (individually or
collectively hereinafter referred to as the "Portfolio" or the "Portfolios").
Additional Portfolios may be created from time to time. The Fund is the funding
vehicle for variable annuity contracts and variable life insurance policies
("Participating Contracts and Policies") to be offered to the separate accounts
(the "Accounts") of certain life insurance companies ("Participating Insurance
Companies") to be offered to the separate accounts (the "Accounts") of certain
life insurance companies ("Participating Insurance Companies"). Owners of
Participating Contracts and Policies will designate a portion of their premium
to be invested in insurance company separate accounts or sub-accounts which
invest in, or represent an investment in, directly or indirectly, shares of
beneficial interest ("Shares") of the Portfolios of the Fund. You are a
registered broker/dealer which intends to offer and sell Participating Contracts
and Policies. In connection with such offer and sale you will be obligated to
deliver the prospectuses of such Participating Contracts and Policies and,
contemporaneously therewith, the prospectus of the Fund. Sales of Shares to
Participating Insurance Companies or their affiliates or the separate accounts
of either shall be effected solely by us as principal underwriter of the Fund,
and not by you; provided, however, that you shall be our agent in connection
with the receipt of purchase orders for Fund Shares and not in connection with
their offer and sale. The relationship between us shall be further governed by
the following terms and conditions:
1. To the extent, if any, that your activities or the activities of
the Participating Insurance Companies in connection with the sale
of participating Contracts and Policies may constitute the sale of
Shares, you and we agree that (i) we are the sole "principal
underwriter" of the Fund and the sold "underwriter" of the Shares
as those terms are defined in the Investment Company Act of 1940
(the "1940 Act") and in the Securities Act of 1933 (the "1933
Act"), respectively, and (ii) neither you nor the Participating
Insurance Companies or the Accounts shall be deemed to be
"principal underwriters" of the Fund or "underwriters" of the Fund
within the meaning of the 1940 Act and the 1933 Act, respectively.
2. You hereby represent and warrant to us as follows:
(a) You are a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware and have
full power and authority to enter into this Agreement.
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<PAGE>
(b) This Agreement has been duly authorized, executed and
delivered by you and is a valid and binding obligation
enforceable against you in accordance with its terms.
(c) Your compliance with the provisions of this Agreement will not
conflict with or result in a violation of the provisions of
your charter or by-laws, of any statute or any judgment,
decree, order, rule or regulation of any court or governmental
agency or body having jurisdiction.
3. We hereby represent and warrant to you as follows:
(a) A registration statement (File No. 2-96461) on Form N-1A with
respect to the Shares (x) has been prepared by the Fund in
conformity with the Requirement of the 1940 Act and the 1933
Act and all applicable published instructions, rules and
regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission"), (y) has been filed
with the Commission, and (z) is currently effective. The
registration statement, including financial statements and
exhibits, and the final prospectus, including the statement of
additional information, as subsequently amended and
supplemented, are herein respectively referred to as the
"Registration Statement" and the "Prospectus".
(b) The Registration Statement and the Prospectus and any
amendment or supplement thereto will contain all statements
required to be stated therein and will comply in all material
respects with the requirements of the 1940 Act, the 1933 Act
and the Rules and Regulations, and the Registration Statement
and any post-effective amendment thereto will not contain or
incorporate by reference any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not
misleading, and the Prospectus and any amendment or supplement
thereto will not contain or incorporate by reference any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) We are a corporation duly organized and validly existing in
good standing under the laws of The Commonwealth of
Massachusetts and have full power and authority to enter into
this Agreement.
(d) This Agreement has been duly authorized, executed and
delivered by us and is a valid and binding obligation
enforceable against us in accordance with its terms.
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<PAGE>
(e) Our compliance with all of the provisions of this Agreement
will not conflict with or result in a violation of the
provisions of our charter or by-laws, or any statute or any
judgment, decree, order, rule or regulation of any court of
governmental agency or body having jurisdiction over us.
4. You hereby covenant and agree with us as follows:
(a) You shall be an independent contractor and neither you nor any
of your directors, partners, officers or employees as such, is
or shall be an employee of us or of the Fund. You are
responsible for your own conduct and the employment, control
and conduct of your agents and employees and for injury to
such agents or employees or to others through your agents or
employees.
(b) You or one or more Participating Insurance Companies will be
responsible for insuring compliance with all applicable laws
and regulations of any regulatory body having jurisdiction
over you or Participating Contracts and Policies.
(c) No person is authorized to make any representations concerning
Shares except those contained in the prospectus and statement
of additional information relating thereto and in such printed
information as issued by us for use as information
supplemental to the prospectus. In offering Participating
Contracts and Policies you shall, with respect to the Fund and
the Shares, rely solely on the representations contained in
the prospectus and statement of additional information and in
the above-mentioned supplemental information.
(d) You are not entitled to any compensation whatsoever from us or
the Fund with respect to offers of Participating Contracts and
Policies.
5. We hereby covenant and agree with you as follows:
(a) If, at any time when a prospectus relating to the Shares is
required to be delivered under the 1940 Act, the 1933 Act or
the Rules and Regulations, we become aware of the occurrence
of any event as a result of which the Prospectus as then
amended or supplemented would include any untrue statement of
a material fact, or omit to state a material fact necessary to
make the statements therein, in light of the circumstances
under which made, not misleading, or if we become aware that
it has become necessary at any time to amend or supplement the
Prospectus to comply with the 1940 Act, the 1933 Act or the
Rules and Regulations, we will promptly notify you and
promptly request the Fund to prepare and to file with the
Commission an amendment to
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<PAGE>
the Registration Statement or supplement to the Prospectus
which will correct such statement or omission or an amendment
or supplement which will effect such compliance, and deliver
to you copies of any such amendment or supplement.
(b) We will cooperate with you in taking such action as may be
necessary to qualify the Shares for offering and sale under
the securities or Blue Sky laws of any state or jurisdiction
as you may request and will continue such qualification in
effect so long as is required by applicable law in connection
with the distribution of Shares.
6. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Shares entirely, as to any person
or generally. We reserve the right to amend this agreement at any
time and you agree that the sale of Participating Contracts and
Policies, after notice of any such amendment has been sent to you,
shall constitute your agreement to any such amendment.
7. If we elect to provide to you for the purpose of your offering
Participating Contracts and Policies copies of any prospectus and
statement of additional information relating to the Shares and
printed information supplemental thereto, we shall furnish you with
such copies as you reasonably request upon the payment of
reasonable charges therefor by you or one or more Participating
Insurance Companies. If we elect not to provide such copies of
such documents printed by you or one or more Participating
Insurance Companies shall bear the entire cost of printing copies
for your use. You shall not use such copies of such documents
printed by you or one or more Participating Insurance Companies
until you shall have furnished us with a copy thereof and we either
have given you written approval for use or twenty days shall have
elapsed following our receipt thereof and we have not objected
thereto in writing.
8. (a) You will indemnify and hold harmless Investor Services and
each of its directors and officers and each person, if any,
who controls Investor Services within the meaning of Section
15 of the 1933 Act, against any loss, liability, damages,
claim or expense (including the reasonable cost of
investigating or defending any alleged loss, liability,
damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person's
acquiring any Shares, which may be based upon the 1933 Act or
any other statute or common law, and which (i) may be based
upon any wrongful act by you, any of your employees or
representatives, any affiliate of or any person acting on
behalf of you, or (ii) may be based upon any untrue statement
or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering Shares or any
amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to
be
4
<PAGE>
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 us or the Fund by you,
or (iii) may be based on any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement or prospectus covering insurance
products sold by you, or any amendments 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,
unless such statement or omission was made in reliance upon
information furnished to you or a Participating Insurance
Company by or on behalf of Investor Services or the Fund;
provided, however, that in no case (i) is the indemnity by you
in favor of any person indemnified to be deemed to protect
Investor Services or any such person against any liability to
which Investor Services or any such person would otherwise be
subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its or his duties or by
reason of its or his reckless disregard of its obligations and
duties under this Agreement, of (ii) are you to be liable
under your indemnity agreement contained in this paragraph
with respect to any claim made against Investor Services or
any person indemnified unless Investor Services or such
person, as the case may be, shall have notified you 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 Investor Services or upon such
person (or after Investor Services or such person shall have
received notice of such service on any designated agent), but
failure to notify you of any such claim shall not relieve you
from any liability which you may have to Investor Services or
any person against whom such action is brought otherwise than
on account of your indemnity agreement contained in this
paragraph. You shall be entitled to participate, at your own
expense, in the defense, or, if you so elect, to assume the
defense of any suit brought to enforce any such liability,
but, if you elect to assume the defense, such defense shall be
conducted by counsel chosen by you and satisfactory to
Investor Services, or to its officers or directors, or to any
controlling person or persons, defendant or defendants in the
suit. In the event that you assume the defense of any such
suit and retain such counsel, Investor Services or such
officers and directors or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in
case you do not elect to assume the defense or any such suit,
you shall reimburse Investor Services and such officers,
directors or controlling person or persons, defendant of
defendants in such suit, for the reasonable fees and expenses
of any counsel retained by them. You agree promptly to notify
Investor Services of the
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commencement of any litigation or proceedings against it in
connection with the offer, issue and sale of any shares.
(b) Investor Services will indemnify and hold harmless you and
each of your directors and officers and each person, if any,
who controls you within the meaning of Section 15 of the 1933
Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending
any alleged loss, liability, damages, claim or expense and
reasonable counsel fees incurred in connection therewith),
arising by reason of any person's acquiring any Shares, which
may be based upon the 1933 Act or any other statute or common
law, and which (i) may be based upon any wrongful act by
Investor Services, any of its employees or representatives, or
(ii) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement or prospectus covering Shares 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 unless such information furnished by Investor
Services or the Fund by you or (iii) may be based on any
untrue statement or alleged untrue statement of a material
fact contained in a registration statement or prospectus
covering insurance products sold by you, or any amendment 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 you by or on behalf of Investor
Services of the Fund; provided, however, that in no case (i)
is the indemnity by Investor Services in favor of any person
indemnified to be deemed to protect you or any such person
against any liability to which you or any such person would
otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of your or his
duties by reason of your or his reckless disregard of your or
his obligations and duties under this Agreement, or (ii) is
Investor Services to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made
against you or any person indemnified unless you or such
person, as the case may be, shall have notified Investor
Services 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 you or upon such
person (or after you or such person shall have received notice
of such service on any designated agent), but failure to
notify Investor Services of any such liability which Investor
Services may have to you or any person against whom such
action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. Investor Services
shall be entitled to participate, at it own expense,
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<PAGE>
in the defense, or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but, if it
elects to assume the defense, such defense shall be conducted
by counsel chosen by Investor Services and satisfactory to
you, or to your controlling person or persons, defendant or
defendants in the suit. In the event that Investor Services
assumes the defense of any such suit and retains such counsel,
you or such officers or directors or controlling person or
persons, defendant or defendants in the suit, shall bear the
fees and expenses of any additional counsel retained by it,
but, in case Investor Services does not elect to assume the
defense of any such suit, Investor Services shall reimburse
you and such officers, directors or controlling person or
persons, defendant or defendants in such suit, for the
reasonable fees and expenses of any counsel retained by it.
Investor Services agrees promptly to notify you of the
commencement of any litigation or proceedings against it in
connection with the offer, issue and sale of any Shares.
9. The indemnities, representations, warranties, covenants and
agreements of each party to this Agreement as set forth in
this Agreement will remain in full force and effect regardless
of any investigation made by or on behalf of either of such
parties or any of their respective officers, directors,
partners or any controlling person, and will survive delivery
of and payment for the Shares.
10. Any provision of this Agreement which may be determined by
competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, each
party hereto waives any provision of law which renders any
provision hereof prohibited or unenforceable in any respect.
11. This Agreement constitutes the entire agreement among the
parties concerning the subject matter hereof, and supersedes
any and all prior understandings.
12. This Agreement shall automatically terminate in the event of
its assignment. This Agreement may be terminated at any time
by either party by written notice given to the other party,
provided that the obligation of each party to indemnify the
other party pursuant to paragraph 8 hereof shall apply with
respect to any Shares sold before or after such termination.
13. Any notice hereunder shall be duly given if mailed or
telegraphed to the other party hereto at the address specified
below. This
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<PAGE>
Agreement shall be governed by and construed in accordance
with the laws of The Commonwealth of Massachusetts.
14. This Agreement may be executed in any number of counterparts
which, taken together shall constitute one and the same
instrument. This Agreement shall become effective upon
receipt by us of your acceptance hereof.
15. This Agreement may not be modified or amended except by a
written instrument duly executed by the parties hereto.
SCUDDER INVESTOR SERVICES, INC.
By: /s/David S. Lee
------------------------------------
David S. Lee
President
175 Federal Street
Boston, Massachusetts 02110
The undersigned hereby accepts the offer set
forth in the above letter.
LINCOLN BENEFIT FINANCIAL SERVICES
Dated: December 30, 1993 By: /s/B. Eugene Wraith
----------------- ------------------------------------
B. Eugene Wraith
President
134 South 13th Street
Lincoln, Nebraska 68508
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DRAFT
PARTICIPATION AGREEMENT
THIS AGREEMENT, is made as of ___________ __, 199_, by and among
________________________________________ ("Company"), on its own behalf and on
behalf of ____________________________________ Separate Account ___, a
segregated asset account of the Company ("Account"), Strong Variable Insurance
Funds, Inc. ("Strong Variable") on behalf of the Portfolios of Strong Variable
listed on the attached Exhibit A as such Exhibit may be amended from time to
time (the "Designated Portfolios"), Strong Opportunity Fund II, Inc.
("Opportunity Fund II"), Strong Capital Management, Inc. (the "Adviser"), the
investment adviser and transfer agent for the Opportunity Fund II and Strong
Variable, and Strong Funds Distributors, Inc. ("Distributors"), the distributor
for Strong Variable and the Opportunity Fund II (each, a "Party" and
collectively, the "Parties").
PRELIMINARY STATEMENTS
A. Beneficial interests in Strong Variable are divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (each, a "Portfolio").
B. To the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares of Opportunity Fund II and the Designated
Portfolios ("Fund" or "Funds" shall be deemed to refer to each Designated
Portfolio and to the Opportunity Fund II to the extent the context requires), on
behalf of the Account to fund the variable annuity contracts that use the Funds
as an underlying investment medium (the "Contracts").
C. The Company, Adviser and Distributors desire to facilitate the
purchase and redemption of shares of the Funds by the Company for the Account
through one account in each Fund (each an "Omnibus Account") to be maintained of
record by the Company, subject to the terms and conditions of this Agreement.
D. The Company desires to provide administrative services and functions
(the "Services") for purchasers of Contracts ("Owners") who are beneficial
owners of shares of the Funds on the terms and conditions set forth in this
Agreement.
AGREEMENTS
The parties to this Agreement agree as follows:
1. PERFORMANCE OF SERVICES. Company agrees to perform the administrative
functions and services specified in Exhibit B attached to this Agreement with
respect to the shares of the Funds beneficially owned by the Owners and included
in the Account.
<PAGE>
2. THE OMNIBUS ACCOUNTS.
2.1 Each Omnibus Account will be opened based upon the information
contained in Exhibit C to this Agreement. In connection with each Omnibus
Account, Company represents and warrants that it is authorized to act on behalf
of each Owner effecting transactions in the Omnibus Account and that the
information specified on Exhibit C to this Agreement is correct.
2.2 Each Fund shall designate each Omnibus Account with an account number.
These account numbers will be the means of identification when the Parties are
transacting in the Omnibus Accounts. The assets in the Accounts are segregated
from the Company's own assets. The Adviser agrees to cause the Omnibus Accounts
to be kept open on each Fund's books, as applicable, regardless of a lack of
activity or small position size except to the extent the Company takes specific
action to close an Omnibus Account or to the extent a Fund's prospectus reserves
the right to close accounts which are inactive or of a small position size. In
the latter two cases, the Adviser will give prior notice to the Company before
closing an Omnibus Account.
2.3 The Company agrees to provide Adviser such information as Adviser or
Distributors may reasonably request concerning Owners as may be necessary or
advisable to enable Company and Distributors to comply with applicable laws,
including state "Blue Sky" laws relating to the sales of shares of the Funds to
the Accounts.
3. FUND SHARES TRANSACTIONS.
3.1 IN GENERAL. Shares of the Funds shall be sold on behalf of the Funds
by Distributors and purchased by Company for the Account and, indirectly for the
appropriate subaccount thereof at the net asset value next computed after
receipt by Distributors of each order of the Company or its designee, in
accordance with the provisions of this Agreement, the then current prospectuses
of the Funds, and the Contracts. Company may purchase shares of the Funds for
its own account subject to (a) receipt of prior written approval by
Distributors; and (b) such purchases being in accordance with the then current
prospectuses of the Fund and the Contracts. The Board of Directors of each Fund
("Directors") may refuse to sell shares of the applicable Fund to any person, or
suspend or terminate the offering of shares of the Fund if such action is
required by law or by regulatory authorities having jurisdiction. Company
agrees to purchase and redeem the shares of the Funds in accordance with the
provisions of this Agreement, of the Contracts and of the then current
prospectuses for the Contracts and Funds. Except as necessary to implement
transactions initiated by Owners, or as otherwise permitted by state or federal
laws or regulations, Company shall not redeem shares of Funds attributable to
the Contracts.
3.2 PURCHASE AND REDEMPTION ORDERS. On each day that a Fund is open for
business (a "Business Day"), the Company shall aggregate and calculate the net
purchase or redemption order it receives for the Account from the Owners for
shares of the Fund that it received prior to
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<PAGE>
the close of trading on the New York Stock Exchange (the "NYSE") (i.e. 3:00
p.m., Central time, unless the NYSE closes at an earlier time in which case such
earlier time shall apply) and communicate to Distributors, by telephone or
facsimile (or by such other means as the Parties to this Agreement may agree to
in writing), the net aggregate purchase or redemption order (if any) for the
Omnibus Account for such Business Day (such Business Day is sometimes referred
to herein as the "Trade Date"). The Company will communicate such orders to
Distributors prior to 9:00 a.m., Central time, on the next Business Day
following the Trade Date. All trades communicated to Distributors by the
foregoing deadline shall be treated by Distributors as if they were received by
Distributors prior to the close of trading on the Trade Date.
3.3 SETTLEMENT OF TRANSACTIONS.
(a) PURCHASES. Company will wire, or arrange for the wire of, the
purchase price of each purchase order to the custodian for the Fund in
accordance with written instructions provided by Distributors to the Company so
that either (1) such funds are received by the custodian for the Fund prior to
10:30 a.m., Central time, on the next Business Day following the Trade Date, or
(2) Distributors is provided with a Federal Funds wire system reference number
prior to such 10:30 a.m. deadline evidencing the entry of the wire transfer of
the purchase price to the applicable custodian into the Federal Funds wire
system prior to such time. Company agrees that if it fails to provide funds to
the Fund's custodian by the close of business on the next Business Day following
the Trade Date, then, at the option of Distributors, (i) the transaction may be
canceled, or (ii) the transaction may be processed at the next-determined net
asset value for the applicable Fund after purchase order funds are received. In
such event, the Company shall indemnify and hold harmless Distributors, Adviser
and the Funds from any liabilities, costs and damages either may suffer as a
result of such failure.
(b) REDEMPTIONS. The Adviser will use its best efforts to cause to
be transmitted to such custodial account as Company shall direct in writing, the
proceeds of all redemption orders placed by Company by 9:00 a.m., Central time,
on the Business Day immediately following the Trade Date, by wire transfer on
that Business Day. Should Company need to extend the settlement on a trade, it
will contact Adviser to discuss the extension. For purposes of determining the
length of settlement, Adviser agrees to treat the Account no less favorably than
other shareholders of the Funds. Each wire transfer of redemption proceeds
shall indicate, on the Federal Funds wire system, the amount thereof
attributable to each Fund; PROVIDED, HOWEVER, that if the number of entries
would be too great to be transmitted through the Federal Funds wire system, the
Adviser shall, on the day the wire is sent, fax such entries to Company or if
possible, send via direct or indirect systems access until otherwise directed by
the Company in writing.
(c) AUTHORIZED PERSONS. The following persons are each duly
authorized to act on behalf of the Company under this Agreement. The Funds,
Adviser and Distributors are entitled to conclusively rely on verbal or written
instructions that Adviser or Distributors reasonably believes were originated by
any one of said persons. The Company shall inform
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Adviser and Distributors of additions to or subtractions from this list of
authorized persons pursuant to Section 13, hereof:
Janet Anderbery
--------------------------------
Tricia Wittmaack
--------------------------------
Cheryl Meyer
--------------------------------
3.4 BOOK ENTRY ONLY. Issuance and transfer of shares of a Fund will be by
book entry only. Stock certificates will not be issued to the Company or the
Account. Shares of the Funds ordered from Distributors will be recorded in the
appropriate book entry title for the Account.
3.5 DISTRIBUTION INFORMATION. The Adviser or Distributors shall provide
the Company with all distribution announcement information as soon as it is
announced by the Funds. The distribution information shall set forth, as
applicable, ex-dates, record date, payable date, distribution rate per share,
record date share balances, cash and reinvested payment amounts and all other
information reasonably requested by the Company. Where possible, the Adviser or
Distributors shall provide the Company with direct or indirect systems access to
the Adviser's systems for obtaining such distribution information.
3.6 REINVESTMENT. All dividends and capital gains distributions will be
automatically reinvested on the payable date in additional shares of the
applicable Fund at net asset value in accordance with each Fund's then current
prospectus.
3.7 PRICING INFORMATION. Distributors shall use its best efforts to
furnish to the Company prior to 6:00 p.m., Central time, on each Business Day
each Fund's closing net asset value for that day, and for those Funds for which
such information is calculated, the daily accrual for interest rate factor (mil
rate). Such information shall be communicated via fax, or indirect or direct
systems access acceptable to the Company.
3.8 PRICE ERRORS.
(a) NOTIFICATION. If an adjustment is required in accordance with a
Fund's then current policies on reimbursement ("Fund Reimbursement Policies") to
correct any error in the computation of the net asset value of Fund shares
("Price Error"), Adviser or Distributors shall notify Company as soon as
practicable after discovering the Price Error. Notice may be made via facsimile
or via direct or indirect systems access and shall state the incorrect price,
the correct price and, to the extent communicated to the Fund's shareholders,
the reason for the price change.
(b) UNDERPAYMENTS. If a Price Error causes an Account to receive
less than the amount to which it otherwise would have been entitled, Adviser
shall make all necessary adjustments (subject to the Fund Reimbursement
Policies) so that the Account receives the amount to which it would have been
entitled
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<PAGE>
(c) OVERPAYMENTS. If a Price Error causes an Account to receive more
than the amount to which it otherwise would have been entitled, Company, when
requested by Adviser (in accordance with the Fund Reimbursement Policies), will
use its best efforts to collect such excess amounts from the applicable Owners.
(d) FUND REIMBURSEMENT POLICIES. Adviser agrees to treat Company's
customers no less favorably than Adviser treats its retail shareholders in
applying the provisions of paragraphs 3.8(b) and 3.8(c).
(e) EXPENSES. Adviser shall reimburse Company for all reasonable and
necessary out-of-pocket expenses incurred by Company for payroll overtime,
stationery and postage in adjusting Owner accounts affected by a Price Error
described in paragraphs 3.8(b) and 3.8(c). Company shall use its best efforts
to mitigate all expenses which may be reimbursable under this section 3.8(e) and
agrees that payroll overtime shall not include any time spent programming
computers or otherwise customizing Company's recordkeeping system. Upon
requesting reimbursement, Company shall present an itemized bill to Adviser
detailing the costs for which it seeks reimbursement.
3.9 AGENCY. Distributors hereby appoints the Company as its agent for the
limited purpose of accepting purchase and redemption instructions from the
Owners for the purchase and redemption of shares of the Funds by the Company on
behalf of Account.
3.10 QUARTERLY REPORTS. Adviser agrees to provide Company a statement of
Fund assets as soon as practicable and in any event within 30 days after the end
of each fiscal quarter, and a statement certifying the compliance by the Funds
during that fiscal quarter with the diversification requirements and
qualification as a regulated investment company. In the event of a breach of
Section 6.4(a), Adviser 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 Treasury Regulation 1.817-5.
4. PROXY SOLICITATIONS AND VOTING. The Company shall, at its expense,
distribute or arrange for the distribution of all proxy materials furnished by
the Funds to the Account and shall: (i) solicit voting instructions from Owners;
(ii) vote the Fund shares in accordance with instructions received from Owners;
and (iii) vote the Fund shares for which no instructions have been received, as
well as shares attributable to it, in the same proportion as Fund shares for
which instructions have been received from Owners, so long as and to the extent
that the Securities and Exchange Commission (the "SEC") continues to interpret
the Investment Company Act of 1940, as amended (the "1940 Act"), to require
pass-through voting privileges for various contract owners. The Company and its
agents will not recommend action in connection with, or oppose or interfere
with, the solicitation of proxies for the Fund shares held for Owners.
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<PAGE>
5. CUSTOMER COMMUNICATIONS.
5.1 PROSPECTUSES. The Adviser or Distributors, at its expense, will
provide the Company with as many copies of the current prospectus for the Funds
as the Company may reasonably request for distribution, at the Company's
expense, to existing or prospective Owners.
5.2 SHAREHOLDER MATERIALS. The Adviser and Distributors shall, as
applicable, provide in bulk to the Company or its authorized representative, at
a single address and at no expense to the Company, the following shareholder
communications materials prepared for circulation to Owners in quantities
requested by the Company which are sufficient to allow mailing thereof by the
Company and, to the extent required by applicable law, to all Owners: proxy or
information statements, annual reports, semi-annual reports, and all initial and
updated prospectuses, supplements and amendments thereof. None of the Funds,
the Adviser or Distributors shall be responsible for the cost of distributing
such materials to Owners.
6. REPRESENTATIONS AND WARRANTIES.
6.1 The Company represents and warrants that:
(a) It is an insurance company duly organized and in good standing
under the laws of the State of Nebraska and that it has legally and
validly established the Account prior to any issuance or sale thereof as a
segregated asset account and that the Company has and will maintain the capacity
to issue all Contracts that may be sold; and that it is and will remain duly
registered, licensed, qualified and in good standing to sell the Contracts in
all the jurisdictions in which such Contracts are to be offered or sold;
(b) It is and will remain duly registered and licensed in all
material respects under all applicable federal and state securities and
insurance laws and shall perform its obligations under this Agreement in
compliance in all material respects with any applicable state and federal laws;
(c) The Contracts are and will be registered under the Securities Act
of 1933, as amended (the "1933 Act"), and are and will be registered and
qualified for sale in the states where so required; and the Account is and will
be registered as a unit investment trust in accordance with the 1940 Act and
shall be a segregated investment account for the Contracts;
(d) The Contracts are currently treated as annuity contracts, under
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Company will maintain such treatment and will notify Adviser,
Distributors and Funds promptly 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;
6
<PAGE>
(e) It is registered as a transfer agent pursuant to Section 17A of
the Securities Exchange Act of 1934, as amended (the "1934 Act"), or is not
required to be registered as such;
(f) The arrangements provided for in this Agreement will be disclosed
to the Owners; and
(g) It is registered as a broker-dealer under the 1934 Act and any
applicable state securities laws, including as a result of entering into and
performing the Services set forth in this Agreement, or is not required to be
registered as such.
6.2 The Funds each represent and warrant that Fund shares sold pursuant to
this Agreement are and will be registered under the 1933 Act and the Fund is and
will be registered as a registered investment company under the Investment
Company Act of 1940, in each case, except to the extent the Company is so
notified in writing;
6.3 Distributors represents and warrants that:
(a) It is and will be a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD")and is and will be registered as
a broker-dealer with the SEC; and
(b) It will sell and distribute Fund shares in accordance with all
applicable state and federal laws and regulations.
6.4 Adviser represents and warrants that:
(a) It will cause each Fund to invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
annuity contracts under the Code and the regulations issued thereunder, and that
each Fund will comply with Section 817(h) of the Code as amended from time to
time and with all applicable regulations promulgated thereunder;
(b) It is and will remain duly registered and licensed in all
material respects under all applicable federal and state securities and
insurance laws and shall perform its obligations under this Agreement in
compliance in all material respects with any applicable state and federal laws;
and
6.5 Each of the Parties to this Agreement represents and warrants to the
others that:
(a) It has full power and authority under applicable law, and has
taken all action necessary, to enter into and perform this Agreement and the
person executing this Agreement on its behalf is duly authorized and empowered
to execute and deliver this Agreement;
7
<PAGE>
(b) This Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms and it shall
comply in all material respects with all laws, rules and regulations applicable
to it by virtue of entering into this Agreement;
(c) No consent or authorization of, filing with, or other act by or
in respect of any governmental authority, is required in connection with the
execution, delivery, performance, validity or enforceability of this Agreement;
(d) The execution, performance and delivery of this Agreement will
not result in it violating any applicable law or breaching or otherwise
impairing any of its contractual obligations;
(e) Each Party to this Agreement is entitled to rely on any written
records or instructions provided to it by another Party; and
(f) Its directors, officers, employees, and investment advisers, and
other individuals/entities dealing with the money or securities of a 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
amount required by the applicable rules of the NASD and the federal securities
laws, which bond shall include coverage for larceny and embezzlement and shall
be issued by a reputable bonding company.
7. SALES MATERIAL AND INFORMATION
7.1 NASD FILINGS. The Company shall promptly inform Distributors as to
the status of all sales literature filings pertaining to the Funds and shall
promptly notify Distributors of all approvals or disapprovals of sales
literature filings with the NASD. For purposes of this Section 7, the phrase
"sales literature or other promotional material" shall be construed in
accordance with all applicable securities laws and regulations.
7.2 COMPANY REPRESENTATIONS. The Company shall not make any material
representations concerning the Adviser, the Distributors, or a Fund other than
the information or representations contained in: (a) a registration statement of
the Fund or prospectus of a Fund, as amended or supplemented from time to time;
(b) published reports or statements of the Funds which are in the public domain
or are approved by Distributors or the Funds; or (c) sales literature or other
promotional material of the Funds.
7.3 ADVISER, DISTRIBUTORS AND FUND REPRESENTATIONS. None of Adviser,
Distributors or any Fund shall make any material representations concerning the
Company other than the information or representations contained in: (a) a
registration statement or prospectus for the Contracts, as amended or
supplemented from time to time; (b) published reports or statements of
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<PAGE>
the Contracts or the Account which are in the public domain or are approved by
the Company; or (c) sales literature or other promotional material of the
Company.
7.4 TRADEMARKS, ETC. Except to the extent required by applicable law, no
Party shall use any other Party's names, logos, trademarks or service marks,
whether registered or unregistered, without the prior consent of such Party.
7.5 INFORMATION FROM DISTRIBUTORS AND ADVISER. Upon request, Distributors
or Adviser will provide to Company at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, solicitations for voting instructions, applications
for exemptions, requests for no action letters, and all amendments to any of the
above, that relate to the Funds, in final form as filed with the SEC, NASD and
other regulatory authorities.
7.6 INFORMATION FROM COMPANY. Company will provide to Distributors 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 a Fund and the Contracts, in final form as filed with the SEC, NASD
and other regulatory authorities.
7.7 REVIEW OF MARKETING MATERIALS. If so requested by Company, the
Adviser or Distributors will use its best efforts to review sales literature and
other marketing materials prepared by Company which relate to the Funds, the
Adviser or Distributors for factual accuracy as to such entities, provided that
the Adviser or Distributors is provided at least five (5) Business Days to
review such materials. Neither the Adviser nor Distributors will review such
materials for compliance with applicable laws. Company shall provide the
Adviser with copies of all sales literature and other marketing materials which
refer to the Funds, the Company or Distributors within five (5) Business Days
after their first use, regardless of whether the Adviser or Distributors has
previously reviewed such materials. If so requested by the Adviser or
Distributors, Company shall cease to use any sales literature or marketing
materials which refer to the Funds, the Adviser or Distributors that the Adviser
or Distributors determines to be inaccurate, misleading or otherwise
unacceptable.
8. FEES AND EXPENSES.
8.1 FUND REGISTRATION EXPENSES. Fund or Distributors shall bear the cost
of registration and qualification of Fund shares; preparation and filing of Fund
prospectuses and registration statements, proxy materials and reports;
preparation of all other statements and notices relating to the Fund or
Distributors required by any federal or state law; payment of all applicable
fees, including, without limitation, any fees due under Rule 24f-2 of the 1940
Act, relating to a Fund; and all taxes on the issuance or transfer of Fund
shares on the Fund's records.
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8.2 CONTRACT REGISTRATION EXPENSES. The Company shall bear the expenses
for the costs of preparation and filing of the Company's prospectus and
registration statement with respect to the Contracts; preparation of all other
statements and notices relating to the Account or the Contracts required by any
federal or state law; expenses for the solicitation and sale of the Contracts
including all costs of printing and distributing all copies of advertisements,
prospectuses, Statements of Additional Information, proxy materials, and reports
to Owners or potential purchasers of the Contracts as required by applicable
state and federal law; payment of all applicable fees relating to the Contracts;
all costs of drafting, filing and obtaining approvals of the Contracts in the
various states under applicable insurance laws; filing of annual reports on form
N-SAR, and all other costs associated with ongoing compliance with all such laws
and its obligations under this Agreement.
9. INDEMNIFICATION.
9.1 INDEMNIFICATION BY COMPANY.
(a) Company agrees to indemnify and hold harmless the Funds, Adviser
and Distributors and each of their directors, officers, employees and agents,
and each person, if any, who controls any of them within the meaning of Section
15 of the 1933 Act (each, an "Indemnified Party" and collectively, the
"Indemnified Parties" for purposes of this Section 9.1) from and against any and
all losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of Company), and expenses including reasonable legal
fees and expenses, (collectively, hereinafter "Losses"), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise insofar as such Losses:
(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 sales literature for the Contracts or contained in 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 paragraph 9.1(a) 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 Company by or on behalf of a Fund, Distributors or Adviser for use
in the registration statement or prospectus for the Contracts or in 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 or wrongful conduct of Company or its agents, with respect to
the sale or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature covering a Fund
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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 written information furnished to a Fund,
Adviser or Distributors by or on behalf of Company; or
(iv) arise out of, or as a result of, any failure by Company or
persons under its control to provide the Services and furnish the materials
contemplated under the terms of this Agreement; or
(v) arise out of, or result from, any material breach of any
representation or warranty made by Company or persons under its control in this
Agreement or arise out of or result from any other material breach of this
Agreement by Company or persons under its control; as limited by and in
accordance with the provisions of Sections 9.1(b) and 9.1(c) hereof; or
(vi) arise out of, or as a result of, adherence by Adviser or
Distributors to instructions that it reasonably believes were originated by
persons specified in Section 3.3(c), hereof.
This indemnification provision is in addition to any liability which
the Company may otherwise have.
(b) Company shall not be liable under this indemnification provision
with respect to any Losses to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or duties
under this Agreement.
(c) 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 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 Company of any such claim shall not
relieve Company from any liability which it may have to the Indemnified Party
otherwise than on account of this indemnification provision. In case any such
action is brought against any Indemnified Party, and it notified the
indemnifying Party of the commencement thereof, the indemnifying Party will be
entitled to participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such Indemnified Party. After
notice from the indemnifying Party of its intention to assume the defense of an
action, the Indemnified Party shall bear the expenses of any additional counsel
obtained by it, and the indemnifying Party shall not be liable to such
Indemnified Party under this Section for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof
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other than reasonable costs of investigation. The Indemnified Party may not
settle any action without the written consent of the indemnifying Party. The
indemnifying Party may not settle any action without the written consent of the
Indemnified Party unless such settlement completely and finally releases the
Indemnified Party from any and all liability. In either event, consent shall
not be unreasonably withheld.
(d) The Indemnified Parties will promptly notify Company of the
commencement of any litigation or proceedings against the Indemnified Parties in
connection with the issuance or sale of Fund shares or the Contracts or the
operation of a Fund.
9.2 INDEMNIFICATION BY ADVISER AND DISTRIBUTORS.
(a) Adviser and Distributors agrees to indemnify and hold harmless
Company and each of its directors, officers, employees and agents and each
person, if any, who controls Company within the meaning of Section 15 of the
1933 Act (each, an "Indemnified Party" and collectively, the "Indemnified
Parties" for purposes of this Section 9.2) from and against any and all Losses
to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such Losses:
(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 a 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 Section 9.2(a) 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 a Fund,
Adviser or Distributors by or on behalf of Company for use in the registration
statement or prospectus for a Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of Adviser or Distributors or persons under
its control, with respect to the sale or distribution of Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature 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 statements therein not misleading, if such statement or omission was made
in reliance upon written information furnished to Company by or on behalf of
Adviser or Distributors; or
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(iv) arise out of, or as a result of, any failure by Adviser or
Distributors or persons under its control to provide the services and furnish
the materials contemplated under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation or warranty made by Adviser or Distributors or persons under its
control in this Agreement or arise out of or result from any other material
breach of this Agreement by Adviser or Distributors or persons under its
control; as limited by and in accordance with the provisions of Sections 9.2(b)
and 9.2(c) hereof.
This indemnification provision is in addition to any liability which
Adviser and Distributors may otherwise have.
(b) Adviser and Distributors shall not be liable under this
indemnification provision with respect to any Losses 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.
(c) Adviser and Distributors 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 Adviser and Distributors
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 Adviser
and Distributors of any such claim shall not relieve Adviser and Distributors
from any liability which it may have to the Indemnified Party otherwise than on
account of this indemnification provision. In case any such action is brought
against any Indemnified Party, and it notified the indemnifying Party of the
commencement thereof, the indemnifying Party will be entitled to participate
therein and, to the extent that it may wish, assume the defense thereof, with
counsel satisfactory to such Indemnified Party. After notice from the
indemnifying Party of its intention to assume the defense of an action, the
Indemnified Party shall bear the expenses of any additional counsel obtained by
it, and the indemnifying Party shall not be liable to such Indemnified Party
under this Section for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation. The Indemnified Party may not settle any action without
the written consent of the indemnifying Party. The indemnifying Party may not
settle any action without the written consent of the Indemnified Party unless
such settlement completely and finally releases the Indemnified Party from any
and all liability. In either event, consent shall not be unreasonably withheld.
(d) The Indemnified Parties will promptly notify Adviser and
Distributors of the commencement of any litigation or proceedings against the
Indemnified Parties in connection with the issuance or sale of the Contracts or
the operation of the Account.
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10. POTENTIAL CONFLICTS.
10.1 MONITORING BY DIRECTORS FOR CONFLICTS OF INTEREST. The Directors of
each Fund will monitor the Fund for any potential or existing material
irreconcilable conflict of interest between the interests of the contract owners
of all separate accounts investing in the Fund, including such conflict of
interest with any other separate account of any other insurance company
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 interpretive 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 the Fund are
being managed; (e) a difference in voting instructions given by variable annuity
contract owners and variable life insurance contract owners or by contract
owners of different life insurance companies utilizing the Fund; or (f) a
decision by Company to disregard the voting instructions of Owners. The
Directors shall promptly inform the Company, in writing, if they determine that
an irreconcilable material conflict exists and the implications thereof.
10.2 MONITORING BY THE COMPANY FOR CONFLICTS OF INTEREST. The Company
will promptly notify the Directors, in writing, of any potential or existing
material irreconcilable conflicts of interest, as described in Section 10.1
above, of which it is aware. The Company will assist the Directors in
carrying out their responsibilities under any applicable provisions of the
federal securities laws and any exemptive orders granted by the SEC
("Exemptive Order"), by providing the Directors, in a timely manner, with all
information reasonably necessary for the Directors to consider any issues
raised. This includes, but is not limited to, an obligation by the Company
to inform the Directors whenever Owner voting instructions are disregarded.
10.3 REMEDIES. If it is determined by a majority of the Directors, or a
majority of disinterested Directors, that a material irreconcilable conflict
exists, as described in Section 10.1 above, the Company shall, at its own
expense take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including, but not limited to: (a),
withdrawing the assets allocable to some or all of the separate accounts from
the applicable Fund and reinvesting such assets in a different investment
medium, including (but not limited to) another fund managed by the Adviser, or
submitting the question whether such segregation should be implemented to a vote
of all affected Owners and, as appropriate, segregating the assets of any
particular group that votes in favor of such segregation, or offering to the
affected owners the option of making such a change; and (b), establishing a new
registered management investment company or managed separate account.
10.4 CAUSES OF CONFLICTS OF INTEREST.
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(a) STATE INSURANCE REGULATORS. 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
applicable Fund and terminate this Agreement with respect to such Account within
the period of time permitted by such decision, but in no event later than six
months after the Directors inform the Company in writing that it has determined
that such decision has created an irreconcilable material conflict; PROVIDED,
HOWEVER, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Directors. Until the end of the foregoing period,
the Distributors and Funds shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund to the extent
such actions do not violate applicable law.
(b) DISREGARD OF OWNER VOTING. If a material irreconcilable conflict
arises because of Company's decision to disregard Owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
Company may be required, at the applicable Fund's election, to withdraw the
Account's investment in said Fund. No charge or penalty will be imposed against
the Account as a result of such withdrawal.
10.5 LIMITATIONS ON CONSEQUENCES. For purposes of Sections 10.3 through
10.5 of this Agreement, a majority of the disinterested Directors shall
determine whether any proposed action adequately remedies any irreconcilable
material conflict. In no event will a Fund, the Adviser or the Distributors be
required to establish a new funding medium for any of the Contracts. The
Company shall not be required by Section 10.3 to establish a new funding medium
for the Contracts if an offer to do so has been declined by vote of a majority
of Owners affected by the irreconcilable material conflict. In the event that
the Directors determine that any proposed action does not adequately remedy any
irreconcilable material conflict, then the Company will withdraw the Account's
investment in the applicable Fund and terminate this Agreement as quickly as may
be required to comply with applicable law, but in no event later than six (6)
months after the Directors inform the Company in writing of the foregoing
determination, PROVIDED, HOWEVER, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict.
10.6 CHANGES IN LAWS. 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 Funds' Exemptive Order) on terms and
conditions materially different from those contained in the Funds' Exemptive
Order, then (a) the Funds 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, and
Rule 6e-3, as adopted, to the extent such rules are applicable; and (b) Sections
10.1, 10.2, 10.3 and 10.4 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such Sections are
contained in such Rule(s) as so amended or adopted.
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11. MAINTENANCE OF RECORDS.
(a) Recordkeeping and other administrative services to Owners shall
be the responsibility of the Company and shall not be the responsibility of the
Funds, Adviser or Distributors. None of the Funds, the Adviser or Distributors
shall maintain separate accounts or records for Owners. Company shall maintain
and preserve all records as required by law to be maintained and preserved in
connection with providing the Services and in making shares of the Funds
available to the Account.
(b) Upon the request of the Adviser or Distributors, the Company
shall provide copies of all the historical records relating to transactions
between the Funds and the Account, written communications regarding the Funds to
or from the Account and other materials, in each case (1) as are maintained by
the Company in the ordinary course of its business and in compliance with
applicable law, and (2) as may reasonably be requested to enable the Adviser and
Distributors, or its representatives, including without limitation its auditors
or legal counsel, to (A) monitor and review the Services, (B) comply with any
request of a governmental body or self-regulatory organization or the Owners,
(C) verify compliance by the Company with the terms of this Agreement, (D) make
required regulatory reports, or (E) perform general customer supervision. The
Company agrees that it will permit the Adviser and Distributors or such
representatives of either to have reasonable access to its personnel and records
in order to facilitate the monitoring of the quality of the Services.
(c) Upon the request of the Company, the Adviser and Distributors
shall provide copies of all the historical records relating to transactions
between the Funds and the Account, written communications regarding the Funds to
or from the Account and other materials, in each case (1) as are maintained by
the Adviser and Distributors, as the case may be, in the ordinary course of its
business and in compliance with applicable law, and (2) as may reasonably be
requested to enable the Company, or its representatives, including without
limitation its auditors or legal counsel, to (A) comply with any request of a
governmental body or self-regulatory organization or the Owners, (B) verify
compliance by the Adviser and Distributors with the terms of this Agreement, (C)
make required regulatory reports, or (D) perform general customer supervision.
(d) The Parties agree to cooperate in good faith in providing records
to one another pursuant to this Section 11.
12. TERM AND TERMINATION.
12.1 TERM AND TERMINATION WITHOUT CAUSE. The initial term of this
Agreement shall be for a period of one year from the date hereof. Unless
terminated as to any Fund upon not less than thirty (30) days prior written
notice to the other Parties, this Agreement shall thereafter automatically renew
for the remaining Funds from year to year, subject to termination at the next
applicable renewal date upon not less than 30 days prior written notice. Any
Party may
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terminate this Agreement as to any Fund following the initial term upon six (6)
months advance written notice to the other Parties.
12.2 TERMINATION BY FUND, DISTRIBUTORS OR ADVISER FOR CAUSE. Adviser, Fund
or Distributors may terminate this Agreement by written notice to the Company,
if any of them shall determine, in its sole judgment exercised in good faith,
that (a) 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 (b) any of the Contracts are
not registered, issued or sold in accordance with applicable state and federal
law or such law precludes the use of Fund shares as the underlying investment
media of the Contracts issued or to be issued by the Company.
12.3 TERMINATION BY COMPANY FOR CAUSE. Company may terminate this
Agreement by written notice to the Adviser, Funds and Distributors in the event
that (a) any of the Fund shares are not registered, issued or sold in accordance
with applicable state or federal law or such law precludes the use of such
shares as the underlying investment media of the Contracts issued or to be
issued by the Company; (b) the Funds cease to qualify as Regulated Investment
Companies under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Funds may fail to so
qualify; or (c) a Fund fails to meet the diversification requirements specified
in Section 6.4(a).
12.4 TERMINATION BY ANY PARTY. This Agreement may be terminated as to any
Fund by any Party at any time (A) by giving 30 days' written notice to the other
Parties in the event of a material breach of this Agreement by the other Party
or Parties that is not cured during such 30-day period, and (B) (i) upon
institution of formal proceedings relating to the legality of the terms and
conditions of this Agreement against the Account, Company, Funds, Adviser or
Distributors by the NASD, the SEC or any other regulatory body provided that the
terminating Party has a reasonable belief that the institution of formal
proceedings is not without foundation and will have a material adverse impact on
the terminating Party, (ii) by the non-assigning Party upon the assignment of
this Agreement in contravention of the terms hereof, or (iii) as is required by
law, order or instruction by a court of competent jurisdiction or a regulatory
body or self-regulatory organization with jurisdiction over the terminating
Party.
12.5 LIMIT ON TERMINATION. Notwithstanding the termination of this
Agreement with respect to any or all Funds, for so long as any Contracts remain
outstanding and invested in a Fund each Party to this Agreement shall continue
to perform such of its duties under this Agreement as are necessary to ensure
the continued tax deferred status thereof and the payment of benefits
thereunder, except to the extent proscribed by law, the SEC or other regulatory
body. Notwithstanding the foregoing, nothing in this Section 12.5 obligates a
Fund to continue in existence. In the event that any Fund elects to terminate
its operations, the Company shall, as soon as practicable, obtain an exemptive
order or order of substitution from the SEC to remove all Owners from the
applicable Fund.
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13. NOTICES.
All notices under this Agreement shall be given in writing (and shall be
deemed to have been duly given upon receipt) by delivery in person, by
facsimile, by registered or certified mail
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or by overnight delivery (postage prepaid, return receipt requested) to the
respective Parties as follows:
If to Strong Variable:
Strong Variable Insurance Funds, Inc.
100 Heritage Reserve
Milwaukee, Wisconsin 53051
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Opportunity Fund II:
Strong Opportunity Fund II, Inc.
100 Heritage Reserve
Milwaukee, Wisconsin 53051
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Adviser:
Strong Capital Management, Inc.
100 Heritage Reserve
Milwaukee, Wisconsin 53051
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Distributors:
Strong Funds Distributors, Inc.
100 Heritage Reserve
Milwaukee, Wisconsin 53051
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Company:
Lincoln Benefit Life
--------------------------------
206 South 13th St.
--------------------------------
Lincoln, Ne 68508
--------------------------------
Attention: Carol Watson
----------------------------
Facsimile No.: (402) 479-7497
-----------------
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14. MISCELLANEOUS.
14.1. CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no way affect the construction or effect
of any provisions hereof.
14.2. ENFORCEABILITY. If any portion 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.
14.3. COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which taken together shall constitute one
and the same instrument.
14.4. REMEDIES NOT EXCLUSIVE. 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 to
this Agreement are entitled to under state and federal laws.
14.5. CONFIDENTIALITY. Subject to the requirements of legal process and
regulatory authority, the Funds and Distributors shall treat as confidential
the names and addresses of the owners of the Contracts and all information
reasonably identified as confidential in writing by the Company to this
Agreement 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 Company until such
time as it may come into the public domain.
14.6. GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the internal laws of the State of Wisconsin applicable to
agreements fully executed and to be performed therein; exclusive of conflicts
of laws.
14.7. SURVIVABILITY. Sections 6, 7.2, 7.3, 7.4, 9, 11 and 12.5 hereof
shall survive termination of this Agreement. In addition, all provisions of
this Agreement shall survive termination of this Agreement in the event that
any Contracts are invested in a Fund at the time the termination becomes
effective and shall survive for so long as such Contracts remain so invested.
14.8. AMENDMENT AND WAIVER. No modification of any provision of this
Agreement will be binding unless in writing and executed by the Party to be
bound thereby. No waiver of any provision of this Agreement will be binding
unless in writing and executed by the Party granting such waiver.
Notwithstanding anything in this Agreement to the contrary, the Company may
unilaterally amend Exhibit A to this Agreement to add additional series of
Strong Variable Funds ("New Funds") as Funds by sending to the Company a
written notice of the New Funds. Any valid waiver of a provision set forth
herein shall not constitute a waiver of any other provision of this
Agreement. In addition, any such waiver shall constitute a present waiver of
such provision and shall not constitute a permanent future waiver of such
provision.
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14.9. ASSIGNMENT. This Agreement shall be binding upon and shall inure
to the benefit of the Parties and their respective successors and assigns;
PROVIDED, HOWEVER, that neither this Agreement nor any rights, privileges,
duties or obligations of the Parties may be assigned by any Party without the
written consent of the other Parties or as expressly contemplated by this
Agreement.
14.10. ENTIRE AGREEMENT. This Agreement contains the full and complete
understanding between the Parties with respect to the transactions covered
and contemplated under this Agreement, and supersedes all prior agreements
and understandings between the Parties relating to the subject matter hereof,
whether oral or written, express or implied.
14.11. RELATIONSHIP OF PARTIES; NO JOINT VENTURE, ETC. Except for the
limited purpose provided in Section 3.8, it is understood and agreed that the
Company shall be acting as an independent contractor and not as an employee
or agent of the Adviser, Distributors or the Funds, and none of the Parties
shall hold itself out as an agent of any other Party with the authority to
bind such Party. Neither the execution nor performance of this Agreement
shall be deemed to create a partnership or joint venture by and among any of
the Company, Funds, Adviser, or Distributors.
14.12. EXPENSES. All expenses incident to the performance by each Party
of its respective duties under this Agreement shall be paid by that Party.
14.13. TIME OF ESSENCE. Time shall be of the essence in this Agreement.
14.14. NON-EXCLUSIVITY. Each of the Parties acknowledges and agrees
that this Agreement and the arrangements described herein are intended to be
non-exclusive and that each of the Parties is free to enter into similar
agreements and arrangements with other entities.
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14.15. OPERATIONS OF FUNDS. In no way shall the provisions of this
Agreement limit the authority of the Funds, the Company or Distributors to
take such action as it may deem appropriate or advisable in connection with
all matters relating to the operation of such Fund and the sale of its
shares. In no way shall the provisions of this Agreement limit the authority
of the Company to take such action as it may deem appropriate or advisable in
connection with all matters relating to the provision of Services or the
shares of funds other than the Funds offered to the Account.
[COMPANY]
----------------------------------------
By:
Name:
Title:
STRONG CAPITAL MANAGEMENT, INC.
----------------------------------------
Rochelle Lamm Wallach
President of Strong Advisory Services, a
division of Strong Capital Management, Inc.
STRONG FUNDS DISTRIBUTORS, INC.
----------------------------------------
Stephen J. Shenkenberg, Vice President
STRONG VARIABLE INSURANCE FUNDS, INC. on
behalf of the Designated Portfolios
----------------------------------------
Stephen J. Shenkenberg, Vice President
STRONG OPPORTUNITY FUND II, INC.
----------------------------------------
Stephen J. Shenkenberg, Vice President
22
<PAGE>
EXHIBIT A
The following is a list of Designated Portfolios under this Agreement:
Strong Discovery Fund II
Strong Growth Fund II
Strong Opportunity Fund II
23
<PAGE>
EXHIBIT B
THE SERVICES
Company shall perform the following services. Such services shall be
the responsibility of the Company and shall not be the responsibility of the
Funds, Adviser or Distributors.
1. Maintain separate records for each Account, which records shall
reflect Fund shares ("Shares") purchased and redeemed, including the date and
price for all transactions, Share balances, and the name and address of each
Owner, including zip codes and tax identification numbers.
2. Credit contributions to individual Owner accounts and invest such
contributions in shares of the Funds to the extent so designated by the Owner.
3. Disburse or credit to the Owners, and maintain records of, all
proceeds of redemptions of Fund shares and all other distributions not
reinvested in shares.
4. Prepare and transmit to the Owners, periodic account statements
showing, among other things, the total number of Fund shares owned as of the
statement closing date, purchases and redemptions of shares during the period
covered by the statement, the net asset value of the Funds as of a recent date,
and the dividends and other distributions paid during the statement period
(whether paid in cash or reinvested in shares).
5. Transmit to the Owners, as required by applicable law, prospectuses,
proxy materials, shareholder reports, and other information provided by the
Adviser, Distributors or Funds and required to be sent to shareholders under the
Federal securities laws.
6. Transmit to Distributors purchase orders and redemption requests
placed by the Account and arrange for the transmission of funds to and from the
Funds.
7. Transmit to Distributors such periodic reports as Distributors shall
reasonably conclude is necessary to enable the Funds to comply with applicable
Federal securities and state Blue Sky requirements.
8. Transmit to each Account confirmations of purchase orders and
redemption requests placed by each Account.
9. Maintain all account balance information for the Account and daily and
monthly purchase summaries expressed in shares and dollar amounts.
10. Prepare, transmit and file any Federal, state and local government
reports and returns as required by law with respect to each account maintained
on behalf of the Account.
24
<PAGE>
11. Respond to Owners' inquiries regarding, among other things, share
prices, account balances, dividend options, dividend amounts, and dividend
payment dates.
25
<PAGE>
EXHIBIT C
ACCOUNT INFORMATION
1. Entity in whose name each Account will be opened:
------------------------
Mailing address:
------------------------
------------------------
------------------------
2. Employer ID number (FOR INTERNAL USAGE ONLY):
------------------------
3. Authorized contact persons: The following persons are authorized on behalf
of the Company to effect transactions in each Account:
Name: Name:
----------------------------- ------------------------------------
Phone: Phone:
----------------------------- ------------------------------------
4. Will the Accounts have telephone exchange? Yes No
----- -----
(THIS OPTION LETS COMPANY REDEEM SHARES BY TELEPHONE AND APPLY THE PROCEEDS
FOR PURCHASE IN ANOTHER IDENTICALLY REGISTERED STRONG FUNDS ACCOUNT.)
5. Will the Accounts have telephone redemption? Yes No
----- -----
(THIS OPTION LETS COMPANY SELL SHARES BY TELEPHONE. THE PROCEEDS WILL BE
WIRED TO THE BANK ACCOUNT SPECIFIED BELOW.)
6. All dividends and capital gains will be reinvested automatically.
7. Instructions for all outgoing wire transfers:
------------------------
------------------------
------------------------
------------------------
8. If this Account Information Form contains changed information, the
undersigned authorized officer has executed this amended Account Information
Form as of the date set forth below and acknowledges the agreements and
representations set forth in the Participation Agreement between the Company,
the Funds, Adviser and Distributors:
26
<PAGE>
9. Company represents under penalty of perjury that:
(i) The employer ID number on this form is correct; and
(ii) Company is not subject to backup withholding because (a) Company is
exempt from backup withholding, (b) Company has not been notified by the IRS
that it is subject to backup withholding as a result of failure to report all
interest or dividends, or (c) the IRS has notified the Company that it is no
longer subject to backup withholding. (Cross out (ii) if Company has been
notified by the IRS that it is subject to backup withholding because of
underreporting interest or dividends on its tax return.)
------------------------------------- ----------------------
(SIGNATURE OF AUTHORIZED OFFICER) (DATE)
PLEASE NOTE: DISTRIBUTORS EMPLOYS REASONABLE PROCEDURES TO CONFIRM THAT
INSTRUCTIONS COMMUNICATED BY TELEPHONE ARE GENUINE AND MAY NOT BE LIABLE FOR
LOSSES DUE TO UNAUTHORIZED OR FRAUDULENT INSTRUCTIONS. PLEASE SEE THE
PROSPECTUS FOR THE APPLICABLE FUND FOR MORE INFORMATION ON THE TELEPHONE
EXCHANGE AND REDEMPTION PRIVILEGES.
FOR STRONG INTERNAL USE: THIS ACCOUNT INFORMATION FORM MAY BE A COPY. THE
ORIGINAL ACCOUNT INFORMATION FORM IS ATTACHED TO THE PARTICIPATION AGREEMENT
WITH THE ADVISER AND RETAINED IN THE LEGAL DEPARTMENT.
27
<PAGE>
Re: Fee Letter Relating to the [Company] Participation Agreement.
Dear
---------------
Pursuant to the Participation Agreement by and among Strong Capital
Management, Inc. ("Strong"), ____________________ (the "Company"), Strong
Variable Insurance Funds, Inc., Strong Opportunity Fund II, Inc. and Strong
Funds Distributors, Inc. ("Distributors") dated _________ __, 1997 (the
"Participation Agreement"), the Company will provide certain administrative
services on behalf of the registered investment companies or series thereof
specified in Exhibit A (each a "Fund" and collectively the "Funds").
In recognition of the reduction in administrative expenses that derives
from the performance of said administrative services, Strong agrees to pay the
Company the fee specified below for each Fund specified in Exhibit A to this
Agreement.
(a) For average aggregate amounts (as calculated in paragraph (b),
below) invested through variable insurance products issued by the Company
with the Funds, the monthly fee shall equal the percentage (calculated in
paragraph (b), below) of the applicable annual fee for each Fund specified
in Exhibit A.
(b) For purposes of computing the fee contemplated in paragraph (a)
above, Strong shall calculate and pay to the Company an amount with respect
to each Fund equal to the product of: (a) the product of (i) the number of
calendar days in the applicable month divided by the number of calendar
days in that year (365 or 366 as applicable) and (ii) the applicable
percentage specified in Exhibit A, to this Agreement, multiplied by (b) the
average daily market value of the investments held in such Fund pursuant to
the Participation Agreement computed by totaling the aggregate investment
(share net asset value multiplied by the total number of shares held) on
each day during the calendar month and dividing by the total number of days
during such month.
(c) Strong shall calculate the amount of the payment to be made
pursuant to this Letter Agreement at the end of each calendar month and
will make such payment to the Company within 30 days after receiving the
report referenced in paragraph (e), below. Fees will be paid, at Strong's
election, by wire transfer or by check. All payments under this Agreement
shall be considered final unless disputed by the Company in writing within
60 days of receipt.
(d) The parties agree that the fees contemplated herein are solely
for shareholder servicing and other administrative services provided by the
Company and do not constitute payment in any manner for investment
advisory, distribution, trustee, or custodial services.
(e) The Company agrees to provide Strong by the 15th day of each
month with a report which indicates the number of Owners that hold through
a Contract interests in each Account as of the last day of the prior month.
28
<PAGE>
(f) If requested in writing by Strong, and at Strong's expense, the
Company shall provide to Strong, by February 14th of each year, a "Special
Report" from a nationally recognized accounting firm reasonably acceptable
to Strong which substantiates for each month of the prior calendar year:
(a) the number of Owners that hold, through an Account, interests in each
Account maintained by the Company on the last day of each month which held
shares for which the fee provided for in this Letter Agreement was received
by the Company, (b) that any fees billed to Strong for such month were
accurately determined in accordance with this Letter Agreement, and (c)
such other information in connection with this Agreement and the
Participation Agreement as may be reasonably requested by Strong.
(g) The parties to this Agreement agree that Strong may unilaterally
amend Schedule A to this Agreement to add additional investment companies
or series thereof ("New Funds") as Funds subject to the provisions of this
Letter Agreement by sending to the Company a written notice of the New
Funds and indicating therein the fees to be paid to the Company with
respect to the administrative services provided pursuant to the
Participation Agreement in connection with such New Funds.
(h) This Letter Agreement shall terminate upon termination of the
Participation Agreement. Accordingly, all payments pursuant to this Letter
Agreement shall cease upon termination of the Participation Agreement.
(i) Capitalized terms not otherwise defined herein shall have the
meaning assigned to them in the Participation Agreement.
If you are in agreement with the foregoing, please sign and date below
where indicated and return one copy of this signed letter agreement to me.
Very truly yours,
Rochelle Lamm Wallach
President, Strong Advisory Services, a
division of Strong Capital
Management, Inc.
Accepted and agreed to this _____ day of
_____________, 1997.
[COMPANY]
- ---------------------------------------
By:
Name:
Title:
29
<PAGE>
EXHIBIT A TO FEE LETTER
The Funds subject to this Agreement and applicable annual fees are as follows:
<TABLE>
<CAPTION>
Fund Annual Fee
- ---- ----------
<S> <C>
Strong Opportunity Fund II, Inc. %
Strong Variable Insurance Funds, Inc.
Strong Discovery Fund II %
Strong International Stock Fund II %
Strong Growth Fund II %
</TABLE>
30
<PAGE>
PARTICIPATION AGREEMENT
AMONG
[ NAME OF FUND(s) ],
T. ROWE PRICE INVESTMENT SERVICES, INC.,
AND
LINCOLN BENEFIT LIFE COMPANY
THIS AGREEMENT, made and entered into as of this day of
, 1998 by and among Lincoln Benefit Life Company
(hereinafter, the "Company"), a Nebraska insurance company, on its own
behalf and on behalf of each segregated asset account of the Company set forth
on Schedule A hereto as may be amended from time to time (each account
hereinafter referred to as the "Account"), and the undersigned funds, each, a
corporation organized under the laws of Maryland (each hereinafter referred to
as the "Fund") and T. Rowe Price Investment Services, Inc. (hereinafter the
"Underwriter"), a Maryland corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is or will be available to act as the investment vehicle
for separate accounts established for variable life insurance and variable
annuity contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission ("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, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T) (b)(15) thereunder, to the extent necessary to permit shares of the Fund
to be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Shared Funding Exemptive Order"); and
<PAGE>
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, T. Rowe Price Associates, Inc. and Rowe Price-Fleming
International, Inc. (each hereinafter referred to as the "Adviser") are each
duly registered as an investment adviser under the Investment Advisers Act of
1940, as amended, and any applicable state securities laws; and
WHEREAS, the Company has registered or will register certain variable
life insurance or variable annuity contracts supported wholly or partially by
the Account (the "Contracts") under the 1933 Act, and said Contracts are listed
in Schedule A hereto, as it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid Contracts; and
WHEREAS, the Company has registered or will register the Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Underwriter agrees to sell to the Company those shares of the
Designated Portfolios which the Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Designated Portfolios.
1.2 The Fund agrees to make shares of the Designated Portfolios
available for purchase at the applicable net asset value per share by the
Company and the Account on
<PAGE>
those days on which the Fund calculates its net asset value pursuant to rules of
the SEC, and the Fund shall use its best 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 sell shares of any Designated Portfolio to any
person, or suspend or terminate the offering of shares of any Designated
Portfolio if such action is required by law or by regulatory authorities having
jurisdiction, or is, in the sole discretion of the Board acting in good faith
and in light of their fiduciary duties under federal and any applicable state
laws, necessary in the best interests of the shareholders of such Designated
Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Designated Portfolios will be sold to the general public. The
Fund and the Underwriter will not sell Fund shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Articles I, III and VII of this Agreement is in effect to govern such
sales.
1.4 The Fund agrees to redeem, on the Company's request, any full or
fractional shares of the Designated Portfolios held by the Company, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the request for redemption, except that
the Fund reserves the right to suspend the right of redemption or postpone the
date of payment or satisfaction upon redemption consistent with Section 22(e) of
the 1940 Act and any sales thereunder, and in accordance with the procedures and
policies of the Fund as described in the then current prospectus.
1.5 For purposes of Sections 1.1 and 1.4, the Company shall be the
designee of the Fund for receipt of purchase and redemption orders from the
Account, and receipt by such designee shall constitute receipt by the Fund;
provided that the Company receives the order by 4:00 p.m. Baltimore time and the
Fund receives notice of such order by 9:30 a.m. Baltimore time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the SEC.
1.6 The Company agrees to purchase and redeem the shares of each
Designated Portfolio offered by the then current prospectus of the Fund and in
accordance with the provisions of such prospectus.
1.7 The Company shall pay for Fund shares one Business Day after
receipt of an order to purchase Fund shares is made in accordance with the
provisions of Section 1.5 hereof. Payment shall be in federal funds transmitted
by wire by 3:00 p.m. Baltimore time. If payment in Federal Funds for any
purchase is not received or is received by the Fund after 3:00 p.m. Baltimore
time on such Business Day, the Company shall promptly, upon the Fund's request,
reimburse the Fund for any charges, costs, fees, interest or other expenses
incurred by the Fund in connection with any advances to, or borrowings or
<PAGE>
overdrafts by, the Fund, or any similar expenses incurred by the Fund, as a
result of portfolio transactions effected by the Fund based upon such purchase
request. For purposes of Section 2.8 and 2.9 hereof, upon receipt by the Fund
of the federal funds so wired, such funds shall cease to be the responsibility
of the Company and shall become the responsibility of the Fund.
1.8 Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Designated Portfolios' shares. The
Company hereby elects to receive all such income, dividends, and capital gain
distributions as are payable on Designated Portfolio shares in additional shares
of that Portfolio. The Company reserves the right to revoke this election and
to receive all such income dividends and capital gain distributions in cash.
The Fund shall notify the Company of the number of shares so issued as payment
of such dividends and distributions.
1.10 The Fund shall make the net asset value per share for each
Designated Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is calculated (normally
by 6:30 p.m. Baltimore time) and shall use its best efforts to make such net
asset value per share available by 7 p.m. Baltimore time. If the net asset
value is materially incorrect through no fault of the Company, the Company on
behalf of each Account, shall be entitled to an adjustment to the number of
shares purchased or redeemed to reflect the correct net asset value in
accordance with Fund procedures. Any material error in the net asset value
shall be reported to the Company promptly upon discovery. Any administrative or
other costs or losses incurred for correcting underlying Contract owner accounts
shall be at Company's expense.
1.11 The Parties hereto acknowledge that the arrangement contemplated
by this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies.
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
<PAGE>
and validly established the Account prior to any issuance or sale thereof as a
segregated asset account under the [ STATE ] insurance laws and has registered
or, prior to any issuance or sale of the Contracts, will register the Account as
a unit investment trust in accordance with the provisions of the 1940 Act to
serve as a segregated investment account for the Contracts.
2.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the state of [STATE] and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may
make such payments in the future. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund will undertake to have
the Board, a majority of whom are not interested persons of the Fund, formulate
and approve any plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses.
2.4 The Fund makes no 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, 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 [ STATE ] to the extent required to perform this Agreement.
2.5 The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.6 The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of [ STATE ] and any applicable
state and federal securities laws.
2.7 The Underwriter represents and warrants that the Adviser is and
shall remain duly registered under all applicable federal and state securities
laws and that the Adviser shall perform its obligations for the Fund in
compliance in all material respects with the laws of the State of [ STATE ] and
any applicable state and federal securities laws.
<PAGE>
2.8 The Fund and the Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other individuals
or entities dealing with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less 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.
2.9 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 Fund are covered by
a blanket fidelity bond or similar coverage 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 that any amounts
received under such bond in connection with claims that arise from the
arrangements described in this Agreement will be held by the Company for the
benefit of the Fund. 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. The Company agrees to exercise its best efforts to
ensure that other individuals/entities not employed or controlled by the Company
and dealing with the money and/or securities of the Fund maintain a similar bond
or coverage in a reasonable amount.
ARTICLE III. PROSPECTUSES, STATEMENTS OF ADDITIONAL INFORMATION, 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 (describing only
the Designated Portfolios listed on Schedule A) as the Company may reasonably
request. If requested by the Company in lieu thereof, the Fund shall provide
such documentation (including a final copy of the new prospectus as set in type
or on a diskette, at the Fund's expense) and other assistance as is reasonably
necessary in order for the Company (at the Company's expense) once each year (or
more frequently if the prospectus for the Fund is amended) to have the
prospectus for the Contracts and the Fund's prospectus printed together in one
document (such printing to be at the Company's expense).
3.2 The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available from the Company (or,
in the Fund's discretion, from the Fund), and the Underwriter (or the Fund), at
its expense, shall print, or otherwise reproduce, and provide a copy of such SAI
free of charge to the Company for itself and for any owner of a Contract who
requests such SAI.
3.3 The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to shareholders, and other communications to
shareholders in such
<PAGE>
quantity as the Company shall reasonably require for distributing to Contract
owners in the Fund. The Underwriter (at the Company's expense) shall provide
the Company with copies of the Fund's annual and semi-annual reports to
shareholders in such quantity as the Company shall reasonably request for use in
connection with offering the Variable Contracts issued by the Company. If
requested by the Company in lieu thereof, the Underwriter shall provide such
documentation (which may include a final copy of the Fund's annual and
semi-annual reports as set in type or on diskette) and other assistance as is
reasonably necessary in order for the Company (at the Company's expense) to
print such shareholder communications for distribution to Contract owners.
3.4 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
Designated 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 reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law.
3.5 Participating Insurance Companies shall be responsible for
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.
3.6 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act
in accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors or trustees and with whatever
rules the SEC may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material that the Company develops or uses and in which the Fund (or a Portfolio
thereof) or the Adviser or the
<PAGE>
Underwriter is named, at least ten calendar days prior to its use. No such
material shall be used if the Fund or its designee reasonably object to such use
within ten calendar days after receipt of such material. The Fund or its
designee reserves the right to reasonably object to the continued use of such
material, and no such material shall be used if the Fund or its designee so
object.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus or SAI for
the Fund shares, as such registration statement and prospectus or SAI may be
amended or supplemented from time to time, or in reports or proxy statements for
the Fund, or in sales literature or other promotional material approved by the
Fund or its designee or by the Underwriter, except with the permission of the
Fund or the Underwriter or the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company, each piece of sales literature or other
promotional material in which the Company, and/or its Account, is named at least
ten calendar days prior to its use. No such material shall be used if the
Company reasonably objects to such use within ten calendar days after receipt of
such material. The Company reserves the right to reasonably object to the
continued use of such material and no such material shall be used if the Company
so objects.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus, or SAI for the Contracts, as
such registration statement, prospectus or SAI may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution to Contract owners, or
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, 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, within a reasonable time after the filing of
such document(s) with the SEC or other regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, 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, within a
reasonable time after the filing of such document(s) with the SEC or other
regulatory authorities.
<PAGE>
4.7 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 Funds.
ARTICLE V. FEES AND EXPENSES
5.1 The Fund and the Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance
distribution expenses, then the Underwriter may make payments to the Company or
to the underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing, and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter, or other
resources available to the Underwriter. No such payments shall be made directly
by the Fund. Currently, no such payments are contemplated.
5.2 All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund, except as otherwise provided herein. The
Fund shall see to it that all its shares are registered and authorized for
issuance in accordance with applicable federal law and, if and to the extent
deemed advisable by the Fund, in accordance with applicable state laws prior to
their sale. The Fund shall bear the expenses for the cost of registration and
qualification of the Fund's shares, preparation and filing of the Fund's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, setting in type and printing the proxy materials and reports
to shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Fund's
shares.
5.3 The Company shall bear the expenses of printing the Fund's
prospectus (in accordance with 3.1) and of distributing the Fund's prospectus,
proxy materials, and reports to Contract owners and prospective Contract owners.
ARTICLE VI. DIVERSIFICATION AND QUALIFICATION
<PAGE>
6.1 The Fund will invest the assets of each Designated Portfolio in
such a manner as to ensure that the Contracts will be treated as annuity,
endowment, or life insurance contracts, whichever is appropriate, under the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
issued thereunder (or any successor provisions). Without limiting the scope of
the foregoing, each Designated Portfolio of the Fund will comply with Section
817(h) of the Code and Treasury Regulation Section 1.817-5, and any Treasury
interpretations thereof, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts, and any amendments or
other modifications or successor provisions to such Section or Regulations. In
the event of a breach of this Article VI by the Fund, it will take all
reasonable steps (a) to notify the Company of such breach and (b) to adequately
diversify the Fund so as to achieve compliance within the grace period afforded
by Regulation 817.5.
6.2 The Fund represents that each Designated Portfolio is or will be
qualified as a Regulated Investment Company under Subchapter M of the Code, and
that it will make every effort to maintain such qualification (under Subchapter
M or any successor or similar provisions) and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased to
so qualify or that it might not so qualify in the future.
6.3 The Company represents that the Contracts are currently, and at
the time of issuance shall be, treated as life insurance, endowment contracts,
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.
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
<PAGE>
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 Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (I.E., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
provided, however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested members of the Board. Any such withdrawal
and termination must take place within six (6) months after the Fund gives
written notice that this provision is being implemented, and until the end of
that six month period the Fund shall continue to accept and implement orders by
the Company for the purchase (and redemption) of shares of the Fund.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Fund shall continue to
accept
<PAGE>
and implement orders by the company for the purchase (and redemption) of shares
of the Fund.
7.6 For purposes of Section 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contract if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this Agreement
shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the
Fund and the Underwriter and each of their officers and directors and each
person, if any, who controls the Fund or the Underwriter within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Section 8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
<PAGE>
(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 ("SAI") 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,
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 other
promotional material (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 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
authorization or control, with respect to the sale or
distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, SAI, or sales literature 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 if such a statement or omission was made in
reliance upon information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the
terms of this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply with
the qualification requirements specified in Article VI of
this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
<PAGE>
Agreement or arise out of or result from any other material
breach of this Agreement by the Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an 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 and to settle the claim at its own expense; provided,
however, that no such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulation referring to the Indemnified Parties or
their conduct. 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 UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of it directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the
<PAGE>
Underwriter) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Fund's shares or the Contracts; and
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the Registration Statement or
prospectus or SAI or sales literature 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, provided that
this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission
or such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to the Underwriter or Fund by or on behalf
of the Company for use in the Registration Statement
or prospectus for the Fund or in sales literature or
other promotional material (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 or other
promotional material for the Contracts not supplied
by the Underwriter or persons under its control) or
wrongful conduct of the Fund or Underwriter or
persons under their control, with respect to the
sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
Registration Statement, prospectus, SAI, or sales
literature or other promotional material of 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
<PAGE>
(iv) arise as a result of any material failure by the
Fund to provide the services and furnish the
materials under the terms of this Agreement
(including a failure, whether unintentional or in
good faith or otherwise, to comply with the
diversification and other qualification requirements
specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Underwriter in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) 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 and to settle the claim at its own expense;
provided, however, that no such settlement shall, without the Indemnified
Parties' written consent, include any factual stipulation referring to the
Indemnified Parties or their conduct. After notice from the Underwriter to such
party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or
<PAGE>
directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3 INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties may be
required to pay or may become subject under any statute or regulation, at common
law or otherwise, insofar as such losses, claims, expenses, damages, liabilities
or expenses (or actions in respect thereof) or settlements, are related to the
operations of the Fund and:
(i) arise as a result of any material failure by the
Fund to provide the services and furnish the
materials under the terms of this Agreement
(including a failure, whether unintentional or in
good faith or otherwise, to comply with the
diversification and other qualification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of
any representation and/or warranty made by the Fund
in this Agreement or arise out of or result from any
other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or the Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this
<PAGE>
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
expense thereof, with counsel satisfactory to the party named in the action and
to settle the claim at its own expense; provided, however, that no such
settlement shall, without the Indemnified Parties' written consent, include any
factual stipulation referring to the Indemnified Parties or their conduct.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify
the Fund of the commencement of any litigation or proceeding against it or any
of its respective officers or directors in connection with the Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Maryland.
9.2 This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, any Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. TERMINATION
10.1 This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party, for any reason with respect to
some or all Designated Portfolios, by six (6) months'
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Designated
Portfolio based upon the Company's determination that
shares of the Fund are not reasonably available to meet the
requirements of the Contracts; provided that such
termination shall apply only to the Designated Portfolio
not reasonably available; or
<PAGE>
(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
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 Designated 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
Designated 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 Section 6.3 hereof; or if
the Fund or Underwriter reasonably believes that such
Contracts may fail to so qualify; 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
<PAGE>
adverse change in its business, operations, financial
condition, or prospects since the date of this Agreement or
is the subject of material adverse publicity; or
(i) termination by the Company by written notice to the Fund
and the Underwriter, if the Company shall determine, in its
sole judgment exercised in good faith, that the Fund or the
Underwriter has suffered a material adverse change in its
business, operations, financial condition or prospects
since the date of this Agreement or is the subject of
material adverse publicity.
10.2 EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, the owners of the Existing Contracts may be
permitted to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not
apply to any termination under Article VII and the effect of such Article VII
termination shall be governed by Article VII of this Agreement. The parties
further agree that this Section 10.2 shall not apply to any termination under
Section 10.1(g) of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or (iii) pursuant
to the terms of a substitution order issued by the SEC pursuant to Section 26(b)
of the 1940 Act. Upon request, the Company will promptly furnish to the Fund
and the Underwriter the opinion of counsel for the Company (which counsel shall
be reasonably satisfactory to the Fund and the Underwriter) to the effect that
any redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Fund or the Underwriter 90 days notice of its intention to do so.
10.4 Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.
ARTICLE XI. NOTICES
<PAGE>
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Henry H. Hopkins, Esq.
If to the Company:
Lincoln Benefit Life
206 South 13th St.
Lincoln, NE 68508-1993
Attention: Carol Watson
If to Underwriter:
T. Rowe Price Investment Services
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Henry H. Hopkins, Esq.
ARTICLE XII. MISCELLANEOUS
12.1 All references herein to the Fund are to each of the undersigned
Funds as if this agreement were between such individual Fund and the Underwriter
and the Company. All references herein to the Adviser relate solely to the
Adviser of such individual Fund, as appropriate. All persons dealing with a
Fund must look solely to the property of such Fund, and in the case of a series
company, the respective Designated Portfolio listed on Schedule A hereto as
though such Designated Portfolio had separately contracted with the Company and
the Underwriter for the enforcement of any claims against the Fund. The parties
agree that neither the Board, officers, agents or shareholders assume any
personal liability or responsibility for obligations entered into by or on
behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the
<PAGE>
express written consent of the affected party until such time as such
information may come into the public domain.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without 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 [ 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
[ STATE ] variable annuity laws and regulations and any other applicable law or
regulations.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies, and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8 This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto.
12.9 The Company shall furnish or 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.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
COMPANY: [ COMPANY ]
By its authorized officer
By:
Title:
Date:
FUND: T. ROWE PRICE [ ]
By its authorized officer
By:
Title: Vice President
------------------
Date:
FUND: T. ROWE PRICE [ ]
By its authorized officer
By:
Title: Vice President
------------------
Date:
FUND: T. ROWE PRICE [ ]
By its authorized officer
<PAGE>
By:
Title: Vice President
------------------
Date:
UNDERWRITER: T. ROWE PRICE INVESTMENT SERVICES, INC.
By its authorized officer
By:
Title: Vice President
------------------
Date:
SCHEDULE A
<TABLE>
<CAPTION>
Name of Separate Account and Contracts Funded by
Date Established by Board of Directors Separate Account Designated Portfolios
- -------------------------------------- -------------------- ---------------------
<S>
<C> <C>
</TABLE>
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
LINCOLN BENEFIT LIFE COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this ____ day of ____ 199_, by and
among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), Lincoln Benefit Life Company, Nebraska corporation (the "Company") on
its own behalf and on behalf of each of the segregated asset accounts of the
Company set forth in Schedule A hereto, as may be amended from time to time (the
"Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company, to set aside and invest assets attributable to the aforesaid variable
annuity and/or variable life insurance contracts that are allocated to the
Accounts (the Policies and the Accounts covered by this Agreement, and each
corresponding Portfolio covered by this Agreement in which the Accounts invest,
is specified in Schedule A attached hereto as may be modified from time to
time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered as
a broker-dealer with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"),
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD");
WHEREAS, Lincoln Benefit Financial Services, the underwriter for the
individual variable annuity and the variable life policies, is registered as a
broker-dealer with the SEC under the 1934 Act and is a member in good standing
of the NASD; and
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust,
MFS, and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that Business
Day, as defined below) and which are available for purchase by such
Accounts, executing such orders on a daily basis at the net asset value
next computed after receipt by the Trust or its designee of the order for
the Shares. For purposes of this Section 1.1, the Company shall be the
designee of the Trust for receipt of such orders from Policy owners and
receipt by such designee shall constitute receipt by the Trust; PROVIDED
that the Trust receives notice of such orders by 9:30 a.m. New York time
on the next following Business Day. "Business Day" shall mean any day on
which the New York Stock Exchange, Inc. (the "NYSE") is open for trading
and on which the Trust calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and
the Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall calculate such net
asset value on each day which the NYSE is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Board") may refuse to sell any Shares to the Company and the Accounts,
or suspend or terminate the offering of the Shares if such action is
required by law or by regulatory authorities having jurisdiction or is,
in the sole discretion of the Board acting in good faith and in light of
its fiduciary duties under federal and any applicable state laws,
necessary in the best interest of the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements with
the Trust and MFS (the "Participating Insurance Companies") and their
separate accounts, qualified pension and retirement plans and MFS or its
affiliates. The Trust and MFS will not sell Trust shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Articles III and VII of this Agreement is in
effect to govern such sales. The Company will not resell the Shares
except to the Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed by
Policy owners on that Business Day), executing such requests on a daily
basis at the net asset value next computed after receipt by the Trust or
its designee of the request for redemption. For purposes of this Section
1.4, the Company shall be the designee of the Trust for receipt of
requests for redemption from Policy owners and receipt by such designee
shall constitute receipt by the Trust; provided that the Trust receives
notice of such request for redemption by 9:30 a.m. New York time on the
next following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted
with respect to any Portfolio. However, with respect to payment of the
purchase price by the Company and of redemption proceeds by the Trust,
the Company and the Trust shall net purchase and redemption orders with
respect to each Portfolio and shall transmit one net payment for all of
the Portfolios in accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the
Shares by 2:00 p.m. New York time on the next Business Day after an order
to purchase the Shares is made in accordance with the provisions of
Section 1.1. hereof. In the event of net redemptions, the Trust shall
pay the redemption proceeds by 2:00
- 2 -
<PAGE>
p.m. New York time on the next Business Day after an order to redeem the
shares is made in accordance with the provisions of Section 1.4. hereof.
All such payments shall be in federal funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts.
The Shares ordered from the Trust will be recorded in an appropriate
title for the Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby
elects to receive all such dividends and distributions as are payable on
a Portfolio's Shares in additional Shares of that Portfolio. The Trust
shall notify the Company of the number of Shares so issued as payment of
such dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per
share for each Portfolio available to the Company on each Business Day as
soon as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value
per share available by 6:30 p.m. New York time. In the event that the
Trust is unable to meet the 6:30 p.m. time stated herein, it shall
provide additional time for the Company to place orders for the purchase
and redemption of Shares. Such additional time shall be equal to the
additional time which the Trust takes to make the net asset value
available to the Company. If the Trust provides materially incorrect
share net asset value information, the Trust shall make an adjustment to
the number of shares purchased or redeemed for the Accounts to reflect
the correct net asset value per share. Any material error in the
calculation or reporting of net asset value per share, dividend or
capital gains information shall be reported promptly upon discovery to
the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will
be registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable
state and federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the
1940 Act. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable
law and that it has legally and validly established the Account as a
segregated asset account under applicable law and has registered or,
prior to any issuance or sale of the Policies, will register the Accounts
as unit investment trusts in accordance with the provisions of the 1940
Act (unless exempt therefrom) to serve as segregated investment accounts
for the Policies, and that it will maintain such registration for so long
as any Policies are outstanding. The Company shall amend the
registration statements under the 1933 Act for the Policies and the
registration statements under the 1940 Act for the Accounts from time to
time as required in order to effect the continuous offering of the
Policies or as may otherwise be required by applicable law. The Company
shall register and qualify the Policies for sales in accordance with the
securities laws of the various states only if and to the extent deemed
necessary by the Company.
2.2. The Company represents and warrants that the Policies are
currently and at the time of issuance will be treated as life insurance,
endowment or annuity contract under applicable provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), that it will maintain such
treatment and that it will notify the Trust or MFS immediately upon
having a reasonable basis for believing that the Policies have ceased to
be so treated or that they might not be so treated in the future.
2.3. The Company represents and warrants that Lincoln Benefit
Financial Services, Inc., the underwriter for the individual variable
annuity and the variable life policies, is a member in good standing of
the NASD and is a registered broker-dealer with the SEC. The Company
represents and warrants that the Company and Lincoln Benefit Financial
Services, Inc. will sell and distribute such policies in accordance in
all material respects with all applicable state and federal securities
laws, including without limitation the 1933 Act, the 1934 Act, and the
1940 Act.
- 3 -
<PAGE>
2.4. The Trust and MFS represent and warrant that the Shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of The
Commonwealth of Massachusetts and all applicable federal and state
securities laws and that the Trust is and shall remain registered under
the 1940 Act. The Trust shall amend the registration statement for its
Shares under the 1933 Act and the 1940 Act from time to time as required
in order to effect the continuous offering of its Shares. The Trust
shall register and qualify the Shares for sale in accordance with the
laws of the various states only if and to the extent deemed necessary by
the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in
good standing of the NASD and is registered as a broker-dealer with the
SEC. The Trust and MFS represent that the Trust and the Underwriter will
sell and distribute the Shares in accordance in all material respects
with all applicable state and federal securities laws, including without
limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act and any
applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it shall
perform its obligations for the Trust in compliance in all material
respects with any applicable federal securities laws and with the
securities laws of The Commonwealth of Massachusetts. MFS represents and
warrants that it is not subject to state securities laws other than the
securities laws of The Commonwealth of Massachusetts and that it is
exempt from registration as an investment adviser under the securities
laws of The Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably request
so that it may carry out fully the obligations imposed upon it by the
conditions contained in the exemptive application pursuant to which the
SEC has granted exemptive relief to permit mixed and shared funding (the
"Mixed and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the
Shares as the Company may reasonably request for distribution to existing
Policy owners whose Policies are funded by such Shares. The Trust or its
designee shall provide the Company, at the Company's expense, with as
many copies of the current prospectus for the Shares as the Company may
reasonably request for distribution to prospective purchasers of
Policies. If requested by the Company in lieu thereof, the Trust or its
designee shall provide such documentation (including a "camera ready"
copy of the new prospectus as set in type or, at the request of the
Company, as a diskette in the form sent to the financial printer) and
other assistance as is reasonably necessary in order for the parties
hereto once each year (or more frequently if the prospectus for the
Shares is supplemented or amended) to have the prospectus for the
Policies and the prospectus for the Shares printed together in one
document; the expenses of such printing to be apportioned between (a) the
Company and (b) the Trust or its designee in proportion to the number of
pages of the Policy and Shares' prospectuses, taking account of other
relevant factors affecting the expense of printing, such as covers,
columns, graphs and charts; the Trust or its designee to bear the cost of
printing the Shares' prospectus portion of such document for distribution
to owners of existing Policies funded by the Shares and the Company to
bear the expenses of printing the portion of such document relating to
the Accounts; PROVIDED, however, that the Company shall bear all printing
expenses of such combined documents where used for distribution to
prospective purchasers or to owners of existing Policies not funded by
the Shares. In the event that the Company requests that the Trust or its
designee provides the Trust's prospectus in a "camera ready" or diskette
format, the Trust shall be responsible for providing the prospectus in
the format in which it or
- 4 -
<PAGE>
MFS is accustomed to formatting prospectuses and shall bear the expense
of providing the prospectus in such format (E.G., typesetting expenses),
and the Company shall bear the expense of adjusting or changing the
format to conform with any of its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or its
designee. The Trust or its designee, at its expense, shall print and
provide such statement of additional information to the Company (or a
master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust or
its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser
who requests such statement or to an owner of a Policy not funded by the
Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's
proxy materials, reports to Shareholders and other communications to
Shareholders in such quantity as the Company shall reasonably require for
distribution to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3
above, or of Article V below, the Company shall pay the expense of
printing or providing documents to the extent such cost is considered a
distribution expense. Distribution expenses would include by way of
illustration, but are not limited to, the printing of the Shares'
prospectus or prospectuses for distribution to prospective purchasers or
to owners of existing Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate
to include in the prospectus pursuant to which a Policy is offered
disclosure regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received
from Policy owners; and
(c) vote the Shares for which no instructions have been
received in the same proportion as the Shares of such
Portfolio for which instructions have been received from
Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass through voting privileges for variable contract
owners. The Company will in no way recommend action in connection with
or oppose or interfere with the solicitation of proxies for the Shares
held for such Policy owners. The Company reserves the right to vote
shares held in any segregated asset account in its own right, to the
extent permitted by law. Participating Insurance Companies shall be
responsible for assuring that each of their separate accounts holding
Shares calculates voting privileges in the manner required by the Mixed
and Shared Funding Exemptive Order. The Trust and MFS will notify the
Company of any changes of interpretations or amendments to the Mixed and
Shared Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other
promotional material in which the Trust, MFS, any other investment
adviser to the Trust, or any affiliate of MFS are named, at least three
(3) Business Days prior to its use. No such material shall be used if
the Trust, MFS, or their respective designees reasonably objects to such
use within three (3) Business Days after receipt of such material.
- 5 -
<PAGE>
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning
the Trust or any other such entity in connection with the sale of the
Policies other than the information or representations contained in the
registration statement, prospectus or statement of additional information
for the Shares, as such registration statement, prospectus and statement
of additional information may be amended or supplemented from time to
time, or in reports or proxy statements for the Trust, or in sales
literature or other promotional material approved by the Trust, MFS or
their respective designees, except with the permission of the Trust, MFS
or their respective designees. The Trust, MFS or their respective
designees each agrees to respond to any request for approval on a prompt
and timely basis. The Company shall adopt and implement procedures
reasonably designed to ensure that information concerning the Trust, MFS
or any of their affiliates which is intended for use only by brokers or
agents selling the Policies (I.E., information that is not intended for
distribution to Policy owners or prospective Policy owners) is so used,
and neither the Trust, MFS nor any of their affiliates shall be liable
for any losses, damages or expenses relating to the improper use of such
broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or the Accounts is
named, at least three (3) Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects
to such use within three (3) Business Days after receipt of such
material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf of
the Company or concerning the Company, the Accounts, or the Policies in
connection with the sale of the Policies other than the information or
representations contained in a registration statement, prospectus, or
statement of additional information for the Policies, as such
registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
reports for the Accounts, or in sales literature or other promotional
material approved by the Company or its designee, except with the
permission of the Company. The Company or its designee agrees to respond
to any request for approval on a prompt and timely basis. The parties
hereto agree that this Section 4.4. is neither intended to designate nor
otherwise imply that MFS is an underwriter or distributor of the
Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company
or the Trust, as appropriate) will each provide to the other at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and
other promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to
the Policies, or to the Trust or its Shares, prior to or
contemporaneously with the filing of such document with the SEC or other
regulatory authorities. The Company and the Trust shall also each
promptly inform the other of the results of any examination by the SEC
(or other regulatory authorities) that relates to the Policies, the Trust
or its Shares, and the party that was the subject of the examination
shall provide the other party with a copy of relevant portions of any
"deficiency letter" or other correspondence or written report regarding
any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as
is reasonably practicable of any proxy solicitation for any Portfolio,
and of any material change in the Trust's registration statement,
particularly any change resulting in change to the registration statement
or prospectus or statement of additional information for any Account.
The Trust and MFS will cooperate with the Company so as to enable the
Company to solicit proxies from Policy owners or to make changes to its
prospectus, statement of additional information or registration
statement, in an orderly manner. The Trust and MFS will make reasonable
efforts to attempt to have changes affecting Policy prospectuses become
effective simultaneously with the annual updates for such prospectuses.
- 6 -
<PAGE>
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures,
or other public media), and sales literature (such as brochures,
circulars, reprints or excerpts or any other advertisement, sales
literature, or published articles), distributed or made generally
available to customers or the public, educational or training materials
or communications distributed or made generally available to some or all
agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, and the Company shall pay no fee or other
compensation to the Trust, except that if the Trust or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act to
finance distribution and Shareholder servicing expenses, then, subject to
obtaining any required exemptive orders or regulatory approvals, the
Trust may make payments to the Company or to the underwriter for the
Policies if and in amounts agreed to by the Trust in writing. Each
party, however, shall, in accordance with the allocation of expenses
specified in Articles III and V hereof, reimburse other parties for
expenses initially paid by one party but allocated to another party. In
addition, nothing herein shall prevent the parties hereto from otherwise
agreeing to perform, and arranging for appropriate compensation for,
other services relating to the Trust and/or to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal
and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration fees;
preparation and filing of the Trust's proxy materials and reports to
Shareholders; setting in type and printing its prospectus and statement
of additional information (to the extent provided by and as determined in
accordance with Article III above); setting in type and printing the
proxy materials and reports to Shareholders (to the extent provided by
and as determined in accordance with Article III above); the preparation
of all statements and notices required of the Trust by any federal or
state law with respect to its Shares; all taxes on the issuance or
transfer of the Shares; and the costs of distributing the Trust's
prospectuses and proxy materials to owners of Policies funded by the
Shares and any expenses permitted to be paid or assumed by the Trust
pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act. The
Trust shall not bear any expenses of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies
and of distributing the Trust's Shareholder reports to Policy owners.
The Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal
securities and state insurance laws; the cost of preparing, printing and
distributing the Policy prospectus and statement of additional
information; and the cost of preparing, printing and distributing annual
individual account statements for Policy owners as required by state
insurance laws.
5.4 MFS will quarterly reimburse the Company certain of the
administrative costs and expenses incurred by the Company as a result of
operations necessitated by the beneficial ownership by Policy owners of
shares of the Portfolios of the Trust, equal to ________% per annum of
the aggregate net assets of the Trust attributable to variable life or
variable annuity contracts offered by the Company or its affiliates up
to $100 million and ________% per annum of the net assets of the Trust
attributable to such contracts over $100 million. In no event shall
such fee be paid by the Trust, its shareholders or by the Policy holders
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817 (h) (1)
of the Code and Treas. Reg. 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance
contracts, as they may be amended from time to time (and any revenue
rulings, revenue procedures, notices, and other published announcements
of the Internal Revenue Service interpreting these sections), as if those
requirements applied directly to each such Portfolio.
6.2. The Trust and MFS represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the
Code and that they will maintain such qualification (under Subchapter M
or any successor or similar provision).
- 7 -
<PAGE>
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests
of the variable annuity contract owners and the variable life insurance
policy owners of the Company and/or affiliated companies ("contract
owners") investing in the Trust. The Board shall have the sole authority
to determine if a material irreconcilable conflict exists, and such
determination shall be binding on the Company only if approved in the
form of a resolution by a majority of the Board, or a majority of the
disinterested trustees of the Board. The Board will give prompt notice of
any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set forth
in the Trust's exemptive application pursuant to which the SEC has
granted the Mixed and Shared Funding Exemptive Order by providing the
Board, as it may reasonably request, with all information necessary for
the Board to consider any issues raised and agrees that it will be
responsible for promptly reporting any potential or existing conflicts of
which it is aware to the Board including, but not limited to, an
obligation by the Company to inform the Board whenever contract owner
voting instructions are disregarded. The Company also agrees that, if a
material irreconcilable conflict arises, it will at its own cost remedy
such conflict up to and including (a) withdrawing the assets allocable to
some or all of the Accounts from the Trust or any Portfolio and
reinvesting such assets in a different investment medium, including (but
not limited to) another Portfolio of the Trust, or submitting to a vote
of all affected contract owners whether to withdraw assets from the Trust
or any Portfolio and reinvesting such assets in a different investment
medium and, as appropriate, segregating the assets attributable to any
appropriate group of contract owners that votes in favor of such
segregation, or offering to any of the affected contract owners the
option of segregating the assets attributable to their contracts or
policies, and (b) establishing a new registered management investment
company and segregating the assets underlying the Policies, unless a
majority of Policy owners materially adversely affected by the conflict
have voted to decline the offer to establish a new registered management
investment company.
7.3. A majority of the disinterested trustees of the Board shall
determine whether any proposed action by the Company adequately remedies
any material irreconcilable conflict. In the event that the Board
determines that any proposed action does not adequately remedy any
material irreconcilable conflict, the Company will withdraw from
investment in the Trust each of the Accounts designated by the
disinterested trustees and terminate this Agreement within six (6) months
after the Board informs the Company in writing of the foregoing
determination; PROVIDED, HOWEVER, that such withdrawal and termination
shall be limited to the extent required to remedy any such material
irreconcilable conflict as determined by a majority of the disinterested
trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Mixed and Shared Funding Exemptive
Order) on terms and conditions materially different from those contained
in the Mixed and Shared Funding Exemptive Order, then (a) the Trust
and/or the Participating Insurance Companies, as appropriate, shall take
such steps as may be necessary to comply with Rule 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3 and 7.4 of this
Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
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<PAGE>
8.1. INDEMNIFICATION BY THE COMPANY
The Company agrees to indemnify and hold harmless the Trust, MFS,
any affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or MFS within
the meaning of Section 15 of the 1933 Act, and any agents or employees of
the foregoing (each an "Indemnified Party," or collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Company) or expenses
(including reasonable counsel fees) to which any Indemnified Party may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement, prospectus or statement of
additional information for the Policies or contained in the
Policies or sales literature or other promotional material
for the Policies (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading PROVIDED that
this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished
to the Company or its designee by or on behalf of the Trust
or MFS for use in the registration statement, prospectus or
statement of additional information for the Policies or in
the Policies or sales literature or other promotional
material (or any amendment or supplement) or otherwise for
use in connection with the sale of the Policies or Shares;
or
(b) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus,
statement of additional information or sales literature or
other promotional material of the Trust not supplied by the
Company or its designee, or persons under its control and
on which the Company has reasonably relied) or wrongful
conduct of the Company or persons under its control, with
respect to the sale or distribution of the Policies or
Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the registration
statement, prospectus, statement of additional information,
or sales literature or other promotional literature of the
Trust, or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon
information furnished to the Trust by or on behalf of the
Company; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of
this Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.2. INDEMNIFICATION BY THE TRUST
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<PAGE>
The Trust 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, and any
agents or employees of the foregoing (each an "Indemnified Party," or
collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Trust) or
expenses (including reasonable counsel fees) to which any Indemnified
Party may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement, prospectus, statement of
additional information or sales literature or other
promotional material of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement therein not misleading,
PROVIDED that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in
reasonable reliance upon and in conformity with information
furnished to the Trust, MFS, the Underwriter or their
respective designees by or on behalf of the Company for use
in the registration statement, prospectus or statement of
additional information for the Trust or in sales literature
or other promotional material for the Trust (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus,
statement of additional information or sales literature or
other promotional material for the Policies not supplied by
the Trust, MFS, the Underwriter or any of their respective
designees or persons under their respective control and on
which any such entity has reasonably relied) or wrongful
conduct of the Trust or persons under its control, with
respect to the sale or distribution of the Policies or
Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the registration
statement, prospectus, statement of additional information,
or sales literature or other promotional literature of the
Accounts or relating to the Policies, or any amendment
thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Company by or on behalf of the Trust, MFS or the
Underwriter; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) or
arise out of or result from any other material breach of
this Agreement by the Trust; or
(e) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset
value per share or dividend or capital gain distribution
rate; or
(f) arise as a result of any failure by the Trust to provide
the services and furnish the materials under the terms of
the Agreement;
as limited by and in accordance with the provisions of this Article VIII.
- 10 -
<PAGE>
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating Insurance
Company or any Policy holder, with respect to any losses, claims,
damages, liabilities or expenses that arise out of or result from (i) a
breach of any representation, warranty, and/or covenant made by the
Company hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties
and covenants; (ii) the failure by the Company or any Participating
Insurance Company to maintain its segregated asset account (which invests
in any Portfolio) as a legally and validly established segregated asset
account under applicable state law and as a duly registered unit
investment trust under the provisions of the 1940 Act (unless exempt
therefrom); or (iii) the failure by the Company or any Participating
Insurance Company to maintain its variable annuity and/or variable life
insurance contracts (with respect to which any Portfolio serves as an
underlying funding vehicle) as life insurance, endowment or annuity
contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to
any losses, claims, damages, liabilities or expenses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, willful misconduct, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of notice of commencement of any action, such Indemnified Party
will, if a claim in respect thereof is to be made against the
indemnifying party under this section, notify the indemnifying party of
the commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
Indemnified Party otherwise than under this section. In case any such
action is brought against any Indemnified Party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it may
wish, assume the defense thereof, with counsel satisfactory to such
Indemnified Party. After notice from the indemnifying party of its
intention to assume the defense of an action, the Indemnified Party shall
bear the expenses of any additional counsel obtained by it, and the
indemnifying party shall not be liable to such Indemnified Party under
this section for any legal or other expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or 1933 Act control
persons in connection with the Agreement, the issuance or sale of the
Policies, the operation of the Accounts, or the sale or acquisition of
Shares.
8.7. A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this Article
VIII. The indemnification provisions contained in this Article VIII
shall survive any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as
the SEC may grant and the terms hereof shall be interpreted and construed
in accordance therewith.
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<PAGE>
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts, or
one, some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance
written notice to the other parties; or
(b) at the option of the Company to the extent that the Shares
of Portfolios are not reasonably available to meet the
requirements of the Policies or are not "appropriate
funding vehicles" for the Policies, as reasonably
determined by the Company. Without limiting the generality
of the foregoing, the Shares of a Portfolio would not be
"appropriate funding vehicles" if, for example, such Shares
did not meet the diversification or other requirements
referred to in Article VI hereof; or if the Company would
be permitted to disregard Policy owner voting instructions
pursuant to Rule 6e-2 or 6e-3(T) under the 1940 Act.
Prompt notice of the election to terminate for such cause
and an explanation of such cause shall be furnished to the
Trust by the Company; or
(c) at the option of the Trust or MFS upon institution of
formal proceedings against the Company by the NASD, the
SEC, or any insurance department or any other regulatory
body regarding the Company's duties under this Agreement or
related to the sale of the Policies, the operation of the
Accounts, or the purchase of the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any
state securities or insurance department or any other
regulatory body regarding the Trust's or MFS' duties under
this Agreement or related to the sale of the Shares; or
(e) at the option of the Company, the Trust or MFS upon receipt
of any necessary regulatory approvals and/or the vote of
the Policy owners having an interest in the Accounts (or
any subaccounts) to substitute the shares of another
investment company for the corresponding Portfolio Shares
in accordance with the terms of the Policies for which
those Portfolio Shares had been selected to serve as the
underlying investment media. The Company will give thirty
(30) days' prior written notice to the Trust of the Date of
any proposed vote or other action taken to replace the
Shares; or
(f) termination by either the Trust or MFS by written notice to
the Company, if either one or both of the Trust or MFS
respectively, shall determine, in their sole judgment
exercised in good faith, that the Company has suffered a
material adverse change in its business, operations,
financial condition, or prospects since the date of this
Agreement or is the subject of material adverse publicity;
or
(g) termination by the Company by written notice to the Trust
and MFS, if the Company shall determine, in its sole
judgment exercised in good faith, that the Trust or MFS has
suffered a
- 12 -
<PAGE>
material adverse change in this business, operations,
financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity;
or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement;
or
(i) upon assignment of this Agreement, unless made with the
written consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies
and, if applicable, the Accounts as to which the Agreement is to be
terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised for
cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations, the
Company shall not redeem the Shares attributable to the Policies (as
opposed to the Shares attributable to the Company's assets held in the
Accounts), and the Company shall not prevent Policy owners from
allocating payments to a Portfolio that was otherwise available under the
Policies, until thirty (30) days after the Company shall have notified
the Trust of its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and
MFS shall, at the option of the Company, continue to make available
additional shares of the Portfolios pursuant to the terms and conditions
of this Agreement, for all Policies in effect on the effective date of
termination of this Agreement (the "Existing Policies"), except as
otherwise provided under Article VII of this Agreement. Specifically,
without limitation, the owners of the Existing Policies shall be
permitted to transfer or reallocate investment under the Policies, redeem
investments in any Portfolio and/or invest in the Trust upon the making
of additional purchase payments under the Existing Policies.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail, overnight courier or facsimile to the other party at the address
of such party set forth below or at such other address as such party may from
time to time specify in writing to the other party.
If to the Trust:
MFS VARIABLE INSURANCE TRUST
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary
If to the Company:
Lincoln Benefit Life Company
206 South 13th Street
Lincoln, NE 68508-1993
Facsimile No.: (402) 479-7497
Attn: Carol Watson
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<PAGE>
If to MFS:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement or as otherwise required by
applicable law or regulation, shall not disclose, disseminate or utilize
such names and addresses and other confidential information without the
express written consent of the affected party until such time as it may
come into the public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument
are not binding upon any of the Trust's trustees, officers, employees,
agents or shareholders individually, but are binding solely upon the
assets and property of the Trust in accordance with its proportionate
interest hereunder. The Company further acknowledges that the assets and
liabilities of each Portfolio are separate and distinct and that the
obligations of or arising out of this instrument are binding solely upon
the assets or property of the Portfolio on whose behalf the Trust has
executed this instrument. The Company also agrees that the obligations
of each Portfolio hereunder shall be several and not joint, in accordance
with its proportionate interest hereunder, and the Company agrees not to
proceed against any Portfolio for the obligations of another Portfolio.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
LINCOLN BENEFIT LIFE COMPANY,
By its authorized officer,
By:
---------------------------------
Title:
------------------------------
MFS VARIABLE INSURANCE TRUST, ON BEHALF OF
THE PORTFOLIOS
By its authorized officer and not
individually,
By:
---------------------------------
Title:
------------------------------
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By:
---------------------------------
Title:
------------------------------
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<PAGE>
As of
--------------
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
- --------------------------------------------------------------------------------
NAME OF SEPARATE
ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESTABLISHED BY BOARD OF BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
DIRECTORS
- --------------------------------------------------------------------------------
Lincoln Benefit Life VAP9830 MFS Growth with Income Series
Variable Annuity Account VAP9840 MFS Research Series
August 3, 1992 MFS Emerging Growth Series
MFS Total Return Series
MFS New Discovery Series
- --------------------------------------------------------------------------------
Lincoln Benefit Life VUL9800 (effective May 1, 1998)
Variable Life Account
May 17, 1990
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<PAGE>
FUND PARTICIPATION AGREEMENT
This AGREEMENT is made this 30TH day of DECEMBER, 1993, by and between
Lincoln Benefit Life Company (the "Insurer"), a life insurance company
domiciled in Nebraska, on its behalf and on behalf of the segregated asset
accounts of the Insurer listed on Exhibit A to this Agreement (the "Separate
Accounts"); Insurance Management Series (the "Fund"), a Massachusetts
business trust; and Federated Securities Corp. ("Distributor"), a
PENNSYLVANIA corporation.
WITNESSETH
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 ("1940 Act") and the Fund is
authorized to issue separate classes of shares of beneficial interests
("shares"), each representing an interest in a separate portfolio of assets
known as a "portfolio" and each portfolio has its own investment objective,
policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its
portfolios to separate accounts of insurance companies that fund variable
annuity contracts ("Variable Contracts") and to serve as an investment medium
for Variable Contracts offered by insurance companies that have entered into
participation agreements substantially similar to this agreement ("Participating
Insurance Companies"), and the Fund will be made available in the future to
offer shares of one or more of its portfolios to separate accounts of insurance
companies that fund variable life insurance policies (at which time such
policies would also be "Variable Contracts" hereunder), and
WHEREAS, the Fund is currently comprised of five separate portfolios, and
other portfolios may be established in the future; and
WHEREAS, the Distributor is registered as a broker/dealer with the SEC
under the Securities Exchange Act of 1934, as amended ("1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurer wishes to purchase shares of one or more of the Fund's
portfolios on behalf of its Separate Accounts to serve as an investment medium
for Variable Contracts funded by the Separate Accounts, and the Distributor is
authorized to sell shares of the Fund's portfolios;
NOW THEREFORE, in consideration of the foregoing and the mutual promises
and covenants hereinafter set forth, the parties hereby agree as follows:
1
<PAGE>
ARTICLE I.
SALE OF FUND SHARES
1.1 The distributor agrees to sell to the Insurer those shares of the
portfolios offered and made available by the Fund and identified on Exhibit
B("Portfolios") that the Insurer orders on behalf of its Separate Accounts, and
agrees to execute such orders on each day on which the Fund calculates its net
asset value pursuant to rules of the SEC ("business day") 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.
1.2 The Fund agrees to make available on each business day shares of
the Portfolios for purchase at the applicable net asset value per share by the
Insurer on behalf of its Separate Accounts; provided, however, that the Board of
Trustees 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 is, in
the sole discretion of the Trustees, acting in good faith and in light of the
Trustees' fiduciary duties under applicable law, necessary in the best interests
of the shareholders of any Portfolio.
1.3 The Fund and the Distributor agree that shares of the Portfolios
of the Fund will be sold only to Participating Insurance Companies, their
separate accounts, and other persons consistent with each Portfolio being
adequately diversified pursuant to Section 817(h) of the Internal Revenue Code
of 1986, as amended ("Code") and the regulations thereunder. No shares of any
Portfolio will be sold directly to the general public to the extent not
permitted by applicable tax law.
1.4 The Fund and the Distributor will not sell shares of the
Portfolios to any insurance company or separate account unless an agreement
containing provisions substantially the same as the provisions in Article IV of
this Agreement is in effect to govern such sales.
1.5 Upon receipt of a request for redemption in proper form from the
Insurer, the Fund agrees to redeem any full or fractional shares of the
Portfolios held by the Insurer, ordinarily executing such requests on each
business day at the net asset value next computed after receipt and acceptance
by the Fund or its agent of the request for redemption, except that the Fund
reserves the right to suspend the right of redemption, consistent with Section
22(e) of the 1940 Act and any rules thereunder. Such redemption shall be paid
consistent with applicable rules of the SEC and procedures and policies of the
Fund as described in the current prospectus.
1.6 For purposes of Sections 1.2 and 1.5, the Insurer shall be the
agent of the Fund for the limited purpose of receiving and accepting purchase
and redemption orders from each Separate Account and receipt by such agent shall
constitute receipt by the Fund; provided that the Fund receives notice of such
orders on the next following business day prior to 4:00 p.m. New York City time
on such day, although the Insurer will use its best efforts to provide such
notice by 12:00 noon New York City time.
1.7 The Insurer agrees to purchase and redeem the shares of each
Portfolio in accordance with the provisions of the current prospectus for the
Fund.
2
<PAGE>
1.8 The Insurer shall pay for shares of the Portfolio on the next
business day after it places an order to purchase shares of the Portfolio.
Payment shall be in federal funds transmitted by wire.
1.9 Issuance and transfer of shares of the Portfolios will be by book
entry only unless otherwise agreed by the Fund. Stock certificates will not be
issued to the Insurer or the Separate Accounts unless otherwise agreed by the
Fund. Shares ordered from the Fund will be recorded in an appropriate title for
the Separate Accounts or the appropriate subaccounts of the Separate Accounts.
1.10 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurer of any income dividends or
capital gain distributions payable on the shares of the Portfolios. The Insurer
hereby elects to reinvest in the Portfolio all such dividends and distributions
as are payable on a Portfolio's shares and to receive such dividends and
distributions in additional shares of that Portfolio. The Insurer reserves the
right to revoke this election in writing and to receive all such dividends and
distributions in cash. The Fund shall notify the Insurer of the number of
shares so issued as payment of such dividends and distributions.
1.11 The Fund shall instruct its recordkeeping agent to advise the
Insurer on each business day of the net asset value per share for each Portfolio
as soon as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value per share
available by 6:00 p.m. New York time.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 The Insurer represents and warrants that it is an insurance
insurer duly organized and in good standing under applicable law and that it is
taxed as an insurance company under Subchapter L of the Code.
2.2 The Insurer represents and warrants that it has legally and
validly established each of the Separate Accounts as a segregated asset account
under the Nebraska Insurance Code, and that each of the Separate Accounts is a
validly existing segregated asset account under applicable federal and state
law.
2.3 The Insurer represents and warrants that the Variable Contracts
issued by the Insurer or interests in the Separate Accounts under such Variable
Contracts (1) are or, prior to issuance, will be registered as securities under
the Securities Act of 1933 ("1933 Act") or, alternatively (2) are not registered
because they are properly exempt from registration under the 1933 Act or will be
offered exclusively in transactions that are properly exempt from registration
under the 1933 Act.
2.4 The Insurer represents and warrants that each of the Separate
Accounts (1) has been registered as a unit investment trust in accordance with
the provisions of
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the 1940 Act or, alternatively (2) has not been registered in proper reliance
upon an exclusion from registration under the 1940 Act.
2.5 The Insurer represents that it believes, in good faith, that the
Variable Contracts issued by the Insurer are currently treated as annuity
contracts or life insurance policies (which may include modified endowment
contracts), whichever is appropriate, under applicable provisions of the Code.
2.6 The Fund represents and warrants that it is duly organized as a
business trust under the laws of the Commonwealth of Massachusetts, and is in
good standing under applicable law.
2.7 The Fund represents and warrants that the shares of the
Portfolios are duly authorized for issuance in accordance with applicable law
and that the Fund is registered as an open-end management investment company
under the 1940 Act.
2.8 The Fund represents that it believes, in good faith, that the
Portfolios currently comply with the diversification provisions of Section
817(h) of the Code and the regulations issued thereunder relating to the
diversification requirements for variable life insurance policies and variable
annuity contracts.
2.9 The Distributor represents and warrants that it is a member in
good standing of the NASD and is registered as a broker/dealer with the SEC.
ARTICLE III.
GENERAL DUTIES
3.1 The Fund shall take all such actions as are necessary to permit
the sale of the shares of each Portfolio to the Separate Accounts, including
maintaining its registration as an investment company under the 1940 Act, and
registering the shares of the Portfolios sold to the Separate Accounts under the
1933 Act for so long as required by applicable law. The Fund shall amend its
Registration Statement filed with the SEC under the 1933 Act and the 1940 act
from time to time as required in order to effect the continuous offering of the
shares of the Portfolios. The Fund shall register and qualify the shares for
sale in accordance with the laws of the various states to the extent deemed
necessary by the Fund or the Distributor.
3.2 The Fund shall make every effort to maintain qualification of
each Portfolio as a Regulated Investment Company under Subchapter M of the Code
(or any successor or similar provision) and shall notify the Insurer immediately
upon having a reasonable basis for believing that a Portfolio has ceased to so
qualify or that it might not so qualify in the future.
3.3 The Fund shall make every effort to enable each Portfolio to
comply with the diversification provisions of Section 817(h) of the Code and the
regulations issued thereunder relating to the diversification requirements for
variable life insurance policies and variable annuity contracts and any
prospective amendments or other modifications
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to Section 817 or regulations thereunder, and shall notify the Insurer
immediately upon having a reasonable basis for believing that any Portfolio has
ceased to comply.
3.4 The Insurer shall take all such actions as are necessary under
applicable federal and state law to permit the sale of the Variable Contracts
issued by the Insurer, including registering each Separate Account as an
investment company to the extent required under the 1940 Act, and registering
the Variable Contracts or interests in the Separate Accounts under the Variable
Contracts to the extent required under the 1933 Act, and obtaining all necessary
approvals to offer the Variable Contracts from state insurance commissioners.
3.5 The Insurer shall make every effort to maintain the treatment of
the Variable Contracts issued by the Insurer as annuity contracts or life
insurance policies, whichever is appropriate, under applicable provisions of the
Code, and shall notify the Fund and the Distributor immediately upon having a
reasonable basis for believing that such Variable Contracts have ceased to be so
treated or that they might not be so treated in the future.
3.6 The Insurer shall offer and sell the Variable Contracts issued by
the Insurer in accordance with applicable provisions of the 1933 Act, the 1934
Act, the 1940 act, the NASD Rules of Fair Practice, and state law respecting the
offering of variable life insurance policies and variable annuity contracts.
3.7 The Distributor shall sell and distribute the shares of the
Portfolios of the Fund in accordance with the applicable provisions of the 1933
Act, the 1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and state law.
3.8 Before shares of the Fund are offered (1) to variable annuity
separate accounts and variable life insurance separate accounts of the same life
insurance company or of affiliated life insurance companies ("Mixed Funding") or
(2) to variable life insurance separate accounts of one life insurance company
and separate accounts funding variable life insurance policies or variable
annuity contracts of other unaffiliated life insurance companies ("Shared
Funding"), the Fund shall use its best efforts to obtain an order from the SEC,
granting Participating Insurance Companies, separate accounts funding Variable
Contracts of Participating Insurance Companies, and the Fund 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) under the 1940 Act, to the extent necessary
to permit such persons to rely on the exemptive relief provided under paragraph
(b)(15) of Rule 6e-2 and/or paragraph (b)(15) of Rule 6e-3(T) (the "Mixed and
Shared Funding Exemptive Order").
3.9 During such time as the Fund engages in Mixed Funding or Shared
Funding, a majority of the Board of Trustees of the Fund shall consist of
persons who are not "interested persons" of the Fund ("disinterested Trustees"),
as defined by Section 2(a)(19) of the 1940 Act and the rules thereunder, and as
modified by any applicable orders of the SEC, except that if this provision of
this Section 3.9 is not met by reason of the death, disqualification, or bona
fide resignation of any Trustee or Trustees, then the operation of this
provision shall be suspended (a) for a period of 45 days if the vacancy or
vacancies may be filled by the Fund's Board; (b) for a period of 60 days if a
vote of
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shareholders is required to fill the vacancy or vacancies; or (c) for such
longer period as the SEC may prescribe by order upon application.
3.10 The Insurer and its agents will not in any way recommend any
proposal or oppose or interfere with any proposal submitted by the Fund at a
meeting of owners of Variable Contracts or shareholders of the Fund, and will in
no way recommend, oppose, or interfere with the solicitation of proxies for Fund
shares held by Contract Owners, without the prior written consent of the Fund,
which consent may be withheld in the Fund's sole discretion.
3.11 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (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.
ARTICLE IV.
POTENTIAL CONFLICTS
4.1 During such time as the Fund engages in Mixed Funding or Shared
Funding, the parties hereto shall comply with the conditions in this Article IV.
4.2 The Fund's Board of Trustees shall monitor the Fund for the
existence of any material irreconcilable conflict (1) between the interests of
owners of variable annuity contracts and variable life insurance policies, and
(2) between the interests of owners of Variable Contracts ("Variable Contract
Owners") issued by different Participating Life Insurance Companies that invest
in the Fund. A material irreconcilable conflict may arise for a variety of
reasons, including: (a) an action by any state insurance regulatory authority;
(b) a change in applicable federal or state insurance, tax, or securities laws
or regulations, or a public ruling, private letter ruling, no-action or
interpretive 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 of
the Fund are being managed; (e) a difference in voting instructions given by
variable annuity and variable life insurance contract owners; or (f) a decision
by a Participating Insurance Company to disregard the voting instructions of
Variable Contract Owners.
4.3 The Insurer agrees that it shall report any potential or existing
conflicts of which it is aware to the Fund's Board of Trustees. The Insurer
will be responsible for assisting the Board of Trustees of the Fund in carrying
out its responsibilities under the Mixed and Shared Funding Exemptive Order, or,
if the Fund is engaged in Mixed Funding or Shared Funding in reliance on Rule
6e-2, 6e-3(T), or any other regulation under the 1940 Act, the Insurer will be
responsible for assisting the Board of Trustees of the Fund in carrying out its
responsibilities under such regulation, 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 Insurer to inform the
Board whenever Variable Contract Owner voting instructions are disregarded. The
Insurer
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shall carry out its responsibility under this Section 4.3 with a view only to
the interests of the Variable Contract Owners.
4.4 The Insurer agrees that in the event that it is determined by a
majority of the Board of Trustees of the Fund or a majority of the Fund's
disinterested Trustees that a material irreconcilable conflict exists, the
Insurer shall, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees of the Board of the
Fund), 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 another portfolio of the Fund, or submitting the question as to
whether such segregation should be implemented to a vote of all affected
Variable Contract Owners and, as appropriate, segregating the assets of any
appropriate group (I.E., annuity contract owners or life insurance contract
owners issued by one or more Participating Insurance Companies) that votes in
favor of such segregation, or offering to the affected Variable 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 the Insurer's decision to disregard
Variable Contract Owners' voting instructions and that decision represents a
minority position or would preclude a majority vote, the Insurer shall be
required, at the Fund's election, to withdraw the Separate Accounts' investment
in the Fund, provided however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested Trustees, and no charge or
penalty will be imposed as a result of such withdrawal. These responsibilities
shall be carried out with a view only to the interests of the Variable Contract
Owners. A majority of the disinterested Trustees of the Fund shall determine
whether or not any proposed action adequately remedies any material
irreconcilable conflict, but in no event, will the Fund or its investment
adviser or the Distributor be required to establish a new funding medium for any
Variable Contract. The Insurer shall not be required by this Section 4.4 to
establish a new funding medium for any Variable Contract if any offer to do so
has been declined by vote of a majority of Variable Contract Owners materially
adversely affected by the material irreconcilable conflict.
4.5 The Insurer, at least annually, shall submit to the Fund's Board
of Trustees such reports, materials, or data as the Board reasonably may request
so that the Trustees of the Fund may fully carry out the obligations imposed
upon the Board by the conditions contained in the application for the Mixed and
Shared Funding Exemptive Order and said reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
4.6 All reports of potential or existing conflicts received by the
Fund's Board of Trustees, and all Board action with regard to determining the
existence of a conflict, notifying Participating Insurance Companies of a
conflict, and determining whether any proposed action adequately remedies a
conflict, shall be properly recorded in the minutes of the Board of Trustees of
the Fund or other appropriate records, and such minutes or other records shall
be made available to the SEC upon request.
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4.7 The Board of Trustees of the Fund shall promptly notify the
Insurer in writing of its determination of the existence of an irreconcilable
material conflict and its implications.
ARTICLE V.
PROSPECTUSES AND PROXY STATEMENTS; VOTING
5.1 The Insurer shall distribute such prospectuses, proxy statements
and periodic reports of the Fund to the owners of Variable Contracts issued by
the Insurer as required to be distributed to such Variable Contract Owners under
applicable federal or state law.
5.2 The Distributor shall provide the Insurer with as many copies of
the current prospectus of the Fund as the Insurer may reasonably request. If
requested by the Insurer in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type or
in camera-ready copy) and other assistance as is reasonably necessary in order
for the Insurer to print together in one document the current prospectus for the
Variable Contracts issued by the Insurer and the current prospectus for the
Fund. The Fund shall bear the expense of printing copies of its current
prospectus that will be distributed to existing Variable Contract Owners, and
the Insurer shall bear the expense of printing copies of the Fund's prospectus
that are used in connection with offering the Variable Contracts issued by the
Insurer.
5.3 The Fund and the Distributor shall provide at the Fund's expense,
such copies of the Fund's current Statement of Additional Information ("SAI") as
may reasonably be requested, to the Insurer and to any owner of a Variable
Contract issued by the Insurer who requests such SAI.
5.4 The Fund, at its expense, shall provide the Insurer with copies
of its proxy material, periodic reports to shareholders and other communications
to shareholders in such quantity as the Insurer shall reasonably require for
purposes of distributing to owners of Variable Contracts issued by the Insurer.
The Fund, at the Insurer's expense, shall provide the Insurer with copies of its
periodic reports to shareholders and other communications to shareholders in
such quantity as the Insurer shall reasonably request for use in connection with
offering the Variable Contracts issued by the Insurer. If requested by the
Insurer in lieu thereof, the Fund shall provide such documentation (including a
final copy of the Fund's proxy materials, periodic reports to shareholders and
other communications to shareholders, as set in type or in camera-ready copy)
and other assistance as reasonably necessary in order for the Insurer to print
such shareholder communications for distribution to owners of Variable Contracts
issued by the Insurer.
5.5 For so long as the SEC interprets the 1940 Act to require
pass-through voting by Participating Insurance Companies whose Separate Accounts
are registered as investment companies under the 1940 Act, the Insurer shall
vote shares of each Portfolio of the Fund held in a Separate Account or a
subaccount thereof, whether or not registered under the 1940 Act, at regular and
special meetings of the Fund in accordance with instructions timely received by
the Insurer (or its designated agent) from owners of Variable Contracts funded
by such Separate Account or subaccount thereof
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having a voting interest in the Portfolio. The Insurer shall vote shares of a
Portfolio of the Fund held in a Separate Account or a subaccount thereof that
are attributable to the Variable Contracts as to which no timely instructions
are received, as well as shares held in such Separate Account or subaccount
thereof that are not attributable to the Variable Contracts and owned
beneficially by the Insurer (resulting from charges against the Variable
Contracts or otherwise), in the same proportion as the votes cast by owners of
the Variable Contracts funded by that Separate Account or subaccount thereof
having a voting interest in the Portfolio from whom instructions have been
timely received. The Insurer shall vote shares of each Portfolio of the Fund
held in its general account, if any, in the same proportion as the votes cast
with respect to shares of the Portfolio held in all Separate Accounts of the
Insurer or subaccounts thereof, in the aggregate.
5.6 During such time as the Fund engages in Mixed Funding or Shared
Funding, the Fund shall disclose in its prospectus that (1) the Fund is intended
to be a funding vehicle for variable annuity and variable life insurance
contracts offered by various insurance companies, (2) material irreconcilable
conflicts possibly may arise, and (3) the Board of Trustees of the Fund will
monitor events in order to identify the existence of any material irreconcilable
conflicts and to determine what action, if any, should be taken in response to
any such conflict. The Fund hereby notifies the Insurer that prospectus
disclosure may be appropriate regarding potential risks of offering shares of
the Fund to separate accounts funding both variable annuity contracts and
variable life insurance policies and to separate accounts funding Variable
Contracts of unaffiliated life insurance companies.
ARTICLE VI.
SALES MATERIAL AND INFORMATION
6.1 The Insurer 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 any Portfolio thereof) or its investment adviser
or the Distributor is named at least 15 days prior to the anticipated use of
such material, and no such sales literature or other promotional material shall
be used unless the Fund and the Distributor or the designee of either approve
the material or do not respond with comments on the material within 10 days from
receipt of the material.
6.2 The Insurer agrees that neither it nor any of its affiliates or
agents shall give any information or make any representations or statements on
behalf of the Fund or concerning the Fund 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 and by the Distributor or its designee, except with the permission of
the Fund or its designee and the Distributor or its designee.
6.3 The Fund or the Distributor or the designee of either shall
furnish to the Insurer or its designee, each piece of sales literature or other
promotional material in which the Insurer or its Separate Accounts are named at
least 15 days prior to the anticipated use of such material, and no such
material shall be used unless the Insurer
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or its designee approve the material or do not respond with comments on the
material within 10 days from receipt of the material.
6.4 The Fund and the Distributor agree that each and the affiliates
and agents of each shall not give any information or make any representations on
behalf of the Insurer or concerning the Insurer, the Separate Accounts, or the
Variable Contracts issued by the Insurer, other than the information or
representations contained in a registration statement or prospectus for such
Variable Contracts, as such registration statement and prospectus may be amended
or supplemented from time to time, or in reports for the Separate Accounts or
prepared for distribution to owners of such Variable Contracts, or in sales
literature or other promotional material approved by the Insurer or its
designee, except with the permission of the Insurer.
6.5 The Fund will provide to the Insurer at least one complete copy
of the Mixed and Shared Funding Exemptive Application and any amendments
thereto, all prospectuses, Statements of Additional Information, reports, proxy
statements and other voting solicitation materials, and all amendments and
supplements to any of the above, that relate to the Fund or its shares, promptly
after the filing of such document with the SEC or other regulatory authorities.
6.6 The Insurer will provide to the Fund at least one complete copy
of the application and any amendments thereto for the Mixed and Shared Funding
Exemptive Order, all prospectuses (which shall include an offering memorandum if
the Variable Contracts issued by the Insurer or interests therein are not
registered under the 1933 Act), Statements of Additional Information, reports,
solicitations for voting instructions, and all amendments or supplements to any
of the above, that relate to the Variable Contracts issued by the Insurer or the
Separate Accounts promptly after the filling of such document with the SEC or
other regulatory authority.
6.7 For purposes of this Article VI, 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, computerized media, 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.
ARTICLE VII.
INDEMNIFICATION
7.1 INDEMNIFICATION BY THE INSURER
7.1(a). The Insurer agrees to indemnify and hold harmless the
Fund, each of its Trustees and officers, any affiliated person of the Fund
within the meaning of Section 2(a)(3) of the 1940 Act, and the Distributor
(collectively, the "Indemnified Parties"
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for purposes of this Section 7.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Insurer) or litigation expenses (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 litigation expenses are related to the sale or acquisition of the Fund's
shares or the Variable Contracts issued by the Insurer 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 (which shall include an
offering memorandum) for the Variable Contracts issued by the
Insurer or sales literature for such Variable Contracts (or any
amendment or supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided
that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity
with information furnished to the Insurer by or on behalf of the
Fund for use in the Contracts issued by the Insurer or sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of such Variable Contracts of Fund
shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations
contained in the registration statement, prospectus or sales
literature of the Fund not supplied by the Insurer or persons
under its control) or wrongful conduct of the Insurer or any of
its affiliates, employees or agents with respect to the sale or
distribution of the Variable Contracts issued by the Insurer or
the Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of the Fund or any
amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance
upon information furnished to the Fund by or on behalf of the
Insurer; or (iv) arise out of or result from any material failure
by the Insurer to provide the services or furnish the materials
required 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 Insurer in this Agreement or arise out of or
result from any other material breach of this Agreement by the
Insurer; or
(iv) arise out of or result from any material failure by
the Insurer to provide the services or furnish the materials
required under the terms of this Agreement; or
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(v) arise out of or result from any material breach of
any representation and/or warranty made by the Insurer in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Insurer;
except to the extent provided in Sections 7.1(b) and 7.1(c) hereof.
7.1(b). The Insurer shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation expenses to which an Indemnified Party would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of the Indemnified Party's duties or by reason of the
Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Fund.
7.1(c). The Insurer shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Party shall have notified the Insurer 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 Insurer of any such
claim shall not relieve the Insurer 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 Insurer shall be entitled to participate, at its
own expense, in the defense of such action. The Insurer also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Insurer to such party of the insurer'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 Insurer will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
7.1(d). The Indemnified Parties shall promptly notify the
Insurer of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Variable
Contracts issued by the Insurer or the operation of the Fund.
7.2 INDEMNIFICATION BY THE DISTRIBUTOR
7.2(a). The Distributor agrees to indemnify and hold harmless
the Insurer, its affiliated principal underwriter of the Variable Contracts, and
each of their directors and officers and each person, if any, who is an
affiliated person of the Insurer within the meaning of Section 2(a)(3) of the
1940 Act (collectively, the "Indemnified Parties" for purposes of this Section
7.2) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Distributor) or litigation
expenses (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such
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losses, claims, damages, liabilities or litigation expenses are related to the
sale or acquisition of the Fund's shares or the Variable Contracts issued by the
Insurer 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 Distributor
or the Fund or the designee of either by or on behalf of the
Insurer 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 Variable
Contracts issued by the Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations
contained in the registration statement, prospectus or sales
literature for the Variable Contracts not supplied by the
Distributor or any employees or agents thereof) or wrongful
conduct of the Fund or Distributor, or the affiliates, employees,
or agents of the Fund or the Distributor with respect to the sale
or distribution of the Variable Contracts issued by the Insurer
or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the Variable
Contracts issued by the Insurer, 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 Insurer by or on behalf of the
Fund; or
(iv) arise out of or result from any material failure by
the Distributor to provide the services or furnish the materials
required 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 Distributor in
this Agreement or arise out of or result from any other material
breach of this Agreement by the Distributor;
except to the extent provided in Sections 7.2(b) and 7.2(c) hereof.
7.2(b). The Distributor shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation expenses to
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which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations and duties under this Agreement or to the Insurer or
the Separate Accounts.
7.2(c). The Distributor shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Party shall have notified the Distributor 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 Distributor of any
such claim shall not relieve the Distributor 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 Distributor will be entitled to
participate, at its own expense, in the defense thereof. The Distributor also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Distributor to such party
of the Distributor'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 Distributor will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.2(d). The Insurer shall promptly notify the Distributor 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 Variable Contracts
issued by the Insurer or the operation of the Separate Accounts.
7.3 INDEMNIFICATION BY THE FUND
7.3(a). The Fund agrees to indemnify and hold harmless the
Insurer, its affiliated principal underwriter of the Variable Contracts, and
each of their directors and officers and each person, if any, who is an
affiliated person of the Insurer within the meaning of Section 2(a)(3) the 1940
Act (collectively, the "Indemnified Parties" for purposes of this Section 7.3)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Fund) or litigation expenses
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Insurer
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
14
<PAGE>
omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to the
Distributor or the Fund or the designee of either by or on behalf
of the Insurer 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 Variable Contracts issued by the Insurer or Fund shares;
or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations
contained in the registration statement, prospectus or sales
literature for the Variable Contracts not supplied by the
Distributor or any employees or agents thereof) or wrongful
conduct of the Fund or Distributor, or the affiliates, employees,
or agents of the Fund or the distributor with respect to the sale
or distribution of the Variable contracts issued by the Insurer
or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the Variable
Contracts issued by the Insurer, 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 Insurer by or on behalf of the
Fund; or
(iv) arise out of or result from any material failure by the
Fund to provide the services or furnish the material required
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 Fund in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Fund;
except to the extent provided in Sections 7.3(b) and 7.3(c) hereof.
7.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations and duties under this Agreement or to the Insurer or
the Separate Accounts.
7.3(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such 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
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
15
<PAGE>
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.
7.3(d). The Insurer shall promptly notify the Fund 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 Variable Contracts
issued by the Insurer or the sale of the Fund's shares.
ARTICLE VIII.
APPLICABLE LAW
8.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Pennsylvania.
8.2 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 IX.
TERMINATION
9.1 This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written
notice to the other parties; or
(b) at the option of the Insurer if shares of the Portfolios are
not reasonably available to meet the requirements of the Variable Contracts
issued by the Insurer, as determined by the Insurer, and upon prompt notice by
the Insurer to the other parties; or
(c) at the option of the Fund or the Distributor upon
institution of formal proceedings against the Insurer or its agent by the NASD,
the SEC, or any state securities or insurance department or any other regulatory
body regarding the Insurer's duties under this Agreement or related to the sale
of the Variable Contracts issued by the Insurer, the operation of the Separate
Accounts, or the purchase of the Fund shares; or
16
<PAGE>
(d) at the option of the Insurer upon institution of formal
proceedings against the Fund or the Distributor by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body; or
(e) upon requisite vote of the Variable Contract Owners having
an interest in the Separate Accounts (or any subaccounts thereof) to substitute
the shares of another investment company for the corresponding shares of the
Fund or a Portfolio in accordance with the terms of the Variable Contracts for
which those shares had been selected to serve as the underlying investment
media; or
(f) in the event any of the shares of a Portfolio are not
registered, issued or sold in accordance with applicable state and/or federal
law, or such law precludes the use of such shares as the underlying investment
media of the Variable Contracts issued or to be issued by the Insurer; or
(g) by any party to the Agreement upon a determination by a
majority of the Trustees of the Fund, or a majority of its disinterested
Trustees, that an irreconcilable conflict exists; or
(h) at the option of the Insurer if the Fund or a Portfolio
fails to meet the requirements under Subchapter M of the Code for qualification
as a Regulated Investment Company specified in Section 3.2 hereof or the
diversification requirements specified in Section 3.3 hereof.
9.2 Each party to this Agreement shall promptly notify the other
parties to the Agreement of the institution against such party of any such
formal proceedings as described in Sections 9.1(c) and (d) hereof. The Insurer
shall give 60 days prior written notice to the Fund of the date of any proposed
vote of Variable Contract Owners to replace the Fund's shares as described in
Section 9.1(e) hereof.
9.3 Except as necessary to implement Variable Contract Owner
initiated transactions, or as required by state insurance laws or regulations,
the Insurer shall not redeem Fund shares attributable to the Variable Contracts
issued by the Insurer (as opposed to Fund shares attributable to the Insurer's
assets held in the Separate Accounts), and the Insurer shall not prevent
Variable Contract Owners from allocating payments to a Portfolio, until 60 days
after the Insurer shall have notified the Fund or Distributor of its intentions
to do so.
9.4 Notwithstanding any termination of this Agreement, the Fund and
the Distributor shall at the option of the Insurer, continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Variable Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, based upon instructions from the owners of the
Existing Contracts, the Separate Account shall be permitted to reallocate
investments in the Portfolios of the Fund and redeem investments in the
Portfolios, and shall be permitted to invest in the Portfolios in the event that
owners of the Existing Contracts make additional purchase payments under the
Existing Contracts. If this Agreement terminates, the parties agree that
Sections 3.11, 7.1, 7.2, 7.3, 8.1, and 8.2, and, to the extent that all or a
portion of the assets of the Separate
17
<PAGE>
Account continue to be invested in the Fund or any Portfolio of the Fund,
Article I, II, IV, and Sections 5.5 and 5.6 will remain in effect after
termination.
ARTICLE X.
NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
Insurance Management Series
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn: Andrew Bonnewell
If to the Distributor:
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn: Andrew Bonnewell
If to the Insurer:
Lincoln Benefit Life Company
134 South 13th Street
Lincoln, Nebraska 68508
Attn: Carol S. Watson, Esq.
ARTICLE XI.
MISCELLANEOUS
11.1 The Fund and the Insurer agree that if and to the extent Rule
6e-2 or Rule 6e-3(T) under the 1940 Act is amended or if Rule 6e-3 is adopted in
final form, to the extent applicable, the Fund and the Insurer shall each take
such steps as may be necessary to comply with the Rule as amended or adopted in
final firm.
11.2 A copy of the Fund's Agreement and Declaration of Trust is on
file with the Secretary of the Commonwealth of Massachusetts and notice is
hereby given that any agreements that are executed on behalf of the Fund by any
Trustee or officer of the Fund are executed in his or her capacity as Trustee or
officer and not individually. The obligations of this Agreement shall only be
binding upon the assets and property of the
18
<PAGE>
Fund and shall not be binding upon any Trustee, officer or shareholder of the
Fund individually.
11.3 Nothing in this Agreement shall impede the Fund's Trustees or
shareholders of the shares of the Fund's Portfolios from exercising any of the
rights provided to such Trustees or shareholders in the Fund's Agreement and
Declaration of Trust, as amended, a copy of which will be provided to the
Insurer upon request.
11.4 It is understood that the name "Federated" or any derivative
thereof or logo associated with that name is the valuable property of the
Distributor and its affiliates, and that the Insurer has the right to use such
name (or derivative or logo) only so long as this Agreement is in effect. Upon
termination of this Agreement the Insurer shall forthwith cease to use such name
(or derivative or logo).
11.5 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.6 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.7 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
11.8 This Agreement may not be assigned by any party to the Agreement
except with the written consent of the other parties to the Agreement.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
INSURANCE MANAGEMENT SERIES
ATTEST: /s/G. Andrew Bonnewell By: /s/J. Christopher Donahue
---------------------------- ------------------------------
Name: G. Andrew Bonnewell Name: J. Christopher Donahue
Title: Assistant Secretary Title: President
FEDERATED SECURITIES CORP.
ATTEST: /s/S. Elliott Cohan By: /s/Richard B. Fisher
---------------------------- ------------------------------
Name: S. Elliott Cohan Name: Richard B. Fisher
Title: Secretary Title: Chairman, CEO, COO
LINCOLN BENEFIT LIFE COMPANY
ATTEST: /s/Carol S. Watson By: /s/Fred H. Jonske
---------------------------- ------------------------------
Name: Carol W. Watson Name: Fred H. Jonske
Title: Senior Vice President Title: President & COO
and General Counsel
20
<PAGE>
FIRST AMENDMENT TO FUND PARTICIPATION AGREEMENT
THE FUND PARTICIPATION AGREEMENT AMONG LINCOLN BENEFIT LIFE COMPANY, INSURANCE
MANAGEMENT SERIES AND FEDERATED SECURITIES CORP., DATED DECEMBER 30, 1993, IS
HEREBY AMENDED AS FOLLOWS:
Section 11.9 Administrative services to Variable Contract Owners shall be
the responsibility of Insurer. Insurer, on behalf of its separate accounts
will be the sole shareholder of record of Fund shares. Fund and Distributor
recognize that they will derive a substantial savings in administrative
expense by virtue of having a sole shareholder rather than multiple
shareholders. In consideration of the administrative savings resulting from
having a sole shareholder rather than multiple shareholders, Distributor
agrees to pay to Insurer an amount computed at an annual rate of the average
daily net asset value of shares held in subaccounts for which Insurer
provides administrative services. Distributor's payments to Insurer are for
administrative services only and do not constitute payment in any manner for
investment advisory services.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be duly
executed as of the 1ST day of JANUARY, 1994.
INSURANCE MANAGEMENT SERIES
By: /s/Richard B. Fisher
-----------------------------------
Name: Richard B. Fisher
--------------------------------
Title: Vice President
--------------------------------
FEDERATED SECURITIES CORP.
By: /s/Byron F. Bowman
-----------------------------------
Name: Byron F. Bowman
--------------------------------
Title: Vice President
--------------------------------
LINCOLN BENEFIT LIFE COMPANY
By: /s/Douglas F. Gaer
-----------------------------------
Name: Douglas F. Gaer
--------------------------------
Title: Sr. Vice President
--------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S><C>
LINCOLN BENEFIT LIFE COMPANY
P.O. BOX 80469, LINCOLN, NEBRASKA 68501
USE DARK
INK ONLY PART I - APPLICATION FOR INSURANCE ON LIFE OF PROPOSED INSURED BELOW
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION I Name Birthdate Age Sex Birth Place Social Sec. No.
THE ----------------------------------------------------------------------------------------------------------------------
PROPOSED Last First Mid. Initial
INSURED
OR ----------------------------------------------------------------------------------------------------------------------
JOINT -------------
INSURED `A' Home Address City State Zip How Long There? / If this is
---------------------------------------------------------------------------------------------------- / not to be
\ the mailing
---------------------------------------------------------------------------------------------------- \ address,
check here
Employer's Name and Address City State Zip How Long There? / / and
---------------------------------------------------------------------------------------------------- provide
separate
---------------------------------------------------------------------------------------------------- instructions.
-------------
Height Weight Occupation and Job Duties (BE SPECIFIC) Home Phone No. Bus. Phone No.
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Tobacco Use
----------------------------------------------------------------------------------------------------------------------
(A) Do you currently smoke cigarettes, or have you smoked them in the last 12 months? / / Yes / / No
(B) Have you used any form of tobacco in the last 3 years? (Type ________________________________) / / Yes / / No
----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION II Plan of Insurance Face Amount
THE ----------------------------------------------------------------------------------------------------------------------
POLICY $
----------------------------------------------------------------------------------------------------------------------
Modal Planned Premium Mode of Payment
----------------------------------------------------------------------------------------------------------------------
$ _____________________ / / Single / / Ann. / / Semi-Ann. / / Quarterly / / Monthly B.O.M. / / ______
----------------------------------------------------------------------------------------------------------------------
Death Benefit Option? Continuation of U.L. Premium? ADB? APL? Waiver of Premium?
----------------------------------------------------------------------------------------------------------------------
For U.L. Only (U.L.-Only) / / Yes, For: (Non-U.L. Only) (Non-U.L. Only)
/ / One or / / Two / / Yes For: $______________________ $_______________ / / Yes / / Yes
----------------------------------------------------------------------------------------------------------------------
Additional Riders
----------------------------------------------------------------------------------------------------------------------
On Base Insured: / / Prime Term Rider (UL only)
/ / Additional Insured Rider Amount $________________________________________
----------------------------------------------------------------------------------------------------------------------
On Other Person(s): / / Additional Insured Rider _________________________ Complete Section V on Page 2.
----------------------------------------------------------------------------------------------------------------------
/ / Child Rider for / / One / / Two units / / Other _____________________________________________________
/ / Caretaker (Long Term Care--UL only) / / Other _____________________________________________________
/ / Safekeeper (Catastrophic Illness--UL only) / / Other _____________________________________________________
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Is this life insurance policy being funded by a qualified retirement plan, pursuant to the
incidental insurance provision? / / Yes / / No
----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION III Name of Applicant (Owner) If Other Than Proposed Insured Relationship Social Sec. No. or Tax ID No.
THE ----------------------------------------------------------------------------------------------------------------------
APPLICANT
(OWNER) ----------------------------------------------------------------------------------------------------------------------
Address City, State, Zip Phone No. Birthdate
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
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SECTION IV Primary Relationship Address
THE ----------------------------------------------------------------------------------------------------------------------
BENEFICIARY
----------------------------------------------------------------------------------------------------------------------
Contingent
----------------------------------------------------------------------------------------------------------------------
LA 9000
Page 1 ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
PART I CONTINUED (PAGE 2)
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION V If more than one additional insured, check here / / and complete Section V of another application.
ADDITIONAL Name Birthdate Age Sex Birth Place Social Sec. No.
INSURED, ----------------------------------------------------------------------------------------------------------------------
JOINT
INSURED `B' ----------------------------------------------------------------------------------------------------------------------
OR Height Weight Occupation and Job Duties Home Phone No. Bus. Phone No.
SPOUSE ----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Employer's Name and Address How Long There?
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Amount Applied for Under This Rider ADB?
----------------------------------------------------------------------------------------------------------------------
$______________________________________________________ / / Yes For $______________________________________
----------------------------------------------------------------------------------------------------------------------
Tobacco Use
----------------------------------------------------------------------------------------------------------------------
(A) Do you currently smoke cigarettes, or have you smoked them in the last 12 months? / / Yes / / No
(B) Have you used any form of tobacco in the last 3 years? (Kind: _______________________________) / / Yes / / No
----------------------------------------------------------------------------------------------------------------------
Beneficiary
----------------------------------------------------------------------------------------------------------------------
Primary Relationship Contingent Relationship
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION VI Only children, step-children and adopted children under age 18. If more children, check here / /, complete
CHILDREN Section VI of another application.
TO Name Age Sex Birthdate Birthplace Height Weight
BE ----------------------------------------------------------------------------------------------------------------------
INSURED
UNDER ----------------------------------------------------------------------------------------------------------------------
CHILD
RIDER ----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION VII (A) List personal and business life insurance, annuity, and long term care coverage. If "none", so state.
EXISTING Proposed Insured(s) Life Amount Plan Company Policy # ADB Amount Year Issued
INSURANCE ----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
(B) Will this policy, if issued, replace or change insurance or annuities in this or any company? / / Yes / / No
If YES, circle which policies listed above are to be replaced or changed and follow state regulations. Face amount
being replaced $______________________________
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION VIII Questions apply to all proposed insureds. Provide details of "YES" answers in Section IX.
ADDITIONAL ----------------------------------------------------------------------------------------------------------------------
RISK (A) Is any other insurance application pending? / / Yes / / No
SELECTION ----------------------------------------------------------------------------------------------------------------------
QUESTIONS (B) Had any application for insurance declined, postponed, rated, modified, or refused for
reinstatement? / / Yes / / No
----------------------------------------------------------------------------------------------------------------------
(C) Ever been convicted of a felony? / / Yes / / No
----------------------------------------------------------------------------------------------------------------------
(D) In the last 3 years:
(1) Had 3 or more moving traffic violations, had driver's license suspended or revoked,
or more than 2 auto accidents? (If "Yes" D.L. #_____________________________________) / / Yes / / No
(2) Flown as a pilot, co-pilot, or crew member of an aircraft? / / Yes / / No
(3) Participated in sky or scuba diving, hang gliding or racing? / / Yes / / No
----------------------------------------------------------------------------------------------------------------------
(E) Has lived in the U.S.A. for less than 3 years or will travel out of the U.S.A. in the
next 2 years? / / Yes / / No
----------------------------------------------------------------------------------------------------------------------
(F) Is a member of the military (active or National Guard)? Provide rank, duties,
travel assignment / / Yes / / No
----------------------------------------------------------------------------------------------------------------------
(G) Has anyone to be considered been advised they need to have an exam or lab test
for this insurance? (If yes, provide name below) / / Yes / / No
----------------------------------------------------------------------------------------------------------------------
SECTION IX
REMARKS,
SPECIAL
INSTRUCTIONS
LA9000
Page 2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
COMPLETE FOR ALL PROPOSED INSUREDS WHO ARE APPLYING
PART 2 THE ANSWERS TO THE FOLLOWING QUESTIONS APPLY TO ALL PERSONS PROPOSED FOR INSURANCE
- -----------------------------------------------------------------------------------------------------------------------------------
1. To your best knowledge and belief, have you ever sought or received TREATMENT or ADVICE for:
(a) Heart attack, stroke, paralysis or cancer, or ever had or been told that you had any of these
disorders? / / Yes / / No
(b) The use of alcohol or been arrested for having used it? / / Yes / / No
(c) The use of any narcotic, barbiturate, amphetamine or hallucinogenic drug or been arrested for
the use or possession of such drug or are you currently using except as prescribed by a physician? / / Yes / / No
(d) Acquired immune deficiency syndrome (AIDS), AIDS related complex (ARC) or AIDS related condition? / / Yes / / No
IF ANY OF QUESTIONS 1(a), 1(b), 1(c) OR 1(d) ARE ANSWERED "YES" DO NOT COLLECT A REMITTANCE OR ISSUE A RECEIPT AND TEMPORARY
INSURANCE AGREEMENT.
- -----------------------------------------------------------------------------------------------------------------------------------
2. Have you, within the last ten years, consulted a physician or practitioner for, or have you ever had symptoms pertaining
to, or disease of:
(a) Heart, blood or blood vessels? / / Yes / / No
(b) High blood pressure or chest pain? / / Yes / / No
(c) Brain; mental or emotional disorder? / / Yes / / No
(d) Lungs, shortness of breath, asthma or emphysema? / / Yes / / No
(e) Tumor? / / Yes / / No
(f) Stomach, intestines, liver or pancreas? / / Yes / / No
(g) Diabetes, thyroid or pituitary gland? / / Yes / / No
(h) Anemia requiring prescription medication? / / Yes / / No
(i) Kidneys; sugar, albumin or blood in the urine? / / Yes / / No
(j) Nervous system; seizures, convulsions, epilepsy, dizziness or fainting spells? / / Yes / / No
- -----------------------------------------------------------------------------------------------------------------------------------
3. Have you ever been advised to have diagnostic tests, hospitalization or surgery which was not
completed? / / Yes / / No
- -----------------------------------------------------------------------------------------------------------------------------------
4. Has your parent, grandparent, brother or sister ever had cancer, heart disease or diabetes?
If yes, advise on whom and if deceased, state cause of death and age at death. / / Yes / / No
- -----------------------------------------------------------------------------------------------------------------------------------
5. Have you, within the last five years:
(a) Had any illness, disease or injury that is not included in your other answers? / / Yes / / No
(b) Consulted or been examined or treated by any physician or practitioner not named in connection
with your other answers? / / Yes / / No
(c) Had a checkup or routine physical examination? (Give full reasons and details below.) / / Yes / / No
(d) Had an electrocardiogram, X-ray or any laboratory test or study? / / Yes / / No
- -----------------------------------------------------------------------------------------------------------------------------------
6. (a) Full name, address and phone number (if known) of personal physician. IF NONE, SO STATE.
(b) Date last seen:
----------------------------------------------------------------------------------------------------------
(c) Reason
------------------------------------------------------------------------------------------------------------------
(d) Result
------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
7. DETAILS IN CONNECTION WITH QUESTIONS ANSWERED "YES" ABOVE
- -----------------------------------------------------------------------------------------------------------------------------------
Give full details for each question answered "YES", including nature of
Question Date of Name of Person to illness or injury, number of attacks, duration, severity, treatment
Number History Whom Answers Apply results, name and address of doctors, hospital or clinic involved.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NO.
LA 9000 Page 3
</TABLE>
<PAGE>
PARTS 1 AND 2 continued
- --------------------------------------------------------------------------------
FOR HOME OFFICE ENDORSEMENTS ONLY
- --------------------------------------------------------------------------------
OWNER AND PERSONS PROPOSED FOR INSURANCE: PLEASE READ AND SIGN:
I declare that all answers written on this Application are full and correct, to
the best of my knowledge and belief. Except in Maine, Oregon, and South
Carolina, Lincoln Benefit Life Company is not presumed to know any information
not in this Application.
A. Lincoln Benefit Life Company has the right to require a medical exam of any
person proposed for insurance, even if Question G, Section VIII is answered
"No".
B. Lincoln Benefit Life Company may add to or correct the Application in the
space "For Home Office Endorsement Only." Any changes are agreed to if the
policy issued is accepted, but written agreement will be obtained from me
for any change in insurance amount, plan, benefits, payment class or age at
issue. (In Kentucky, Maryland, Pennsylvania, and W. Virginia written
agreement will be obtained for any changes.)
C. Insurance will start only as provided in the Receipt and Temporary
Insurance Agreement issued in connection with this application. If no
receipt is issued, or if Insurance under it has been stopped and not
started again, no insurance will start by reason of the application until
the policy is delivered and the first payment is accepted by Lincoln
Benefit Life. In this case, the Insurance will start on the date shown in
the policy. No insurance will start if on the start date of the policy the
health of the persons proposed for insurance is not as described in the
application.
D. Each person who signs below acknowledges that he or she has read and
understands this Application, including the notice about the M.I.B. and
consumer reports, and acknowledges receipt of the Special Notice about
M.I.B. and consumer reports.
E. Only an officer of Lincoln Benefit Life Company may change the app or waive
a right or requirement. No agent may do this.
F. Under penalties of perjury, I certify (1) that the number shown on this
form is my correct taxpayer identification number and (2) that I am not
subject to backup withholding either because I have not been notified that
I am subject to backup withholding as a result of a failure to report all
interest or dividends, or the Internal Revenue Service has notified me that
I am no longer subject to backup withholding.
G. Authorization and Disclosure
I authorize any (a) physician, medical practitioner, hospital, clinic,
other medical or medically related facility, (b) Veterans Administration,
(c) insurance, or reinsuring company, (d) M.I.B., consumer reporting
agency, or (e) employer having information available as to diagnosis,
treatment and prognosis with respect to (1) any past and present physical,
mental, drug and/or alcohol conditions and/or treatment for each person
proposed for insurance and (2) any other non-medical information, including
information obtained after this authorization is signed, to give any and
all such information to Lincoln Benefit Life Company, its reinsurers, and
(except for M.I.B. information), its legal representative, or consumer
reporting agency. I acknowledge receipt of the Special Notice about M.I.B.
and Consumer reports. / / I WANT TO BE INTERVIEWED IF AN INVESTIGATIVE
CONSUMER REPORT IS OBTAINED ON ME. I understand that the information
obtained by use of this authorization will be used to determine eligibility
for insurance and/or benefits. Any information obtained will not be
released by Lincoln Benefit Life Company to any person or organization
except to reinsuring companies, M.I.B., or other persons or organizations
performing business or legal services in connection with my application or
claim, as may be otherwise lawfully required or as I may further authorize.
I may request a copy of this authorization. I agree that a photographic
copy of this authorization shall be as valid as the original. This
authorization shall remain valid for 24 months from the date it is signed.
I may revoke this authorization in whole or in part at any time, except to
the extent that action is taken in reliance thereon.
<TABLE>
<CAPTION>
<S><C>
Signed at Date 19
------------------------------------ ------------------ -----
(City) (State) (Month) (Day) (Yr.)
------------------------------------------------------ ---------------------------------
Primary Insured, Joint Insured `A', or Parent of Minor Adult Additional Insured
------------------------------------------------------ ---------------------------------
Spouse, Joint Insured `B' or Owner
Adult Additional Insured
---------------------------------
Witnessed by Writing Agent
</TABLE>
LA 9000 Page 4
<PAGE>
<TABLE>
<CAPTION>
<S><C>
- -----------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL FINANCIAL INFORMATION
- -----------------------------------------------------------------------------------------------------------------------------------
Complete all sections below on all BUSINESS cases, all PERSONAL insurance OVER $250,000, for ANY amount when the applicant is
OVER AGE 65 and on all RETIRED persons.
Complete Section XII on ALL cases where the amount applied is OVER $100,000.
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION X PURPOSE OF INSURANCE
- -----------------------------------------------------------------------------------------------------------------------------------
Please explain the purpose of the insurance, including who will suffer a financial loss, how the amount of insurance was determined,
and how it is expected that the proceeds will be utilized.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION XI NET WORTH
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
1. Cash, personal property, stocks, etc. $ 4. Notes payable and Other liabilities $
- -----------------------------------------------------------------------------------------------------------------------------------
2. Real Estate, Business Interest $ 5. Mortgages or liens on Real Estate $
- -----------------------------------------------------------------------------------------------------------------------------------
3. Total assets $ 6. Total liabilities $
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION XII INCOME DATA
- -----------------------------------------------------------------------------------------------------------------------------------
/ / Salaried / / Self-Employed / / Retired
1. Annual Earned 1. Gross Income $ _______________ 1. Soc. Sec. income $_______________
Income (Salary) $_______________ 2. Expenses $ _______________ 2. Pension income $_______________
2. Unearned income 3. Net Income $ _______________ 3. Investment and
(dividends, interest) $_______________ 4. Other Income $ _______________ other income $_______________
3. Total Income $_______________ 5. Total Income $ _______________ 4. Total Income $_______________
- ------------------------------------------------------------------------------------------------------------------------------------
SECTION XIII BUSINESS DATA
- -----------------------------------------------------------------------------------------------------------------------------------
/ / Corporation / / Partnership / / Sole Proprietorship
Please attach a copy of your Company's LATEST AUDITED FINANCIAL STATEMENTS (Balance Sheet and Profit & Loss). IF NOT AVAILABLE,
complete the following questions:
1. COMPANY Net Worth $ _____________ 2. CURRENT MARKET VALUE of Insured's % Ownership $___________
3. COMPANY NET PROFIT (Before taxes and bonuses) 19____ $ __________ This Year (Est.) $ _________
4. Insured's % of Ownership _____%
- -----------------------------------------------------------------------------------------------------------------------------------
AGREEMENT FOR PRE-AUTHORIZED METHOD (NOT TRANSFERABLE OR NEGOTIABLE)
LINCOLN BENEFIT LIFE COMPANY ID NUMBER 47-0221457 AGENT: ATTACH VOIDED BLANK CHECK
I (we) hereby authorize (a) LINCOLN BENEFIT LIFE COMPANY to initiate debit entries to my (our) account indicated below to pay
the premiums due on any insurance policy issued pursuant to the application to which this statement is attached, and (b) the
Financial Institution named below (INSTITUTION) to debit my (our) account for such amount.
INSTITUTION ST ADDRESS
CITY STATE I.D. #
TRANSIT/ABA NO. ACCOUNT NO.
The term "debit entry" shall include charges to my (our) account by orders initiated by electronic means, checks, drafts or any
other order. I agree that a photographic copy of this agreement shall be as valid as the original.
I (we) have the right to stop payment of a debit entry by giving notice to INSTITUTION in such time as to afford INSTITUTION a
reasonable opportunity to act prior to charging my (our) account. After my (our) account has been charged, I (we) have the right
to have the amount of an erroneous debit immediately credited to such account by INSTITUTION up to 15 days following issuance of
statement or 45 days after posting, whichever occurs first.
INSTITUTION'S treatment of each account debit, check, draft or other order initiated by LINCOLN BENEFIT LIFE COMPANY, and its
rights with respect to it will be the same as if it were signed personally by me (us). If any such debit entry is dishonored for
any reason, INSTITUTION will not be under any liability even though dishonor results in the forfeiture of insurance.
In addition, I (we) have read, fully understand and also agree to the provisions on the reverse side of this form.
(Depositor) (Joint Depositor, if any)
(Date) (Owner, if other than Depositor or Joint Depositor)
</TABLE>
NOTICE UNDER THE FAIR CREDIT REPORTING ACT
AND NOTICE REGARDING M.I.B.
WRITING AGENT: This special notice must be detached and given to the Proposed
Insured.
PROPOSED INSURED: PLEASE RETAIN THIS SPECIAL NOTICE FOR YOUR RECORDS.
LA 9000 Page 5
<PAGE>
<TABLE>
<CAPTION>
<S><C>
AGENTS REPORT (All questions in this Section must be answered)
Agent Name Agent No. % of Commission (Split) Agent Name Agent No. % of Commission (Split)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
1. (A) Amount of Cash submitted with Application: $ (B) Premium Class Quoted: / / Preferred / / Non-Smoker / / Smoker
-------
2. Is proposed insured:
A member of your household, yourself, your spouse, your child, or another Lincoln Benefit Life Company agent? / / Yes / / No
(Relationship: (if not yourself)
---------------------
3. Indicate requirements ordered and on whom
-----------------------------------------------------------------------------------
/ / Exam / / Urinalysis / / Rest EKG / / Stress EKG / / SMAC / / DBS / / X-Ray
4. Mail Policy to:
------------------------------------------------------------------------------------------------------------
5. How long and how well have you known the persons proposed for insurance?
----------------------------------------------------
6. If proposed insured is a child and brothers or sisters have less insurance, please explain.
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
7. If more than $50,000 applied for on child(ren) ($100,000 if other than parents are Payor), how much coverage is in force on
parent(s)? Father $ Mother $
--------------- --------------
8. If applicant is married but not employed, how much coverage in force on employed spouse? $
-----------------
9. Do you have knowledge or reason to believe that replacement of existing insurance or annuities in this or other company may be
involved? / / Yes / / No If "YES", follow state regulations.
</TABLE>
I HEREBY CERTIFY that the answers given to the foregoing questions in this
application are full, complete and true to the best of my knowledge and belief;
that I know of nothing affecting the risk which is not fully set forth on these
papers; that I asked and carefully explained each question before recording each
answer prior to the application being signed; that the Special Notice regarding
the M.I.B. and the Federal Fair Credit Reporting Act was given to the Proposed
Primary Insured.
Date X
---------------------------- --------------------------------------
Signature of Agent and Phone Number
IT IS UNDERSTOOD THAT ALL DEBIT ENTRIES INITIATED BY LINCOLN BENEFIT LIFE
COMPANY PURSUANT TO THE AGREEMENT BELOW SHALL BE SUBJECT TO THE FOLLOWING
PROVISIONS:
This Agreement shall not be effective until accepted by LINCOLN BENEFIT
LIFE COMPANY.
LINCOLN BENEFIT LIFE COMPANY may initiate an entry that is larger than the
next previous entry, or may change the date of the billing cycle, provided
LINCOLN BENEFIT LIFE COMPANY tells me (either of us) in writing about the
increase or the new date at least ten (10) days before charging the larger
amount to my (our) account or making the first entry to be affected by the new
date.
LINCOLN BENEFIT LIFE COMPANY will not send premium notices. Periodic
statements, cancelled checks or other orders received by me (either of us) from
INSTITUTION will be my (our) receipt.
This agreement will end when (a) LINCOLN BENEFIT LIFE COMPANY or
INSTITUTION receives a written request from me (either of us) to end it, or (b)
when LINCOLN BENEFIT LIFE COMPANY or INSTITUTION sends me (either of us) written
notice ten (10) days prior to LINCOLN BENEFIT LIFE COMPANY'S or INSTITUTION'S
termination of this Agreement.
This Agreement may be ended automatically by LINCOLN BENEFIT LIFE COMPANY
if any debit entry has been refused by INSTITUTION because of insufficient funds
in my (our) account.
If the Agreement ends for any reason, all premiums due will become directly
payable to LINCOLN BENEFIT LIFE COMPANY by me (us) until another payment plan is
agreed to in writing.
In compliance with the Fair Credit Reporting Act, you are hereby notified
that an investigative consumer report may be made. This would be by personal
interviews with neighbors, friends, associates, or other persons. This will
concern the character, general reputation, personal characteristics, and mode of
living of any person proposed for insurance. You may obtain additional
information concerning the nature and scope of this investigation by contacting
our Home Office. Our address is Lincoln Benefit Life Company, P.O. Box 80489,
Lincoln, Nebraska 88501. Upon your written request, you will be informed
whether or not an investigation was made by us. If so, you will receive the
name and address of the consumer reporting agency involved. You may inspect and
review a copy of the Investigative Consumer Report by contacting the consumer
reporting agency.
Information regarding insurability will be treated as confidential. We
or our reinsurer(s) may make a brief report to the Medical Information
Bureau, Inc. (M.I.B.). M.I.B. is a non-profit membership organization of
life insurance companies. M.I.B. operates an information exchange on behalf
of its members. If you apply to another M.I.B. member for life or health
insurance, or a claim for benefits is submitted to such a company, the M.I.B.
may supply such company with the information in its file. Upon receipt of a
request from you, the M.I.B. will arrange disclosure of any information it
may have in your file. If you question the accuracy of information in the
M.I.B.'s file, you may contact M.I.B. and seek a correction in accordance
with the Federal Fair Credit Reporting Act. The address of the M.I.B.'s
information office is Post Office Box 105, Essex Station, Boston,
Massachusetts 02112. Its telephone number is (617) 426-3680.
We or our reinsurer(s) may also release information in its file to other
life insurance companies to whom you may apply for life or health insurance or
to whom a claim for benefits may be submitted.
LA 9000 Page 6
<PAGE>
RECEIPT AND TEMPORARY INSURANCE AGREEMENT
(REFERRED TO AS "AGREEMENT")
$ has been received from as a
------------ ---------------------------------
payment for the life insurance applied for on this date, except as limited in
the AMOUNT OF INSURANCE section below:
NO INSURANCE WILL TAKE EFFECT EXCEPT AS DESCRIBED BELOW
WHEN TEMPORARY INSURANCE STARTS
If a first modal premium payment has been accepted by us and if Part I of the
application has been completed on or before the date of this Agreement,
temporary insurance under this Agreement will start on the date of this
Agreement on all persons proposed for insurance except that:
If the answer to Question (G) Section VIII in the application is YES,
insurance on all persons proposed for insurance through the application
will start when all medical exams and lab tests on each person named in No.
(G) in Section VIII are completed.
WHEN TEMPORARY INSURANCE WILL STOP
Temporary insurance under this Agreement will stop on the first of the dates
below:
1. The date we notify the Owner that we have stopped considering the
application. We have the absolute right to so stop.
2. The date we notify the Proposed Insured that a medical exam and lab
test is required (other than any exams and lab tests referred to in
Question G, Section VIII), in which event insurance will stop with
respect only to the person(s) required to have a medical exam and lab
test and any person(s) whose insurance is contingent on the insurance
of the person(s) required to have a medical exam and lab test.
Insurance under this Agreement will start again for the person(s) when
the last of the required medical exams and lab tests is done. All
temporary insurance under this Agreement will stop if all required
medical exams and lab tests are not completed within 15 days of the
date we notify Proposed Insured requiring a medical exam and lab test,
and we will then stop considering the application. We have the
absolute right to so stop. We have the absolute right to require such
medical exams and lab tests.
3. The date we agree to issue the coverage applied for in the
application. The insurance will then be provided by the policy as of
its start date and not by this Agreement.
4. The date we offer to issue insurance other than as applied for in the
application.
5. Sixty days from the date of this Agreement except that in Connecticut,
written notice of termination will first be sent.
AMOUNT OF INSURANCE
If temporary insurance under this Agreement is in effect, it will have the same
benefits, provisions and limitations and be for the same amount as the plan
applied for. However, we will provide no more than a combined total of $500,000
of temporary life insurance and temporary accidental death benefit insurance
under this Agreement and all other Agreements with this Company issued for
pending applications for each person to whom this receipt applies.
CONDITIONS UNDER WHICH THERE IS NO COVERAGE
1. If any of Questions 1(A), (B), (C) or (D) on Part II of the
application are answered "yes," no insurance is provided by this
Agreement.
2. If in the answers in the application, there is fraud or
misrepresentation material to the home office underwriter's acceptance
of the risk, then no insurance starts under this Agreement. We will
pay only a refund of all payments made.
3. If a person proposed for insurance dies by suicide while sane or
self-destruction while insane, we will pay only a refund of all
payments made for that person's insurance. Temporary insurance will
continue on all other proposed insureds whose coverage is not
contingent on the insurance of the person who died. We may offer to
issue insurance other than as applied for in the application on any
other person(s) proposed for insurance.
4. No insurance starts under this Agreement if no payment is received or
if a check or draft given as payment is not honored by the bank, or in
the case of a credit card payment, if the charge is refused by the
credit card issuer.
No one may waive or change any of the terms of this Agreement.
Date Agent
---------------- ------------------------------------------------------
(Name) (Number)
ALL PREMIUM CHECKS MUST BE MADE PAYABLE TO LINCOLN BENEFIT LIFE COMPANY.
DO NOT MAKE CHECKS PAYABLE TO THE AGENT OR LEAVE THE PAYEE BLANK.
AGENT REMINDER - BE SURE THAT QUESTION (G) SECTION VIII IS ANSWERED CORRECTLY.
- DO NOT COLLECT A REMITTANCE OR LEASE THIS AGREEMENT IF TOTAL
RISK EXCEEDS $500,000 FOR THIS APPLICATION.
LINCOLN BENEFIT LIFE COMPANY
P.O. BOX 80469, LINCOLN, NEBRASKA 68501
LA9000 Page 7 NO.
<PAGE>
LINCOLN BENEFIT LIFE COMPANY
P.O. BOX 80469, LINCOLN, NEBRASKA 68501
<PAGE>
SUPPLEMENT TO APPLICATION FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
LINCOLN BENEFIT LIFE COMPANY, P.O. BOX 82532, LINCOLN, NE 68501-2532
IMPORTANT NOTICE: Any person who, with intent to defraud or knowing that he is
facilitating a fraud against an insurer, submits an application or file a claim
containing a false or deceptive statement is guilty of insurance fraud.
Proposed Primary Insured________________________________________________________
<TABLE>
<CAPTION>
Guaranteed Minimum Death Benefit Option: / / Safety Net (will apply if no selection made) / / Lifetime
- --------------------------------------------
PREMIUM ALLOCATION: (WHOLE PERCENTAGES ONLY)
- --------------------------------------------
<S> <C> <C>
MFS VARIABLE INSURANCE TRUST FIDELITY VIPF FIDELITY VIPF II
Plan Lump Plan Lump Plan Lump
Premium Sum Premium Sum Premium Sum
_____% _____%Growth with Income _____% _____%Money Market _____% _____%Asset Manager
_____% _____%Research _____% _____%Equity Income _____% _____%Contrafund
_____% _____%Emerging Growth _____% _____%Overseas _____% _____%Index 500
_____% _____%Total Return _____% _____%Growth
_____% _____%New Discovery ALGER AMERICAN FUND SCUDDER VARIABLE LIFE INVESTMENT FUND
JANUS ASPEN SERIES Plan Lump Plan Lump
Plan Lump Premium Sum Premium Sum
Premium Sum _____% _____%Income & Growth _____% _____%Bond
_____% _____%Flexible Income _____% _____%Small Capitalization _____% _____%Balanced
_____% _____%Balanced _____% _____%Growth _____% _____%Growth and Income
_____% _____%Growth _____% _____%Midcap Growth _____% _____%Global Discovery
_____% _____%Aggressive Growth _____% _____%Leveraged AllCap _____% _____%International
_____% _____%Worldwide Growth T.ROWE PRICE EQUITY SERIES FEDERATED INSURANCE MANAGEMENT SERIES
STRONG VARIABLE INSURANCE FUNDS, INC. Plan Lump Plan Lump
Plan Lump Premium Sum Premium Sum
Premium Sum _____% _____%New America Growth _____% _____%Utility Fund II
_____% _____%Discovery Fund II _____% _____%MidCap Growth _____% _____%Fund for U.S. Gov't Securities
_____% _____%Opportunity Fund II _____% _____%Equity Income _____% _____%High Income Bond Fund II
_____% _____%Growth Fund II T.ROWE PRICE INTERNATIONAL SERIES, INC. FIXED ACCOUNT
Plan Lump Plan Lump
Premium Sum Premium Sum
_____% _____%International Stock _____% _____%
<CAPTION>
- -----------------------------------------------------
MORTALITY CHARGE ALLOCATION: (WHOLE PERCENTAGES ONLY)
- -----------------------------------------------------
/ / Prorata: According to percentages of cash value in subaccounts (will apply if no selection made).
/ / Premium: According to allocation of future money received.
/ / Specific Allocation: Specified funds. Indicate below.
<S> <C> <C>
MFS VARIABLE INSURANCE TRUST FIDELITY VIPF FIDELITY VIPF II
Specific Allocation Specific Allocation Specific Allocation
_____%Growth with Income _____%Money Market _____%Asset Manager
_____%Research _____%Equity Income _____%ContraFund
_____%Emerging Growth _____%Overseas _____%Index 500
_____%Total Return _____%Growth
_____%New Discovery ALGER AMERICAN FUND SCUDDER VARIABLE LIFE INVESTMENT FUND
JANUS ASPEN SERIES Specific Allocation Specific Allocation
Specific Allocation _____%Income & Growth _____%Bond
_____%Flexible Income _____%Small Capitalization _____%Balanced
_____%Balanced _____%Growth _____%Growth and Income
_____%Growth _____%MidCap Growth _____%Global Discovery
_____%Aggressive Growth _____%Leveraged AllCap _____%International
_____%Worldwide Growth T.ROWE PRICE EQUITY SERIES FEDERATED INSURANCE MANAGEMENT SERIES
STRONG VARIABLE INSURANCE FUNDS, INC. Specific Allocation Specific Allocation
Specific Allocation _____%New America Growth _____%Utility Fund II
_____%Discovery Fund II _____%MidCap Growth _____%Fund for U.S. Gov't Securities II
_____%Opportunity Fund II _____%Equity Income _____%High Income Bond Fund II
_____%Growth Fund II T.ROWE PRICE INTERNATIONAL SERIES, INC. FIXED ACCOUNT
Specific Allocation Specific Allocation
_____%International Stock _____%
</TABLE>
VLA 9800 PAGE 1
<PAGE>
I UNDERSTAND THAT
THE AMOUNT AND DURATION OF THE DEATH BENEFIT MAY VARY UNDER SPECIFIED
CONTITIONS.
POLICY VALUES MAY INCREASE OR DECREASE IN ACCORDANCE WITH THE EXPERIENCE OF
THE SEPARATE ACCOUNT.
ILLUSTRATIONS OF BENEFITS, INCLUDING DEATH BENEFITS, POLICY VALUES, AND
CASH SURRENDER VALUES ARE AVAILABLE UPON REQUEST.
The undersigned represent that I/we have received a current prospectus for the
contract and that all statements and answers on this Supplement to Application
are made part of the application and that such are complete and correctly
recorded to the best of my/our knowledge and belief.
Proposed Insured (Child over age 15 must sign)___________________ Date__________
_________________________________________________________________ Date__________
Signature of applicant (owner) other than proposed insured (if business
insurance, show title of officer and name of firm) If proposed insured is under
age 18, parent must sign)
________________________________________ ___________________________________
Witness Registered Representative
<TABLE>
<CAPTION>
- --------------------------------------------
DOLLAR COST AVERAGING/PORTFOLIO REBALANCING:
- --------------------------------------------
<S> <C> <C>
MFS VARIABLE INSURANCE TRUST FIDELITY VIPF FIDELITY VIPF II
DCA PR DCA PR DCA PR
$_____ _____%Growth with Income $_____ _____%Money Market $_____ _____%Asset Manager
$_____ _____%Research $_____ _____%Equity Income $_____ _____%ContraFund
$_____ _____%Emerging Growth $_____ _____%Overseas $_____ _____%Index 500
$_____ _____%Total Return $_____ _____%Growth
$_____ _____%New Discovery ALGER AMERICAN FUND SCUDDER VARIABLE LIFE INVESTMENT FUND
JANUS ASPEN SERIES DCA PR DCA PR
DCA PR $_____ _____%Income & Growth $_____ _____%Bond
$_____ _____%Flexible Income $_____ _____%Small Capitalization $_____ _____%Balanced
$_____ _____%Balanced $_____ _____%Growth $_____ _____%Growth and Income
$_____ _____%Growth $_____ _____%MidCap Growth $_____ _____%Global Discovery
$_____ _____%Aggressive Growth $_____ _____%Leveraged AllCap $_____ _____%International
$_____ _____%Worldwide Growth T.ROWE PRICE EQUITY SERIES FEDERATED INSURANCE MANAGEMENT SERIES
STRONG VARIABLE INSURANCE FUNDS, INC. DCA PR DCA PR
DCA PR $_____ _____%New America Growth $_____ _____%Utility Fund II
$_____ _____%Discovery Fund II $_____ _____%MidCap Growth $_____ _____%Fund for U.S. Gov't Securities II
$_____ _____%Opportunity Fund II $_____ _____%Equity Income $_____ _____%High Income Bond Fund II
$_____ _____%Growth Fund II T.ROWE PRICE INTERNATIONAL SERIES, INC. FIXED ACCOUNT
DCA PR DCA PR
$_____ _____%International Stock $_____ _____%(Restrictions apply for DCA--
see prospectus for details)
</TABLE>
- -----------------------
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_____________________
VLA 9800 PAGE 2
