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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
--
Post-Effective Amendment No. 2 (File No. 333-00041)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 X
Amendment No. 3 (File No. 811-07475)
ACL VARIABLE ANNUITY ACCOUNT 1
- -------------------------------------------------------------------
(Exact Name of Registrant)
American Centurion Life Assurance Company
- -------------------------------------------------------------------
(Name of Depositor)
20 Madison Avenue Extension, Albany, NY 12203
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
Mary Ellyn Minenko, IDS Tower 10, Minneapolis, MN 55440-0010
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (Check
approprate box)
_____immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1997 pursuant to paragraph (b) of Rule 485
_____60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate check the following box:
_____this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Section 24-f of the Investment Company
Act of 1940. Registrant's Rule 24f- 2 Notice for its most recent fiscal year was
filed on or about Feb.
14, 1997.
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CROSS REFERENCE SHEET
Cross reference sheet showing location in the prospectus and Statement of
Additional Information of the information called for by the items enumerated in
Part A and B of Form N-4.
Negative answers omitted from prospectus and Statement of Additional Information
are so indicated.
PART A PART B
<TABLE>
<CAPTION>
Section in
Section Statement of
Item No. in Prospectus Item No. Additional Information
<S> <C> <C> <C> <C>
1 Cover page 15 Cover page
2 Key terms 16 Table of contents
3(a) Expense summary 17(a) NA
(b) The Annuity in brief (b) NA
(c) About American Centurion Life*
4(a) Condensed financial
information 18(a) NA
(b) Performance information (b) NA
(c) Financial statements (c) Independent auditors
(d) NA
5(a) Cover page; About (e) NA
American Centurion Life (f) NA
(b) The variable account
(c) The funds 19(a) Distribution of the contracts*
(d) Cover page; The funds About American Centurion Life*
(e) Voting rights (b) NA
(f) NA
(g) NA 20(a) Principal underwriter
(b) Principal underwriter
6(a) Charges (c) NA
(b) Charges (d) NA
(c) Charges
(d) NA 21(a) Performance information
(e) The funds (b) Performance information
(f) NA
22 Calculating Annuity Payouts
7(a) Buying your annuity;
Benefits in case of 23(a) Financial Statements
death; (b) Financial Statements
The annuity payout
period
(b) The variable account;
Making the most of your
annuity
(c) The funds; Charges
(d) Cover page
8(a) The annuity payout period
(b) Buying the annuity
(c) The annuity payout period
(d) The annuity payout period
(e) The annuity payout period
(f) The annuity payout period
9(a) Benefits in case of death
(b) Benefits in case of death
10(a) Buying your annuity;
Valuing your investment
(b) Valuing your investment
(c) Buying your annuity; Valuing
your investment
(d) About American Centurion Life
</TABLE>
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11(a) Surrendering your contract
(b) NA
(c) Surrendering your contract
(d) Buying your annuity
(e) The annuity in brief
12(a) Taxes
(b) Key terms
(c) NA
13 NA
14 Table of contents of the
Statement of Additional Information
*Designates section in the prospectus, which is hereby incorporated by reference
in this Statement of Additional Information.
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Privileged Assets(R) Select Annuity
Prospectus/May 1, 1997
The Privileged Assets(R) Select Annuity is a flexible premium group deferred
fixed/variable annuity.
The annuity is available for non-qualified and certain qualified retirement
plans.
ACL Variable Annuity Account 1
Sold by: American Centurion Life Assurance Company (American
Centurion Life).
Service Office: 20 Madison Avenue Ext. Albany, NY 12203
Telephone: (518) 452-4150
This Prospectus contains the information about the variable accounts that you
should know before investing. Refer to "The variable accounts" in this
prospectus.
The Prospectus is accompanied or preceded by the following prospectuses: IDS
Life Investment Series, Inc., IDS Life Managed Fund, Inc., IDS Life Special
Income Fund, Inc. and IDS Life Moneyshare Fund, Inc., INVESCO Variable
Investment Funds, Inc., Janus Aspen Series, American Century Variable
Portfolios, Inc. and Warburg Pincus Trust. Please read these documents carefully
and keep them for future reference.
These securities have not been approved or disapproved by the Securities and
Exchange Commission, or any state securities commission, nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this Prospectus. Any representation to the contrary is a
criminal offense.
American Centurion Life is not a financial institution, and the securities it
offers are not deposits or obligations of, or guaranteed or endorsed by any
financial institution nor are they insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency.
A Statement of Additional Information (SAI) (incorporated by reference into this
prospectus) has been filed with the Securities and Exchange Commission (SEC) and
is available for reference, along with other related materials, on the SEC
Internet web site (http://www.sec.gov). The SAI is available without charge by
contacting American Centurion Life at the telephone number above or by
completing and sending the order form on the last page of this prospectus. The
table of contents of the SAI is on the last page of this prospectus.
Participation in the annuity contract will be accounted for separately by the
issuance of an annuity certificate showing your interest in the contract.
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Purchase payments may be allocated among different accounts, providing variable
and/or fixed returns. Through the subaccounts of the variable account, you can
invest in mutual funds that are managed to meet a variety of investment
objectives. The certificate value will vary according to the investment
performance of the funds you select. You bear the entire investment risk under
the annuity.
The annuity offers tax-deferred asset accumulation. This may be particularly
attractive to investors in high federal and state tax brackets who have made
maximum contributions to employer-sponsored retirement programs and IRAs.
The annuity has no front-end sales charge, nor does it have a redemption or
surrender charge.
The Privileged Assets Select Annuity is designed to allow you to build up funds
for retirement. When you need to access your money, such as at retirement, you
may do so in several ways including the following: you may take a monthly fixed
annuity payout for the lifetime of the annuitant(s) you have designated, or you
may take a lump-sum or a fixed amount per month on the principal and/or earnings
on the annuity.
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Contents
Key terms.....................................................
The Privileged Assets(R) Select Annuity in brief................
Expense summary...............................................
Financial statements..........................................
Performance information.......................................
The variable account..........................................
The funds.....................................................
IDS Life Aggressive Growth Fund..........................
IDS Life International Equity Fund.......................
IDS Life Capital Resource Fund...........................
IDS Life Managed Fund....................................
IDS Life Special Income Fund.............................
IDS Life Moneyshare Fund.................................
INVESCO VIF-Industrial Income Portfolio..................
Janus Aspen Series Worldwide Growth Portfolio............
Janus Aspen Series Growth Portfolio......................
American Century VP Capital Appreciation.................
American Century VP Value................................
Warburg Pincus Trust-Post-Venture Capital Portfolio......
The fixed account.............................................
Buying your annuity...........................................
Setting the annuity start date...........................
Beneficiary..............................................
Minimum purchase payments................................
Three ways to make purchase payments.....................
Charges.......................................................
Administrative charge....................................
Mortality and expense risk fee...........................
Other information on charges.............................
Valuing your investment.......................................
Number of units..........................................
Accumulation unit value..................................
Net investment factor....................................
Factors that affect variable subaccount
accumulation units....................................
Making the most of your annuity...............................
Automated dollar-cost averaging..........................
Transferring money between accounts......................
Transfer policies........................................
Two ways to request a transfer or a surrender............
Surrendering your annuity.....................................
Surrender policies.......................................
Receiving payment when you request a surrender...........
Changing ownership............................................
Benefits in case of death.....................................
The annuity payout period.....................................
Annuity payout plans.....................................
Death after annuity payouts begin........................
Taxes.........................................................
Voting rights.................................................
Substitution of investments...................................
Distribution of the annuities.................................
About American Centurion Life.................................
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Regular and special reports...................................
Table of contents of the Statement of Additional
Information................................................
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Key terms
These terms can help you understand details about your annuity.
American Centurion Life - In this prospectus, "we," "us," "our" and "American
Centurion Life" refer to American Centurion Life Assurance Company.
Annuity - A contract or the related certificate you receive that shows your
coverage under the contract, purchased from an insurance company that offers
tax-deferred growth of the investment until earnings are withdrawn, and that can
be tailored to meet the specific needs of the individual during retirement.
Accumulation unit - A measure of the value of each variable subaccount before
annuity payouts begin.
Annuitant - The person on whose life or life expectancy the payouts are based.
Annuity payout - An amount paid at regular intervals under one of several plans
available to the owner and/or any other payee. This amount is paid on a fixed
basis.
Annuity start date - The date when annuity payouts are scheduled to begin. This
date is established when you start your annuity. As your financial goals change,
you may change the annuity start date.
Beneficiary - The person designated to receive annuity benefits in case of the
owner's or annuitant's death.
Certificate value - The total purchase payments, plus investment return, less
any administrative charges and prior withdrawals.
Certificate year - A period of 12 months, starting on the effective date of the
certificate and on each anniversary of the effective date.
Close of business - When the New York Stock Exchange (NYSE) closes, normally 4
p.m. Eastern time.
Code - Internal Revenue Code of 1986, as amended.
Fixed account - An account to which you may allocate purchase payments. Amounts
allocated to this account earn interest at rates that are declared periodically
by American Centurion Life.
Mutual funds (funds) - Mutual funds or portfolios, each with a different
investment objective. (See "The funds.") You may allocate your purchase payments
into variable subaccounts investing in shares of any or all of these funds.
Owner (you, your) - The person who controls the annuity (decides on investment
allocation, transfers, payout options, etc.).
Purchase payments - Payments made to American Centurion Life for an annuity.
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Qualified annuity - An annuity purchased for a retirement plan that is subject
to applicable federal law and any rules of the plan itself. These plans include:
o Individual Retirement Annuities (IRAs), including rollovers from
qualified plans
o Simplified Employee Pension (SEP) Plans
All other annuities we currently issue are considered nonqualified annuities.
Surrender value - The amount you are entitled to receive if you surrender your
annuity. It is the certificate value. No surrender charge will apply.
Valuation date - Any normal business day, Monday through Friday, that the NYSE
is open. The value of each variable subaccount is calculated at the close of
business on each valuation date.
Variable account - An account consisting of separate subaccounts to which you
may allocate purchase payments; each invests in shares of one mutual fund. (See
"The variable account.") The value of your investment in each variable
subaccount changes with the performance of the particular fund.
The Privileged Assets(R) Select Annuity in brief
Purpose: The Privileged Assets(R) Select Annuity is designed to allow you to
build up funds for retirement. You do this by making one or more investments
(purchase payments) that may earn returns that increase the value of the
annuity. Beginning at a specified future date (the annuity start date), the
annuity provides lifetime or other forms of annuity payouts to you or to anyone
you designate.
Accounts: You may allocate your purchase payments among any or all
of:
o variable subaccounts, each of which invests in a mutual fund with a
particular investment objective. The value of each variable subaccount
varies with the performance of the particular fund. Therefore, the
certificate value at the annuity start date may be more or less than the
total of purchase payments allocated to the variable subaccounts. (p.)
o a fixed account, which earns interest at rates that are declared
periodically by American Centurion Life. The guaranteed minimum interest
rate is 3%. (p.)
Buying the annuity: You can purchase an annuity by submitting a complete
application. Applications are subject to acceptance at our service office. You
may buy a nonqualified annuity or a qualified annuity. Payment may be made
either in a lump sum with the option of additional payments in the future or
installments:
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o Minimum purchase payment - $2,000 ($1,000 for qualified certificates)
unless you pay in installments by means of a bank authorization or under a
group billing arrangement at a rate of $100/month or more or other payment
plan acceptable to us.
o Minimum additional payment - $100.
o Maximum first-year payment(s) - $500,000 to $1,000,000
depending on your age.
o Maximum payment for each subsequent year - $50,000. (p.)
Thirty-day free look: You may return your annuity for a full refund within 30
days after you receive it. The portion of your first purchase payment allocated
to the variable account must be invested initially in the IDS Life Moneyshare
subaccount for the period we estimate or calculate your free look right to be in
existence (generally 35 days after the annuity issue date.)
If you choose not to keep your annuity, return it to us within the free look
period. The annuity will be canceled and we will refund promptly the greater of
(1) your purchase payment without investment earnings, or (2) your certificate
value plus any amount deducted from your payment prior to allocation to the
variable account or the fixed account.
Transfers: Subject to certain restrictions you may re-allocate your money among
accounts without charge at any time until annuity payouts begin. You may
establish automated transfers among the fixed account and variable subaccount(s)
and you may request a transfer by telephone. (p.)
Surrenders: You may surrender all or part of your certificate value at any time
before the annuity start date. You also may establish systematic surrenders.
There is no surrender charge. Earnings on amounts you surrender may be taxable
(and include a 10% penalty if surrenders are made prior to your reaching age 59
1/2); and have other tax consequences; also, certain restrictions apply. (p.)
Changing ownership: You may change ownership of a nonqualified annuity by
written instruction. However, such changes of nonqualified annuities may have
federal income tax consequences. Certain restrictions apply concerning change of
ownership of a qualified annuity. (p.)
Benefits in case of death: If you or the annuitant dies before annuity payouts
begin, we will pay the beneficiary the greater of the certificate value or total
purchase payments made less partial surrenders. (p.)
Annuity payouts: The certificate value of your investment can be applied to an
annuity payout plan that begins on the annuity start date. You may choose from a
variety of plans to make sure that payouts continue as long as they are needed.
If you purchased a qualified annuity, the payout schedule must meet requirements
of the qualified plan. Payouts will be made on a fixed basis. (p.)
Taxes: Generally, your annuity grows tax-deferred until you surrender it or
begin to receive payouts. (Under certain
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circumstances, IRS penalty taxes may apply.) Even if you direct payouts
to someone else, you will still be taxed on the income if you are the owner.
(p.)
Charges: Your Privileged Assets Select Annuity is subject to a $30 annual
administrative charge and a 1% mortality and expense risk charge against the
variable subaccounts. (p.)
Expense summary
The purpose of this summary is to help you understand the various costs and
expenses associated with the annuity.
Owner expenses*
Surrender charge 0%
Annual contract administrative charge $30 (If the total purchase payments (less
partial surrenders) is at least $10,000, we will waive the charge.)
Separate account annual expenses
(as a percentage of average net assets)
Mortality and expense risk fee 1%
Operating expenses of underlying mutual funds: management fees and other
expenses deducted as a percentage of average net assets as follows:
<TABLE>
<CAPTION>
IDS Life IDS Life IDS Life IDS Life
Aggressive International Capital IDS Life Special IDS Life
Growth Equity Resource Managed Income Moneyshare
<S> <C> <C> <C> <C> <C> <C>
Management fees .60% .82% .60% .59% .59% .50%
Other expenses .09 .16 .08 .07 .10 .06
Total** .69% .98% .68% .66% .69% .56%
INVESCO VIF Janus Aspen American American Warburg Pincus
Industrial Series Worldwide Janus Aspen Century Century Trust-Post-Venture
Income Growth Series Growth VP Capital VP Value Capital
(After expense (After expense (After expense Appreciation (After fee limitation)
reimbursement) reimbursement) reimbursement)
Management fees .75% .66% .65% 1.00% 1.00% .64%
Other expenses .20 .14 .04 -- -- .76
Total .95***+++ .80%*** .69%*** 1.00%++ 1.00%++ 1.40%+
* Premium taxes imposed by some state and local governments are not reflected in
this table.
American Centurion Life has entered into certain agreements under which it is
compensated by the funds' advisors and/or distributors for the administrative
services it provides to the funds.
** Annualized operating expenses of the underlying mutual funds at Dec. 31, 1996.
*** The figures given above are based on gross expenses before expense offset
arrangements, if any, during 1996, for these funds. As of the date of this
prospectus, certain fees are being waived or expenses are being assumed by the
respective investment managers or service providers for certain of the
underlying mutual funds, in each case on a voluntary basis. Without such waivers
or reimbursements, the "Management fees," "Other expenses" and "Total" that
would have been incurred for the last completed fiscal year would be: .75%, 0.44
and 1.19%, respectively, for the INVESCO VIF - Industrial Income Portfolio;
.77%, .14 and .91%, respectively, for Janus Aspen Series Worldwide Growth and
.79%, .44 and 1.19%, respectively, for Janus Aspen Series Growth. See the
Portfolios' prospectuses for a discussion of fee waiver and expense
reimbursements. + Operating expenses of the underlying funds at Dec. 31, 1996.
++ Absent the waiver of fees by the Portfolio's investment adviser and
co-administrator, Management Fees would equal 1.25%; Other Expenses would equal
0.82%; and Total Portfolio Operating Expenses would equal 2.07%. Other Expenses
for the Portfolio is based on annualized estimates of expenses for the fiscal
year ending Dec. 31, 1997 net of any fee waivers or expense reimbursements. The
investment adviser has undertaken to limit the Portfolio's Total Portfolio
Operating Expenses to 1.40% through Dec. 31, 1997.
</TABLE>
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+++ It should be noted that the Fund's actual total operating expenses were
lower than the figures shown because the Fund's custodian fees were reduced
under an expense offset arrangement. However, as a result of an SEC requirement
for mutual funds to state their total operating expenses without crediting any
such expenses offset arrangements, the figures shown above do not reflect these
reductions. In comparing expenses for different years, please note the Ratios of
Expenses to Average Net Assets shown under "Financial Highlights", in the Fund's
prospectus, do relect any reductions prior to the fiscal year ended Dec. 31,
1996.
Example:* You would pay the following expenses on a $1,000 investment, assuming
5% annual return and surrender, no surrender or selection of an annuity payout
plan at the end of each time period:
<TABLE>
<CAPTION>
IDS Life IDS Life IDS Life IDS Life
Aggressive International Capital IDS Life Special IDS Life
Growth Equity Resource Managed Income Moneyshare
<S> <C> <C> <C> <C> <C> <C>
1 year $ 20.25 $ 23.23 $ 20.15 $ 19.95 $ 20.25 $ 18.82
3 years 62.59 71.56 62.28 61.66 62.59 58.55
5 years 107.48 122.52 106.95 105.91 107.48 100.67
10 years 231.92 262.34 230.85 228.72 231.92 217.99
INVESCO VIF Janus Aspen American American Warburg Pincus
Industrial Series Worldwide Janus Aspen Century VP Century Trust-Post-Venture
Income Growth Series Growth Capital VP Value Capital
Appreciation
1 year $ 22.92 $ 21.38 $ 20.25 $ 23.43 $ 23.43 $ 27.53
3 years 70.64 66.00 62.59 72.18 72.18 84.47
5 years 120.97 113.20 107.48 123.55 123.55 144.00
10 years 259.24 243.56 231.92 264.41 264.41 304.92
</TABLE>
This example should not be considered a representation of past or future
expenses. Actual expenses may be more or less than those shown.
* In this example, the $30 annual administrative charge is approximated as a
.286% charge based on our estimated average annuity size.
Financial statements
The SAI dated May 1, 1997, contains:
The audited financial statements of American Centurion Life including:
- balance sheets as of Dec. 31, 1996 and Dec. 31, 1995
- related statements of income and cash flows for the years
ended Dec. 31, 1996 and 1995
The SAI does not include financial statements of the variable account because
this is a new account that did not have any activity in 1996.
Performance information
Performance information for the variable subaccounts may appear from time to
time in advertisements or sales literature. In all cases, such information
reflects the performance of a hypothetical
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investment in a particular account during a particular time period.
Calculations are performed as follows:
Simple yield - IDS Life Moneyshare Subaccount: Income over a given seven-day
period (not counting any change in the capital value of the investment) is
annualized (multiplied by 52) by assuming that the same income is received for
52 weeks. This annual income is then stated as an annual percentage return on
the investment.
Compound yield - IDS Life Moneyshare Subaccount: Calculated like simple yield,
except that, when annualized, the income is assumed to be reinvested.
Compounding of reinvested returns increases the yield as compared to a simple
yield.
Yield - For accounts investing in income funds: Net investment income (income
less expenses) per accumulation unit during a given 30-day period is divided by
the value of the unit on the last day of the period. The result is converted to
an annual percentage.
Average annual total return: Expressed as an average annual compounded rate of
return of a hypothetical investment over a period of one, five and ten years (or
up to the life of the subaccount if it is less than ten years old). This figure
reflects deduction of all applicable charges, including the administrative
charge, and mortality and expense risk fee.
Aggregate total return: Represents the cumulative change in the value of an
investment for a specified period of time (reflecting change in a subaccount's
accumulation unit value). The calculation assumes reinvestment of investment
earnings and reflects the deduction of all applicable charges, including the
administrative charge and mortality and expense risk fee. Aggregate total return
may be shown by means of schedules, charts or graphs.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the fund in which the
subaccount invests and the market conditions during the given time period. Such
information is not intended to indicate future performance. Because advertised
yields and total return figures include all charges attributable to the annuity,
which has the effect of decreasing advertised performance, subaccount
performance should not be compared to that of mutual funds that sell their
shares directly to the public. (See the SAI for a further description of methods
used to determine yield and total return for the subaccounts.)
If you would like additional information about actual performance, contact
American Centurion Life at telephone number on cover page.
The variable account
Purchase payments can be allocated to any or all of the subaccounts of the
variable account that invest in shares of the following funds:
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Subaccount
IDS Life Aggressive Growth Fund DAG
IDS Life International Equity Fund DIE
IDS Life Capital Resource Fund DCR
IDS Life Managed Fund DMG
IDS Life Special Income Fund DSI
IDS Life Moneyshare Fund DMS
INVESCO VIF - Industrial Income Portfolio DII
Janus Aspen Series Worldwide Growth Portfolio DWG
Janus Aspen Series Growth Portfolio DSG
American Century VP Capital Appreciation DGR
American Century VP Value DVL
Warburg Pincus Trust-Post-Venture Capital Portfolio DVC
The variable account meets the definition of a separate account under federal
securities laws. Income, capital gains and capital losses of each subaccount are
credited or charged to that account alone. No subaccount will be charged with
liabilities of any other variable account or of our general business. The
obligations arising under the annuities are general obligations of American
Centurion Life.
The variable account was established under New York law and is registered as a
unit investment trust under the Investment Company Act of 1940 (the 1940 Act).
This registration does not involve any supervision of our management or
investment practices and policies by the SEC.
The funds
IDS Life Aggressive Growth Fund
Objective: capital appreciation. Invests primarily in common stock of small- and
medium-size companies.
IDS Life International Equity Fund
Objective: capital appreciation. Invests primarily in common stock of foreign
issuers and foreign securities convertible into common stock.
IDS Life Capital Resource Fund
Objective: capital appreciation. Invests primarily in U.S. common stocks and
other securities convertible into common stock, diversified over many different
companies in a variety of industries.
IDS Life Managed Fund
Objective: maximum total investment return. Invests primarily in U.S. common
stocks, securities convertible into common stock, warrants, fixed income
securities (primarily high-quality corporate bonds) and money market
instruments.
IDS Life Special Income Fund
Objective: to provide a high level of current income while conserving the value
of the investment for the longest time period. Invests primarily in
high-quality, lower-risk corporate bonds issued by many different companies in a
variety of industries, and in government bonds.
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PAGE 15
IDS Life Moneyshare Fund
Objective: maximum current income consistent with liquidity and conservation of
capital. Invests in high-quality money market securities with remaining
maturities of 13 months or less. The fund also will maintain a dollar-weighted
average portfolio maturity not exceeding 90 days. The fund attempts to maintain
a constant net asset value of $1 per share.
INVESCO VIF - Industrial Income Portfolio
Objective: to seek the best possible current income while following sound
investment practices with capital growth potential as a secondary consideration.
The Fund normally invests at least 65% of the total assets in dividend-paying
common stocks. Up to 10% of the Fund's total assets may be invested in equity
securities that do not pay regular dividends.
Janus Aspen Series Worldwide Growth Portfolio
Objective: long-term growth of capital in a manner consistent with the
preservation of capital. Invests primarily in common stocks of foreign and
domestic issuers.
Janus Aspen Series Growth Portfolio
Objective: long-term growth of capital in a manner consistent with the
preservation of capital. Invests primarily in common stocks, with an emphasis on
companies with larger market capitalizations.
American Century VP Capital Appreciation
Objective: capital growth. Invests primarily in common stocks that are
considered by management to have better-than-average prospects for appreciation.
American Century VP Value
Objective: long-term capital growth, with income as a secondary objective.
Invests primarily in securities that management believes to be undervalued at
the time of purchase.
Warburg Pincus Trust-Post-Venture Capital Portfolio
Objective: long-term growth of capital. Invests primarily in equity securities
of issuers in their post-venture capital stage of development.
More comprehensive information regarding each fund is contained in the funds'
prospectuses. You should read the fund prospectuses and consider carefully, and
on a continuing basis, which fund or combination of funds is best suited to your
long-term investment needs. There is no assurance that the investment objectives
of the funds will be attained nor is there any guarantee that the certificate
value will equal or exceed the total purchase payments made. Some funds may
involve more risk than others -- please monitor your investments accordingly.
All funds are available to serve as the underlying investment for variable
annuities, and some funds are available to serve as the underlying investment
for variable annuities and variable life insurance contracts and qualified
plans. It is conceivable that in the future it may be disadvantageous for
variable annuity separate accounts, variable life insurance separate accounts
and/or
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PAGE 16
qualified plans to invest in the available funds simultaneously. Although
American Centurion Life and the funds do not currently foresee any such
disadvantages, the boards of directors or trustees of the appropriate funds will
monitor events in order to identify any material conflicts between such
certificate owners and policy owners and qualified plans to determine what
action, if any, should be taken in response to a conflict. If a board were to
conclude that separate funds should be established for variable life insurance,
variable annuity and qualified separate accounts, the variable annuity
certificate holders would not bear any expenses associated with establishing
separate funds.
The Internal Revenue Service (IRS) has issued final regulations relating to the
diversification requirements under Section 817(h) of the Code. Each mutual fund
intends to comply with these requirements.
The U.S. Treasury and the IRS have indicated that they may provide additional
guidance concerning how many variable subaccounts may be offered and how many
exchanges among variable subaccounts may be allowed before the owner is
considered to have investment control, and thus is currently taxed on income
earned within variable subaccount assets. We do not know at this time what the
additional guidance will be or when action will be taken. We reserve the right
to modify the annuity, as necessary, to ensure that the owner will not be
subject to current taxation as the owner of the variable subaccount assets.
We intend to comply with all federal tax laws to ensure that the annuity
continues to qualify as an annuity for federal income tax purposes. To the
extent permitted under applicable law, we reserve the right to modify the
contract as necessary to comply with any new tax laws.
IDS Life is the investment manager and American Express Financial Corporation
(AEFC) is the investment advisor for each of the IDS Life Funds. IDS
International, Inc., a wholly owned subsidiary of AEFC, is the sub-investment
advisor for IDS Life International Equity Fund. INVESCO Funds Group, Inc. is the
investment advisor and INVESCO Trust Company is the sub-adviser for the INVESCO
VIF - Industrial Income Portfolio. Janus Capital Corporation is the investment
manager for Janus Aspen Series Worldwide Growth Portfolio and Janus Aspen Series
Growth Portfolio. American Century Investment Management, Inc. serves as the
investment manager of American Century Variable Portfolios, Inc. Warburg, Pincus
Counsellors, Inc. is the investment adviser of Warburg Pincus Trust-Post-Venture
Capital Portfolio.
The investment managers and advisors cannot guarantee that the funds will meet
their investment objectives. Please read the prospectuses for the funds for
complete information on investment risks, deductions, expenses and other facts
you should know before investing. They are available by contacting American
Centurion Life at the address or telephone number on the front of this
prospectus.
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PAGE 17
The fixed account
Purchase payments may also be allocated to the fixed account. The cash value of
the fixed account increases as interest is credited to the account. Purchase
payments and transfers to the fixed account become part of the general account
of American Centurion Life, the company's main portfolio of investments.
Interest is credited daily and compounded annually. We guarantee a minimum
interest rate of 3%. We may declare interest rates above the guaranteed rate
from time to time.
Because of exemptive and exclusionary provisions, interests in the fixed account
have not been registered under the Securities Act of 1933 (1933 Act), nor is the
fixed account registered as an investment company under the 1940 Act.
Accordingly, neither the fixed account nor any interests in it are generally
subject to the provisions of the 1933 or 1940 Acts, and we have been advised
that the staff of the SEC has not reviewed the disclosures in this prospectus
that relate to the fixed account. Disclosures regarding the fixed account,
however, may be subject to certain generally applicable provisions of the
federal securities laws relating to the accuracy and completeness of statements
made in prospectuses.
Buying the annuity
Our representative can help you prepare and submit your application.
Alternatively, you may ask us for the forms and prepare them yourself. As an
owner, you have all rights and may receive all benefits under the annuity. The
annuity can be owned in joint tenancy only in spousal situations (but not IRAs
or SEPs). Please remember that investment performance, expenses and deductions
of certain charges affect accumulation unit value.
When you apply, you can select:
o the account(s) in which you want to invest;
o how you want to make purchase payments;
o the date you want to start receiving annuity payouts (the
annuity start date); and
o a beneficiary.
If your application is complete, we will process it and apply your purchase
payment to your account(s) within two business days after we receive it at our
service office. If your application is accepted, we will send you an annuity. If
we cannot accept your application within five business days, we will decline it
and return your payment. We will credit additional purchase payments you make to
an existing annuity to your account(s) at the next close of business after we
receive and accept your payments at our service office.
Setting the annuity start date
Annuity payouts will be scheduled to begin on the annuity start date. This date
can be aligned with your actual retirement from a job, or it can be a different
future date, depending on your needs and goals and on certain restrictions. You
can also change the
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date, provided you send us written instructions at least 30 days before annuity
payouts begin.
For nonqualified annuities, the annuity start date must be:
o no earlier than the 60th day after the annuity's effective
date; and
o no later than the annuitant's 85th birthday.
For qualified annuities, to avoid IRS penalty taxes, the annuity start date
generally must be:
o on or after the date the annuitant reaches age 59 1/2; and
o for qualified annuities, by April 1 of the year following the
calendar year when the annuitant reaches age 70 1/2 or, if later, retires;
except that 5% business owners may not select a retirement date that is
later than April 1 of the year following the calendar year when they reach
age 70 1/2.
If you are taking the minimum IRA distributions as required by the Code from
another tax-qualified investment, or in the form of partial surrenders from this
annuity, annuity payouts can start as late as, but not later than, the
annuitant's 85th birthday.
Beneficiary
If death benefits become payable before the annuity start date, your named
beneficiary will receive all or part of the certificate value. If there is no
named beneficiary, then you or your estate will be the beneficiary. (See
"Benefits in case of death" for more about beneficiaries.)
Minimum purchase payments
If single payment:
Nonqualified: $2,000
Qualified: $1,000
If installment payments:
$100 monthly; $50.00 biweekly
Installments must total at least $1,000 in the first year.*
*If you make no purchase payments for the most recent 36 months, and your
previous payments total $1,000 or less, we have the right to give you 30 days'
written notice and pay you the total value of your annuity in a lump sum.
Minimum additional purchase payment(s): $100
Maximum first-year payment(s):
This maximum is based on your age or age of the annuitant (whomever is older) on
the effective date of the annuity.
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Up to age 75 $1 million
76 to 85 $500,000
Maximum payment for each subsequent year: $50,000**
**These limits apply in total to all American Centurion Life annuities you own.
We reserve the right to increase maximum limits or reduce age limits. For
qualified annuities the qualified plan's or the Code's limits on annual
contributions also apply.
Three ways to make purchase payments
1 By letter
Send your check along with your name and account number to:
Regular mail:
American Centurion Life Assurance Company
Box 5144
Albany, NY 12205
Express mail:
American Centurion Life Assurance Company
20 Madison Avenue Ext.
Albany, NY 12203
2 By scheduled payment plan
Through:
o a bank authorization.
3 Other
o wire transfer; or
o other method acceptable to us.
Charges
Administrative charge
This charge is for establishing and maintaining your records. On each annuity
anniversary we will deduct $30 from the certificate value. The deduction will be
allocated among the subaccounts on a pro-rata basis.
This charge will be waived for any certificate year where the total purchase
payments (less partial surrenders) on the current annuity anniversary is $10,000
or more, or if, during the certificate year, a death benefit is payable or the
annuity is surrendered in full. This charge does not apply after annuity payouts
begin.
We do not expect to profit from the administrative charge. We reserve the right
to impose the charge on all annuities, including those with purchase payments
equal to or greater than $10,000.
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Mortality and expense risk fee
This fee is to cover the mortality risk and expense risk and is applied daily to
the variable subaccounts and reflected in the unit values of the accounts.
Annually it totals 1% of their average daily net assets. Approximately
two-thirds of this amount is for our assumption of mortality risk, and one-third
is for our assumption of expense risk. This fee does not apply to the fixed
account.
Mortality risk arises because of our guarantee to pay a death benefit and our
guarantee to make annuity payouts according to the terms of the contract and
certificates, no matter how long a specific annuitant lives and no matter how
long the entire group of American Centurion Life annuitants live. If, as a
group, American Centurion Life annuitants outlive the life expectancy we have
assumed in our actuarial tables, then we must take money from our general assets
to meet our obligations. If, as a group, American Centurion Life annuitants do
not live as long as expected, we could profit from the mortality risk fee.
Expense risk arises because the administrative charge may not cover our
expenses. Any deficit would have to be made up from our general assets. We could
profit from the expense risk fee if the annual administrative charge is more
than sufficient to meet expenses.
We may use any profits realized from the mortality and expense risk fee for any
proper corporate purpose, including, among others, payment of distribution
(selling) expenses.
Other information on charges
There is no surrender charge if you take a total or a partial surrender from
your annuity.
In some cases lower sales and administrative expenses may be incurred. In such
cases, we may be able to reduce or eliminate the administrative charge. However,
we expect this to occur infrequently.
Valuing your investment
Here is how your accounts are valued:
Fixed account: The amounts allocated to the fixed account are valued directly in
dollars and equal the sum of your purchase payments plus interest earned, less
any amounts surrendered or transferred.
Variable subaccounts: Amounts allocated to the variable subaccounts are
converted into accumulation units. Each time you make a purchase payment or
transfer amounts into one of the variable subaccounts, a certain number of
accumulation units are credited to your annuity for that account. Conversely,
each time you take a partial surrender, transfer amounts out of a variable
subaccount or are assessed an administrative charge, a certain number of
accumulation units are subtracted from your annuity.
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PAGE 21
The accumulation units are the true measure of investment value in each
subaccount during the accumulation period. They are related to, but not the same
as, the net asset value of the underlying fund.
The dollar value of each accumulation unit can rise or fall daily depending on
the performance of the underlying mutual fund and on certain fund expenses. Here
is how unit values are calculated:
Number of units
To calculate the number of accumulation units for a particular subaccount, we
divide your investment by the current accumulation unit value.
Accumulation unit value
The current accumulation unit value for each variable subaccount equals the last
value times the subaccount's current net investment factor.
Net investment factor
o Determined each business day by adding the underlying mutual fund's
current net asset value per share plus per-share amount of any current
dividend or capital gain distribution; then
o dividing that sum by the previous net asset value per share;
and
o subtracting the percentage factor representing the mortality
and expense risk fee from the result.
Because the net asset value of the underlying mutual fund may fluctuate, the
accumulation unit value may increase or decrease. You bear this investment risk
in a variable subaccount.
Factors that affect variable subaccount accumulation units Accumulation units
may change in two ways; in number and in value. Here are the factors that
influence those changes:
The number of accumulation units you own may fluctuate due to:
o additional purchase payments allocated to the variable
subaccounts;
o transfers into or out of the variable subaccount(s);
o partial surrenders; and/or
o administrative charges.
Accumulation unit values may fluctuate due to:
o changes in underlying mutual fund(s) net asset value;
o dividends distributed to the variable subaccount(s);
o capital gains or losses of underlying mutual funds;
o mutual fund operating expenses; and/or
o mortality and expense risk fees.
Making the most of your annuity
Automated dollar-cost averaging
You can use automated transfers to take advantage of dollar-cost
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PAGE 22
averaging (investing a fixed amount at regular intervals). For example, you
might have a set amount transferred monthly from a relatively conservative
variable subaccount to a more aggressive one, or to several others.
This systematic approach can help you benefit from fluctuations in accumulation
unit values caused by fluctuations in the market value(s) of the underlying
mutual fund(s). Since you invest the same amount each period, you automatically
acquire more units when the market value falls, fewer units when it rises. The
potential effect is to lower your average cost per unit. Contact our service
office for more information.
How dollar-cost averaging works
<TABLE>
<CAPTION>
Month Amount Accumulation Number of units
invested unit value purchased
<S> <C> <C> <C> <C>
By investing an Jan $100 $20 5.00
equal number of
dollars each month.... Feb 100 16 6.25
March 100 9 11.11
you automatically April 100 5 20.00
buy more units
when the per unit May 100 7 14.29
market price is low....
June 100 10 10.00
July 100 15 6.67
and fewer units Aug 100 20 5.00
when the per unit
market price is Sept 100 17 5.88
high.
Oct 100 12 8.33
</TABLE>
You have paid an average price of only $10.81 per unit over the 10 months, while
the average market price actually was $13.10.
Dollar-cost averaging does not guarantee that any subaccount will gain in value,
nor will it protect against a decline in value if market prices fall. Because
this strategy involves continuous investing, your success with dollar cost
averaging will depend upon your willingness to continue to invest regularly
through periods of low price levels. Dollar cost averaging can be an effective
way to help meet your long-term goals.
Transferring money between accounts
You may transfer money from any one subaccount or the fixed account to another
at any time before annuity payouts begin. If we receive your request before the
close of business, we will process it that day. Requests received after the
close of business will be processed the next business day. Before making a
transfer, you should consider the risks involved in switching investments. We
may suspend or modify transfer privileges at any time.
Transfer policies
o You may transfer certificate values at any time between the variable
subaccounts, from the variable subaccount(s) to the fixed account or from
the fixed account to the variable subaccount(s).
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o The amount being transferred to any one account must be at least $100.
o If you make more than 12 transfers in a certificate year, we will charge
$25 for each transfer in excess of 12.
o Excessive trading activity can disrupt mutual fund management strategy and
increase expenses, which are borne by all annuity owners participating in
the mutual fund regardless of their transfer activity. Therefore, we
reserve the right to limit the number of transfers permitted, but not to
fewer than twelve per certificate year.
Two ways to request a transfer or a surrender
1 By letter
Send your name, contract number, Social Security Number or Taxpayer
Identification Number and signed request for a transfer or surrender to:
Regular mail:
American Centurion Life Assurance Company
Box 5144
Albany, NY 12205
Express mail:
American Centurion Life Assurance Company
20 Madison Avenue Ext.
Albany, NY 12203
Minimum amount
Mail transfers: $100 or entire account balance
Mail surrenders: $100 or entire account balance
Maximum amount
Mail transfers: None (up to certificate value)
Mail surrenders: None (up to certificate value)
2 By automated transfers and automated partial surrenders
o You can set up automated transfers among your accounts or partial
surrenders from the accounts.
You can start or stop this service by written request or other method acceptable
to American Centurion Life. You must allow 30 days for American Centurion Life
to change any instructions that are currently in place.
o Automated transfers and automated partial surrenders are subject to all of
the annuity provisions and terms, including transfer of certificate values
between accounts. Automated surrenders may be restricted by applicable law
under some annuities.
o Automated partial surrenders may result in IRS taxes and penalties on all
or part of the amount surrendered.
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PAGE 24
Minimum amount
Automated transfers or surrenders: $100
Maximum amount
Automated transfers or surrenders: None
Surrendering your annuity
As owner, you may surrender all or part of your annuity at any time before
annuity payouts begin by sending a written request to American Centurion Life.
For total surrenders we will compute the certificate value at the close of
business after we receive your request. We may ask you to return the annuity.
You may have to pay IRS taxes and penalties. (See "Taxes.") No surrenders may be
made after annuity payouts begin.
Surrender policies
If you have a balance in more than one account and request a partial surrender,
we will surrender money from all your accounts in the same proportion as your
value in each account correlates to your total certificate value, unless you
request otherwise.
Receiving payment when you request a surrender
By regular or express mail:
o Payable to owner.
o Normally mailed to address of record within seven days after receiving your
request. However, we may postpone the payment if:
- the surrender amount includes a purchase payment check
that has not cleared;
- the NYSE is closed, except for normal holiday and weekend
closings;
- trading on the NYSE is restricted, according to SEC
rules;
- an emergency, as defined by SEC rules, makes it
impractical to sell securities or value the net assets of
the accounts; or
- the SEC permits us to delay payment for the protection of
security holders.
NOTE: You will be charged a fee if you request express mail delivery.
Changing ownership
You may change ownership of your non-qualified annuity at any time by filing a
change of ownership with us at our service office. The change will become
binding upon us when we receive and record it. We will honor any change of
ownership request believed to be authentic and will use reasonable procedures to
confirm that it is. If these procedures are followed, we take no responsibility
for the validity of the change.
If you have a nonqualified annuity, you may lose your tax advantages by
transferring, assigning or pledging any part of it. (See "Taxes.")
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PAGE 25
If you have a qualified annuity, you may not sell, assign, transfer, discount or
pledge your annuity as collateral for a loan, or as security for the performance
of an obligation or for any other purpose to any person except American
Centurion Life. However, if the owner is a trust or custodian, or an employer
acting in a similar capacity, ownership of an annuity may be transferred to the
annuitant.
Benefits in case of death
If you or the annuitant dies (or, for qualified annuities, if the annuitant
dies) before annuity payouts begin, we will pay the beneficiary the greater of:
o the annuity value; or
o purchase payments, minus any partial surrenders.
If your spouse is sole beneficiary under a non-qualified annuity and you die
before the annuity start date, your spouse may keep the annuity as owner. To do
this your spouse must, within 60 days after we receive proof of death, give us
written instructions to keep the annuity in force.
Under a qualified annuity if the annuitant dies before annuity payouts begin,
and the spouse is the only beneficiary, the spouse may keep the annuity in force
as owner until the date on which the spouse reaches age 70 1/2 or until the date
on which the annuitant would have reached age 70 1/2 or any other date permitted
by the Code. To do this, the spouse must give us written instructions within 60
days after we receive proof of death.
Payouts: We will pay the beneficiary in a single sum unless you have given us
other written instructions, or the beneficiary may receive payouts under any
annuity payout plan available under this annuity if:
o the beneficiary asks us in writing within 60 days after we
receive proof of death;
o payouts begin no later than one year after death or other
date as permitted by the Code; and
o the payout period does not extend beyond the beneficiary's
life or life expectancy.
When paying the beneficiary, we will determine the certificate's value at the
next close of business after our death claim requirements are fulfilled.
Interest, if any, will be paid from the date of death at a rate no less than
required by law. We will mail payment to the beneficiary within seven days after
our death claim requirements are fulfilled. (See "Taxes.")
The annuity payout period
As owner, you have the right to decide how and to whom annuity payouts will be
made starting at the annuity start date. You may select one of the annuity
payout plans outlined below, or we will mutually agree on other payout
arrangements. The amount available
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PAGE 26
for payouts under the plan you select is the certificate value on your annuity
start date. Annuity payouts will be made on a fixed basis.
Amounts of payouts depend on:
o the annuity payout plan you select;
o the annuitant's age and, in most cases, sex; and
o the annuity table in the annuity.
Annuity payout plans
You may choose any one of these annuity payout plans by giving us written
instructions at least 30 days before certificate values are to be used to
purchase the payout plan:
o Plan A - Life annuity - no refund: Monthly payouts are made until the
annuitant's death. Payouts end with the last payout before the annuitant's
death; no further payouts will be made. This means that if the annuitant dies
after only one monthly payout has been made, no more payouts will be made.
o Plan B - Life annuity with five, 10 or 15 years certain: Monthly payouts are
made for a guaranteed payout period of five, 10 or 15 years that the annuitant
elects. This election will determine the length of the payout period to the
beneficiary if the annuitant should die before the elected period has expired.
The guaranteed payout period is calculated from the annuity start date. If the
annuitant outlives the elected guaranteed payout period, payouts will continue
until the annuitant's death.
o Plan C - Life annuity - installment refund: Monthly payouts are made until the
annuitant's death, with our guarantee that payouts will continue for some period
of time. Payouts will be made for at least the number of months determined by
dividing the amount applied under this option by the first monthly payout,
whether or not the annuitant is living.
o Plan D - Joint and last survivor life annuity - no refund: Monthly payouts are
made while both the annuitant and a joint annuitant are living. If either
annuitant dies, monthly payouts continue at the full amount until the death of
the surviving annuitant. Payouts end with the death of the second annuitant.
o Plan E - Payouts for a specified period: Monthly payouts are made for a
specific payout period of 10 to 30 years chosen by the annuitant. Payouts will
be made only for the number of years specified whether the annuitant is living
or not. Depending on the time period selected, it is foreseeable that an
annuitant can outlive the payout period selected. In addition, a 10% IRS penalty
tax could apply under this payout plan. (See "Taxes.")
Restrictions for some qualified plans: If you purchased a qualified annuity, you
must select a payout plan that provides for payouts:
o over the life of the annuitant;
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PAGE 27
o over the joint lives of the annuitant and a designated
beneficiary;
o for a period not exceeding the life expectancy of the
annuitant; or
o for a period not exceeding the joint life expectancies of the
annuitant and a designated beneficiary.
If we do not receive instructions: You must give us written instructions for the
annuity payouts at least 30 days before the annuitant's annuity start date. If
you do not, we will make payouts under Plan B, with 120 monthly payouts
guaranteed.
If monthly payouts would be less than $20: We will calculate the amount of
monthly payouts at the time the certificate value is used to purchase a payout
plan. If the calculations show that monthly payouts would be less than $20, we
have the right to pay the certificate value to you in a lump sum.
Death after annuity payouts begin
If you or the annuitant dies after annuity payouts begin, any amount payable to
the beneficiary will be provided in the annuity payout plan in effect.
Taxes
Generally, under current law, any increase in your certificate value is taxable
to you only when you receive a payout or surrender. (However, see detailed
discussion below.) Any portion of the annuity payouts and any surrenders you
request that represent ordinary income are normally taxable. You will receive a
1099 tax information form for any year in which a taxable distribution was made
according to our records.
Annuity payouts under nonqualified annuities: A portion of each payout will be
ordinary income and subject to tax, and a portion of each payout will be
considered a return of part of your investment and will not be taxed. All
amounts received after your investment in the annuity is fully recovered will be
subject to tax.
Tax law requires that all nonqualified deferred annuities issued by the same
company to the same owner during a calendar year are to be taxed as a single,
unified annuity when distributions are taken from any one of such annuities.
Annuity payouts under qualified annuities: Under a qualified annuity, the entire
payout generally will be includable as ordinary income and subject to tax except
to the extent that contributions were made with after-tax dollars. If you
invested in your annuity with pre-tax dollars as part of a qualified retirement
plan, such amounts are not considered to be part of your investment in the
annuity and will be taxed when paid to you.
Surrenders: If you surrender part or all of your annuity before your annuity
payouts begin, your surrender payment will be taxed to the extent that the value
of your annuity immediately before the surrender exceeds your investment. You
also may have to pay a 10%
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PAGE 28
IRS penalty for surrenders before reaching age 59 1/2. For qualified annuities,
other penalties may apply if you surrender your annuity before your plan
specifies that you can receive payouts.
Death benefits to beneficiaries: The death benefit under an annuity is not
tax-exempt. Any amount received by the beneficiary that represents previously
deferred income earnings within the annuity is taxable as ordinary income to the
beneficiary in the year(s) he or she receives the payments.
Annuities owned by corporations, partnerships or trusts: For nonqualified
annuities, any annual increase in the value of annuities held by such entities
generally will be treated as ordinary income received during that year. This
provision is effective for purchase payments made after Feb. 28, 1986. However,
if the trust was set up for the benefit of a natural person only, the increase
in value will be tax-deferred.
Penalties: If you receive amounts from your annuity before reaching age 59 1/2,
you may have to pay a 10% IRS penalty on the amount includable in your ordinary
income. However, this penalty will not apply to any amount received by you or
your beneficiary:
o because of your death;
o because you become disabled (as defined in the Code);
o if the distribution is part of a series of substantially equal
periodic payments after separation from service, made at least annually,
over your life or life expectancy (or joint lives or life expectancies of
you and your beneficiary); or
o if it is allocable to an investment before Aug. 14, 1982
(except for qualified annuities).
For a qualified annuity, other penalties or exceptions may apply if you
surrender your annuity before your plan specifies that payouts can be made.
Withholding, generally: If you receive all or part of the certificate value from
an annuity, withholding may be imposed against the taxable income portion of the
payment. Any withholding that is done represents a prepayment of your tax due
for the year. You take credit for such amounts on the annual tax return that you
file.
If the payment is part of an annuity payout plan, the amount of withholding
generally is computed using payroll tables. You can provide us with a statement
of how many exemptions to use in calculating the withholding. As long as you've
provided us with a valid Social Security Number or Taxpayer Identification
Number, you can elect not to have any withholding occur.
If the distribution is any other type of payment (such as a partial or total
surrender) withholding is computed using 10% of the taxable portion. Similar to
above, as long as you've provided us with a valid Social Security Number or
Taxpayer Identification Number, you can elect not to have this withholding
occur.
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PAGE 29
The state also imposes withholding requirements similar to the federal
withholding described above. If this should be the case, any payment from which
federal withholding is deducted may also have state withholding deducted.
The withholding requirements may differ if payment is being made to a non-U.S.
citizen or if the payment is being delivered outside the United States.
Transfer of ownership of a nonqualified annuity: If you make such a transfer
without receiving adequate consideration, the transfer is considered a gift, and
also may be considered a surrender for federal income tax purposes. If the gift
is a currently taxable event for income tax purposes, the amount of deferred
earnings at the time of the transfer will be taxed to the original owner, who
also may be subject to a 10% IRS penalty as discussed earlier. In this case, the
new owner's investment in the annuity will be the certificate value of at the
time of the transfer.
Collateral assignment of a nonqualified certificate: If you collaterally assign
or pledge your annuity, earnings on purchase payments you made after Aug. 13,
1982 will be taxed to you like a surrender.
Important: Our discussion of federal tax laws is based upon our understanding of
these laws as they are currently interpreted. Federal tax laws or current
interpretations of them may change. For this reason and because tax consequences
are complex and highly individual and cannot always be anticipated, you should
consult a tax adviser if you have any questions about taxation of your annuity.
Tax Qualification
This annuity is intended to qualify for federal income tax purposes as an
annuity. To the extent permitted by applicable law, we will administer the
provisions to be consistent with such qualification. We reserve the right to
amend the annuity to reflect any clarifications that may be needed or are
appropriate to maintain such qualification or to conform the annuity to any
applicable changes in the tax qualification requirements. We will obtain any
necessary regulatory approvals and send you a copy of any such amendments.
Voting rights
As an owner with investments in the variable account(s), you may vote on
important mutual fund policies. We will vote fund shares according to your
instructions.
The number of votes you have is determined by applying your percentage interest
in each variable subaccount to the total number of votes allowed to the
subaccount.
We calculate votes separately for each subaccount not more than 60 days before a
shareholders' meeting. Notice of these meetings, proxy materials and a statement
of the number of votes to which the voter is entitled, will be sent.
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We will vote shares for which we have not received instructions in the same
proportion as the votes for which we have received instructions. We also will
vote the shares for which we have voting rights in the same proportion as the
votes for which we have received instructions.
Substitution of investments
If shares of any fund should not be available for purchase by the appropriate
variable subaccount or if, in the judgment of American Centurion Life's
Management, further investment in such shares is no longer appropriate in view
of the purposes of the subaccount, investment in the subaccount may be
discontinued or another registered open-end management investment company may be
substituted for fund shares held in the subaccounts if American Centurion Life
believes it would be in the best interest of persons having voting rights under
the annuity. The variable account may be operated as a management company under
the 1940 Act or it may be deregistered under this Act if the registration is no
longer required. In the event of any such substitution or change, American
Centurion Life, without the consent or approval of the owners, may amend the
annuity and take whatever action is necessary and appropriate. However, no such
substitution or change will be made without the necessary approval of the SEC
and state insurance departments. American Centurion Life will notify owners of
any substitution or change.
Distribution of the Annuities
The annuities will be distributed by American Express Service Corporation, the
principal underwriter for the variable account.
About American Centurion Life
The Privileged Assets Select Annuity is issued by American Centurion Life.
American Centurion Life is a wholly owned subsidiary of IDS Life Insurance
Company, which is a wholly owned subsidiary of AEFC. AEFC is a wholly owned
subsidiary of the American Express Company. American Express Company is a
financial services company principally engaged through subsidiaries (in addition
to AEFC) in travel related services, investment services and international
banking services.
American Centurion Life is a stock life insurance company organized in 1969
under the laws of the State of New York. Its service office is located at 20
Madison Avenue Ext., Albany, NY 12203. American Centurion Life is licensed in
the state of New York where it conducts a conventional life insurance business.
American Express Service Corporation is the principal underwriter for the
variable account. Its service office is located at 80 South 8th Street,
Minneapolis, MN 55440-0010. American Express Service Corporation is registered
with the SEC under the Securities Exchange Act of 1934 as a broker-dealer and is
a member of the National Association of Securities Dealers, Inc. American
Express Service Corporation is a wholly owned subsidiary of American Express
Travel Related Services Company which is a wholly owned subsidiary of American
Express Company.
<PAGE>
PAGE 31
The AEFC family of companies also offers mutual funds, investment certificates
and a broad range of financial management services.
Other subsidiaries provide investment management and related services for
pension, profit-sharing, employee savings and endowment funds of businesses and
institutions.
Regular and special reports
Services
To help you track and evaluate the performance of your annuity, American
Centurion Life provides:
Quarterly statements showing the value of your investment. Annual reports
containing required information on the certificate and its underlying
investments.
Table of contents of the Statement of Additional Information
Performance information............................
Calculating annuity payouts........................
Rating Agencies....................................
Principal underwriter..............................
Independent auditors...............................
Retirement planning................................
Prospectus.........................................
Financial statements -
American Centurion Life Assurance Company
- -------------------------------------------------------------------
Please check the appropriate box to receive a copy of the Statement of
Additional Information for:
_____ Privileged Assets Select Annuity
_____ IDS Life Retirement Annuity Mutual Funds
_____ INVESCO Variable Investment Funds, Inc.
_____ Janus Aspen Series
_____ American Century Variable Portfolios, Inc.
_____ Warburg Pincus Trust-Post-Venture Capital Portfolio
Please return this request to:
American Centurion Life Assurance Company
20 Madison Avenue Ext.
Albany, NY 12203
Your name _______________________________________________________
Address _________________________________________________________
City ______________________ State ______________ Zip ___________
<PAGE>
PAGE 32
STATEMENT OF ADDITIONAL INFORMATION
for
PRIVILEGED ASSETS(R) SELECT ANNUITY
ACL VARIABLE ANNUITY ACCOUNT 1
May 1, 1997
ACL Variable Annuity Account 1 is a separate account established and maintained
by American Centurion Life Assurance Company
(American Centurion Life).
This Statement of Additional Information, dated May 1, 1997, is not a
prospectus. It should be read together with the account's prospectus, dated May
1, 1997, which may be obtained by writing or calling American Centurion Life at
the address or telephone number below.
American Centurion Life Assurance Company
20 Madison Avenue Ext.
Albany, NY 12203
Phone (518) 452-4150
<PAGE>
PAGE 33
TABLE OF CONTENTS
Performance Information.......................................p. 3
Calculating Annuity Payouts...................................p. 5
Rating Agencies...............................................p. 6
Principal Underwriter.........................................p. 6
Independent Auditors..........................................p. 6
Retirement Planning...........................................p. 6
Prospectus....................................................p. 7
Financial Statements
- American Centurion Life Assurance Company
<PAGE>
PAGE 34
PERFORMANCE INFORMATION
The following performance figures are calculated on the basis of historical
performance of the funds. The performance figures relating to these funds assume
that the annuity was offered prior to November 18, 1996 which it was not. Before
the subaccounts began investing in these funds, the figures show what the
subaccount performance would have been if these subaccounts had existed during
the illustrated periods. Once these subaccounts begin investing in these funds,
actual values will be used for the calculations.
Calculation of yield for IDS Life Moneyshare Subaccount
Simple yield for the IDS Life Moneyshare subaccount (DMS) will be based on the:
(a) change in the value of a hypothetical investment (exclusive of capital
changes) at the beginning of a seven-day period for which yield is to be quoted;
(b) subtracting a pro rata share of subaccount expenses accrued over the
seven-day period; (c) dividing the difference by the value of the subaccount at
the beginning of the period to obtain the base period return; and (d)
annualizing the results (i.e., multiplying the base period return by 365/7).
Calculation of compound yield begins with the same base period return used in
the calculation of yield, which is then annualized to reflect compounding
according to the following formula:
Compound Yield = [(return for seven-day period + 1) 365/7 ]-1
On Dec. 31, 1996, the account's annualized yield was 3.66% and its compound
yield was 3.73%.
The rate of return, or yield, on the subaccount's accumulation unit may
fluctuate daily and does not provide a basis for determining future yields.
Investors must consider, when comparing an investment in subaccount DMS with
fixed annuities, that fixed annuities often provide an agreed-to or guaranteed
fixed yield for a stated period of time, whereas the variable subaccount's yield
fluctuates. In comparing the yield of subaccount DMS to a money market fund, you
should consider the different services that the annuity provides.
Calculation of yield for Subaccounts (Investing in income funds)
Quotations of yield will be based on all investment income earned during a
particular 30-day period, less expenses accrued during the period (net
investment income) and will be computed by dividing net investment income per
accumulation unit by the value of an accumulation unit on the last day of the
period, according to the following formula:
YIELD = 2[(a-b + 1) 6 - 1]
cd
<PAGE>
PAGE 35
where: a = dividends and investment income earned during the
period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units outstanding
during the period that were entitled to receive dividends.
d = the maximum offering price per accumulation unit on
the last day of the period.
Yield on the subaccount is earned from the increase in the net asset value of
shares of the fund in which the subaccount invests and from dividends declared
and paid by the fund, which are automatically invested in shares of the fund.
Annualized yield based on 30-Day period ended Dec. 31, 1996
Subaccount investing in: Yield
IDS Life Special Income Fund 8.04%
Calculation of average annual total return
Quotations of average annual total return for a subaccount will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the annuity contract over a period of one, five and ten years (or,
if less, up to the life of the subaccount), calculated according to the
following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical $1,000 payment made
at the beginning of the one, five, or ten year (or other)
period at the end of the one, five, or ten year (or other)
period (or fractional portion thereof).
The Securities and Exchange Commission requires that an assumption be made that
the owner surrenders the entire annuity at the end of the one, five and ten year
periods (or, if less, up to the life of the subaccount) for which performance is
required to be calculated.
Average Annual Total Return Period Ended: Dec. 31, 1996
Average Annual Total Return with or without Surrender
<TABLE>
<CAPTION>
Since
Subaccount investing in: 1 Year 5 Years 10 Years Inception
- -----------------------
<S> <C> <C> <C> <C>
IDS LIFE
Aggressive Growth Fund (1/92)* 14.94% -% -% 10.92%
Capital Resource Fund (10/81) 6.68 7.21 12.27 -
International Equity Fund (1/92) 8.27 - - 7.24
Managed Fund (4/86) 15.71 9.59 11.14 -
Moneyshare Fund (10/81) 3.79 2.77 4.39 -
Special Income Fund (10/81) 5.70 8.47 7.73 -
<PAGE>
PAGE 36
INVESCO VIF
Industrial Income Portfolio (8/94) 20.99 - - 20.17
Janus Aspen Series
Worldwide Growth Portfolio (9/93) 27.75 - - 21.91
Growth Portfolio (9/93) 17.16 - - 14.93
American Century
VP Capital Appreciation (11/87) -5.61 4.88 - 9.52
VP Value (5/96) 7.98 - - 10.99
Warburg Pincus Trust
Post-Venture Capital Portfolio (9/95)** - - - -3.69
</TABLE>
* inception dates of the funds are shown in parentheses.
** annualized.
Aggregate Total Return
Aggregate total return represents the cumulative change in value of an
investment for a given period (reflecting change in a subaccount's accumulation
unit value) and is computed by the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000.
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the one, five, or ten year (or
other) period at the end of the one, five, or ten year (or
other) period (or fractional portion thereof).
Subaccount total return figures reflect the deduction of the administrative
charge and mortality and expense risk fee.
Performance of the subaccounts may be quoted or compared to rankings, yields, or
returns as published or prepared by independent rating or statistical services
or publishers or publications such as The Bank Rate Monitor National Index,
Barron's, Business Week, CDA Technologies, Donoghue's Money Market Fund Report,
Financial Services Week, Financial Times, Financial World, Forbes, Fortune,
Global Investor, Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Morningstar, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report, Sylvia Porter's
Personal Finance, USA Today, U.S. News and World Report, The Wall Street Journal
and Wiesenberger Investment Companies Service.
CALCULATING ANNUITY PAYOUTS
Your fixed annuity payout amounts are guaranteed. Once calculated, your payout
will remain the same and never change. To calculate your annuity payouts we:
o take the total value of your fixed account and the subaccounts at the annuity
start date or the date you have selected to begin receiving your annuity
payouts; then o using an annuity table we apply the value according to the
annuity payout plan you select.
<PAGE>
PAGE 37
o The annuity payout table we use will be the one in effect at the time you
choose to begin your annuity payouts. The table will be equal to or greater than
the table in the annuity.
RATING AGENCIES
The following chart reflects the ratings given to American Centurion Life by
independent rating agencies. These agencies evaluate the financial soundness and
claims-paying ability of insurance companies based on a number of different
factors. This information does not relate to the management or performance of
the variable subaccounts of the Privileged Assets Select Annuity.
This information relates only to the fixed account and reflects American
Centurion Life's ability to make annuity payouts and to pay death benefits and
other distributions from the annuity.
Rating agency Rating
A.M. Best A+
(Superior)
Duff & Phelps AAA
PRINCIPAL UNDERWRITER
The principal underwriter for the accounts is American Express Service
Corporation which offers the variable contracts on a continuous basis.
INDEPENDENT AUDITORS
The financial statements of American Centurion Life Assurance Company (a wholly
owned subsidiary of IDS Life Insurance Company) as of December 31, 1996 and
1995, and for the years then ended, have been audited by Ernst & Young LLP,
independent auditors as stated in their report appearing herein.
RETIREMENT PLANNING
You may have to save more for retirement because social security and employee
savings plans are estimated to cover only 40% of your retirement savings. The
remaining 60% must come from personal investments, savings and other income.*
One way to help save for retirement is by purchasing a variable annuity.
Variable annuity sales have almost tripled in the last 4 years to over $52
billion dollars.**
Sources:
* Social Security Administration
**LIMRA 1994 Individual Annuity Market Report
<PAGE>
PAGE 38
PROSPECTUS
The prospectus dated May 1, 1997, is hereby incorporated in this Statement of
Additional Information by reference.
<PAGE>
American Centurion Life Financial Information
The financial statements shown below are those of the insurance company and not
those of any other entity. They are included for the purpose of informing the
investor as to the financial condition of the insurance company and its ability
to carry out its obligations under its variable contracts.
AMERICAN CENTURION LIFE ASSURANCE COMPANY
BALANCE SHEETS
Dec. 31, Dec. 31,
ASSETS 1996 1995
------ ---------- -------
(thousands)
Investments in fixed maturities:
Held to maturity, at amortized cost (Fair value:
1996, $19,958; 1995, $24,191) $ 19,579 $ 23,222
Available for sale, at fair value (Amortized cost:
1996, $134,631; 1995, $83,589) 136,091 86,980
-------- --------
155,670 110,202
Cash and cash equivalents 13,856 2,531
Amounts recoverable from reinsurance 2,728 3,402
Other accounts receivable 14 86
Accrued investment income 2,104 1,500
Deferred policy acquisition costs 4,364 1,318
Deferred income taxes -- 144
Other assets 41 44
---------- ------------
Total assets $178,777 $119,227
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits:
Fixed annuities $139,362 $ 92,789
Traditional life insurance 1,883 3,579
Disability income insurance 225 225
Policy claims and other policyholders' funds 691 263
Amounts due to broker 4,916 --
Deferred income taxes 592 --
Other liabilities 34 1,121
-------- ---------
Total liabilities 147,703 97,977
Stockholder's equity:
Capital stock, $10 par value per share;
100,000 shares authorized,
issued and outstanding 1,000 1,000
Additional paid-in capital 16,600 6,600
Net unrealized gain on investments 863 2,204
Retained earnings 12,611 11,446
---------- ----------
Total stockholder's equity 31,074 21,250
---------- ----------
Total liabilities and stockholder's equity $178,777 $119,227
======= =======
Commitments and contingencies (note 6)
See accompanying notes.
<PAGE>
AMERICAN CENTURION LIFE ASSURANCE COMPANY
STATEMENTS OF INCOME
Years ended Dec. 31,
1996 1995
------ -----
(thousands)
Revenues:
Contractholder charges $ 306 $ 299
Net investment income 8,851 7,734
Net realized gain (loss) on investments (57) 112
------- ------
Total revenues 9,100 8,145
------ ------
Benefits and expenses:
Interest credited on investment contracts 5,849 4,670
Amortization of deferred policy
acquisition costs 21 294
Other operating expenses 1,387 710
------ ------
Total expenses 7,257 5,674
------ ------
Income before income taxes 1,843 2,471
Income taxes 678 885
------- -------
Net income $ 1,165 $ 1,586
===== =====
See accompanying notes.
<PAGE>
AMERICAN CENTURION LIFE ASSURANCE COMPANY
STATEMENTS OF CASH FLOWS
Years ended Dec. 31,
1996 1995
(thousands)
Cash flows from operating activities:
Net income $ 1,165 $ 1,586
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Change in reinsurance receivable 674 166
Change in accounts receivable 72 1,059
Change in accrued investment income (604) (270)
Change in deferred policy acquisition
costs, net (3,177) 252
Change in liabilities for future policy
benefits for traditional life and
disability income insurance (1,696) --
Change in other assets 3 (44)
Change in policy claims and other
policyholders' funds 428 (97)
Change in deferred income taxes 1,457 (640)
Change in other liabilities (1,087) 386
Amortization of premium
(accretion of discount), net 56 101
Net realized (gain) loss on investments 57 (112)
Other, net -- (75)
---------- -----------
Net cash (used in) provided by
operating activities (2,652) 2,312
------- ---------
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases -- (1,980)
Maturities 2,603 3,443
Sales 477 --
Fixed maturities available for sale:
Purchases (59,425) (22,290)
Maturities 7,261 4,819
Sales 1,572 496
Change in due to broker 4,916 (1,446)
--------- -----------
Net cash used in
investing activities (42,596) (16,958)
-------- ----------
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 55,594 20,876
Surrenders and other benefits (14,870) (12,691)
Interest credited to account balances 5,849 4,670
Capital contribution from parent 10,000 -
------- -------------
Net cash provided by
financing activities 56,573 12,855
-------- ---------
Net increase (decrease) in cash and
cash equivalents 11,325 (1,791)
Cash and cash equivalents at beginning of year 2,531 4,322
--------- --------
Cash and cash equivalents at end of year $ 13,856 $ 2,531
======= =======
See accompanying notes.
<PAGE>
AMERICAN CENTURION LIFE ASSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ thousands)
1. Summary of significant accounting policies
Nature of business
American Centurion Life Assurance Company (the Company) issues business
consisting primarily of single and installment premium annuity contracts
sold to New York residents. The Company is licensed to transact insurance
business in New York, Alabama and Delaware.
Basis of presentation
The Company is a wholly owned subsidiary of IDS Life Insurance Company (IDS
Life), which is a wholly owned subsidiary of American Express Financial
Corporation. American Express Financial Corporation is a wholly owned
subsidiary of American Express Company. The accompanying financial
statements have been prepared in conformity with generally accepted
accounting principles which vary in certain respects from reporting
practices prescribed or permitted by the New York Department of Insurance
(see Note 8).
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Investments
Fixed maturities that the Company has both the positive intent and the
ability to hold to maturity are classified as held to maturity and carried
at amortized cost. All other fixed maturities and all marketable equity
securities are classified as available for sale and carried at fair value.
Unrealized gains and losses on securities classified as available for sale
are carried as a separate component of stockholder's equity, net of
deferred taxes.
Realized investment gain or loss is determined on an identified cost basis.
Prepayments are anticipated on certain investments in mortgage-backed
securities in determining the constant effective yield used to recognize
interest income. Prepayment estimates are based on information received
from brokers who deal in mortgage-backed securities.
When evidence indicates a decline, which is other than temporary, in the
underlying value or earning power of individual investments, such
investments are written down to the fair value by a charge to income.
Statements of cash flows
The Company considers investments with a maturity at the date of their
acquisition of three months or less to be cash equivalents. These
securities are carried principally at amortized cost which approximates
fair value.
Supplementary information to the statements of cash flows is summarized as
follows:
1996 1995
------- -----
Cash paid during the year for:
Income taxes $257 $531
Recognition of profits on fixed annuity contracts
Profits on fixed deferred annuities are recognized by the Company over the
lives of the contracts, using primarily the retrospective deposit method.
This method recognizes profits over the lives of the policies in proportion
to the estimated gross profits expected to be realized.
Deferred policy acquisition costs
The costs of acquiring new business, principally sales compensation, policy
issue costs, and certain sales expenses, have been deferred on annuity
contracts. These costs are amortized as a percentage of the estimated gross
profits expected to be realized on the policies.
Liabilities for future policy benefits
Liabilities for single premium deferred annuities and installment annuities
are accumulation values. Liabilities for fixed annuities in a benefit
status are based on the 1983a Table with interest at 6.25%.
Federal income taxes
The Company's taxable income is included in the consolidated federal income
tax return of American Express Company. The Company provides for income
taxes on a separate return basis, except that, under an agreement between
American Express Financial Corporation and American Express Company, tax
benefit is recognized for losses to the extent they can be used on the
consolidated tax return. It is the policy of American Express Financial
Corporation and its subsidiaries that American Express Financial
Corporation will reimburse subsidiaries for all tax benefits.
Included in other liabilities at Dec. 31, 1996 and 1995 are ($185) and
$758, respectively, (receivable from) payable to IDS Life for federal
income taxes.
Accounting changes
The Financial Accounting Standards Board's (FASB) Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," was effective Jan. 1,
1996. The new rule did not have a material impact on the Company's results
of operations or financial condition.
2. Investments
Fair values of investments in fixed maturities represent quoted market
prices and estimated values when quoted prices are not available. Estimated
values are determined by established procedures involving, among other
things, review of market indices, price levels of current offerings of
comparable issues, price estimates and market data from independent brokers
and financial files.
Net realized (loss) gain on investments was ($57) and $112 for the years
ended Dec. 31, 1996 and 1995, respectively, and was entirely due to sales
of fixed maturities.
Changes in net unrealized appreciation (depreciation) of investments
for the years ended Dec. 31 are summarized as follows:
1996 1995
Investments in fixed maturities:
Held to maturity $ (590) $6,587
Available for sale (1,931) 2,283
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at Dec. 31, 1996 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
---------------- --------- --------- -------- --------
<S> <C> <C> <C> <C>
Corporate bonds and obligations $ 17,995 $ 421 $ 154 $ 18,262
Mortgage-backed securities 1,584 112 -- 1,696
---------- -------- --------- ----------
$ 19,579 $ 533 $ 154 $ 19,958
========= ======== ======== =========
Available for sale
U.S. Government agency obligations $ 2,095 $ -- $ 32 $ 2,063
State and municipal obligations 1,000 21 -- 1,021
Corporate bonds and obligations 74,327 1,808 369 75,766
Mortgage-backed securities 57,209 638 606 57,241
----------- -------- ------ -----------
$134,631 $ 2,467 $ 1,007 $136,091
======== ======= ======= ========
</TABLE>
The change in net unrealized gain on available for sale securities included
as a separate component of stockholder's equity, net of deferred taxes, was
$1,341 in 1996.
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at Dec. 31, 1995 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
---------------- --------- --------- -------- --------
<S> <C> <C> <C> <C>
Corporate bonds and obligations $ 21,199 $ 848 $ 29 $ 22,018
Mortgage-backed securities 2,023 150 -- 2,173
----------- --------- --------- ------------
$ 23,222 $ 998 $ 29 $ 24,191
========= ======== ======= ==========
Available for sale
U.S. Government agency obligations $ 2,104 $ 31 $ 2 $ 2,133
Corporate bonds and obligations 42,174 2,623 5 44,792
Mortgage-backed securities 39,311 944 200 40,055
----------- -------- ------ -----------
$ 83,589 $ 3,598 $ 207 $ 86,980
========= ======= ====== ==========
</TABLE>
The change in net unrealized gain on available for sale securities included
as a separate component of stockholder's equity, net of deferred taxes, was
$3,934 in 1995.
The amortized cost and fair value of investments in fixed maturities at
Dec. 31, 1996 by contractual maturity are shown below. Actual maturities
will differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 1,502 $ 1,505
Due from one to five years 12,840 13,101
Due from five to ten years 2,019 2,094
Due in more than ten years 1,634 1,562
Mortgage-backed securities 1,584 1,696
---------- ----------
$ 19,579 $ 19,958
========= =========
Amortized Fair
Available for sale Cost Value
Due in one year or less $ 1,249 $ 1,261
Due from one to five years 22,708 23,569
Due from five to ten years 43,626 44,152
Due in more than ten years 9,839 9,868
Mortgage-backed securities 57,209 57,241
------------ -----------
$ 134,631 $ 136,091
=========== ==========
During the year ended Dec. 31, 1996, fixed maturities classified as held to
maturity were sold with amortized cost of $500. Net gains and losses on
these sales were not significant. The sale of these fixed maturities was
due to significant deterioration in the issuers' creditworthiness. There
were no sales of fixed maturities classified as held to maturity in 1995.
In addition, fixed maturities available for sale were sold during 1996 with
proceeds of $1,572 and gross realized gains and losses of $36 and $71,
respectively. In 1995, fixed maturities available for sale were sold with
proceeds of $496 and gross realized gains and losses of $nil and $4,
respectively.
At Dec. 31, 1996, bonds carried at $1,094 were on deposit with various
states as required by law.
Net investment income for the years ended Dec. 31 is summarized as follows:
1996 1995
-------- -----
Interest on fixed maturities $ 9,170 $ 7,561
Interest on cash equivalents 308 157
Other 16 21
---------- --
9,494 7,739
Less investment expenses 643 5
---------- ----
$ 8,851 $ 7,734
========= ========
Securities are rated by Moody's and Standard & Poor's (S&P), except for
approximately $17.1 million of securities which are rated by American
Express Financial Corporation's internal analysts using criteria similar to
Moody's and S&P. A summary of investments in fixed maturities, at amortized
cost, by rating on Dec. 31 is as follows:
Rating 1996 1995
---------------------- --------- ------
Aaa/AAA $ 60,374 $ 42,939
Aa/AA 4,648 4,762
Aa/A 1,469 1,551
A/A 26,768 22,003
A/BBB 4,988 5,473
Baa/BBB 35,071 23,747
Baa/BB 6,977 3,250
Below investment grade 13,915 3,086
--------- -----------
$154,210 $106,811
======== ========
At Dec. 31, 1996, approximately 87 percent of the securities rated Aaa/AAA
are GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of any
other issuer are greater than 10% of stockholder's equity.
3. Income taxes
The Company qualifies as a life insurance company for federal income tax
purposes. As such, the Company is subject to the Internal Revenue Code
provisions applicable to life insurance companies.
The income tax expense consists of the following:
1996 1995
-------- -----
Federal income taxes:
Current $ (819) $1,495
Deferred 1,457 (640)
----- ------
638 855
State income taxes-current 40 30
---- ---
Income tax expense $ 678 $ 885
===== ======
Increases (decreases) to the federal income tax provision applicable to
pretax income based on the statutory rate are attributable to:
<TABLE>
<CAPTION>
1996 1995
------------ --------
Provision Rate Provision Rate
<S> <C> <C> <C> <C>
Federal income taxes based
on the statutory rate $645 35.0% $865 35.0%
Increases (decreases) are attributable to :
Other, net (7) (0.4) (10) (0.3)
-- ----- --- ----
Federal income taxes $638 34.6% $855 34.7%
==== ==== ==== ====
</TABLE>
Significant components of the Company's deferred tax assets and
liabilities as of Dec. 31 are as follows:
Deferred tax assets: 1996 1995
----- -----
Policy reserves $ 738 $1,073
Deferred policy acquisition costs -- 116
Other -- 142
------ -------
Total deferred tax assets 738 1,331
----- ------
Deferred tax liabilities:
Deferred policy acquisition costs 802 --
Investments 478 1,187
Other 50 --
------ -----
Total deferred tax liabilities 1,330 1,187
------ ------
Net deferred tax assets (liabilities) $ (592) $ 144
====== ======
The Company is required to establish a valuation allowance for any portion
of the deferred tax assets that management believes will not be realized.
In the opinion of management, it is more likely than not that the Company
will realize the benefit of the deferred tax assets and, therefore, no such
valuation allowance has been established.
4. Stockholder's equity
Retained earnings available for distribution as dividends to the parent are
limited to the Company's surplus as determined in accordance with
accounting practices prescribed by the New York Department of Insurance.
All dividend distributions must be approved by the New York Department of
Insurance. Statutory unassigned surplus aggregated $7,220 and $7,671 as of
Dec. 31, 1996 and 1995, respectively (see note 8 for a reconciliation of
net income and stockholder's equity per the accompanying financial
statements to statutory net income and surplus).
5. Related party transactions
Until July 1, 1995, the Company participated in the IDS Retirement Plan of
American Express Financial Corporation which covered all permanent
employees age 21 and over who had met certain employment requirements.
Effective July 1, 1995, the IDS Retirement Plan was merged with American
Express Company's American Express Retirement Plan, which simultaneously
was amended to include a cash balance formula and a lump sum distribution
option. Employer contributions to the plan are based on participants' age,
years of service and total compensation for the year. Funding of retirement
costs for this plan complies with the applicable minimum funding
requirements specified by ERISA. The Company's share of the total net
periodic pension cost was $nil in 1996 and 1995.
The Company also participates in defined contribution pension plans of
American Express Company which cover all employees who have met certain
employment requirements. Company contributions to the plans are a percent
of either each employee's eligible compensation or basic contributions.
Costs of these plans charged to operations in 1996 and 1995 were $19 and
$13, respectively.
The Company participates in defined benefit health care plans of American
Express Financial Corporation that provide health care and life insurance
benefits to retired employees. The plans include participant contributions
and service related eligibility requirements. Upon retirement, such
employees are considered to have been employees of American Express
Financial Corporation. American Express Financial Corporation expenses
these benefits and allocates the expenses to its subsidiaries. Accordingly,
costs of such benefits to the Company are included in employee compensation
and benefits and cannot be identified on a separate company basis.
Charges by IDS Life for use of joint facilities and other services
aggregated $3,142 and $105 for 1996 and 1995, respectively. Certain of
these costs are included in deferred policy acquisition costs.
6. Commitments and contingencies
At Dec. 31, 1996 and 1995, traditional life insurance in force aggregated
$242,209 and $265,799, respectively, of which $241,974 and $265,564 were
reinsured at the respective year ends. Under all reinsurance agreements,
premiums ceded to reinsurers amounted to $1,351 and $1,384 and reinsurance
recovered from reinsurers amounted to $2,027 and $929 for the years ended
Dec. 31, 1996 and 1995.
The economy and other factors have caused an increase in the number of
insurance companies that are under regulatory supervision. This
circumstance has resulted in substantial assessments by state guaranty
associations to cover losses to policyholders of insolvent or rehabilitated
companies. The Company expects additional future assessments related to
past insolvencies and rehabilitations. Management has estimated the impact
of future assessments on the Company's financial position and recorded a
reserve for such future assessments.
Reinsurance contracts do not relieve the Company from its primary
obligations to policyholders.
7. Fair values of financial instruments
The Company discloses fair value information for most on- and off-balance
sheet financial instruments for which it is practicable to estimate that
value. Fair value of life insurance obligations, receivables and all
non-financial instruments, such as deferred acquisition costs are excluded.
Off-balance sheet intangible assets are also excluded. Management believes
the value of excluded assets is significant. The fair value of the Company,
therefore, cannot be estimated by aggregating the amounts presented.
<TABLE>
<CAPTION>
1996 1995
------- -------
Carrying Fair Carrying Fair
Financial Assets Value Value Value Value
---------------- ------- -------- ------- ------
<S> <C> <C> <C> <C>
Investments in fixed maturities (Note 2)
Held to maturity $ 19,579 $ 19,958 $ 23,222 $ 24,191
Available for sale 136,091 136,091 86,980 86,980
Cash and cash equivalents (Note 1) 13,856 13,856 2,531 2,531
Financial Liabilities
Future policy benefits for fixed
annuities 139,352 136,332 92,704 90,975
</TABLE>
At Dec. 31, 1996 and 1995, the carrying amount and fair value of future
policy benefits for fixed annuities exclude life insurance-related
contracts carried at $10 and $85, respectively. The fair value of these
benefits is based on the status of the annuities at Dec. 31, 1996 and 1995.
The fair value of deferred annuities is estimated as the carrying amount
less applicable surrender charges. The fair value for annuities in non-life
contingent payout status is estimated as the present value of projected
benefit payments at rates appropriate for contracts issued in 1996 and
1995.
8. Statutory insurance accounting practices
Reconciliations of net income for 1996 and 1995 and stockholder's equity at
Dec. 31, 1996 and 1995, as shown in the accompanying financial statements,
to that determined using statutory accounting practices are as follows:
1996 1995
-------- ------
Net income, per accompanying
financial statements $ 1,165 $ 1,586
Deferred policy acquisition costs (3,177) 252
Adjustments of future policy
benefit liabilities (57) (356)
Deferred federal income taxes 1,457 (640)
Provision for losses on investments -- (12)
IMR gain/loss transfer and amortization 47 (46)
Provision for other losses -- (837)
Prior period adjustment (313) 328
Other, net 16 (27)
-------- --------
Net income (loss), on basis of
statutory accounting practices $ (862) $ 248
======= =======
Stockholder's equity, per accompanying
financial statements $31,074 $21,250
Deferred policy acquisition costs (4,364) (1,318)
Adjustments of future policy benefit liabilities 3,145 474
Adjustments of reinsurance ceded reserves (2,728) --
Deferred federal income taxes 592 (100)
Asset valuation reserve (1,287) (869)
Net unrealized gain on investments (1,460) (3,390)
Interest maintenance reserve (62) (110)
Provision for other losses -- (837)
Other, net (90) 171
--------- ---------
Stockholder's equity on basis of statutory
accounting practices $24,820 $15,271
======= =======
<PAGE>
Report of Independent Auditors
The Board of Directors
American Centurion Life Assurance Company
We have audited the accompanying balance sheets of American Centurion Life
Assurance Company (a wholly owned subsidiary of IDS Life Insurance Company) as
of December 31, 1996 and 1995, and the related statements of income and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Centurion Life
Assurance Company at December 31, 1996 and 1995, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
Ernst & Young, LLP
February 7, 1997
Minneapolis, Minnesota
<PAGE>
PAGE 39
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B of this Registration
Statement:
American Centurion Life Insurance Company:
Balance Sheets as of Dec. 31, 1996 and 1995.
Statements of Income for the years ended Dec. 31, 1996 and
1995.
Statements of Cash Flows for the years ended Dec. 31, 1996 and
1995.
Notes to Financial Statements.
Report of Independent Auditors dated February 7, 1997.
Exhibits to Financial Statemenst included in Part C:
Financial Statement Schedules I and IV as required by Regulation S-X:
Schedule I - Consolidated Summary of Investments other than
Investments in Ralated Parties
Schedule IV - Reinsurance
(b) Exhibits:
1. Certificate, establishing the ACL Variable Annuity Account 1 dated December
1, 1995, filed electronically as Exhibit 1 to Registrant's Initial
Registration Statement No. 333-00041 is incorporated herein by reference.
2. Not applicable.
3. Variable Annuity and Life Insurance Distribution and Administrative
Services Agreement, dated April 10, 1997 is filed electronically herewith.
4.1 Form of Group Deferred Annuity Certificate for nonqualified contract (form
38502-NY 10/95), filed electronically as Exhibit 4.1 to Registrant's
Initial Registration Statement No. 333-00041 is incorporated herein by
reference.
4.2 Form of Group Deferred Annuity Certificate for qualified contract (form
38503-IRA-NY 10/95), filed electronically as Exhibit 4.2 to Registrant's
Initial Registration Statement No. 333-00041 is incorporated by reference.
4.3 Form of Group Deferred Annuity Contract (form 38501 10/95), filed
electronically as Exhibit 4.3 to Registrant's Initial Registration
Statement No. 333-00041 is incorporated by reference.
5.1 Form of Group Deferred Variable Annuity Application (form 32041 10/95),
filed electronically as Exhibit 5.1 to Registrant's Initial Registration
Statement No. 333-00041 is incorporated by reference.
<PAGE>
PAGE 40
5.2 Form of Variable Annuity Participant Enrollment Form (form 32027C
10/95), filed electronically as Exhibit 5.2 to Registrant's Initial
Registration Statement No. 333-00041 is incorporated by reference.
6.1 Amended and Restated Articles of Incorporation of American Centurion Life,
filed electronically as Exhibit 6.1 to Registrant's Initial Registration
Statement No. 333-00041 is incorporated by reference.
6.2 Amended By-Laws of American Centurion Life, filed electronically as Exhibit
6.2 to Registrant's Initial Registration Statement No. 333-00041 is
incorporated by reference.
6.3 Emergency By-Laws of American Centurion Life, filed electronically as
Exhibit 6.3 to Registrant's Initial Registration Statement No. 333-00041 is
incorporated by reference.
7. Not applicable.
8.1 Participation Agreement, dated Oct. 7, 1996, by and among American
Centurion Life and Warburg Pincus Trust and Warburg, Pincus Counsellors,
Inc. and Counsellors Securities, Inc., filed electronically herewith.
8.2 Fund Participation Agreement, dated July 31, 1996, by and among American
Centurion Life, TCI Portfolios, Inc. and Investors Research Corporation,
filed electronically herewith.
8.3 Fund Participation Agreement, dated Oct. 23, 1996, between Janus Aspen
Series and American Centurion Life, filed electronically herewith.
8.4 Participation Agreement, dated Dec. 4, 1996, among INVESCO Variable
Investment Funds, Inc., INVESCO Funds Group, Inc. and American Centurion
Life, filed electronically herewith.
9. Opinion of counsel and consent to its use as to the legality of the
securities being registered was filed with Registrant's 24f-2 Notice.
10. Consent of Independent Auditors, filed electronically herewith.
11. Financial Statement Schedules and Report of Independent Auditors filed
electronically herewith.
12. Not applicable.
13. Copy of schedule for computation of each performance quotation provided in
the Registration Statement in response to Item 21, filed electronically as
Exhibit 13 to Registrant's Initial Registration Statement No. 333-00041 is
incorporated by reference.
14.1 Financial Data Schedule, filed electronically herewith.
<PAGE>
PAGE 41
14.2 Power of Attorney to sign this Registration Statement dated March 25,
1997, filed electronically herewith.
Item 25. Directors and Officers of the Depositor (American
Centurion Life Assurance Company)
<TABLE>
<CAPTION>
Positions and
Name Principal Business Address Offices with Depositor
<S> <C> <C>
Doris A. Anfinson IDS Tower 10 Vice President
Minneapolis, MN 55440
Norma J. Arnold IDS Tower 10 Director
Minneapolis, MN 55440
Robert C. Auriema Technical Consultants Ltd. Director
Bayview Tower
Apt. 8G
80 Bay Street Landing
Staten Island, NY 10301
Maureen A. Buckley IDS Tower 10 Chief Administrative Officer
Minneapolis, MN 55440 and Consumer Affairs Officer
Douglas L. Forsberg IDS Tower 10 Director
Minneapolis, MN 55440
Clarence E. Galston IDS Tower 10 Director
Minneapolis, MN 55440
Morris Goodwin Jr. IDS Tower 10 Vice President and Treasurer
Minneapolis, MN 55440
Jay C. Hatlestad IDS Tower 10 Vice President and Controller
Minneapolis, MN 55440
Robert A. Hatton IDS Tower 10 Director
Minneapolis, MN 55440
William J. Heron Jr. IDS Tower 10 Director
Minneapolis, MN 55440
Richard W. Kling IDS Tower 10 Director
Minneapolis, MN 55440
David M. Kuplic IDS Tower 10 Vice President - Investments
Minneapolis, MN 55440
Ryan R. Larson IDS Tower 10 Director and Vice President -
Minneapolis, MN 55440 Product Development
Herbert W. Marache Jr. Janney Montgomery Scott, Inc. Director
26 Broadway
New York, NY 10004
Eric L. Marhoun IDS Tower 10 General Counsel and
Minneapolis, MN 55440 Secretary
<PAGE>
PAGE 42
Item 25. Directors and Officers of the Depositor (American Centurion
Life Assurance Company (cont'd)
Sarah A. Mealey IDS Tower 10 Vice President - Variable
Minneapolis, MN 55440 Product Development
Kenneth W. Nelson Tech Products, Inc. Director
15 Beach Street
Suite 304
Staten Island, NY 10304
Doretta Rinaldi IDS Tower 10 Vice President - Marketing
Minneapolis, MN 55440
Stuart A. Sedlacek IDS Tower 10 Director, Chairman and
Minneapolis, MN 55440 President
Anne L. Segal IDS Tower 10 Director
Minneapolis, MN 55440
Daniel J. Segner IDS Tower 10 Vice President - Investments
Minneapolis, MN 55440
Guerdon D. Smith Guerdon D. Smith & Company Director
P.O. Box 91739
Santa Barbara, CA 93190-1739
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
American Centurion Life Assurance Company is a wholly owned
subsidiary of IDS Life Insurance Company which is a wholly owned
subsidiary of American Express Financial Corporation. American
Express Financial Corporation is a wholly owned subsidiary of
American Express Company (American Express).
The following list includes the names of major subsidiaries of
American Express.
Jurisdiction
Name of Subsidiary of Incorporation
I. Travel Related Services
American Express Travel Related
Services Company, Inc. New York
II. International Banking Services
American Express Bank Ltd. Connecticut
III. Companies engaged in Financial Services
Advisory Capital Strategies Group Inc. Minnesota
American Centurion Life Assurance Company New York
American Enterprise Investment Services Inc. Minnesota
American Enterprise Life Insurance Company Indiana
<PAGE>
PAGE 43
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant (Continued)
Jurisdiction
Name of Subsidiary of Incorporation
American Express Client Services Corporation Minnesota
American Express Financial Advisors Inc. Delaware
American Express Financial Corporation Delaware
American Express Insurance Agency of Arizona Inc.Arizona
American Express Insurance Agency of Idaho Inc. Idaho
American Express Insurance Agency of Nevada Inc. Nevada
American Express Minnesota Foundation Minnesota
American Express Property Casualty Insurance
Agency of Kentucky Inc. Kentucky
American Express Property Casualty Insurance
Agency of Mississippi Inc. Mississippi
American Express Property Casualty Insurance
Agency of Pennsylvania Inc. Pennsylvania
American Express Service Corporation Delaware
American Express Tax and Business Services Inc. Minnesota
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
AMEX Assurance Company Illinois
IDS Advisory Group Inc. Minnesota
IDS Aircraft Services Corporation Minnesota
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
IDS Deposit Corp. Utah
IDS Fund Management Limited U.K.
IDS Futures Corporation Minnesota
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Massachusetts Inc. Massachusetts
IDS Insurance Agency of Mississippi Ltd. Mississippi
IDS Insurance Agency of New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Ohio Inc. Ohio
IDS Insurance Agency of Texas Inc. Texas
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
IDS International, Inc. Delaware
IDS Life Insurance Company Minnesota
IDS Life Insurance Company of New York New York
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Plan Services of California, Inc. Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Real Estate Services, Inc. Delaware
IDS Realty Corporation Minnesota
IDS Sales Support Inc. Minnesota
IDS Securities Corporation Delaware
Investors Syndicate Development Corp. Nevada
<PAGE>
PAGE 44
Item 27. Number of Contractowners
As of January 31, 1997, there were 10 contract owners of
non-qualified Privileged Assets Select Annuity contracts.
Item 28. Indemnification
The By-Laws of the depositor provide that it shall indemnify a
director, officer, agent or employee of the depositor pursuant to
the provisions of applicable statutes or pursuant to contract.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to director, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
Item 29. Principal Underwriters.
(a) American Express Service Corporation acts as principal
underwriter for the following investment companies:
Strategist Income Fund, Inc.; Strategist Growth Fund, Inc.; Strategist
Growth and Income Fund, Inc.; Strategist World Fund, Inc.; Strategist
Tax-Free Income Fund, Inc., APL Variable Annuity Account 1, ACL Variable
Annuity Account 1 and IDS Certificate Company.
(b) As to each director, officer or partner of the principal
underwriter:
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Norma J. Arnold Vice President- None
American Express Company FSD Marketing
American Express Tower
World Financial Center
200 Vesey Street
New York, NY 10285-0001
<PAGE>
PAGE 45
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Service Corporation):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Robert E. Bruers Vice President and None
IDS Tower 10 Chief Financial
Minneapolis, MN 55440 Officer
Colleen Curran Vice President and None
IDS Tower 10 Chief Legal Counsel
Minneapolis, MN 55440
George L. Farr Director None
American Express Company
American Express Tower
World Financial Center
200 Vesey Street
New York, NY 10285-0001
William J. Heron Jr. Director and President Board member
American Express Company and Vice
American Express Tower President
World Financial Center
200 Vesey Street
New York, NY 10285-0001
Kevin P. Howe Vice President and None
IDS Tower 10 Chief Compliance
Minneapolis, MN 55440 Officer
David R. Hubers Executive Vice None
IDS Tower 10 President
Minneapolis, MN 55440
Richard W. Kling Vice President None
IDS Tower 10
Minneapolis, MN 55440
Timothy S. Meehan Secretary None
IDS Tower 10
Minneapolis, MN 55440
James A. Mitchell Senior Vice President Board member
IDS Tower 10 and President
Minneapolis, MN 55440
Karen L. Stone Vice President None
American Express Company
American Express Tower
World Financial Center
200 Vesey Street
New York, NY 10285-0001
<PAGE>
PAGE 46
<TABLE>
<CAPTION>
(c) Name of Net Underwriting
Principal Discounts and Compensation on Brokerage Other
Underwriter Commissions Redemption Commissions Compensation
<S> <C> <C> <C> <C>
American Express
Service Corporation None None None None
</TABLE>
Item 30. Location of Accounts and Records
American Centurion Life Assurance Company
20 Madison Avenue Extension
Albany, NY 12203
Item 31. Management Services
Not Applicable
Item 32. Undertakings
(a)(b)(c) These undertakings were filed with Registrant's
Initial Registration Statement, File No. 333-00041.
(d) The sponsoring insurance company represents that the
fees and charges deducted under the contract, in the
aggregate, are reasonable in relation to the
services rendered, the expenses expected to be
incurred, and the risks assumed by the insurance
company.
<PAGE>
PAGE 47
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, American Centurion Life Assurance Company, on behalf of the Registrant
certifies that it meets the requirements of Securities Act Rule 485(b) for
effectiveness of this Registration Statement and has duly caused this
Registration Statement to be signed on its behalf in the City of Minneapolis,
and State of Minnesota, on the 24th day of April, 1997.
ACL VARIABLE ANNUITY ACCOUNT 1
(Registrant)
By American Centurion Life Assurance Company
(Sponsor)
By /s/ Stuart A. Sedlacek*
Stuart A. Sedlacek
Chairman and President
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the 24th day of
April, 1997.
Signature Title
/s/ Stuart A. Sedlacek* Director, Chairman and
Stuart A. Sedlacek President
/s/ Jay C. Hatlestad* Vice President and
Jay C. Hatlestad Controller
/s/ Norma J. Arnold* Director
Norma J. Arnold
/s/ Robert C. Auriema* Director
Robert C. Auriema
/s/ Douglas L. Forsberg* Director
Douglas L. Forsberg
/s/ Clarence E. Galston* Director
Clarence E. Galston
/s/ Robert A. Hatton* Director
Robert A. Hatton
/s/ William J. Heron Jr.* Director
William J. Heron Jr.
/s/ Richard W. Kling* Director
Richard W. Kling
/s/ Ryan R. Larson* Director
Ryan R. Larson
<PAGE>
PAGE 48
Signature Title
/s/ Herbert W. Marache Jr.* Director
Herbert W. Marache Jr.
/s/ Kenneth W. Nelson* Director
Kenneth W. Nelson
/s/ Anne L. Segal* Director
Anne L. Segal
/s/ Guerdon D. Smith* Director
Guerdon D. Smith
*Signed pursuant to Power of Attorney dated March 25, 1997 filed electronically
herewith.
- ------------------------------
Sherilyn K. Beck
<PAGE>
PAGE 49
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 2
This Registration Statement is comprised of the following papers and documents:
The Cover Page.
Cross-reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
Exhibits.
<PAGE>
PAGE 1
ACL VARIABLE ANNUITY ACCOUNT 1
Registration Number 333-00041/811-07475
EXHIBIT INDEX
Exhibit 3: Variable Annuity and Life Insurance Distribution and
Administrative Services Agreement,
dated April 10, 1997
Exhibit 8.1: Participation Agreement, dated Oct. 7, 1996, by and
among American Centurion Life and Warburg Pincus
Trust and Warburg, Pincus Counsellors, Inc. and
Counsellors Securities, Inc.
Exhibit 8.2: Fund Participation Agreement, dated July 31, 1996,
by and among American Centurion Life, TCI
Portfolios, Inc. and Investors Research Corporation.
Exhibit 8.3: Fund Participation Agreement, dated Oct. 23, 1996,
between Janus Aspen Series and American
Centurion Life.
Exhibit 8.4: Participation Agreement, dated Dec. 4, 1996, among
INVESCO Variable Investment Funds, Inc., INVESCO
Funds Group, Inc. and American Centurion Life.
Exhibit 10: Consent of Independent Auditors
Exhibit 11: Financial Statement Schedules and Report of
Independent Auditors.
Exhibit 14.1: Financial Data Schedule.
Exhibit 14.2: Power of Attorney to sign this Registration
Statement dated March 25, 1997
<PAGE>
PAGE 1
VARIABLE ANNUITY AND LIFE INSURANCE DISTRIBUTION AND ADMINISTRATIVE
SERVICES AGREEMENT
This Variable Annuity and Life Insurance Distribution Agreement ("Agreement")
entered into by and between American Centurion Life Assurance Company ("ACL"), a
New York corporation, and American Express Service Corporation ("AESC"), a
Delaware corporation, is effective as of April 10, 1997.
ACL desires AESC to act as principal underwriter and distributor (as those terms
are defined by the Investment Company Act of 1940 ("1940 Act")) with respect to
the distribution and sale of variable annuity and life insurance contracts
issued by ACL ("Variable Contracts", specifically those variable annuity
contracts and life insurance policies identified in Exhibit 1 attached hereto,
and as may be hereafter amended), in order to satisfy the requirements of the
Securities Exchange Act of 1934 ("1934 Act"). The solicitation and sale of the
Variable Contracts will be conducted through persons who are licensed as life
insurance agents in appropriate jurisdictions and appointed with ACL and are
also registered representatives of AESC ("Representatives").
In consideration of the mutual promises contained herein the parties agree as
follows:
1. Representations of AESC
AESC represents and warrants that it is registered with the National Association
of Securities Dealers, Inc. ("NASD") and Securities Exchange Commission ("SEC")
as a broker-dealer under the 1934 Act and is qualified to do business in those
states where ACL is licensed and qualified to do business.
2. Appointment of AESC
On the effective date of the Agreement, ACL appoints AESC and AESC accepts the
appointment (1) as principal underwriter and distributor of the Variable
Contracts, and (2) to solicit sales of and to sell Variable Contracts pursuant
to the terms of this Agreement.
3. Duties of AESC
(a) Supervision of Representatives
(i) AESC will have full responsibility for the training and supervision of
all Representatives who are engaged directly or indirectly in the offer or sale
of the Variable Contracts, and all Representatives will be subject to the
control of AESC with respect to such Representative's securities regulated
activities with respect to the Variable Contracts. AESC will cause the
Representatives to:
(1) be trained in the sale of the Variable Contracts;
(2) be registered representatives of AESC with the NASD
before such Representatives engage in the
solicitation of applications for the Variable
Contracts;
<PAGE>
PAGE 2
(3) be validly licensed with states and appointed with ACL as an
insurance agent in accordance with the requirements of the
insurance laws of the state of New York where the solicitations
and sales of Variable Contracts take place; and
(4) limit solicitation of applications for the Variable Contracts to
the state of New York where ACL has authorized such solicitation.
AESC will notify ACL if any Representative ceases to be a registered
representative of AESC or ceases to maintain the proper state insurance
licensing required for the sale of Variable Contracts. ACL will have sole
discretion to appoint, refuse to appoint, discontinue or terminate the
appointment of any Representative as an insurance agent of ACL.
(ii) AESC will fully comply with the requirements of the NASD, the SEC and
all other applicable federal and state laws. AESC will establish and maintain
such rules and procedures as may be necessary to cause diligent supervision of
the securities activities of Representatives. Upon request by ACL, AESC will
furnish such records as may be necessary to establish such diligent supervision.
(iii) In the event a Representative refuses or fails to submit to
supervision of AESC or otherwise fails to meet the rules and standards imposed
by AESC on its representatives, AESC will notify such Representative that he or
she is no longer authorized to sell the Variable Contracts and AESC will take
such additional action as is necessary to terminate the sales activities of such
Representative with respect to the Variable Contracts.
(b) Prospectuses, Sales Literature and Advertising.
(i) No sales literature or advertising relating to the Variable Contracts
will be printed, published, distributed or otherwise used by AESC unless the
specific item has been approved in writing by ACL and a principal of AESC prior
to use. It is expressly understood that all books and records relevant to this
Agreement and the services hereunder shall be and remain the property of ACL.
(ii) In accordance with the requirements of the laws of New York and New
York Insurance Department Regulation 152 specifically, and rules of the NASD and
SEC, AESC will maintain complete records indicating the manner and extent of
distribution of prospectuses, sales literature and advertising and will make
such records and files available to staff of ACL and personnel of state
insurance departments, the NASD, SEC or other regulatory agencies which have
regulatory authority over ACL or AESC.
(iii) AESC agrees to cause to be delivered to each person submitting an
application a prospectus to be furnished by ACL in the form required by the
applicable federal laws or by the acts or statutes of any applicable state,
province or country.
<PAGE>
PAGE 3
(iv) AESC shall file all sales literature or advertising for review with
the NASD to ensure consistency with the applicable rules of the Securities Act
of 1933 ("1933 Act") and the Conduct Rules of the NASD.
(c) Applications for Variable Contracts
(i) All applications for Variable Contracts will be made on application
forms supplied and/or approved by ACL. AESC will ensure that applications for
Variable Contracts and all payments collected by AESC or any Representative are
remitted promptly, together with such other documentation as ACL may require,
directly to ACL at the address indicated on the application or to such other
address as ACL may from time to time designate in writing. AESC will review all
such applications for accuracy and completeness, and to determine the
suitability of the sale. Checks or money orders for payment of the Variable
Contracts will be drawn to the order of "American Centurion Life Assurance
Company". All applications are subject to acceptance or rejection by ACL at its
sole discretion. All applications or information obtained hereunder by AESC will
be used only as expressly authorized herein. AESC will keep such records and
information confidential, to be disclosed only as authorized by ACL or the owner
of a Variable Contract or if expressly required by federal or state regulatory
authorities, or by order of a court.
(ii) Upon ACL's acceptance of any payment for a Variable Contract AESC
will deliver to each contract owner a statement confirming the transaction in
accordance with Rule 10b-10 under the 1934 Act.
(d) Purchase Payments
AESC agrees that all money or other consideration tendered with or in respect of
any application for a Variable Contract and the Variable Contract when issued is
the property of ACL. Purchase or premium payments will be promptly remitted in
full to ACL without deduction or offset for any reason.
(e) Delivery of Variable Contracts
AESC will assure itself that ACL has proper procedures in place to ensure
delivery of all Variable Contracts.
(f) Books, Records and Reports
AESC will comply with all applicable requirements of the 1934 Act and the NASD
including the requirements to maintain and preserve books and records pursuant
to Section 17(a) of the 1934 Act and the rules thereunder. Any commissions and
fees relating to the Variable Contracts will be reflected in the quarterly FOCUS
reports and the fee assessment reports filed by AESC with the NASD in accordance
with the NASD Conduct Rules.
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PAGE 4
(g) Fidelity Bond
AESC represents that all directors, officers, employees and Representatives of
AESC who are licensed pursuant to this Agreement as ACL's agents for state
insurance law purposes or who have access to funds of ACL, including but not
limited to funds submitted with applications for the Variable Contracts are and
will be covered by a blanket fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond will be
maintained by AESC at AESC's expense. Such bond will be, at the least, of the
form and type and amount required under the NASD Conduct Rules. ACL may require
evidence, satisfactory to it, that such coverage is in force and AESC will give
prompt written notice to ACL of any notice of cancellation or change of
coverage. AESC assigns any proceeds received from the fidelity bonding company
to ACL to the extent ACL's loss is due to activities covered by the bond. If
there is any deficiency amount, whether due to a deductible or otherwise, AESC
will promptly pay ACL such amount on demand.
(h) Indemnification
AESC hereby agrees to hold harmless and indemnify ACL against any and all
claims, liabilities and expenses which ACL may incur from liabilities arising
out of or based upon (1) any alleged or untrue statement other than statements
contained in the registration statement, prospectus or approved sales literature
or advertisement of any Variable Contract and (2) AESC's failure to perform the
undertakings described in Section 2, Duties of AESC, of this Agreement.
4. Representations of ACL
(a) ACL represents and warrants that it is domiciled and licensed in the
State of New York by its Insurance Department ("New York Insurance Department").
(b) ACL has registered the Variable Contracts with the Securities and
Exchange Commission as securities under the 1933 Act and has registered the
variable contract separate accounts as a unit investment trusts under the
Investment Company Act of 1940.
(c) ACL will meet any requirements of the New York Insurance Department
regarding filing of advertising and sales literature.
5. Duties of ACL
(a) Prospectuses, Sales Literature and Advertising
(i) ACL will provide AESC, without any expense to AESC, prospectuses
relating to the Variable Contracts and such other sales literature and
advertising as ACL determines is necessary or desirable for use in connection
with sales of the Variable Contracts.
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PAGE 5
(ii) ACL represents and warrants that the prospectus(es) and registration
statement(s) relating to the Variable Contracts contain no untrue statements of
material fact or omission to state a material fact, the omission of which makes
any statement contained in the prospectus(es) and registration statement(s)
misleading.
(b) Variable Contract Delivery
ACL will transmit Variable Contracts directly to contract owners in accordance
with administrative procedures acceptable to AESC and ACL.
(c) Retention of Rights by ACL
ACL reserves the right to reject any and all applications and payments
submitted, discontinue writing any form of contract, take possession of and
cancel any contract and return the payment or any part of it, and make any
compromise or settlement in respect of a contract. ACL may in its sole
discretion and without notice to AESC, suspend sales of any Variable Contracts
or amend any policies or contracts evidencing such Variable Contracts if, in
ACL's opinion, such suspension or amendment is (1) necessary for compliance with
federal, state or local laws, regulations or administrative order(s); or, (2)
necessary to prevent administrative or financial hardship to ACL. In all other
situations, ACL will provide 30 days notice to AESC prior to suspending sales of
any Variable Contracts or amending any policies or contracts evidencing such
Variable Contracts.
(d) Compensation
ACL will pay AESC for its services under this Agreement, in accordance with the
form of Exhibit 2 hereto, which is in effect when such services are performed.
Upon termination of this Agreement, all compensation payable hereunder will
cease. ACL will pay all such Compensation to and in the name of AESC, and will
have no responsibility for payment of any compensation to Representatives for
sales hereunder.
(e)Indemnification
ACL hereby agrees to hold harmless and indemnify AESC against any and all
claims, liabilities and expenses which AESC may incur from liabilities arising
out of or based upon ACL's breach of any of the undertakings set forth in
Section 5, Duties of ACL, of this Agreement, including claims, liabilities and
expenses which may be incurred under the Securities Act of 1933, the 1940 Act,
common law or otherwise.
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PAGE 6
6.Termination
This Agreement may be terminated, without cause, by either party upon thirty
(30) days prior written notice; and may be terminated immediately, by either
party for failure to perform satisfactorily or other cause; and will be
terminated immediately if AESC ceases to be registered as a broker dealer under
the 1934 Act and a member of the NASD.
7.General Provisions
(a)Amendment and Entirety
This is the entire Agreement between ACL and AESC with respect to the subject
matter of this Agreement. No additions, amendments or modifications of this
Agreement or any waiver of any provision will be valid unless approved, in
writing, by authorized representatives of ACL and AESC. In addition, no waiver
of any default or failure of performance by either party will affect the other
party's rights with respect to a subsequent default or failure.
(b) Independent Contractor Relationship
This Agreement does not create the relationship of employer and employee between
the parties to this Agreement. ACL and AESC are independent contractors with
respect to each other, and their respective employees and agents.
(c) Assignment
Neither ACL nor AESC will assign or transfer, in whole or in part, this
Agreement or any of the benefits accrued or to accrue hereunder, without prior
written consent of an authorized representative of each party.
(d) Arbitration
In the event of any dispute arising between ACL and AESC with reference to any
provision of this Agreement, the matter shall be referred to a Board of
Arbitration appointed in the following manner:
Within 30 days following notification by one party to this Agreement to the
other of its decision to arbitrate a dispute arising hereunder, ACL shall
appoint an Arbiter, and AESC shall appoint an Arbiter. In the event one of the
parties fails to appoint an Arbiter within said 30 days, the other party shall
appoint both Arbiters. Within 15 days following their appointment, and before
entering into arbitration, the Arbiters shall select an Umpire. In the event the
Arbiters are not able to decide upon an Umpire within said 15 days, the Umpire
shall be appointed by the President of the American Arbitration Association. The
Arbiters and the Umpire shall be executive officers of insurance or
<PAGE>
PAGE 7
reinsurance companies. Within 60 days following the notification of the decision
to arbitrate, the Arbiters shall begin arbitration in the City of New York, New
York, unless some other place is agreed upon by ACL and AESC, at which time the
parties hereto may submit their cases in writing to the Board of Arbitration.
Within 60 days after beginning the arbitration, the Arbiters shall file their
written decision on the matter under arbitration with ACL and with AESC. The
expenses of the arbitration shall be paid by the party or parties in the
proportion established by the Board of Arbitration.
(e) Governing Law
It is agreed by the parties that this Agreement will be governed by the laws of
the State of New York.
(f) Severability
It is understood and agreed by the parties that if any part, term or provision
of this Agreement is held to be invalid or in conflict with any law or
regulation, the validity of the remaining part, terms or provisions will not be
affected and the parties' rights and obligations will be construed and enforced
as if this Agreement did not contain the part, term or provision held to be
invalid.
American Centurion Life Assurance Company
Attest:
By:_/s/ Stuart A. Sedlacek__________ By: Eric L. Marhoun
Title:__Chairman and President______ Title: General Counsel
and Secretary
American Express Service Corporation
Attest:
By:____/s/ Richard W. Kling_________ By: Timothy S. Meehan
Title:__Vice President______________ Title: Secreatary
<PAGE>
PAGE 8
EXHIBIT 1
AESC is the broker-dealer authorized to distribute the following ACL variable
annuity (or annuities):
Privileged Assets Select Annuity flexible premium group deferred fixed/variable
annuity (ACL Variable Annuity Account 1)
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PAGE 9
EXHIBIT 2
For the services provided by AESC pursuant to this Agreement, ACL will reimburse
AESC for its expenses. It is agreed, with respect to those services which are to
be provided to ACL upon an allocated cost basis, that any method of allocation
or classification of expenses incurred or services rendered shall be in
conformance with the laws of the State of New York and regulations of the New
York Insurance Department, particularly in conformance with Regulation 33. If at
any time ACL or AESC can reasonably demonstrate that any method of allocation is
more equitable and in accordance with such laws and regulations, the current
method of allocation shall then be subject to renegotiation. In any event,
review of all expenses for the year will be made annually, to make all necessary
adjustments in the amounts billed hereunder in order to conform them with the
amount of such expenses actually incurred.
<PAGE>
PAGE 1
PARTICIPATION AGREEMENT
By and Among
AMERICAN CENTURION LIFE ASSURANCE COMPANY
And
WARBURG PINCUS TRUST
And
WARBURG, PINCUS COUNSELLORS, INC.
And
COUNSELLORS SECURITIES INC.
THIS AGREEMENT, made and entered into this 7th day of October, 1996 by and among
American Centurion Life Assurance Company, organized under the laws of the State
of New York (the "Company"), on its own behalf and on behalf of each separate
account of the Company named in Schedule 1 to this Agreement, as may be amended
from time to time (each account referred to as the "Account"), Warburg Pincus
Trust, an open-end management investment company and business trust organized
under the laws of the Commonwealth of Massachusetts (the "Fund"); Warburg,
Pincus Counsellors, Inc. a corporation organized under the laws of the State of
Delaware (the "Adviser"); and Counsellors Securities Inc., a corporation
organized under the laws of the State of New York ("CSI").
WHEREAS, the Fund engages in business as an open-end management investment
company and was established for the purpose of serving as the investment vehicle
for separate accounts established for variable life insurance contracts and
variable annuity contracts to be offered by insurance companies that have
entered into participation agreements similar to this Agreement (the
"Participating Insurance Companies"), and
WHEREAS, beneficial interests in the Fund are divided into several series of
shares, each representing the interest in a particular managed portfolio of
securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has received an order from the Securities and Exchange
Commission (the "SEC") granting Participating Insurance Companies and variable
annuity separate accounts and variable life insurance separate accounts relief
from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the Investment
Company Act of 1940, as amended (the "1940 Act"), and Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Fund to
be sold to and held by variable annuity separate accounts and variable life
insurance separate accounts of both affiliated and unaffiliated Participating
Insurance Companies and qualified pension and retirement plans outside of the
separate account context (the "Mixed and Shared Funding Exemptive Order"). The
parties to this Agreement agree that the conditions or undertakings specified in
the Mixed and Shared Funding Exemptive Order and that may be imposed on the
Company, the Fund, the Adviser and/or CSI by virtue of the receipt of such order
by the SEC will be incorporated herein by reference, and such parties agree to
comply with such conditions and undertakings to the extent applicable to each
such party; and
<PAGE>
PAGE 2
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, the Company has registered or will register certain variable annuity
contracts (the "Contracts") under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of the Company
under the insurance laws of the State of New York, to set aside and invest
assets attributable to the Contracts; and
WHEREAS, the Company has registered the Account as a unit investment trust under
the 1940 Act; and
WHEREAS, CSI, the Fund's distributor, is registered as a broker-dealer with the
SEC under the Securities Exchange Act of 1934, as amended (the "1934 Act") and
is a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares of the Portfolios named in Schedule 2, as
such schedule may be amended from time to time (the "Designated Portfolios") on
behalf of the Account to fund the Contracts, and the Fund 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, the Adviser and CSI agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of the
Designated Portfolios that each Account orders, executing such
orders on a daily basis at the net asset value next computed
after receipt and acceptance by the Fund or its designee of
the order for the shares of the Fund. For purposes of this
Section 1.1, the Company will be the designee of the Fund for
receipt of such orders from each Account and receipt by such
designee will constitute receipt by the Fund; provided that
the Fund receives notice of such order by 10:00 a.m. Eastern
Time on the next following Business Day ("T+1"). "Business
Day" will mean any day on which the New York Stock Exchange,
Inc. (the "NYSE") is open for trading and on which the Fund
calculates its net asset value pursuant to the rules of the
SEC.
1.2. The Company will pay for Fund shares on T+1 in each case that
an order to purchase Fund shares is made in accordance with
Section 1.1 above. Payment will be in federal funds
transmitted by wire. This wire transfer will be initiated by
12:00 p.m. Eastern Time.
<PAGE>
PAGE 3
1.3. The Fund agrees to make shares of the Designated Portfolios
available for purchase at the applicable net asset value per share by
Participating Insurance Companies and their separate accounts on those days
on which the Fund calculates its Designated Portfolio net asset value
pursuant to rules of the SEC; provided, however, that the Fund, the Adviser
or CSI 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
its or their sole discretion, in necessary in the best interests of the
Fund as described in the prospectus for the Designated Portfolio.
1.4 On each Business Day on which the Fund calculates its net asset value, the
Company will aggregate and calculate the net purchase or redemption orders
for each Account maintained by the Fund in which contractowner assets are
invested. Net orders will only reflect orders that the Company has received
prior to the close of regular trading on the NYSE (currently 4:00 p.m.,
Eastern Time) on that Business Day. Orders that the Company has received
after the close of regular trading on the NYSE will be treated as though
received on the next Business Day. Each communication of orders by the
Company will constitute a representation that such orders were received by
it prior to the close of regular trading on the NYSE on the Business Day on
which the purchase or redemption order is priced in accordance with Rule
22c-1 under the 1940 Act. Other procedures relating to the handling of
orders will be in accordance with the prospectus and statement of
additional information of the relevant Designated Portfolio or with oral or
written instructions that CSI or the Fund will forward to the Company from
time to time.
1.5. The Fund agrees that shares of the Fund will be sold only to Participating
Insurance Companies and their separate accounts, qualified pension and
retirement plans or such other persons as are permitted under applicable
provisions of the Internal Revenue Code of 1986, as amended, (the "Internal
Revenue Code"), and regulations promulgated thereunder, the sale to which
will not impair the tax treatment currently afforded the Contracts. No
shares of any Portfolio will be sold to the general public except as set
forth in this Section 1.5.
1.6. The Fund agrees to redeem for cash, upon the Company's request, any full or
fractional shares of the Fund held by the Company, executing such requests
on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its designee of the request for redemption. For
purposes of this Section 1.6, the Company will be the designee of the Fund
for receipt of requests for redemption from each Account and receipt by
such designee will constitute receipt by the Fund, provided the Fund
receives notice of request for redemption by 10:00 a.m. Eastern Time on the
next following Business Day. Payment will be in federal funds transmitted
by wire to the Company's account as designated by the Company in writing
from time to time, on the same Business Day the Fund receives notice of the
redemption order from the Company. The
<PAGE>
PAGE 4
Fund reserves the right to delay payment of redemption proceeds, but in no
event may such payment be delayed longer than the period permitted by the
1940 Act. The Fund will not bear any responsibility whatsoever for the
proper disbursement or crediting of redemption proceeds; the Company alone
will be responsible for such action. If notification of redemption is
received after 10:00 a.m. Eastern Time, payment for redeemed shares will
be made on the next following Business Day.
1.7. The Company agrees to purchase and redeem the shares of the Designated
Portfolios offered by the then current prospectus of the Fund in
accordance with the provisions of such prospectus.
1.8. Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account.
Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each Account or the appropriate subaccount of each
Account.
1.9. The Fund will furnish same day notice (by telecopier, followed by written
confirmation) to the Company of the declaration of any income, dividends or
capital gain distributions payable on each Designated Portfolio's shares.
The Company hereby elects to receive all such dividends and distributions
as are payable on the Designated Portfolio shares in the form of additional
shares of that Designated Portfolio. The Fund will notify the Company of
the number of shares so issued as payment of such dividends and
distributions. The Company reserves the right to revoke this election upon
reasonable prior notice to the Fund and to receive all such dividends and
distributions in cash.
1.10. The Fund will 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 and will use its best efforts to make such net asset
value per share available by 6:00 p.m., Eastern Time, but in no
event later than 7:00 p.m., Eastern Time, each Business Day.
1.11 In the event adjustments are required to correct any error in the
computation of the net asset value of the Fund's shares, the Fund or CSI
will notify the Company as soon as practicable after discovering the need
for those adjustments that result in an aggregate reimbursement of $150 or
more. The Company will make an adjustmentthat result in an aggregate
reimbursement of $150 or to any contractowner's account that requires an
adjustment of $10 or more. Any such notice will state for each day for
which an error occurred the incorrect price, the correct price and, to the
extent communicated to the Fund's shareholders, the reason for the price
change. The Company may send this notice or a derivation thereof (so long
as such derivation is approved in advance by CSI or the Adviser) to
contractowners whose accounts are affected by the
<PAGE>
PAGE 5
price change. The parties will negotiate in good faith to develop a
reasonable method for effecting such adjustments.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act and that the Contracts will be issued and
sold in compliance with all applicable federal and state laws, including
state insurance suitability requirements. The Company further represents
and warrants that it is an insurance company duly organized and in good
standing under applicable law and that it has legally and validly
established each Account as a separate account under applicable state law
and has registered 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, and that it will maintain such registration for
so long as any Contracts are outstanding. The Company will amend the
registration statement under the 1933 Act for the Contracts and the
registration statement under the 1940 Act for the Account from time to time
as required in order to effect the continuous offering of the Contracts or
as may otherwise be required by applicable law. The Company will register
and qualify the Contracts for sale in accordance with the securities laws
of any state only if and to the extent deemed necessary by the Company.
2.2. The Company represents that the Contracts are currently and at the time of
issuance will be treated as annuity contracts under applicable provisions
of the Internal Revenue Code, and that it will make every effort to
maintain such treatment and that it will notify the Fund and the Adviser
immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the
future.
2.3. The Company represents and warrants that it will not purchase shares of
the Designated Portfolios with assets derived from tax-qualified
retirement plans except, indirectly, through Contracts purchased in
connection with such plans.
2.4. The Fund represents and warrants that Fund shares of the Designated
Portfolios sold pursuant to this Agreement will be registered under the
1933 Act and duly authorized for issuance in accordance with applicable law
and that the Fund is and will remain registered under the 1940 Act for as
long as such shares of the Designated Portfolios are sold. The Fund will
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 or as may otherwise be required by applicable law.
The Fund will register and qualify the shares of the Designated Portfolios
for sale in accordance with the laws of any state only if and to the extent
deemed advisable by the Fund.
<PAGE>
PAGE 6
2.5. The Fund represents that each Designated Portfolio is currently
qualified as a Regulated Investment Company under Subchapter M of the
Internal Revenue Code, and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable
basis for believing that it has ceased to so qualify or that a Designated
Portfolio might not so qualify in the future.
2.6. The Fund represents and warrants that in performing the services described
in this Agreement, the Fund will comply with all applicable laws, rules and
regulations. The Fund makes no representation as to whether any aspect of
its operations (including, but not limited to, fees and expenses and
investment policies, objectives and restrictions) complies with the
insurance laws and regulations of any state. The Fund and CSI agree that
upon request they will use their best efforts to furnish the information
required by state insurance laws so that the Company can obtain the
authority needed to issue the Contracts in any applicable state.
2.7. 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 reserves the right to make such payments in the future. To the extent
that it decides to finance distribution expenses pursuant to Rule 12b-1,
the Fund undertakes to have its Board of Trustees of the Fund (the "Fund
Board") formulate and approve any plan under Rule 12b-1 to finance
distribution expenses in accordance with 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 applicable provisions of the
1940 Act.
2.9. CSI represents and warrants that it will distribute the Fund shares of the
Designated Portfolios in accordance with all applicable federal and state
securities laws including, without limitation, the 1933 Act, the 1934 Act
and the 1940 Act.
2.10. CSI represents and warrants that it is and will remain duly
registered under all applicable federal and state securities laws
and that it will perform its obligations for the Fund in accordance
in all material respects with any applicable state and federal
securities laws.
2.11.The Fund represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having
access to the funds and/or securities of the Fund are and continue to be at
all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund in an amount not less than the minimal coverage as
required currently by Rule 17g-(1) of the 1940 Act or related provisions as
may be promulgated from time to time. The aforesaid bond
<PAGE>
PAGE 7
includes coverage for larceny and embezzlement and is issued by a
reputable bonding company. CSI and the Adviser represent and warrant
that they are and continue to be at all times covered by policies
similar to the aforesaid bond.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Fund or CSI will provide the Company, at the Fund's or its affiliate's
expense, with as many copies of the current Fund prospectus for the
Designated Portfolios as the Company may reasonably request for
distribution, at the Company's expense, to prospective contractowners and
applicants. The Fund or CSI will provide, at the Fund's or its affiliate's
expense, as many copies of said prospectus as necessary for distribution,
at the Company's expense, to existing contractowners. The Fund or CSI will
provide the copies of said prospectus to the Company or to its mailing
agent. If requested by the Company in lieu thereof, the Fund or CSI will
provide such documentation, including a computer diskette or a final copy
of a current prospectus set in type at the Fund's or its affiliate's
expense, and such other assistance as is reasonably necessary in order for
the Company at least annually (or more frequently if the Fund prospectus is
amended more frequently) to have the Fund's prospectus and the prospectuses
of other mutual funds in which assets attributable to the Contracts may be
invested printed together in one document, in which case the Fund or its
affiliate will bear its reasonable share of expenses as described above,
allocated based on the proportionate number of pages of the Fund's and
other funds' respective portions of the document.
3.2 The Fund or CSI will provide the Company, at the Fund's or its affiliate's
expense, with as many copies of the statement of additional information as
the Company may reasonably request for distribution, at the Company's
expense, to prospective contractowners and applicants. The Fund or CSI will
provide, at the Fund's or its affiliate's expense, as many copies of said
statement of additional information as necessary for distribution, at the
Company's expense, to any existing contractowner who requests such
statement or whenever state or federal law otherwise requires that such
statement be provided. The Fund or CSI will provide the copies of said
statement of additional information to the Company or to its mailing agent.
3.3. The Fund or CSI, at the Fund's or its affiliate's expense, will provide
the Company or its mailing agent with copies of its proxy material, if
any, reports to shareholders and other communications to shareholders in
such quantity as the Company will reasonably require. The Company will
distribute this proxy material, reports and other communications to
existing contractowners and tabulate the votes.
<PAGE>
PAGE 8
3.4. If and to the extent required by law the Company will:
(a) solicit voting instructions from contractowners;
(b) vote the shares of the Designated Portfolios held in
the Account in accordance with instructions received
from contractowners; and
(c) vote shares of the Designated Portfolios held in the Account
for which no timely instructions have been received, as well
as shares it owns, in the same proportion as shares of such
Designated Portfolio for which instructions have been received
from the Company's contractowners;
so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass-through voting privileges for variable contractowners.
Except as set forth above, the Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the
extent permitted by law. The Company will be responsible for assuring that
each of its separate accounts participating in the Fund calculates voting
privileges in a manner consistent with all legal requirements, including
the Mixed and Shared Funding Exemptive Order.
3.5. The Fund will comply with all provisions of the 1940 Act requiring voting
by shareholders, and in particular, the Fund either will provide for annual
meetings (except insofar as the SEC may interpret Section 16 of the 1940
Act not to require such meetings) or, as the Fund currently intends, will
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 trustees and with whatever
rules the SEC may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. CSI will provide the Company on a timely basis with investment performance
information for each Designated Portfolio in which the Company maintains an
Account, including total return for the preceding calendar month and
calendar quarter, the calendar year to date, and the prior one-year,
five-year, and ten-year (or life of the Designated Portfolio) periods. The
Company may, based on the SEC-mandated information supplied by CSI, prepare
communications for contractowners ("Contractowner Materials"). The Company
will provide copies of all Contractowner Materials concurrently with their
first use for CSI's internal recordkeeping purposes. It is understood that
neither CSI nor any Designated Portfolio will be responsible for errors or
omissions in, or the content of, Contractowner Materials except to the
extent that the error or omission resulted from information provided by or
on behalf of CSI or the Designated Portfolio. Any printed information that
is furnished to the Company other than each Designated
<PAGE>
PAGE 9
Portfolio's prospectus or statement of additional information (or
information supplemental thereto), periodic reports and proxy solicitation
materials is CSI's sole responsibility and not the responsibility of any
Designated Portfolio or the Fund. The Company agrees that the Portfolios,
the shareholders of the Portfolios and the officers and governing Board of
the Fund will have no liability or responsibility to the Company in these
respects.
4.2. The Company will 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, prospectus or statement of
additional information for Fund 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
Fund, or in published reports for the Fund which are in the public domain
or approved by the Fund or CSI for distribution, or in sales literature or
other material provided by the Fund or by CSI, except with permission of
the Fund or CSI. The Fund and CSI agree to respond to any request for
approval on a prompt and timely basis. Nothing in this Section 4.2 will be
construed as preventing the Company or its employees or agents from giving
advice on investment in the Fund.
4.3. The Fund, the Adviser and CSI will not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, each Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus or
statement of additional information for the Contracts, as such registration
statement, prospectus and statement of additional information may be
amended or supplemented from time to time, or in published reports for each
Account or the Contracts which are in the public domain or approved by the
Company for distribution to contractowners, or in sales literature or other
material provided by the Company, except with permission of the Company.
The Company agrees to respond to any request for approval on a prompt and
timely basis. The Fund, the Adviser or CSI will furnish, or will cause to
be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company or its
Account is named, at least ten (10) Business Days prior to its use. No such
material will be used if the Company reasonably objects to such use within
five (5) Business Days after receipt of such material.
4.4. 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
<PAGE>
PAGE 10
to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the SEC, the NASD
or other regulatory authority.
4.5. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no action letters, and all amendments to any of the above,
that relate to the Contracts or each Account, contemporaneously with the
filing of such document with the SEC, the NASD or other regulatory
authority.
4.6. 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 (e.g.,
on-line networks such as the Internet or other ---- electronic messages)
sales literature (i.e., any written ---- communication distributed or made
generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other
communications distributed or made generally available to some or all
agents or employees, registration statements, prospectuses, statements of
additional information, shareholder reports, proxy materials and any other
material constituting sales literature or advertising under the NASD rules,
the 1933 Act or the 1940 Act.
4.7. The Fund and CSI hereby consent to the Company's use of the names Warburg
Pincus Trust - Post-Venture Capital Portfolio (or the name of any other
Designated Portfolio) and Warburg, Pincus Counsellors, Inc. in connection
with the marketing of the Contracts, subject to the terms of Sections 4.1
and 4.2 of this Agreement. Such consent will terminate with the
termination of this Agreement.
ARTICLE V. Fees and Expenses
5.1. The Fund, the Adviser and CSI will pay no distribution fee or other
compensation to the Company under this Agreement pursuant to Rule 12b-1
under the 1940 Act except if the Fund or any Designated Portfolio adopts
and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then, subject to obtaining any required exemptive orders or other
regulatory approvals, the Fund may make payments to the Company if and in
such amounts agreed to by the Fund in writing.
<PAGE>
PAGE 11
5.2. All expenses incident to performance by the Fund of this Agreement will be
paid by the Fund to the extent permitted by law. The Fund will bear the
expenses for the cost of registration and qualification of the Fund's
shares; preparation and filing of the Fund's prospectus, statement of
additional information and registration statement, proxy materials and
reports; setting in type and printing the Fund's prospectus; setting in
type and printing proxy materials and reports by it to contractowners
(including the costs of printing a Fund prospectus that contains an annual
report); the preparation of all statements and notices required by any
federal or state law; all taxes on the issuance or transfer of the Fund's
shares; any expenses permitted to be paid or assumed by the Fund pursuant
to a plan, if any, under Rule 12b-1 under the 1940 Act; and all other
expenses set forth in Article III of this Agreement.
ARTICLE VI. Diversification
6.1 The Fund will at all times invest money from the Contracts in such a manner
as to ensure that the Contracts will be treated as variable annuity
contracts under the Internal Revenue Code and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Fund will
comply with Section 817(h) of the Internal Revenue Code and Treasury
Regulation 1.817-5, as amended from time to time, relating to the
diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such
Section or Regulation. 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 Treasury Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Fund Board will monitor the Fund for the existence of any
irreconcilable material conflict among the interests of the contractowners
of all separate accounts investing in the Fund. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by
any state insurance regulatory authority; (b) a change in applicable
federal or state insurance, tax or securities laws or regulations, or a
public ruling, private letter ruling, no-action or interpretative letter,
or any similar action by insurance, tax, or securities regulatory
authorities; (c) an administrative or judicial decision in any relevant
proceeding; (d) the manner in which the investments of any Portfolio are
being managed; (e) a difference in voting instructions given by
Participating Insurance Companies or by variable annuity and variable life
insurance contractowners; or (f) a decision by an insurer to disregard the
voting instructions of contractowners. The Fund Board will promptly inform
the Company if it determines that an irreconcilable material conflict
exists and the implications thereof.
<PAGE>
PAGE 12
7.2. The Company will report any potential or existing conflicts of which it is
aware to the Fund Board. The Company agrees to assist the Fund Board in
carrying out its responsibilities, as delineated in the Mixed and Shared
Funding Exemptive Order, by providing the Fund Board with all information
reasonably necessary for the Fund Board to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to inform the
Fund Board whenever contractowner voting instructions are to be
disregarded. The Company's responsibilities hereunder will be carried out
with a view only to the interest of contractowners.
7.3. If it is determined by a majority of the Fund Board, or a majority of its
disinterested trustees, that an irreconcilable material conflict exists,
the Company will, at its expense and to the extent reasonably practicable
(as determined by a majority of the disinterested trustees), take whatever
steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (a) withdrawing the assets allocable to some
or all of the Accounts from the Fund or any Designated Portfolio and
reinvesting such assets in a different investment medium, including (but
not limited to) another Portfolio of the Fund, or submitting the question
whether such segregation should be implemented to a vote of all affected
contractowners and, as appropriate, segregating the assets of any
appropriate group (i.e., variable annuity ---- contractowners or variable
life insurance contractowners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the
affected contractowners the option of making such a change; and (b)
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 contractowner voting instructions, and the Company's
judgment represents a minority position or would preclude a majority vote,
the Company may be required, at the Fund's election, to withdraw the
affected subaccount of the Account's investment in the Fund and terminate
this Agreement with respect to such subaccount; provided, however, that
such withdrawal and termination will be limited to the extent required by
the foregoing irreconcilable material conflict as determined by a majority
of the disinterested trustees of the Fund Board. No charge or penalty will
be imposed as a result of such withdrawal.
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 insurance regulators, then the Company will
withdraw the affected subaccount of the Account's investment in the Fund
and terminate this Agreement with respect to such subaccount; provided,
however, that such withdrawal and termination will be limited to the extent
required by the foregoing
<PAGE>
PAGE 13
irreconcilable material conflict as determined by a majority of the
disinterested trustees of the Fund Board. No charge or penalty will be
imposed as a result of such withdrawal.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of
the disinterested members of the Fund Board will determine whether any
proposed action adequately remedies any irreconcilable material conflict,
but in no event will the Fund or the Adviser (or any other investment
adviser to the Fund) be required to establish a new funding medium for the
Contracts. The Company will not be required by Section 7.3 to establish a
new funding medium for the Contracts if an offer to do so has been declined
by vote of a majority of contractowners materially affected by the
irreconcilable material conflict.
7.7. The Company will at least annually submit to the Fund Board such reports,
materials or data as the Fund Board may reasonably request so that the
Fund Board may fully carry out the duties imposed upon it as delineated in
the Mixed and Shared Funding Exemptive Order, and said reports, materials
and data will be submitted more frequently if deemed appropriate by the
Fund Board.
7.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Mixed and Shared Funding Exemptive Order) on
terms and conditions materially different from those contained in the Mixed
and Shared Funding Exemptive Order, then: (a) the Fund and/or the
Participating Insurance Companies, as appropriate, will take such steps as
may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and
Rule 6e-3, as adopted, to the extent such rules are applicable; and (b)
Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement will
continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as
so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the Fund, the Adviser,
CSI, and each person, if any, who controls or is associated with the Fund,
the Adviser or CSI within the meaning of such terms under the federal
securities laws and any director, trustee, officer, partner, employee or
agent of the foregoing (collectively, the "Indemnified Parties" for
purposes of this Section 8.1) against any and all losses, claims, expenses,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or litigation (including reasonable legal and other
expenses), to which the Indemnified Parties may become
<PAGE>
PAGE 14
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:
(1) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration statement,
prospectus or statement of additional information for the Contracts or
contained in the Contracts or sales literature or other promotional
material for the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated or
necessary to make such statements not misleading in light of the
circumstances in which they were made; provided that this agreement to
indemnify will 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 the Company by the
Fund, the Adviser or CSI for use in the registration statement, prospectus
or statement of additional information for the Contracts or in the
Contracts or sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Fund shares; or
(2) arise out of or as a result of statements or representations by or on
behalf of the Company or wrongful conduct of the Company or persons under
its control, with respect to the sale or distribution of the Contracts or
Fund shares; or
(3) arise out of any untrue statement or alleged untrue statement of a material
fact contained in the Fund registration statement, prospectus, statement of
additional information or sales literature or other promotional material of
the Fund (or amendment or supplement) or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make such statements not misleading in light of the circumstances in
which they were made, if such a statement or omission was made in reliance
upon and in conformity with information furnished to the Fund by or on
behalf of the Company or persons under its control; or
(4) 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
<PAGE>
PAGE 15
(5) arise out of any material breach of any representation and/or
warranty made by the Company in this Agreement or arise out of or result
from any other material breach by the Company of this Agreement;
except to the extent provided in Sections 8.1(b) and 8.3 hereof.
This indemnification will be in addition to any liability that the
Company otherwise may have.
(b) No party will be entitled to indemnification under Section 8.1(a) to the
extent such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, or gross negligence in the performance of
such party's duties under this Agreement, or by reason of such party's
reckless disregard of its obligations or duties under this Agreement by the
party seeking indemnification.
(c) The Indemnified Parties promptly will notify the Company of the
commencement of any litigation, proceedings, complaints or actions by
regulatory authorities 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 Adviser, the Fund and CSI
(a) The Adviser, the Fund and CSI, in each case solely to the extent relating
to such party's responsibilities hereunder, agree to indemnify and hold
harmless the Company and each person, if any, who controls or is associated
with the Company within the meaning of such terms under the federal
securities laws and any director, trustee, officer, partner, employee or
agent of the foregoing (collectively, the "Indemnified Parties" for
purposes of this Section 8.2) against any and all losses, claims, expenses,
damages, liabilities (including amounts paid in settlement with the written
consent of the Adviser) or litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(1) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement,
prospectus or statement of additional information for the Fund or sales
literature or other promotional material of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required
to be stated or necessary to make such statements not misleading in light
of the circumstances in which they were made
<PAGE>
PAGE 16
(in each case substantially as transmitted to you by the Fund or CSI);
provided that this agreement to indemnify will not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to the Adviser, CSI or the Fund by or on behalf of the Company
for use in the registration statement, prospectus or statement of
additional information for the Fund or in sales literature of the Fund (or
any amendment or supplement thereto) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(2) arise out of or as a result of statements or representations
or wrongful conduct of the Adviser, the Fund or CSI or persons
under the control of the Adviser, the Fund or CSI
respectively, with respect to the sale of the Fund shares; or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material covering the Contracts (or any
amendment or supplement thereto), or the omission or
alleged omission to state therein a material fact
required to be stated or necessary to make such
statement or statements not misleading in light of
the circumstances in which they were made, if such
statement or omission was made in reliance upon and
in conformity with written information furnished to
the Company by the Adviser, the Fund or CSI or
persons under the control of the Adviser, the Fund
or CSI; or
(4) arise as a result of any failure by the Fund, the
Adviser or CSI to provide the services and furnish
the materials under the terms of this Agreement
(including a failure, whether unintentional or in
good faith or otherwise, to comply with the
diversification requirements and procedures related
thereto specified in Article VI of this Agreement);
or
(5) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser, the Fund
or CSI in this Agreement, or arise out of or result from any
other material breach of this Agreement by the Adviser, the
Fund or CSI;
except to the extent provided in Sections 8.2(b) and 8.3
hereof.
<PAGE>
PAGE 17
(b) No party will be entitled to indemnification under
Section 8.2(a) to the extent such loss, claim, damage,
liability or litigation is due to the willful
misfeasance, bad faith, or gross negligence in the
performance of such party's duties under this Agreement,
or by reason of such party's reckless disregard of its
obligations or duties under this Agreement by the party
seeking indemnification.
(c) The Indemnified Parties will promptly notify the Adviser, the Fund
and CSI of the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against them in
connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3. Indemnification Procedure
Any person obligated to provide indemnification under this Article VIII
("Indemnifying Party" for the purpose of this Section 8.3) will not be
liable under the indemnification provisions of this Article VIII with
respect to any claim made against a party entitled to indemnification
under this Article VIII ("Indemnified Party" for the purpose of this
Section 8.3) unless such Indemnified Party will have notified the
Indemnifying Party in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the claim
will have been served upon such Indemnified Party (or after such party
will have received notice of such service on any designated agent), but
failure to notify the Indemnifying Party of any such claim will not
relieve the Indemnifying Party from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on
account of the indemnification provision of this Article VIII, except to
the extent that the failure to notify results in the failure of actual
notice to the Indemnifying Party and such Indemnifying Party is damaged
solely as a result of failure to give such notice. In case any such action
is brought against the Indemnified Party, the Indemnifying Party will be
entitled to participate, at its own expense, in the defense thereof. The
Indemnifying Party also will be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After notice
from the Indemnifying Party to the Indemnified Party of the Indemnifying
Party's election to assume the defense thereof, the Indemnified Party will
bear the fees and expenses of any additional counsel retained by it, and
the Indemnifying Party will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof other than
reasonable costs of investigation, unless: (a) the Indemnifying Party and
the Indemnified Party will have mutually agreed to the retention of such
counsel; or (b) the named parties to any such proceeding (including any
impleaded parties) include both the Indemnifying Party and the Indemnified
Party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them.
The Indemnifying Party will
<PAGE>
PAGE 18
not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there is a final
judgment for the plaintiff, the Indemnifying Party agrees to indemnify the
Indemnified Party from and against any loss or liability by reason of such
settlement or judgment. A successor by law of the parties to this
Agreement will be entitled to the benefits of the indemnification
contained in this Article VIII. The indemnification provisions contained
in this Article VIII will survive any termination of this Agreement.
ARTICLE IX. Applicable Law
9.1. This Agreement will be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Minnesota.
9.2. This Agreement will be subject to the provisions of the 1933 Act, the 1934
Act and the 1940 Act, 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 will be
interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement will terminate:
(a) at the option of any party, with or without cause, with respect to
some or all of the Designated Portfolios, upon ninety (90) days'
advance written notice to the other parties or, if later, upon
receipt of any required exemptive relief or orders from the SEC,
unless otherwise agreed in a separate written agreement among the
parties; or
(b) at the option of the Company, upon receipt of the Company's written
notice by the other parties, with respect to any Designated
Portfolio if shares of the Designated Portfolio are not reasonably
available to meet the requirements of the Contracts as determined in
good faith by the Company; or
(c) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio 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 Company; or
(d) at the option of the Fund, upon receipt of the Fund's written notice
by the other parties, upon institution of formal proceedings against
the Company by the NASD, the SEC, the insurance commission of any
state or any other
<PAGE>
PAGE 19
regulatory body regarding the Company's duties under this Agreement
or related to the sale of the Contracts, the administration of the
Contracts, the operation of the Account, or the purchase of the Fund
shares, provided that the Fund determines in its sole judgment,
exercised in good faith, that any such proceeding would have a
material adverse effect on the Company's ability to perform its
obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the
Company's written notice by the other parties, upon
institution of formal proceedings against the Fund or CSI
by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body,
provided that the Company determines in its sole
judgment, exercised in good faith, that any such
proceeding would have a material adverse effect on the
Fund's or CSI's ability to perform its obligations under
this Agreement; or
(f) at the option of the Company, upon receipt of the
Company's written notice by the other parties, if, with
respect to any Designated Portfolio, the Designated
Portfolio ceases to qualify as a Regulated Investment
Company under Subchapter M of the Internal Revenue Code,
or under any successor or similar provision, or if the
Company reasonably and in good faith believes that the
Designated Portfolio may fail to so qualify; or
(g) at the option of the Company, upon receipt of the Company's written
notice by the other parties, if, with respect to any Designated
Portfolio, the Designated Portfolio fails to meet the
diversification requirements specified in Article VI hereof or if
the Company reasonably and in good faith believes the Designated
Portfolio may fail to meet such requirements; or
(h) at the option of any party to this Agreement, upon written notice to
the other parties, upon another party's material breach of any
provision of this Agreement; or
(i) at the option of the Company, if the Company determines
in its sole judgment exercised in good faith, that either
the Fund, the Adviser or CSI has suffered a material
adverse change in its business, operations or financial
condition since the date of this Agreement or is the
subject of material adverse publicity which is likely to
have a material adverse impact upon the business and
operations of the Company, such termination to be
effective sixty (60) days' after receipt by the other
parties of written notice of the election to terminate;
or
<PAGE>
PAGE 20
(j) at the option of the Fund or CSI, if the Fund or CSI
respectively, determines in its sole judgment exercised
in good faith, that the Company has suffered a material
adverse change in its business, operations or financial
condition since the date of this Agreement or is the
subject of material adverse publicity which is likely to
have a material adverse impact upon the business and
operations of the Fund or the Adviser, such termination
to be effective sixty (60) days' after receipt by the
other parties of written notice of the election to
terminate; or
(k) at the option of the Company or the Fund upon receipt of
any necessary regulatory approvals and/or the vote of the
contractowners having an interest in the Account (or any
subaccount) to substitute the shares of another
investment company for the corresponding Designated
Portfolio shares of the Fund in accordance with the terms
of the Contracts for which those Designated Portfolio
shares had been selected to serve as the underlying
investment media. The Company will give sixty (60) days'
prior written notice to the Fund of the date of any
proposed vote or other action taken to replace the Fund's
shares; or
(l) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a
majority of the disinterested Fund Board members, that an
irreconcilable material conflict exists among the
interests of: (1) all contractowners of variable
insurance products of all separate accounts; or (2) the
interests of the Participating Insurance Companies
investing in the Fund as set forth in Article VII of this
Agreement; or
(m) at the option of the Fund in the event any of the Contracts are not
issued or sold in accordance with applicable federal and/or state
law. Termination will be effective immediately upon such occurrence
without notice.
10.2. Notice Requirement
Except as specified in Section 10.1(m), no termination of this Agreement
will be effective unless and until the party terminating this Agreement
gives prior written notice to all other parties of its intent to
terminate, which notice will set forth the basis for the termination.
10.3. Effect of Termination
In the event of any termination of this Agreement other than pursuant to
subsection (l) of Section 10.1, the Fund and CSI will, 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").
<PAGE>
PAGE 21
Specifically, without limitation, the owners of the Existing Contracts
will be permitted to reallocate investments in the Designated Portfolios
(as in effect on such date), redeem investments in the Designated
Portfolios and/or invest in the Designated Portfolios upon the making of
additional purchase payments under the Existing Contracts.
10.4 Surviving Provisions
Notwithstanding any termination of this Agreement, each party's
obligations under Article VIII to indemnify other parties will survive and
not be affected by any termination of this Agreement. In addition, each
party's obligations under Section 12.6 will survive and not be affected by
any termination of this Agreement. Finally, with respect to Existing
Contracts, all provisions of this Agreement also will survive and not be
affected by any termination of this Agreement.
ARTICLE XI. Notices
11.1 Any notice will be deemed duly 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 parties.
If to the Company:
American Centurion Life Assurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
Attn: Jim Mortensen
Manager - Product Development
With a simultaneous copy to:
American Centurion Life Assurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
Attn: Mary Ellyn Minenko
Counsel
If to the Fund, the Adviser and/or CSI:
466 Lexington Avenue
10th Floor
New York, NY 10017
Attn: Eugene P. Grace
Senior Vice President
ARTICLE XII. Miscellaneous
12.1. The Fund, the Adviser and CSI acknowledge that the identities of the
customers of the Company or any of its affiliates (collectively the
"Company Protected Parties" for purposes of this Section 12.1),
information maintained regarding those customers, and all computer
programs and procedures or other information developed or used by
the Company Protected Parties or any of their
<PAGE>
PAGE 22
employees or agents in connection with the Company's performance of
its duties under this Agreement are the valuable property of the
Company Protected Parties. The Fund, the Adviser and CSI agree that
if they come into possession of any list or compilation of the
identities of or other information about the Company Protected
Parties' customers, or any other information or property of the
Company Protected Parties, other than such information as is
publicly available or as may be independently developed or compiled
by the Fund, the Adviser or CSI from information supplied to them by
the Company Protected Parties' customers who also maintain accounts
directly with the Fund, the Adviser or CSI, the Fund, the Adviser
and CSI will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such
information or other property except: (a) with the Company's prior
written consent; or (b) as required by law or judicial process. The
Company acknowledges that the identities of the customers of the
Fund, the Adviser, CSI or any of their affiliates (collectively the
"Adviser Protected Parties" for purposes of this Section 12.1),
information maintained regarding those customers, and all computer
programs and procedures or other information developed or used by
the Adviser Protected Parties or any of their employees or agents in
connection with the Funds', the Adviser's or CSI's performance of
their respective duties under this Agreement are the valuable
property of the Adviser Protected Parties. The Company agrees that
if it comes into possession of any list or compilation of the
identities of or other information about the Adviser Protected
Parties' customers, or any other information or property of the
Adviser Protected Parties, other than such information as is
publicly available or as may be independently developed or compiled
by the Company from information supplied to them by the Adviser
Protected Parties' customers who also maintain accounts directly
with the Company, the Company will hold such information or property
in confidence and refrain from using, disclosing or distributing any
of such information or other property except: (a) with the Fund's,
the Adviser's or CSI's prior written consent; or (b) as required by
law or judicial process. Each party acknowledges that any breach of
the agreements in this Section 12.1 would result in immediate and
irreparable harm to the other parties for which there would be no
adequate remedy at law and agree that in the event of such a breach,
the other parties will be entitled to equitable relief by way of
temporary and permanent injunctions, as well as such other relief as
any court of competent jurisdiction deems appropriate.
12.2. 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.
<PAGE>
PAGE 23
12.3. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together will
constitute one and the same instrument.
12.4. If any provision of this Agreement will be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement will not be affected thereby.
12.5. This Agreement will not be assigned by any party hereto
without the prior written consent of all the parties.
12.6. Each party to this Agreement will maintain all records
required by law, including records detailing the services
it provides. Such records will be preserved, maintained
and made available to the extent required by law and in
accordance with the 1940 Act and the rules thereunder.
Each party to this Agreement will cooperate with each
other party and all appropriate governmental authorities
(including without limitation the SEC, the NASD and state
insurance regulators) and will permit each other and such
authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to
this Agreement or the transactions contemplated hereby.
Upon request by the Fund or CSI, the Company agrees to
promptly make copies or, if required, originals of all
records pertaining to the performance of services under
this Agreement available to the Fund or CSI, as the case
may be. The Fund agrees that the Company will have the
right to inspect, audit and copy all records pertaining
to the performance of services under this Agreement
pursuant to the requirements of any state insurance
department. Each party also agrees to promptly notify
the other parties if it experiences any difficulty in
maintaining the records in an accurate and complete
manner. This provision will survive termination of this
Agreement.
12.7. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated
herein have been duly authorized by all necessary corporate or board
action, as applicable, by such party and when so executed and
delivered this Agreement will be the valid and binding obligation of
such party enforceable in accordance with its terms.
12.8. The parties to this Agreement acknowledge and agree that
all liabilities of the Fund arising, directly or
indirectly, under this agreement, will be satisfied
solely out of the assets of the Fund and that no trustee,
officer, agent or holder of shares of beneficial interest
of the Fund will be personally liable for any such
liabilities. No Portfolio will be liable for the
obligations or liabilities of any other Portfolio.
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PAGE 24
12.9. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the
Contracts, the Accounts or the Designated Portfolios of the Fund or
other applicable terms of this Agreement.
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 date specified below.
AMERICAN CENTURION LIFE
ASSURANCE COMPANY
SEAL By: /s/ Stuart A. Sedlacek
Stuart A. Sedlacek
Chairman and President
ATTEST:
By: /s/ Eric L. Marhoun
Eric L. Marhoun
General Counsel and Secretary
WARBURG PINCUS TRUST
SEAL By: /s/ Eugene P. Grace
Eugene P. Grace
Vice President & Secretary
WARBURG, PINCUS COUNSELLORS, INC.
SEAL By: /s/ Eugene P. Grace
Eugene P. Grace
Senior Vice President &
Assistant Secretary
COUNSELLORS SECURITIES INC.
SEAL By: /s/ Eugene P. Grace
Eugene P. Grace
Vice President
<PAGE>
PAGE 25
Schedule 1
PARTICIPATION AGREEMENT
By and Among
AMERICAN CENTURION LIFE ASSURANCE COMPANY
And
WARBURG PINCUS TRUST
And
WARBURG, PINCUS COUNSELLORS, INC.
And
COUNSELLORS SECURITIES INC.
The following separate accounts of American Centurion Life Assurance Company are
permitted in accordance with the provisions of this Agreement to invest in
Designated Portfolios of the Fund shown in Schedule 2:
ACL Variable Annuity Account 1, established October 12, 1995
October 7, 1996
<PAGE>
PAGE 26
Schedule 2
PARTICIPATION AGREEMENT
By and Among
AMERICAN CENTURION LIFE ASSURANCE COMPANY
And
WARBURG PINCUS TRUST
And
WARBURG, PINCUS COUNSELLORS, INC.
And
COUNSELLORS SECURITIES INC.
The Separate Account(s) shown on Schedule 1 may invest in the following
Designated Portfolios of the Warburg Pincus Trust:
Post-Venture Capital Portfolio
October 7, 1996
10/3/96
<PAGE>
PAGE 1
FUND PARTICIPATION AGREEMENT
THIS FUND PARTICIPATION AGREEMENT is made and entered into as of July 31,
1996 by and among AMERICAN CENTURION LIFE ASSURANCE COMPANY (the "Company") TCI
PORTFOLIOS, INC. (the "Issuer") and the investment adviser of the Issuer,
INVESTORS RESEARCH CORPORATION ("Investors Research").
WHEREAS, the Company offers to the public certain qualified and
nonqualified variable annuity contracts (collectively, the "Contracts"), which
the Company has registered under the Securities Act of 1933, as amended (the
"1933 Act"); and
WHEREAS, the Company wishes to offer as investment options under the
Contracts, TCI Growth and TCI Value (collectively the "Fund"), each a series of
mutual fund shares registered under the Investment Company act of 1940, as
amended (the "1940 Act"), and issued by the Issuer; and
WHEREAS, on the terms and conditions hereinafter set forth, Investors
Research and the Issuer desire to make shares of the Funds available as
investment options under the Contracts;
NOW, THEREFORE, the Company, the Issuer and Investors Research agree as
follows:
1. Transactions in the Funds. Subject to the terms and conditions of this
Agreement, The Issuer will make shares of the Funds available to be purchased,
exchanged, or redeemed, by the Company on behalf of the Account (defined in
Section 6(a) below) through a single account per Fund at the net asset value
applicable to each order. The Funds' shares shall be purchased and redeemed on a
net basis in such quantity and at such time as determined by the Company to
satisfy the requirements of the Contracts for which the Funds serve as
underlying investment media. Dividends and capital gains distributions will be
automatically reinvested in full and fractional shares of the Funds.
2. Administrative Services. The Company shall be solely responsible for
providing all administrative services for the Contracts owners. The Company
agrees that it will maintain and preserve all records as required by law to be
maintained and preserved, and will otherwise comply with all laws, rules and
regulations applicable to the marketing of the Contracts and the provision of
administrative services to the Contract owners.
3. Processing and Timing of Transactions
(a) The Issuer hereby appoints the Company as its agent for the limited
purpose of accepting purchase and redemption orders for Fund shares from the
Contract owners. On each day the New York Stock Exchange (the "Exchange") is
open for business (each, a "Business Day"), the Company may receive instructions
from the Contract owners for the purchase or redemption of shares of the Funds
("Orders"). Orders received and accepted by the Company
<PAGE>
PAGE 2
prior to the close of regular trading on the Exchange (the "Close of Trading")
on any given Business Day (currently, 3:00 p.m. Central time) and transmitted to
the Issuer by 9:00am Central time on the next following Business Day will be
executed by the Issuer at the net asset value determined as of the Close of
Trading on the previous Business Day ("Day 1"). Any Orders received by the
Company after the Close of Trading, and all Orders that are transmitted to the
Issuer after 9:00 a.m. Central time on the next following Business Day, will be
executed by the Issuer at the net asset value determined following receipt by
the Issuer of such Order. The day as of which an Order is executed by the Issuer
pursuant to the provisions set forth above is referred to herein as the
"Effective Trade Date".
(b) By 5:30 p.m. Central time on each Business Day, Investors Research
will provide to the Company via facsimile or other electronic transmission
acceptable to the Company the Funds' net asset value, dividend and capital gain
information and, in the case of income funds, the daily accrual for interest
rate factor (mil rate), determined at the Close of Trading.
(c) By 9:00 a.m. Central time on each Business Day, the Company will
provide to Investors Research via facsimile or other electronic transmission
acceptable to Investors Research a report (referred to in subsection (a) above)
stating whether the Orders received by the Company from Contract owners by the
Close of Trading on the preceding Business Day resulted in the Account being a
net purchaser or net seller of shares of the Funds. As used in this Agreement,
the phrase "other electronic transmission acceptable to Investors Research"
includes the use of remote computer terminals located at the premises of the
Company, its agents or affiliates, which terminals may be linked electronically
to the computer system of Investors Research, its agents or affiliates
(hereinafter, "Remote Computer Terminals").
(d) Upon the timely receipt from the Company of the report described in
subsection (c) above, Investors Research will execute the purchase or redemption
transactions (as the case may be) at the net asset value computed as at the
Close of Trading on Day 1. Payment for net purchase transactions shall be made
by wire transfer by the Company to the custodial account designated by the Fund
on the Business Day next following the Effective Trade Date. Such wire transfers
shall be initiated by the Company's bank prior to 3:00 p.m. Central time and
received by the Funds prior to 5:00 p.m. Central time on the Business Day next
following the Effective Trade Date. If payment for a purchase Order is not
timely received, such Order will be executed at the net asset value next
computed following receipt of payment. Payments for net redemption transactions
shall be made by wire transfer by the Issuer to the account designated by the
Company within the time period set forth in the applicable Fund's then-current
prospectus; provided, however, Investors Research will use all reasonable
efforts to settle all redemptions on the Business Day next following the
Effective Trade Date. On any Business Day when the Federal Reserve Wire Transfer
System is closed, all communication and processing rules will be suspended for
the settlement of Orders. Orders will
<PAGE>
PAGE 3
be settled on the next Business Day on which the Federal Reserve Wire Transfer
System is open and the Effective Trade Date will apply.
4. Prospectus and Proxy Materials.
(a) Investors Research shall provide to the shareholder of record copies of
the Issuer's proxy materials, periodic reports to shareholders and other
materials that are required by law to be sent to the Issuer's shareholders. In
addition, Investors Research shall provide the Company copies of the Fund's
prospectuses and periodic reports to shareholders in sufficient quantity to
distribute to each Contract owner, together with such additional copies of the
Fund's prospectuses as may be reasonably requested by Company. If the Company
provides for pass-through voting by the Contract owners, Investors Research will
provide the Company with a sufficient quantity of proxy materials for each
Contract owner.
(b) The cost of preparing, typesetting, printing and shipping to the
Company the Fund's separate prospectuses, proxy materials, periodic reports to
shareholders and other materials shall be paid by Investors Research or its
agents or affiliates. If the Company elects to print a prospectus that combines
the separate prospectuses of the Fund with the prospectuses of other investment
options under the Contracts, Investors Research shall provide the Company a copy
of the Fund's prospectus in electronic format. The cost of preparing,
typesetting and printing the combined prospectus shall be borne by the Company.
(c) The cost of mailing prospectuses, proxy materials, periodic fund
reports and other materials of the Issuer to the Contract owners and prospective
Contract owners shall be paid by the Company and shall not be the responsibility
of Investors Research or the Issuer.
5. Compensation and Expenses.
(a) Investors Research will pay no fee or other compensation
to the Company under this Agreement.
(b) All expenses incident to performance by the Issuer of its duties under
this Agreement, including, but not limited to, the cost of registration and
qualification of the Fund's shares, will be paid by Investors Research to the
extent permitted by law. All expenses incident to performance by the Company of
its duties under this Agreement, including, but not limited to, the cost of
providing the administrative services to Contract owners, shall be paid by the
Company.
6. Representations and Warranties.
(a) The Company represents and warrants that: (i) this Agreement has been
duly authorized by all necessary corporate action and, when executed and
delivered, shall constitute the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms; (ii) it has established the
ACL Variable
<PAGE>
PAGE 4
Annuity Account 1 (the "Account"), which is a separate account under New York
Insurance law, and has registered each Account as a unit investment trust under
the Investment Company Act of 1940 (the "1940 Act") to serve as an investment
vehicle for the Contracts; (iii) each Contract provides for the allocation of
net amounts received by the Company to an Account for investment in the shares
of one or more specified investment companies selected among those companies
available through the Account to act as underlying investment media; (iv)
selection of a particular investment company is made by the Contract owner under
a particular Contract, who may change such selection from time to time in
accordance with the terms of the applicable Contract; and (v) the activities of
the Company contemplated by this Agreement comply in all material respects with
all provisions of federal and state insurance, securities, and tax laws
applicable to such activities.
(b) Investors Research represents that: (i) this Agreement has been duly
authorized by all necessary corporate action and, when executed and delivered,
shall constitute the legal, valid and binding obligation of Investors Research
and Issuer, enforceable in accordance with its terms; and (ii) the investments
of the Funds will at all times be adequately diversified within the Section
817(h) of the Internal Revenue Service Code of 1986, as amended (the "Code"),
and the regulations thereunder, and that at all times while this Agreement is in
effect, all beneficial interests in each of the Funds will be owned by one or
more insurance companies or by any other party permitted under Section
1.817-5(f)(3) of the Regulations promulgated under the Code. In the event of a
breach, Investors Research will take reasonable steps to notify the Company of
such breach and to adequately diversify the Fund so as to achieve compliance
within the grace period afforded by Regulation 1.817-5.
(c) Investors Research represents that the Fund's investment objectives,
policies, and restrictions comply in all material respects with applicable state
investment laws as they may apply to the Fund. Neither the Issuer nor Investors
Research makes any representation as to whether any aspect of the Fund's
operations (including, but not limited to, fees and expenses and investment
policies, objections and restrictions) complies with the insurance laws and
regulations of any state. Investors Research agrees that it will use reasonable
effort to furnish such information regarding the Funds as may be reasonably
required by state insurance laws so that the Company may obtain the authority
needed to issue the Contracts in any applicable state.
7. Additional Covenants and Agreements.
(a) Each party shall comply with all provisions of federal and state laws
applicable to its respective activities under this Agreement.
(b) Each party shall promptly notify the other parties in the event that it
is, for any reason, unable to perform any of its obligations under this
Agreement.
<PAGE>
PAGE 5
(c) The Company covenants and agrees that all Orders accepted and
transmitted by it hereunder with respect to each Account on any Business Day
will be based upon instructions that it received from the Contract owners in
proper form prior to the Close of Trading of the Exchange on the previous
Business Day.
(d) The Company covenants and agrees that all Orders transmitted to the
Issuer, whether by telephone, telecopy, or other electronic transmission
acceptable to Investors Research, shall be sent by or under the authority and
direction of a person designated by the Company as being duly authorized to act
on behalf of the owner of the Account. Absent actual knowledge to the contrary,
Investors Research shall be entitled to rely on the existence of such authority
and to assume that any person transmitting Orders for the purchase, redemption
or transfer of Fund shares on behalf of the Company is "an appropriate person"
as used in Sections 8-308 and 8-404 of the Uniform Commercial Code with respect
to the transmission of instructions regarding Fund shares on behalf of the owner
of such Fund shares. The Company shall maintain the confidentiality of all
passwords and security procedures issued, installed or otherwise put in place
with respect to the use of Remote Computer Terminals and assumes full
responsibility for the security therefor. The Company further agrees to be
solely responsible for the accuracy, propriety, and consequences of all data
transmitted to Investors Research by the Company by telephone, telecopy, or
other electronic transmission acceptable to Investors Research.
(e) The Company agrees to make every reasonable effort to market its
Contracts. It will use its best efforts to give equal emphasis and promotion to
shares of the Funds as is given to other underlying investments of the Account.
(f) The Company or its employees or agents will not give any information or
advice, or make any representations or statements on behalf of or concerning the
Issuer or the Fund, in connection with the sale of the Contracts unless based
upon information or representations contained in the registration statement for
the Fund's shares, as such registration statement may be amended or supplemented
from time to time, or in reports or proxy statements of the Fund, or in
published reports for the Fund that are published in reputable financial
publications or approved by Investors Research for distribution, or in sales
literature or other material provided by Investors Research. Investors Research
agrees to use reasonable efforts to respond to any request for approval on a
prompt and timely basis.
(g) Notwithstanding anything in Section 7(f) above, the Company will
furnish, or will cause to be furnished, to the Issuer or Investors Research,
each piece of sales literature or other promotional material in which the Fund
or the Issuer or Investors Research is named, at least ten (10) business days
prior to its use. No such material will be used if Investors Research reasonably
objects to such use. Investors Research agrees to use reasonable efforts to
respond to any request for approval on a prompt and timely basis.
<PAGE>
PAGE 6
(h) Investors Research will furnish or will cause to be furnished to the
Company or its designee, each piece of sales literature or other promotional
material in which the Company or its Account is named, at least ten (10)
business days prior to its use. No such material will be used if the Company
reasonably objects to such use. The Company agrees to use reasonable efforts to
respond to any request for approval on a prompt and timely basis.
(i) Investors Research will not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Account, or the Contracts unless based upon information or
representations contained in the registration statement for the Contracts, as
such registration statement may be amended or supplemented from time to time, or
in reports for the Contracts, or in published reports for the Account or the
Contracts that are published in reputable financial publications or are approved
by the Company for distribution, or in sales literature or other material
provided by the Company. The Company agrees to use reasonable efforts to respond
to any request for approval on a prompt and timely basis.
(j) The Company will provide to Investors Research at least on complete
copy of all registration statements, annual and semi-annual reports, proxy
statements, and all amendments or supplements to any of the above that include a
description of or information regarding the Funds promptly after the filing of
such document with the SEC or other regulatory authority.
(k) For purposes of this Section 7, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media (e.g., online
networks such as the Internet or other electronic messages), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, shareholder reports,
and proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
8. Use of Names. Except as otherwise expressly provided for in this
Agreement, neither Investors Research nor the Funds shall use any trademark,
trade name, service mark or logo of the Company, or any variation of any such
trademark, trade name, service mark or logo, without the Company's prior written
consent, the granting of which shall be at the Company's sole option. Except as
otherwise expressly provided for in this Agreement, the Company shall not use
any trademark, trade name, service mark or logo of the Issuer or Investors
Research, or any variation of any such trademarks, trade
<PAGE>
PAGE 7
names, service marks, or logos, without the prior written consent of either the
Issuer or Investors Research, as appropriate, the granting of which shall be at
the sole option of Investors Research and/or the Issuer.
9. Proxy Voting
(a) The Company shall provide pass-through voting privileges to all
Contract owners so long as the SEC continues to interpret the 1940 Act as
requiring such privileges. It shall be the responsibility of the Company to
assure that it and the separate accounts of the other Participating Companies
(as defined in Section 11(a) below) participating in any Fund calculate voting
privileges in a consistent manner.
(b) The Company will distribute to Contract owners all proxy material
furnished by Investors Research and will vote shares in accordance with
instructions received from such Contract owners. The Company shall vote Fund
shares for which no instructions have been received in the same proportion as
shares for which such instructions have been received. The Company and its
agents shall not oppose or interfere with the solicitation of prozies for Fund
shares held for such Contract owners.
10. Indemnity.
(a) Investors Research agrees to indemnify and hold harmless the Company
and each person, if any, who controls the Company within the meaning of the
Securities Act of 1933, and any officers, directors, employees, agents, and
affiliates of the foregoing (collectively, the "Indemnified Parties" for
purposes of this Section 10(a)) against any losses, claims, expenses, damages or
liabilities (including amounts paid in settlement thereof) or litigation
expenses (including reasonable legal and other expenses) (collectively,
"Losses"), to which the Indemnified Parties may become subject, insofar as such
Losses (i) result from a breach by Investors Research of a material provision of
this Agreement, including the incorrect calculation or reporting of the daily
net asset value per share or dividend or capital gain distribution rate, or (ii)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement or any prospectus
of the Fund or arise out of or are based upon 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. Investors Research will reimburse
any legal or other expenses reasonably incurred by the Indemnified Parties in
connection with investigating or defending any such Losses. Investors Research
shall not be liable for indemnification hereunder if such Losses are
attributable to the negligence or misconduct of the Company performing its
obligations under this Agreement or as a result of a breach of Section 21.
(b) The Company agrees to indemnify and hold harmless Investors Research
and the Issuer and each person, if any, who controls the Issuer or Investors
Research within the meaning of the
<PAGE>
PAGE 8
Securities Act of 1933, and their respective officers, directors, employees,
agents, and affiliates of the foregoing (collectively, the "Indemnified Parties"
for purposes of this Section 10(b)) against any Losses to which the Indemnified
Parties may become subject, insofar as such Losses (i) result from a breach by
the Company of a material provision of this Agreement, or (ii) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the sales literature of the Company or in a registration
statement or any prospectus of the Company regarding the Contracts or the
Account, if any, or arise out of or are based upon 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, or arise out of or as a
result of conduct, statements or representations of the Company or its agents
(other than statements or representations contained in the prospectuses or sales
literature of the Fund), with respect to the sale and distribution of Contracts
for which the Fund's shares serve as the underlying investment, or (iii) result
from the use by any person of a Remote Computer Terminal. The Company will
reimburse any legal or other expenses reasonably incurred by the Indemnified
Parties in connection with investigating or defending any such Losses. The
Company shall not be liable for indemnification hereunder if such Losses are
attributable to the negligence or misconduct of Investors Research or the Issuer
in performing their obligations under this Agreement.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party hereunder, 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 10. In case any such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish to, assume
the defense thereof, with counsel satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 10 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
(d) If the indemnifying party assumes the defense of any such action, the
indemnifying party shall not, without the prior written consent of the
indemnified parties in such action, settle or compromise the liability of the
indemnified parties in such action, or permit a default or consent to the entry
of any judgement in respect thereof, unless in connection with such settlement,
compromise or consent, each indemnified party receives from such claimant an
unconditional release from all liability in respect of such claim.
<PAGE>
PAGE 9
11. Potential Conflicts.
(a) The Company has received a copy of an application for exemptive relief,
as amended, filed by Investors Research on December 21, 1987, with the SEC and
the order issued by the SEC in response thereto (the "Shared Funding Exemptive
Order"). The Company has reviewed the conditions to the requested relief set
forth in such application for exemptive relief. As set forth in such
application, the Board of Directors of the Issuer (the "Board") will monitor the
Issuer for the existence of any material irreconcilable conflict between the
interests of the contract owners of all separate accounts ("Participating
Companies") investing in funds of the Issuer. 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 interpretative letter, or any similar
actions 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 owners 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.
(b) 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.
(c) If a majority of the Board, or a majority of its disinterested Board
members, determines that a material irreconcilable conflict exists with regard
to contract owner investments in a Fund, the Board shall give prompt notice to
all Participating Companies. If the Board determines that the Company is
responsible for causing or creating said conflict, the Company shall at its sole
cost and expense, and to the extent reasonably practicable (as determined by a
majority of the disinterested Board members), take such action as is necessary
to remedy or eliminate the irreconcilable material conflict. Such necessary
action may include but shall not be limited to:
(i) withdrawing the assets allocable to the Account from the Fund and
reinvesting such assets in a different investment medium or
submitting the question of whether such segregation should be
implemented to a vote of all affected contract owners and as
appropriate, segregating the assets of any appropriate group
(i.e., annuity contract owners,
<PAGE>
PAGE 10
life insurance contract owners, or variable contract owners of
one or more Participating Companies) that votes in favor of such
segregation, or offering to the affected contract owners the
option of making such a change; and/or
(ii) establishing a new registered management investment
company or managed separate account.
(d) If a material irreconcilable conflict arises as a result of a decision
by the Company to disregard its contract owner voting instructions and said
decision represents a minority position or would preclude a majority vote by all
of its contract owners having an interest in the Issuer, the Company at its sole
cost, may be required, at the Board's election, to withdraw an Account's
investment in the Issuer and terminate this Agreement; provided, however, that
such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
(e) For the purpose of this Section 11, a majority of the disinterested
Board members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event the Issuer be
required to establish a new funding medium for any Contract. The Company shall
not be required by this Section 11 to establish a new funding medium for any
Contract if an offer to do so has been declined by vote of a majority of the
Contract owners materially adversely affected by the irreconcilable material
conflict.
12. Termination. This agreement shall terminate as to the
sale and issuance of new Contracts:
(a) at the option of either the Company, Investors Research or the Issuer
upon six months' advance written notice, except that if exemptive relief or an
exemptive order from the SEC is required in connection with such termination, at
such later date as may be necessary to obtain such exemptive relief;
(b) at the option of the Company if the Funds' shares are not
available for any reason to meet the requirement of Contracts as
determined by the Company. Reasonable advance notice of election to
terminate shall be furnished by Company;
(c) at the option of either the Company, Investors Research or the Issuer,
upon institution of formal proceedings against the broker-dealer or
broker-dealers marketing the Contracts, the Account, the Company, or the Issuer
by the National Association of Securities Dealers, Inc. (the "NASD"), the SEC or
any other regulatory body;
<PAGE>
PAGE 11
(d) upon termination of the Management Agreement between the Issuer and
Investors Research. Notice of such termination shall be promptly furnished to
the Company. This Section 12(d) shall not be deemed to apply if
contemporaneously with such termination a new contract of substantially similar
terms is entered into between the Issuer and Investors Research;
(e) upon the requisite vote of Contract owners having an interest in the
Issuer to substitute for the Issuer's shares the shares of another investment
company in accordance with the terms of Contracts for which the Issuer's shares
had been selected to serve as the underlying investment medium. The Company will
give 60 days' written notice to the Issuer and Investors Research of any
proposed vote to replace the Funds' shares;
(f) upon assignment of this Agreement unless made with the
written consent of all other parties hereto;
(g) if the Issuer's shares are not registered, issued or sold in
conformance with Federal law or such law precludes the use of Fund shares as an
underlying investment medium of Contracts issued or to be issued by the Company.
Prompt notice shall be given by either party should such situation occur; or
(h) at the option of the Issuer, if the Issuer reasonably determines in
good faith that the Company is not offering shares of the Fund in conformity
with the terms of this Agreement or applicable law.
(i) at the option of any party hereto upon a determination that continuing
to perform under this Agreement would, in the reasonable opinion of the
terminating party's counsel, violate any applicable federal or state law, rule,
regulation or judicial order.
(j) at the option of the Company, if the Company determines, in its sole
judgement exercised in good faith, that Investors Research has suffered a
material adverse change in its business, operations or financial condition since
the date of this Agreement or is the subject of material adverse publicity that
is likely to have a material adverse impact upon the business and operations of
the Company, such termination to be effective sixty (60) days' after receipt by
Investors Research of written notice of the Company's election to terminate this
Agreement.
(k) at the option of Investors Research, if Investors Research determines,
in its sole judgment exercised in good faith, that the Company has suffered a
material adverse change in its business, operations or financial condition since
the date of this Agreement or is the subject of material adverse publicity that
is likely to have a material adverse impact upon the business and operations of
the Fund or Investors Research, such termination to be effective sixty (60)
days' after receipt by the Company of written notice of Investors Research's
election to terminate this Agreement
<PAGE>
PAGE 12
13. Continuation of Agreement. Termination as the result of any cause
listed in Section 12 shall not affect the Issuer's obligation to furnish, under
the terms of this Agreement, its shares to Contracts then in force for which its
shares serve or may serve as the underlying medium (unless such further sale of
Fund shares is proscribed by law or the SEC or other regulatory body).
14. Non-Exclusivity. Each of the parties acknowledges and
agrees that this Agreement and the arrangement described herein are
intended to be non-exclusive and that each is free to enter into
similar agreements and arrangements with other entities.
15. Survival. The provisions of Section 8 (use of names) and
Section 10 (indemnity) of this Agreement shall survive termination
of this Agreement.
16. Amendment. Neither this Agreement, nor any provision
hereof, may be amended, waived, discharged or terminated orally,
but only by an instrument in writing signed by all of the parties
hereto.
17. Notices. All notices and other communications hereunder shall be given
or made in writing and shall be delivered personally, or sent by telex,
telecopier, express delivery or registered or certified mail, postage prepaid,
return receipt requested, to the party or parties to whom they are directed at
the following addresses or at such other addresses as may be designated by
notice from such party to all other parties.
To the Company:
American Centurion Life Assurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, Minnesota 55440
Attention: Jim Mortensen, Manager-Product
Development
(612) 671-2269 (telecopy number)
With a simultaneous copy to:
American Centurion Life Assurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, Minnesota 55440
Attention: Mary Ellyn Minenko, Counsel
(612) 671-3767 (telecopy number)
To the Issuer or Investors Research:
Twentieth Century Mutual Funds
4500 Main Street
Kansas City, Missouri 64111
Attention: Charles A. Etherington, Esq.
(816) 340-4964 (telecopy number)
<PAGE>
PAGE 13
Any notice, demand or other communication given in a manner prescribed in this
Section 17 shall be deemed to have been delivered on receipt.
18. Successors and Assigns. This Agreement may not be
assigned without the written consent of all parties to the
Agreement at the time of such assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective permitted successors and assigns.
19. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall
constitute one agreement, and any party hereto may execute this
Agreement by signing any such counterpart.
20. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
21. Confidentiality.
(a) Investors Research acknowledges that the identities of the customers of
the Company or any of its affiliates (collectively, the "Protected Parties" for
purposes of this Section 21), information maintained regarding those customers,
and all computer programs and procedures or other confidential information
developed or used by the Protected Parties or any of their employees or agents
in connection with the Company's performance of its duties under this Agreement
are the valuable property of the Protected Parties. Investors Research agrees
that if in connection with the performance of its duties under this Agreement it
comes into possession of any list or compilation of the identities of or other
confidential information about the Protected Parties' customers, or any other
confidential information or property of the Protected Parties, other than such
information as may be independently developed, compiled or obtained by Investors
Research, whether from information supplied by the Protected Parties' customers
who also maintain accounts directly with the Issuer or another affiliate of
Investors Research or otherwise, Investors Research will hold such information
or property in confidence and refrain from using, disclosing or distributing any
of such information or other property except: (a) with the Company's prior
written consent; or (b) as required by law or judicial process. Investors
Research acknowledges that any breach of this Section 21(a) would result in
immediate and irreparable harm to the Protected Parties for which there would be
no adequate or quantifiable remedy at law. As a result, the parties agree that
in the event of a breach, as their sole remedy, the Protected Parties will be
entitled to equitable relief by way of temporary and permanent injunctions, as
well as such other equitable relief as a court of competent jurisdiction deems
appropriate.
<PAGE>
PAGE 14
(b) The parties acknowledge that it is not contemplated that any
confidential information of the Protected Parties is necessary for the
performance by Investors Research or the Issuer of their respective duties under
this Agreement. If the parties determine that the communication of such
confidential information is necessary or desirable, the parties agree to
cooperate in the establishment of procedures to identify such information as
confidential in order to ensure its protection.
22. Access to Books and Records. Each party to this Agreement agrees to
cooperate with each other party and all appropriate governments authorities
(including without limitation the SEC, the NASD and state insurance regulators)
and will permit each other and such authorities reasonable access to its books
and records in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby. Each party agrees to permit
the other party or the appropriate governmental authority to make copies of
portions of its books and records that relate to the party's performance of its
duties under this Agreement an which are the subject matter of the investigation
or inquiry.
23. Entire Agreement. This Agreement, including the Attachments hereto,
constitutes the entire agreement between the parties with respect to the matters
dealt with herein, and supersedes all previous agreements, written or oral, with
respect to such matters.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth above.
INVESTORS RESEARCH CORPORATION AMERICAN CENTURION LIFE
ASSURANCE COMPANY
By:/s/ William M. Lyons By:/s/ Stuart A. Sedlack
William M. Lyons Stuart A. Sedlacek
Executive Vice President Chairman and President
TCI PORTFOLIOS, INC. Attest:
By:/s/ William M. Lyons By:/s/ Eric L. Marhoun
William M. Lyons Eric L. Marhoun
Executive Vice President General Counsel and Secretary
<PAGE>
PAGE 1
JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made this 23rd day of October, 1996, between JANUS ASPEN
SERIES, an open-end management investment company organized as a Delaware
business trust (the "Trust"), and American Centurion Life Assurance Company, a
life insurance company organized under the laws of the State of New York (the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A, as may be amended from time to time (the
"Accounts").
WITNESSETH:
WHEREAS, the Trust has registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and has registered the offer
and sale of its shares under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has received an order from the Securities and Exchange
Commission granting Participating Insurance Companies and their separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b)
of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the
extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the Company has registered or will register (unless registration
is not required under applicable law) certain variable life insurance policies
and/or variable annuity contracts under the 1933 Act (the "Contracts"); and
WHEREAS, the Company has registered or will register (unless registration
is not required under applicable law) each Account as a unit investment trust
under the 1940 Act; and
WHEREAS, the Company desires to utilize shares of the Portfolios listed on
Schedule B, as may be amended from time to time, as an investment vehicle of the
Accounts;
<PAGE>
PAGE 2
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 on the
same Business Day (as defined below) as the Trust receives notice of redemption
orders in accordance with Section 1.3 and in the manner established from time to
time by the Trust, except that the Trust reserves the right to suspend payment
consistent with Section 22(e) of the 1940 Act and any rules thereunder.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints the
Company as its agent for the limited purpose of receiving and accepting purchase
and redemption orders resulting from investment in and payments under the
Contracts. Receipt by the Company shall constitute receipt by the Trust provided
that i) such orders are received by the Company in good order prior to the time
the net asset value of each Portfolio is priced in accordance with its
prospectus and ii) the Trust receives notice of such orders by 11:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.4 Purchase orders that are transmitted to the Trust in accordance with
Section 1.3 shall be initiated by wire no later than 12:00 noon New York time on
the same Business Day that the Trust receives notice of the order. Payments
shall be made in federal funds transmitted by wire.
<PAGE>
PAGE 3
1.5 Issuance and transfer of the Trust's shares will be by book entry only.
Stock certificates will not be issued to the Company or the Account. Shares
ordered from the Trust will be recorded in the appropriate title for each
Account or the appropriate subaccount of each Account.
1.6 The Trust shall furnish same-day notice (by wire or telephone followed
by written confirmation) to the Company of any income dividends or capital gain
distributions payable on the Trust's shares. The Company hereby elects to
receive all such income dividends or gain distributions as are payable on a
Portfolio's shares in additional shares of that Portfolio. The Company reserves
the right to revoke this election and to receive all such dividends and
distributions in cash upon 90 days' prior notice to the Trust. The Trust shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.7 The Trust shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 6 p.m. New York time.
1.8 The Trust agrees that its shares will be sold only to Participating
Insurance Companies and their separate accounts and to certain qualified pension
and retirement plans to the extent permitted by the Exemptive Order. No shares
of any Portfolio will be sold directly to the general public. The Company agrees
that Trust shares will be used only for the purposes of funding the Contracts
and Accounts listed in Schedule A, as amended from time to time.
1.9 The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and conflicts
of interest corresponding to those contained in Section 2.8 and Article IV of
this Agreement.
ARTICLE II
Obligations of the Parties
2.1 The Trust shall prepare and be responsible for filing with the
Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and statements
of additional information of the Trust. The Trust shall bear the costs of
registration and qualification of its shares, preparation and filing of the
documents listed in this Section 2.1 and all taxes to which an issuer is subject
on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust shall either (a) provide the
Company (at the Company's expense) with as many copies of the Trust's current
prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
as the Company
<PAGE>
PAGE 4
shall reasonably request; or (b) provide the Company with a camera ready copy or
a computer disk 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.
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 sole owner of the name and mark
"Janus" and that all use of any designation comprised in whole or part of Janus
(a "Janus Mark") under this Agreement shall inure to the benefit of Janus
Capital. Except as provided in Section 2.5, the Company shall not use any Janus
Mark on its own behalf or on behalf of the Accounts or Contracts in any
registration statement, advertisement, sales literature or other materials
relating to the Accounts or Contracts without the prior written consent of Janus
Capital. Upon termination of this Agreement for any reason, the Company shall
cease all use of any Janus Mark(s) as soon as reasonably practicable.
2.5 The Company shall furnish, or cause to be furnished, to the Trust or
its designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or its investment adviser is named prior to the
filing of such document with the Securities and Exchange Commission. The Company
shall furnish, or shall cause to be furnished, to the Trust or its designee,
each piece of sales literature or other promotional material in which the Trust
or its investment adviser is named, at least ten Business Days prior to its use.
No such material shall be used if the Trust or its designee reasonably objects
to such use within five Business Days after receipt of such material.
2.6 The Trust shall furnish, or cause to be furnished, to the Company or
its designee, a copy of each Trust prospectus or statement of additional
information in which the Company is named prior to the filing of such document
with the Securities and Exchange Commission. The Trust shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company is named, at least
ten Business Days prior to its use. No such material shall be used if the
Company or its designee reasonably objects to such use within five Business Days
after receipt of such material.
<PAGE>
PAGE 5
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, prospectus or statement of additional information for the Trust
shares (as such registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time), reports of the
Trust, Trust-sponsored proxy statements, or in sales literature or published
reports in the public domain or other promotional material approved by the Trust
or its designee, except as required by legal process or regulatory authorities
or with the written permission of the Trust or its designee. Nothing in this
Section 2.7 will be construed as preventing the Company or its employees or
agents from giving advice on investments in the Trust.
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, prospectus or statement of
additional information for the Contracts (as such registration statement,
prospectus and statement of additional information 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 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.
2.10 The Company shall notify the Trust of any applicable state insurance
laws of which it becomes aware that restrict the Portfolios' investments or
otherwise affect the operation of the Trust and shall notify the Trust of any
changes in such laws.
<PAGE>
PAGE 6
ARTICLE III
Representations and Warranties
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of New York and
that it has legally and validly established each Account as a segregated asset
account under such law on the date set forth in Schedule A.
3.2 The Company represents and warrants that each Account (1) has been
registered or, prior to any issuance or sale of the Contracts, will be
registered as a unit investment trust in accordance with the provisions of the
1940 Act or, alternatively (2) has not been registered in proper reliance upon
an exclusion from registration under the 1940 Act.
3.3 The Company represents and warrants that the Contracts or interests in
the Accounts (1) are or, prior to issuance, will be registered as securities
under the 1933 Act or, alternatively (2) are not registered because they are
properly exempt from registration under the 1933 Act or will be offered
exclusively in transactions that are properly exempt from registration under the
1933 Act. The Company further represents and warrants that the Contracts will be
issued and sold in compliance in all material respects with all applicable
federal and state laws; and the sale of the contracts shall comply in all
material respects with state insurance suitability requirements.
3.4 The Trust represents and warrants that it is duly organized and validly
existing under the laws of the State of Delaware.
3.5 The Trust represents and warrants that the Trust shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Trust shall be registered under the 1940 Act prior to any issuance or sale of
such shares. The Trust shall amend its registration statement under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify its shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Trust.
3.6 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in Section
817(h) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder. In the event the Trust fails to comply with these
diversification requirements, the Trust will take all reasonable steps: (a) to
notify the Company of such noncompliance; and (b) to adequately diversify the
Trust so as to achieve compliance within the grace period afforded by Treasury
Regulation 1.817-5.
3.7 The Trust represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code, and that it
will make every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the Company immediately
upon
<PAGE>
PAGE 7
having a reasonable basis for believing that it has ceased to so qualify or that
it might not so qualify in the future.
3.8 The Trust represents that its investment objectives, policies and
restrictions comply in all material respects with any applicable state
securities laws of which the Trust is aware as they may apply to the Trust. The
Trust makes no representation as to whether any aspect of its operations
(including, but not limited to, fees and expenses and investment policies,
objectives and restrictions) complies with the insurance laws and regulations of
any state. The Trust agrees that it will furnish the information required by
state insurance laws and requested by the Company to assist the Company in
obtaining the authority needed to issue the Contracts in any applicable state.
3.9 The Trust represents and warrants that all of its trustees, officers,
employees, investment advisors, and other individuals/entities having access to
the funds and/or securities of the Trust are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Trust in an amount not less than the minimal coverage as required currently by
Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
ARTICLE IV
Potential Conflicts
4.1 The parties acknowledge that the Trust's shares may be made available
for investment to other Participating Insurance Companies. In such event, the
Trustees will monitor the Trust for the existence of any material irreconcilable
conflict between the interests of the contract owners of all Participating
Insurance Companies. An irreconcilable material conflict may arise for a variety
of reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Trustees shall promptly inform the Company if they determine that an
irreconcilable material conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Exemptive Order by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
<PAGE>
PAGE 8
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 subaccounts 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 subaccount of
the Account's investment in the Trust and terminate this Agreement with respect
to such subaccount of the 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. No charge or penalty will be imposed as a result of such withdrawal.
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
subaccount of the Account's investment in the Trust and terminate this Agreement
with respect to such subaccount of the 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. No charge or penalty will be imposed as a result of such
withdrawal. 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.
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PAGE 9
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
subaccount of 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. No charge or
penalty will be imposed as a result of such withdrawal.
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 carry out the duties imposed upon them by the Exemptive
Order, and said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Exemptive Order) on terms and conditions materially different
from those contained in the Exemptive Order, then the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3(t), as amended, and Rule 6e-3,
as adopted, to the extent such rules are applicable.
ARTICLE V
Indemnification
5.1 Indemnification By the Company. The Company agrees to indemnify and
hold harmless the Trust and each person, if any, who controls the Trust within
the meaning of Section 15 of the 1933 Act and any Trustees, officers, employees
and agents of the foregoing (collectively, the "Indemnified Parties" for
purposes of this Article V) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or expenses (including the reasonable costs of investigating or
defending any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively, "Losses"),
to which the Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such Losses:
<PAGE>
PAGE 10
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a registration
statement, prospectus or statement of additional information 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 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 or representations contained in and accurately derived from Trust
Documents as defined in Section 5.2(a)) or wrongful conduct of the Company
or personsunder its control, with respect to the sale or acquisition of
the Contracts or Trust shares: or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust Documents as
defined in Section 5.2(a) or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written information
furnished to the Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the terms of
this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Company.
5.2 Indemnification By the Trust. The Trust agrees to indemnify and hold
harmless the Company and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act and any directors, officers, employees
and agents of the foregoing (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:
<PAGE>
PAGE 11
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement, prospectus or statement of additional information for the Trust
or any sales literature generated or approved by the Trust (or any
amendment or supplement thereto), (collectively, "Trust Documents" for the
purposes of this Article V), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and was accurately derived from
written information furnished to the Trust by or on behalf of the Company
for use in Trust Documents or otherwise for use in connection with the
sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately derived
from Company Documents) or wrongful conduct of the Trust or persons under
its control, with respect to the sale or acquisition of the Contracts or
Trust shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Company Documents or the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading if such statement or omission was made in reliance upon and
accurately derived from written information furnished to the Company by or
on behalf of the Trust; or
(d) arise out of or result from any failure by the Trust to provide
the services or furnish the materials required under the terms of this
Agreement, including, but not limited to, any material (based on current
standards of the Securities and Exchange Commission) errors in or untimely
calculation or reporting of the daily net asset value per share or
dividend or capital gain distribution rate; 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.
<PAGE>
PAGE 12
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, complaint or action by a regulatory authority shall have
been served upon or otherwise received by such Indemnified Party (or after such
Indemnified Party shall have received notice of service upon or other
notification to any designated agent), but failure to notify the party against
whom indemnification is sought of any such claim shall not relieve that party
from any liability which it may have to the Indemnified Party in the absence of
Sections 5.1 and 5.2.
5.5 in case any such action is brought against the Indemnified Parties, the
indemnifying party shall be entitled to participate, at its own expense, in the
defense of such action. The indemnifying party also shall be entitled to assume
the defense thereof, with counsel reasonably satisfactory to the party named in
the action. After notice from the indemnifying party to the Indemnified Party of
an election to assume such defense, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the indemnifying
party will not be liable to the Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
ARTICLE VI
Termination
6.1 This Agreement may be terminated by either party for any reason by
ninety (90) days' advance written notice delivered to the other party or as
otherwise agreed in writing by both parties. This Agreement may be terminated at
the option of the Trust immediately if the Company is no longer controlled by or
under common control with IDS Life Insurance Company.
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 as long as shares of the Trust are held on behalf of Contract
owners in accordance with Section 6.2, the provisions of this Agreement shall
survive the termination of this Agreement with respect to those Contract owners.
<PAGE>
PAGE 13
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
Denver, Colorado 80206
Attention: David C. Tucker, Esq.
If to the Company:
American Centurion Life Assurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
Attention: Jim Mortensen
Manager-Product Development
With a simultaneous copy to:
American Centurion Life Assurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
Attention: Mary Ellyn Minenko
Counsel
ARTICLE VIII
Miscellaneous
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 this Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of State of Colorado. This Agreement will
be subject to the provisions of the 1933 Act, the Securities Exchange Act of
1934 and the 1940 Act, and the rules and regulations and rulings thereunder,
including such exemptions from those statues, rules and regulations as the
Securities and Exchange commission may grant (including, but not limited to, the
Exemptive Order) and the terms hereof will be interpreted and construed in
accordance therewith.
<PAGE>
PAGE 14
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc., and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby. The Trust
agrees that the Company will have the right to inspect, audit and copy all
records pertaining to the performance of services under this Agreement to the
extent required by any state insurance department upon reasonable notice to the
Trust and during the Trust's normal business hours.
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.
8.11 The Trust acknowledges that the identities of the customers of the
Company or any of its affiliates (collectively the "Protected Parties" for
purposes of this Section 8.11), information maintained regarding those
customers, and all computer programs and procedures or other information
developed or used by the Protected Parties or any of their employees or agents
in connection with the Company's performance of its duties under this Agreement
are the valuable property of the Protected Parties. The Trust agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the Protected Parties' customers, or any other information or
property of the Protected Parties, other than such information as may be
independently developed or compiled by the Trust from information supplied to it
by the Protected Parties' customers who also maintain accounts directly with the
Trust, the Trust will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with the Company's prior written consent; or (b) as
required by law or judicial process. The Trust acknowledges that any breach of
the agreements in this Section 8.11 would result in immediate and irreparable
harm to the Protected Parties for which there would be
<PAGE>
PAGE 15
no adequate remedy at law and agree that in the event of such a breach, the
Protected Parties will be entitled to equitable relief by way of temporary and
permanent injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate.
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.
Attest: AMERICAN CENTURION LIFE
ASSURANCE COMPANY
By:/s/ Eric L. Marhoun By:/s/ Michael J. Hogan
Name: Eric L. Marhoun Name: Micheal J. Hogan
Title: General Counsel and Title: Vice President, Variable
Secretary Product Development
JANUS ASPEN SERIES
By:/s/ Deborah E. Bielicke
Name: Deborah E. Bielicke
Title: Assistant Vice President
<PAGE>
PAGE 16
Schedule A
Separate Accounts and Associated Contract and Certificates
Name of Separate Account and Contracts and
Date Established by Certificates Funded
Board of Directors By Separate Account
ACL Variable Annuity Account 1, Contract Form 38501
established October 12, 1995 Certificate Form 38502-NY
Certificate Form 38503-IRA-NY
<PAGE>
PAGE 17
Schedule B
Portfolios of Janus Aspen Series
Available as an Investment Vehicle of the Accounts
Growth Portfolio
Worldwide Growth Portfolio
<PAGE>
PAGE 1
PARTICIPATION AGREEMENT
Among
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO FUNDS GROUP, INC.
and
AMERICAN CENTURION LIFE ASSURANCE COMPANY
THIS AGREEMENT, made and entered into this 4th day of December, 1996 by
and among AMERICAN CENTURION LIFE ASSURANCE COMPANY, (hereinafter the "Insurance
Company"), a New York corporation, on its own behalf and on behalf of each
separate account of the Insurance Company set forth on Schedule A hereto as may
be amended from time to time (each such account hereinafter referred to as the
"Account"), INVESCO VARIABLE INVESTMENT FUNDS, INC., a Maryland corporation (the
"Company") and INVESCO FUNDS GROUP, INC. ("INVESCO"), a Delaware corporation.
WHEREAS, the Company 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 annuity and life insurance contracts
to be offered by insurance companies which have entered into participation
agreements substantially identical to this Agreement ("Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Company is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Company has obtained an order from the Securities and
Exchange Commission (the "Commission"), dated December 29, 1993 (File No.
812-8590), granting Participating Insurance Companies and their separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and
l5(b) of the Investment Company Act of 1940, as amended, (the "1940 Act") and
Rules 6e2(b)(15) and 6e- 3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Company to be sold to and held by variable annuity and
variable life insurance separate accounts of life insurance companies that may
or may not be affiliated with one another (the "Mixed and Shared Funding
Exemptive Order"); and
WHEREAS, the Company is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, INVESCO is duly registered as an investment adviser under the
Investment Advisers Act of 1940 and any applicable state securities law and as a
broker dealer 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
<PAGE>
PAGE 2
WHEREAS, the Insurance Company has registered under the 1933 Act, or will
register under the 1933 Act, certain variable annuity contracts identified by
the form number(s) listed on Schedule B to this Agreement, as amended from time
to time hereafter by mutual written agreement of all the parties hereto (the
"Contracts"); and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the board of directors of the
Insurance Company on the date shown for that Account on Schedule A hereto, to
set aside and invest assets attributable to the Contracts; and
WHEREAS, the Insurance Company has registered or will register each
Account as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurance Company intends to purchase shares in the Funds
designated on Schedule C to this Agreement, as it may be amended from time to
time, on behalf of the Accounts to fund the Contracts and INVESCO 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 Insurance
Company, the Company and INVESCO agree as follows:
ARTICLE I. Sale of Company Shares
1.1. INVESCO agrees to sell to the Insurance Company those shares of the
Company which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Company or its designee of
the order for the shares of the Company. For purposes of this Section 1.1, the
Insurance Company shall be the designee of the Company for receipt of such
orders from the Accounts and receipt by such designee shall constitute receipt
by the Company; provided that the Company receives notice of such order by 9:00
a.m., Mountain 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 Company calculates its net asset value pursuant to the rules of the
Commission.
1.2. The Company agrees to make its shares available for purchase at the
applicable net asset value per share by the Insurance Company and its Accounts
on those days on which the Company calculates its Funds' net asset values
pursuant to rules of the Commission and the Company shall use reasonable efforts
to calculate its Funds' net asset values on each day on which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the board of
directors of the Company (hereinafter the "Board") may refuse to sell shares of
any Fund to any person, or suspend or terminate the offering of shares of any
Fund if such action is required by law or by regulatory authorities having
jurisdiction or 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 that Fund.
<PAGE>
PAGE 3
1.3. The Company and INVESCO agree that shares of the Company will be sold
only to Participating Insurance Companies and their separate accounts. No shares
of any Fund will be sold to the general public.
1.4. The Company and INVESCO will not sell Company shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Sections 2.1, 3.4, 3.5 and Article VII of this
Agreement is in effect to govern such sales.
1.5. The Company agrees to redeem, on the Insurance Company's request, any
full or fractional shares of the Company held by the Insurance Company,
executing such requests on a daily basis at the net asset value next computed
after receipt by the Company or its designee of the request for redemption. For
purposes of this Section 1.5, the Insurance Company shall be the designee of the
Company for receipt of requests for redemption from each Account and receipt by
that designee shall constitute receipt by the Company; provided that the Company
receives notice of the request for redemption by 9:00 a.m., Mountain Time, on
the next following Business Day.
1.6. The Insurance Company agrees to purchase and redeem the shares of
each Fund offered by the then-current prospectus of the Company in accordance
with the provisions of that prospectus.
1.7. The Insurance Company shall pay for Company shares by 9:00 a.m.,
Mountain Time, on the next Business Day after an order to purchase Company
shares is made in accordance with the provisions of Section 1.1 hereof. Payment
shall be in federal funds transmitted by wire. For the purpose of Sections 2.10
and 2.11, upon receipt by the Company of the federal funds so wired, such funds
shall cease to be the responsibility of the Insurance Company and shall become
the responsibility of the Company. Payment of aggregate redemption proceeds
(aggregate redemptions of a Fund's shares by an Account) for a given Business
Day will be made by wiring federal funds to the Insurance Company on the next
Business Day after receipt of the redemption request. Notwithstanding the
foregoing, in the event that one or more Funds has insufficient cash on hand to
pay aggregate redemptions on the next Business Day, and if such Fund has
determined to settle redemption transactions for all of its shareholders on a
delayed basis (more than one Business Day, but in no event more than seven
calendar days, after the date on which the redemption order is received, unless
otherwise permitted by an order of the Commission under Section 22(e) of the
1940 Act), the Company shall be permitted to delay sending redemption proceeds
to the Insurance Company by the same number of days that the Company is delaying
sending redemption proceeds to the other shareholders of the Fund.
1.8. Issuance and transfer of the Company's shares will be by book entry
only. Stock certificates will not be issued to the Insurance Company or any
Account. Shares ordered from the Company will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account.
<PAGE>
PAGE 4
1.9. The Company shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurance Company of any income,
dividends or capital gain distributions payable on the Funds' shares. The
Insurance Company hereby elects to receive all income dividends and capital gain
distributions payable on a Fund's shares in additional shares of that Fund. The
Insurance Company reserves the right to revoke this election and to receive all
such income, dividends and capital gain distributions in cash. The Company shall
notify the Insurance Company of the number of shares issued as payment of
dividends and distributions.
1.10. The Company shall make the net asset value per share for each Fund
available to the Insurance Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make those per-share net asset values available by 4:00 p.m.,
Mountain Time. If there are dividends or capital gain distributions payable on
the Funds' Shares, the Company will use its best efforts to make the per share
net asset values and dividend or distribution amounts available by 5:00 p.m.,
Mountain Time, but in no event later than 6:00 p.m., Mountain Time. In the event
adjustments are required to correct any error in the computation of the net
asset value of Fund shares made by the Company or INVESCO, INVESCO shall notify
the Insurance Company as soon as possible after discovering the need for such
adjustments. The parties shall negotiate in good faith to develop a reasonable
method for effecting such adjustments.
ARTICLE II. Representations and Warranties
2.1. The Insurance 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 applicable state insurance suitability requirements. The Insurance
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established the Account prior to any issuance or sale thereof as a
segregated asset account under Section 4240 of the New York Insurance Law 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 Company represents and warrants that Company shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sale in compliance with the laws of the State of Maryland and all
applicable federal securities laws and that the Company is and shall remain
registered under the 1940 Act. The Company 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
Company 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
Company or INVESCO.
<PAGE>
PAGE 5
2.3. The Company represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain that
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Insurance Company immediately upon having a reasonable
basis for believing that it has ceased to so qualify or that it might not so
qualify in the future.
2.4. The Insurance Company represents and warrants that the Contracts are
currently treated as 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 Company and INVESCO immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that they might not
be so treated in the future.
2.5. The Company currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Company undertakes
to have a board of directors, a majority of whom are not interested persons of
the Company, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Company 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 any state.
2.7. INVESCO represents and warrants that it is a member in good standing
of the NASD and is registered as a broker-dealer with the Commission. INVESCO
further represents that it will sell and distribute the Company shares in
accordance with the laws of the State of New York and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Company 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.
2.9. INVESCO represents and warrants that it is and shall remain duly
registered in all material respects under all applicable federal and state
securities laws and that it shall perform its obligations for the Company in
compliance in all material respects with the laws of the State of Colorado and
any applicable state and federal securities laws.
2.10. The Company and INVESCO represent and warrant that all of their
officers, employees, investment advisers, investment sub-advisers, and other
individuals or entities dealing with the money and/or securities of the Company
are, and shall continue to be at all times, covered by a blanket fidelity bond
or similar coverage for the benefit of the Company in an amount not less than
the minimum coverage required currently by Section 17g-(1) of the
<PAGE>
PAGE 6
1940 Act or related provisions as may be promulgated from time to time. That
fidelity bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
2.11. The Insurance Company represents and warrants that all of its
officers, employees, investment advisers and other individuals/entities dealing
with the money and/or securities of the Company are covered by a blanket
fidelity bond or similar coverage for the benefit of the Company, in an amount
not less than $5 million. The aforesaid includes coverage for larceny and
embezzlement and is issued by a reputable bonding company. The Insurance 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
Company and INVESCO in the event that such coverage no longer applies. The
Insurance Company further represents and warrants that the employees of
Insurance Company, or such other persons designated by Insurance Company, listed
on Schedule D have been authorized by all necessary action of Insurance Company
to give directions, instructions and certifications to the Company and INVESCO
on behalf of Insurance Company. The Company and INVESCO are authorized to act
and rely upon any directions, instructions and certifications received from such
persons unless and until they have been notified in writing by the Insurance
Company of a change in such persons, and the Company and INVESCO shall incur no
liability in doing so.
2.12. The Insurance Company represents and warrants that it will not
purchase Company shares with Account assets derived from tax-qualified
retirement plans except indirectly, through Contracts purchased in connection
with such plans.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1 INVESCO shall provide the Insurance Company (at INVESCO's expense)
with as many copies of the Company's current prospectus as the Insurance Company
may reasonably request for distribution, at the Insurance Company's expense, to
prospective Contract owners and applicants. The Company will provide, at the
Company's expense, as many copies of said prospectus as necessary for
distribution, at the Company's expense, to existing Contract owners whose
Contract values are invested in the Company. INVESCO (or the Company) will
provide the copies of said prospectus to the Insurance Company or to its mailing
agent. The Insurance Company will distribute the prospectus to existing Contract
owners and will bill the Company for the reasonable cost of such distribution.
If requested by the Insurance Company in lieu thereof, the Company shall provide
such documentation (including a final copy of the new prospectus as set in type
at the Company's expense) and other assistance as is reasonably necessary in
order for the Insurance Company once each year (or more frequently if the
prospectus for the Company is amended) to have the Company's prospectus and the
prospectuses of other mutual funds in which assets attributable to the Contracts
may be invested printed together in one document, in which case the Company or
INVESCO will bear its reasonable share of expenses as described above, allocated
based on the proportionate number of pages of the Company's and other funds'
respective portions of the document.
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PAGE 7
3.2. The Company's prospectus shall state that the Statement of Additional
Information for the Company (the "SAI") is available from INVESCO (or in the
Company's discretion, the Prospectus shall state that the SAI is available from
the Company), and INVESCO, at its expense, shall print and provide the SAI free
of charge to the Insurance Company for distribution, at INVESCO's expense, to
prospective Contract owners and applicants. The Company will provide, at the
Company's expense, as many copies of said SAI as necessary for distribution, at
the Company's expense, to any existing Contract owner whose Contract values are
invested in the Company who requests such SAI or whenever state or federal law
otherwise requires that such SAI be provided. INVESCO (or the Company) will
provide the copies of said SAI to the Insurance Company or to its mailing agent.
The Insurance Company will distribute the SAI as requested or required and will
bill the Company or INVESCO for the reasonable cost of such distribution.
3.3. The Company, at its expense, shall provide the Insurance Company or
its mailing agent with copies of its proxy material, reports to stockholders and
other communications to stockholders in such quantity as the Insurance Company
shall reasonably require for distributing to Contract owners. The Insurance
Company will distribute this proxy material, reports and other communications to
existing Contract owners and tabulate the votes and will bill the Company for
the reasonable cost of such distribution and tabulation.
3.4. If and to the extent required by law, the Insurance
Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Company shares in accordance with instructions
received from Contract owners; and
(iii) vote Company shares for which no instructions have been
received in the same proportion as Company shares of such
portfolio for which instructions have been received:
so long as and to the extent that the Commission continues to interpret the 1940
Act to require pass-through voting privileges for variable contract owners. The
Insurance Company reserves the right to vote Company shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each of
their separate accounts participating in the Company calculates voting
privileges in a manner consistent with the standards agreed to by the parties,
which standards will also be consistent with those of the other Participating
Insurance Companies. The Insurance Company shall fulfill its obligations under,
and abide by the terms and conditions of, the Mixed and Shared Funding Exemptive
Order.
3.5. The Company will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Company will either provide for
annual meetings (except insofar as the Commission may interpret Section 16 of
the 1940 Act not to require such meetings) or, as the Company currently intends,
comply with
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PAGE 8
Section 16(c) of the 1940 Act (although the Company 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 Company will act in accordance with the
Commission's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the Commission may
promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Insurance Company 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, a sub-adviser of one of the Funds, or
INVESCO is named, at least ten calendar days prior to its use. No such material
shall be used if the Company or its designee objects to such use within five
calendar days after receipt of such material.
4.2. The Insurance Company shall not give any information or make any
representations or statements on behalf of the Company or concerning the Company
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement, prospectus or SAI for
the Company's shares, as such registration statement, prospectus or SAI may be
amended or supplemented from time to time, or in reports or proxy statements for
the Company, or in published reports for the Company which are in the public
domain and approved by the Company or INVESCO for distribution, or in sales
literature or other promotional material approved by the Company or its designee
or by INVESCO, except with the permission of the Company or INVESCO. The Company
and INVESCO agree to respond to any request for approval on a reasonably prompt
and timely basis. Nothing in this Section 4.2 will be construed as preventing
the Insurance Company or its employees or agents from giving advice on
investment in the Company.
4.3. The Company, INVESCO, or its designee shall furnish, or shall cause
to be furnished, to the Insurance Company or its designee, each piece of sales
literature or other promotional material in which the Insurance Company and/or
its separate account(s), is named at least ten calendar days prior to its use.
No such material shall be used if the Insurance Company or its designee object
to such use within five calendar days after receipt of that material.
4.4. The Company and INVESCO shall not give any information or make any
representations on behalf of the Insurance Company or concerning the Insurance
Company, the Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus or statement
of additional information for the Contracts, as that registration statement,
prospectus or statement of additional information may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain and approved by the Insurance Company for distribution to Contract
owners, or in sales literature or other promotional material approved by the
Insurance Company or its designee, except with the permission of the Insurance
Company. The Insurance Company agrees to respond to any request for approval on
a reasonably prompt and timely basis.
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PAGE 9
4.5. The Company will provide to the Insurance Company at least one
complete copy of each registration statement, prospectus, SAI, report, proxy
statement, piece of sales literature or other promotional material, application
for exemption, request for no- action letter, and any amendment to any of the
above, that relate to the Company or its shares, contemporaneously with the
filing of the document with the Commission, the NASD, or other regulatory
authorities.
4.6. The Insurance Company will provide to the Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, solicitation for voting instructions, piece of
sales literature and other promotional material, application for exemption,
request for no action letter, and any amendment to any of the above, that
relates to the Contracts or the Account, contemporaneously with the filing of
the document with the Commission, the NASD, or other regulatory authorities.
4.7. For purposes of this Agreement, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements,
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media (e.g., on-line networks such as the Internet or other electronic
messages), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, and registration
statements, prospectuses, statements of additional information, shareholder
reports, and proxy materials.
4.8. At the request of any party to this Agreement, each other party will
make available to the other party's independent auditors and/or representative
of the appropriate regulatory agencies, all records, data and access to
operating procedures that may be reasonably requested. However, Company and
INVESCO shall own and control all of their respective records pertaining to
their performance of the services under this Agreement.
4.9. The Company and INVESCO hereby consent to the Insurance Company's use of
the names INVESCO and INVESCO VIF-Industrial Income Portfolio in connection with
marketing the Contracts, subject to Sections 4.1 and 4.2 of this Agreement. Such
consent will terminate with the termination of this Agreement.
ARTICLE V. Fees and Expenses
5.1. The Company and INVESCO shall pay no fee or other compensation to the
Insurance Company under this Agreement, except that if the Company or any Fund
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then INVESCO may make payments to the Insurance Company if and in
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PAGE 10
amounts agreed to by INVESCO in writing, subject to review by the board of
directors of the Company. No such payments shall be made directly by the
Company.
5.2. All expenses incident to performance by the Company under this
Agreement shall be paid by the Company. The Company 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 Company or
INVESCO, in accordance with applicable state laws prior to their sale. The
Company shall bear the expenses for the cost of registration and qualification
of the Company's shares, preparation and filing of the Company's prospectus, SAI
and registration statement, proxy materials and reports, setting the prospectus
in type, setting in type and printing the proxy materials and reports to
shareholders (including the costs of printing a prospectus that constitutes an
annual report), the preparation of all statements and notices required by any
federal or state law, all taxes on the issuance or transfer of the Company's
shares and other typesetting, printing and distribution expenses set forth in
Article III of this Agreement.
5.3. The Insurance Company shall bear the expenses of printing
and distributing to Contract owners the Contract prospectuses.
ARTICLE VI. Diversification
6.1. The Company will, at the end of each calendar quarter, comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5 relating to the
diversification requirements for variable annuity, endowment, modified endowment
or life insurance contracts and any amendments or other modifications to that
Section or Regulation. In the event of a breach of this Article VI by the
Company, it will take all reasonable steps to: (i) notify the Insurance Company
of such breach; and (ii) adequately diversify the Company so as to achieve
compliance within the grace period afforded by Treasury Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Company for the existence of any material
irreconcilable conflict between the interests of the variable contract owners of
all separate accounts investing in the Company. 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 any Fund 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 a Participating Insurance Company to
disregard the voting instructions of variable contract owners. The Board shall
promptly inform the Insurance Company if it determines that an irreconcilable
material conflict exists and the
<PAGE>
PAGE 11
implications thereof. The Board shall have sole authority to determine whether
an irreconcilable material conflict exists and such determination shall be
binding upon the Insurance Company.
7.2 The Insurance Company will report promptly any potential or existing
conflicts of which it is aware to the Board. The Insurance Company will assist
the Board in carrying out its responsibilities under the Mixed and Shared
Funding Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Insurance Company to inform the Board whenever
Contract owner voting instructions are to be disregarded. Such responsibilities
shall be carried out by Insurance Company with a view only to the interests of
the Contract owners.
7.3. If it is determined by a majority of the Board, or a majority of its
directors who are not interested persons of the Company, INVESCO, or any
sub-adviser to any of the Funds (the "Independent Directors"), that a material
irreconcilable conflict exists, the Insurance Company and/or other Participating
Insurance Companies shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the Independent Directors), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1), withdrawing the assets allocable to some or
all of the separate accounts from the Company or any Fund and reinvesting those
assets in a different investment medium, including (but not limited to) another
Fund of the Company, or submitting the question 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 (e.g., 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 variable contract owners the option of
making such a change; and (2), establishing a new registered management
investment company or managed separate account and obtaining approval thereof by
the Commission.
7.4. If a material irreconcilable conflict arises because of a decision by
the Insurance Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Insurance Company may be required, at the Company's election, to withdraw the
affected Account's investment in the Company and terminate this Agreement with
respect to that 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 Independent Directors. No charge or
penalty will be imposed as a result of such withdrawal. Any such withdrawal and
termination must take place within six (6) months after the Company gives
written notice that this provision is being implemented, and until the end of
that six month period INVESCO and the Company shall continue to accept and
implement orders by the Insurance Company for the purchase (and redemption) of
shares of the Company.
<PAGE>
PAGE 12
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Insurance Company
conflicts with the majority of other state regulators, then the Insurance
Company will withdraw the affected Account's investment in the Company and
terminate this Agreement with respect to that Account within six months after
the Board informs the Insurance Company in writing that it has determined that
the state insurance regulator's 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 Independent Directors. No charge or penalty
will be imposed as a result of such withdrawal. Until the end of the foregoing
six month period, INVESCO and the Company shall continue to accept and implement
orders by the Insurance Company for the purchase (and redemption) of shares of
the Company.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the Independent Directors 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. The Insurance 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 Insurance Company will withdraw the Account's investment in
the Company and terminate this Agreement within six (6) months after the Board
informs the Insurance Company in writing of the foregoing determination,
provided, however, that the withdrawal and termination shall be limited to the
extent required by the material irreconcilable conflict, as determined by a
majority of the Independent Directors.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the 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 Company 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 those 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 those Sections are contained in
the Rule(s) as so amended or adopted.
<PAGE>
PAGE 13
ARTICLE VIII. Indemnification
8.1. Indemnification By The Insurance Company
8.1(a). The Insurance Company agrees to indemnify and hold harmless the
Company and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act and any director, officer, employee or agent of the
foregoing (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 Insurance Company) or
litigation (including reasonable legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration statement,
prospectus or statement of additional information for the Contracts or
contained in the Contracts or sales literature for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing to the Insurance
Company by or on behalf of the Company for use in the registration
statement, prospectus or statement of additional information for the
Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or shares of the Company;
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus, SAI or sales literature of the Company (or any
amendment or supplement) not supplied by the Insurance Company, or persons
under its control) or wrongful conduct of the Insurance Company or persons
under its control, with respect to the sale or distribution of the
Contracts or Company 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 of the Company 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
<PAGE>
PAGE 14
not misleading if such a statement or omission was made
in reliance upon information furnished in writing to the
Company by or on behalf of the Insurance Company: or
(iv) arise as a result of any failure by the Insurance 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 Insurance Company in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Insurance Company,
as limited by and in accordance with the provisions of Sections
8.1(b) and 8.1(c) hereof.
8.1(b). The Insurance Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party that
may arise from that Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of that Indemnified Party's duties or by reason of
that Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Company, whichever is applicable.
8.1(c). The Insurance Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless that Indemnified Party shall have notified the Insurance 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 that
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Insurance Company of its obligations hereunder except to the extent
that the Insurance Company has been prejudiced by such failure to give notice.
In addition, any failure by the Indemnified Party to notify the Insurance
Company of any such claim shall not relieve the Insurance Company from any
liability which it may have to the Indemnified Party against whom the action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Insurance Company
shall be entitled to participate, at its own expense, in the defense of the
action. The Insurance Company also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action; provided,
however, that if the Indemnified Party shall have reasonably concluded that
there may be defenses available to it which are different from or additional to
those available to the Insurance Company, the Insurance Company shall not have
the right to assume said defense, but shall pay the costs and expenses thereof
(except that in no event shall the Insurance Company be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or
<PAGE>
PAGE 15
circumstances). After notice from the Insurance Company to the Indemnified Party
of the Insurance Company's election to assume the defense thereof, and in the
absence of such a reasonable conclusion that there may be different or
additional defenses available to the Indemnified Party, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Insurance Company will not be liable to that party under this Agreement for
any legal or other expenses subsequently incurred by the party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d). The Indemnified Parties will promptly notify the Insurance Company
of the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Company's shares or the Contracts or the
operation of the Company.
8.2. Indemnification by INVESCO
8.2(a). INVESCO agrees to indemnify and hold harmless the Insurance
Company and each person, if any, who controls the Insurance Company within the
meaning of Section 15 of the 1933 Act and any director, officer, employee or
agent of the foregoing (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 INVESCO) or
litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Company'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,
prospectus, SAI or sales literature of the Company (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 the statement or omission or alleged statement
or omission was made in reliance upon and in conformity with information
furnished in writing to INVESCO or the Company by or on behalf of the
Insurance Company for use in the registration statement, prospectus or SAI
for the Company or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Company
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, statement of additional information or sales
literature for the Contracts (or any amendment or supplement) not
<PAGE>
PAGE 16
supplied by INVESCO or persons under its control) or wrongful conduct of
the Company, INVESCO or persons under their control, with respect to the
sale or distribution of the Contracts or shares of the Company; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, statement
of additional information or sales literature 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
in writing to the Insurance Company 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
(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 INVESCO in this Agreement or arise out of or
result from any other material breach of this Agreement by INVESCO; as
limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b) INVESCO shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party that may arise from the Indemnified
Party's 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
Insurance Company or the Account, whichever is applicable.
8.2(c) INVESCO shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified INVESCO 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 the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any Indemnified
Party to give notice as provided herein shall not relieve INVESCO of its
obligations hereunder except to the extent that INVESCO has been prejudiced by
such failure to give notice. In addition, any failure by the Indemnified Party
to notify INVESCO of any such claim shall not relieve INVESCO from any liability
which it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this
<PAGE>
PAGE 17
indemnification provision. In case any such action is brought against the
Indemnified Parties, INVESCO will be entitled to participate, at its own
expense, in the defense thereof. INVESCO also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action;
provided, however, that if the Indemnified Party shall have reasonably concluded
that there may be defenses available to it which are different from or
additional to those available to INVESCO, INVESCO shall not have the right to
assume said defense, but shall pay the costs and expenses thereof (except that
in no event shall INVESCO be liable for the fees and expenses of more than one
counsel for Indemnified Parties in connection with any one action or separate
but similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances). After notice from INVESCO to the
Indemnified Party of INVESCO's election to assume the defense thereof, and in
the absence of such a reasonable conclusion that there may be different or
additional defenses available to the Indemnified Party, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
INVESCO will not be liable to that party under this Agreement for any legal or
other expenses subsequently incurred by that party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.2(d) The Insurance Company agrees to notify INVESCO promptly 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 Company
8.3(a). The Company agrees to indemnify and hold harmless the Insurance
Company, and each person, if any, who controls the Insurance Company within the
meaning of Section 15 of the 1933 Act and any director, officer, employee or
agent of the foregoing (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 Company)
or litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as those losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements result from the gross negligence, bad
faith or willful misconduct of the Board or any member thereof, are related to
the operations of the Company and:
(i) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise out of or
result from any other material breach of this Agreement by the Company;
<PAGE>
PAGE 18
as limited by, and in accordance with the provisions of, Sections
8.3(b) and 8.3(c) hereof.
8.3(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party that may arise from the
Indemnified Party's 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 Insurance Company, the Company, INVESCO or the Account, whichever is
applicable.
8.3(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless the
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 the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Company of its
obligations hereunder except to the extent that the Company has been prejudiced
by such failure to give notice. In addition, any failure by the Indemnified
Party to notify the Company of any such claim shall not relieve the Company from
any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, the Company
will be entitled to participate, at its own expense, in the defense thereof. The
Company also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action; provided, however, that if the
Indemnified Party shall have reasonably concluded that there may be defenses
available to it which are different from or additional to those available to the
Company, the Company shall not have the right to assume said defense, but shall
pay the costs and expenses thereof (except that in no event shall the Company be
liable for the fees and expenses of more than one counsel for Indemnified
Parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances). After notice from the Company to the Indemnified Party of the
Company's election to assume the defense thereof, and in the absence of such a
reasonable conclusion that there may be different or additional defenses
available to the Indemnified Party, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the Company will not
be liable to that party under this Agreement for any legal or other expenses
subsequently incurred by that party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Insurance Company and INVESCO agree promptly to
notify the Company of the commencement of any litigation or
proceedings against it or any of its respective officers or
<PAGE>
PAGE 19
directors in connection with this Agreement, the issuance or sale of the
Contracts, the operation of the Account, or the sale or acquisition of shares of
the Company.
8.4. A successor by law of the parties to this Agreement shall be entitled
to the benefits of 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 provisions
hereof interpreted under and in accordance with the laws of the
State of Colorado.
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
any exemptions from those statutes, rules and regulations the Commission may
grant (including, but not limited to, the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon ninety (90) days' advance written
notice to the other parties or, if later, upon receipt of any required
exemptive relief or orders from the SEC, unless otherwise agreed among the
parties; provided, however such notice shall not be given earlier than one
year following the date of this Agreement; or
(b) at the option of the Insurance Company to the extent that shares of
Funds are not reasonably available to meet the requirements of the
Contracts as determined by the Insurance Company, provided however, that
such a termination shall apply only to the Fund(s) not reasonably
available. Prompt written notice of the election to terminate for such
cause shall be furnished by the Insurance Company; or
(c) at the option of the Company in the event that formal administrative
proceedings are instituted against the Insurance Company by the NASD, the
Commission, an insurance commissioner or any other regulatory body
regarding the Insurance Company's duties under this Agreement or related
to the sale of the Contracts, the operation of any Account, or the
purchase of the Company's shares, 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 Insurance Company to perform its obligations under this
Agreement; or
<PAGE>
PAGE 20
(d) at the option of the Insurance Company in the event that proceedings
are instituted against the Company or INVESCO by the NASD, the Commission,
or any state securities or insurance department or any other regulatory
body, provided, however, that the Insurance 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 Company or
INVESCO to perform its obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the Contract
owners having an interest in that Account (or any subaccount) to
substitute the shares of another investment company for the corresponding
Fund shares in accordance with the terms of the Contracts for which those
Fund shares had been selected to serve as the underlying investment media.
The Insurance Company will give at least 30 days' prior written notice to
the Company of the date of any proposed vote to replace the Company's
shares; or
(f) at the option of the Insurance Company, in the event any of the
Company's shares are not registered, issued or sold in accordance with
applicable state and/or federal law or exemptions therefrom, or such law
precludes the use of those shares as the underlying investment media of
the Contracts issued or to be issued by the Insurance Company; or
(g) at the option of the Insurance Company, if the Company ceases to
qualify as a regulated investment company under Subchapter M of the Code
or under any successor or similar provision, or if the Insurance Company
reasonably believes that the Company may fail to so qualify; or
(h) at the option of the Insurance Company, if the Company
fails to meet the diversification requirements specified in
Article VI hereof; or
(i) at the option of either the Company or INVESCO, if (1) the Company or
INVESCO, respectively, shall determine, in their sole judgment reasonably
exercised in good faith, that the Insurance Company has suffered a
material adverse change in its business or financial condition or is the
subject of material adverse publicity and that material adverse change or
material adverse publicity will have a material adverse impact upon the
business and operations of either the Company or INVESCO, (2) the Company
or INVESCO shall notify the Insurance Company in writing of that
determination and its intent to terminate this Agreement, and (3) after
considering the actions taken by the Insurance Company and any other
changes in circumstances since the giving of such a notice, the
determination of the Company or INVESCO shall continue to apply on the
sixtieth (60th) day following the giving of that notice, which sixtieth
day shall be the effective date of termination; or
<PAGE>
PAGE 21
(j) at the option of the Insurance Company, if (1) the Insurance Company
shall determine, in its sole judgment reasonably exercised in good faith,
that either the Company or INVESCO has suffered a material adverse change
in its business or financial condition or is the subject of material
adverse publicity and that material adverse change or material adverse
publicity will have a material adverse impact upon the business and
operations of the Insurance Company, (2) the Insurance Company shall
notify the Company and INVESCO in writing of the determination and its
intent to terminate the Agreement, and (3) after considering the actions
taken by the Company and/or INVESCO and any other changes in circumstances
since the giving of such a notice, the determination shall continue to
apply on the sixtieth (60th) day following the giving of the notice, which
sixtieth day shall be the effective date of termination; or
(k) at the option of any party to this Agreement upon another party's
material breach of any provision of this Agreement.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3 Notice Requirement. No termination of this Agreement
shall be effective unless and until the party terminating this
Agreement gives prior written notice to all other parties to this
Agreement of its intent to terminate, which notice shall set forth
the basis for the termination. Furthermore,
(a) in the event that any termination is based upon the provisions of
Article VII, or the provisions of Section 10.1(a), 10.1(i), or 10.1(j) of
this Agreement, the prior written notice shall be given in advance of the
effective date of termination as required by those provisions; and
(b) in the event that any termination is based upon the provisions of
Section 10.1(c) or 10.1(d) of this Agreement, the prior written notice
shall be given at least ninety (90) days before the effective date of
termination.
10.4. Effect of Termination. Notwithstanding any termination of this
Agreement, the Company and INVESCO shall at the option of the Insurance Company,
continue to make available additional shares of the Company pursuant to the
terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement ("Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Company, redeem investments in the
Company and/or invest in the Company upon the making of additional purchase
payments under the Existing Contracts. The parties agree that this Section 10.4
shall not apply to any terminations under Article VII and the effect of Article
VII terminations shall be governed by Article VII of this Agreement. In
addition, with respect to Existing Contracts, all provisions of this Agreement
will survive and not be affected by any termination of this Agreement.
<PAGE>
PAGE 22
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of that other party set forth
below or at such other address as the other party may from time to time specify
in writing.
If to the Company:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
If to the Insurance Company:
American Centurion Life Assurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440
Attention: Jim Mortensen
Manager - Product Development
with a simultaneous copy to:
American Centurion Life Assurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440
Attention: Mary Ellyn Minenko
Counsel
If to INVESCO:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
ARTICLE XII. Miscellaneous
12.1. The Company and INVESCO acknowledge that the identities of the
customers of the Insurance Company or any of its affiliates (collectively, the
"Insurance Company Protected Parties" for purposes of this Section 12.1),
information maintained regarding those customers, and all computer programs and
procedures or other information developed or used by the Insurance Company
Protected Parties or any of their employees or agents in connection with the
Insurance Company's performance of its duties under this Agreement are the
valuable property of the Insurance Company Protected Parties. The Company and
INVESCO agree that if they come into possession of any list or compilation of
the identities of or other information about the Insurance Company Protected
Parties' customers, or any other information or property of the Insurance
Company Protected Parties, other than such information as may be independently
developed or compiled by the Company or INVESCO from information supplied to
them by the Insurance Company Protected Parties' customers who also maintain
accounts directly with the Company, INVESCO or other mutual funds advised by
INVESCO, the Company and INVESCO shall hold such information or property in
confidence and refrain from using, disclosing or distributing any of such
information or other property except: (i) with the Insurance Company's prior
written consent; or (ii) as required by law or judicial process. The Insurance
Company acknowledges that
<PAGE>
PAGE 23
all computer programs, procedures and other information developed or used by the
Company or INVESCO (collectively, the "INVESCO Protected Parties" for purposes
of this Section 12.1) or any of their employees or agents in connection with the
Company's or INVESCO's performance of their respective duties under this
Agreement are the valuable property of the INVESCO Protected Parties. The
Insurance Company agrees that if it comes into possession of any information or
property of the INVESCO Protected Parties, other than such information as may be
independently developed or compiled by the Insurance Company, the Insurance
Company shall hold such information or property in confidence and refrain from
using, disclosing or distributing any of such information or other property
except: (i) with the prior written consent of INVESCO and the Company; or (ii)
as required by law or judicial process. Each party acknowledges that any breach
of the agreements in this Section 12.1 would result in immediate and irreparable
harm to the other parties for which there would be no adequate remedy at law and
agree that in the event of such a breach, the other parties shall be entitled to
equitable relief by way of temporary and permanent injunctions, as well as such
other relief as any court of competent jurisdiction deems appropriate.
12.2. 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.
12.3. This Agreement may be executed simultaneously in two
or more counterparts, each of which taken together shall constitute
one and the same instrument.
12.4. 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.
12.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Commission, the NASD and state insurance regulators) and shall permit those
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.6. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.7. No party may assign this Agreement without the prior
written consent of the others.
<PAGE>
PAGE 24
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.
Insurance Company:
AMERICAN CENTURION LIFE ASSURANCE COMPANY
By its authorized officer,
By: /s/ Michael J. Hogan
Michael J. Hogan
Vice President, Variable Product
Development
Date: 10/18/96
ATTEST:
By: /s/ Eric L. Marhoun
Eric L. Marhoun
General Counsel
Date: 10/22/96
Company:
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By its authorized officer,
By: /s/ Glen A. Payne
Glen A. Payne
Secretary
Date: 12/4/96
INVESCO:
INVESCO FUNDS GROUP, INC.
By its authorized officer,
By: /s/ Ronald L. Grooms
Ronald L. Grooms
Senior Vice President
Date: 12/4/96
<PAGE>
PAGE 25
Schedule A
Accounts
Name of Account Date of Resolution of Insurance
Company's Board which Established the
Account
ACL Variable Annuity Account 1 October 12, 1995
<PAGE>
PAGE 26
Schedule B
Contracts
American Centurion Life Assurance Company Deferred Annuity Contract
1. Contract Form 38501
2. Certificate Form 38502-NY
3. Certificate Form 38503-IRA-NY
<PAGE>
PAGE 27
Schedule C
Funds
INVESCO VIF - Industrial Income Portfolio
<PAGE>
PAGE 28
Schedule D
Persons Authorized to Give Instructions to the Company and INVESCO
NAME ADDRESS AND PHONE NUMBER
(1) Hope Jaecks T11/1438
Print or Type Name
/s/ Hope Jaecks (612) 671-1175
Signature Phone
(2) Dean Reznecheck T11/125
Print or Type Name
/s/ Dean Reznecheck (612) 671-3182
Signature Phone
(3) Richard Taliaferro T11/125
Print or Type Name
/s/ Richard Taliaferro (612) 671-2748
Signature Phone
(4) Mary Berger T11/125
Print or Type Name
/s/ Mary Berger (612) 671-5003
Signature Phone
(5) Joe Lardy T11/1438
Print or Type Name
/s/ Joe Lardy (612) 671-6165
Signature Phone
(6) Patrick Jacobson T11/125
Print or Type Name
/s/ Patrick Jacobson (612) 671-1978
Signature Phone
(7) Chad Callahan T11/125
Print or Type Name
/s/ Chad Callahan (612) 671-2037
Signature Phone
(8) Kathy Rothstein T11/125
Print or Type Name
/s/ Kathy Rothstein (612) 671-3843
Signature Phone
(9) Sheila Ranum T11/1438
Print or Type Name
/s/ Sheila Ranum (612) 671-1148
Signature Phone
<PAGE>
PAGE 29
(10) Kenneth Montague T11/125
Print or Type Name
/s/ K.G. Montague (612) 671-0495
Signature
(11) Dan Retzer T11/125
Print or Type Name
/s/ Dan Retzer (612) 671-3616
Signature
All addresses are IDS Tower 10, Minneapolis, MN 55440.
<PAGE>
PAGE 1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our reports dated February 7, 1997 on the financial statements
and schedules of American Centurion Life Assurance Company in Post-Effective
Amendment No. 2 to the Registration Statement (Form N-4, File No. 333-00041) and
related Prospectus for the registration of the Privileged Assets Select Annuity
to be offered by American Centurion Life Assurance Company.
Ernst & Young LLP
Minneapolis, Minnesota
April 21, 1997
<PAGE>
AMERICAN CENTURION LIFE INSURANCE COMPANY
SCHEDULE I - CONSOLIDATED SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES ($ thousands)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Column A Column B Column C Column D
Type of Investment Cost Value Amount at which
shown in the
balance sheet
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities:
Held to maturity:
United States Government and
government agencies and
authorities (a) $ 1,584 $ 1,696 $ 1,584
All other corporate bonds 17,995 18,262 17,995
------------- --------------- -----------------
Total held to maturity 19,579 19,958 19,579
Available for sale:
United States Government and
government agencies and
authorities (b) 50,788 50,710 50,710
States, municipalities and
political subdivisions 1,000 1,021 1,021
All other corporate bonds 82,843 84,360 84,360
------------- --------------- -----------------
Total available for sale 134,631 136,091 136,091
Total investments $ 154,210 $ XXXXXXXXX $ 155,670
============= =================
</TABLE>
(a) - Includes mortgage-backed securities with a cost and market value of
$1,584 and $1,696, respectively.
(b) - Includes mortgage-backed securities with a cost and market value of
$48,693 and $48,647, respectively.
<PAGE>
AMERICAN CENTURION LIFE INSURANCE COMPANY
SCHEDULE IV - REINSURANCE ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1996 and 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
Gross amount Ceded to other Assumed from Net % of amount
companies other companies Amount assumed to net
- --------------------------------------------------------------------------------------------------------------------
For the year ended
December 31, 1996
<S> <C> <C> <C> <C> <C>
Life insurance in force $ 242,209 $ 241,974 $ 0 $ 235 0.00%
====================================================================================================================
Premiums:
Life insurance $ 1,351 $ 1,351 $ -- $ 0 0.00%
====================================================================================================================
Total premiums $ 1,351 $ 1,351 $ -- $ 0 0.00%
====================================================================================================================
For the year ended
December 31, 1995
Life insurance in force $ 265,799 $ 265,564 $ -- $ 235 0.00%
====================================================================================================================
Premiums:
Life insurance $ 1,384 $ 1,384 $ -- $ 0 0.00%
====================================================================================================================
Total premiums $ 1,384 $ 1,384 $ -- $ 0 0.00%
====================================================================================================================
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors
American Centurion Life Assurance Company
We have audited the financial statements of American Centurion Life Assurance
Company (a wholly-owned subsidiary of IDS Life Insurance Company) as of December
31, 1996 and 1995, and for the years then ended, and have issued our report
thereon dated February 7, 1997 (included elsewhere in this Registration
Statement). Our audits also included the financial statement schedules listed in
Item 24(a) of this Registration Statement. These schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth herein.
Ernst & Young LLP
Minneapolis, Minnesota
February 7, 1997
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0001004871
<NAME> American Centurion Life Assurance Company
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLAR
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> YEAR
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 136091
<DEBT-CARRYING-VALUE> 19579
<DEBT-MARKET-VALUE> 19958
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 155670
<CASH> 13856
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 4364
<TOTAL-ASSETS> 178777
<POLICY-LOSSES> 141470
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 691
<NOTES-PAYABLE> 0
<COMMON> 1000
0
0
<OTHER-SE> 30074
<TOTAL-LIABILITY-AND-EQUITY> 178777
0
<INVESTMENT-INCOME> 8851
<INVESTMENT-GAINS> (57)
<OTHER-INCOME> 306
<BENEFITS> 5849
<UNDERWRITING-AMORTIZATION> 21
<UNDERWRITING-OTHER> 1387
<INCOME-PRETAX> 1843
<INCOME-TAX> 678
<INCOME-CONTINUING> 1165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1165
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
<PAGE>
PAGE 1
AMERICAN CENTURION LIFE ASSURANCE COMPANY
ACL Variable Annuity Account 1
ACL Variable Annuity Account 2
POWER OF ATTORNEY
City of Albany
State of New York
Each of the undersigned, as a director and/or officer of American Centurion Life
Assurance Company (ACL), sponsor of the unit investment trusts consisting of the
ACL Variable Annuity Account 1 and ACL Variable Annuity Account 2 in connection
with the filing of registration statements on Form N-4 under the Securities Act
of 1933 and the Investment Company Act of 1940, hereby constitutes and appoints
William A. Stoltzmann, Mary Ellyn Minenko, Sherilyn Beck, Colin Lancaster and
Eric L. Marhoun or any one of them, as his/her attorney-in-fact and agent, to
sign for him/her in his/her name, place and stead any and all filings,
applications (including applications for exemptive relief), periodic reports,
registration statements (with all exhibits and other documents required or
desirable in connection therewith), other documents, and amendments thereto and
to file such filings, applications periodic reports, registration statements,
other documents, and amendments thereto with the Securities and Exchange
Commission, and any necessary states, and grants to any or all of them the full
power and authority to do and perform each and every act required or necessary
in connection therewith.
/s/ Norma J. Arnold March 24, 1997
- -------------------------------------
Norma J. Arnold
Director
/s/ Robert C. Auriema March 24, 1997
- -------------------------------------
Robert C. Auriema
Director
/s/ Douglas L. Forsberg March 10, 1997
- -------------------------------------
Douglas L. Forsberg
Director
/s/ Clarence E. Galston March 24, 1997
- -------------------------------------
Clarence E. Galston
Director
/s/ Jay C. Hatlestad March 11, 1997
- -------------------------------------
Jay C. Hatlestad
Vice President and Controller
<PAGE>
PAGE 2
/s/ Robert A. Hatton March 24, 1997
- -------------------------------------
Robert A. Hatton
Director
/s/ William J. Heron Jr. March 24, 1997
- -------------------------------------
William J. Heron Jr.
Director
/s/ Richard W. Kling March 12, 1997
- -------------------------------------
Richard W. Kling
Director
/s/ Ryan R. Larson March 10, 1997
- -------------------------------------
Ryan R. Larson
Vice President - Product
Development
Director
/s/ Herbert W. Marache Jr. March 24, 1997
- -------------------------------------
Herbert W. Marache Jr.
Director
/s/ Kenneth W. Nelson March 25, 1997
- -------------------------------------
Kenneth W. Nelson
Director
/s/ Stuart A. Sedlacek March 7, 1997
- -------------------------------------
Stuart A. Sedlacek
Chairman and President
Director
/s/ Anne L. Segal March 24, 1997
- -------------------------------------
Anne L. Segal
Director
/s/ Guerdon D. Smith March 25, 1997
- -------------------------------------
Guerdon D. Smith
Director
