As filed with the Securities and Exchange Commission on May 1, 1998.
Registration No. 333-02581
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 3 /X/
TO THE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
(Exact Name of Trust)
GLENBROOK LIFE AND ANNUITY COMPANY
(Name of Depositor)
3100 SANDERS ROAD
NORTHBROOK, IL 60062
(Complete Address of Depositor's Principal Executive Offices)
MICHAEL J. VELOTTA, ESQ.
GLENBROOK LIFE AND ANNUITY COMPANY
3100 SANDERS ROAD
NORTHBROOK, IL 60062
(Name and Complete Address of Agent for Service)
COPIES TO:
RICHARD T. CHOI, ESQUIRE JOHN R. HEDRICK,ESQUIRE
FREEDMAN, LEVY, KROLL & SIMONDS ALLSTATE LIFE FINANCIAL
1050 CONNECTICUT AVENUE, N.W. SERVICES, INC.
SUITE 825 3100 SANDERS ROAD
WASHINGTON, D.C. 20036-5366 NORTHBROOK, IL 60062
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on (date) pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/X/ on May 1, 1998 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.
Securities being offered - interests in Glenbrook Life Variable Life Separate
Account A of Glenbrook Life and Annuity Company under modified single premium
variable life insurance contracts.
Approximate date of proposed public offering: continuous.
<PAGE>
RECONCILIATION AND TIE BETWEEN FORM N-8B-2 AND PROSPECTUS
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
---------------------
1. Cover Page
2. Cover Page; Additional Information about the Company
3. Not applicable
4. The Company; Distribution of the Contracts
5. The Variable Account -- General
6. The Variable Account -- General
7. Not required by Form S-6
8. Not required by Form S-6
9. Legal Proceedings
10. Summary; The Variable Account -- Funds; The Contract --
Application for a Contract; Contract Benefits and Rights;
Other Matters -- Voting Rights, Dividends
11. Summary; The Variable Account -- Funds
12. Summary; The Variable Account -- Funds
13. Summary; Deductions and Charges; Distribution of the
Contracts; Federal Tax Matters
14. The Contract -- Application for a Contract, Premiums,
Allocation of Premiums
15. Summary; The Contract -- Premiums, Allocation of Premiums
16. The Variable Account -- Funds; The Contract -- Allocation
of Premiums
17. Summary; Contract Benefits and Rights -- Amount Payable on
Surrender of the Contract, Partial Withdrawals,
Cancellation and Exchange Rights
18. The Variable Account; The Contract -- Allocation of Premiums;
Deductions and Charges; Federal Tax Matters
19. Other Matters -- Statements to Contract Owners
20. Not applicable
21. Contract Benefits and Rights -- Contract Loans; Contract
Benefits and Rights -- Suspension of Valuation, Payments
and Transfers
22. Not applicable
23. Safekeeping of Variable Account's Assets; Additional
Information about the Company
24. Contract Benefits and Rights -- Transfer of Account Value;
Other Matters
25. The Company
26. Not applicable
27. The Company; Additional Information about the Company
28. Executive Officers and Directors of the Company
29. The Company
30. Not applicable
31. Not applicable
32. Not applicable
33. Not applicable
34. Not applicable
35. The Company; Distribution of the Contracts
36. Not required by Form S-6
37. Not applicable
38. Distribution of the Contracts
39. The Company; Distribution of the Contracts
40. Not applicable
41. The Company; Distribution of the Contracts
42. Not applicable
43. Not applicable
44. The Contract -- Allocation of Premiums, Accumulation Unit
Value; Contract Benefits and Rights -- Account Value;
Deductions and Charges
45. Not applicable
46. Contract Benefits and Rights -- Account Value, Amount
Payable on Surrender of the Contract, Partial Withdrawals;
Deductions and Charges
47. Not applicable
48. Cover Page; The Company
49. Not applicable
50. The Variable Account -- General
51. Summary; The Company; The Contract; Contract Benefits
and Rights; Other Matters; Federal Tax
Matters
52. The Variable Account -- Funds, Investment Adviser
53. Summary; Federal Tax Matters
54. Not applicable
55. Not applicable
56. Not required by Form S-6
57. Not required by Form S-6
58. Not required by Form S-6
59. Not required by Form S-6
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM
VARIABLE LIFE INSURANCE CONTRACTS
3100 SANDERS ROAD
NORTHBROOK, IL 60062
TELEPHONE (800) 755-5275
This prospectus describes the "Glenbrook Provider Variable Life," a modified
single premium variable life insurance contract ("Contract") offered by
Glenbrook Life and Annuity Company (the "Company") for prospective insured
persons age 0-85. The Contract lets the Contract Owner pay a significant single
premium and, subject to restrictions, additional premiums.
The Contracts are modified endowment contracts for federal income tax purposes,
except in certain cases described under "Federal Tax Matters," page __. A LOAN,
DISTRIBUTION OR OTHER AMOUNT RECEIVED FROM A MODIFIED ENDOWMENT CONTRACT DURING
THE LIFE OF THE INSURED WILL BE TAXED TO THE EXTENT OF ANY ACCUMULATED INCOME IN
THE CONTRACT. ANY AMOUNTS THAT ARE TAXABLE WITHDRAWALS WILL BE SUBJECT TO A 10%
PENALTY, WITH CERTAIN EXCEPTIONS.
The minimum initial premium the Company will accept is $10,000. Premiums are
allocated to Glenbrook Life Variable Life Separate Account A ("Variable
Account"). The Variable Account will invest in shares of one or more managed
investment companies ("Funds") each of which has multiple investment Portfolios.
All of the Funds which are described in this prospectus may not be available
with your Contract. Presently, the Variable Account invests in shares of the
following Funds:
- AIM Variable Insurance Funds, Inc. ("AIM Fund")
- American Century Variable Portfolios, Inc. ("American Century Funds")
- Dean Witter Variable Investment Series ("Dean Witter Fund")
- Dreyfus Variable Investment Fund and The Dreyfus Socially Responsible
Growth Fund, Inc. (collectively the "Dreyfus Funds")
- Fidelity Variable Insurance Products Fund (VIP) and Fidelity Variable
Insurance Products Fund II (VIP II) (collectively the "Fidelity
Funds")
- MFS(R) Variable Insurance Trust ("MFS Fund")
Under the Contracts the AIM FUND has eight available Portfolios: (1) AIM V.I.
Capital Appreciation Fund (2) AIM V.I. Growth and Income Fund (3) AIM V.I.
Global Utilities Fund (4) AIM V.I. Diversified Income Fund (5) AIM V.I.
Government Securities Fund (6) AIM V.I. Growth Fund (7) AIM V.I. International
Equity Fund and (8) AIM V.I. Value Fund; the AMERICAN CENTURY FUNDS have two
available Portfolios: (1) American Century VP Balanced and (2) American Century
VP International. the DEAN WITTER FUND has four available Portfolios: (1) VIS
Dividend Growth (2) VIS European Growth (3) VIS Quality Income Plus and (4) VIS
Utilities; the DREYFUS FUNDS have five available Portfolios: (1) VIF Growth and
Income (2) VIF Money Market (3) The Dreyfus Socially Responsible Growth Fund,
Inc. (4) VIF Small Company Stock and (5) Dreyfus Stock Index Fund; and the
FIDELITY FUNDS have four available Portfolios: (1) VIP II Contrafund (2) VIP
Growth (3) VIP High Income and (4) VIP Equity-Income; and the MFS FUND has two
available Portfolios: (1) MFS Emerging Growth Series and (2) MFS Limited
Maturity Series.
There is no guaranteed minimum Account Value for a Contract. The Account Value
of a Contract will vary up or down to reflect the investment experience of the
Portfolios to which premiums have been allocated. The Contract Owner bears the
investment risk for all amounts so allocated. The Contract continues in effect
while the Cash Surrender Value is sufficient to pay the monthly charges under
the Contract ("Monthly Deduction Amount").
The Contracts provide for an Initial Death Benefit shown on the Contract Data
page. The death benefit ("Death Benefit") payable under a Contract may be
greater than the Initial Death Benefit but so long as the Contract continues in
effect, if no withdrawals are made, it will never be less than the Initial Death
Benefit. The Account Value will, and under certain circumstances the Death
Benefit of the Contract may, increase or decrease based on the investment
experience of the Portfolios to which premiums have been allocated. At the death
of the Insured, we will pay a Death Benefit to the beneficiary.
IT MAY NOT BE ADVANTAGEOUS TO PURCHASE VARIABLE LIFE INSURANCE AS A REPLACEMENT
FOR YOUR CURRENT LIFE INSURANCE OR IF YOU ALREADY OWN A VARIABLE LIFE INSURANCE
CONTRACT.
THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED BY THE CURRENT PROSPECTUSES OF THE
APPLICABLE ELIGIBLE FUNDS WHICH CONTAIN A FULL DESCRIPTION OF THOSE FUNDS. ALL
PROSPECTUSES SHOULD BE READ AND RETAINED 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.
THE PRODUCTS DESCRIBED HEREIN ARE NOT DEPOSITS OF, OR GUARANTEED BY, ANY BANK,
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
The Contracts may not be available in all states.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER OR OTHER PERSON IS AUTHORIZED
TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
The date of this Prospectus is May 1, 1998.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY......................................................
SPECIAL TERMS................................................
THE COMPANY..................................................
THE VARIABLE ACCOUNT.........................................
General.................................................
Funds...................................................
THE CONTRACT.................................................
Application for a Contract..............................
Premiums................................................
Allocation of Premiums..................................
Accumulation Unit Values................................
DEDUCTIONS AND CHARGES.......................................
Monthly Deductions......................................
Cost of Insurance Charge.............................
Tax Expense Charge...................................
Administrative Expense Charge........................
Other Deductions........................................
Mortality and Expense Risk Charge....................
Annual Maintenance Fee...............................
Taxes Charged Against the Variable Account...........
Charges Against the Funds............................
Withdrawal Charge....................................
Due and Unpaid Premium Tax Charge....................
CONTRACT BENEFITS AND RIGHTS.................................
Death Benefit...........................................
Accelerated Death Benefit...............................
Account Value...........................................
Transfer of Account Value
Dollar Cost Averaging...................................
Automatic Portfolio Rebalancing
Contract Loans..........................................
Amount Payable on Surrender of the Contract
Partial Withdrawals.....................................
Maturity................................................
Lapse and Reinstatement
Cancellation and Exchange Rights........................
Confinement Waiver Benefit..............................
Suspension of Valuation, Payments and Transfers.........
Last Survivor Contracts.................................
OTHER MATTERS................................................
Voting Rights...........................................
Statements to Contract Owners
Limit on Right to Contest...............................
Misstatement as to Age and Sex..........................
Payment Options.........................................
Beneficiary.............................................
Assignment..............................................
Dividends...............................................
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY..............
DISTRIBUTION OF THE CONTRACTS
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS.................
FEDERAL TAX MATTERS..........................................
Introduction............................................
Taxation of the Company and the Variable
Account.................................................
Taxation of Contract Benefits
Modified Endowment Contracts............................
Diversification Requirements............................
Ownership Treatment.....................................
Policy Loan Interest....................................
ADDITIONAL INFORMATION ABOUT THE COMPANY.....................
LEGAL PROCEEDINGS............................................
LEGAL MATTERS................................................
REGISTRATION STATEMENT.......................................
EXPERTS......................................................
FINANCIAL INFORMATION
INDEPENDENT AUDITORS' REPORT................................. F-1
FINANCIAL STATEMENTS......................................... F-2
<PAGE>
SUMMARY
NOTE: A glossary of Special Terms used in this Prospectus appears at page __,
immediately following this Summary.
The Contract
The Contracts are life insurance contracts with death benefits, cash values, and
other traditional life insurance features. The Contracts are "variable." Unlike
the fixed benefits of ordinary whole life insurance, the Account Value will
increase or decrease based on the investment experience of the investment
Portfolios of the Funds to which premiums have been allocated. Similarly, the
Death Benefit may increase or decrease under some circumstances, but so long as
the Contract remains in effect it will not decrease below the Initial Death
Benefit if no withdrawals are made. The Contracts are credited with units
("Accumulation Units") to calculate cash values. The Contract Owner may transfer
the Account Value among the Variable Account's underlying investment Portfolios.
The Contracts can be issued on a single life or "last survivor" basis. For a
discussion of how last survivor Contracts operate differently from single life
Contracts, see "Last Survivor Contracts," page __.
In some states, the Contracts may be issued in the form of a group Contract. In
those states, certificates will be issued evidencing a purchaser's rights under
the group Contract. In certain states, certificates are issued under group
Contracts issued to the Financial Services Group Insurance Trust, an Illinois
Trust. The terms "Contract" and "Contract Owner", as used in this Prospectus,
refer to and include such a certificate and certificate owner, respectively.
The Variable Account and the Funds
The Variable Account funds the variable life insurance Contracts offered by this
prospectus. The Variable Account is a unit investment trust registered as such
under the Investment Company Act of 1940. It consists of multiple sub-accounts
("Variable Sub-Accounts"), each investing in a corresponding Fund Portfolio.
Applicants should read the prospectuses for the Funds in connection with the
purchase of a Contract. The investment objectives of the Fund Portfolios are
briefly summarized below under "Funds," page __. Presently, the Variable Account
invests in shares of the following Funds:
- AIM Fund
- American Century Funds
- Dean Witter Variable Fund
- Dreyfus Funds
- Fidelity Funds
- MFS Fund
The AIM FUND has eight available Portfolios: (1) AIM V.I. Capital Appreciation
Fund (2) AIM V.I. Growth and Income Fund (3) AIM V.I. Global Utilities Fund (4)
AIM V.I. Diversified Income Fund (5) AIM V.I. Government Securities Fund (6) AIM
V.I. Growth Fund (7) AIM V.I. International Equity Fund and (8) AIM V.I. Value
Fund; the AMERICAN CENTURY FUNDS have two available Portfolios: (1) American
Century VP Balanced and (2) American Century VP International. the DEAN WITTER
FUND has four available Portfolios: (1) VIS Dividend Growth (2) VIS European
Growth (3) VIS Quality Income Plus and (4) VIS Utilities; the DREYFUS FUNDS have
five available Portfolios: (1) VIF Growth and Income (2) VIF Money Market (3)
The Dreyfus Socially Responsible Growth Fund, Inc. (4) VIF Small Company Stock
and (5) Dreyfus Stock Index Fund; the FIDELITY FUNDS have four available
Portfolios: (1) VIP II Contrafund (2) VIP Growth and (3) VIP High Income and (4)
VIP Equity-Income; and the MFS FUND has two available Portfolios: (1) MFS
Emerging Growth Series and (2) MFS Limited Maturity Series.
The assets of each Portfolio are accounted for separately from the other
Portfolios and each has distinct investment objectives and policies which are
described in the accompanying prospectuses for the Funds.
Premiums
The Contract requires the Contract Owner to pay an initial premium of at least
$10,000. Additional premium payments may be made at any time, subject to the
following conditions:
- only one payment is allowed in any Contract Year;
- the minimum payment is $500;
- the attained age of the insured must be less than age 86; and
- absent submission of new evidence of insurability of the insured, the
maximum additional payment permitted in a Contract Year is the
"Guaranteed Additional Payment." The Guaranteed Additional Payment is
the lesser of $5,000 or a percentage of the initial payment (5% for
attained ages 40-70, and 0% for attained ages 20-39 and 71-80).
Additional premium payments may require an increase in the Specified Amount in
order for the Contract to meet the definition of a life insurance contract under
the Internal Revenue Code. The Company reserves the right to obtain satisfactory
evidence of insurability before accepting any additional premium payments
requiring an increase in Specified Amount. However, we reserve the right to
reject an additional premium payment for any reason. Additional Premiums may
also be paid at any time and in any amount necessary to avoid termination of the
Contract.
Death Benefit
At the death of the Insured while the Contract is in force, we will pay the
Death Benefit (less any Indebtedness and certain due and unpaid Monthly
Deduction Amounts) to the beneficiary. The Death Benefit determined on the date
of the Insured's death is the greater of (1) the Specified Amount, or (2) the
Account Value multiplied by the Death Benefit ratio as found in the Contract.
See "Contract Benefits and Rights -- Death Benefit," page __.
Account Value
The Account Value of the Contract will increase or decrease to reflect (1) the
investment experience of the Fund Portfolios underlying the Variable Sub-Account
to which Account Value is allocated, and (2) deductions for the mortality and
expense risk charge, the Monthly Deduction Amount, and the annual maintenance
fee. There is no minimum guaranteed Account Value and the Contract Owner bears
the risk of the investment in the Fund Portfolios. See "Contract Benefits and
Rights -- Account Value," page __.
Contract Loans
A Contract Owner may obtain one or both of two types of cash loans from the
Company. Both types of loans are secured by the Contract. The maximum amount
available for such loans is 90% of the Contract's Cash Value, less the amount of
all loans existing on the date of the loan request (including loan interest to
the next Contract Anniversary), less any annual maintenance fee due on or before
the next Contract Anniversary, and less any due and unpaid Monthly Deduction
Amounts. See "Contract Benefits and Rights -- Contract Loans," page __.
Lapse
Under certain circumstances a Contract may terminate if the Cash Surrender Value
on any Monthly Activity Date is less than the required Monthly Deduction Amount.
The Company will give written notice to the Contract Owner and a 61 day grace
period during which additional amounts may be paid to continue the Contract. See
"Contract Benefits and Rights -- Contract Loans," page __ and "Lapse and
Reinstatement," page __.
Cancellation and Exchange Rights
A Contract Owner has a limited right to return his or her Contract for
cancellation. The right to return exists during the free-look period. The
free-look period is a number of days (which varies by state) as specified in
your contract. If the Contract Owner returns the Contract for cancellation, by
mail or hand delivery, to the agent who sold the Contract, within the free-look
period following delivery of the Contract to the Contract Owner, the Company
will return to the Contract Owner within 7 days thereafter the premiums paid for
the Contract adjusted to reflect any investment gain or loss resulting from
allocation to the Variable Account prior to the date of cancellation, unless
state law requires a return of premium without such adjustments. In those states
where the Company is required to return the premiums paid upon a free-look of
the Contract and where it has been approved by the state, the Company reserves
the right to allocate all premium payments made prior to the expiration of the
free-look period to the money market sub-account of the Variable Account.
In addition, once the Contract is in effect it may be exchanged during the first
24 months after its issuance for a permanent life insurance contract on the life
of the Insured without submitting proof of insurability. See "Contract Benefits
and Rights -- Cancellation and Exchange Rights," page __.
Tax Consequences
The current Federal tax law generally excludes all death benefit payments from
the gross income of the Contract beneficiary. The Contracts generally will be
treated as modified endowment contracts. This status does not affect the
Contracts' classification as life insurance, nor does it affect the exclusion of
death benefit payments from gross income. However, loans, distributions or other
amounts received under a modified endowment contract are taxed to the extent of
accumulated income in the Contract (generally, the excess of Account Value over
premiums paid) and may be subject to a 10% penalty tax. See "Federal Tax
Matters," page __.
Personalized Illustrations
The Company will furnish, upon request and at no charge, a personalized
illustration reflecting the proposed Insured's age, sex, and underwriting
classification. Where applicable, the Company will also furnish upon request an
illustration for a Contract that is not affected by the sex of the Insured.
Personalized illustrations provided by the Company upon request will be based,
as appropriate, on the methodology and format of the hypothetical illustrations
that the Company has included in its registration statement for the Contracts.
See "Registration Statement," page __, for further information.
Fees and Expenses
The following tables are designed to help you understand the various fees and
expenses that you will bear, directly or indirectly, as a Contract owner. The
first table describes the Contract charges and deductions you will directly bear
under the Contracts. The second table describes the fees and expenses of the
Fund Portfolios you will indirectly bear when you invest in the Contracts. For
further information, see "Deductions and Charges" on page ___ .
<TABLE>
<CAPTION>
CONTRACT CHARGES AND DEDUCTIONS
Account Value Charges (deducted monthly and shown as an annualized percentage of
Account Value):(1)
<S> <C> <C>
Current(2) Maximum
---------- -------
Cost of Insurance Charge............ Single Life Single Life
----------- -----------
Standard - 0.65% (Contract Years 1-10) Standard-Ranges from $0.06 per $1,000 of net
- 0.55% (Contract Years 11+) amount at risk (younger ages) up to $82.50 per
$1,000 of net amount at risk (age 99)
Special -1.00% (Contract Years 1-10) Special-Ranges from $0.12 per $1,000 of net
-0.90% (Contract Yaers 11+) amount at risk Contract Years up to $82.92
(age 99).
Joint Life Joint Life
---------- ----------
Standard -0.30% (Contract Years 1-10) Standard-Ranges from $0.00015 per $1,000 of net
-0.20% (Contract Years 11+) amount at risk (younger ages) up to $61.995
per $1,000 of net amount at risk (age 99)
Special -0.65% (Contract Years 1-10) Special-Ranges from $0.00061 per $1,000 of net
-0.55% (Contract Years 11+) amount at risk (younger ages) up to $78.71083
(age 99).
</TABLE>
Administrative Expense Charge........ 0.25%
Tax Expense Charge................... 0.40%(3)
Annual Separate Account Charges (deducted daily and shown as a percentage of
average net assets):
Mortality and Expense Risk Charge.... 0.90%
Federal Income Tax Charge............ Currently none(4)
Annual Maintenance Fee:................. $35(5)
Transfer Charges:....................... $25(6)
Maximum Withdrawal Charge: ............. 7.75% of initial premium withdrawn(7)
Due and Unpaid Premium Tax Charge: ..... 2.25% of initial premium withdrawn(8)
- ----------------------
(1) Except for the maximum or "guaranteed" cost of insurance charge, which is
expressed as a range of monthly costs per thousand dollars of net amount at
risk. The net amount at risk is the difference between the Death Benefit
and the Account Value. See "Cost of Insurance Charge," page ___.
(2) The actual amount of insurance purchased will depend on the insured's age,
sex (where permitted) and rate class. See "Cost of Insurance Charge," page
__. The current cost of insurance charge under the Contracts will never
exceed the guaranteed cost of insurance charge shown in your Contract.
(3) This charge includes a premium tax deduction of 0.25%, and a federal tax
deduction of 0.15%, of Account Value. This charge is assessed only during
the first 10 Contract Years. See "Tax Expense Charge," page ___.
(4) The Company does not currently assess a charge for federal income taxes
that may be attributable to the operations of the Variable Account, though
it may do so in the future. See "Taxes Charged Against the Variable
Account," page ___.
(5) This fee is waived if total premiums paid are $50,000 or more.
(6) No charges will be imposed on the first 12 transfers in any Contract Year.
The Company reserves the right to assess a $25 charge for each transfer in
excess of 12 in any Contract Year, excluding transfers due to dollar cost
averaging.
(7) This charge applies only upon withdrawals of the initial premium paid at
the time of Contract purchase. It does not apply to withdrawals of any
additional payments paid under a Contract. The withdrawal charge declines
to 0% over ten years and is imposed to cover a portion of the sales expense
incurred by the Company in distributing the Contracts. See "Deductions and
Charges -- Other Deductions -- Withdrawal Charge," page __. No withdrawal
charge will be imposed on any withdrawal to the extent that aggregate
withdrawal charges and the federal tax portion of the tax expense charge
imposed would otherwise exceed 9% of total premiums paid prior to the
Withdrawal. See "Deductions and Charges," page __ and "Withdrawal Charge,"
page __.
(8) This charge applies only upon withdrawals of the initial premium paid at
the time of Contract purchase. It does not apply to withdrawals of any
additional payments paid under a Contract. The charge for due and unpaid
premium tax declines to 0% over nine years and is imposed on full or
partial withdrawals in excess of the Free Withdrawal Amount.
<TABLE>
<CAPTION>
PORTFOLIO EXPENSES (Net of Voluntary Reductions and Reimbursements)
(As a Percentage of Portfolio Assets)
MANAGEMENT OTHER TOTAL FUND
PORTFOLIO FEES EXPENSES ANNUAL EXPENSES
- --------- ---- -------- ---------------
<S> <C> <C> <C>
AIM V.I. Capital Appreciation Fund(1)... 0.63% 0.05% 0.68%
AIM V.I. Growth and Income Fund(1)...... 0.63% 0.06% 0.69%
AIM V.I. Global Utilities Fund(1)....... 0.65% 0.63% 1.28%
AIM V.I. Diversified Income Fund(1)..... 0.60% 0.20% 0.80%
AIM V.I. Government Securities Fund(1).. 0.50% 0.37% 0.87%
AIM V.I. Growth Fund(1)................. 0.65% 0.08% 0.73%
AIM V.I. International Equity Fund(1)... 0.75% 0.18% 0.93%
AIM V.I. Value Fund(1).................. 0.62% 0.08% 0.70%
American Century VP International....... 1.50% 0.00% 1.50%
American Century VP Balanced............ 1.00% 0.00% 1.00%
VIS Dividend Growth..................... 0.625%(2) 0.01% 0.635%
VIS European Growth..................... 1.00% (3) 0.12% 1.11%
VIS Utilities........................... 0.65%(4) 0.02% 0.67%
VIS Quality Income Plus................. 0.50%(5) 0.03% 0.53%
VIP Growth.............................. 0.60% 0.09% 0.69%
VIP High Income 0.59% 0.12% 0.71%(6)
VIP Equity-Income....................... 0.50% 0.08% 0.58%
VIP II Contrafund....................... 0.60% 0.11% 0.71%(6)
Dreyfus Socially Responsible Growth..... 0.75% 0.07% 0.82%
Dreyfus Stock Index..................... 0.25% 0.03% 0.28%
VIF Small Company Stock................. 0.75% 0.37% 1.12%
VIF Growth and Income................... 0.75% 0.05% 0.80%
VIF Money Market........................ 0.50% 0.11% 0.61%
MFS Emerging Growth Series.............. 0.75% 0.12% 0.87%
MFS Limited Maturity Series(7).......... 0.55% 0.45% 1.00%
</TABLE>
(1) A I M Advisors, Inc. ("AIM") may from time to time voluntarily waive or
reduce its respective fees. Effective May 1, 1998, the Funds reimburse AIM
in an amount up to 0.25% of the average net asset value of each Fund, for
expenses incurred in providing, or assuring that participating insurance
companies provide, certain administrative services. Currently, the fee
only applies to the average net asset value of each Fund in excess of the
net asset value of each Fund as calculated on April 30, 1998.
(2) Applicable to net assets of up to $500 million. For net assets which exceed
$500 million, the fee will be 0.50%, for assets that exceed $1 billion, the
fee will be 0.475%, and for assets that exceed $2 billion, the fee will be
0.45%.
(3) Applicable to net assets of up to $500 million. For net assets which exceed
$500 million, the fee will be 0.95%.
(4) This percentage is applicable to Portfolio net assets of up to $500
million. For net assets which exceed $500 million, the management fee is
0.45%.
(5) This percentage is applicable to Portfolio net assets of up to $500
million. For net assets which exceed $500 million, the management fee is
0.55%.
(6) A portion of the brokerage commissions that certain funds pay was used to
reduce fund's expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby interest
earned on uninvested cash balances was used to reduce custodian and
transfer agent expenses. Including these reductions, the total operating
expenses presented in the table would have been .67% for VIP Growth
Portfolio and .71% for VIPII Contrafund Portfolio.
(7) The Adviser has agreed to bear expenses for the limited Maturity Portfolio,
subject to reimbursement by the Portfolio, such that the Portfolios' "Other
Expenses" shall not exceed 0.45% of the average daily net assets for the
Limited Maturity Portfolio. See "Information Concerning Shares of Each
Portfolio -- Expenses" for the Limited Maturity Portfolio would be 5.65%
and 6.20% respectively.
<PAGE>
SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated meanings:
Account Value: The aggregate value under a Contract of the Variable Sub-Accounts
and the Loan Account.
Accumulation Unit: An accounting unit of measure used to calculate the value of
a Variable Sub-Account.
Age: The Insured's age at the Insured's last birthday.
Cash Value: The Account Value less any applicable withdrawal charges and due and
unpaid Premium Tax Charges.
Cash Surrender Value: The Cash Value less all Indebtedness and the annual
maintenance fee, if applicable.
Code: The Internal Revenue Code of 1986, as amended.
Contract Anniversary: The same day and month as the Contract Date for each
subsequent year the Contract remains in force.
Contract Date: The date on or as of which coverage under a Contract becomes
effective and the date from which Contract Anniversaries, Contract Years and
Contract months are determined.
Contract Owner: The person having rights to benefits under the Contract during
the lifetime of the Insured; the Contract Owner may or may not be the Insured.
Contract Years: Annual periods computed from the Contract Date.
Death Benefit: The greater of (1) the Specified Amount or (2) the Account Value
on the date of death multiplied by the Death Benefit ratio as specified in the
Contract.
Free Withdrawal Amount: The amount of a surrender or partial withdrawal that is
not subject to a withdrawal charge. This amount in any Contract Year is 15% of
total premiums paid.
Initial Death Benefit: The Initial Death Benefit under a Contract is shown on
the Contract Data page.
Funds: The registered management investment companies in which assets of the
Variable Account may be invested.
Indebtedness: All Contract loans, if any, and accrued loan interest.
Insured: The person whose life is insured under a Contract.
Loan Account: An account in the Company's General Account, established for any
amounts transferred from the Variable Sub-Accounts for requested loans. The loan
account credits a fixed rate of interest that is not based on the investment
experience of the Variable Account.
Monthly Activity Date: The day of each month on which the Monthly Deduction
Amount is deducted from the Account Value of the Contract. Monthly Activity
Dates occur on the same day of the month as the Contract Date. If there is no
date equal to the Monthly Activity Date in a particular month, the Monthly
Activity Date will be the last day of that month.
Monthly Deduction Amount: A deduction on each Monthly Activity Date for the cost
of insurance charge, a tax expense charge and an administrative expense charge.
Specified Amount: The minimum death benefit under a Contract, equal to the
Initial Death Benefit on the Contract Date. Thereafter it may change in
accordance with the terms of the partial withdrawal and the subsequent premium
provisions of the Contract.
Valuation Day: Every day the New York Stock Exchange is open for trading. The
value of the Variable Account is determined at the close of regular trading on
the New York Stock Exchange (currently 4:00 p.m. Eastern Time) on such days.
Valuation Period: The period between the close of regular trading on the New
York Stock Exchange on successive Valuation Days.
Variable Account: Glenbrook Life Variable Life Separate Account A, an account
established by the Company to separate the assets funding the Contracts from
other assets of the Company.
Variable Sub-Account: The subdivisions of the Variable Account used to allocate
a Contract Owner's Account Value, less Indebtedness, among the Portfolios of the
Funds.
<PAGE>
THE COMPANY
The Company is the issuer of the Contract. The Company is a stock life insurance
company which was organized under the laws of the State of Illinois in 1992. The
Company was originally organized under the laws of the State of Indiana in 1965.
From 1965 to 1983 the Company was known as "United Standard Life Assurance
Company" and from 1983 to 1992 the Company was known as "William Penn Life
Assurance Company of America." As of the date of this prospectus, the Company is
licensed to operate in the District of Columbia and all states except New York.
The Company intends to market the Contract in those jurisdictions in which it is
licensed to operate. The Company's home office is located at 3100 Sanders Road,
Northbrook, Illinois 60062.
The Company is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), a stock life insurance company incorporated under the laws of
the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate
Insurance Company ("Allstate"), a stock property-liability insurance company
incorporated under the laws of Illinois. All of the outstanding capital stock of
Allstate is owned by The Allstate Corporation ("Corporation"). On June 30, 1995,
Sears, Roebuck and Co. ("Sears") distributed its 80.3% ownership in the
Corporation to Sears common shareholders through a tax-free dividend.
THE VARIABLE ACCOUNT
General
The Variable Account is a separate account of the Company established on January
15, 1996 pursuant to the insurance laws of the State of Illinois. The Variable
Account is organized as a unit investment trust and registered as such with the
Securities and Exchange Commission under the Investment Company Act of 1940. The
Variable Account meets the definition of "separate account" under federal
securities law. Under Illinois law, the assets of the Variable Account are held
exclusively for the benefit of Contract Owners and persons entitled to payments
under the Contracts. The assets of the Variable Account are not chargeable with
liabilities arising out of any other business which the Company may conduct.
Funds
The Variable Account will invest in shares of one or more Funds. The Funds are
registered with the Securities and Exchange Commission as open-end, series,
management investment companies. Registration of the Funds does not involve
supervision of their management, investment practices or policies by the
Securities and Exchange Commission. The Funds' Portfolios are designed to
provide investment vehicles for variable insurance contracts of various
insurance companies, in addition to the Variable Account. The Funds available
for investment by the Variable Account are listed below.
I. AIM Fund
- AIM V.I. Capital Appreciation Fund - is a diversified Portfolio which
seeks to provide capital appreciation through investments in common
stocks, with emphasis on medium-sized and smaller emerging growth
companies.
- AIM V.I. Diversified Income Fund - is a diversified Portfolio which
seeks to achieve a high level of current income primarily by investing
in a diversified portfolio of foreign and U.S. government and
corporate debt securities, including lower rated high yield debt
securities (commonly known as "junk bonds"). The risks of investing in
junk bonds are described in the accompanying prospectus for the
Portfolio, which should be read carefully before investing.
- AIM V.I. Global Utilities Fund - is a non-diversified Portfolio which
seeks to achieve a high level of current income and, as a secondary
objective, to achieve capital appreciation, by investing primarily in
common and preferred stocks of public utility companies (either
domestic or foreign).
- AIM V.I. Government Securities Fund - is a diversified Portfolio which
seeks to achieve a high level of current income consistent with
reasonable concern for safety of principal by investing in debt
securities issued, guaranteed or otherwise backed by the U.S.
Government.
- AIM V.I. Growth Fund - is a diversified Portfolio which seeks to
provide growth of capital through investments primarily in common
stocks of leading U.S. companies considered by A I M Advisors, Inc.
("AIM") to have strong earnings momentum.
- AIM V.I. Growth and Income Fund - is a diversified Portfolio which
seeks to provide growth of capital, with current income as a secondary
objective by investing primarily in dividend paying common stocks
which have prospects for both growth of capital and dividend income.
- AIM V.I. International Equity Fund - is a diversified Portfolio which
seeks to provide long-term growth of capital by investing in
international equity securities, the issuers of which are considered
by AIM to have strong earnings momentum.
- AIM V.I. Value Fund - is a diversified Portfolio which seeks to
achieve long-term growth of capital by investing primarily in equity
securities judged by AIM to be undervalued relative to the current or
projected earnings of the companies issuing the securities, or
relative to current market values of assets owned by the companies
issuing the securities or relative to the equity markets generally.
Income is a secondary objective.
AIM serves as the investment advisor to the AIM Fund. AIM was organized in 1976
and, together with its domestic subsidiaries, manages or advises over 50
investment company portfolios (including the Portfolios listed above)
encompassing a broad range of investment objectives. AIM is a wholly owned
subsidiary of A I M Management Group Inc. Its principal place of business is 11
Greenway Plaza, Suite 1919, Houston, Texas 77046-1173.
II. American Century Funds
- American Century VP Balanced -- the investment objective of American
Century VP Balanced is capital growth and current income. It will seek
to achieve its investment objective by maintaining approximately 60%
of the assets of American Century VP Balanced in common stocks that
are considered by management to have better-than-average prospects for
appreciation and the remaining assets in bonds and other fixed income
securities.
- American Century VP International -- the investment objective of
American Century VP International is Capital Growth. It will seek to
achieve its investment objective by investing primarily in an
internationally diversified portfolio of common stocks that are
considered by management to have prospects for appreciation. The Fund
will invest primarily in securities of issuers located in developed
markets.
American Century Investment Management, Inc. serves as the investment manager of
American Century Variable Portfolios, Inc. Its principal place of business is
American Century Tower, 4500 Main Street, Kansas City, Missouri 64111.
III. Dean Witter Fund
- VIS Dividend Growth Portfolio -- seeks to provide reasonable current
income and long-term growth of income and capital by investing
primarily in common stock of companies with a record of paying
dividends and the potential for increasing dividends.
- VIS European Growth Portfolio -- seeks to maximize the capital
appreciation on its investments by investing primarily in securities
issued by issuers located in Europe.
- VIS Quality Income Plus Portfolio -- seeks, as its primary objective,
to earn a high level of current income and, as a secondary objective,
capital appreciation, but only when consistent with its primary
objective, by investing primarily in debt securities issued by the
U.S. Government, its agencies and instrumentalities, including zero
coupon securities, and in fixed-income securities rated A or higher by
Moody's Investors Service, Inc. (Moody's) or Standard & Poor's
Corporation (Standard & Poor's) or non-rated securities of comparable
quality, and by writing covered call and put options against such
securities.
- VIS Utilities Portfolio -- seeks to provide current income and
long-term growth of income and capital by investing primarily in
equity and fixed-income securities of companies engaged in the public
utilities industry.
Dean Witter InterCapital Inc. ("InterCapital"), Two World Trade Center, New
York, New York 10048, is the Fund's Investment Manager. InterCapital is a wholly
owned subsidiary of Dean Witter, Discover & Co. Morgan Grenfell Investment
Services Limited, 20 Finsbury Circus, London, England, is the Sub-Advisor of the
European Growth Portfolio of the Fund.
IV. Dreyfus Funds
- VIF Growth & Income Portfolio -- seeks to provide long-term capital
growth, current income and growth of income, consistent with
reasonable investment risk.
- VIF Money Market Portfolio -- seeks to provide as high a level of
current income as is consistent with the preservation of capital and
the maintenance of liquidity.
- The Dreyfus Socially Responsible Growth Fund, Inc. -- seeks to provide
capital growth. Current income is a secondary goal. Invests
principally in common stocks, or securities convertible into common
stock, of companies which, in the opinion of the Fund's management,
not only meet traditional investment standards, but also show evidence
that they conduct their business in a manner that contributes to the
enhancement of the quality of life in America.
- VIF Small Company Stock Portfolio -- seeks to provide investment
results that are greater than the total return performance of
publicly-traded common stocks in the aggregate, as represented by the
Russell 2500 Index. Invests primarily in a portfolio of equity
securities of small - to medium-sized domestic issuers, while
attempting to maintain volatility and diversification similar to that
of the Russell 2500 Index.
- Dreyfus Stock Index Fund - seeks to provide investment results that
correspond to the price and yield performance of publicly traded
common stocks in the aggregate, as represented by the Standard and
Poor's 500 Composite Stock Price Index.
An investment in the Dreyfus VIF Money Market Portfolio is neither insured nor
guaranteed by the U.S. Government. There can be no assurance that the Money
Market Portfolio will be able to maintain a stable net asset value of $1.00 per
share.
The Dreyfus Corporation, 200 Park Avenue, New York, New York 10166, was formed
in 1947 and serves as the Fund's investment manager. The Dreyfus Corporation is
a wholly-owned subsidiary of Mellon Bank, N.A., which is a wholly-owned
subsidiary of Mellon Bank Corporation. NCM Capital Management Group, Inc., 105
West Main Street, Durham, North Carolina 27701, serves as sub-investment advisor
to the Dreyfus Socially Responsible Growth Fund, Inc.
V. Fidelity Funds
- VIP II Contrafund -- seeks capital appreciation by investing in
companies that Fidelity Management & Research Company ("FMR") believes
to be undervalued due to an overly pessimistic appraisal by the
public.
- VIP Growth -- seeks capital appreciation by investing primarily in
common stocks. The fund may also pursue capital appreciation through
the purchase of bonds and preferred stocks.
- VIP High Income -- seeks high current income by investing primarily in
all types of income-producing debt securities, preferred stocks, and
convertible securities.
- VIP Equity-Income - seeks reasonable income by investing primarily in
income-producing equity securities. When choosing the Portfolio's
investments, Fidelity Management & Research Company also considers the
potential for capital appreciation. The Portfolio seeks to achieve a
yield that exceeds the yield on the securities comprising that of the
S&P 500.
Fidelity Management & Research Company, 82 Devonshire Street, Boston,
Massachusetts, is the Investment Manager of the Funds.
VI. MFS Fund
- MFS Emerging Growth Series -- seeks to provide long-term growth of
capital. Dividend and interest income from portfolio securities, if
any, is incidental to the Portfolio's investment objective of
long-term growth of capital.
- MFS Limited Maturity Series -- the primary investment objective is to
provide as high a level of current income as is believed to be
consistent with prudent investment risk. The Portfolio's secondary
objective is to protect shareholders' capital.
MFS manages each Series pursuant to an Investment Advisory Agreement with the
Trust on behalf of each Portfolio. MFS provides the Series with overall
investment advisory and administrative services, as well as general office
facilities. Its principal place of business is 500 Boylston Street, Boston,
Massachusetts 02116.
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
All dividends and capital gains distributions from the Portfolios are
automatically reinvested in shares of the distributing Portfolio at their net
asset value.
There is no assurance that the Portfolios will attain their respective stated
objectives. Additional information concerning the investment objectives and
policies of the Portfolios can be found in the current prospectuses for the
Funds accompanying this prospectus.
You will find more complete information about the Portfolios, including the
risks associated with each Portfolio, in the accompanying prospectuses. You
should read the prospectuses for the Funds in conjunction with this prospectus.
THE FUND PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS TO A PARTICULAR VARIABLE
SUB-ACCOUNT.
It is conceivable that in the future it may be disadvantageous for variable life
insurance separate accounts and variable annuity separate accounts to invest in
a Fund simultaneously. Although neither the Company nor any such Fund currently
foresees any such disadvantages either to variable life insurance or variable
annuity contract owners, the Company has been advised that each Fund's Board of
Directors intends to monitor events in order to identify any material conflicts
between variable life and variable annuity contract owners and to determine what
action, if any, should be taken in response thereto. If the Board of Directors
were to conclude that separate funds should be established for variable life and
variable annuity separate accounts, the Company may be required to bear the
attendant expenses.
All investment income of and other distributions to each Variable Sub-Account
arising from the corresponding Portfolio are reinvested in shares of that
Portfolio at net asset value. The income and both realized and unrealized gains
or losses on the assets of each Variable Sub-Account are therefore separate and
are credited to or charged against the Variable Sub-Account without regard to
income, gains or losses from any other Variable Sub-Account or from any other
business of the Company. The Company will purchase shares in the Funds in
connection with premiums allocated to the corresponding Variable Sub-Account in
accordance with Contract Owners' directions and will redeem shares in the Funds
to meet Contract obligations or make adjustments in reserves, if any.
The Company reserves the right, subject to compliance with the law as then in
effect, to make additions to, deletions from, or substitutions for the Fund
shares underlying the Variable Sub-Accounts. If shares of any of the Funds
should no longer be available for investment, or if, in the judgment of the
Company's management, further investment in shares of any Fund should become
inappropriate in view of the purposes of the Contracts, the Company may
substitute shares of another Fund for shares already purchased, or to be
purchased in the future, under the Contracts. No substitution of securities will
take place without notice to Contract Owners and without prior approval of the
Securities and Exchange Commission to the extent required by the Investment
Company Act of 1940 ("1940 Act"). The Company reserves the right to establish
additional Variable Sub-accounts of the Variable Account, each of which would
invest in shares of another Fund. Subject to Contract Owner approval, the
Company also reserves the right to end the registration under the 1940 Act of
the Variable Account or any other separate accounts of which it is the depositor
or to operate the Variable Account as a management company under the 1940 Act.
Each Fund is subject to certain investment restrictions and policies which may
not be changed without the approval of a majority of the shareholders of the
Fund. See the accompanying prospectuses for the Funds for further information.
THE CONTRACT
Application for a Contract
Individuals wishing to purchase a Contract must submit an application to the
Company. A Contract will be issued only on the lives of Insureds age 0-85 who
supply evidence of insurability satisfactory to the Company. Acceptance is
subject to the Company's underwriting rules and the Company reserves the right
to reject an application for any lawful reason. If a Contract is not issued, the
premium will be returned to you. No change in the terms or conditions of a
Contract will be made without the consent of the Contract Owner.
Once the Company has received the initial premium and underwriting has been
approved, the Contract will be issued on the date the Company has received the
final requirement for issue. In the case of simplified underwriting, the
Contract will be issued or coverage denied within 3 business days of receipt of
premium. The Insured will be covered under the Contract, however, as of the
Contract Date. Since the Contract Date will generally be the date the Company
receives the initial premium, coverage under a Contract may begin before it is
actually issued. In addition to determining when coverage begins, the Contract
Date determines Monthly Activity Dates, Contract months, and Contract Years.
If the initial premium is over the limits established from time to time by the
Company ($1,000,000 as of the date of this Prospectus), the initial payment will
not be accepted with the application. In other cases where we receive the
initial payment with the application, we will provide fixed conditional
insurance during underwriting according to the terms of a conditional receipt.
The fixed conditional insurance will be the insurance applied for, up to a
maximum that varies by age.
Premiums
The Contract is designed to permit an initial premium payment and, subject to
certain conditions, additional premium payments. The initial premium payment
purchases a Death Benefit initially equal to the Contract's Specified Amount.
The minimum initial payment is $10,000.
Under current underwriting rules, which are subject to change, proposed Insureds
are eligible for simplified underwriting without a medical examination if their
application responses and initial premium payment meet simplified underwriting
standards. Customary underwriting standards will apply to all other proposed
Insureds. The maximum initial premium currently permitted on a simplified
underwriting basis varies with the issue age of the insured according to the
following table:
Simplified Underwriting
Issue Age Maximum Initial Premium
- --------- -----------------------
0-34.................................... Not available
35-44................................... $ 15,000
45-54................................... $ 30,000
55-64................................... $ 50,000
65-80................................... $ 100,000
Over age 80............................. Not available
Additional premium payments may be made at any time, subject to the following
conditions:
- only one additional premium payment may be made in any Contract Year;
- each additional premium payment must be at least $500;
- the attained age of the Insured must be less than age 86; and
- absent submission of new evidence of insurability of the insured, the
maximum additional payment permitted in a Contract Year is the
"Guaranteed Additional Payment."
- the Guaranteed Additional Payment is the lesser of $5,000 or a
percentage of the initial payment (5% for attained ages 40-70, and 0%
for attained ages 20-39 and 71-85).
Additional premium payments may require an increase in Specified Amount in order
for the Contract to remain within the definition of a life insurance contract
under Section 7702 of the Code. The Company reserves the right to obtain
satisfactory evidence of insurability upon any additional premium payments
requiring an increase in Specified Amount. However, we reserve the right to
reject any additional premium payment for any reason.
Unless you request otherwise in writing, any additional premium payment received
while a Contract loan exists will be applied: first, as a repayment of
Indebtedness, and second, as an additional premium payment, subject to the
conditions described above.
Additional premiums may be paid at any time and in any amount necessary to avoid
termination of the Contract without evidence of insurability.
Allocation Of Premiums
Upon completion of underwriting, the Company will either issue a Contract, or
deny coverage and return all premiums. If a Contract is issued, the initial
premium payment, plus an amount equal to the interest that would have been
earned had the initial premium been invested in the Money Market Sub-Account
since the date of receipt of the premium, will be allocated on the date the
Contract is issued according to the initial premium allocation instructions
specified on the application. In the future, the Company may allocate the
initial premium (and the interest that would have been earned had the initial
premium been invested in the Money Market Sub-Account since its receipt) to the
Money Market Sub-Account during the free look period in those states where state
law requires premiums to be returned upon exercise of the free-look right.
Accumulation Unit Values
The Accumulation Unit Value for each Variable Sub-Account will vary to reflect
the investment experience of the corresponding Fund Portfolio and will be
determined on each Valuation Day by multiplying the Accumulation Unit Value of
the particular Variable Sub-Account on the preceding Valuation Day by a "Net
Investment Factor" for that Sub-Account for the Valuation Period then ended. The
Net Investment Factor for each Variable Sub-Account is determined by first
dividing (A) the net asset value per share of the corresponding Fund Portfolio
at the end of the current Valuation Period (plus the per share dividends or
capital gains by that Fund Portfolio if the ex-dividend date occurs in the
Valuation Period then ended), by (B) the net asset value per share of the
corresponding Fund Portfolio at the end of the immediately preceding Valuation
Period; and then subtracting from the result an amount equal to the daily
deductions for mortality and expense risk charges imposed during the Valuation
Period. Applicants should refer to the prospectuses for the Funds which
accompany this prospectus for a description of how the assets of each Fund are
valued since such determination has a direct bearing on the Accumulation Unit
Value of the corresponding Sub-Account and therefore the Account Value of a
Contract. See "Contract Benefits and Rights -- Account Value," page __.
All valuations in connection with a Contract, e.g., with respect to determining
Account Value and Cash Surrender Value and in connection with Contract loans, or
calculation of Death Benefits, or with respect to determining the number of
Accumulation Units to be credited to a Contract with each premium, other than
the initial premium and additional premiums requiring underwriting, will be made
on the date the request or payment is received in good order by the Company at
its Home Office if such date is a Valuation Day; otherwise such determination
will be made on the next succeeding date which is a Valuation Day.
Specialized Uses of the Contract: Because the Contract provides for an
accumulation of cash value as well as a death benefit, the Contract can be used
for various individual and business financial planning purposes. Purchasing the
Contract in part for such purposes entails certain risks. For example, if the
investment performance of Sub-Accounts to which Account Value is allocated is
poorer than expected or if sufficient premiums are not paid, the Contract may
lapse or may not accumulate sufficient Account Value to fund the purpose for
which the Contract was purchased. Withdrawals and Contract loans may
significantly affect current and future Account Value, Cash Surrender Value, or
Death Benefit proceeds. Depending upon Sub-Account investment performance and
the amount of a Contract loan, the loan may cause a Contract to lapse. Because
the Contract is designed to provide benefits on a long-term basis, before
purchasing a Contract for a specialized purpose a purchaser should consider
whether the long-term nature of the Contract is consistent with the purpose for
which it is being considered. Using a Contract for a specialized purpose may
have tax consequences. (See "Federal Tax Matters," Page __.)
DEDUCTIONS AND CHARGES
Monthly Deductions
On each Monthly Activity Date including the Contract Date, the Company will
deduct from the Account Value attributable to the Variable Account an amount
("Monthly Deduction Amount") to cover charges and expenses incurred in
connection with a Contract. Each Monthly Deduction Amount will be deducted pro
rata from each Variable Sub-Account attributable to the Contract such that the
proportion of Account Value of the Contract attributable to each Sub-Account
remains the same before and after the deduction. The Monthly Deduction Amount
will vary from month to month. If the Cash Surrender Value is not sufficient to
cover a Monthly Deduction Amount due on any Monthly Activity Date, the Contract
may lapse. See "Contract Benefits and Rights -- Lapse and Reinstatement," page
__. The following is a summary of the monthly deductions and charges which
constitute the Monthly Deduction Amount:
Cost of Insurance Charge: The cost of insurance charge covers the Company's
anticipated mortality costs for standard and special risks. Current cost of
insurance rates are lower after the 10th Contract Year. The current cost of
insurance charge will not exceed the guaranteed cost of insurance charge. This
charge is the maximum annual cost of insurance per $1,000 as indicated in the
Contract; multiplied by the difference between the Death Benefit and the Account
Value (both as determined on the Monthly Activity Date); divided by $1,000; and
divided by 12. For standard risks, the guaranteed cost of insurance rate is
based on the 1980 Commissioners Standard Ordinary Mortality Table, age last
birthday. (Unisex rates may be required in some states). A table of guaranteed
cost of insurance charges per $1,000 will be included in each Contract; however,
the Company reserves the right to use rates less than those shown in the table.
Special risks will be charged at a higher cost of insurance rate that will not
exceed rates based on a multiple of the 1980 Commissioners Standard Ordinary
Mortality Table, age last birthday. The multiple will be based on the Insured's
substandard rating.
The cost of insurance charge rates are applied to the difference between the
Death Benefit determined on the Monthly Activity Date and the Account Value on
that same date prior to assessing the Monthly Deduction Amount, because the
difference is the amount for which the Company is at risk should the Death
Benefit be then payable. The Death Benefit as computed on a given date is the
greater of (1) the Specified Amount on that date, and (2) the Account Value on
that date multiplied by the applicable Death Benefit ratio. (For an explanation
of the Death Benefit, see "Contract Benefits and Rights" on page __.)
Example:
Specified Amount = $100,000
Account Value on the Monthly Activity Date = $30,000
Insured's attained age = 45
Death Benefit ratio for age 45 = 2.15
On the Monthly Activity Date in this example, the Death Benefit as then computed
would be $100,000, because the Specified Amount ($100,000) is greater than the
Account Value multiplied by the applicable Death Benefit ratio ($30,000 x 2.15 =
$64,500). Since the Account Value on that date is $30,000, the cost of insurance
charges per $1,000 are applied to the difference ($100,000 - $30,000 = $70,000).
Assume that the Account Value in the above example was $50,000. The Death
Benefit would then be $107,500 (2.15 x $50,000), since this is greater than the
Specified Amount ($100,000). The cost of insurance rates in that case would be
applied to ($107,500 - $50,000) = $57,500.
The level of specified amount that an initial premium will purchase will vary
based on age and sex. For example, a $10,000 initial premium paid by a male at
age 45 would result in a specified amount of $39,998. If a female age 65 paid a
$10,000 premium, the specified amount would be equal to $22,749.
Because the Account Value and, as a result, the amount for which the Company is
at risk under a Contract may vary from month to month, the cost of insurance
charge may also vary on each Monthly Activity Date. However, once a risk rating
class has been assigned to an Insured when the Contract is issued, that rating
class will not change if additional premium payments or partial withdrawals
increase or decrease the Specified Amount.
Tax Expense Charge: The Company will deduct monthly from the Account Value a tax
expense charge equal to an annual rate of 0.40% for the first ten Contract
Years. This charge compensates the Company for premium taxes imposed by various
states and local jurisdictions and for federal taxes related to the receipt of
premiums under the Contract and that results from the application of section 848
of the Code. The charge includes a premium tax deduction of 0.25% and a federal
tax deduction of 0.15%. The 0.25% premium tax deduction over ten Contract Years
approximates the Company's average expenses for state and local premium taxes
(2.5%). Premium taxes vary, ranging from zero to 3.5%. The premium tax deduction
will be imposed regardless of a contract owner's state of residence and,
therefore, is made whether or not any premium tax applies. The deduction may be
higher or lower than the premium tax imposed. However, the Company does not
expect to make a profit from this deduction. The 0.15% federal tax deduction
helps reimburse the Company for approximate expenses incurred for federal taxes
resulting from the application of Section 848 of the Code.
Administrative Expense Charge: The Company will deduct monthly from the Account
Value an administrative expense charge equal to an annual rate of 0.25%. This
charge compensates the Company for administrative expenses incurred in the
administration of the Variable Account and the Contracts.
All monthly deductions are taken by canceling Accumulation Units of the Variable
Account under your Contract.
Other Deductions
Mortality and Expense Risk Charge: The Company will deduct from the Variable
Account a daily charge equivalent to an annual rate of 0.90% for the mortality
risks and expense risks the Company assumes in relation to the Contracts. The
mortality risk assumed includes the risk that the cost of insurance charges
specified in the Contract will be insufficient to meet claims. The Company also
assumes a risk that the Death Benefit will exceed the amount on which the cost
of insurance charges were based on the Monthly Activity Date preceding the death
of an Insured. The expense risk assumed is that expenses incurred in issuing and
administering the Contracts will exceed the administrative charges set in the
Contract.
Annual Maintenance Fee: If the aggregate premiums paid on a Contract are less
than $50,000, the Company will deduct from the Account Value an annual
maintenance fee of $35 on each Contract Anniversary. This fee will help
reimburse the Company for administrative and maintenance costs of the Contracts.
Taxes Charged Against the Variable Account: Currently, no charge is made to the
Variable Account for federal income taxes that may be attributable to the
operations of the Variable Account (as opposed to the federal tax related to the
receipt of premiums under the Contract). The Company may, however, make such a
charge in the future. Charges for other taxes, if any, attributable to the
Variable Account or this class of Contracts may also be made.
Charges Against the Funds: The Variable Account purchases shares of the Funds at
net asset value. The net asset value of the Fund shares reflect Fund investment
management fees already deducted from the assets of the Funds. The Fund
investment management fees are a percentage of the average daily value of the
net assets of the Portfolios. See the "Fund Fees and Expenses" table on page __.
Withdrawal Charge: Upon surrender of the Contract and partial withdrawals in
excess of the Free Withdrawal Amount, a withdrawal charge may be assessed. The
Free Withdrawal Amount in any Contract Year is 15% of total premiums paid. Any
Free Withdrawal Amount not taken in a Contract Year may not be carried forward
to increase the Free Withdrawal Amount in any subsequent year. Withdrawals in
excess of the Free Withdrawal Amount will be subject to a withdrawal charge as
set forth in the table below:
Percentage of Initial
Contract Year Premium Withdrawn
- ------------- ---------------------
1....................................... 7.75%
2....................................... 7.75%
3....................................... 7.75%
4....................................... 7.25%
5....................................... 6.25%
6....................................... 5.25%
7....................................... 4.25%
8....................................... 3.25%
9....................................... 2.25%
10+..................................... 0.00%
After the ninth Contract Year, no withdrawal charges will be imposed. In
addition, no withdrawal charge will be imposed on any withdrawal to the extent
that aggregate withdrawal charges and the federal tax portion of the tax expense
charge imposed would otherwise exceed 9% of total premiums paid prior to the
withdrawal. The withdrawal charge may be waived under certain circumstances if
the Insured is confined to a qualified long-term care facility or hospital. See
"Contract Benefits and Rights -- Confinement Waiver Benefit", page __.
The withdrawal charge is imposed to cover a portion of the sales expense
incurred by the Company in distributing the Contracts. This expense includes
agents' commissions, advertising and the printing of prospectuses.
Due and Unpaid Premium Tax Charge: During the first nine Contract Years, a
charge for due and unpaid premium tax will be imposed on full or partial
withdrawals in excess of the Free Withdrawal Amount. This charge is shown below,
as a percent of the Account Value withdrawn:
Percentage of Initial
Year Premium Withdrawn
- ---- ---------------------
1....................................... 2.25%
2....................................... 2.00%
3....................................... 1.75%
4....................................... 1.50%
5....................................... 1.25%
6....................................... 1.00%
7....................................... 0.75%
8....................................... 0.50%
9....................................... 0.25%
10+..................................... 0.00%
After the ninth Contract Year, no due and unpaid premium tax charge will be
imposed. The percentages indicated above are guaranteed not to increase.
CONTRACT BENEFITS AND RIGHTS
Death Benefit
The Contracts provide for the payment of Death Benefit proceeds to the named
beneficiary when the Insured under the Contract dies. The proceeds payable to
the beneficiary equal the Death Benefit less any Indebtedness and less any due
and unpaid Monthly Deduction Amounts occurring during a Grace Period (if
applicable). The Death Benefit equals the greater of (1) the Specified Amount or
(2) the Account Value multiplied by the Death Benefit ratio. The ratios vary
according to the attained age of the Insured and are specified in the Contract.
Therefore, an increase in Account Value due to favorable investment experience
may increase the Death Benefit above the Specified Amount; and a decrease in
Account Value due to unfavorable investment experience may decrease the Death
Benefit (but not below the Specified Amount).
Examples:
A B
Specified Amount: $100,000 $100,000
Insured's Age: 45 45
Account Value on Date of Death: $48,000 $34,000
Death Benefit Ratio 2.15 2.15
In Example A, the Death Benefit equals $103,200, i.e., the greater of $100,000
(the Specified Amount) and $103,200 (the Account Value at the Date of Death of
$48,000, multiplied by the Death Benefit ratio of 2.15). This amount, less any
Indebtedness and due and unpaid Monthly Deduction Amounts, constitutes the
proceeds which we would pay to the beneficiary.
In Example B, the Death Benefit is $100,000, i.e., the greater of $100,000 (the
Specified Amount) or $73,100 (the Account Value of $34,000 multiplied by the
Death Benefit ratio of 2.15).
All or part of the proceeds may be paid in cash or applied under an Income Plan.
See "Other Matters -- Payment Options," page __.
Accelerated Death Benefit
If the Insured becomes terminally ill, the Contract Owner may request an
accelerated Death Benefit in an amount up to the lesser of (1) 50% of the
Specified Amount on the day we receive the request, and (2) $250,000 for all
policies issued by the Company which cover the Insured. "Terminally ill" means
an illness or physical condition of the Insured that, notwithstanding
appropriate medical care, will result in a life expectancy of 12 months or less.
If the Insured is terminally ill as the result of an illness, the accelerated
Death Benefit is not available unless the illness occurred at least 30 days
after the issue date. If the Insured is terminally ill as the result of an
accident, the accelerated Death Benefit is available if the accident occurred
after the issue date.
We will pay benefits due under the accelerated Death Benefit provision upon
receipt of a written request from the Contract Owner and due proof that the
Insured has been diagnosed as terminally ill. The Company also reserves the
right to require supporting documentation of the diagnosis and to require (at
the Company's expense) an examination of the Insured by a physician of the
Company's choice to confirm the diagnosis. The amount of the payment will be the
amount requested by the Contract Owner, reduced by the sum of (1) a 12 month
interest discount to reflect the early payment; (2) an administrative fee (not
to exceed $250); and (3) a pro rata amount of any outstanding Contract loan and
accrued loan interest. After the payment has been made, the Specified Amount,
the Account Value and any outstanding Contract loan will be reduced on a pro
rata basis.
Only one request for an accelerated Death Benefit per Insured is allowed. The
accelerated Death Benefit may not be available in all states. In addition, its
features may differ from those discussed above as required by state law. Please
refer to the Contract for further information.
Account Value
The Account Value of a Contract will be computed on each Valuation Day. On the
Contract Date, the Account Value is equal to the initial premium less the
Monthly Deduction Amount for the first month. Thereafter, the Account Value will
vary to reflect the investment experience of the Funds, the value of the Loan
Account and the Monthly Deduction Amounts. There is no minimum guaranteed
Account Value.
The Account Value of a particular Contract is related to the net asset value of
the Funds to which premiums on the Contract have been allocated. The Account
Value on any Valuation Day is calculated by multiplying the number of
Accumulation Units credited to the Contract in each Variable Sub-Account as of
the Valuation Day by the then Accumulation Unit Value of that Sub-Account and
then adding the results for all the Sub-Accounts credited to the Contract to the
value of the Loan Account. See "The Contract -- Accumulation Unit Values," page
__.
Transfer of Account Value
While the Contract remains in force and subject to the Company's transfer rules
then in effect, the Contract Owner may request that part or all of the Account
Value of a particular Variable Sub-Account be transferred to other Variable
Sub-Accounts. The Company reserves the right to impose a $10 charge on each such
transfer in excess of 12 per Contract Year. However, there are no charges on
transfers at the present time. The minimum amount that can be transferred is
shown on the Contract Data page (currently, there is no minimum).
On days when the New York Stack Exchange ("NYSE") is open for trading, telephone
transfer requests will be accepted by the Company if received at 1(800) 526-4827
by 4:00 p.m., Eastern Time. Telephone transfer requests received by the Company
before 4:00 p.m., Eastern Time are effected at the next computed value. In the
event that the NYSE closes early, i.e., before 4:00 p.m. Eastern Time, or in the
event that the NYSE closes early for a period of time but then reopens for
trading on the same day, telephone transfer requests will be processed by the
Company as of the close of the NYSE on that particular day. Telephone requests
received at any telephone number other than the number that appears in this
paragraph or received after the close of trading on the NYSE will not be
accepted by the Company.
Transfers by telephone may be made by the Contract Owner's agent of record or
attorney-in-fact pursuant to a power of attorney. Telephone transfers may not be
permitted in some states. The policy of the Company and its agents and
affiliates is that they will not be responsible for losses resulting from acting
upon telephone requests reasonably believed to be genuine. The Company will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine; otherwise, the Company may be liable for any losses due
to unauthorized or fraudulent instructions. The procedures the Company follows
for transactions initiated by telephone include requirements that callers on
behalf of a Contract Owner identify themselves and the Contract Owner by name
and social security number or other identifying information. All transfer
instructions by telephone are tape recorded.
As a result of a transfer, the number of Accumulation Units credited to the
Variable Sub-Account from which the transfer is made will be reduced by the
number obtained by dividing the amount transferred by the Accumulation Unit
Value of the Sub-Account from which the transfer is made next computed on the
Valuation Date the Company receives the transfer request. The number of
Accumulation Units credited to the Sub-Account to which the transfer is made
will be increased by the number obtained by dividing the amount transferred by
the Accumulation Unit Value of that Sub-Account next computed on the Valuation
Day the Company receives the transfer request.
Dollar Cost Averaging
Transfers may be made automatically through Dollar Cost Averaging while the
Contract is in force. Dollar Cost Averaging permits the Owner to transfer a
specified amount every month (or some other frequency as may be determined by
the Company) from the Money Market Sub-Account to any other Variable
Sub-Account. The theory of Dollar Cost Averaging is that, if purchases of equal
dollar amounts are made at fluctuating prices, the aggregate average cost per
unit will be less than the average of the unit prices on the same purchase
dates. However, participation in the Dollar Cost Averaging program does not
assure you of a greater profit from your purchases under the program; nor will
it prevent or alleviate losses in a declining market. There are no additional
charges imposed upon participants in the Dollar Cost Averaging program.
Transfers under Dollar Cost Averaging are not counted toward the 12 free
transfers per Contract Year currently permitted.
Automatic Portfolio Rebalancing
Transfers may be made automatically through Automatic Portfolio Rebalancing
while the Contract is in force. By electing Automatic Portfolio Rebalancing, the
Account Value in the Variable Sub-Accounts will be rebalanced to the desired
allocation on a quarterly basis, determined from the first date that you decide
to rebalance. Each quarter, Account Value will be transferred among Variable
Sub-Accounts to achieve the desired allocation.
The desired allocation will be the allocation initially selected, unless
subsequently changed. You may change the allocation at any time by giving us
written notice. The new allocation will be effective with the first rebalancing
that occurs after we receive the written request. We are not responsible for
rebalancing that occurs prior to receipt of the written request.
Contract Loans
While the Contract is in force, a Contract Owner may obtain, without the consent
of the beneficiary (provided the designation of beneficiary is not irrevocable),
one or both of two types of cash loans from the Company. These types are
Preferred Loans (described below) and non-Preferred Loans. Both types of loans
are secured by the Contract. The maximum amount available for a loan is 90% of
the Contract's Cash Value, less the amount of all Contract loans existing on the
date of the loan (including loan interest to the next Contract Anniversary),
less any due and unpaid Monthly Deduction Amounts, and less any annual
maintenance fee due on or before the next Contract Anniversary.
The loan amount will be transferred pro rata from each Variable Sub-Account
attributable to the Contract (unless the Contract Owner specifies otherwise) to
the Loan Account. The amounts allocated to the Loan Account will be credited
with interest at the loan credited rate set forth in the Contract. Loans will
bear interest at rates determined by the Company from time to time, but which
will not exceed the maximum rate indicated in the Contract (currently, 8% per
year). The amount of the Loan Account that equals the excess of the Account
Value over the total of all premiums paid under the Contract net of any premiums
returned due to partial withdrawals, as determined on each Contract Anniversary,
is considered a "Preferred Loan." Preferred Loans bear interest at a rate not to
exceed the Preferred Loan rate set forth in the Contract. The difference between
the value of the Loan Account and the Indebtedness will be transferred on a pro
rata basis from the Variable Sub-Accounts to the Loan Account on each Contract
Anniversary. If the aggregate outstanding loan(s) and loan interest secured by
the Contract exceeds the Cash Value of the Contract, the Company will give
written notice to the Contract Owner that unless the Company receives an
additional payment within 61 days to reduce the aggregate outstanding loan(s)
secured by the Contract, the Contract may lapse.
All or any part of any loan secured by a Contract may be repaid while the
Contract is still in effect. When loan repayments or interest payments are made,
the repayment will be allocated among the Variable Sub-Accounts in the same
percentage as subsequent payments are allocated (unless the Contract Owner
requests a different allocation), and an amount equal to the payment will be
deducted from the Loan Account. Any outstanding loan at the end of a grace
period must be repaid before the Contract will be reinstated. See "Contract
Benefits and Rights -- Lapse and Reinstatement," page __.
A loan, whether or not repaid, will have a permanent effect on the Account Value
because the investment results of each Variable Sub-Account will apply only to
the amount remaining in that Sub-Account. The longer a loan is outstanding, the
greater the effect is likely to be. The effect could be favorable or
unfavorable. If the Variable Sub-Accounts earn more than the annual interest
rate for amounts held in the Loan Account, a Contract Owner's Account Value will
not increase as rapidly as it would have had no loan been made. If the Variable
Sub-Accounts earn less than that rate, the Contract Owner's Account Value will
be greater than it would have been had no loan been made. Also, if not repaid,
the aggregate outstanding loan(s) will reduce the Death Benefit proceeds and
Cash Surrender Value otherwise payable.
Amount Payable On Surrender Of The Contract
While the Contract is in force, a Contract Owner may elect, without the consent
of the beneficiary (provided the designation of beneficiary is not irrevocable),
to fully surrender the Contract. Upon surrender, the Contract Owner will receive
the Cash Surrender Value determined as of the day the Company receives the
Contract Owner's written request or the date requested by the Contract Owner,
whichever is later. The Cash Surrender Value equals the Cash Value less the
annual maintenance fee and any Indebtedness. The Company will pay the Cash
Surrender Value of the Contract within seven days of receipt by the Company of
the written request or on the effective surrender date requested by the Contract
Owner, whichever is later.
The Contract will terminate on the date of receipt of the written request, or
the date the Contract Owner requests the surrender to be effective, whichever is
later. For a discussion of the tax consequences of surrendering the Contract,
see "Federal Tax Matters," page __.
The Contract Owner may elect to apply the surrender proceeds to an Income Plan
(see "Other Matters -- Payment Options," page __).
Partial Withdrawals
While the Contract is in force, a Contract Owner may elect, by written request,
to make partial withdrawals of at least $50 from the Cash Surrender Value. The
Cash Surrender Value, after the partial withdrawal, must at least equal $2,000;
otherwise, the request will be treated as a request for full surrender. The
partial withdrawal will be deducted pro rata from each Variable Sub-Account,
unless the Contract Owner instructs otherwise. The Specified Amount after the
partial withdrawal will be the greater of:
- the Specified Amount prior to the partial withdrawal reduced
proportionately to the reduction in Account Value; or
- the minimum Specified Amount necessary in order to meet the definition
of a life insurance contract under section 7702 of the Code.
Partial withdrawals in excess of the Free Withdrawal Amount may be subject to a
withdrawal charge and any due and unpaid premium tax charges. See "Deductions
and Charges -- Other Deductions -- Withdrawal Charge" and "Due and Unpaid
Premium Tax Charge," page __. For a discussion of the tax consequences of
partial withdrawals, see "Federal Tax Matters," page __.
Maturity
The Contracts have no maturity date.
Lapse and Reinstatement
The Contract will remain in force until the Cash Surrender Value is insufficient
to cover a Monthly Deduction Amount due on a Monthly Activity Date. The Company
will give written notice to the Contract Owner that if an amount shown in the
notice (which will be sufficient to cover the Monthly Deduction Amount(s) due)
is not paid within 61 days ("grace period"), there is a danger of lapse.
The Contract will continue through the grace period, but if no payment is
forthcoming, it will terminate at the end of the grace period. If the Insured
dies during the grace period, the proceeds payable under the Contract will be
reduced by the Monthly Deduction Amount(s) due and unpaid. See "Contract
Benefits and Rights -- Death Benefit," page __.
If the Contract lapses, the Contract Owner may apply for reinstatement of the
Contract by payment of the reinstatement premium (and any applicable charges)
required under the Contract. A request for reinstatement must be made within
five years of the date the Contract entered a grace period. If a loan was
outstanding at the time of lapse, the Company will require repayment of the loan
before permitting reinstatement. In addition, the Company reserves the right to
require evidence of insurability satisfactory to the Company. The reinstatement
premium is equal to an amount sufficient to (1) cover all Monthly Deduction
Amounts and annual maintenance fees due and unpaid during the grace period, and
(2) keep the Contract in force for three months after the date of reinstatement.
The Specified Amount upon reinstatement cannot exceed the Specified Amount of
the Contract at its lapse. The Account Value on the reinstatement date will
reflect the Account Value at the time of termination of the Contract plus the
premiums paid at the time of reinstatement. Withdrawal charges and due and
unpaid premium tax charges, cost of insurance, and tax expense charges will
continue to be based on the original Contract Date.
Cancellation and Exchange Rights
A Contract Owner has a limited right to return a Contract for cancellation. This
right to return exists during the free-look period. The free-look period is a
number of days which varies by state as specified in your contract. If the
Contract is returned for cancellation by mail or personal delivery to the
Company or to the agent who sold the Contract within the free-look period
following delivery of the Contract to the Contract Owner, the Company will
return to the Contract Owner within 7 days the sum of (1) the Account Value on
the date the returned Contract is received by the Company or its agent; and (2)
any deductions under the Contract or by the Funds for taxes, charges or fees.
Some states may require the Company to return the premiums paid for the returned
Contract.
Once the Contract is in effect, it may be exchanged during the first 24 months
after its issuance for a non-variable permanent life insurance contract offered
by the Company on the life of the Insured. The amount at risk to the Company
(i.e., the difference between the Death Benefit and the Account Value) under the
new contract will be equal to or less than the amount at risk to the Company
under the exchanged Contract on the date of exchange. Premiums under the new
Contract will be based on the same risk classification as the exchanged
Contract. The exchange is subject to adjustments in premiums and Account Value
to reflect any variance between the exchanged Contract and the new contract. The
Company reserves the right to make such a contract available that is offered by
the Company's parent or by any affiliate of the Company.
Confinement Waiver Benefit
Under the terms of an amendatory endorsement to the Contract, the Company will
waive any withdrawal charges on partial withdrawals and surrenders of the
Contract requested while the Insured is confined to a qualified long-term care
facility or hospital for a period of more than 90 consecutive days beginning 30
days or more after the issue date, or within 90 days after the Insured is
discharged from such confinement. The confinement must have been prescribed by a
licensed medical doctor or a licensed doctor of osteopathy, operating within the
scope of his or her license, and must be medically necessary. The prescribing
doctor may not be the Insured, the Contract Owner, or any spouse, child, parent,
grandchild, grandparent, sibling or in-law of the Contract Owner. "Medically
necessary" means appropriate and consistent with the diagnosis and which could
not have been omitted without adversely affecting the Insured's condition. The
confinement waiver benefit may not be available in all states. The Company
reserves the right to discontinue the offering of the confinement waiver benefit
amendatory endorsement upon the purchase of a new Contract.
Suspension of Valuation, Payments and Transfers
The Company will suspend all procedures requiring valuation of the Variable
Account (including transfers, surrenders and loans) on any day the New York
Stock Exchange is closed or trading is restricted due to an existing emergency
as defined by the Securities and Exchange Commission, or on any day the
Securities and Exchange Commission has ordered that the right of surrender of
the Contracts be suspended for the protection of Contract Owners, until such
condition has ended.
Last Survivor Contracts
The Contracts are offered on a single life and "last survivor" basis. Contracts
sold on a last survivor basis operate in a manner almost identical to the single
life version. The most important difference is that the last survivor version
involves two Insureds and the proceeds are paid only on the death of the last
surviving Insured. The other significant differences between the last survivor
and single life versions are listed below:
1. Last survivor Contracts are offered for prospective insured persons age
18-85.
2. The cost of insurance charges under the last survivor Contracts are
determined in a manner that reflects the anticipated mortality of the two
Insureds and the fact that the Death Benefit is not payable until the death
of the second Insured.
3. To qualify for simplified underwriting under a last survivor Contract, both
Insureds must meet the simplified underwriting standards.
4. For a last survivor Contract to be reinstated, both Insureds must be alive
on the date of reinstatement.
5. The Contract provisions regarding misstatement of age or sex, suicide and
incontestability apply to either Insured.
6. Additional tax disclosures applicable to last survivor Contracts are
provided in "Federal Tax Matters," page __.
7. The Accelerated Death Benefit provision is only available upon terminal
illness of the last survivor.
8. The Confinement Waiver Benefit is available upon confinement of either
Insured.
OTHER MATTERS
Voting Rights
In accordance with its view of presently applicable law, the Company will vote
the shares of the Funds at regular and special meetings of the shareholders of
the Funds in accordance with instructions from Contract Owners (or the assignee
of the Contract, as the case may be) having a voting interest in the Variable
Account. The number of shares of a Fund Portfolio held in a Variable Sub-Account
which are attributable to each Contract Owner is determined by dividing the
Contract Owner's interest in that Variable Sub-Account by the per share net
asset value of the corresponding Fund Portfolio. The Company will vote shares
for which no instructions have been given and shares which are not attributable
to Contract Owners (i.e., shares owned by the Company) in the same proportion as
it votes shares for which it has received instructions. If the Investment
Company Act of 1940 or any rule promulgated thereunder should be amended,
however, or if the Company's present interpretation should change and, as a
result, the Company determines it is permitted to vote the shares of the Funds
in its own right, it may elect to do so.
The voting interests of the Contract Owner (or the assignee) in the Funds will
be determined as follows: Contract Owners are entitled to give voting
instructions to the Company with respect to Fund Portfolio shares attributable
to them as described above, determined on the record date for the shareholder
meeting for that Fund. Therefore, if a Contract Owner has taken a loan secured
by the Contract, amounts transferred from the Sub-Account(s) to the Loan Account
in connection with the loan (see "Contract Benefits and Rights -- Contract
Loans," page __) will not be considered in determining the voting interests of
the Contract Owner. Contract Owners should review the prospectuses for the Funds
which accompany this prospectus to determine matters on which Fund shareholders
may vote.
The Company may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to cause a change in the sub-classification or investment objective
of one or more of the Funds or to approve or disapprove an investment advisory
contract for the Funds.
In addition, the Company itself may disregard voting instructions in favor of
changes initiated by Contract Owners in the investment objectives or the
investment adviser of the Funds if the Company reasonably disapproves of such
changes. A change would be disapproved only if the proposed change is contrary
to state law or prohibited by state regulatory authorities. If the Company does
disregard voting instructions, a summary of that action and the reasons for such
action will be included in the next periodic report to Contract Owners.
Statements to Contract Owners
The Company will maintain all records relating to the Variable Account and the
Variable Sub-Accounts. At least once each Contract Year, the Company will send
to each Contract Owner a statement showing the coverage amount and the Account
Value of the Contract (indicating the number of Accumulation Units credited to
the Contract in each Variable Sub-Account and the corresponding Accumulation
Unit), and any outstanding loan secured by the Contract as of the date of the
statement. The statement will also show premium paid, Monthly Deduction Amounts
under the Contract since the last statement, and any other information required
by any applicable law or regulation.
Limit on Right to Contest
The Company may not contest the validity of the Contract after it has been in
effect during the Insured's lifetime for two years from the Contract Date. If
the Contract is reinstated, the two-year period is measured from the date of
reinstatement. Any increase in the Specified Amount for which evidence of
insurability was obtained is contestable for 2 years from its effective date. In
addition, if the Insured dies by suicide while sane or self destruction while
insane in the two-year period after the Contract Date, or such period as
specified in state law, the benefit payable will be limited to the premiums paid
less any Indebtedness and partial withdrawals. If the Insured dies by suicide
while sane or self-destruction while insane in the two-year period following an
increase in the Specified Amount, the benefit payable with respect to the
increase will be limited to the additional premium paid for such increase, less
any Indebtedness and partial withdrawals.
Misstatement as to Age and Sex
If the age or sex of the Insured is incorrectly stated, the Death Benefit will
be appropriately adjusted as specified in the Contract.
Payment Options
The surrender proceeds or Death Benefit proceeds under the Contracts may be paid
in a lump sum or may be applied to one of the Company's Income Plans. If the
amount to be applied to an Income Plan is less than $3,000 or if it would result
in an initial income payment of less than $20, the Company may require that the
frequency of income payments be decreased such that the income payments are
greater than $20 each, or it may elect to pay the amount in a lump sum. No
surrender or partial withdrawals are permitted after payments under an Income
Plan commence.
We will pay interest on the proceeds from the date of the Insured's death to the
date payment is made or a payment option is elected. At such times, the proceeds
are not subject to the investment experience of the Variable Account.
The Income Plans are fixed annuities payable from the Company's general account.
They do not reflect the investment experience of the Variable Account. Fixed
annuity payments are determined by multiplying the amount applied to the annuity
by a rate to be determined by the Company which is no less than the rate
specified in the fixed payment annuity tables in the Contract. The annuity
payment will remain level for the duration of the annuity. The Company may
require proof of age and gender of the payee (and joint payee, if applicable)
before payments begin. The Company may also require proof that such person(s)
are living before it makes each payment.
The following options are available under the Contracts (the Company may offer
other payment options):
INCOME PLAN 1 -- Life Income With Guaranteed Payments
The Company will make payments for as long as the payee lives. If the payee
dies before the selected number of guaranteed payments have been made, the
Company will continue to pay the remainder of the guaranteed payments.
INCOME PLAN 2 -- Joint And Survivor Life Income With Guaranteed Payments
The Company will make payments for as long as either the payee or Joint
payee, named at the time of Income Plan selection, is living. If both the
payee and the Joint payee die before the selected number of guaranteed
payments have been made, the Company will continue to pay the remainder of
the guaranteed payments.
The Company will make any other arrangements for income payments as may be
agreed on.
Beneficiary
The applicant names the beneficiary in the application for the Contract. The
Contract Owner may change the beneficiary (unless irrevocably named) during the
Insured's lifetime by written request to the Company. If no beneficiary is
living when the Insured dies, the proceeds will be paid to the Contract Owner if
living; otherwise to the Contract Owner's estate.
Assignment
Unless required by state law, the Contract may not be assigned as collateral for
a loan or other obligation.
Dividends
No dividends will be paid under the Contracts.
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The directors and executive officers of the Company are listed below, together
with information as to their ages, dates of election and principal business
occupations during the last five years (if other than their present business
occupations).
LOUIS G. LOWER, II, 52, Chief Executive Officer and Chairman of the Board
(1995)*
Also Director (1986-Present) and Senior Vice President (1995-Present) of
Allstate Insurance Company; Director (1991-Present) of Allstate Life Financial
Services, Inc.; Director (1986-Present) and President (1990-Present) Allstate
Life Insurance Company; Director (1983-Present) and Chairman of the Board
(1990-Present) of Allstate Life Insurance Company of New York; Director
(1990-1997), Chairman of the Board of Directors and Chief Executive Officer
(1995-1997), Chairman of the Board of Directors and President (1990-1995) of
Glenbrook Life Insurance Company; Director and Chairman of the Board
(1995-Present) of Laughlin Group Holdings, Inc.; Director and Chairman of the
Board of Directors and Chief Executive Officer (1989-Present) Lincoln Benefit
Life Company; Director (1986-Present), Chairman of the Board of Directors and
Chief Executive Officer (1995-Present) of Northbrook Life Insurance Company; and
Chairman of the Board of Directors and Chief Executive Officer (1995-Present)
Surety Life Insurance Company.
PETER H. HECKMAN, 52, President, Chief Operating Officer and Director (1996)*
Also Director and Vice President (1988-Present) of Allstate Life Insurance
Company; Director (1990-1996), Vice President (1989-Present), Allstate Life
Insurance Company of New York; Director (1991-1993) of Allstate Life Financial
Services, Inc.; Director (1990-1997), President and Chief Operating Officer
(1996-1997), and Vice President (1990-1996), Glenbrook Life Insurance Company;
Director (1995-Present) and Vice Chairman of the Board (1996-Present) Laughlin
Group Holdings, Inc.; Director (1990-Present) and Vice Chairman of the Board
(1996-Present) Lincoln Benefit Life Company; Director (1988-Present) President
and Chief Operating Officer (1996-Present), and was Vice President (1989-1996),
Northbrook Life Insurance Company; and Director (1995-Present) and Vice Chairman
of the Board (1996-Present) Surety Life Insurance Company.
MICHAEL J. VELOTTA, 52, Vice President, Secretary, General Counsel, and Director
(1992)*
Also Director and Secretary (1993-Present) of Allstate Life Financial Services,
Inc.; Director (1992-Present) Vice President, Secretary and General Counsel
(1993-Present) Allstate Life Insurance Company; Director (1992-Present) Vice
President, Secretary and General Counsel (1993-Present) Allstate Life Insurance
Company of New York; Director (1992-1997) Vice President, Secretary and General
Counsel (1993-1997) Glenbrook Life Insurance Company; Director and Secretary
(1995-Present) Laughlin Group Holdings, Inc.; Director (1992-Present) and
Assistant Secretary (1995-Present) Lincoln Benefit Life Company; Director
(1992-Present) Vice President, Secretary and General Counsel (1993-Present)
Northbrook Life Insurance Company; and Director and Assistant Secretary
(1995-Present) Surety Life Insurance Company.
JOHN R. HUNTER, 43, Director (1996)*
Also Assistant Vice President (1990-Present) Allstate Life Insurance Company;
Assistant Vice President (1996-Present) Allstate Life Insurance Company of New
York; President and Chief Operating Officer (1998-Present) Allstate Life
Financial Services Inc.; Director (1996-1997) Glenbrook Life Insurance Company;
and Director (1994-Present) and Assistant Vice President (1990-Present)
Northbrook Life Insurance Company.
G. CRAIG WHITEHEAD, 51, Senior Vice President and Director (1995)*
Also Assistant Vice President (1991-Present) Allstate Life Insurance Company;
Director (1994-1997) Assistant Vice President (1991-1997) Glenbrook Life
Insurance Company; Assistant Vice President (1992-Present) Secretary (1995)
Glenbrook Life and Annuity Company; Director (1995-Present) Laughlin Group
Holdings, Inc.
MARLA G. FRIEDMAN, 44, Vice President (1996)*
Also Director (1991-Present) and Vice President (1988-Present) Allstate Life
Insurance Company; Director (1993-1996) Allstate Life Financial Services, Inc.;
Director (1997-Present), and Assistant Vice President (1996-Present) Allstate
Life Insurance Company of New York; Director (1991-1996), President and Chief
Operating Officer (1995-1996) and Vice President (1990-1995) and (1996-1997)
Glenbrook Life Insurance Company; Director and Vice Chairman of the Board
(1995-1996) Laughlin Group Holdings, Inc.; and Director (1989-1996), President
and Chief Operating Officer (1995-1996) and Vice President (1996-Present)
Northbrook Life Insurance Company.
KEVIN R. SLAWIN, 40, Vice President (1996)*
Also Assistant Vice President and Assistant Treasurer (1995-1996) Allstate
Insurance Company; Director (1996-Present) and Assistant Treasurer (1995-1996)
Allstate Life Financial Services, Inc.; Director and Vice President
(1996-Present) and Assistant Treasurer (1995-1996) Allstate Life Insurance
Company; Director and Vice President (1996-Present) and Assistant Treasurer
(1995-1996) Allstate Life Insurance Company of New York; Director and Vice
President (1996-1997) and Assistant Treasurer (1995-1996) Glenbrook Life
Insurance Company; Director (1996-Present) and Assistant Treasurer (1995-1996)
Laughlin Group Holdings, Inc.; Director (1996-Present) Lincoln Benefit Life
Company; Director and Vice President (1996-Present) and Assistant Treasurer
(1995-1996) Northbrook Life Insurance Company; Director (1996-Present) Surety
Life Insurance Company; and Assistant Treasurer and Director (1994-1995) Sears
Roebuck and Co.; and Treasurer and First Vice President (1986-1994) Sears
Mortgage Corporation.
CASEY J. SYLLA, 54, Chief Investment Officer (1995)*
Also Director (1995-Present ) Senior Vice President and Chief Investment Officer
(1995-Present) Allstate Insurance Company; Director (1995-Present) Chief
Investment Officer (1995-Present) Allstate Life Insurance Company; Chief
Investment Officer (1995-Present) Allstate Life Insurance Company of New York;
Chief Investment Officer (1995-1997) Glenbrook Life Insurance Company; and
Director and Chief Investment Officer (1995-Present) Northbrook Life Insurance
Company. Prior to 1995 he was Senior Vice President and Executive
Officer-Investments (1992-1995) of Northwestern Mutual Life Insurance Company.
JAMES P. ZILS, 47, Treasurer (1995)*
Also Vice President and Treasurer (1995-Present) Allstate Insurance Company;
Treasurer (1995-Present) Allstate Life Financial Services, Inc.; Treasurer
(1995-Present) Allstate Life Insurance Company; Treasurer (1995-Present)
Allstate Life Insurance Company of New York; Treasurer (1995-1997) Glenbrook
Life Insurance Company; Treasurer (1995-Present) Laughlin Group Holdings, Inc.;
and Treasurer (1995-Present) Northbrook Life Insurance Company. From 1993 to
1995, he was Vice President of Allstate Life Insurance Company. Prior to 1993,
he held various management positions.
* Date elected to current office.
DISTRIBUTION OF THE CONTRACTS
Allstate Life Financial Services, Inc. ("ALFS"), 3100 Sanders Road, Northbrook
Illinois, a wholly owned subsidiary of Allstate Life, acts as the principal
underwriter of the Contracts. ALFS is registered as a broker-dealer under the
Securities Exchange Act of 1934 and became a member of the National Association
of Securities Dealers, Inc. on June 30, 1993. Contracts are sold by registered
representatives of unaffiliated broker-dealers or bank employees who are
licensed insurance agents appointed by the Company, either individually or
through an incorporated insurance agency and who have entered into a selling
agreement with ALFS and the Company to sell the Contracts. In some states,
Contracts may be sold by representatives or employees of banks which may be
acting as broker-dealers without separate registration under the Securities
Exchange Act of 1934, pursuant to legal and regulatory exceptions.
Commissions paid may vary, but in the aggregate are not anticipated to exceed
7.25% of any purchase payment. These commissions are intended to cover
distribution expenses. In addition, sale of the Contract may count toward
incentive program awards for the registered representative.
The underwriting agreement with ALFS provides for indemnification of ALFS by the
Company for liability to Owners arising out of services rendered or Contracts
issued.
SAFEKEEPING OF THE VARIABLE
ACCOUNT'S ASSETS
The assets of the Variable Account are held by the Company. The assets of the
Variable Account are kept physically segregated and held separate and apart from
the general account of the Company. The Company maintains records of all
purchases and redemptions of shares of the Funds.
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. THE
COMPANY MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax
consequences of ownership or purchase of a life insurance contract depend upon
the individual circumstances of each person. If you are concerned about any tax
consequences with regard to your individual circumstances, you should consult a
qualified tax advisor.
TAXATION OF THE COMPANY AND THE VARIABLE ACCOUNT
The Company is taxed as a life insurance company under Part I of Subchapter L of
the Internal Revenue Code. Since the Variable Account is not an entity separate
from the Company and its operations form a part of the Company, it will not be
taxed separately as a "Regulated Investment Company" under Subchapter M of the
Code. Investment income and realized capital gains are automatically applied to
increase reserves under the Contracts. Under existing federal income tax law,
the Company believes that the Variable Account investment income and net capital
gains will not be taxed to the extent that such income and gains are applied to
increase the reserves under the Contracts. Accordingly, the Company does not
anticipate that it will incur any federal income tax liability attributable to
the Variable Account, and therefore the Company does not intend to make
provisions for any such taxes. If the Company is taxed on investment income or
capital gains of the Variable Account, then the Company may impose a charge
against the Variable Account in order to make provision for such taxes.
TAXATION OF CONTRACT BENEFITS
In order to qualify as a life insurance contract for federal income tax
purposes, the Contract must meet the definition of a life insurance contract set
forth in Section 7702 of the Code. Section 7702 limits the amount of premiums
that may be invested in a contract that is treated as life insurance. The manner
in which Section 7702 should be applied to certain features of the Contract
offered in this prospectus is not directly addressed in Section 7702.
Nevertheless, the Company believes that the Contact will meet the Section 7702
definition of a life insurance contract. This means that:
- the death benefit should be fully excludable from the gross income of
the beneficiary under Section 101(a)(1) of the Code; and
- the Contract Owner should not be considered in constructive receipt of
the Cash Value of the Contract, including any increases, until actual
cancellation of the Contract
In addition, in the absence of final regulations or other pertinent
interpretations of Section 7702, there is necessarily some uncertainty as to
whether a substandard risk Contract will meet the statutory life insurance
contract definition. If a Contract were determined not to be a life insurance
contract for purposes of Section 7702, such Contract would not provide most of
the tax advantages normally provided by a life insurance contract. The Company
reserves the right to amend the Contracts to comply with any future changes in
the Code, any regulations or rulings under the Code and any other requirements
imposed by the Internal Revenue Service.
Upon surrender of the Contract, the cash surrender value is taxable to the
extent it exceeds the investment in the Contract. The investment in the Contract
is the gross premium or other consideration paid for the Contract reduced by any
amounts previously received from the Contract to the extent such amounts were
properly excluded from gross income. For non-modified endowment contracts, in
the event of a partial withdrawal, or a reduction in benefit in the first
fifteen years of the Contract, the partial withdrawal or reduction in benefit
may result in a taxable distribution of income before recovery of the investment
in the Contract. Partial withdrawals and reduction in benefits on non-modified
endowment contracts after fifteen years are taxed first as a recovery of
investment in the Contract, then as a taxable distribution of income.
If you own and are the Insured under the Contract, the Death Benefit will be
included in your gross estate for federal estate tax purposes if the proceeds
are payable to your estate. If the beneficiary is other than your estate but you
retained incidents of ownership in the Contract, the Death Benefit will also be
included in your gross estate. Examples of incidents of ownership include, but
are not limited to, the right to change beneficiaries, to assign the Contract or
revoke an assignment, to pledge the Contract or to obtain a policy loan. If you
own and are the Insured under the Contract and you transfer all incidents of
ownership in the Contract, the Death Benefit will be included in your gross
estate if you die within three years from the date of the ownership transfer.
State and local estate and inheritance tax consequences may also apply. In
addition, certain transfers of the Contract or Death Benefit, either during life
or at death, to individuals (or trusts for the benefit of such individuals) two
or more generations below that of the transferor may be subject to the federal
generation skipping transfer tax.
In addition, the Contract may be used in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, retiree medical benefit plans, and
others. The tax consequences of such plans may vary depending on the particular
facts and circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Contract in any arrangement the value of which
depends in part on its tax consequences, you should be sure to consult a
qualified tax advisor regarding the tax attributes of the particular
arrangement.
MODIFIED ENDOWMENT CONTRACTS
A life insurance contract is treated as a "modified endowment contract" under
Section 7702A of the Code if it meets the definition of life insurance in
Section 7702 but fails the "seven-pay" test of Section 7702A. The seven-pay test
provides that premiums cannot be paid at a rate more rapidly than that allowed
by the payment of seven annual premiums using specified computational rules
provided in Section 7702A(c). The large single premium permitted under the
Contract (which is equal to 100% of the "Guideline Single Premium" as defined in
Section 7702 of the Code) does not meet the specified computational rules for
the "seven-pay test" under Section 7702A(c). Therefore, the Contract will
generally be treated as a modified endowment contract for federal income tax
purposes. However, an exchange of a life insurance contract that is not a
modified endowment contract will not cause the new contract to be a modified
endowment contract if no additional premiums are paid. An exchange under Section
1035 of the Code of a life insurance contract that is a modified endowment
contract for a new life insurance contract will always cause the new contract to
be a modified endowment contract. A contract that is classified as a modified
endowment contract is generally eligible for the beneficial tax treatment
accorded to life insurance. Accordingly, the death benefit is excluded from
income and increments in value are not subject to current taxation. If a person
receives any amount as a policy loan from a modified endowment contract, or
assigns or pledges any part of the value of the contract, such amount is treated
as a distribution. Unlike other life insurance contracts, distributions received
before the insured's death are treated first as income (to the extent of gain)
and then as recovery of investment in the contract. Any amounts that are taxable
withdrawals will be subject to a 10% additional tax, with certain exceptions:
(1) distributions made on or after the date on which the taxpayer attains age 59
1/2; (2) distributions attributable to the taxpayer's becoming disabled (within
the meaning of Section 72(m)(7) of the Code); or (3) any distribution that is
part of a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the taxpayer or the
joint lives (or joint life expectancies) of such taxpayer and his or her
beneficiary.
All modified endowment contracts that are issued within any calendar year to the
same Contract Owner by one company or its affiliates shall be treated as one
modified endowment contract in determining the taxable portion of any loan or
distributions.
<PAGE>
DIVERSIFICATION REQUIREMENTS
For a Contract to be treated as a variable life insurance contract for federal
tax purposes, the investments in the Variable Account must be "adequately
diversified" in accordance with the standards provided in the Treasury
regulations. If the investments in the Variable Account are not adequately
diversified, then the Contract will not be treated as a variable life insurance
contract for federal income tax purposes and the Owner will be taxed on the
excess of the Contract Value over the investment in the Contract. Although the
Company does not have control over the Funds or their investments, the Company
expects the Funds to meet the diversification requirements.
OWNERSHIP TREATMENT
In connection with the issuance of the regulations on the adequate
diversification standards, the Department of the Treasury announced that the
regulations do not provide guidance concerning the extent to which contract
owners may direct their investments among sub-accounts of a separate account.
The Internal Revenue Service has previously stated in published rulings that a
variable contract owner will be considered the owner of separate account assets
if the owner possesses incidents of ownership in those assets such as the
ability to exercise investment control over the assets. At the time the
diversification regulations were issued, the Treasury Department announced that
guidance would be issued in the future regarding the extent that owners could
direct their investments among sub-accounts without being treated as owners of
the underlying assets of the separate account.
The ownership rights under the Contract described in this prospectus are similar
to, but different in certain respects from, those described by the service in
rulings in which it was determined that contract owners were not owners of
separate account assets. For example, the owner of the Contract has the choice
of more investment options to which to allocate premiums and Contract values,
and may be able to transfer among investment options more frequently than in
such rulings. These differences could result in the Contract Owner being treated
as the owner of the Variable Account. In those circumstances, income and gain
from the Variable Account assets would be includible in the Contract Owner's
gross income. In addition, the Company does not know what standards will be set
forth in the regulations or rulings which the Treasury Department has stated it
expects to issue. It is possible that Treasury Department's position, when
announced, may adversely affect the tax treatment of existing contracts. The
Company, therefore, reserves the right to modify the contract as necessary to
attempt to prevent the Contract Owner from being considered the federal tax
owner of the assets of the Variable Account. However, the Company makes no
guarantee that such modification to the contract will be successful.
POLICY LOAN INTEREST
Interest paid on loans against a Contract is generally not deductible.
ADDITIONAL INFORMATION ABOUT THE COMPANY
The Company also acts as the sponsor for three other of its separate accounts
that are registered investment companies: Glenbrook Life and Annuity Company
Variable Annuity Account, Glenbrook Life and Annuity Company Separate Account A,
Glenbrook Life AIM Variable Life Separate Account A and Glenbrook Life
Multi-Manager Variable Account. The officers and employees of the Company are
covered by a fidelity bond in the amount of $5,000,000. No person beneficially
owns more than 5% of the outstanding voting stock of The Allstate Corporation,
of which the Company is an indirect wholly owned subsidiary.
LEGAL PROCEEDINGS
From time to time the Company is involved in pending and threatened litigation
in the normal course of its business in which claims for monetary damages are
asserted. Management, after consultation with legal counsel, does not anticipate
the ultimate liability arising from such pending or threatened litigation to
have a material effect on the financial condition of the Company or the Variable
Account.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised the Company on
certain federal securities law matters. All matters of Illinois law pertaining
to the Contracts, including the validity of the Contracts and the Company's
right to issue such Contracts under Illinois insurance law, have been passed
upon by Michael J. Velotta, General Counsel of the Company.
REGISTRATION STATEMENT
A registration statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. This Prospectus does
not contain all information set forth in the registration statement, its
amendments and exhibits, to all of which reference is made for further
information concerning the Variable Account, the Funds, the Company, and the
Contracts. The exhibits to the registration statement include hypothetical
illustrations of the Contract that show how the Death Benefit, Account Value and
Cash Surrender Value could vary over an extended period of time assuming
hypothetical gross rates of return (i.e., investment income and capital gains
and losses, realized or unrealized) for the Variable Account equal to annual
rates of 0%, 6%, and 12%, an initial premium of $10,000, Insureds in the
standard rating class, and based on current and guaranteed Contract charges.
Personalized illustrations provided by the Company upon request will be based on
the methodology and format of these hypothetical illustrations as appropriate.
EXPERTS
The financial statements of the Variable Account and the financial statements
and financial statement schedule of the Company included in this prospectus,
have been audited by Deloitte & Touche LLP, Two Prudential Plaza, 180 North
Stetson Avenue, Chicago, Illinois 60601-6779, independent auditors, as stated in
their reports appearing herein and incorporated by reference in this prospectus,
and are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The hypothetical Contract illustrations included in the Company's registration
statement have been approved by Diana Montigney, FSA, Allstate Life Insurance
Company, and are included in reliance upon her opinion as to their
reasonableness.
FINANCIAL INFORMATION
The financial statements of the Company and the Variable Account appear
immediately below. The financial statements for the Company should be considered
as bearing only on the ability of the Company to fulfill its obligations under
the Contracts. They do not relate to the investment performance of the Variable
Account.
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
GLENBROOK LIFE AND ANNUITY COMPANY:
We have audited the accompanying Statements of Financial Position of Glenbrook
Life and Annuity Company (the "Company") as of December 31, 1997 and 1996, and
the related Statements of Operations, Shareholder's Equity and Cash Flows for
each of the three years in the period ended December 31, 1997. Our audits also
included Schedule IV - Reinsurance. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule 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, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1997 and
1996, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles. Also, in our opinion, Schedule IV - Reinsurance,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
February 20, 1998
F-1
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31,
------------
($ in thousands) 1997 1996
---------------- ----------------
<S> <C> <C>
ASSETS
Investments
Fixed income securities, at fair value
(amortized cost $81,369 and $46,925) $ 86,243 $ 49,389
Short-term 4,231 1,287
--------------- ---------------
Total investments 90,474 50,676
Reinsurance recoverable from Allstate Life Insurance
Company 2,637,983 2,060,419
Net receivable from affiliates - 18,963
Other assets 2,549 2,049
Separate Accounts 620,535 272,420
--------------- ---------------
Total assets $ 3,351,541 $ 2,404,527
=============== ===============
LIABILITIES
Contractholder funds $ 2,637,983 $ 2,060,419
Income taxes payable 609 410
Deferred income taxes 1,772 1,528
Net payable to affiliates 2,698 -
Separate Accounts 620,535 260,290
--------------- ---------------
Total liabilities 3,263,597 2,322,647
=============== ===============
SHAREHOLDER'S EQUITY
Common stock, $500 par value, 4,200 shares
authorized, issued, and outstanding 2,100 2,100
Additional capital paid-in 69,641 69,641
Unrealized net capital gains 3,168 2,790
Retained income 13,035 7,349
--------------- ---------------
Total shareholder's equity 87,944 81,880
--------------- ---------------
Total liabilities and shareholder's equity $ 3,351,541 $ 2,404,527
=============== ===============
</TABLE>
See notes to financial statements.
F-2
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
($ in thousands) 1997 1996 1995
---------------- --------------- ----------------
<S> <C> <C> <C>
REVENUES
Net investment income $ 5,304 $ 3,774 $ 3,996
Realized capital gains and losses 3,460 - 459
---------------- --------------- ----------------
INCOME BEFORE INCOME TAX EXPENSE 8,764 3,774 4,455
INCOME TAX EXPENSE 3,078 1,339 1,576
---------------- --------------- ----------------
NET INCOME $ 5,686 $ 2,435 $ 2,879
================ =============== ================
</TABLE>
See notes to financial statements.
F-3
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
($ in thousands) 1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
COMMON STOCK $ 2,100 $ 2,100 $ 2,100
--------------- --------------- ---------------
ADDITIONAL CAPITAL PAID-IN
Balance, beginning of year 69,641 49,641 49,641
Capital contributions - 20,000 -
--------------- --------------- ---------------
Balance, end of year 69,641 69,641 49,641
--------------- --------------- ---------------
UNREALIZED NET CAPITAL GAINS
Balance, beginning of year 2,790 3,357 (1,118)
Net change 378 (567) 4,475
--------------- --------------- ---------------
Balance, end of year 3,168 2,790 3,357
--------------- --------------- ---------------
RETAINED INCOME
Balance, beginning of year 7,349 4,914 2,035
Net income 5,686 2,435 2,879
--------------- --------------- ---------------
Balance, end of year 13,035 7,349 4,914
--------------- --------------- ---------------
Total shareholder's equity $ 87,944 $ 81,880 $ 60,012
=============== =============== ===============
</TABLE>
See notes to financial statements.
F-4
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
($ in thousands) 1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,686 $ 2,435 $ 2,879
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation, amortization and other non-cash
items 29 - -
Realized capital gains and losses (3,460) - (459)
Change in deferred income taxes 41 4 (39)
Changes in other operating assets and liabilities 1,160 (510) 1,217
------------ ------------ ------------
Net cash provided by operating activities 3,456 1,929 3,598
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed income securities
Proceeds from sales 1,405 - 7,836
Investment collections 14,217 2,891 1,568
Investment purchases (50,115) (5,667) (1,491)
Participation in Separate Accounts 13,981 (232) (10,069)
Change in short-term investments, net (2,944) 815 (1,178)
------------ ------------ ------------
Net cash used in investing activities (23,456) (2,193) (3,334)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contribution 20,000 - -
------------ ------------ ------------
Net cash provided by financing activities 20,000 - -
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH - (264) 264
CASH AT BEGINNING OF YEAR - 264 -
------------ ------------ ------------
CASH AT END OF YEAR $ - $ - $ 264
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Noncash financing activity:
Capital contribution receivable from
Allstate Life Insurance Company $ - $ 20,000 $ -
============ ============ ============
</TABLE>
See notes to financial statements.
F-5
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. General
Basis of presentation
The accompanying financial statements include the accounts of Glenbrook Life and
Annuity Company (the "Company"), a wholly owned subsidiary of Allstate Life
Insurance Company ("ALIC"), which is wholly owned by Allstate Insurance Company
("AIC"), a wholly owned subsidiary of The Allstate Corporation (the
"Corporation"). On June 30, 1995, Sears, Roebuck and Co. ("Sears") distributed
its 80.3% ownership in the Corporation to Sears common shareholders through a
tax-free dividend (the "Distribution"). These financial statements have been
prepared in conformity with generally accepted accounting principles.
To conform with the 1997 presentation, certain amounts in the prior years'
financial statements and notes have been reclassified.
Nature of operations
The Company markets life insurance and annuity products in the United States
through banks and broker-dealers. Life insurance includes both
interest-sensitive and variable life insurance products. Annuities include
deferred annuities, such as variable annuities and fixed rate flexible premium
annuities. The Company has entered into exclusive distribution arrangements with
management investment companies to market its variable annuity contracts.
Annuity contracts and life insurance policies issued by the Company are subject
to discretionary withdrawal or surrender by customers, subject to applicable
surrender charges. These policies and contracts are reinsured with ALIC (see
Note 3), which invests premiums and deposits to provide cash flows that will be
used to fund future benefits and expenses. In order to support competitive
crediting rates and limit interest rate risk, ALIC , as the Company's reinsurer,
adheres to a basic philosophy of matching assets with related liabilities while
maintaining adequate liquidity and a prudent and diversified level of credit
risk.
The Company monitors economic and regulatory developments which have the
potential to impact its business. There continues to be new and proposed federal
and state regulation and legislation that would allow banks greater
participation in the securities and insurance businesses, which will present an
increased level of competition for sales of the Company's life and annuity
products. Furthermore, the market for deferred annuities and interest-sensitive
life insurance is enhanced by the tax incentives available under current law.
Any legislative changes which lessen these incentives are likely to negatively
impact the demand for these products.
Although the Company currently benefits from agreements with financial services
entities who market and distribute its products, consolidation within that
industry and specifically, a change in control of those entities with which the
Company partners, could affect the Company's sales.
Enacted and pending state legislation to permit mutual insurance companies to
convert to a hybrid structure known as a mutual holding company could have a
number of significant effects on the Company by (1) increasing industry
competition through consolidation caused by mergers and acquisitions related to
the new corporate form of business; (2) increasing competition in capital
markets; and (3) reopening stock/mutual company disagreements related to such
issues as taxation disparity between mutual and stock insurance companies.
The Company is authorized to sell life and annuity products in all states except
New York, as well as in the District of Columbia. The Company is also authorized
to sell variable annuities in Puerto Rico. The top geographic locations for
statutory premiums and deposits earned by the Company are Florida, Pennsylvania,
California, Texas and Michigan for the year ended December 31, 1997. No other
jurisdiction accounted for more than 5% of statutory premiums and deposits. All
premiums and contract charges are ceded to ALIC under reinsurance agreements.
2. Summary of Significant Accounting Policies
Investments
Fixed income securities include bonds and mortgage-backed securities. All fixed
income securities are carried at fair value and may be sold prior to their
contractual maturity ( "available for sale"). The difference between amortized
cost and fair value, net of deferred income taxes, is reflected as a component
of shareholder's equity. Provisions are recognized for declines in the value of
fixed income securities that are other than temporary. Such writedowns are
included in realized capital gains and losses. Short-term investments are
carried at cost which approximates fair value.
F-6
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
Investment income consists primarily of interest, which is recognized on an
accrual basis. Interest income on mortgage-backed securities is determined on
the effective yield method, based on the estimated principal repayments. Accrual
of income is suspended for fixed income securities that are in default or when
the receipt of interest payments is in doubt. Realized capital gains and losses
are determined on a specific identification basis.
Reinsurance
The Company and ALIC entered into a reinsurance agreement effective June 5,
1992. All business issued subsequent to that date is ceded to ALIC. Life
insurance in force prior to that date is ceded to non-affiliated reinsurers.
Contract charges, credited interest, policy benefits and certain expenses are
ceded to ALIC and reflected net of such cessions in the statements of
operations. The amounts shown in the Company's statements of operations relate
to the investment of those assets of the Company that are not transferred to
ALIC under the reinsurance agreements. Reinsurance recoverable and
contractholder funds are reported separately in the statements of financial
position. The Company continues to have primary liability as the direct insurer
for risks reinsured.
Recognition of premium revenue and contract charges
Revenues on interest-sensitive life insurance policies are comprised of contract
charges and fees, and are recognized when assessed against the policyholder
account balance. Revenues on annuities, which are considered investment
contracts, include contract charges and fees for contract administration and
surrenders. These revenues are recognized when levied against the contract
balance.
Income taxes
The income tax provision is calculated under the liability method. Deferred tax
assets and liabilities are recorded based on the difference between the
financial statement and tax bases of assets and liabilities at the enacted tax
rates, and reflect the impact of reinsurance agreements. Deferred income taxes
arise primarily from unrealized capital gains and losses on fixed income
securities carried at fair value.
Separate Accounts
The Company issues flexible premium deferred variable annuity contracts and
single premium variable life policies, the assets and liabilities of which are
legally segregated and reflected in the accompanying statements of financial
position as assets and liabilities of the Separate Accounts (Glenbrook Life and
Annuity Company Variable Annuity Account, Glenbrook Life and Annuity Company
Separate Account A, Glenbrook Life Multi-Manager Variable Account and Glenbrook
Life Variable Life Separate Account A, unit investment trusts registered with
the Securities and Exchange Commission).
Assets of the Separate Accounts, including the Company's ownership interest
("Participation"), are carried at fair value. Unrealized gains and losses on the
Company's Participation, net of deferred income taxes, are shown as a component
of shareholder's equity. Investment income and realized capital gains and losses
arising from the Participation are included in the Company's statements of
operations. The Company liquidated its Participation during 1997, resulting in a
realized capital gain of $3,515. At December 31, 1996, the Participation
amounted to $12,130.
Investment income and realized capital gains and losses of the Separate
Accounts, other than the portion related to the Participation, accrue directly
to the contractholders and, therefore, are not included in the Company's
statements of operations. Revenues to the Company from the Separate Accounts
consist of contract maintenance fees, administrative fees, mortality and expense
risk charges, cost of insurance charges and tax expense charges, all of which
are ceded to ALIC.
Contractholder funds
Contractholder funds arise from the issuance of individual or group policies and
contracts that include an investment component, including most annuities and
universal life policies. Payments received are recorded as interest-bearing
liabilities. Contractholder funds are equal to deposits received and interest
credited to the benefit of the customer less withdrawals, mortality charges and
administrative expenses. During 1997, credited interest rates on contractholder
funds ranged from 3.55% to 7.45% for those contracts with fixed interest rates
and from 3.70% to 7.85% for those with flexible rates.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
F-7
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
3. Related Party Transactions
Reinsurance
Contract charges ceded to ALIC were $11,641, $4,254 and $1,523 in 1997, 1996 and
1995, respectively. Credited interest, policy benefits and expenses ceded to
ALIC amounted to $179,954, $113,703 and $71,905 in 1997, 1996 and 1995,
respectively. Investment income earned on the assets which support
contractholder funds is not included in the Company's financial statements as
those assets are owned and managed by ALIC under the terms of reinsurance
agreements.
Business operations
The Company utilizes services and business facilities owned or leased, and
operated by AIC in conducting its business activities. The Company reimburses
AIC for the operating expenses incurred by AIC on behalf of the Company. The
cost to the Company is determined by various allocation methods and is primarily
related to the level of services provided. Operating expenses, including
compensation and retirement and other benefit programs, allocated to the Company
were $5,959, $759 and $348 in 1997, 1996 and 1995, respectively. Of these costs,
the Company retains investment related expenses. All other costs are ceded to
ALIC under reinsurance agreements.
Laughlin Group
Laughlin Group, Inc. ("Laughlin") is an indirect wholly owned subsidiary of
ALIC. Laughlin markets certain of the Company's flexible premium deferred
variable annuity contracts and flexible premium deferred fixed annuity
contracts. Sales commissions paid to Laughlin, for which the related cost was
ceded to ALIC, were $945 and $8,623 during 1997 and 1996, respectively. The
Company had a receivable of $850 from Laughlin at December 31, 1996, which is
included in net receivable from affiliates in the statements of financial
position.
4. Investments
Fair values
The amortized cost, gross unrealized gains and losses, and fair value for fixed
income securities are as follows:
<TABLE>
<CAPTION>
Gross Unrealized
----------------
Amortized Fair
Cost Gains Losses Value
--------- ----- --------- ----------
<S> <C> <C> <C> <C>
At December 31, 1997
U.S. government and agencies $ 24,419 $ 2,961 $ - $ 27,380
Municipal 656 17 - 673
Corporate 25,476 840 - 26,316
Mortgage-backed securities 30,818 1,056 - 31,874
-------- ------- --------- --------
Total fixed income securities $ 81,369 $ 4,874 $ - $ 86,243
======== ======= ========= ========
At December 31, 1996
U.S. government and agencies $ 24,265 $ 1,722 $ (3) $ 25,984
Corporate 6,970 96 (15) 7,051
Mortgage-backed securities 15,690 664 - 16,354
-------- ------- --------- --------
Total fixed income securities $ 46,925 $ 2,482 $ (18) $ 49,389
======== ======= ========= ========
</TABLE>
F-8
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
Scheduled maturities
The scheduled maturities for fixed income securities are as follows at December
31, 1997:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
--------- -----
<S> <C> <C>
Due in one year or less $ 400 $ 400
Due after one year through five years 3,838 3,877
Due after five years through ten years 33,245 35,102
Due after ten years 13,068 14,990
----------- ------------
50,551 54,369
Mortgage-backed securities 30,818 31,874
----------- ------------
Total $ 81,369 $ 86,243
=========== ============
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
<TABLE>
<CAPTION>
Net investment income
Year Ended December 31, 1997 1996 1995
----------------------- ---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 5,014 $ 3,478 $ 3,850
Short-term investments 231 126 113
Participation in Separate Accounts 161 232 69
-------------- -------------- --------------
Investment income, before expense 5,406 3,836 4,032
Investment expense 102 62 36
-------------- -------------- --------------
Net investment income $ 5,304 $ 3,774 $ 3,996
============== ============== ==============
</TABLE>
Realized capital gains and losses
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995
----------------------- ---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ (61) $ - $ 459
Short-term investments 6 - -
Participation in Separate Accounts 3,515 - -
------------- ------------- -------------
Realized capital gains and losses 3,460 - 459
Income taxes (1,211) - (161)
------------- ------------- -------------
Realized capital gains and losses,
after tax $ 2,249 $ - $ 298
============= ============= =============
</TABLE>
Excluding calls and prepayments, gross losses of $61 and gross gains of $459
were realized on sales of fixed income securities during 1997 and 1995,
respectively.
F-9
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
Unrealized net capital gains
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Cost/ Unrealized
Amortized Fair Net
Cost Value Gains
--------- ----- -----------
<S> <C> <C> <C>
Fixed income securities $ 81,369 $ 86,243 $ 4,874
Deferred income taxes ======== ======== (1,706)
-------
Unrealized net capital gains $ 3,168
=======
</TABLE>
Change in unrealized net capital gains
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995
- ----------------------- ---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 2,410 $ (2,239) $ 6,423
Participation in Separate Accounts (1,829) 1,368 461
Deferred income taxes (203) 304 (2,409)
------------- ------------- -------------
Increase (decrease) in unrealized net capital gains $ 378 $ (567) $ 4,475
============= ============== =============
</TABLE>
Securities on deposit
At December 31, 1997, fixed income securities with a carrying value of
$10,108 were on deposit with regulatory authorities as required by law.
5. Financial Instruments
In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value estimates of
financial instruments presented below are not necessarily indicative of the
amounts the Company might pay or receive in actual market transactions.
Potential taxes and other transaction costs have not been considered in
estimating fair value. The disclosures that follow do not reflect the fair value
of the Company as a whole since a number of the Company's significant assets
(including reinsurance recoverable) and liabilities (including deferred income
taxes) are not considered financial instruments and are not carried at fair
value. Other assets and liabilities considered financial instruments, such as
accrued investment income, are generally of a short-term nature. It is assumed
that their carrying value approximates fair value.
F-10
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
Financial assets
The carrying value and fair value of financial assets at December 31, are as
follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
Carrying Fair Carrying Fair
Value Value Value Value
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Fixed income securities $ 86,243 $ 86,243 $ 49,389 $ 49,389
Short-term investments 4,231 4,231 1,287 1,287
Separate Accounts 620,535 620,535 272,420 272,420
</TABLE>
Fair values for fixed income securities are based on quoted market prices.
Short-term investments are highly liquid investments with maturities of less
than one year whose carrying value approximates fair value.
Separate Accounts assets are carried in the statements of financial position at
fair value.
Financial liabilities
The carrying value and fair value of financial liabilities at December 31, are
as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
Carrying Fair Carrying Fair
Value Value Value Value
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Contractholder funds on
investment contracts $2,636,331 $2,492,095 $2,059,642 $1,949,329
Separate Accounts 620,535 620,535 260,290 260,290
</TABLE>
The fair value of contractholder funds on investment contracts is based on the
terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms is
estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Accounts liabilities are carried at the fair value of the underlying assets.
F-11
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
6. Income Taxes
For 1996 and 1995, the Company filed a separate federal income tax return. The
Company will join the Corporation and its other eligible domestic subsidiaries
in the filing of a consolidated federal income tax return (the "Allstate Group")
for 1997 and is party to a federal income tax allocation agreement (the "Tax
Sharing Agreement"). Under the Tax Sharing Agreement, the Company paid to or
received from the Corporation the amount, if any, by which the Allstate Group's
federal income tax liability was affected by virtue of inclusion of the Company
in the consolidated federal income tax return. Effectively, this results in the
Company's annual income tax provision being computed, with adjustments, as if
the Company filed a separate return.
Prior to the Distribution, the Corporation and all of its eligible domestic
subsidiaries, including the Company, joined with Sears and its domestic business
units (the "Sears Group") in the filing of a consolidated federal income tax
return (the "Sears Tax Group") and were parties to a federal income tax
allocation agreement (the "Sears Tax Sharing Agreement"). Under the Sears Tax
Sharing Agreement, the Company, through the Corporation, paid to or received
from the Sears Group the amount, if any, by which the Sears Tax Group's federal
income tax liability was affected by virtue of inclusion of the Company in the
consolidated federal income tax return. Effectively, this resulted in the
Company's annual income tax provision being computed as if the Allstate Group
filed a separate consolidated return, except that items such as net operating
losses, capital losses or similar items, which might not be recognized in a
separate return, were allocated according to the Sears Tax Sharing Agreement.
The Allstate Group and Sears Group have entered into an agreement which governs
their respective rights and obligations with respect to federal income taxes for
all periods prior to the Distribution ("Consolidated Tax Years"). The agreement
provides that all Consolidated Tax Years will continue to be governed by the
Sears Tax Sharing Agreement with respect to the Allstate Group's federal income
tax liability.
The components of the deferred income tax liability at December 31, are as
follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Unrealized net capital gains on fixed income securities $ 1,706 $ 1,503
Difference in tax bases of investments 66 25
------------- -------------
Total deferred liability $ 1,772 $ 1,528
============= =============
</TABLE>
F-12
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
The components of income tax expense for the year ended December 31, are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- --------- --------
<S> <C> <C> <C>
Current $ 3,037 $ 1,335 $ 1,615
Deferred 41 4 (39)
------- ------- -------
Total income tax expense $ 3,078 $ 1,339 $ 1,576
======= ======= =======
</TABLE>
The Company paid income taxes of $2,839, $2,446 and $866 in 1997, 1996 and 1995,
respectively.
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Other .1 .5 .4
---- ---- ----
Effective federal income tax rate 35.1% 35.5% 35.4%
==== ==== ====
</TABLE>
F-13
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
7. Statutory Financial Information
The following tables reconcile net income for the year ended December 31, and
shareholder's equity at December 31, as reported herein in conformity with
generally accepted accounting principles with statutory net income and capital
and surplus, determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities:
<TABLE>
<CAPTION>
Net Income
----------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance per generally accepted accounting principles $ 5,686 $ 2,435 $ 2,879
Deferred income taxes 41 4 (39)
Unrealized gain on participation in
Separate Accounts (1,829) 1,368 -
Statutory investment reserves 93 35 (279)
Other (354) (85) 108
----------- ------------ ------------
Balance per statutory accounting practices $ 3,637 $ 3,757 $ 2,669
=========== ============ ============
Shareholder's Equity
--------------------
1997 1996
---- ----
Balance per generally accepted accounting principles $ 87,944 $ 81,880
Deferred income taxes 1,772 1,528
Unrealized gain/loss on fixed income securities (4,874) (2,464)
Non-admitted assets (86) (850)
Statutory investment reserves 958 (2,282)
Other (3,114) (2,118)
---------- ------------
Balance per statutory accounting practices $ 82,600 $ 75,694
========== ============
</TABLE>
Permitted statutory accounting practices
The Company prepares its statutory financial statements in accordance with
accounting principles and practices prescribed or permitted by the Illinois
Department of Insurance. Prescribed statutory accounting practices include a
variety of publications of the National Association of Insurance Commissioners
("NAIC"), as well as state laws, regulations and general administrative rules.
Permitted statutory accounting practices encompass all accounting practices not
so prescribed. The Company does not follow any permitted statutory accounting
practices that have a material effect on statutory surplus, statutory net income
or risk-based capital.
Final approval of the NAIC's proposed "Comprehensive Guide" on statutory
accounting principles is expected in early 1998. The requirements may be
effective as early as January 1, 1999, and are not expected to have a material
impact on statutory surplus of the Company.
Dividends
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. The payment
of shareholder dividends by insurance companies without the prior approval of
the state insurance regulator is limited to formula amounts based on net income
and capital and surplus, determined in accordance with statutory accounting
practices, as well as the timing and amount of dividends paid in the preceding
twelve months. The maximum amount of dividends that the Company can distribute
during 1998 without prior approval of the Illinois Department of Insurance is
$8,050.
F-14
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
SCHEDULE IV--REINSURANCE
($ in thousands)
<TABLE>
<CAPTION>
Gross Net
Year Ended December 31, 1997 amount Ceded amount
- ---------------------------- --------- ------------ --------
<S> <C> <C> <C>
Life insurance in force $ 4,095 $ 4,095 $ -
================== ================== ==================
Premiums and contract charges:
Life and annuities $ 11,641 $ 11,641 $ -
================== ================== ==================
Gross Net
Year Ended December 31, 1996 amount Ceded amount
- ---------------------------- --------- ------------ --------
Life insurance in force $ 2,436 $ 2,436 $ -
================== ================== ==================
Premiums and contract charges:
Life and annuities $ 4,254 $ 4,254 $ -
================== =================== ==================
Gross Net
Year Ended December 31, 1995 amount Ceded amount
- ---------------------------- --------- ------------ --------
Life insurance in force $ 1,250 $ 1,250 $ -
================== ================== ==================
Premiums and contract charges:
Life and annuities $ 6,571 $ 6,571 $ -
================== ================== ==================
</TABLE>
F-15
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Glenbrook Life and Annuity Company:
We have audited the accompanying statement of net assets of Glenbrook Life
Variable Life Separate Account A (the "Account") as of December 31, 1997, and
the related statements of operations and changes in net assets for the period
from December 29, 1997 (date operations commenced) to December 31, 1997, of the
American Century VP Balanced and American Century VP International portfolios of
the American Century Variable Portfolios, Inc., the VIS Dividend Growth, VIS
European Growth, VIS Quality Income Plus, and VIS Utilities portfolios of the
Dean Witter Variable Investment Series, the VIF Growth and Income, VIF Money
Market, and VIF Small Company Stock portfolios of the Dreyfus Variable
Investment Fund, The Dreyfus Socially Responsible Growth Fund, Inc. portfolio,
the VIP Growth and VIP High Income portfolios of the Fidelity Variable Insurance
Products Fund, the VIP II Contrafund portfolio of the Fidelity Variable
Insurance Products Fund II, and the MFS Emerging Growth Series and MFS Limited
Maturity Series portfolios of the MFS Variable Insurance Trust that comprise the
Account. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1997. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Account as of December 31, 1997, the
results of its operations and the changes in its net assets for the period from
December 29, 1997 (date operations commenced) to December 31, 1997, of each of
the portfolios comprising the Account, in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 20, 1998
F-16
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSETS
Investments in the American Century Variable Portfolios, Inc. Portfolios:
American Century VP Balanced, 6,126 shares (cost $50,358) $ 50,480
American Century VP International, 0 shares (cost $0) -
Investments in the Dean Witter Variable Investment Series Portfolios:
VIS Dividend Growth, 0 shares (cost $0) -
VIS European Growth, 0 shares (cost $0) -
VIS Quality Income Plus, 0 shares (cost $0) -
VIS Utilities, 0 shares (cost $0) -
Investments in the Dreyfus Variable Investment Fund Portfolios:
VIF Growth and Income, 2,456 shares (cost $50,616) 51,034
VIF Money Market, 75,440 shares (cost $75,440) 75,440
VIF Small Company Stock, 0 shares (cost $0) -
Investment in The Dreyfus Socially Responsible Growth Fund, Inc.,
0 shares (cost $0) -
Investments in the Fidelity Variable Insurance Products Fund Portfolios:
VIP Growth, 1,380 shares (cost $50,867) 51,184
VIP High Income, 0 shares (cost $0) -
Investment in the Fidelity Variable Insurance Products Fund II Portfolio:
VIP II Contrafund, 0 shares (cost $0) -
Investments in the MFS Variable Insurance Trust Portfolios:
MFS Emerging Growth Series, 0 shares (cost $0) -
MFS Limited Maturity Series, 5,603 shares (cost $56,085) 56,085
---------
Net assets $ 284,223
=========
See notes to financial statements.
</TABLE>
F-17
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM DECEMBER 29, 1997 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1997
- ------------------------------------------------------------------
American Century Variable
Portfolios, Inc. Portfolios
-------------------------------------
American American
Century Century
VP Balanced VP International
-------------------------------------
INVESTMENT INCOME
Dividends $ -- $ --
Charges from Glenbrook Life
and Annuity Company:
Mortality and expense risk (1) --
Administative expense -- --
--------- ---------
Net investment income (loss) (1) --
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains from sales of investments:
Proceeds from sales 1 --
Cost of investments sold (1) --
--------- ---------
Net realized gains -- --
Change in unrealized gains 122 --
--------- ---------
Net gains on investments 122 --
--------- ---------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ 121 $ --
========= =========
F-18
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS (CONTINUED)
FOR THE PERIOD FROM DECEMBER 29, 1997 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1997
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
Dean Witter Variable Investment Series Portfolios
----------------------------------------------------------------------
VIS Dividend VIS European VIS Quality
Growth Growth Income Plus VIS Utilities
----------------------------------------------------------------------
INVESTMENT INCOME
<S> <C> <C> <C> <C>
Dividends $ -- $ -- $ -- $ --
Charges from Glenbrook Life
and Annuity Company:
Mortality and expense risk -- -- -- --
Administative expense -- -- -- --
--------- ----------- ----------- ---------
Net investment income (loss) -- -- -- --
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains from sales of investments:
Proceeds from sales -- -- -- --
Cost of investments sold -- -- -- --
--------- ----------- ----------- ---------
Net realized gains -- -- -- --
Change in unrealized gains -- -- -- --
--------- ----------- ----------- ---------
Net gains on investments -- -- -- --
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ -- $ -- $ -- $ --
========= =========== =========== =========
</TABLE>
F-19
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS (CONTINUED)
FOR THE PERIOD FROM DECEMBER 29, 1997 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1997
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
Dreyfus Variable Investment Fund Portfolios The Dreyfus
-------------------------------------------- Socially
Responsible
VIF Growth & VIF Money VIF Small Growth Fund
Income Market Company Stock Inc.
-------------------------------------------- ------------
INVESTMENT INCOME
<S> <C> <C> <C> <C>
Dividends $ - $ - $ - $ -
Charges from Glenbrook Life and Annuity
Company:
Mortality and expense risk (1) - - -
Administative expense - - - -
---------- ---------- ---------- ----------
Net investment income (loss) (1) - - -
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains from sales of investments:
Proceeds from sales 1 - - -
Cost of Investments sold (1) - - -
---------- ---------- ----------- -----------
Net realized gains - - - -
Change in unrealized gains 418 - - -
---------- ---------- ----------- -----------
Net gains on investments 418 - - -
---------- ---------- ----------- -----------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ 417 $ - $ - $ -
========== ========== =========== ===========
</TABLE>
See notes to financial statements.
F-20
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS (CONTINUED)
FOR THE PERIOD FROM DECEMBER 29, 1997 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity Variable
Fidelity Variable Insurance Insurance Products MFS Variable Insurance
Products Fund Portfolios Fund II Portfolio Trust Portfolios
---------------------------- -------------------- --------------------------
MFS Emerging MFS Limited
VIP Growth VIP High VIP II Growth Maturity
Fund Income Fund Contrafund Series Series Total
------------ ------------- ---------- ---------- ------------- -------
INVESTMENT INCOME
<S> <C> <C> <C> <C> <C> <C>
Dividends $ - $ - $ - $ - $ 3,220 $ 3,220
Charges from Glenbrook Life and Annuity
Company:
Mortality and expense risk (1) - - - (1) (4)
Administative expense
- - - - - -
--------- --------- --------- ---------- -------- --------
Net investment income (loss) (1) - - - 3,219 3,216
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains from sales of investments:
Proceeds from sales 1 - - - 1 4
Cost of investments sold (1) - - - (1) (4)
--------- --------- --------- ---------- -------- --------
Net realized gains - - - - - -
Change in unrealized gains 317 - - - - 857
--------- --------- --------- ---------- -------- --------
Net gains on investments 317 - - - - 857
--------- --------- --------- ---------- -------- --------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ 316 $ - - - $ 3,219 $ 4,073
========= ========= ========= ========== ======== ========
See notes to financial statements.
</TABLE>
F-21
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM DECEMBER 29, 1997 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
American Century Variable
Portfolios, Inc. Portfolios Dean Witter Variable Investment Series Portfolios
-------------------------------- --------------------------------------------------------
American American
Century Century VIS Dividend VIS European VIS Quality
VP Balanced VP International Growth Growth Income Plus VIS Utilities
----------- ---------------- ----------------------------------------------------------
FROM OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ (1) $ - $ - $ - $ - $ -
Net realized gains - - - - - -
Change in unrealized gains 122 - - - - -
---------- ---------- ---------- ---------- ---------- ---------
Change in net assets resulting
from operations 121 - - - - -
FROM CAPITAL TRANSACTIONS
Deposits - - - - - -
Benefits payments - - - - - -
Payments on termination - - - - - -
Contract charges (69) - - - - -
Transfer among the portfolios and
with the general account - net 50,428 - - - - -
---------- ---------- ---------- ---------- ---------- ---------
Change in net assets resulting
from capital transactions 50,359 - - - - -
---------- ---------- ---------- ---------- ---------- ---------
INCREASE IN NET ASSETS 50,480 - - - - -
NET ASSETS AT BEGINNING OF PERIOD - - - - - -
---------- ---------- ---------- ---------- ---------- ---------
NET ASSETS AT END OF PERIOD $ 50,480 $ - $ - $ - $ - $ -
Net asset value per unit at end
of period $ 10.21 $ - $ - $ - $ - $ -
========== ========== ========== ========== ========== =========
Units outstanding at end of period 4,945 - - - - -
========== ========== ========== ========== ========== ==========
</TABLE>
F-22
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE PERIOD FROM DECEMBER 29, 1997 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1997
- -------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund Portfolios The Dreyfus
--------------------------------------------- Socially
Responsible
VIF Growth & VIF Money VIF Small Growth Fund,
Income Market Company Stock Inc.
--------------------------------------------- ------------
FROM OPERATIONS
<S> <C> <C> <C> <C>
Net investment income (loss) $ (1) $ - $ - $ -
Net realized gains - - - -
Change in unrealized gain 418 - - -
---------- ---------- ---------- ----------
Change in net assets resulting
from operations 417 - - -
FROM CAPITAL TRANSACTIONS
Deposits - - - -
Benefits payments - - - -
Payments on termination - - - -
Contract charges (69) (103) - -
Transfer among the portfolios and
with the general account - net 50,686 75,543 - -
---------- ---------- ---------- ----------
Change in net assets resulting
from capital transactions 50,617 75,440 - -
---------- ---------- ---------- ----------
INCREASE IN NET ASSETS 51,034 75,440 - -
NET ASSETS AT BEGINNING OF PERIOD - - - -
---------- ---------- ---------- ----------
NET ASSETS AT END OF PERIOD $ 51,034 $ 75,440 $ - $ -
Net asset value per unit at end
of period $ 10.35 $ 10.19 $ - $ -
========== ========== ========== ==========
Units outstanding at end of period 4,931 7,405 - -
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
F-23
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE PERIOD FROM DECEMBER 29, 1997 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity Variable
Fidelity Variable Insurance Insurance Products MFS Variable Insurance
Products Fund Portfolios Fund II Portfolio Trust Portfolios
---------------------------- ------------------- ---------------------------
MFS Emerging MFS Limited
VIP Growth VIP High VIP II Growth Maturity
Fund Income Fund Contrafund Series Series Total
------------ ------------- ---------- ----------- ------------ --------
FROM OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ (1) $ - $ - $ - $ 3,219 $ 3,216
Net realized gains - - - - - -
Change in unrealized gains
317 - - - - 857
--------- --------- --------- --------- --------- --------
Change in net assets resulting
from operations 316 - - - 3,219 4,073
FROM CAPITAL TRANSACTIONS
Deposits - - - - - -
Benefits payments - - - - - -
Payments on termination - - - - - -
Contract charges (69) - - - (69) (379)
Transfer among the portfolios and
with the general account - net 50,937 - - - 52,935 280,529
--------- --------- --------- --------- --------- --------
Change in net assets resulting
from capital transactions 50,868 - - - 52,866 280,150
--------- --------- --------- --------- --------- --------
INCREASE IN NET ASSETS $ 51,184 $ - $ - $ - $ 56,085 $284,223
NET ASSETS AT BEGINNING OF PERIOD - - - - - -
--------- --------- --------- --------- --------- --------
NET ASSETS AT END OF PERIOD $ 51,184 $ - $ - $ - $ 56,085 $284,223
========= ========= ========= ========= ========= ========
Net asset value per unit at end of
period $ 10.51 $ - $ - $ - $ 11.51
========= ========= ========= ========= =========
Units outstanding at end of period 4,868 - - - 4,871
========= ========= ========= ========= =========
</TABLE>
See notes to financial statements.
F-24
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM DECEMBER 29, 1997 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1997
- ------------------------------------------------------------------
1. ORGANIZATION
Glenbrook Life Variable Life Separate Account A (the "Account"), a unit
investment trust registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, is a Separate Account of
Glenbrook Life and Annuity Company ("Glenbrook Life"). The assets of the
Account are legally segregated from those of Glenbrook Life. Glenbrook Life
is wholly owned by Allstate Life Insurance Company, a wholly owned
subsidiary of Allstate Insurance Company, which is a wholly owned
subsidiary of The Allstate Corporation. The Account was established January
15, 1996, by resolution of the Board of Directors of Glenbrook Life and
began accepting policyholder deposits on December 29, 1997.
Glenbrook Life writes certain life insurance policies, the proceeds of
which are invested at the direction of the policyholder. Policyholders
invest in units of the portfolios comprising the Account, for which they
bear all of the investment risk. The Account, in turn, invests in the
shares of the portfolios of the American Century Variable Portfolios, Inc,
the Dean Witter Variable Investment Series, the Dreyfus Variable Investment
Funds, The Dreyfus Socially Responsible Growth Fund, Inc. (available for
investment beginning February 5, 1998), the Fidelity Variable Insurance
Products Fund, the Fidelity Variable Insurance Products Fund II, and the
MFS Variable Insurance Trust (collectively the "Funds"). Glenbrook Life
provides administrative and insurance services to the Account for a fee.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments - Investments consist of shares of the Funds and
are stated at fair value based on quoted market prices.
Recognition of Investment Income - Investment income consists of dividends
declared by of the Funds and is recognized on the date of record.
Realized Gains and Losses - Realized gains and losses represent the
difference between the proceeds from sales of shares by the Account and the
cost of such shares, which is determined on a weighted average basis.
Policyholder Account Activity - Account activity is reflected in individual
policyholder accounts on a daily basis.
Federal Income Taxes - The Account is intended to qualify as a segregated
asset account as defined in the Internal Revenue Code ("Code"). As such,
the operations of the Account are included with and taxed as a part of
Glenbrook Life. Glenbrook Life is taxed as a life insurance company under
the Code. Under current law, no federal income taxes are payable by the
Account.
Account Value - Certain calculations that could be made in the financial
statements may differ from published amounts due to the truncation of
actual Account values.
3. MORTALITY AND EXPENSE RISK AND CONTRACT CHARGES
Glenbrook Life assumes mortality and expense risks related to the
operations of the Account and deducts charges daily at a rate equal to .90%
per annum of the daily net assets of the Account. Glenbrook Life guarantees
that the rate of this charge will not increase over the life of the
contract.
Glenbrook Life deducts certain contract charges including cost of
insurance, tax expense charges and contract maintenance charges. The cost
of insurance charge covers Glenbrook Life's anticipated mortality costs for
standard and substandard risks. The cost of insurance will not exceed the
guaranteed cost of insurance as determined by the 1980 Commissioners
Standard Mortality Table for standard risks. Substandard risks are charged
a higher cost of insurance that will not exceed rates based on a multiple
of the previously mentioned table. The multiple is based on the insured's
substandard rating.
Glenbrook Life deducts monthly a tax expense charge equal to .40% per annum
of policy value for the first 10 years of the policy to cover Glenbrook
Life's expenses for state and federal taxes relating to receipt of premium.
Glenbrook Life deducts a monthly administration fee equal to .25% per annum
of policy value on a monthly basis to compensate Glenbrook Life for
administrative expenses incurred in the administration of the Account.
F-25
<PAGE>
For each year or portion of a year a contract is in effect, Glenbrook Life
deducts a fixed annual contract maintenance charge of $35 as reimbursement
for expenses related to the maintenance of each contract and the Account.
The amount of this charge is guaranteed not to increase over the life of
the contract. This charge is waived if the total purchase payments are
$50,000 or more on a contract anniversary.
4. FINANCIAL INSTRUMENTS
The investments of the Account are carried at fair value, based upon quoted
market prices.
F-26
<PAGE>
5. UNITS ISSUED AND REDEEMED
Units issued and redeemed by the Account during 1997 were as follows:
<TABLE>
<CAPTION>
American Century Variable
Portfolios, Inc.Portfolios Dean Witter Variable Investment Series Portfolios
------------------------------- -------------------------------------------------------
American American
Century Century VIS Dividend VIS European VIS Quality
VP Balanced VP International Growth Growth Income Plus VIS Utilities
----------- ---------------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding at beginning of
period - - - - - -
Unit activity during 1997:
Issued 4,952 - - - - -
Redeemed (7) - - - - -
-------- -------- -------- -------- -------- --------
Units outstanding at end of period 4,945 - - - - -
======== ======== ======== ======== ======== ========
</TABLE>
Dreyfus Variable
Investment Fund Portfolios
---------------------------
VIF Growth & VIF Money
Income Market
------------ ---------
Units outstanding at beginning of
period - -
Unit activity during 1997:
Issued 4,938 7,415
Redeemed (7) (10)
-------- --------
Units outstanding at end of period 4,931 7,405
======== ========
F-27
<PAGE>
5. UNITS ISSUED AND REDEEMED (CONTINUED)
Units issued and redeemed by the Account during 1997 were as follows:
<TABLE>
<CAPTION>
Dreyfus Variable Fidelity Variable
Investment Fund Fidelity Variable Insurance Insurance Products
Portfolios The Dreyfus Products Fund Portfolios Fund II Portfolio
--------------- Socially --------------------------- ------------------
Responsible
VIF Small Growth Fund, VIP Growth VIP High VIP II
Company Stock Inc. Fund Income Fund Contrafund
----------- -------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Units outstanding at beginning of - - - - -
period
Unit activity during 1997:
Issued - - 4,875 - -
Redeemed - - (7) - -
-------- -------- --------- -------- --------
Units outstanding at end of period - - 4,868 - -
======== ======== ========= ======== ========
</TABLE>
MFS Variable Insurance
Trust Portfolios
----------------------------
MFS Emerging MFS Limited
Growth Maturity
Series Series
------------- ------------
Units outstanding at beginning of
period - -
Unit activity during 1997:
Issued - 4,878
Redeemed - (7)
-------- --------
Units outstanding at end of period - 4,871
======== ========
F-28
<PAGE>
PART II -- OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
REPRESENTATION AS TO FEES AND CHARGES
Glenbrook Life and Annuity Company (the "Company") represents that the fees and
charges deducted under the Modified Single Premium Variable Life Insurance
Contract hereby registered by this Registration Statement, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by the Company.
REPRESENTATION PURSUANT TO RULE 6e-3(T)
This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the Investment
Company Act of 1940 ("Investment Company Act").
RULE 484 UNDERTAKING
The By-Laws of Glenbrook Life and Annuity Company ("Glenbrook Life") which are
incorporated herein by reference as Exhibit 1(A)(6)(b), provide that it will
indemnify its officers and directors for certain damages and expenses that may
be incurred in the performance of their duty to Glenbrook Life. No
indemnification is provided, however, when such person is adjudged to be liable
for negligence or misconduct in the performance of his or her duty, unless
indemnification is deemed appropriate by the court upon application. Insofar as
indemnification for liability arising under the Securities Act of 1933 (the
"Act") may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the Glenbrook
Life Variable Life Separate Account A (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.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The Facing Sheet.
Reconciliation and tie between items in Form N-8B-2 and the Prospectus
The Prospectus consisting of 56 pages.
The Undertaking to File Reports.
Representation as to Fees and Charges.
Representations Pursuant to Rule 6e-3(T)
Rule 484 Undertaking
The Signatures
Written Consents of the following persons:
(a) Freedman, Levy, Kroll & Simonds
(b) Deloitte & Touche LLP
The following exhibits:
1. The following exhibits are required by Article IX, paragraph A of Form
N-8B-2:
A. (1) Resolution of the Board of Directors of Glenbrook Life and Annuity
Company authorizing establishment of the Variable Life Separate Account.*
(2) Not Applicable.
(3) (a) Form of Underwriting Agreement**
(b) Form of Selling Agreement**
(c) See Exhibit 1.(3)(b)
(4) Not Applicable.
(5) (a) Specimen Contract.**
(1) Modified Single Premium Variable Life Insurance Contract**
(2) Last Survivor Modified Single Premium Variable Life
Insurance Contract**
(b) Riders**
(1) Amendatory Endorsement for Waiver of Charges (KLU100)**
(2) Amendatory Endorsement (KLU101)**
(3) Accelerated Death Benefit Rider (KLU105)**
(4) Amendatory Endorsement for Waiver of Charges (KLU106)**
(5) Accelerated Death Benefit Summary and Disclosure
Statement (KLU74)**
(6) Accelerated Death Benefit Summary and Disclosure
Statement (KLU80)**
(7) Accelerated Death Benefit Effect on Contract (KLU81)**
(8) Accelerated Death Benefit Rider (KLU99)**
(6) (a) Certificate of Incorporation of Glenbrook Life and
Annuity Company***
(b) By-laws of Glenbrook Life and Annuity Company***
(7) Not Applicable.
(8) Participation Agreements****
(9) Not Applicable.
(10) Form of Application for Contract**
B. Not Applicable.
C. Not Applicable.
2. Opinion of General Counsel**
3. Not Applicable
(1) Not Applicable
(2) Not Applicable
4. Not Applicable
5. Not Applicable
6. Not Applicable
7. Powers of Attorney**
8. Consents
(1) Freedman, Levy, Kroll & Simonds
(2) Deloitte & Touche LLP
9. Procedures Memorandum pursuant to Rule 6e-3(T)(b)(12)(3)(iii)**
10. Actuarial Opinion and Consent
* Previously filed in S-6 Registration Statement No. 333-02581, dated April
17, 1996.
** Previously filed in S-6, Pre-Effective Amendment No. 1, Registration
Statement No. 333-02581, dated September 20, 1996
*** Incorporated by reference with Depositor's Form S-1 Registration Statement
No. 333-07275 dated June 28, 1996.
**** Dean Witter Fund agreement previously filed in S-6, Pre-Effective Amendment
No. 1, Registration Statement No. 333-02581, dated September 20, 1996; AIM
Fund agreement incorporated by reference from Depositor's N-4 Registration
Statement No. 33-62203 dated November 21, 1995; Fidelity Fund Agreement
incorporated by reference from Depositor's N-4 Registration Statement No.
33-60882 dated June 11, 1993; Dreyfus Fund, MFS Fund and American Century
Fund agreements are filed herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 (the "Act"), the
registrant, Glenbrook Life Variable Life Separate Account A, has duly caused
this amended registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the Village of Northfield, and State of Illinois, on the 30th
day of April 1998.
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
(Registrant)
GLENBROOK LIFE AND ANNUITY COMPANY
(Depositor)
(SEAL)
Attest: /s/ BRENDA D. SNEED By: /s/ MICHAEL J. VELOTTA
----------------------- ----------------------
Brenda D. Sneed Michael J. Velotta
Assistant Secretary and Assistant Vice President, Secretary and
General Counsel General Counsel
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed below by the following persons in the
capacities indicated, on the 30th day of April 1998.
*/LOUIS G. LOWER, II Chairman of the Board of Directors and
- -------------------- Chief Executive Officer
Louis G. Lower, II (Principal Executive Officer)
/s/ MICHAEL J. VELOTTA Vice President, Secretary,
- ---------------------- General Counsel and Director
Michael J. Velotta
*/PETER H. HECKMAN President, Chief Operating Officer
- ------------------ and Director
Peter H. Heckman
*/JOHN R. HUNTER Director
- ----------------
John R. Hunter
*/MARLA G. FRIEDMAN Vice President
- -------------------
Marla G. Friedman
*/KEVIN R. SLAWIN Vice President
- ----------------- (Principal Financial Officer)
Kevin R. Slawin
*/G. CRAIG WHITEHEAD Senior Vice President and Director
- --------------------
G. Craig Whitehead
*/JAMES P. ZILS Treasurer
- ---------------
James P. Zils
*/CASEY J. SYLLA Chief Investment Officer
- ----------------
Casey J. Sylla
*/KEITH A. HAUSCHILDT Assistant Vice President and Controller
- --------------------- (Principal Accounting Officer)
Keith A. Hauschildt
*/ By Michael J. Velotta, pursuant to Power of Attorney, previously filed.
<PAGE>
EXHIBIT LIST
The following exhibits are filed herewith:
Exhibit No. Description
A. (8) Participation Agreements: American Century, Dreyfus and MFS Funds
C. (8)(1) Consent of Attorneys
(2) Consent of Independent Public Accountants
C. (10) Actuarial Opinion and Consent
(11) Hypothetical Illustrations
EXHIBIT (8)
PARTICIPATION AGREEMENTS
FUND PARTICIPATION AGREEMENT
THIS FUND PARTICIPATION AGREEMENT is made and entered into as of April 1, 1997
by and between GLENBROOK LIFE AND ANNUITY COMPANY (the "Company"), AMERICAN
CENTURY INVESTMENT MANAGEMENT, INC. ("ACIM") and AMERICAN CENTURY INVESTMENT
SERVICES, INC. (the "Distributor").
WHEREAS, the Company offers to the public certain variable annuity
contracts and variable life insurance contracts (the "Contracts"); and
WHEREAS, the Company wishes to offer as investment options under the
Contracts, certain series of mutual fund shares registered under the Investment
Company Act of 1940, as amended, and issued by TCI Portfolios, Inc. ("Issuer"),
as set forth in Schedule A attached hereto (each, a "Fund"); and
WHEREAS, on the terms and conditions hereinafter set forth, Distributor
desires to make shares of the Funds available as investment options under the
Contracts and to retain the Company to perform certain administrative services
on behalf of the Funds for the benefit of Contract owners;
NOW, THEREFORE, the Company, Distributor and ACIM agree as follows:
1. Transactions in the Funds.
Subject to the terms and conditions of this Agreement, Distributor will
cause the Issuer to make shares of the Funds available to be purchased,
exchanged, or redeemed, by the Company on behalf of the Accounts (defined in
Section 5(a) below) through a single account for each 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.
Issuance and transfer of shares of the Funds shall be by book entry only.
2. Administrative Services.
The Company shall be solely responsible for providing all administrative
services for the Contract 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 in all material respects 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) Distributor hereby appoints the Company as its agent for the
limited purpose of accepting purchase and redemption orders for Fund shares
from the Plans and/or Participants, as applicable. 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 Plans and/or
Participants for the purchase or redemption of shares of the Funds
("Orders"). Orders received and accepted by the Company 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
Issuers by 9:00 a.m. Central time on the next following Business Day will
be executed by the Issuers at the net asset value determined as of the
Close of Trading on the previous Business Day ("Day I "). Any Orders
received by the Company on such Business Day after the Close of Trading,
and all Orders that are transmitted to the Issuers after 9:00 a.m. Central
time on the next following Business Day, will be executed by the Issuers at
the net asset value next determined following receipt of such Order. The
day as of which an Order is executed by the Issuers 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, Distributor (or
one of its affiliates) 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. In the event Distributor (or one of its affiliates)
is unable to meet the 5:30 p.m. time stated herein, it shall, to the extent
reasonably possible given its systems limitations and the Fund's custodial
relationship, provide a reasonable amount of additional time for the
Company to place Orders pursuant to Sections 3(a) and 3(c) and to pay for
net purchase transactions pursuant to Section 3(d). If Distributor (or one
of its affiliates) provides materially incorrect share net asset value,
dividend or capital gain information, or, in the case of income funds, the
daily accrual for interest rate, Distributor (or one of its affiliates)
shall make an adjustment to the number of shares purchased or redeemed for
each of the Accounts (defined in Section 5(a) below) to reflect the correct
net asset value, dividend or capital gain information, or the daily accrual
for interest rate. Any material error in the calculation or reporting of
net asset value per share, dividend or capital gain information, or daily
accrual for interest rate shall be reported promptly upon discovery to the
Company.
(c) By 9:00 a.m. Central time on each Business Day, the Company will
provide to Distributor via facsimile or other electronic transmission
acceptable to Distributor a report stating whether the Orders received by
the Company from Contract owners by the Close of Trading on the preceding
Business Day resulted in each Account being a net purchaser or net seller
of shares of the Funds and stating the amount of the net purchase or
redemption of Fund shares for each Account. As used in this Agreement, the
phrase "other electronic transmission acceptable to Distributor" 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 Distributor, its agents or
affiliates (hereinafter, "Remote Computer Terminals").
(d) Upon the timely receipt from the Company of the report described
in (c) above, the Funds' transfer agent will execute the purchase or
redemption transactions (as the case may be) at the net asset value
computed as of the Close of Trading on Day 1. Payment for net purchase
transactions shall be made by wire transfer to the custodial account
designated by the Funds 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 appropriate
receiving party within the time period set forth in the applicable Fund's
then-current prospectus; provided, however, the Issuers will use all
reasonable efforts to settle all redemption on the Business Day 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 be settled on the next
Business Day on which the Federal Reserve Wire Transfer System is open and
the original Effective Trade Date will apply.
4. Prospectus and Proxy Materials.
(a) Distributor shall provide to the shareholder of record copies of
the Issuer's proxy materials, periodic fund reports to shareholders and
other materials that are required by law to be sent to the Issuer's
shareholders. In addition, Distributor shall provide the Company with a
sufficient quantity of prospectuses (describing only those Funds set forth
in Schedule A to this Agreement) of the Funds to be used in conjunction
with the transactions contemplated by this Agreement, together with such
additional copies of the Issuer's prospectuses as may be reasonably
requested by Company. If the Company provides for pass-through voting by
the Contract owners, Distributor shall provide the Company with a
sufficient quantity of proxy materials for each Contract owner. Distributor
also shall provide the Company with a sufficient quantity of periodic Fund
reports for each Contract Owner.
(b) Except as otherwise specifically provided in Schedule B, attached
hereto and made a part hereof, each party will bear all expenses incident
to its performance under this Agreement.
5. 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 separate accounts set forth on Schedule A attached hereto
(the "Accounts"), each of which is a separate account under Illinois
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 of 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 with all material provisions of federal and state
insurance, securities, and tax laws applicable to such activities.
(b) Distributor represents and warrants that (i) the Issuer is
lawfully organized and validly existing under the laws of Maryland and that
the Issuer does and will comply in all material respects with the 1940 Act
and any applicable regulations thereunder; (ii) Fund shares sold pursuant
to this Agreement will be registered under the Securities Act of 1933 and
any applicable state securities laws and duly authorized for issuance under
the laws of Maryland, and will be issued and sold in compliance in all
material respects with applicable law and the Issuer's Articles of
Incorporation and that the Issuer is and will remain registered under the
1940 Act for so long as Fund shares are sold; (iii) each Fund currently
qualifies and will continue to qualify as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), and will maintain such qualification (under Subchapter M or any
successor or similar provision), and that the Distributor will notify the
Company immediately upon having a reasonable basis for believing that any
Fund has ceased to so qualify or that the Fund might not so qualify in the
future; (iv) 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 Distributor and ACIM, enforceable in
accordance with its terms; (v) the investments of the Funds will at all
times be adequately diversified within the meaning of Section 817(h) of 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;
and (vi) that Distributor will notify the Company immediately upon having a
reasonable basis for believing that the Fund has ceased to so comply or
that the Fund might not so qualify in the future.
(c) Distributor and ACIM each represent and warrant that it is duly
registered under all applicable federal and state securities laws and that
it shall perform its obligations to the Issuer in compliance in all
material respects with any applicable federal and state securities laws.
(d) Distributor represents that the Issuer's investment policies,
fees, expenses and operations are and shall at all times remain in material
compliance with applicable state securities laws to the extent required to
perform this Agreement. The Company shall prepare and transmit to
Distributor a schedule setting forth the investment limitations with which
the Company reasonably believes each Fund should comply in order for the
Contracts to comply with applicable state insurance law requirements and
shall notify the Issuer of any change in such schedule. Distributor shall
notify the Company if the Issuer is not in material compliance with, or is
unable to comply with, any such investment limitations.
6. Additional Covenants and Agreements.
(a) In addition to complying with the specific provisions of this
Agreement, each party shall comply in all material respects 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.
(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 that
Business Day.
(d) The Company covenants and agrees that all Orders transmitted to
the Issuer's transfer agent, whether by telephone, telecopy, or other
electronic transmission acceptable to Issuer's transfer agent, 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
Accounts. Absent actual knowledge to the contrary, Distributor and Issuer's
transfer agent 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 8-107 and 8-401 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 Distributor
or the Funds' transfer agent by the Company by telephone, telecopy or other
electronic transmission acceptable to Distributor or the Funds' transfer
agent.
(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 Accounts.
(f) (i) The Company shall not, without the written consent of
Distributor, make representations concerning the Issuer or the shares of
the Funds except those contained in the then-current prospectus and
Statement of Additional Information and in current printed sales literature
approved by Distributor, ACIM or the Issuer.
(ii) Distributor, ACIM the Issuer, and their agents shall not,
without the written consent of the Company, make written
representations concerning the Company, the Account, or the Contracts
except those contained in the then-current prospectus and Statement of
Additional Information for the Contracts and in current printed sales
literature for the Contracts approved by the Company.
(g) Advertising and sales literature with respect to the Issuer or the
Funds prepared by the Company or its agents, if any, for use in marketing
shares of the Funds to Contract owners as underlying investment media for
the Contracts shall be submitted to Distributor for review and approval
before such material is used. Distributor agrees to respond to requests for
review and approval of such material within a reasonable amount of time.
(h) (i) The Company shall provide to Distributor at least one complete
copy of all registration statements, prospectuses, statements of additional
information, annual and semi-annual reports, 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.
(ii) Distributor shall provide to the Company at least one
complete copy of all registration statements, prospectuses, Statements
of Additional Information, 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 Company or the
Contracts promptly after the filing of such document with the SEC or
other regulatory authority.
(iii) Distributor shall provide Company with at least 60 days'
prior written notice of any change in the name of a Fund in order to
enable Company to control its inventory of marketing and other Fund
materials.
7. Use of Names.
Except as otherwise expressly provided for in this Agreement, neither
Distributor or any of its affiliates 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 provided for in this
Agreement, the Company shall not use any trademark, trade name, service mark or
logo of the Issuer, Distributor or any of Distributor's affiliates, or any
variation of any such trademarks, trade names, service marks, or logos, without
the prior written consent of either the Issuer or Distributor, as appropriate,
the granting of which shall be at the sole option of Distributor and/or the
Issuer.
8. 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 calculates voting privileges in a consistent manner as required
by the Shared Funding Exemptive Order (as defined in Section 10(a) below).
Distributor hereby confirms that the manner in which the Company currently
calculates voting privileges is consistent with that required in the Shared
Funding Exemptive Order and the manner in which other Participating Companies
(as defined in Section 10(a) below) so calculate voting privileges. Distributor
will notify the Company if it becomes aware that another Participating Company
has changed the manner in which it so calculates voting privileges.
(b) So long as it is required to provide pass-through voting privileges,
the Company will distribute to Contract owners all proxy materials furnished by
Distributor 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 proxies for Fund shares held for such
Contract owners.
9. Indemnity.
(a) Distributor agrees to indemnity and hold harmless the Company and each
of its officers, directors, employees, agents, affiliates and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act of 1933 (collectively, the "Indemnified Parties" for purposes of this
Section 9(a)) against any losses, claims, expenses, damages or liabilities
(including amounts paid in settlement thereof) or litigation expenses (including
legal and other expenses) (collectively, "Losses"), to which the Indemnified
Parties may become subject, insofar as such Losses (or actions in respect
thereof) (i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement,
prospectuses, statement of additional information, or sales literature of any
Fund or the Issuer, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; or (ii) result from
any breach by Distributor or ACIM of a material provision of this Agreement.
Distributor will reimburse any legal or other expenses reasonably incurred by
the Indemnified Parties in connection with investigating or defending any such
Losses. Distributor shall not be liable for indemnification hereunder if such
Losses are attributable to the negligence or misconduct of the Company in
performing its obligations under this Agreement.
(b) The Company agrees to indemnity and hold harmless Distributor, ACIM and
the Issuer and each of their respective officers, directors, employees, agents,
affiliates and each person, if any, who controls Distributor or ACIM within the
meaning of the Securities Act of 1933 (collectively, the "Indemnified Parties"
for purposes of this Section 9(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 any registration statement, prospectus, statement of
additional information, or sales literature of the Company regarding the
Contracts, 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 (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 Distributor or ACIM in performing their
obligations under this Agreement; or in any such case to the extent that any
such Loss arises out of or is based upon an untrue statement or omission or
alleged omission made in such registration statement, prospectus, statement of
additional information in conformity with written materials furnished to the
Company by the Distributor or ACIM specifically for use therein.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of action, such indemnified party shall, 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 9. 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. To the extent that the indemnifying party may wish to, it
may assume the defense thereof, with counsel satisfactory to the indemnified
party. 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 9 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation. If the
indemnified party proceeds with the defense, the indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnity the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(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 judgment 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.
10. Potential Conflicts.
(a) The Company has received a copy of an application for exemptive relief,
as amended, filed by ACIM and the Issuer 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 Accounts 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, 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/
(ii) or 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 10, a majority of the
disinterested Board members shall determine whether or not any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Issuer be required to establish a new funding medium for any
Contract. The Company shall not be required by this Section 10 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.
(f) If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the 1940 Act or the Rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Shared
Funding Exemptive Order, then (i) the Issuer and/or the Participating
Companies, as appropriate, shall take such steps as may be necessary to
comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted,
to the extent such rules are applicable; and (ii) the applicable sections
of this Agreement shall continue in effect only to the extent that they are
not inconsistent with such Rule(s) as so amended or adopted.
11. Termination.
This Agreement shall terminate with respect to the Accounts, or one,
some or all of the Funds:
(a) at the option of either the Company, Distributor or ACIM upon
six months' advance written notice to the other;
(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 the Company;
(c) at the option of either the Company, Distributor or ACIM upon
institution of formal proceedings against the broker-dealer or
broker-dealers marketing the Contracts, the Accounts, the Company, or
the Issuer by the National Association of Securities Dealers, Inc.
(the NASD), the SEC or any other regulatory body;
(d) upon termination of the Distribution Agreement between the
Issuer and Distributor. Notice of such termination shall be promptly
furnished to the Company. This subsection (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
Distributor;
(e) upon (i) receipt by the Company of an order of substitution
issued by the Securities and Exchange Commission permitting the
substitution of shares of another investment company for the
corresponding Fund shares, and/or (ii) 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 and any applicable SEC
approval. The Company will give 60 days' written notice to the Issuer
and Distributor of any substitution or 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 state 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;
(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; or
(j) at the option of the Company by written notice to the Issuer
in the event that the Issuer fails to meet the Section 817(h)
diversification requirements or Subchapter M qualifications specified
in this Agreement or if the Company reasonably believes that the
Issuer may fail to meet either of those requirements.
12. Continuation of Agreement.
Termination as the result of any cause listed in Section 11 shall not
affect the Issuer's obligation to furnish its shares to Contracts then in
force for which its shares serve or may serve as the underlying medium
("Existing Contracts") (unless such further sale of Fund shares is
proscribed by law or the SEC or other regulatory body). Specifically,
without limitation, the owners of the Existing Contracts shall be permitted
to reallocate investments in the Issuer, redeem investments in the Issuer
and/or invest in the Issuer upon the making of additional purchase payments
under the Existing Contracts. Each party's obligation under Section 9 to
indemnify other parties shall survive and not be affected by any
termination of this Agreement. In addition, with respect to Existing
Contracts, all provisions of this Agreement shall also survive and not be
affected by any termination of this Agreement. Following termination,
Distributor shall not have any Administrative Services payment obligation
to the Company (except for payment obligations accrued but not yet paid as
of the termination date).
13. 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 of the parties is free to enter into similar agreements and
arrangements with other entities.
14. Survival.
The provisions of Section 7 (use of names) and Section 9 (indemnity)
of this Agreement shall survive termination of this Agreement.
15. 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:
Glenbrook Life and Annuity Company
3100 Sanders Road
Northbrook, IL 60062
Attention: Craig Whitehead
(847) 402-4601 (office number)
(847) 402-3673 (telecopy number)
To the Issuer, Distributor or ACIM:
American Century Investments
4500 Main Street
Kansas City, Missouri 64111
Attention: Charles A. Ethefington, Esq
(816) 340-4051 (office number)
(816) 340-4964 (telecopy number)
Any notice, demand or other communication given in a manner prescribed
in this Section 15 shall be deemed to have been delivered on receipt.
16. 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.
17. 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.
18. 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.
19. 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. 20. Applicable Law.
(a) This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of Missouri.
(b) This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the Securities and Exchange Commission may grant
(including, but not limited to, the Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in accordance
therewith.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth above.
AMERICAN CENTURY INVESTMENT GLENBROOK LIFE AND ANNUITY
SERVICES, INC. COMPANY
By: ____________________________ By: _____________________________
William M. Lyons Name:____________________________
Executive Vice President Title: __________________________
AMERICAN CENTURY INVESTMENT
MANAGEMENT, INC.
By: __________________________________
William M Lyons
Executive Vice President
<PAGE>
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the 30th day of June, 1997, between
Glenbrook Life and Annuity Company, a life insurance company organized under the
laws of the State of Illinois ("Insurance Company"), and each of DREYFUS
VARIABLE INVESTMENT FUND, THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. and
DREYFUS LIFE AND ANNUITY INDEX FUND, INC. (d/b/a DREYFUS STOCK INDEX FUND) (each
a "Fund").
ARTICLE I
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Directors or Trustees, as the case may be,
of a Fund, which has the responsibility for management and control of the Fund.
1.3 "Business Day" shall mean any day for which a Fund calculates net asset
value per share as described in the Fund's Prospectus.
1.4 "Commission" shall mean the Securities and Exchange Commission.
1.5 "Contract" shall mean a variable annuity or life insurance contract that
uses any Participating Fund (as defined below) as an underlying investment
medium. Individuals who participate under a group Contract are "Participants."
1.6 "Contractholder" shall mean any entity that is a party to a Contract with a
Participating Company (as defined below).
1.7 "Disinterested Board Members" shall mean those members of the Board of a
Fund that are not deemed to be "interested persons" of the Fund, as defined by
the Act.
1.8 "Dreyfus" shall mean The Dreyfus Corporation and its affiliates, including
Dreyfus Service Corporation.
1.9 "Participating Companies" shall mean any insurance company (including
Insurance Company) that offers variable annuity and/or variable life insurance
contracts to the public and that has entered into an agreement with one or more
of the Funds.
1.10 "Participating Fund" shall mean each Fund, including, as applicable, any
series thereof, specified in Exhibit A, as such Exhibit may be amended from time
to time by agreement of the parties hereto, the shares of which are available to
serve as the underlying investment medium for the aforesaid Contracts.
1.11 "Prospectus" shall mean the current prospectus and statement of additional
information of a Fund, as most recently filed with the Commission.
1.12 "Separate Account" shall mean each separate account established by
Insurance Company in accordance with the laws of the State of Illinois as
specified in Schedule A.
1.13 "Software Program" shall mean the software program used by a Fund for
providing Fund and account balance information including net asset value per
share. Such Program may include the Lion System. In situations where the Lion
System or any other Software Program used by a Fund is not available, such
information may be provided by telephone. The Lion System shall be provided to
Insurance Company at no charge.
1.14 "Insurance Company's General Account(s)" shall mean the general account(s)
of Insurance Company and its affiliates that invest in a Fund.
ARTICLE II
REPRESENTATIONS
2.1 Insurance Company represents and warrants that (a) it is an insurance
company duly organized and in good standing under applicable law; (b) it has
legally and validly established each Separate Account pursuant to the Illinois
Insurance Code for the purpose of offering to the public certain individual and
group variable annuity and variable life insurance contracts; (c) it has
registered the Separate Account as a unit investment trust under the Act to
serve as the segregated investment account for the Contracts; and (d) the
Separate Account is eligible to invest in shares of each Participating Fund
without such investment disqualifying any Participating Fund as an investment
medium for insurance company separate accounts supporting variable annuity
contracts or variable life insurance contracts.
2.2 Insurance Company represents and warrants that (a) the Contracts will be
described in a registration statement filed under the Securities Act of 1933, as
amended ("1933 Act"); (b) the Contracts will be issued and sold in compliance in
all material respects with all applicable federal and state laws; and (c) the
sale of the Contracts shall comply in all material respects with state insurance
law requirements. Insurance Company agrees to notify each Participating Fund
promptly of any investment restrictions imposed by state insurance law and
applicable to the Participating Fund.
2.3 Insurance Company represents and warrants that the income, gains and losses,
whether or not realized, from assets allocated to the Separate Account are, in
accordance with the applicable Contracts, to be credited to or charged against
such Separate Account without regard to other income, gains or losses from
assets allocated to any other accounts of Insurance Company. Insurance Company
represents and warrants that the assets of the Separate Account are and will be
kept separate from Insurance Company's General Account and any other separate
accounts Insurance Company may have, and will not be charged with liabilities
from any business that Insurance Company may conduct or the liabilities of any
companies affiliated with Insurance Company.
2.4 Each Participating Fund represents that it is registered with the Commission
under the Act as an open-end, management investment company and possesses, and
shall maintain, all legal and regulatory licenses, approvals, consents and/or
exemptions required for the Participating Fund to operate and offer its shares
as an underlying investment medium for Participating Companies.
2.5 Each Participating Fund represents that it is currently qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code), and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify Insurance Company immediately upon having a reasonable
basis for believing that it has ceased to so qualify or that it might not so
qualify in the future.
2.6 Insurance Company represents and agrees that the Contracts are currently,
and at the time of issuance will be, treated as life insurance policies or
annuity contracts, whichever is appropriate, under applicable provisions of the
Code, and that it will make every effort to maintain such treatment and that it
will notify each Participating Fund and Dreyfus immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future. Insurance Company agrees
that any prospectus offering a Contract that is a "modified endowment contract,"
as that term is defined in Section 7702A of the Code, will identify such
Contract as a modified endowment contract (or policy).
2.7 Each Participating Fund agrees that its assets shall be managed and invested
in a manner that complies with the requirements of Section 817(h) of the Code.
2.8 Insurance Company agrees that each Participating Fund shall be permitted
(subject to the other terms of this Agreement) to make its shares available to
other Participating Companies and Contractholders
2.9 Each Participating Fund represents and warrants that any of its directors,
trustees, officers, employees, investment advisers, and other
individuals/entities who deal with the money and/or securities of the
Participating Fund are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Participating
Fund in an amount not less than that required by Rule 17g-1 under the Act. The
aforesaid Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
2.10 Insurance Company represents and warrants that all of its employees and
agents who deal with the money and/or securities of each Participating Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage in an amount not less than the coverage required to be
maintained by the Participating Fund. The aforesaid Bond shall include coverage
for larceny and embezzlement and shall be issued by a reputable bonding company.
2.11 Insurance Company agrees that Dreyfus shall be deemed a third party
beneficiary under this Agreement and may enforce any and all rights conferred by
virtue of this Agreement.
ARTICLE III
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in shares of each Participating Fund.
3.2 Each Participating Fund agrees to make its shares available for purchase at
the then applicable net asset value per share by Insurance Company and the
Separate Account on each Business Day pursuant to rules of the Commission.
Notwithstanding the foregoing, each Participating Fund may refuse to sell its
shares to any person, or suspend or terminate the offering of its shares, if
such action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of its Board, acting in good faith and in light of
its fiduciary duties under federal and any applicable state laws, necessary and
in the best interests of the Participating Fund's shareholders.
3.3 Each Participating Fund agrees that shares of the Participating Fund will be
sold only to (a) Participating Companies and their separate accounts or (b)
"qualified pension or retirement plans" as determined under Section 817(h)(4) of
the Code. Except as otherwise set forth in this Section 3.3, no shares of any
Participating Fund will be sold to the general public.
3.4 Each Participating Fund shall use its best efforts to provide closing net
asset value, dividend and capital gain information on a per-share basis to
Insurance Company by 6:00 p.m. Eastern time on each Business Day. Any material
errors in the calculation of net asset value, dividend and capital gain
information shall be reported immediately upon discovery to Insurance Company.
Non-material errors will be corrected in the next Business Day's net asset value
per share.
3.5 At the end of each Business Day, Insurance Company will use the information
described in Sections 3.2 and 3.4 to calculate the unit values of the Separate
Account for the day. Using this unit value, Insurance Company will process the
day's Separate Account transactions received by it by the close of trading on
the floor of the New York Stock Exchange (currently 4:00 p.m. Eastern time) to
determine the net dollar amount of each Participating Fund's shares that will be
purchased or redeemed at that day's closing net asset value per share. The net
purchase or redemption orders will be transmitted to each Participating Fund by
Insurance Company by 11:00 a.m. Eastern time on the Business Day next following
Insurance Company's receipt of that information. Subject to Sections 3.6 and
3.8, all purchase and redemption orders for Insurance Company's General Accounts
shall be effected at the net asset value per share of each Participating Fund
next calculated after receipt of the order by the Participating Fund or its
Transfer Agent.
3.6 Each Participating Fund appoints Insurance Company as its agent for the
limited purpose of accepting orders for the purchase and redemption of
Participating Fund shares for the Separate Account. Each Participating Fund will
execute orders at the applicable net asset value per share determined as of the
close of trading on the day of receipt of such orders by Insurance Company
acting as agent (,,effective trade date"), provided that the Participating Fund
receives notice of such orders by 11:00 a.m. Eastern time on the next following
Business Day and, if such orders request the purchase of Participating Fund
shares, the conditions specified in Section 3.8, as applicable, are satisfied. A
redemption or purchase request that does not satisfy the conditions specified
above and in Section 3.8, as applicable, will be effected at the net asset value
per share computed on the Business Day immediately preceding the next following
Business Day upon which such conditions have been satisfied in accordance with
the requirements of this Section and Section 3.8.
3.7 Insurance Company will make its best efforts to notify each applicable
Participating Fund in advance of any unusually large purchase or redemption
orders.
3.8 If Insurance Company's order requests the purchase of a Participating Fund's
shares, Insurance Company will pay for such purchases by wiring Federal Funds to
the Participating Fund or its designated custodial account on the day the order
is transmitted. Insurance Company shall make all reasonable efforts to transmit
to the applicable Participating Fund payment in Federal Funds by 12:00 noon
Eastern time on the Business Day the Participating Fund receives the notice of
the order pursuant to Section 3.5. Each applicable Participating Fund will
execute such orders at the applicable net asset value per share determined as of
the close of trading on the effective trade date if the Participating Fund
receives payment in Federal Funds by 12:00 midnight Eastern time on the Business
Day the Participating Fund receives the notice of the order pursuant to Section
3.5. If payment in Federal Funds for any purchase is not received or is received
by a Participating Fund after 12:00 noon Eastern time on such Business Day,
Insurance Company shall promptly, upon each applicable Participating Fund's
request, reimburse the respective Participating Fund for any charges, costs,
fees, interest or other expenses incurred by the Participating Fund in
connection with any advances to, or borrowings or overdrafts by, the
Participating Fund, or any similar expenses incurred by the Participating Fund,
as a result of portfolio transactions effected by the Participating Fund based
upon such purchase request. If Insurance Company's order requests the redemption
of any Participating Fund's shares valued at or greater than $1 million dollars,
the Participating Fund will wire such amount to Insurance Company within seven
days of the order.
3.9 Each Participating Fund has the obligation to ensure that its shares are
registered with applicable federal agencies at all times.
3.10 Each Participating Fund will confirm each purchase or redemption order made
by Insurance Company. Transfer of Participating Fund shares will be by book
entry only. No share certificates will be issued to Insurance Company. Insurance
Company will record shares ordered from a Participating Fund in an appropriate
title for the corresponding account.
3.11 Each Participating Fund shall credit Insurance Company with the appropriate
number of shares.
3.12 On each ex-dividend date of a Participating Fund or, if not a Business Day,
on the first Business Day thereafter, each Participating Fund shall communicate
to Insurance Company the amount of dividend and capital gain, if any, per share.
All dividends and capital gains shall be automatically reinvested in additional
shares of the applicable Participating Fund at the net asset value per share on
the ex-dividend date. Each Participating Fund shall, on the day after the
ex-dividend date or, if not a Business Day, on the first Business Day
thereafter, notify Insurance Company of the number of shares so issued.
ARTICLE IV
STATEMENTS AND REPORTS
4.1 Each Participating Fund shall provide monthly statements of account as of
the end of each month for all of Insurance Company's accounts by the fifteenth
(15th) Business Day of the following month.
4.2 Each Participating Fund shall distribute to Insurance Company copies of the
Participating Fund's Prospectuses, proxy materials, notices, periodic reports
and other printed materials (which the Participating Fund customarily provides
to its shareholders) in quantities as Insurance Company may reasonably request
for distribution to each Contractholder and Participant.
4.3 Each Participating Fund will provide to Insurance Company at least one
complete copy of all registration statements, Prospectuses, reports, proxy
statements, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Participating Fund or its shares, contemporaneously
with the filing of such document with the Commission or other regulatory
authorities.
4.4 Insurance Company will provide to each Participating Fund at least one copy
of all registration statements, Prospectuses, reports, proxy statements, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Contracts or the Separate Account, contemporaneously with the
filing of such document with the Commission.
ARTICLE V
EXPENSES
5.1 The charge to each Participating Fund for all expenses and costs of the
Participating Fund, including but not limited to management fees, administrative
expenses and legal and regulatory costs, will be made in the determination of
the Participating Fund's daily net asset value per share so as to accumulate to
an annual charge at the rate set forth in the Participating Fund's Prospectus.
Excluded from the expense limitation described herein shall be brokerage
commissions and transaction fees and extraordinary expenses.
5.2 Except as provided in this Article V and, in particular in the next
sentence, Insurance Company shall not be required to pay directly any expenses
of any Participating Fund or expenses relating to the distribution of its
shares. Insurance Company and each Participating Fund shall pay expenses and
costs as set forth in Schedule B.
ARTICLE VI
EXEMPTIVE RELIEF
6.1 Insurance Company has reviewed a copy of the order dated December 23, 1987
of the Securities and Exchange Commission under Section 6(c) of the Act with
respect to Dreyfus Variable Investment Fund and a copy of the order dated August
23, 1989 of the Securities and Exchange Commission under Section 6(c) of the Act
with respect to Dreyfus Life and Annuity Index Fund, Inc. and, in particular,
has reviewed the conditions to the relief set forth in each related Notice. As
set forth therein, if Dreyfus Variable Investment Fund or Dreyfus Life and
Annuity Index Fund, Inc. is a Participating Fund, Insurance Company agrees, as
applicable, to report any potential or existing conflicts promptly to the
respective Board of Dreyfus Variable Investment Fund and/or Dreyfus Life and
Annuity Index Fund, Inc. and, in particular, whenever contract voting
instructions are disregarded, and recognizes that it will be responsible for
assisting each applicable Board in carrying out its responsibilities under such
application. Insurance Company agrees to carry out such responsibilities with a
view to the interests of existing Contractholders.
The Dreyfus Socially Responsible Growth Fund, Inc., if it is a Participating
Fund, shall furnish Insurance Company with a copy of its application for an
order of the Securities and Exchange Commission under Section 6(c) of the Act
for mixed and shared funding relief, and the notice of such application and
order when issued by the SEC. Insurance Company agrees to comply with the
conditions on which such order is issued, including reporting any potential or
existing conflicts promptly to the Board of The Dreyfus Socially Responsible
Growth Fund, Inc., and in particular whenever Contractholder voting instructions
are disregarded, to the extent such conditions are not materially different from
the conditions of the mixed and shared funding relief obtained by Dreyfus
Variable Investment Fund and Dreyfus Life and Annuity Index Fund, Inc.,
respectively; and recognizes that it shall be responsible for assisting the
Board of The Dreyfus Socially Responsible Growth Fund, Inc. in carrying out its
responsibilities in connection with such order. Insurance Company agrees to
carry out such responsibilities with a view to the interests of existing
Contractholders.
6.2 If a majority of the Board, or a majority of Disinterested Board Members,
determines that a material irreconcilable conflict exists with regard to
Contractholder investments in a Participating Fund, the Board shall give prompt
notice to all Participating Companies and any other Participating Fund. If the
Board determines that Insurance Company is responsible for causing or creating
said conflict, Insurance Company shall at its sole cost and expense, and to the
extent reasonably practicable (as determined by a majority of the Disinterested
Board Members), take such action as is necessary to remedy or eliminate the
irreconcilable material conflict. Such necessary action may include, but shall
not be limited to:
a. Withdrawing the assets allocable to the Separate Account from the
Participating Fund and reinvesting such assets in another Participating
Fund (if applicable) or a different investment medium, or submitting the
question of whether such segregation should be implemented to a vote of all
affected Contractholders; and/or
b. Establishing a new registered management investment company.
6.3 If a material irreconcilable conflict arises as a result of a decision by
Insurance Company to disregard Contractholder voting instructions and said
decision represents a minority position or would preclude a majority vote by all
Contractholders having an interest in a Participating Fund, Insurance Company
may be required, at the Board's election, to withdraw the investments of the
Separate Account in that Participating Fund.
6.4 For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether or not any proposed action adequately remedies
any irreconcilable material conflict, but in no event will any Participating
Fund be required to bear the expense of establishing a new funding medium for
any Contract. Insurance Company shall not be required by this Article to
establish a new funding medium for any Contract if an offer to do so has been
declined by vote of a majority of the Contractholders materially adversely
affected by the irreconcilable material conflict.
6.5 No action by Insurance Company taken or omitted, and no action by the
Separate Account or any Participating Fund taken or omitted as a result of any
act or failure to act by Insurance Company pursuant to this Article VI, shall
relieve Insurance Company of its obligations under, or otherwise affect the
operation of, Article V.
ARTICLE VII
VOTING OF PARTICIPATING FUND SHARES
7.1 Each Participating Fund shall provide Insurance Company with copies, at no
cost to Insurance Company, of the Participating Fund's proxy material, reports
to shareholders and other communications to shareholders in such quantity as
Insurance Company shall reasonably require for distributing to Contractholders
or Participants.
Insurance Company shall:
(a) solicit voting instructions from Contractholders or Participants on a
timely basis and in accordance with applicable law;
(b) vote the Participating Fund shares in accordance with instructions
received from Contractholders or Participants; and
(c) vote the Participating Fund shares for which no instructions have been
received in the same proportion as Participating Fund shares for which
instructions have been received.
Insurance Company agrees at all times to vote its General Account shares in the
same proportion as the Participating Fund shares for which instructions have
been received from Contractholders or Participants. Insurance Company further
agrees to be responsible for assuring that voting the Participating Fund shares
for the Separate Account is conducted in a manner consistent with other
Participating Companies.
7.2 Insurance Company agrees that it shall not, without the prior written
consent of each applicable Participating Fund and Dreyfus, solicit, induce or
encourage Contractholders to (a) change or supplement the Participating Fund's
current investment adviser or (b) change, modify, substitute, add to or delete
from the current investment media for the Contracts.
ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 Each Participating Fund or its underwriter shall periodically furnish
Insurance Company with the following documents, in quantities as Insurance
Company may reasonably request:
a. Current Prospectus and any supplements thereto; and
b. Other marketing materials.
Expenses for the production of such documents shall be borne by Insurance
Company in accordance with Schedule B.
8.2 Insurance Company shall designate certain persons or entities that shall
have the requisite licenses to solicit applications for the sale of Contracts.
No representation is made as to the number or amount of Contracts that are to be
sold by Insurance Company. Insurance Company shall make reasonable efforts to
market the Contracts and shall comply with all applicable federal and state laws
in connection therewith.
8.3 Insurance Company shall furnish, or shall cause to be furnished, to each
applicable Participating Fund or its designee, each piece of sales literature or
other promotional material in which the Participating Fund, its investment
adviser or the administrator is named, at least seven Business Days prior to its
use. No such material shall be used unless the Participating Fund or its
designee approves such material. Such approval (if given) must be in writing and
shall be presumed not given if not received within ten Business Days after
receipt of such material. Each applicable Participating Fund or its designee, as
the case may be, shall use all reasonable efforts to respond within ten days of
receipt.
8.4 Insurance Company shall not give any information or make any representations
or statements on behalf of a Participating Fund or concerning a Participating
Fund in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or Prospectus of, as may
be amended or supplemented from time to time, or in reports or proxy statements
for, the applicable Participating Fund, or in sales literature or other
promotional material approved by the applicable Participating Fund.
8.5 Each Participating Fund shall furnish, or shall cause to be furnished, to
Insurance Company, each piece of the Participating Fund's sales literature or
other promotional material in which Insurance Company or the Separate Account is
named, at least seven Business Days prior to its use. No such material shall be
used unless Insurance Company approves such material. Such approval (if given)
must be in writing and shall be presumed not given if not received within ten
Business Days after receipt of such material. Insurance Company shall use all
reasonable efforts to respond within ten days of receipt.
8.6 Each Participating Fund shall not, in connection with the sale of
Participating Fund shares, give any information or make any representations on
behalf of Insurance Company or concerning Insurance Company, the Separate
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as may be
amended or supplemented from time to time, or in published reports for the
Separate Account that are in the public domain or approved by Insurance Company
for distribution to Contractholders or Participants, or in sales literature or
other promotional material approved by Insurance Company.
8.7 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without limitation,
advertisements (such as material published, or designed for use, in a newspaper,
magazine or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures or other public media),
sales literature (such as any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, or reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports and
proxy materials, and any other material constituting sales literature or
advertising under National Association of Securities Dealers, Inc. rules, the
Act or the 1933 Act.
ARTICLE IX
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless each Participating
Fund, Dreyfus, each respective Participating Fund's investment adviser and
sub-investment adviser (if applicable), each respective Participating Fund's
distributor, and their respective affiliates, and each of their directors,
trustees, officers, employees, agents and each person, if any, who controls or
is associated with any of the foregoing entities or persons within the meaning
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of Section
9.1), against any and all losses, claims, damages or liabilities joint or
several (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement of, any action,
suit or proceeding or any claim asserted) for which the Indemnified Parties may
become subject, under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect to thereof) (i) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in information furnished by Insurance Company for use in the
registration statement or Prospectus or sales literature or advertisements of
the respective Participating Fund or with respect to the Separate Account or
Contracts, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) arise out of or as
a result of conduct, statements or representations (other than statements or
representations contained in the Prospectus and sales literature or
advertisements of the respective Participating Fund) of Insurance Company or its
agents, with respect to the sale and distribution of Contracts for which the
respective Participating Fund's shares are an underlying investment; (iii) arise
out of the wrongful conduct of Insurance Company or persons under its control
with respect to the sale or distribution of the Contracts or the respective
Participating Fund's shares; (iv) arise out of Insurance Company's incorrect
calculation and/or untimely reporting of net purchase or redemption orders; or
(v) arise out of any breach by Insurance Company of a material term of this
Agreement or as a result of any failure by Insurance Company to provide the
services and furnish the materials or to make any payments provided for in this
Agreement. Insurance Company will reimburse any Indemnified Party in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that with respect to clauses (i) and (ii) above
Insurance Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon any untrue
statement or omission or alleged omission made in such registration statement,
prospectus, sales literature, or advertisement in conformity with written
information furnished to Insurance Company by the respective Participating Fund
specifically for use therein. This indemnity agreement will be in addition to
any liability which Insurance Company may otherwise have.
9.2 Each Participating Fund severally agrees to indemnify and hold harmless
Insurance Company and each of its directors, officers, employees, agents and
each person, if any, who controls Insurance Company within the meaning of the
1933 Act against any losses, claims, damages or liabilities to which Insurance
Company or any such director, officer, employee, agent or controlling person may
become subject, under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) (1) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the registration statement or Prospectus or sales literature or
advertisements of the respective Participating Fund; (2) arise out of or are
based upon the omission to state in the registration statement or Prospectus or
sales literature or advertisements of the respective Participating Fund any
material fact required to be stated therein or necessary to make the statements
therein not misleading; or (3) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
registration statement or Prospectus or sales literature or advertisements with
respect to the Separate Account or the Contracts and such statements were based
on information provided to Insurance Company by the respective Participating
Fund; and the respective Participating Fund will reimburse any legal or other
expenses reasonably incurred by Insurance Company or any such director, officer,
employee, agent or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the respective Participating Fund will not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or omission or alleged omission made in such
registration statement, Prospectus, sales literature or advertisements in
conformity with written information furnished to the respective Participating
Fund by Insurance Company specifically for use therein. This indemnity agreement
will be in addition to any liability which the respective Participating Fund may
otherwise have.
9.3 Each Participating Fund severally shall indemnify and hold Insurance Company
harmless against any and all liability, loss, damages, costs or expenses which
Insurance Company may incur, suffer or be required to pay due to the respective
Participating Fund's (1) incorrect calculation of the daily net asset value,
dividend rate or capital gain distribution rate; (2) incorrect reporting of the
daily net asset value, dividend rate or capital gain distribution rate; and (3)
untimely reporting of the net asset value, dividend rate or capital gain
distribution rate; provided that the respective Participating Fund shall have no
obligation to indemnify and hold harmless Insurance Company if the incorrect
calculation or incorrect or untimely reporting was the result of incorrect
information furnished by Insurance Company or information furnished untimely by
Insurance Company or otherwise as a result of or relating to a breach of this
Agreement by Insurance Company.
9.4 Promptly after receipt by an indemnified party under this Article of notice
of the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this Article,
notify the indemnifying party of the commencement thereof. The omission to so
notify the indemnifying party will not relieve the indemnifying party from any
liability under this Article IX, except to the extent that the omission results
in a failure of actual notice to the indemnifying party and such indemnifying
party is damaged solely as a result of the failure to give such notice. In case
any such action is brought against any indemnified party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such indemnified party, and to the
extent that the indemnifying party has given notice to such effect to the
indemnified party and is performing its obligations under this Article, the
indemnifying party shall not be liable for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation. Notwithstanding the
foregoing, in any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent.
A successor by law of the parties to this Agreement shall be entitled to the
benefits of the indemnification contained in this Article IX. The provisions of
this Article IX shall survive termination of this Agreement.
9.5 Insurance Company shall indemnify and hold each respective Participating
Fund, Dreyfus and sub-investment adviser of the Participating Fund harmless
against any tax liability incurred by the Participating Fund under Section 851
of the Code arising from purchases or redemptions by Insurance Company's General
Accounts or the account of its affiliates.
ARTICLE X
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the date hereof and shall continue
in force until terminated in accordance with the provisions herein.
10.2 This Agreement shall terminate without penalty:
a. As to any Participating Fund, at the option of Insurance Company or the
Participating Fund at any time from the date hereof upon 180 days' notice,
unless a shorter time is agreed to by the respective Participating Fund and
Insurance Company;
b. As to any Participating Fund, at the option of Insurance Company, if
shares of that Participating Fund are not reasonably available to meet the
requirements of the Contracts as determined by Insurance Company. Prompt
notice of election to terminate shall be furnished by Insurance Company,
said termination to be effective ten days after receipt of notice unless
the Participating Fund makes available a sufficient number of shares to
meet the requirements of the Contracts within said ten-day period;
c. As to a Participating Fund, at the option of Insurance Company, upon the
institution of formal proceedings against that Participating Fund by the
Commission, National Association of Securities Dealers or any other
regulatory body, the expected or anticipated ruling, judgment or outcome of
which would, in Insurance Company's reasonable judgment, materially impair
that Participating Fund's ability to meet and perform the Participating
Fund's obligations and duties hereunder. Prompt notice of election to
terminate shall be furnished by Insurance Company with said termination to
be effective upon receipt of notice;
d. As to a Participating Fund, at the option of each Participating Fund,
upon the institution of formal proceedings against Insurance Company by the
Commission, National Association of Securities Dealers or any other
regulatory body, the expected or anticipated ruling, judgment or outcome of
which would, in the Participating Fund's reasonable judgment, materially
impair Insurance Company's ability to meet and perform Insurance Company's
obligations and duties hereunder. Prompt notice of election to terminate
shall be furnished by such Participating Fund with said termination to be
effective upon receipt of notice;
e. As to a Participating Fund, at the option of that Participating Fund, if
the Participating Fund shall determine, in its sole judgment reasonably
exercised in good faith, that Insurance Company has suffered a material
adverse change in its business or financial condition or is the subject of
material adverse publicity and such material adverse change or material
adverse publicity is likely to have a material adverse impact upon the
business and operation of that Participating Fund or Dreyfus, such
Participating Fund shall notify Insurance Company in writing of such
determination and its intent to terminate this Agreement, and after
considering the actions taken by Insurance Company and any other changes in
circumstances since the giving of such notice, such determination of the
Participating Fund shall continue to apply on the sixtieth (60th) day
following the giving of such notice, which sixtieth day shall be the
effective date of termination;
f. As to a Participating Fund, upon termination of the Investment Advisory
Agreement between that Participating Fund and Dreyfus or its successors
unless Insurance Company specifically approves the selection of a new
Participating Fund investment adviser. Such Participating Fund shall
promptly furnish notice of such termination to Insurance Company;
g. As to a Participating Fund, in the event that Participating Fund's
shares are not registered, issued or sold in accordance with applicable
federal law, or such law precludes the use of such shares as the underlying
investment medium of Contracts issued or to be issued by Insurance Company.
Termination shall be effective immediately as to that Participating Fund
only upon such occurrence without notice;
h. At the option of a Participating Fund upon a determination by its Board
in good faith that it is no longer advisable and in the best interests of
shareholders of that Participating Fund to continue to operate pursuant to
this Agreement. Termination pursuant to this Subsection (h) shall be
effective upon 60 days' notice by such Participating Fund to Insurance
Company of such termination unless a shorter time is agreed to by Insurance
Company;
i. At the option of a Participating Fund if the Contracts cease to qualify
as annuity contracts or life insurance policies, as applicable, under the
Code, or if such Participating Fund reasonably believes that the Contracts
may fail to so qualify;
j. At the option of any party to this Agreement, upon another party's
breach of any material provision of this Agreement;
k. At the option of a Participating Fund, if the Contracts are not
registered, issued or sold in accordance with applicable federal and/or
state law; or
l. Upon assignment of this Agreement, unless made with the written consent
of every other non-assigning party.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f or 10.2k
herein shall not affect the operation of Article V of this Agreement. Any
termination of this Agreement shall not affect the operation of Article IX of
this Agreement.
10.3 Notwithstanding any termination of this Agreement pursuant to Section 10.2
hereof, each Participating Fund and Dreyfus may, at the option of the
Participating Fund, continue to make available additional shares of that
Participating Fund for as long as the Participating Fund desires pursuant to the
terms and conditions of this Agreement as provided below, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, if that
Participating Fund and Dreyfus so elect to make additional Participating Fund
shares available, the owners of the Existing Contracts or Insurance Company,
whichever shall have legal authority to do so, shall be permitted to reallocate
investments in that Participating Fund, redeem investments in that Participating
Fund and/or invest in that Participating Fund upon the making of additional
purchase payments under the Existing Contracts. In the event of a termination of
this Agreement pursuant to Section 10.2 hereof, such Participating Fund and
Dreyfus, as promptly as is practicable under the circumstances, shall notify
Insurance Company whether Dreyfus and that Participating Fund will continue to
make that Participating Fund's shares available after such termination. If such
Participating Fund shares continue to be made available after such termination,
the provisions of this Agreement shall remain in effect and thereafter either of
that Participating Fund or Insurance Company may terminate the Agreement as to
that Participating Fund, as so continued pursuant to this Section 10.3, upon
prior written notice to the other party, such notice to be for a period that is
reasonable under the circumstances but, if given by the Participating Fund, need
not be for more than six months.
10.4 Termination of this Agreement as to any one Participating Fund shall not be
deemed a termination as to any other Participating Fund unless Insurance Company
or such other Participating Fund, as the case may be, terminates this Agreement
as to such other Participating Fund in accordance with this Article X.
ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement, except for the addition
or deletion of any Participating Fund as specified in Exhibit A, shall be made
by agreement in writing between Insurance Company and each respective
Participating Fund.
ARTICLE XII
NOTICE
12.1 Each notice required by this Agreement shall be given by certified mail,
return receipt requested, to the appropriate parties at the following addresses:
Insurance Company:Glenbrook Life and Annuity Company
3100 Sanders Roads, J5B
Northbrook, Illinois 60062
Attn: David E. Stone
Associate Counsel
Participating Funds: [Name of Fund]
c/o Premier Mutual Fund Services, Inc.
200 Park Avenue
New York, New York 10166
Attn: Elizabeth A. Keeley, Esq.
with copies to: [Name of Fund]
c/o The Dreyfus Corporation 200 Park Avenue
New York, New York 10166
Attn: Mark N. Jacobs, Esq.
Lawrence B. Stoller, Esq.
Stroock & Stroock & Lavan
180 Maiden Lane
New York, New York 10038-4982
Attn: Lewis G. Cole, Esq.
Stuart H. Coleman, Esq.
Notice shall be deemed to be given on the date of receipt by the addresses as
evidenced by the return receipt.
ARTICLE XIII
MISCELLANEOUS
13.1 This Agreement has been executed on behalf of each Fund by the undersigned
officer of the Fund in his capacity as an officer of the Fund. The obligations
of this Agreement shall only be binding upon the assets and property of the Fund
and shall not be binding upon any director, trustee, officer or shareholder of
the Fund individually. It is agreed that the obligations of the Funds are
several and not joint, that no Fund shall be liable for any amount owing by
another Fund and that the Funds have executed one instrument for convenience
only.
ARTICLE XIV
LAW
14.1 This Agreement shall be construed in accordance with the internal laws of
the State of New York, without giving effect to principles of conflict of laws.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be duly
executed and attested as of the date first above written.
GLENBROOK LIFE AND ANNUITY COMPANY
BY:
Its:
Attest:
DREYFUS LIFE AND ANNUITY INDEX FUND, INC.
(d/b/a DREYFUS STOCK INDEX FUND)
BY:
Its:
Attest:,
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH
FUND, INC.
BY:
Its.
Attest:
DREYFUS VARIABLE INVESTMENT FUND
BY:
Its:
Attest:
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
GLENBROOK LIFE AND ANNUITY COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this 10th day of September 1996, by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), GLENBROOK LIFE AND ANNUITY COMPANY, an Illinois corporation (the
"Company"), on its own behalf and on behalf of each of the segregated asset
accounts of the Company set forth in Schedule A hereto, as may be amended from
time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a
Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolution of the Board of Directors of the Company, to
set aside and invest assets attributable to the aforesaid variable annuity
and/or variable life insurance contracts that are allocated to the Accounts (the
Policies and the Accounts covered by this Agreement, and each corresponding
Portfolio covered by this Agreement in which the Accounts invest, is specified
in Schedule A attached hereto as may be modified from time to time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered as a
broker-dealer with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), and is
a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD");
WHEREAS, Allstate Life Financial Services, Inc. ("ALFS") the underwriter
for the individual variable annuity and the variable life policies, is
registered as a broker-dealer with the SEC under the 1934 Act and is a member in
good standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust, MFS,
and the Company agree as
ARTICLE I. SALE OF TRUST SHARES
1.1 The Trust agrees to sell to the Company those Shares which the Accounts
order (based on orders placed by Policy holders on that Business Day, as
defined below) and which are available for purchase by such Accounts,
executing such orders on a daily basis at the net asset value next computed
after receipt by the Trust or its designee of the order for the Shares. For
purposes of this Section 1.1., the Company shall be the designee of the
Trust for receipt of such orders from Policy owners and receipt by such
designee shall constitute receipt by the Trust; provided that the Trust
receives notice of such orders by 9:30 a.m. New York time on the next
following Business Day. "Business Day" shall mean any day on which the New
York Stock Exchange, Inc. (the "NYSE") is open for trading and on which the
Trust calculates its net asset value pursuant to the rules of the SEC.
1.2 The Trust agrees to make the Shares available indefinitely for purchase at
the applicable net asset value per share by the Company and the Accounts on
those days on which the Trust calculates its net asset value pursuant to
rules of the SEC and the Trust shall calculate such net asset value on each
day which the NYSE is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Trust (the "Board") may refuse to sell any Shares
to the Company and the Accounts, or suspend or terminate the offering of
the Shares if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Board acting in
good faith and in light of its fiduciary duties under federal and any
applicable state laws, necessary in the best interest of the Shareholders
of such Portfolio (it being understood that for this purpose the term
"Shareholders" means Policy owners). Notice of election to suspend or
terminate shall be furnished by the Trust, said termination to be effective
10 Business Days after receipt of such notice by the Company in order to
give the Company sufficient time to take appropriate steps in response to
such suspension or termination.
1.3 The Trust and MFS agree that the Shares will be sold only to insurance
companies which have entered into participation agreements with the Trust
and MFS (the "Participating Insurance Companies") and their separate
accounts, qualified pension and retirement plans and MFS or its affiliates.
The Trust and MFS will not sell Trust shares to any insurance company or
separate account unless an agreement containing provisions substantially
the same as Articles Ill and VII of this Agreement is in effect to govern
such sales. The Company will not resell the Shares except to the Trust or
its agents.
1.4 The Trust agrees to redeem for cash, on the Company's request, any full or
fractional Shares held by the Accounts (based on orders placed by Policy
owners on that Business Day, as defined below), executing such requests on
a daily basis at the net asset value next computed after receipt by the
Trust or its designee of the request for redemption. For purposes of this
Section 1.4, the Company shall be the designee of the Trust for receipt of
requests for redemption from Policy owners and receipt by such designee
shall constitute receipt by the Trust; provided that the Trust receives
notice of such request for redemption by 9:30 a.m. New York time on the
next following Business Day.
1.5 Each purchase, redemption and exchange order placed by the Company shall be
placed separately for each Portfolio and shall not be netted with respect
to any Portfolio. However, with respect to payment of the purchase price by
the Company and of redemption proceeds by the Trust, the Company and the
Trust shall net purchase and redemption orders with respect to each
Portfolio and shall transmit one net payment for all of the Portfolios in
accordance with Section 1.6 hereof.
1.6 In the event of net purchases, the Company shall pay for the Shares by 2:00
p.m. New York time on the next Business Day after an order to purchase the
Shares is deemed to be received in accordance with the provisions of
Section 1.1., hereof. In the event of net redemption the Trust shall pay
the redemption proceeds by 2:00 p.m. New York time on the next Business Day
after an order to redeem the shares is deemed to be received in accordance
with the provisions of Section 1.4. hereof. All such payments shall be in
federal funds transmitted by wire.
1.7 Issuance and transfer of the Shares will be by book entry only. Stock
certificates will not be issued to the Company or the Accounts. The Shares
ordered from the Trust will be recorded in an appropriate title for the
Accounts or the appropriate subaccounts of the Accounts.
1.8 The Trust shall furnish same day notice (by wire or telephone followed by
written confirmation) to the Company of any dividends or capital gain
distributions payable on the Shares. The Company hereby elects to receive
all such dividends and distributions a-s are payable on a Portfolio's
Shares in additional Shares of that Portfolio. T-he Trust shall notify the
Company of the number of Shares so issued as payment of such dividends and
distributions.
1.9 The Trust or its custodian shall make the net asset value per share for
each Portfolio available to the Company on each Business Day as soon as
reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share available
by 6:30 p.m. New York time. In the event that the Trust is unable to meet
the 6:30 p.m. time stated herein, it shall provide additional time for the
Company to place orders for the purchase and redemption of Shares. Such
additional time shall be equal to the additional time which the Trust takes
to make the net asset value available to the Company. If the Trust provides
materially incorrect share net asset value information, the Trust shall
make an adjustment to the number of shares purchased or redeemed for the
Accounts to reflect the correct net asset value per share. Any material
error in the calculation or reporting of net asset value per share,
dividend or capital gains information shall be reported promptly upon
discovery to the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1 The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable
state and federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940
Act. The Company further represents and warrants that it is an insurance
company duly organized and in good standing under applicable law and that
it has legally and validly established the Account as a segregated asset
account under applicable law and has registered or, prior to any issuance
or sale of the Policies, will register the Accounts as unit investment
trusts in accordance with the provisions of the 1940 Act (unless exempt
therefrom) to serve as segregated investment accounts for the Policies, and
that it will maintain such registration for so long as any Policies are
outstanding. The Company shall amend the registration statements under the
1933 Act for the Policies and the registration statements under the 1940
Act for the Accounts from time to time as required in order to effect the
continuous offering of the Policies for so long as the Company desires to
offer the Policies (it being understood that the Company reserves the right
in its sole discretion, to suspend, terminate or resume the offering of the
Policies in any state at any time for any reason, or as may otherwise be
required by applicable law). The Company shall register and qualify the
Policies for sales in accordance with the securities laws of the various
states only if and to the extent deemed necessary by the Company.
2.2. The Company represents and warrants that the Policies are currently and at
the time of issuance will be treated as life insurance, endowment or
annuity contracts under applicable provisions of the Internal Revenue Code
of 1986, as amended (the "Code") subject to the Trust's compliance with
Article VI hereof, that it will maintain such treatment and that it will
notify the Trust or MFS immediately upon having a reasonable basis for
believing that the Policies have ceased to be so treated or that they might
not be so treated in the future.
2.3. The Company represents and warrants that ALFS the underwriter for the
variable annuity and the variable life policies, is a member in good
standing of the NASD and is a registered broker-dealer with the SEC. The
Company represents and warrants that the Company will require ALFS to sell
and distribute such policies in accordance in all material respects with
all applicable state and federal securities laws, including without
limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of The Commonwealth of
Massachusetts and all applicable federal and state securities laws and that
the Trust is and shall remain registered under the 1940 Act. The Trust
shall amend the registration statement for its Shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the
continuous offering of its Shares. The Trust shall register and qualify the
Shares for sale in accordance with the laws of the various states only if
and to the extent deemed necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Trust and MFS represent that the Trust and the Underwriter will sell and
distribute the Shares in compliance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.6. The Trust represents that it is lawfully organized and validly existing
under the laws of The Commonwealth of Massachusetts and that it does and
will comply in all material respects with the 1940 Act and any applicable
regulations thereunder and SEC orders issued to the Trust.
2.7. MFS represents and warrants that it is and shall remain duly registered
under all applicable federal securities laws and that it shall perform its
obligations for the Trust in compliance in all material respects with any
applicable federal securities laws and with the securities laws of The
Commonwealth of Massachusetts. MFS represents and warrants that it is not
subject to state securities laws other than the securities laws of The
Commonwealth of Massachusetts and that it is exempt from registration as an
investment adviser under the securities laws of The Commonwealth of
Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the Board
such reports, material or data as the Board may reasonably request so that
it may carry out fully the obligations imposed upon it by the conditions
contained in the exemptive application pursuant to which the SEC has
granted exemptive relief to permit mixed and shared funding (the "Mixed and
Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS: VOTING
3.1. At least annually, or more frequently if the prospectus is supplemented or
amended, the Trust or its designee shall provide the Company, free of
charge, with as many copies of the current prospectus (describing only the
Portfolios listed in Schedule A hereto) for the Shares as the Company may
reasonably request for distribution to existing Policy owners whose
Policies are funded by such Shares. The Trust or its designee shall provide
the Company, at the Company's expense, with as many copies of the current
prospectus for the Shares as the Company may reasonably request for
distribution to prospective purchasers of Policies. If requested by the
Company in lieu thereof, the Trust or its designee shall provide such
documentation (including a "camera ready" copy of the new prospectus as set
in type or, at the request of the Company, as a diskette in the format,
sent to the financial printer) and other assistance as is reasonably
necessary in order for the parties hereto once each year (or more
frequently if the prospectus for the Shares is supplemented or amended) to
have the prospectus for the Policies and the prospectus for the Shares
printed together in one document; the expenses of such printing to be
apportioned between (a) the Company and (b) the Trust or its designee in
proportion to the number of pages of the Policy and Shares' prospectuses,
taking account of other relevant factors affecting the expense of printing,
such as covers, columns, graphs and charts; the Trust or its designee to
bear the cost of printing the Shares' prospectus portion of such document
for distribution to owners of existing Policies funded by the Shares and
the Company to bear the expenses of printing the portion of such document
relating to the Accounts; provided, however, that the Company shall bear
all printing expenses of such combined documents where used for
distribution to prospective purchasers or to owners of existing Policies
not funded by the Shares. In the event that the Company requests that the
Trust or its designee provides the Trust's prospectus in a "camera ready"
or diskette format, the Trust shall be responsible for providing the
prospectus in the format in which it or MFS is accustomed to formatting
prospectuses and shall bear the expense of providing the prospectus in such
format (e.g., typesetting expenses), and the Company shall bear the expense
of adjusting or changing the format to conform with any of its
prospectuses.
3.2. The prospectus for the Shares shall state that the statement of additional
information for the Shares is available from the Trust or its designee. The
Trust or its designee, at its expense, shall print and provide such
statement of additional information to the Company (or a master of such
statement suitable for duplication by the Company) for distribution to any
owner of a Policy funded by the Shares. The Trust or its designee, at the
Company's expense, shall print and provide such statement to the Company
(or a master of such statement suitable for duplication by the Company) for
distribution to a prospective purchaser who requests such statement or to
an owner of a Policy not funded by the Shares. If applicable SEC rules
require that any of the Trust's proxy materials, reports to shareholders,
or other communications be filed with the SEC, the Trust or its designee
shall prepare and file with the SEC such proxy materials, reports to
shareholders, or other communications in such format as required by such
applicable rules.
3.3. The Trust or its designee shall provide the Company free of charge copies,
if and to the extent applicable to the Shares, of the Trust's proxy
materials, reports to Shareholders and other communications to Shareholders
in such quantity as the Company shall reasonably require for distribution
to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above, or of
Article V below, the Company shall pay the expense of printing or providing
documents to the extent such cost is considered a distribution expense.
Distribution expenses would include by way of illustration, but are not
limited to, the printing of the Shares' prospectus or prospectuses for
distribution to prospective purchasers or to owners of existing Policies
not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate to include
in the prospectus pursuant to which a Policy is offered disclosure
regarding the potential risks of mixed and shared funding. The Trust shall
include disclosure in its prospectus in accordance with SEC guidelines with
regard to mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from
Policy owners; and
(c) vote the Shares for which no instructions have been received in
the same proportion as the Shares of such Portfolio for which
instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass through voting privileges for variable contract owners.
The Company will in no way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Policy owners. The Company reserves the right to vote shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts holding Shares calculates voting privileges
in the manner required by the Mixed and Shared Funding Exemptive Order. The
Trust and MFS will notify the Company of any changes of interpretations or
amendments to the Mixed and Shared Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the Trust or
its designee, each piece of sales literature or other promotional material
in which the Trust, MFS, any other investment adviser to the Trust, or any
affiliate of MFS are named, at least three (3) Business Days prior to its
use. No such material shall be used if the Trust, MFS, or their respective
designees reasonably objects to such use within three (3) Business Days
after receipt of such material. Notwithstanding the fact that the Trust or
its designee may not initially object, the Trust reserves the right to
object at a later date to the continued use of any such sales literature or
other promotional material in which the Trust, MFS any other investment
adviser to the Trust, or any affiliate of MFS, is named and no such
material shall be used thereafter if the Trust or its designee so objects.
4.2. The Company shall not give any information or make any representations or
statement on behalf of the Trust, MFS, any other investment adviser to the
Trust, or any affiliate of MFS or concerning the Trust or any other such
entity in connection with the sale of the Policies inconsistent with the
information or representations contained in the registration statement,
prospectus or statement of additional information for the Shares, as such
registration statement, prospectus and statement of additional information
may be amended or supplemented from time to time, or in reports or proxy
statements for the Trust, or in sales literature or other promotional
material approved by the Trust, MFS or their respective designees, except
with the permission of the Trust, MFS or their respective designees. The
Trust, MFS or their respective designees each agrees to respond to any,
request for approval on a prompt and timely basis. The Company shall adopt
and implement procedures reasonably designed to ensure that information
concerning the Trust, MFS or any of their affiliates which is intended for
use only by brokers or agents selling the Policies (i.e., information that
is not intended for distribution to Policy owners or prospective Policy
holders) is so used, and neither the Trust, MFS nor any of their affiliates
shall be liable for any losses, damages or expenses relating to the
improper use of such broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be furnished, to
the Company or its designee, each piece of sales literature or other
promotional material in which the Company, the Accounts and/or the Policies
is named, at least three (3) Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to
such use within three (3) Business Days after receipt of such material.
Notwithstanding the fact that the Company or its designee may not initially
object, the Company reserves the right to object at a later date to the
continued use of any such sales literature or other promotional material in
which the Company is named and no such material shall be used thereafter if
the Company or its designee so objects.
4.4. The Trust and MFS shall not give, and agree that the Underwriter shall not
give, any information or make any representations on behalf of the Company
or concerning the Company, the Accounts, or the Policies in connection with
the sale of the Policies other than the information or representations
contained in a registration statement, prospectus, or statement of
additional information for the Policies, as such registration statement,
prospectus and statement of additional information may be amended or
supplemented from time to time, or in reports for the Accounts, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company. The Company or its
designee agrees to respond to any request for approval on a prompt and
timely basis. The parties hereto agree that this Section 4.4. is neither
intended to designate nor otherwise imply that MFS is an underwriter or
distributor of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company or the
Trust, as appropriate) will each provide to the other at least one complete
copy of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the
Policies, or to the Trust or its Shares, prior to or contemporaneously with
the filing of such document with the SEC or other regulatory authorities.
The Company and the Trust shall also each promptly inform the other of the
results of any examination by the SEC (or other regulatory authorities)
that relates to the Policies, the Trust or its Shares, and the party that
was the subject of the examination shall provide the other party with a
copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Portfolio, and of
any material change in the Trust's registration statement, particularly any
change resulting in change to the registration statement or prospectus or
statement of additional information for any Account. The Trust and MFS will
cooperate with the Company so as to enable the Company to solicit proxies
from Policy owners or to make changes to its prospectus, statement of
additional information or registration statement, in an orderly manner. The
Trust and MFS will make reasonable efforts to attempt to have changes
affecting Policy prospectuses become effective simultaneously with the
annual updates for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (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,
telephone directories (or other routine listings), electronic or other
public media), and sales literature (any written or electronic
communication distributed or made generally available to customers or the
public, which communication does not meet the foregoing definition of
"advertisement" including, but not limited to, circulars, research reports,
market letters, performance reports or summaries, form letters,
telemarketing scripts, seminar texts, and reprints or excerpts of any other
advertisement, sales literature or published article), distributed or made
generally available to customers or the public, educational or training
materials or communications distributed or made generally available to some
or all agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company under this
Agreement, and the Company shall pay no fee or other compensation to the
Trust, except that if the Trust or any Portfolio adopts and implements a
plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution and
Shareholder servicing expenses, then, subject to obtaining any required
exemptive orders or regulatory approvals, the Trust may make payments to
the Company or to the underwriter for the Policies if and in amounts agreed
to by the Trust in writing. Each party, however, shall, in accordance with
the allocation of expenses specified in Articles III and V hereof,
reimburse other parties for expenses initially paid by one party but
allocated to another party. In addition, nothing herein shall prevent the
parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust and/or
to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal
and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration fees;
preparation and filing of the Trust's proxy materials and reports to
Shareholders; setting in type and printing its prospectus and statement of
additional information (to the extent provided by and as determined in
accordance with Article III above); setting in type and printing the proxy
materials and reports to Shareholders (to the extent provided by and as
determined in accordance with Article III above); the preparation of all
statements and notices required of the Trust by any federal or state law
with respect to its Shares; all taxes on the issuance or transfer of the
Shares; and the costs of distributing the Trust's prospectuses and proxy
materials to owners of Policies funded by the Shares and any expenses
permitted to be paid or assumed by the Trust pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act. The Trust shall not bear any expenses
of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares' prospectus
or prospectuses in connection with new sales of the Policies and of
distributing the Trust's Shareholder reports to Policy owners. The Company
shall bear all expenses associated with the registration, qualification,
and filing of the Policies under applicable federal securities and state
insurance laws; the cost of preparing, printing and distributing the Policy
prospectus and statement of additional information; and the cost of
preparing, printing and distributing annual individual account statements
for Policy owners as required by state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATION
6.1. The Trust and MFS represent and warrant that each Portfolio will meet the
diversification requirements of Section 851 of the Code ("Section 851
Diversification Requirements") and Section 817(h)(1) of the Code and Treas.
Reg. 1.817-5 relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts ("Section 817(h)(1)
Diversification Requirements"), as they may be amended from time to time
(and any revenue rulings, revenue procedures, notices, and other published
announcements of the Internal Revenue Service interpreting these sections)
(collectively, "Diversification Requirements"). In the event that any
Portfolio is not so diversified at the end of any applicable quarter, the
Trust and MFS will make every effort to adequately diversify the Portfolio
so as to achieve compliance within the grace periods afforded by Treas.
Reg. 1.817-5 and Section 851(d) of the Code (the "Grace Periods"). In the
event that any Portfolio is not so diversified at the end of any applicable
Grace Period, the Trust or MFS will promptly notify the Company of such
non-diversification, such notification to be provided in no event later
than 20 days after the end of the applicable Grace Period.
6.2. The Trust and MFS represent that each Portfolio will elect to be qualified
as a Regulated Investment Company under Subchapter M of the Code and that
they will make every effort to ensure the maintenance of such qualification
(under Subchapter M or any successor or similar provision). In the event
that any Portfolio is not so qualified at the end of any applicable quarter
or grace period (if applicable), the Trust or MFS will promptly notify the
Company of such non-qualification, such notification to be provided in no
event later than 20 days after the end of the applicable quarter or grace
period (if applicable).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests of
the variable annuity contract owners and the variable life insurance policy
owners of the Company and/or affiliated companies ("contract owners")
investing in the Trust. The Board shall have the sole authority to
determine if a material irreconcilable conflict exists, and such
determination shall be binding on the Company only if approved in the form
of a resolution by a majority of the Board, or a majority of the
disinterested trustees of the Board. The Board will give prompt notice of
any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the Board in
carrying out its responsibilities under the conditions set forth in the
Trust's exemptive application pursuant to which the SEC has granted the
Mixed and Shared Funding Exemptive Order by providing the Board, as it may
reasonably request, with all information necessary for the Board to
consider any issues raised and agrees that it will be responsible for
promptly reporting any potential or existing conflicts of which it is aware
to the Board including, but not limited to, an obligation by the Company to
inform the Board whenever contract owner voting instructions are
disregarded. The Company also agrees that, if a material irreconcilable
conflict arises, it will at its own cost remedy such conflict up to and
including (a) withdrawing the assets allocable to some or all of the
Accounts from the Trust or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another
Portfolio of the Trust, or submitting to a vote of all affected contract
owners whether to withdraw assets from the Trust or any Portfolio and
reinvesting such assets in a different investment medium and, as
appropriate, segregating the assets attributable to any appropriate group
of contract owners that votes in favor of such segregation, or offering to
any of the affected contract owners the option of segregating the assets
attributable to their contracts or policies, and (b) establishing a new
registered management investment company and segregating the assets
underlying the Policies, unless a majority of Policy owners materially
adversely affected by the conflict have voted to decline the offer to
establish a new registered management investment company.
7.3. A majority of the disinterested trustees of the Board shall determine
whether any proposed action by the Company adequately remedies any material
irreconcilable conflict. In the event that the Board determines that any
proposed action does not adequately remedy any material irreconcilable
conflict, the Company will withdraw from investment in the Trust each of
the Accounts designated by the disinterested trustees and terminate this
Agreement within six (6) months after the Board informs the Company in
writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required to
remedy any such material irreconcilable conflict as determined by a
majority of the disinterested trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Mixed and Shared Funding Exemptive Order) on
terms and conditions materially different from those contained in the Mixed
and Shared Funding Exemptive Order, then (a) the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with Rule 6e-2 and 6e-3(T), as amended, and Rule
6e-3, as adopted, to the extent such rules are applicable; and (b) Sections
3.5, 3.6, 7.1, 7.2, 7.3 and 7.4 of this Agreement shall continue in effect
only to the extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. Indemnification by the Company
The Company agrees to indemnify and hold harmless the Trust, MFS, any
affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls MFS within the meaning of
Section 15 of the 1933 Act, and any agents or employees of the foregoing
(each an "Indemnified Party," or collectively, the "Indemnified Parties"
for purposes of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or expenses (including reasonable counsel fees) to
which any Indemnified Party may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Shares or the
Policies and:
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration
statement, prospectus or statement of additional information for the
Policies or contained in the Policies or sales literature or other
promotional material for the Policies (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading provided that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reasonable reliance
upon and in conformity with information furnished to the Company or
its designee by or on behalf of the Trust or MFS for use in the
registration statement, prospectus or statement of additional
information for the Policies or in the Policies or sales literature or
other promotional material (or any amendment or supplement) or
otherwise for use in connection with the sale of the Policies or
Shares; or
(b) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus, statement of additional information or sales
literature or other promotional material of the Trust not supplied by
the Company or its designee, or persons under its control and on which
the Company has reasonably relied) or wrongful conduct of the Company
or persons under its control, with respect to the sale or distribution
of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the registration statement prospectus,
statement of additional information, or sales literature or other
promotional literature of the Trust, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
to the Trust by or on behalf of the Company; or
(d) arise out of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise out of
or result from any other material breach of this Agreement by the
Company; or
(e) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.2. Indemnification by the Trust
The Trust agrees to indemnify and hold harmless the Company, ALFS, and each
of their respective directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act, and
any agents or employees of the foregoing (each an "Indemnified Party," or
collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Trust) or expenses
(including reasonable counsel fees) to which any Indemnified Party may
become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of
the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration
statement, prospectus, statement of additional information or sales
literature or other promotional material of the Trust (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statement therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reasonable reliance upon and in conformity with information
furnished to the Trust, MFS, the Underwriter or their respective
designees by or on behalf of the Company for use in the registration
statement, prospectus or statement of additional information for the
Trust or in sales literature or other promotional material for the
Trust (or any amendment or supplement) or otherwise for use in
connection with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus, statement of additional information or sales
literature or other promotional material for the Policies not supplied
by the Trust, MFS, the Underwriter or any of their respective
designees or persons under their respective control and on which any
such entity has reasonably relied) or wrongful conduct of the Trust or
persons under its control, with respect to the sale or distribution of
the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the registration statement, prospectus,
statement of additional information, or sales literature or other
promotional literature of the Accounts or relating to the Policies, or
any amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on behalf of
the Trust, MFS or the Underwriter; or
(d) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the registration statement, prospectus,
statement of additional information, or sales literature or other
promotional literature of the Accounts or relating to the Policies, or
any amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on behalf of
the Trust, MFS or the Underwriter; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by the Trust in this Agreement (including a
failure, whether unintentional or in good faith or otherwise, to
comply with the diversification requirements specified in Article VI
of this Agreement) or arise out of or result from any other material
breach of this Agreement by the Trust; or
(f) arise out of or result from the materially incorrect or untimely
calculation or reporting of the daily net asset value per share or
dividend or capital gain distribution rate: or
(g) arise as a result of any failure by the Trust to provide the services
and furnish the materials under the terms of the Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.3. In no event shall the Trust be liable under the indemnification provisions
contained in this Agreement to any individual or entity, including without
limitation, the Company, or any Participating Insurance Company or any
Policy holder, with respect to any losses, claims, damages, liabilities or
expenses that arise out of or result from (i) a breach of any
representation, warranty, and/or covenant made by the Company hereunder or
by any Participating Insurance Company under an agreement containing
substantially similar representations, warranties and covenants; (ii) the
failure by the Company or any Participating Insurance Company to maintain
its segregated asset account (which invests in any Portfolio) as a legally
and validly established segregated asset account under applicable state law
and as a duly registered unit investment trust under the provisions of the
1940 Act (unless exempt therefrom); or (iii) the failure by the Company or
any Participating Insurance Company to maintain its variable annuity and/or
variable life insurance contracts (with respect to which any Portfolio
serves as an underlying funding vehicle) as life insurance, endowment or
annuity contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the indemnification
provisions contained in this Agreement with respect to any losses, claims,
damages, liabilities or expenses to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful
misfeasance, willful misconduct, or gross negligence in the performance of
such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section 8.5. of
commencement of any action, such Indemnified Party will, if a claim in
respect thereof is to be made against the indemnifying party under this
section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnify party will not relieve it from any
liability which it may have to any Indemnified Party otherwise than under
this section. In case any such action is brought against any Indemnified
Party, and it notified the indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate therein and, to the
extent that it may wish, assume the defense thereof, with counsel
satisfactory to such indemnified Party. After notice from the indemnifying
party of its intention to assume the defense of an action, the Indemnified
Party shall bear the expenses of any additional counsel obtained by it, and
the indemnify party shall not be liable to such Indemnified Party under
this section for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of the
commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or 1933 Act control
persons in connection with the Agreement, the issuance or sale of the
Policies, the operation of the Accounts, or the sale or acquisition of
Shares.
8.7. A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts
9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and
1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may
grant and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. TERMINATION
11.1.This Agreement shall terminate with respect to the Accounts, or one, some,
or all Portfolios:
(a) at the option of any party upon six (6) months' advance written notice
to the other parties; or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not reasonably available to meet the requirements of
the Policies or are not "appropriate funding vehicles" for the
Policies, as reasonably determined by the Company. Without limiting
the generality of the foregoing, the Shares of a Portfolio would not
be "appropriate funding vehicles" if, for example, such Shares did not
meet the diversification or other requirements referred to in Article
VI hereof, or if the Company would be permitted to disregard Policy
owner voting instructions pursuant to Rule 6e-2 or 6e-3(T) under the
1940 Act. Prompt notice of the election to terminate for such cause
and an explanation of such cause shall be furnished to the Trust by
the Company; or
(c) at the option of the Trust or MFS upon institution of format
proceedings against the Company by the NASD, the SEC, or any insurance
department or any other regulatory body regarding the Company's duties
under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares; or
(d) at the option of the Company upon institution of formal proceedings
against the Trust or MFS by the NASD, the SEC, or any state securities
or insurance department or any other regulatory body regarding the
Trust's or MFS' duties under this Agreement or related to the sale of
the Shares; or
(e) at the option of the Company, the Trust or MFS upon receipt of any
necessary regulatory approvals and/or the vote of the Policy owners
having an interest in the Accounts (or any subaccounts) to substitute
the shares of another investment company for the corresponding
Portfolio Shares in accordance with the terms of the Policies for
which those Portfolio Shares had been selected to serve as the
underlying investment media. The Company will give thirty (30) days'
prior written notice to the Trust of the Date of any proposed vote or
other action taken to replace the Shares; or
(f) at the option of by either the Trust or MFS by written notice to the
Company, if either one or both of the Trust or MFS respectively, shall
determine, in their sole judgment exercised in good faith, that the
Company has suffered a material adverse change in its business,
operations, financial condition, or prospects since the date of this
Agreement or is the subject of material adverse publicity; or
(g) at the option of the Company by written notice to the Trust and MFS,
if the Company shall determine, in its sole judgment exercised in good
faith, that the Trust or MFS has suffered a material adverse change in
this business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse
publicity; or
(h) at the option of the Company or the Trust by written notice to the
other party upon a determination by the majority of the Trust's Board
that a material irreconcilable conflict exists among the interest of
(i) all contract owners of all separate accounts or (ii) the interests
of the Participating Insurance Companies; or
(i) at the option of any party to this Agreement, upon another party's
material breach of any provision of this Agreement; or
(j) upon assignment of this Agreement, unless made with the written
consent of the parties hereto.
11.2.The notice shall specify the Portfolio or Portfolios, Policies and, if
applicable, the Accounts as to which the Agreement is to be terminated.
11.3.It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11. 1(a) may be exercised for
cause or for no cause.
11.4.Except as necessary to implement Policy owner initiated transactions, or
as required by state insurance laws or regulations, or to resolve a
conflict as contemplated by Article VII hereof, the Company shall not
redeem the Shares attributable to the Policies (as opposed to the Shares
attributable to the Company's assets held in the Accounts), and the Company
shall not prevent Policy owners from allocating payments to a Portfolio
that was otherwise available under the Policies, until thirty (30) days
after the Company shall have notified the Trust of its intention to do so.
11.5.Notwithstanding any termination of this Agreement, the Trust and MFS
shall, at the option of the Company, continue to make available additional
shares of the Portfolios pursuant to the terms and conditions of this
Agreement, for all Policies in effect on the effective date of termination
of this Agreement (the "Existing Policies"), except as otherwise provided
under Article VII of this Agreement. Specifically, without limitation, the
owners of the Existing Policies shall be permitted to transfer or
reallocate investment under the Policies, redeem investments in any
Portfolio and/or invest in the Trust upon the making of additional purchase
payments under the Existing Policies.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail, overnight courier or facsimile to the other party at the address of such
party set forth below or at such other address as such party may from time to
time specify, in writing to the other party.
If to the Trust:
MFS Variable Insurance Trust
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary
If to the Company:
Glenbrook Life and Annuity Company
3 1 00 Sanders Road, Ste N4C
Northbrook. IL 60062
Facsimile No.: (847) 402-3781
Attn: G. Craig Whitehead, Senior Vice President
If to MFS:
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1.Subject to the requirement of legal process and regulatory authority, each
party hereto shall treat as confidential the names and addresses of the
owners of the Policies and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted
by this Agreement or as otherwise required by applicable law or regulation,
shall not disclose, disseminate or utilize such names and addresses and
other confidential information without the express written consent of the
affected party until such Time as it may come into the public domain.
13.2.The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or
otherwise effect their construction or effect.
13.3.This Agreement may be executed simultaneously in one or more counterparts,
each of which taken together shall constitute one and the same instrument.
13.4.If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
13.5.The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference is part of this Agreement.
13.6.Each party hereto shall cooperate with each other party in connection with
inquiries by appropriate governmental authorities (including without
limitation the SEC, the NASD, and state insurance regulators) relating to
this Agreement or the transactions contemplated hereby to the extent
practicable and except where a part),'s respective interests are adverse to
or in conflict with another party's interests.
13.7.The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
13.8.A copy of the Trust's Declaration of Trust is on file with the Secretary
of State of The Commonwealth of Massachusetts. The Company acknowledges
that the obligations of or arising out of this instrument are not binding
upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and
property of the Trust in accordance with its proportionate interest
hereunder. The Company further acknowledges that the assets and liabilities
of each Portfolio are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or
property of the Portfolio on whose behalf the Trust has executed this
instrument. The Company also agrees that the obligations of each Portfolio
hereunder shall be several and not joint, in accordance with its
proportionate interest hereunder, and the Company agrees not to proceed
against any Portfolio for the obligations of another Portfolio.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly, authorized representative
and its seal to be hereunder affixed hereto as of the date specified above.
GLENBROOK LIFE AND ANNUITY COMPANY
By its authorized officer,
By:
Title: Sr. Vice President
MFS VARIABLE INSURANCE TRUST, on behalf
of the Portfolios
By its authorized officer and not individually,
By:
Title: Secretary
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer
By:
Title: Senior Executive Vice President
EXHIBIT 8(1)
CONSENT OF ATTORNEYS
Freedman, Levy, Kroll & Simonds
CONSENT OF
FREEDMAN, LEVY, KROLL & SIMONDS
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the prospectus contained in Post-Effective Amendment No. 3 to the
Form S-6 Registration Statement of Glenbrook Life and Annuity Company (File No.
333-02581).
FREEDMAN, LEVY, KROLL & SIMONDS
Washington, D.C.
April 14, 1998
EXHIBIT 8(2)
CONSENT OF INDEPENDENT AUDITORS
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 3 to Registration
Statement No. 333-02581 of Glenbrook Life Variable Life Separate Account A of
Glenbrook Life and Annuity Company on Form S-6 of our report dated February 20,
1998 relating to the financial statements and financial statement schedule of
Glenbrook Life and Annuity Company and our report dated February 20, 1998
relating to the financial statements of the Glenbrook Life Variable Life
Separate Account A, appearing in the Prospectus, which is part of such
Registration Statement, and to the reference to us under the heading "Experts"
in such Prospectus.
/s/ Deloitte & Touche LLP
Chicago, Illinois
April 27, 1998
EXHIBIT 10
ACTUARIAL OPINION AND CONSENT
GLENBROOK LIFE & ANNUITY COMPANY
3100 Sanders Road--J4B
Northbrook, IL 60062
Telephone: (847) 402-2545 Diana B. Montigney
Fax: (847) 326-7231 Vice President & Life Actuary, FSA., MAAA.
April 30, 1998
In my capacity as Vice President and Life Actuary of Glenbrook Life & Annuity
Company (the Company"), I have provided actuarial advice concerning:
The preparation of Post-Effective Amendment No. 3 to the registration statement
on Form S-6 (File No. 333-02581) filed by Glenbrook Life Variable Life Separate
Account A and the Company with the Securities and Exchange Commission under the
Securities Act of 1933 with respect to variable life insurance policies (the
"Registration Statement"); and
The preparation of policy forms for the variable life policies described in the
Registration Statement (the "Policies").
It is my professional opinion that:
1. The illustrations of death benefits, net cash values, accumulated premium,
internal rates of return on net cash values and internal rates of return on
death benefits shown in Exhibit (11) to the registration statement, based on the
assumptions stated in the illustrations, are consistent with the provisions of
the Policies and with the Company's administrative procedures.
2. The rate structure of the Policies has not been designed so as to make the
relationship between the initial premiums and policy benefits, as shown in the
illustrations, appear to be correspondingly more favorable to prospective
purchasers of Policies for male and female insureds, aged 45, 55, and 65, or for
joint insureds (male/female aged 55 and male/female aged 65) in the underwriting
class illustrated than to prospective purchasers of Policies for insureds of
other sexes or ages. Insureds in other underwriting classes may have higher cost
of insurance charges.
3. The illustrations shown in the registration statement are for commonly used
rating classifications and for premium amounts and ages appropriate to the
markets in which this Policy is sold.
I hereby consent to the filing of this opinion as an Exhibit to this
Post-Effective Amendment No. 3 to the registration statement and to the use of
my name under the heading "Experts" in the Prospectus.
By: /s/ Diana B. Montigney
-----------------------------------------
Diana B. Montigney, F.S.A., M.A.A.A.
Vice President & Life Actuary
EXHIBIT 11
HYPOTHETICAL ILLUSTRATIONS
ILLUSTRATIONS OF ACCOUNT VALUES, CASH SURRENDER VALUES,
DEATH BENEFITS, AND ACCUMULATED PREMIUMS
The tables in Appendix A illustrate the way the Contracts operate. They show how
the Death Benefit, Account Value and Cash Surrender Value could vary over an
extended period of time assuming hypothetical gross rates of return (I.E.,
investment income and capital gains and losses, realized or unrealized) for the
Variable Account equal to annual rates of 0%, 6%, and 12%. The tables are based
on an initial premium of $10,000 and also show the initial Death Benefit based
on that premium. The insureds are assumed to be in the standard underwriting
class. Values are first given based on current Contract charges and then based
on guaranteed Contract charges (See Prospectus heading "Deductions and
Charges"). These tables may assist in the comparison of Death Benefits, Account
Values and Cash Surrender Values for the Contracts with those under other
variable life insurance contracts that may be issued by other companies.
Death Benefits, Account Values and Cash Surrender Values for a Contract would be
different from the amounts shown if the actual investment return averaged 0%, 6%
or 12%, but varied above and below that average for individual Contract Years.
They would also be different, depending on the allocation of Account Value among
the Variable Account's Variable Sub-Accounts, if the actual investment return
for all Variable Sub-Accounts averaged 0%, 6% or 12%, but varied above or below
that average for individual Variable Sub-Accounts. They would also differ if the
initial premium paid were different, if additional premiums were paid, if any
Contract loan or partial withdrawal were made during the period of time
illustrated, or if the insured were in another risk class.
The Death Benefits, Account Values and Cash Surrender Values shown in the tables
reflect the fact that: a Monthly Deduction Amount (consisting of a cost of
insurance charge, tax expense charge, and an administrative expense charge) is
deducted from Account Value each Monthly Activity Date and that an Annual
Maintenance Fee of $35 is deducted on each Contract Anniversary from all
Variable Sub-Accounts to which Account Value is allocated. The values in the
tables also reflect a deduction from the Variable Account of a daily charge
equal to an annual rate of 0.90% for the mortality and expense risk charge. The
Cash Surrender Value shown in the tables reflect the fact that a Withdrawal
Charge is imposed on withdrawals in excess of the Free Withdrawal Amount (See
Prospectus heading "Deductions and Charges").The amounts shown in the table are
based on an average of the investment advisory fees and operating expenses
incurred by the Portfolios, at an annual rate of .85% of the average daily net
assets of the Portfolios (See Prospectus heading "Charges Against the Fund").
Taking account of the average investment advisory fee and operating expenses of
the Portfolios, the gross annual rates of return of 0%, 6% and 12% correspond to
net investment experience at constant annual rates of: (-.85%, 5.15%, and
11.15%,) respectively.
The hypothetical rates of return shown in the tables do not reflect any tax
charges attributable to the Variable Account since no such charges are currently
made. If any such charges are imposed in the future, the gross annual rate of
return would have to exceed the rates shown by an amount sufficient to cover the
tax charges, in order to produce the Account Values, Cash Surrender Values, and
Death Benefits illustrated.
The second column of each table shows the amount that would accumulate if the
initial premium of $10,000 were invested to earn interest, after taxes, of 5%
per year, compounded annually.
Glenbrook Life will furnish upon request a personalized illustration reflecting
the proposed insured's age, sex, and underwriting classification. Where
applicable, Glenbrook Life will also furnish upon request an illustration for a
Contract that is not affected by the sex of the insured.
1
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 45 MALE
INITIAL FACE AMOUNT: $39,998
STANDARD UNDERWRITING CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.15% NET)
Premiums CURRENT CHARGES(1) GUARANTEED CHARGES(2)
Accumulated Cash Cash
End of at 5% Interest Account Surrender Death Account Surrender Death
Contract Year Per Year Value Value Benefit Value Value Benefit
------------- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,838 9,988 39,998 10,762 9,912 39,998
2 11,025 11,749 10,921 39,998 11,587 10,758 39,998
3 11,576 12,740 11,933 39,998 12,483 11,676 39,998
4 12,155 13,817 13,074 39,998 13,457 12,713 39,998
5 12,763 14,989 14,351 39,998 14,515 13,878 39,998
6 13,401 16,262 15,731 39,998 15,667 15,136 39,998
7 14,071 17,647 17,222 39,998 16,920 16,495 39,998
8 14,775 19,153 18,834 39,998 18,286 17,967 39,998
9 15,513 20,790 20,577 39,998 19,775 19,563 39,998
10 16,289 22,570 22,570 39,998 21,402 21,402 39,998
11 17,103 24,629 24,629 39,998 23,276 23,276 39,998
12 17,959 26,878 26,878 39,998 25,342 25,342 39,998
13 18,856 29,337 29,337 41,658 27,623 27,623 39,998
14 19,799 32,027 32,027 44,197 30,144 30,144 41,599
15 20,789 34,971 34,971 46,862 32,914 32,914 44,105
16 21,829 38,198 38,198 49,657 35,949 35,949 46,733
17 22,920 41,721 41,721 53,403 39,262 39,262 50,256
18 24,066 45,569 45,569 57,417 42,881 42,881 54,030
19 25,270 49,771 49,771 61,715 46,833 46,833 58,073
20 26,533 54,361 54,361 66,320 51,150 51,150 62,403
25 33,864 84,510 84,510 98,032 79,411 79,411 92,117
35 55,160 206,520 206,520 216,846 193,809 193,809 203,499
</TABLE>
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual results may be more or less than those shown.
The Death Benefit, Account Value, and Cash Surrender Value for a Contract would
be different from those shown if the actual investment return applicable to the
Contract averaged 12% over a period of years, but also fluctuated above or below
that average for individual Contract Years. The Death Benefit, Account Value,
and Cash Surrender Value for a Contract would also be different from those
shown, depending on the investment allocations made to the Variable Account's
Variable Sub-Accounts, if the actual investment return for all Variable
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual Variable Sub-Accounts. No representation can be made that this
hypothetical rate of return can be achieved for any one year or sustained over
any period of time.
2
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 45 MALE
INITIAL FACE AMOUNT: $39,998
STANDARD UNDERWRITING CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.15% NET)
Premiums CURRENT CHARGES(1) GUARANTEED CHARGES(2)
Accumulated Cash Cash
End of at 5% Interest Account Surrender Death Account Surrender Death
Contract Year Per Year Value Value Benefit Value Value Benefit
------------- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,251 9,401 39,998 10,174 9,324 39,998
2 11,025 10,509 9,681 39,998 10,343 9,514 39,998
3 11,576 10,775 9,968 39,998 10,507 9,699 39,998
4 12,155 11,048 10,305 39,998 10,664 9,920 39,998
5 12,763 11,330 10,692 39,998 10,813 10,176 39,998
6 13,401 11,619 11,087 39,998 10,952 10,421 39,998
7 14,071 11,916 11,491 39,998 11,079 10,654 39,998
8 14,775 12,222 11,903 39,998 11,190 10,871 39,998
9 15,513 12,537 12,324 39,998 11,283 11,070 39,998
10 16,289 12,861 12,861 39,998 11,354 11,354 39,998
11 17,103 13,260 13,260 39,998 11,447 11,447 39,998
12 17,959 13,673 13,673 39,998 11,515 11,515 39,998
13 18,856 14,099 14,099 39,998 11,556 11,556 39,998
14 19,799 14,541 14,541 39,998 11,565 11,565 39,998
15 20,789 14,997 14,997 39,998 11,539 11,539 39,998
16 21,829 15,468 15,468 39,998 11,471 11,471 39,998
17 22,920 15,956 15,956 39,998 11,353 11,353 39,998
18 24,066 16,459 16,459 39,998 11,176 11,176 39,998
19 25,270 16,980 16,980 39,998 10,929 10,929 39,998
20 26,533 17,519 17,519 39,998 10,602 10,602 39,998
25 33,864 20,496 20,496 39,998 7,263 7,263 39,998
35 55,160 28,163 28,163 39,998 0* 0* 0*
</TABLE>
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual results may be more or less than those shown.
The Death Benefit, Account Value, and Cash Surrender Value for a Contract would
be different from those shown if the actual investment return applicable to the
Contract averaged 6% over a period of years, but also fluctuated above or below
that average for individual Contract Years. The Death Benefit, Account Value,
and Cash Surrender Value for a Contract would also be different from those
shown, depending on the investment allocations made to the Variable Account's
Variable Sub-Accounts, if the actual investment return for all Variable
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual Variable Sub-Accounts. No representation can be made that this
hypothetical rate of return can be achieved for any one year or sustained over
any period of time.
3
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 45 MALE
INITIAL FACE AMOUNT: $39,998
STANDARD UNDERWRITING CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.85% NET)
Premiums CURRENT CHARGES(1) GUARANTEED CHARGES(2)
Accumulated Cash Cash
End of at 5% Interest Account Surrender Death Account Surrender Death
Contract Year Per Year Value Value Benefit Value Value Benefit
------------- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,664 8,814 39,998 9,587 8,737 39,998
2 11,025 9,338 8,510 39,998 9,169 8,340 39,998
3 11,576 9,023 8,215 39,998 8,747 7,940 39,998
4 12,155 8,716 7,972 39,998 8,319 7,575 39,998
5 12,763 8,419 7,781 39,998 7,883 7,246 39,998
6 13,401 8,131 7,599 39,998 7,438 6,906 39,998
7 14,071 7,851 7,426 39,998 6,979 6,554 39,998
8 14,775 7,580 7,261 39,998 6,505 6,186 39,998
9 15,513 7,317 7,104 39,998 6,012 5,799 39,998
10 16,289 7,062 7,062 39,998 5,496 5,496 39,998
11 17,103 6,849 6,849 39,998 4,975 4,975 39,998
12 17,959 6,641 6,641 39,998 4,424 4,424 39,998
13 18,856 6,439 6,439 39,998 3,839 3,839 39,998
14 19,799 6,241 6,241 39,998 3,217 3,217 39,998
15 20,789 6,049 6,049 39,998 2,552 2,552 39,998
16 21,829 5,861 5,861 39,998 1,839 1,839 39,998
17 22,920 5,679 5,679 39,998 1,068 1,068 39,998
18 24,066 5,500 5,500 39,998 230 230 39,998
19 25,270 5,327 5,327 39,998 0* 0* 0*
20 26,533 5,157 5,157 39,998 0* 0* 0*
25 33,864 4,373 4,373 39,998 0* 0* 0*
35 55,160 3,074 3,074 39,998 0* 0* 0*
</TABLE>
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual results may be more or less than those shown.
The Death Benefit, Account Value, and Cash Surrender Value for a Contract would
be different from those shown if the actual investment return applicable to the
Contract averaged 0% over a period of years, but also fluctuated above or below
that average for individual Contract Years. The Death Benefit, Account Value,
and Cash Surrender Value for a Contract would also be different from those
shown, depending on the investment allocations made to the Variable Account's
Variable Sub-Accounts, if the actual investment return for all Variable
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual Variable Sub-Accounts. No representation can be made that this
hypothetical rate of return can be achieved for any one year or sustained over
any period of time.
4
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 55 FEMALE
INITIAL FACE AMOUNT: $33,138
STANDARD UNDERWRITING CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.15% NET)
Premiums CURRENT CHARGES(1) GUARANTEED CHARGES(2)
Accumulated Cash Cash
End of at 5% Interest Account Surrender Death Account Surrender Death
Contract Year Per Year Value Value Benefit Value Value Benefit
------------- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,838 9,988 33,138 10,733 9,883 33,138
2 11,025 11,749 10,921 33,138 11,531 10,702 33,138
3 11,576 12,740 11,933 33,138 12,401 11,593 33,138
4 12,155 13,817 13,074 33,138 13,350 12,607 33,138
5 12,763 14,989 14,351 33,138 14,389 13,751 33,138
6 13,401 16,262 15,731 33,138 15,524 14,993 33,138
7 14,071 17,647 17,222 33,138 16,766 16,341 33,138
8 14,775 19,153 18,834 33,138 18,124 17,805 33,138
9 15,513 20,790 20,577 33,138 19,609 19,396 33,138
10 16,289 22,570 22,570 33,138 21,238 21,238 33,138
11 17,103 24,629 24,629 33,138 23,123 23,123 33,138
12 17,959 26,896 26,896 33,138 25,212 25,212 33,138
13 18,856 29,414 29,414 34,708 27,537 27,537 33,138
14 19,799 32,177 32,177 37,647 30,117 30,117 35,237
15 20,789 35,201 35,201 40,833 32,945 32,945 38,217
16 21,829 38,509 38,509 44,285 36,039 36,039 41,445
17 22,920 42,138 42,138 47,616 39,434 39,434 44,560
18 24,066 46,121 46,121 51,194 43,159 43,159 47,906
19 25,270 50,497 50,497 55,041 47,251 47,251 51,504
20 26,533 55,310 55,310 59,182 51,753 51,753 55,376
25 33,864 87,252 87,252 91,614 81,626 81,626 85,708
35 55,160 212,454 212,454 223,077 196,690 196,690 206,525
</TABLE>
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual results may be more or less than those shown.
The Death Benefit, Account Value, and Cash Surrender Value for a Contract would
be different from those shown if the actual investment return applicable to the
Contract averaged 12% over a period of years, but also fluctuated above or below
that average for individual Contract Years. The Death Benefit, Account Value,
and Cash Surrender Value for a Contract would also be different from those
shown, depending on the investment allocations made to the Variable Account's
Variable Sub-Accounts, if the actual investment return for all Variable
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual Variable Sub-Accounts. No representation can be made that this
hypothetical rate of return can be achieved for any one year or sustained over
any period of time.
5
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 55 FEMALE
INITIAL FACE AMOUNT: $33,138
STANDARD UNDERWRITING CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.15% NET)
Premiums CURRENT CHARGES(1) GUARANTEED CHARGES(2)
Accumulated Cash Cash
End of at 5% Interest Account Surrender Death Account Surrender Death
Contract Year Per Year Value Value Benefit Value Value Benefit
------------- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,251 9,401 33,138 10,146 9,296 33,138
2 11,025 10,509 9,681 33,138 10,287 9,458 33,138
3 11,576 10,775 9,968 33,138 10,424 9,616 33,138
4 12,155 11,048 10,305 33,138 10,556 9,813 33,138
5 12,763 11,330 10,692 33,138 10,683 10,046 33,138
6 13,401 11,619 11,087 33,138 10,802 10,270 33,138
7 14,071 11,916 11,491 33,138 10,909 10,484 33,138
8 14,775 12,222 11,903 33,138 11,000 10,681 33,138
9 15,513 12,537 12,324 33,138 11,069 10,856 33,138
10 16,289 12,861 12,861 33,138 11,112 11,112 33,138
11 17,103 13,260 13,260 33,138 11,172 11,172 33,138
12 17,959 13,673 13,673 33,138 11,204 11,204 33,138
13 18,856 14,099 14,099 33,138 11,205 11,205 33,138
14 19,799 14,541 14,541 33,138 11,173 11,173 33,138
15 20,789 14,997 14,997 33,138 11,103 11,103 33,138
16 21,829 15,468 15,468 33,138 10,984 10,984 33,138
17 22,920 15,956 15,956 33,138 10,803 10,803 33,138
18 24,066 16,459 16,459 33,138 10,542 10,542 33,138
19 25,270 16,980 16,980 33,138 10,180 10,180 33,138
20 26,533 17,519 17,519 33,138 9,694 9,694 33,138
25 33,864 20,496 20,496 33,138 4,372 4,372 33,138
35 55,160 28,163 28,163 33,138 0* 0* 0*
</TABLE>
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual results may be more or less than those shown.
The Death Benefit, Account Value, and Cash Surrender Value for a Contract would
be different from those shown if the actual investment return applicable to the
Contract averaged 6% over a period of years, but also fluctuated above or below
that average for individual Contract Years. The Death Benefit, Account Value,
and Cash Surrender Value for a Contract would also be different from those
shown, depending on the investment allocations made to the Variable Account's
Variable Sub-Accounts, if the actual investment return for all Variable
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual Variable Sub-Accounts. No representation can be made that this
hypothetical rate of return can be achieved for any one year or sustained over
any period of time.
6
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 55 FEMALE
INITIAL FACE AMOUNT: $33,138
STANDARD UNDERWRITING CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.85% NET)
Premiums CURRENT CHARGES(1) GUARANTEED CHARGES(2)
Accumulated Cash Cash
End of at 5% Interest Account Surrender Death Account Surrender Death
Contract Year Per Year Value Value Benefit Value Value Benefit
------------- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,664 8,814 33,138 9,559 8,709 33,138
2 11,025 9,338 8,510 33,138 9,114 8,285 33,138
3 11,576 9,023 8,215 33,138 8,665 7,857 33,138
4 12,155 8,716 7,972 33,138 8,212 7,468 33,138
5 12,763 8,419 7,781 33,138 7,754 7,116 33,138
6 13,401 8,131 7,599 33,138 7,287 6,756 33,138
7 14,071 7,851 7,426 33,138 6,808 6,383 33,138
8 14,775 7,580 7,261 33,138 6,310 5,991 33,138
9 15,513 7,317 7,104 33,138 5,787 5,575 33,138
10 16,289 7,062 7,062 33,138 5,236 5,236 33,138
11 17,103 6,849 6,849 33,138 4,671 4,671 33,138
12 17,959 6,641 6,641 33,138 4,068 4,068 33,138
13 18,856 6,439 6,439 33,138 3,426 3,426 33,138
14 19,799 6,241 6,241 33,138 2,742 2,742 33,138
15 20,789 6,049 6,049 33,138 2,007 2,007 33,138
16 21,829 5,861 5,861 33,138 1,211 1,211 33,138
17 22,920 5,679 5,679 33,138 336 336 33,138
18 24,066 5,500 5,500 33,138 0* 0* 0*
19 25,270 5,327 5,327 33,138 0* 0* 0*
20 26,533 5,157 5,157 33,138 0* 0* 0*
25 33,864 4,373 4,373 33,138 0* 0* 0*
35 55,160 3,074 3,074 33,138 0* 0* 0*
</TABLE>
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual results may be more or less than those shown.
The Death Benefit, Account Value, and Cash Surrender Value for a Contract would
be different from those shown if the actual investment return applicable to the
Contract averaged 0% over a period of years, but also fluctuated above or below
that average for individual Contract Years. The Death Benefit, Account Value,
and Cash Surrender Value for a Contract would also be different from those
shown, depending on the investment allocations made to the Variable Account's
Variable Sub-Accounts, if the actual investment return for all Variable
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual Variable Sub-Accounts. No representation can be made that this
hypothetical rate of return can be achieved for any one year or sustained over
any period of time.
7
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE
INITIAL FACE AMOUNT: $19,314
STANDARD UNDERWRITING CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.15% NET)
Premiums CURRENT CHARGES(1) GUARANTEED CHARGES(2)
Accumulated Cash Cash
End of at 5% Interest Account Surrender Death Account Surrender Death
Contract Year Per Year Value Value Benefit Value Value Benefit
------------- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,838 9,988 19,314 10,657 9,807 19,314
2 11,025 11,749 10,921 19,314 11,373 10,544 19,314
3 11,576 12,740 11,933 19,314 12,158 11,351 19,314
4 12,155 13,817 13,074 19,314 13,025 12,281 19,314
5 12,763 14,989 14,351 19,314 13,987 13,349 19,314
6 13,401 16,262 15,731 19,314 15,061 14,530 19,314
7 14,071 17,652 17,227 19,946 16,271 15,846 19,314
8 14,775 19,177 18,858 21,286 17,644 17,325 19,584
9 15,513 20,848 20,635 22,724 19,178 18,965 20,904
10 16,289 22,683 22,683 24,271 20,863 20,863 22,324
11 17,103 24,805 24,805 26,046 22,813 22,813 23,953
12 17,959 27,121 27,121 28,477 24,939 24,939 26,186
13 18,856 29,645 29,645 31,128 27,258 27,258 28,621
14 19,799 32,397 32,397 34,017 29,785 29,785 31,274
15 20,789 35,394 35,394 37,164 32,538 32,538 34,164
16 21,829 38,656 38,656 40,589 35,533 35,533 37,310
17 22,920 42,207 42,207 44,317 38,790 38,790 40,730
18 24,066 46,087 46,087 48,391 42,327 42,327 44,443
19 25,270 50,327 50,327 52,843 46,163 46,163 48,471
20 26,533 54,960 54,960 57,708 50,319 50,319 52,835
25 33,864 85,429 85,429 89,700 76,721 76,721 80,557
35 55,160 208,081 208,081 210,161 183,284 183,284 185,117
</TABLE>
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual results may be more or less than those shown.
The Death Benefit, Account Value, and Cash Surrender Value for a Contract would
be different from those shown if the actual investment return applicable to the
Contract averaged 12% over a period of years, but also fluctuated above or below
that average for individual Contract Years. The Death Benefit, Account Value,
and Cash Surrender Value for a Contract would also be different from those
shown, depending on the investment allocations made to the Variable Account's
Variable Sub-Accounts, if the actual investment return for all Variable
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual Variable Sub-Accounts. No representation can be made that this
hypothetical rate of return can be achieved for any one year or sustained over
any period of time.
8
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE
INITIAL FACE AMOUNT: $19,314
STANDARD UNDERWRITING CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.15% NET)
Premiums CURRENT CHARGES(1) GUARANTEED CHARGES(2)
Accumulated Cash Cash
End of at 5% Interest Account Surrender Death Account Surrender Death
Contract Year Per Year Value Value Benefit Value Value Benefit
------------- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,251 9,401 19,314 10,067 9,217 19,314
2 11,025 10,509 9,681 19,314 10,114 9,285 19,314
3 11,576 10,775 9,968 19,314 10,139 9,331 19,314
4 12,155 11,048 10,305 19,314 10,138 9,394 19,314
5 12,763 11,330 10,692 19,314 10,107 9,470 19,314
6 13,401 11,619 11,087 19,314 10,040 9,509 19,314
7 14,071 11,916 11,491 19,314 9,929 9,504 19,314
8 14,775 12,222 11,903 19,314 9,762 9,444 19,314
9 15,513 12,537 12,324 19,314 9,528 9,316 19,314
10 16,289 12,861 12,861 19,314 9,212 9,212 19,314
11 17,103 13,260 13,260 19,314 8,836 8,836 19,314
12 17,959 13,673 13,673 19,314 8,346 8,346 19,314
13 18,856 14,099 14,099 19,314 7,718 7,718 19,314
14 19,799 14,541 14,541 19,314 6,924 6,924 19,314
15 20,789 14,997 14,997 19,314 5,921 5,921 19,314
16 21,829 15,468 15,468 19,314 4,654 4,654 19,314
17 22,920 15,956 15,956 19,314 3,044 3,044 19,314
18 24,066 16,459 16,459 19,314 982 982 19,314
19 25,270 16,980 16,980 19,314 0* 0* 0*
20 26,533 17,519 17,519 19,314 0* 0* 0*
25 33,864 20,496 20,496 21,521 0* 0* 0*
35 55,160 28,326 28,326 28,609 0* 0* 0*
</TABLE>
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual results may be more or less than those shown.
The Death Benefit, Account Value, and Cash Surrender Value for a Contract would
be different from those shown if the actual investment return applicable to the
Contract averaged 6% over a period of years, but also fluctuated above or below
that average for individual Contract Years. The Death Benefit, Account Value,
and Cash Surrender Value for a Contract would also be different from those
shown, depending on the investment allocations made to the Variable Account's
Variable Sub-Accounts, if the actual investment return for all Variable
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual Variable Sub-Accounts. No representation can be made that this
hypothetical rate of return can be achieved for any one year or sustained over
any period of time.
9
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE
INITIAL FACE AMOUNT: $19,314
STANDARD UNDERWRITING CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.85% NET)
Premiums CURRENT CHARGES(1) GUARANTEED CHARGES(2)
Accumulated Cash Cash
End of at 5% Interest Account Surrender Death Account Surrender Death
Contract Year Per Year Value Value Benefit Value Value Benefit
------------- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,664 8,814 19,314 9,477 8,627 19,314
2 11,025 9,338 8,510 19,314 8,927 8,098 19,314
3 11,576 9,023 8,215 19,314 8,346 7,538 19,314
4 12,155 8,716 7,972 19,314 7,728 6,984 19,314
5 12,763 8,419 7,781 19,314 7,066 6,429 19,314
6 13,401 8,131 7,599 19,314 6,350 5,819 19,314
7 14,071 7,851 7,426 19,314 5,567 5,142 19,314
8 14,775 7,580 7,261 19,314 4,701 4,383 19,314
9 15,513 7,317 7,104 19,314 3,733 3,520 19,314
10 16,289 7,062 7,062 19,314 2,640 2,640 19,314
11 17,103 6,849 6,849 19,314 1,407 1,407 19,314
12 17,959 6,641 6,641 19,314 0* 0* 0*
13 18,856 6,439 6,439 19,314 0* 0* 0*
14 19,799 6,241 6,241 19,314 0* 0* 0*
15 20,789 6,049 6,049 19,314 0* 0* 0*
16 21,829 5,861 5,861 19,314 0* 0* 0*
17 22,920 5,679 5,679 19,314 0* 0* 0*
18 24,066 5,500 5,500 19,314 0* 0* 0*
19 25,270 5,327 5,327 19,314 0* 0* 0*
20 26,533 5,157 5,157 19,314 0* 0* 0*
25 33,864 4,373 4,373 19,314 0* 0* 0*
35 55,160 3,074 3,074 19,314 0* 0* 0*
</TABLE>
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual results may be more or less than those shown.
The Death Benefit, Account Value, and Cash Surrender Value for a Contract would
be different from those shown if the actual investment return applicable to the
Contract averaged 0% over a period of years, but also fluctuated above or below
that average for individual Contract Years. The Death Benefit, Account Value,
and Cash Surrender Value for a Contract would also be different from those
shown, depending on the investment allocations made to the Variable Account's
Variable Sub-Accounts, if the actual investment return for all Variable
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual Variable Sub-Accounts. No representation can be made that this
hypothetical rate of return can be achieved for any one year or sustained over
any period of time.
10
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
JOINT LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 55 MALE / 55 FEMALE
INITIAL FACE AMOUNT: $43,779
STANDARD UNDERWRITING CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.15% NET)
Premiums CURRENT CHARGES(1) GUARANTEED CHARGES(2)
Accumulated Cash Cash
End of at 5% Interest Account Surrender Death Account Surrender Death
Contract Year Per Year Value Value Benefit Value Value Benefit
------------- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,906 10,056 43,779 10,906 10,056 43,779
2 11,025 11,892 11,063 43,779 11,892 11,063 43,779
3 11,576 12,964 12,156 43,779 12,964 12,156 43,779
4 12,155 14,129 13,385 43,779 14,129 13,385 43,779
5 12,763 15,396 14,759 43,779 15,396 14,759 43,779
6 13,401 16,774 16,243 43,779 16,774 16,243 43,779
7 14,071 18,272 17,847 43,779 18,272 17,847 43,779
8 14,775 19,901 19,582 43,779 19,901 19,582 43,779
9 15,513 21,672 21,460 43,779 21,672 21,460 43,779
10 16,289 23,599 23,599 43,779 23,599 23,599 43,779
11 17,103 25,801 25,801 43,779 25,801 25,801 43,779
12 17,959 28,213 28,213 43,779 28,213 28,213 43,779
13 18,856 30,860 30,860 43,779 30,860 30,860 43,779
14 19,799 33,773 33,773 43,779 33,773 33,773 43,779
15 20,789 36,985 36,985 43,779 36,985 36,985 43,779
16 21,829 40,529 40,529 46,608 40,529 40,529 46,608
17 22,920 44,417 44,417 50,191 44,417 44,417 50,191
18 24,066 48,680 48,680 54,035 48,680 48,680 54,035
19 25,270 53,359 53,359 58,161 53,359 53,359 58,161
20 26,533 58,497 58,497 62,592 58,497 58,497 62,592
25 33,864 92,558 92,558 97,186 92,558 92,558 97,186
35 55,160 225,857 225,857 237,150 223,672 223,672 234,855
</TABLE>
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual results may be more or less than those shown.
The Death Benefit, Account Value, and Cash Surrender Value for a Contract would
be different from those shown if the actual investment return applicable to the
Contract averaged 12% over a period of years, but also fluctuated above or below
that average for individual Contract Years. The Death Benefit, Account Value,
and Cash Surrender Value for a Contract would also be different from those
shown, depending on the investment allocations made to the Variable Account's
Variable Sub-Accounts, if the actual investment return for all Variable
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual Variable Sub-Accounts. No representation can be made that this
hypothetical rate of return can be achieved for any one year or sustained over
any period of time.
11
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
JOINT LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 55 MALE / 55 FEMALE
INITIAL FACE AMOUNT: $43,779
STANDARD UNDERWRITING CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.15% NET)
Premiums CURRENT CHARGES(1) GUARANTEED CHARGES(2)
Accumulated Cash Cash
End of at 5% Interest Account Surrender Death Account Surrender Death
Contract Year Per Year Value Value Benefit Value Value Benefit
------------- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,316 9,466 43,779 10,316 9,466 43,779
2 11,025 10,636 9,807 43,779 10,636 9,807 43,779
3 11,576 10,961 10,153 43,779 10,961 10,153 43,779
4 12,155 11,288 10,544 43,779 11,288 10,544 43,779
5 12,763 11,618 10,980 43,779 11,618 10,980 43,779
6 13,401 11,948 11,417 43,779 11,948 11,417 43,779
7 14,071 12,276 11,851 43,779 12,276 11,851 43,779
8 14,775 12,600 12,281 43,779 12,600 12,281 43,779
9 15,513 12,925 12,713 43,779 12,916 12,703 43,779
10 16,289 13,260 13,260 43,779 13,219 13,219 43,779
11 17,103 13,673 13,673 43,779 13,561 13,561 43,779
12 17,959 14,100 14,100 43,779 13,885 13,885 43,779
13 18,856 14,541 14,541 43,779 14,188 14,188 43,779
14 19,799 14,997 14,997 43,779 14,464 14,464 43,779
15 20,789 15,469 15,469 43,779 14,706 14,706 43,779
16 21,829 15,956 15,956 43,779 14,904 14,904 43,779
17 22,920 16,460 16,460 43,779 15,047 15,047 43,779
18 24,066 16,981 16,981 43,779 15,117 15,117 43,779
19 25,270 17,519 17,519 43,779 15,094 15,094 43,779
20 26,533 18,076 18,076 43,779 14,954 14,954 43,779
25 33,864 21,154 21,154 43,779 11,427 11,427 43,779
35 55,160 29,080 29,080 43,779 0* 0* 0*
</TABLE>
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual results may be more or less than those shown.
The Death Benefit, Account Value, and Cash Surrender Value for a Contract would
be different from those shown if the actual investment return applicable to the
Contract averaged 6% over a period of years, but also fluctuated above or below
that average for individual Contract Years. The Death Benefit, Account Value,
and Cash Surrender Value for a Contract would also be different from those
shown, depending on the investment allocations made to the Variable Account's
Variable Sub-Accounts, if the actual investment return for all Variable
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual Variable Sub-Accounts. No representation can be made that this
hypothetical rate of return can be achieved for any one year or sustained over
any period of time.
12
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
JOINT LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 55 MALE / 55 FEMALE
INITIAL FACE AMOUNT: $43,779
STANDARD UNDERWRITING CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.85% NET)
Premiums CURRENT CHARGES(1) GUARANTEED CHARGES(2)
Accumulated Cash Cash
End of at 5% Interest Account Surrender Death Account Surrender Death
Contract Year Per Year Value Value Benefit Value Value Benefit
------------- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,725 8,875 43,779 9,725 8,875 43,779
2 11,025 9,450 8,621 43,779 9,450 8,621 43,779
3 11,576 9,174 8,367 43,779 9,174 8,367 43,779
4 12,155 8,896 8,152 43,779 8,896 8,152 43,779
5 12,763 8,614 7,976 43,779 8,614 7,976 43,779
6 13,401 8,326 7,795 43,779 8,326 7,795 43,779
7 14,071 8,040 7,615 43,779 8,029 7,604 43,779
8 14,775 7,764 7,445 43,779 7,720 7,402 43,779
9 15,513 7,495 7,282 43,779 7,395 7,183 43,779
10 16,289 7,235 7,235 43,779 7,049 7,049 43,779
11 17,103 7,017 7,017 43,779 6,704 6,704 43,779
12 17,959 6,805 6,805 43,779 6,325 6,325 43,779
13 18,856 6,599 6,599 43,779 5,907 5,907 43,779
14 19,799 6,397 6,397 43,779 5,442 5,442 43,779
15 20,789 6,201 6,201 43,779 4,923 4,923 43,779
16 21,829 6,010 6,010 43,779 4,337 4,337 43,779
17 22,920 5,823 5,823 43,779 3,667 3,667 43,779
18 24,066 5,641 5,641 43,779 2,891 2,891 43,779
19 25,270 5,464 5,464 43,779 1,982 1,982 43,779
20 26,533 5,291 5,291 43,779 910 910 43,779
25 33,864 4,490 4,490 43,779 0* 0* 0*
35 55,160 3,166 3,166 43,779 0* 0* 0*
</TABLE>
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual results may be more or less than those shown.
The Death Benefit, Account Value, and Cash Surrender Value for a Contract would
be different from those shown if the actual investment return applicable to the
Contract averaged 0% over a period of years, but also fluctuated above or below
that average for individual Contract Years. The Death Benefit, Account Value,
and Cash Surrender Value for a Contract would also be different from those
shown, depending on the investment allocations made to the Variable Account's
Variable Sub-Accounts, if the actual investment return for all Variable
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual Variable Sub-Accounts. No representation can be made that this
hypothetical rate of return can be achieved for any one year or sustained over
any period of time.
13
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
JOINT LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE / 65 FEMALE
INITIAL FACE AMOUNT: $27,688
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.15% NET)
Premiums CURRENT CHARGES(1) GUARANTEED CHARGES(2)
Accumulated Cash Cash
End of at 5% Interest Account Surrender Death Account Surrender Death
Contract Year Per Year Value Value Benefit Value Value Benefit
------------- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,902 10,052 27,688 10,902 10,052 27,688
2 11,025 11,873 11,044 27,688 11,873 11,044 27,688
3 11,576 12,919 12,112 27,688 12,919 12,112 27,688
4 12,155 14,047 13,304 27,688 14,047 13,304 27,688
5 12,763 15,266 14,628 27,688 15,266 14,628 27,688
6 13,401 16,584 16,053 27,688 16,584 16,053 27,688
7 14,071 18,012 17,587 27,688 18,012 17,587 27,688
8 14,775 19,565 19,247 27,688 19,565 19,247 27,688
9 15,513 21,260 21,047 27,688 21,260 21,047 27,688
10 16,289 23,120 23,120 27,688 23,120 23,120 27,688
11 17,103 25,280 25,280 27,688 25,280 25,280 27,688
12 17,959 27,693 27,693 29,077 27,693 27,693 29,077
13 18,856 30,341 30,341 31,858 30,341 30,341 31,858
14 19,799 33,236 33,236 34,897 33,236 33,236 34,897
15 20,789 36,397 36,397 38,216 36,397 36,397 38,216
16 21,829 39,845 39,845 41,838 39,845 39,845 41,838
17 22,920 43,604 43,604 45,784 43,604 43,604 45,784
18 24,066 47,696 47,696 50,080 47,696 47,696 50,080
19 25,270 52,143 52,143 54,750 52,143 52,143 54,750
20 26,533 56,970 56,970 59,819 56,970 56,970 59,819
25 33,864 88,561 88,561 92,989 87,744 87,744 92,131
35 55,160 215,853 215,853 218,012 210,524 210,524 212,630
</TABLE>
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual results may be more or less than those shown.
The Death Benefit, Account Value, and Cash Surrender Value for a Contract would
be different from those shown if the actual investment return applicable to the
Contract averaged 12% over a period of years, but also fluctuated above or below
that average for individual Contract Years. The Death Benefit, Account Value,
and Cash Surrender Value for a Contract would also be different from those
shown, depending on the investment allocations made to the Variable Account's
Variable Sub-Accounts, if the actual investment return for all Variable
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual Variable Sub-Accounts. No representation can be made that this
hypothetical rate of return can be achieved for any one year or sustained over
any period of time.
14
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
JOINT LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE / 65 FEMALE
INITIAL FACE AMOUNT: $27,688
STANDARD UNDERWRITING CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.15% NET)
Premiums CURRENT CHARGES(1) GUARANTEED CHARGES(2)
Accumulated Cash Cash
End of at 5% Interest Account Surrender Death Account Surrender Death
Contract Year Per Year Value Value Benefit Value Value Benefit
------------- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,311 9,461 27,688 10,311 9,461 27,688
2 11,025 10,617 9,788 27,688 10,617 9,788 27,688
3 11,576 10,914 10,107 27,688 10,914 10,107 27,688
4 12,155 11,201 10,458 27,688 11,201 10,458 27,688
5 12,763 11,487 10,849 27,688 11,474 10,837 27,688
6 13,401 11,781 11,249 27,688 11,728 11,197 27,688
7 14,071 12,083 11,658 27,688 11,958 11,533 27,688
8 14,775 12,393 12,075 27,688 12,155 11,836 27,688
9 15,513 12,713 12,500 27,688 12,310 12,098 27,688
10 16,289 13,042 13,042 27,688 12,413 12,413 27,688
11 17,103 13,447 13,447 27,688 12,503 12,503 27,688
12 17,959 13,866 13,866 27,688 12,518 12,518 27,688
13 18,856 14,300 14,300 27,688 12,443 12,443 27,688
14 19,799 14,748 14,748 27,688 12,262 12,262 27,688
15 20,789 15,211 15,211 27,688 11,951 11,951 27,688
16 21,829 15,689 15,689 27,688 11,477 11,477 27,688
17 22,920 16,184 16,184 27,688 10,796 10,796 27,688
18 24,066 16,696 16,696 27,688 9,848 9,848 27,688
19 25,270 17,225 17,225 27,688 8,552 8,552 27,688
20 26,533 17,771 17,771 27,688 6,802 6,802 27,688
25 33,864 20,795 20,795 27,688 0* 0* 0*
35 55,160 28,579 28,579 28,864 0* 0* 0*
</TABLE>
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual results may be more or less than those shown.
The Death Benefit, Account Value, and Cash Surrender Value for a Contract would
be different from those shown if the actual investment return applicable to the
Contract averaged 6% over a period of years, but also fluctuated above or below
that average for individual Contract Years. The Death Benefit, Account Value,
and Cash Surrender Value for a Contract would also be different from those
shown, depending on the investment allocations made to the Variable Account's
Variable Sub-Accounts, if the actual investment return for all Variable
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual Variable Sub-Accounts. No representation can be made that this
hypothetical rate of return can be achieved for any one year or sustained over
any period of time.
15
<PAGE>
<TABLE>
<CAPTION>
GLENBROOK LIFE AND ANNUITY COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
JOINT LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE / 65 FEMALE
INITIAL FACE AMOUNT: $27,688
STANDARD UNDERWRITING CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.85% NET)
Premiums CURRENT CHARGES(1) GUARANTEED CHARGES(2)
Accumulated Cash Cash
End of at 5% Interest Account Surrender Death Account Surrender Death
Contract Year Per Year Value Value Benefit Value Value Benefit
------------- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,720 8,870 27,688 9,720 8,870 27,688
2 11,025 9,431 8,602 27,688 9,431 8,602 27,688
3 11,576 9,127 8,320 27,688 9,127 8,320 27,688
4 12,155 8,818 8,074 27,688 8,806 8,062 27,688
5 12,763 8,517 7,880 27,688 8,463 7,825 27,688
6 13,401 8,226 7,695 27,688 8,091 7,560 27,688
7 14,071 7,944 7,519 27,688 7,683 7,258 27,688
8 14,775 7,670 7,351 27,688 7,227 6,908 27,688
9 15,513 7,404 7,191 27,688 6,711 6,498 27,688
10 16,289 7,146 7,146 27,688 6,118 6,118 27,688
11 17,103 6,931 6,931 27,688 5,453 5,453 27,688
12 17,959 6,721 6,721 27,688 4,670 4,670 27,688
13 18,856 6,517 6,517 27,688 3,745 3,745 27,688
14 19,799 6,317 6,317 27,688 2,651 2,651 27,688
15 20,789 6,123 6,123 27,688 1,351 1,351 27,688
16 21,829 5,934 5,934 27,688 0* 0* 0*
17 22,920 5,749 5,749 27,688 0* 0* 0*
18 24,066 5,569 5,569 27,688 0* 0* 0*
19 25,270 5,394 5,394 27,688 0* 0* 0*
20 26,533 5,223 5,223 27,688 0* 0* 0*
25 33,864 4,430 4,430 27,688 0* 0* 0*
35 55,160 3,119 3,119 27,688 0* 0* 0*
</TABLE>
* When the account value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
administrative fees, and Mortality and Expense Risk Rates.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual results may be more or less than those shown.
The Death Benefit, Account Value, and Cash Surrender Value for a Contract would
be different from those shown if the actual investment return applicable to the
Contract averaged 0% over a period of years, but also fluctuated above or below
that average for individual Contract Years. The Death Benefit, Account Value,
and Cash Surrender Value for a Contract would also be different from those
shown, depending on the investment allocations made to the Variable Account's
Variable Sub-Accounts, if the actual investment return for all Variable
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual Variable Sub-Accounts. No representation can be made that this
hypothetical rate of return can be achieved for any one year or sustained over
any period of time.
16
