File Nos. 333-32887
811-08325
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. _1__ [X]
Post-Effective Amendment No. ___ [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. _1__ [X]
(Check appropriate box or boxes.)
BMA Variable Annuity Account A
-------------------------------
(Exact Name of Registrant)
Business Men's Assurance Company of America
-------------------------------------------
(Name of Depositor)
700 Karnes Boulevard, Kansas City, Missouri 64108
------------------------------------------------------------ ----------
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (816) 753-8000
Name and Address of Agent for Service
David A. Gates
Business Men's Assurance Company of America
700 Karnes Blvd.
Kansas City, Missouri 64108
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Filing.
Title of Securities Being Registered:
Individual Flexible Purchase Payment Deferred Variable Annuity Contracts
================================================================================
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
CROSS REFERENCE SHEET
(required by Rule 495)
<TABLE>
<CAPTION>
ITEM NO. Location
<S> <C>
PART A
Item 1. Cover Page Cover Page
Item 2. Definitions Index of Special Terms
Item 3. Synopsis Profile
Item 4. Condensed Financial Information Not Applicable
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies Other Information -
BMA; The Separate
Account; Investors Mark Series
Fund, Inc., Berger Institutional
Products Trust
Item 6. Deductions and Expenses Expenses
Item 7. General Description of Variable
Annuity Contracts The Annuity Contract
Item 8. Annuity Period Annuity Payments
(The Income Phase)
Item 9. Death Benefit Death Benefit
Item 10. Purchases and Contract Value Purchase
Item 11. Redemptions Access to Your Money
Item 12. Taxes Taxes
Item 13. Legal Proceedings None
Item 14. Table of Contents of the Statement
of Additional Information Table of Contents of the
Statement of Additional
Information
</TABLE>
CROSS REFERENCE SHEET
(required by Rule 495)
<TABLE>
<CAPTION>
ITEM NO. LOCATION
<S> <C>
PART B
Item 15. Cover Page Cover Page
Item 16. Table of Contents Table of Contents
Item 17. General Information and History Company
Item 18. Services Not Applicable
Item 19. Purchase of Securities Being Offered Not Applicable
Item 20. Underwriters Distribution
Item 21. Calculation of Performance Data Performance Information
Item 22. Annuity Payments Annuity Provisions
Item 23. Financial Statements Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered in Part C to this Registration Statement.
PART A
Business Men's Assurance Company of America _______, 1997
PROFILE OF THE FIXED AND VARIABLE ANNUITY CONTRACT
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD
CONSIDER AND KNOW BEFORE PURCHASING THE CONTRACT. THE CONTRACT IS MORE FULLY
DESCRIBED IN THE PROSPECTUS WHICH ACCOMPANIES THIS PROFILE. PLEASE READ THE
PROSPECTUS CAREFULLY.
1. THE ANNUITY CONTRACT: The fixed and variable annuity contract offered by BMA
is a contract between you, the owner, and Business Men's Assurance Company of
America (BMA), an insurance company. The Contract provides a means for investing
on a tax-deferred basis in 2 fixed account options of BMA and 10 investment
portfolios. The Contract is intended for retirement savings or other long-term
investment purposes and provides for a death benefit and guaranteed income
options.
We offer 2 fixed accounts (Fixed Account I and Fixed Account II). The fixed
accounts offer interest rates that are guaranteed by the insurance company, BMA.
For Fixed Account I, an interest rate is set at the time of each purchase
payment or transfer to Fixed Account I. This initial interest rate is guaranteed
for 12 months. For Fixed Account II, currently there are 3 different guarantee
periods available, each with its own interest rate. If you make a withdrawal or
transfer from Fixed Account II before the end of the guarantee period, it may be
subject to an interest adjustment. While your money is in either fixed account,
the interest your money will earn as well as your principal is guaranteed by
BMA.
This Contract also offers 10 investment portfolios which are listed in Section
4. The returns on these portfolios are NOT guaranteed. You can lose money.
You can put money into any or all of the investment portfolios, Fixed Account I
and/or any currently available guarantee period of Fixed Account II. You can
transfer between accounts up to 12 times a year without charge or tax
implications during the accumulation phase and 4 times each year without charge
or tax implications during the income phase. There are certain limitations on
the amounts that can be transferred to or from the Fixed Accounts. After 12
transfers each year during the accumulation period and four transfers each year
during the income phase, the charge is $25 per transfer.
The Contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal. The income phase occurs when you begin receiving regular payments
from your Contract.
The amount of money you are able to accumulate in your account during the
accumulation phase will determine, in part, the amount of income payments during
the income phase.
2. ANNUITY PAYMENTS (THE INCOME PHASE): If you want to receive regular income
from your annuity, you can choose one of four options: (1) monthly payments for
your life (assuming you are the annuitant); (2) monthly payments for your life,
but with payments continuing to the beneficiary for 10 or 20 years (as you
select) if you die before the end of the selected period; (3) monthly payments
for your life and for the life of another person (usually your spouse) selected
by you; and (4) monthly payments for your life and for the life of another
person (usually your spouse), but if you and the other person die
before payments have been made for the 10 or 20 year period, payments will
continue for the remainder of the period. Once you begin receiving regular
payments, you cannot change your payment plan.
During the income phase, you can choose from the same investment options you had
during the accumulation phase. You can choose to have payments come from our
general account, the investment portfolios or both. If you choose to have any
part of your payments come from the investment portfolios, the dollar amount of
your payments may go up or down.
3. PURCHASE: You can buy this Contract with $10,000 or more under most
circumstances. You can add $1,000 or more any time you like during the
accumulation phase. Your registered representative can help you fill out the
proper forms.
4. INVESTMENT OPTIONS: You can put your money in any or all of these investment
portfolios which are described in the prospectuses for the funds:
MANAGED BY STANDISH, AYER & WOOD, INC.
Intermediate Fixed Income Portfolio
Mid Cap Equity Portfolio
Money Market Portfolio
MANAGED BY STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P.
Global Fixed Income Portfolio
MANAGED BY STEIN ROE & FARNHAM, INCORPORATED
Small Cap Equity Portfolio
Large Cap Growth Portfolio
MANAGED BY DAVID L. BABSON & CO., INC.
Large Cap Value Portfolio
MANAGED BY LORD, ABBETT & CO.
Growth & Income Portfolio
MANAGED BY KORNITZER CAPITAL MANAGEMENT, INC.
Balanced Portfolio
MANAGED BY BBOI WORLDWIDE LLC
Berger/BIAM IPT - International Fund
Depending upon market conditions, you can make or lose money in any of these
portfolios.
5. EXPENSES: The Contract has insurance features and investment features, and
there are costs related to each.
Each year BMA deducts a $35 contract maintenance charge from your Contract.
During the accumulation phase, BMA currently waives this charge if the value of
your Contract is at least $100,000. BMA also deducts a coverage charge which is
equal to 1.40% annually of the average daily value of your Contract allocated to
the investment portfolios.
If you take your money out, BMA may assess a withdrawal charge against each
purchase payment withdrawn. The withdrawal charge is equal to:
<TABLE>
<CAPTION>
Number of Complete Years from
Date of Purchase Payment Withdrawal Charge
----------------------------- -----------------
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 and thereafter 0%
</TABLE>
Under some circumstances BMA may waive the withdrawal charge.
When you begin receiving regular income payments from your annuity, BMA will
assess a state premium tax charge which ranges from 0 - 4%, depending upon the
state. In South Dakota, BMA will deduct the premium tax charge from each
purchase payment.
There are also investment charges which range from .50% to 1.20% of the average
daily value of the investment portfolio depending upon the investment portfolio.
The following chart is designed to help you to understand the expenses in the
Contract. The column "Total Annual Expenses" shows the total of the $35 contract
maintenance charge (which is represented as .14% below), the 1.40% coverage
charge and the investment expenses for each investment portfolio. The next two
columns show you two examples of the expenses, in dollars, you would pay under a
Contract. The examples assume that you invested $1,000 in a Contract which earns
5% annually and that you withdraw your money: (1) at the end of year 1, and (2)
at the end of year 10. For year 1, the Total Annual Expenses are assessed as
well as the withdrawal charges. For year 10, the example shows the aggregate of
all the annual expenses assessed for the 10 years, but there is no withdrawal
charge.
The premium tax is assumed to be 0% in both examples.
<TABLE>
<CAPTION>
EXAMPLES
Total Annual
Total Annual Total Annual Total Expenses At End of:
Insurance Portfolio Annual (1) (2)
Charges Expenses Expenses 1 Year 10 Years
------------ ------------ -------- ------------ --------
<S> <C> <C> <C> <C> <C>
MANAGED BY STANDISH, AYER & WOOD, INC.
Intermediate Fixed Income Portfolio 1.54% .80% 2.34% $ 94.01 $ 270.18
Mid Cap Equity Portfolio 1.54% .90% 2.44% $ 95.01 $ 280.16
Money Market Portfolio 1.54% .50% 2.04% $ 90.99 $ 239.53
MANAGED BY STANDISH INTERNATIONAL
MANAGEMENT COMPANY, L.P.
Global Fixed Income Portfolio 1.54% 1.00% 2.54% $ 96.01 $ 290.03
MANAGED BY STEIN ROE & FARNHAM, INCORPORATED
Small Cap Equity Portfolio 1.54% 1.05% 2.59% $ 96.51 $ 284.92
Large Cap Growth Portfolio 1.54% .90% 2.44% $ 95.01 $ 280.16
MANAGED BY DAVID L. BABSON & CO., INC.
Large Cap Value Portfolio 1.54% .90% 2.44% $ 95.01 $ 280.16
MANAGED BY LORD, ABBETT & CO.
Growth & Income Portfolio 1.54% .90% 2.44% $ 95.01 $ 280.16
MANAGED BY KORNITZER CAPITAL MANAGEMENT, INC.
Balanced Portfolio 1.54% .90% 2.44% $ 95.01 $ 280.16
MANAGED BY BBOI WORLDWIDE LLC
Berger/BIAM IPT - International Fund 1.54% 1.20% 2.74% $ 98.00 $ 309.42
</TABLE>
The expenses reflect the expense reimbursements or fee waivers by the fund
managers. For the newly formed Portfolios, the expenses have been estimated. For
more detailed information, see the Fee Table in the prospectus for the Contract.
6. TAXES: Your earnings are not taxed until you take them out. If you take money
out during the accumulation phase, earnings come out first and are taxed as
income. If you are younger than 59 1/2 when you take money out, you may be
charged a 10% federal tax penalty on the earnings. Payments during the income
phase are considered partly a return of your original investment. That part of
each payment is not taxable as income.
7. ACCESS TO YOUR MONEY: You can take money out at any time during the
accumulation phase. Each purchase payment you add to your Contract has its own 7
year withdrawal charge period. After BMA has had a payment for 7 years, there is
no charge for withdrawals. After the first year and so long as you have not made
another withdrawal during the same Contract year, a withdrawal of up to 10% of
the contract value withdrawn is not subject to a withdrawal charge. Withdrawals
in excess of that will be charged a withdrawal charge which ranges from 7% in
the first year and declines to 0% after the seventh year. Of course, you may
also have to pay income tax and a tax penalty on any money you take out.
8. PERFORMANCE: The value of the Contract will vary up or down depending upon
the investment performance of the investment portfolios you choose. BMA may
provide total return figures for each investment portfolio. The total return
figures are based on historical data and are not intended to indicate future
performance. As of the date of this Profile, the sale of the Contracts had not
begun. Therefore, no performance is presented here.
9. DEATH BENEFIT: If you die before moving to the income phase, the beneficiary
will receive a death benefit. This death benefit will be the greater of: 1) the
payments you have made, less any money you have taken out and related withdrawal
charges; or 2) the value of your Contract.
10. OTHER INFORMATION: Free Look. If you cancel the Contract within 10 days
after receiving it (or whatever period is required in your state), we will send
your money back without assessing a withdrawal charge. You will receive whatever
your Contract is worth on the day we receive your request. This may be more or
less than your original payment. If we are required by law to return your
original payment or if you have purchased the Contract as an Individual
Retirement Annuity (IRA), you will receive back the greater of your purchase
payment, or the contract value and we will put your money in the Money Market
portfolio during the free-look period.
No Probate. In most cases, when you die, the beneficiary will receive the death
benefit without going through probate. However, the avoidance of probate does
not mean that the beneficiary will not have tax liability as a result of
receiving the death benefit.
Who should purchase the Contract? This Contract is designed for people seeking
long-term tax-deferred accumulation of assets, generally for retirement or other
long-term purposes. The tax-deferred feature is most attractive to people in
high federal and state tax brackets. You should not buy this Contract if you are
looking for a short-term investment or if you cannot take the risk of getting
back less money than you put in.
Additional Features. The Contract has additional features you might be
interested in. These include:
* You can arrange to have money automatically sent to you (monthly,
quarterly, semi-annually or annually) while your Contract is still in the
accumulation phase. Of course, you'll have to pay taxes on money you receive.
You may also have to pay a penalty tax on money you receive. We call this
feature the Automatic Withdrawal Program.
* If you purchased the Contract under an Individual Retirement Annuity, you
can arrange to have money sent to you periodically to meet certain required
distribution requirements imposed by the Internal Revenue Code. We call this
feature the Minimum Distribution Program.
* You can arrange to have a regular amount of money automatically
transferred from the Money Market Portfolio or Fixed Account I to the investment
portfolios each month, theoretically giving you a lower average cost per unit
over time than a single one time purchase. We call this feature the Dollar Cost
Averaging Option.
* BMA will automatically readjust the money between investment portfolios
periodically to keep the blend you select. We call this feature the Asset
Rebalancing Option.
* Under certain circumstances, BMA will give you your money without a
withdrawal charge if you are in a nursing home, or become totally disabled,
terminally ill, involuntarily unemployed or divorced.
These features may not be available in your state and may not be suitable
for your particular situation.
11. INQUIRIES: If you need more information about buying a Contract, please
contact us at our service center:
BMA
9735 Landmark Parkway Drive
St. Louis, Missouri 63127-1690
1-888-262-8131
THE FIXED
AND VARIABLE ANNUITY
ISSUED BY
BMA VARIABLE ANNUITY ACCOUNT A
AND
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
This prospectus describes the Fixed and Variable Annuity Contract offered by
Business Men's Assurance Company of America (BMA).
The annuity contract has 12 investment choices - 2 fixed account options and 10
investment portfolios listed below. The 10 investment portfolios are part of
Investors Mark Series Fund, Inc. and Berger Institutional Products Trust. You
can put your money in Fixed Account I, any currently available guarantee period
of Fixed Account II and/or any of these investment portfolios.
INVESTORS MARK SERIES FUND, INC.
MANAGED BY STANDISH, AYER & WOOD, INC.
Intermediate Fixed Income
Mid Cap Equity
Money Market
MANAGED BY STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P.
Global Fixed Income
MANAGED BY STEIN ROE & FARNHAM, INCORPORATED
Small Cap Equity
Large Cap Growth
MANAGED BY DAVID L. BABSON & CO., INC.
Large Cap Value
MANAGED BY LORD, ABBETT & CO.
Growth & Income
MANAGED BY KORNITZER CAPITAL MANAGEMENT, INC.
Balanced
BERGER INSTITUTIONAL PRODUCTS TRUST
MANAGED BY BBOI WORLDWIDE LLC
Berger/BIAM IPT - International
Please read this prospectus before investing and keep it on file for future
reference. It contains important information about the BMA Fixed and Variable
Annuity Contract.
To learn more about the BMA Fixed and Variable Annuity Contract, you can obtain
a copy of the Statement of Additional Information (SAI) dated _________, 1997.
The SAI has been filed with the Securities and Exchange Commission (SEC) and is
legally a part of the prospectus. The SEC has a website (http://www.sec.gov)
that contains the SAI, material incorporated by reference, and other information
regarding companies that file electronically. The Table of Contents of the SAI
is on Page __ of this prospectus. For a free copy of the SAI, call us at 1-888-
262-8131 or write us at: 9735 Landmark Parkway Drive, St. Louis, MO 63127-1690.
INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT TO RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
______________, 1997.
TABLE OF CONTENTS
PAGE
INDEX OF SPECIAL TERMS
FEE TABLE
EXAMPLES
1. THE ANNUITY CONTRACT
2. ANNUITY PAYMENTS (THE INCOME PHASE)
3. PURCHASE
Purchase Payments
Allocation of Purchase Payments
Accumulation Units
4. INVESTMENT OPTIONS
Transfers
Dollar Cost Averaging Option
Asset Rebalancing Option
Asset Allocation Option
Voting Rights
Substitution
5. EXPENSES
Coverage Charge
Contract Maintenance Charge
Withdrawal Charge
Waiver of Withdrawal Charge Benefits
Reduction or Elimination of the Withdrawal Charge
Premium Taxes
Transfer Fee
Income Taxes
Investment Portfolio Expenses
6. TAXES
Annuity Contracts in General
Qualified and Non-Qualified Contracts
Withdrawals - Non-Qualified Contracts
Withdrawals - Qualified Contracts
Death Benefits
Diversification
7. ACCESS TO YOUR MONEY
Automatic Withdrawal Program
Minimum Distribution Program
8. PERFORMANCE
9. DEATH BENEFIT
Upon Your Death
Death of Annuitant
10. OTHER INFORMATION
BMA
The Separate Account
Distributor
Administration
Beneficiary
Assignment
Suspension of Payments or Transfers
Financial Statements
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
INDEX OF SPECIAL TERMS
We have tried to make this prospectus as readable and understandable for you as
possible. By the very nature of the contract, however, certain technical words
or terms are unavoidable. We have identified the following as some of these
words or terms. They are identified in the text in italic and the page that is
indicated here is where we believe you will find the best explanation for the
word or term.
PAGE
Accumulation Phase
Accumulation Unit
Annuitant
Annuity Date
Annuity Options
Annuity Payments
Annuity Unit
Beneficiary
Fixed Account
Guarantee Period
Income Phase
Investment Portfolios
Joint Owner
Non-Qualified
Owner
Purchase Payment
Qualified
Tax Deferral
FEE TABLE
<TABLE>
<CAPTION>
<S> <C> <C>
OWNER TRANSACTION EXPENSES Number of Complete
Withdrawal Charge (as a percentage of Years from date Withdrawal
purchase payments) (see Note 2 below) of Purchase Payment Charge
------------------- ----------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 and thereafter 0%
</TABLE>
TRANSFER FEE (see Note 3 below)
No charge for first 12 transfers in a contract year during the accumulation
phase and no charge for four transfers in a contract year during the income
phase; thereafter, the fee is $25 per transfer.
CONTRACT MAINTENANCE CHARGE (see Note 4 below) $35 per contract per year
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Coverage Charge 1.40%
-----
TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES 1.40%
INVESTMENT PORTFOLIO EXPENSES
(as a percentage of the average daily net assets of an investment portfolio)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Annual
Other Portfolio
Expenses Expenses
(after expense (after expense
reimbursement- reimbursement-
Management See Notes 5 See Notes 5
Fees and 6 below) and 6 below)
---------- ------------- ---------------
INVESTORS MARK SERIES FUND, INC.
MANAGED BY STANDISH, AYER & WOOD, INC.
Intermediate Fixed Income Portfolio .60% .20% .80%
Mid Cap Equity Portfolio .80% .10% .90%
Money Market Portfolio .40% .10% .50%
MANAGED BY STANDISH INTERNATIONAL
MANAGEMENT COMPANY, L.P.
Global Fixed Income Portfolio .75% .25% 1.00%
MANAGED BY STEIN ROE & FARNHAM, INCORPORATED
Small Cap Equity Portfolio .95% .10% 1.05%
Large Cap Growth Portfolio .80% .10% .90%
MANAGED BY DAVID L. BABSON & CO., INC.
Large Cap Value Portfolio .80% .10% .90%
MANAGED BY LORD, ABBETT & CO.
Growth & Income Portfolio .80% .10% .90%
MANAGED BY KORNITZER CAPITAL MANAGEMENT, INC.
Balanced Portfolio .80% .10% .90%
BERGER INSTITUTIONAL PRODUCTS TRUST
MANAGED BY BBOI WORLDWIDE LLC
Berger/BIAM IPT - International Fund .00% 1.20% 1.20%
</TABLE>
EXAMPLES
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
(a) upon surrender at the end of each time period;
(b) if the contract is not surrendered or is annuitized with a life
annuity option or another annuity option with an annuity payment
period of more than 5 years.
<TABLE>
<CAPTION>
Time Periods
1 Year 3 Years
------ -------
<S> <C> <C>
INVESTORS MARK SERIES FUND, INC.
MANAGED BY STANDISH, AYER & WOOD, INC.
Intermediate Fixed Income a) $94.01 a) $118.61
b) $24.01 b) $ 73.91
Mid Cap Equity a) $95.01 a) $121.53
b) $25.01 b) $ 76.91
Money Market a) $90.99 a) $109.36
b) $20.99 b) $ 64.81
MANAGED BY STANDISH INTERNATIONAL
MANAGEMENT COMPANY, L.P.
Global Fixed Income a) $96.01 a) $124.54
b) $26.01 b) $ 79.91
MANAGED BY STEIN ROE & FARNHAM, INCORPORATED
Small Cap Equity a) $96.51 a) $126.04
b) $26.51 b) $ 81.40
Large Cap Growth a) $95.01 a) $121.53
b) $25.01 b) $ 76.91
MANAGED BY DAVID L. BABSON & CO., INC.
Large Cap Value a) $95.01 a) $121.53
b) $25.01 b) $ 76.91
MANAGED BY LORD, ABBETT & CO.
Growth & Income a) $95.01 a) $121.53
b) $25.01 b) $ 76.91
MANAGED BY KORNITZER CAPITAL MANAGEMENT, INC.
Balanced a) $95.01 a) $121.53
b) $25.01 b) $ 76.91
BERGER INSTITUTIONAL PRODUCTS TRUST
MANAGED BY BBOI WORLDWIDE LLC
Berger/BIAM IPT - International a) $98.00 a) $130.53
b) $28.00 b) $ 85.86
</TABLE>
EXPLANATION OF FEE TABLE AND EXAMPLES
1. The purpose of the Fee Table is to show you the various expenses you
will incur directly or indirectly with the contract. The Fee Table reflects
expenses of the Separate Account as well as the investment portfolios.
2. After BMA has had a purchase payment for 7 years, there is no charge by
BMA for a withdrawal of that purchase payment. You may also have to pay income
tax and a tax penalty on any money you take out. After the first Contract Year,
the first 10% of contract value withdrawn is not subject to a withdrawal charge,
unless you have already made another withdrawal during that same contract year.
3. BMA will not charge you the transfer fee even if there are more than 12
transfers in a year during the accumulation phase if the transfer is for the
Dollar Cost Averaging Option, the Asset Allocation Option or Asset Rebalancing
Option.
4. During the accumulation phase, BMA will not charge the contract
maintenance charge if the value of your contract is $100,000 or more. If you
make a complete withdrawal and the contract value is less than $100,000, BMA
will charge the contract maintenance charge. If you own more than one BMA
contract, we will determine the total value of all the contracts. If the total
value of all the contracts is more than $100,000, we will not assess the
contract maintenance charge. During the income phase, BMA will deduct the
contract maintenance charge from each annuity payment on a prorata basis.
5. Investors Mark Advisors, LLC has voluntarily agreed to reimburse
expenses of each Portfolio of Investors Mark Series Fund, Inc. for the first
year of operations so that the annual expenses do not exceed the amounts set
forth above under "Total Annual Portfolio Expenses" for each Portfolio. Absent
such expense reimbursement, the Total Annual Portfolio Expenses are estimated to
be: 2.04% for the Intermediate Fixed Income Portfolio; 1.10% for the Mid Cap
Equity Portfolio; 1.15% for the Money Market Portfolio; 2.04% for the Global
Fixed Income Portfolio; 1.25% for the Small Cap Equity Portfolio; 1.02% for the
Large Cap Growth and Large Cap Value Portfolios; 1.10% for the Growth & Income
Portfolio; and 1.10% for the Balanced Portfolio.
6. BBOI Worldwide LLC has voluntarily agreed to waive its advisory fee and
expects to voluntarily reimburse the Berger/BIAM IPT - International Fund for
additional expenses to the extent that normal operating expenses in any fiscal
year, including the management fee but excluding brokerage commissions,
interest, taxes and extraordinary expenses, of the Fund exceed 1.20% of the
Fund's average daily net assets. Absent the voluntary waiver and reimbursement,
the management fee for the Fund would be .90% and its "Total Annual Portfolio
Expenses" are estimated to be 8.96%.
7. Premium taxes are not reflected. Premium taxes may apply depending on
the state where you live.
8. The assumed average contract size is $25,000.
9. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1. THE ANNUITY CONTRACT
This Prospectus describes the Fixed and Variable Annuity Contract offered by
BMA.
An annuity is a contract between you, the owner, and an insurance company (in
this case BMA), where the insurance company promises to pay you an income, in
the form of annuity payments, beginning on a designated date that's at least one
year after we issue your contract. Until you decide to begin receiving annuity
payments, your annuity is in the accumulation phase. Once you begin receiving
annuity payments, your contract switches to the income phase. The contract
benefits from tax deferral.
Tax deferral means that you are not taxed on earnings or appreciation on the
assets in your contract until you take money out of your contract.
The contract is called a variable annuity because you can choose among 10
investment portfolios and, depending upon market conditions, you can make or
lose money in any of these portfolios. If you select the variable annuity
portion of the contract, the amount of money you are able to accumulate in your
contract during the accumulation phase depends upon the investment performance
of the investment portfolio(s) you select. The amount of the annuity payments
you receive during the income phase from the variable annuity portion of the
contract also depends upon the investment performance of the investment
portfolios you select for the income phase.
The contract also contains two fixed account options (Fixed Account I and Fixed
Account II). The fixed accounts offer interest rates that are guaranteed by BMA.
For Fixed Account I, an interest rate is set at the time of each purchase
payment or transfer to the account. This initial interest rate is guaranteed for
12 months. Fixed Account II offers different guarantee periods. A guarantee
period is the time period for which an interest rate is credited in Fixed
Account II. Currently, the following guarantee periods are available: three
years, five years, and seven years. Each purchase payment or transfer to a
guarantee period has its own interest rate. BMA guarantees that the interest
credited to the fixed account options will not be less than 3% per year. If you
make a withdrawal, transfer or if your contract switches to the income phase
before the end of the guarantee period you have selected, an interest adjustment
will be made to the value of your contract. If you select either fixed account
option, your money will be placed with the other general assets of BMA. If you
select either fixed account, the amount of money you are able to accumulate in
your contract during the accumulation phase depends upon the total interest
credited to your contract. The amount of the annuity payments you receive during
the income phase from the general account will remain level for the entire
income phase.
As owner of the contract, you exercise all rights under the contract. You can
change the owner at any time by notifying BMA in writing. You and your spouse
can be named joint owners. We have described more information on this in Section
10 - Other Information.
2. ANNUITY PAYMENTS (THE INCOME PHASE)
Under the contract you can receive regular income payments. You can choose the
date on which those payments begin. We call that date the annuity date. Your
first annuity payment will be made one month (or one modal period if you do not
choose monthly payments) after the annuity date. Currently, the amount of each
payment is determined ten business days prior to the payment date. You can also
choose among income plans. We call those annuity options.
We ask you to choose your annuity date when you purchase the contract. You
can change it at any time before the annuity date with 30 days notice to
us. Your annuity date cannot be any earlier than one year after we issue
the contract. Annuity payments must begin by the later of the first day of
the first calendar month after the annuitant's 95th birthday or 10 years
after we issue your contract (or the maximum date allowed under state law).
The annuitant is the person whose life we look to when we make annuity
payments.
You can select and/or change an annuity option at any time prior to the annuity
date (with 30 days notice to us). If you do not choose an annuity option, we
will assume that you selected Option 2 which will provide a life annuity with
120 monthly payments guaranteed.
At the annuity date, you can choose whether payments will come from a fixed
account, referred to as a fixed annuity, or from the investment portfolio(s)
available, referred to as a variable annuity, or a combination of both. If you
choose to have any portion of your annuity payments come from the fixed
accounts, Fixed Accounts I and II will be terminated, and the fixed annuity
payments will be made from BMA's general account. The general account of BMA
contains all of our assets except the assets of the Separate Account and other
separate accounts we may have. The dollar amount of each fixed annuity payment
will be determined in accordance with the annuity tables in the contract. If, on
the annuity date, we are using annuity payment tables for similar fixed annuity
contracts which would provide a larger annuity payment, we will use those
tables. Once determined, the amount of the fixed annuity payment will not
change, unless you transfer a portion of your variable annuity payment into the
fixed annuity. Up to four times each contract year you may increase the amount
of your fixed annuity payment by a transfer of all or portion of your variable
annuity payment to the fixed annuity payment. After the annuity date, you may
not transfer any portion of the fixed annuity into the variable annuity payment.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of the initial variable annuity
payment will depend upon the value of your contract in the investment
portfolio(s) and the annuity tables in the contract. The dollar amount of this
variable annuity payment is not guaranteed to remain level. Each variable
annuity payment will vary depending on the investment performance of the
investment portfolio(s) you have selected. A 3.5% annual investment rate is used
in the annuity tables in the contract. If the actual performance of the
investment portfolio(s) you have selected equals 3.5%, then the variable annuity
payments will remain level. If the actual performance of the investment
portfolio(s) you have selected exceeds the 3.5% assumption, the variable annuity
payments will increase, and conversely, if the performance is less than the
3.5%, the payments will decrease.
Annuity payments are made monthly unless you have less than $10,000 to apply
toward a payment. In that case, BMA made provide your annuity payment in a
single lump sum. Likewise, if your annuity payments would be or become less than
$250 a month, BMA has the right to change the frequency of payments so that your
annuity payments are at least $250.
You can choose one of the following annuity options. Any other annuity option
acceptable to us may also be selected. After annuity payments begin, you cannot
change the annuity option.
OPTION 1. LIFE ANNUITY. Under this option, we will make an annuity payment each
month so long as the annuitant is alive. After the annuitant dies, we stop
making annuity payments.
OPTION 2. LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED. Under this option, we
will make an annuity payment each month so long as the annuitant is alive.
However, if, when the annuitant dies, we have made annuity payments for less
than the selected guaranteed period, we will then continue to make annuity
payments for the rest of the guaranteed period to the beneficiary. If the
beneficiary does not want to receive annuity payments, he or she can ask us for
a single lump sum.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make
annuity payments each month so long as the annuitant and a second person are
both alive. When either of these people dies, we will continue to make annuity
payments, so long as the survivor continues to live. The amount of the annuity
payments we will make to the survivor can be equal to 100%, 75% or 50% of the
amount that we would have paid if both were alive.
OPTION 4. JOINT AND LAST SURVIVOR ANNUITY WITH 10 OR 20 YEARS GUARANTEED. Under
this option, we will make annuity payments each month so long as the annuitant
and a second person are both alive. However, if when the last annuitant dies, we
have made annuity payments for less than the selected guaranteed period, we will
then continue to make annuity payments for the rest of the guaranteed period to
the beneficiary. If the beneficiary does not want to receive annuity payments,
he or she can ask us for a single lump sum.
3. PURCHASE
PURCHASE PAYMENTS
A purchase payment is the money you give us to buy the contract. The minimum we
will accept for a non-qualified contract is $10,000. If you buy the contract as
part of an Individual Retirement Annuity (IRA), the minimum purchase payment we
will accept is $2,000. The maximum we accept is $1 million without our prior
approval. You can make additional purchase payments of $1,000 or more.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your purchase payment to Fixed
Account I, any currently available guarantee period of Fixed Account II and/or
one or more of the investment portfolios you have selected. If you make
additional purchase payments, we will allocate them in the same way as your
first purchase payment unless you tell us otherwise. Any allocation to Fixed
Account I or to any guarantee period of Fixed Account II must be at least
$5,000. Any allocation to an investment portfolio must be at least $1,000.
Allocation percentages need to be in whole numbers. Each allocation must be at
least 1%. BMA reserves the right to decline any purchase payment.
At its discretion, BMA may refuse purchase payments into Fixed Account I or
Fixed Account II if the total value of Fixed Accounts I and II is greater than
or equal to 30% of the value of your contract at the time of the purchase
payment.
If you change your mind about owning the contract, you can cancel it within 10
days after receiving it, or the period required in your state (free look
period). When you cancel the contract within this time period, BMA will not
assess a withdrawal charge. You will receive back whatever your contract is
worth on the day we receive your request. In certain states, or if you have
purchased the contract as an IRA, we will refund the greater of your purchase
payment or the value of your contract if you decide to cancel your contract
within 10 days after receiving it (or whatever period is required in your
state). If that is the case, we will put your purchase payment in the Money
Market Portfolio for 15 days after we allocate you first purchase payment. (In
some states, the period may be longer.) At the end of that period, we will
re-allocate those funds as you selected.
Once we receive your purchase payment and the necessary information, we will
issue your contract and allocate your first purchase payment within 2 business
days. If you do not give us all of the information we need, we will contact you
to get it. If for some reason we are unable to complete this process within 5
business days, we will either send back your money or get your permission to
keep it until we get all of the necessary information. If you add more money to
your contract by making additional purchase payments, we will credit these
amounts to your contract within one business day. Our business day closes when
the New York Stock Exchange closes, usually 4:00 P.M. Eastern time.
ACCUMULATION UNITS
The value of the variable annuity portion of your contract will go up or down
depending upon the investment performance of the investment portfolio(s) you
choose. In order to keep track of the value of your contract, we use a unit of
measure we call an accumulation unit. (An accumulation unit works like a share
of a mutual fund.) During the income phase of the contract we call the unit an
annuity unit.
Every business day we determine the value of an accumulation unit for each of
the investment portfolios by multiplying the accumulation unit value for the
previous business day by a factor for the current business day. The factor is
determined by:
1. dividing the value of an investment portfolio share at the end of the
current business day by the value of an investment portfolio share for the
previous business day; and
2. multiplying it by one minus the daily amount of the coverage charge and
any charges for taxes.
The value of an accumulation unit may go up or down from day to day.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the purchase payment allocated to an investment portfolio by
the value of the accumulation unit for that investment portfolio.
We calculate the value of an accumulation unit for each investment portfolio
after the New York Stock Exchange closes each day and then credit your contract.
EXAMPLE:
On Monday we receive an additional purchase payment of $4,000 from you. You
have told us you want this to go to the Balanced Portfolio. When the New
York Stock Exchange closes on that Monday, we determine that the value of
an accumulation unit for the Balanced Portfolio is $12.70. We then divide
$4,000 by $12.70 and credit your contract on Monday night with 314.960630
accumulation units for the Balanced Portfolio.
4. INVESTMENT OPTIONS
The Contract offers 10 investment portfolios which are listed below. Additional
investment portfolios may be available in the future.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY BEFORE INVESTING.
COPIES OF THESE PROSPECTUSES ARE ATTACHED TO THIS PROSPECTUS.
INVESTORS MARK SERIES FUND, INC.
Investors Mark Series Fund, Inc. is managed by Investors Mark Advisors, LLC
(Adviser), which is an affiliate of BMA. Investors Mark Series Fund, Inc. is a
mutual fund with multiple portfolios. Each investment portfolio has a different
investment objective. The Adviser has engaged sub-advisers to provide investment
advice for the individual investment portfolios. The following investment
portfolios are available under the contract.
Standish, Ayer & Wood, Inc. is the sub-adviser to the following portfolios:
Intermediate Fixed Income Portfolio
Mid Cap Equity Portfolio
Money Market Portfolio
Standish International Management Company, L.P. is the sub-adviser to the
following portfolio:
Global Fixed Income Portfolio
Stein Roe & Farnham, Incorporated is the sub-adviser to the following
portfolios:
Small Cap Equity Portfolio
Large Cap Growth Portfolio
David L. Babson & Co., Inc. is the sub-adviser to the following portfolio:
Large Cap Value Portfolio
Lord, Abbett & Co. is the sub-adviser to the following portfolio:
Growth & Income Portfolio
Kornitzer Capital Management, Inc. is the sub-adviser to the following
portfolio:
Balanced Portfolio
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger Institutional Products Trust is a mutual fund with multiple portfolios,
one of which, the Berger/BIAM IPT - International Fund, is managed by BBOI
Worldwide LLC. BBOI Worldwide LLC has retained Bank of Ireland Asset Management
(U.S.) Limited ("BIAM") as subadviser.
The following investment portfolio is available under the contract:
Berger/BIAM IPT - International Fund
Shares of the portfolios may be offered in connection with certain variable
annuity contracts and variable life insurance policies of various life insurance
companies which may or may not be affiliated with BMA. Certain portfolios may
also be sold directly to qualified plans. The funds do not believe that offering
their shares in this manner will be disadvantageous to you.
TRANSFERS
You can transfer money among the fixed accounts and the 10 investment
portfolios.
TRANSFERS DURING THE ACCUMULATION PHASE.
You can make 12 transfers every year during the accumulation phase without
charge. We measure a year from the anniversary of the day we issued your
contract. You can make a transfer to or from the fixed accounts and to or from
any investment portfolio. If you make more than 12 transfers in a year, there is
a transfer fee deducted. The fee is $25 per transfer. The transfer fee is
deducted from the amount which is transferred. The following apply to any
transfer during the accumulation phase:
1. The minimum amount which you can transfer from the investment portfolio,
Fixed Account I or any guarantee period of Fixed Account II is $250 or your
entire interest in the investment portfolio, Fixed Account I or guarantee
period of Fixed Account II, if less.
2. We reserve the right to restrict the maximum amount which you can
transfer from any fixed account option (unless the transfer is from a guarantee
period of Fixed Account II just expiring) to 25% of the amount in Fixed Account
I or any guarantee period of Fixed Account II. Currently, BMA is waiving this
restriction. This requirement is waived if the transfer is part of the dollar
cost averaging, asset allocation or asset rebalancing options. This requirement
is also waived if the transfer is to switch your contract to the income phase.
3. At its discretion, BMA may refuse transfers to Fixed Account I or Fixed
Account II if the total value of Fixed Accounts I and II is greater than or
equal to 30% of the value of your contract at the time of the transfer.
4. The minimum amount which must remain in any investment portfolio after a
transfer is $1,000. The minimum amount which must remain in Fixed Account I or
any guarantee period of Fixed Account II after a transfer is $5,000.
5. You may not make a transfer until after the end of the free look period.
6. We reserve the right to restrict the number of transfers per year and to
restrict transfers made on consecutive business days.
Your right to make transfers may be modified if we determine, in our sole
opinion, that the exercise of the transfer right by one or more owners is, or
would be, harmful to other owners.
You can make transfers by telephone. If you own the contract with a joint owner,
unless BMA is instructed otherwise, BMA will accept instructions from either you
or the other owner. BMA will use reasonable procedures to confirm that
instructions given us by telephone are genuine. If BMA fails to use such
procedures, we may be liable for any losses due to unauthorized or fraudulent
instructions. BMA tape records all telephone instructions.
TRANSFERS DURING THE INCOME PHASE.
Each year, during the income phase, you can make 4 transfers between the
investment portfolio(s). We measure a year from the anniversary of the day we
issued your contract. You can also make 4 transfers each contract year from the
investment portfolios to the general account. You may not make a transfer from
the general account to the investment portfolios. These four transfers each
contract year during the income phase are free. If you make more than 4
transfers in a year during the income phase, a transfer fee of $25 per transfer
(after the 4 free) will be charged.
You can make transfers by telephone. If you own the contract with a joint owner,
unless BMA is instructed otherwise, BMA will accept instructions from either you
or the other owner. BMA will use reasonable procedures to confirm that
instructions given us by telephone are genuine. If BMA fails to use such
procedures, we may be liable for any losses due to unauthorized or fraudulent
instructions. BMA tape records all telephone instructions.
DOLLAR COST AVERAGING OPTION
The dollar cost averaging option allows you to systematically transfer a set
amount each month from the Money Market Portfolio or Fixed Account I to any of
the other investment portfolio(s). By allocating amounts on a regular schedule
as opposed to allocating the total amount at one particular time, you may be
less susceptible to the impact of market fluctuations.
The minimum amount which can be transferred each month is $250. The value of
your contract must be at least $25,000 in order to participate in dollar cost
averaging.
All dollar cost averaging transfers will be made on the 15th day of the month
unless that day is not a business day. If it is not, then the transfer will be
made the next business day. You must participate in dollar cost averaging for at
least 6 months.
If you participate in dollar cost averaging, the transfers made under this
option are not taken into account in determining any transfer fee.
No automatic withdrawals and minimum distributions will be allowed if you are
participating in dollar cost averaging.
ASSET REBALANCING OPTION
Once your money has been allocated among the investment portfolios, the
performance of each portfolio may cause your allocation to shift. If the value
of your contract is at least $10,000, you can direct us to automatically
rebalance your contract each quarter to return to your original percentage
allocations by selecting our asset rebalancing option. The program will
terminate if you make any transfer outside of the investment portfolios you have
selected under the asset rebalancing option. The minimum period to participate
in this program is 6 months. The transfer date will be the 15th of the month
unless that day is not a business day. If it is not, then the transfer will be
made the next business day. The fixed account options are not part of asset
rebalancing. If you participate in the asset rebalancing option, the transfers
made under the program are not taken into account in determining any transfer
fee.
EXAMPLE:
Assume that you want your initial purchase payment split between 2 investment
portfolios. You want 40% to be in the Intermediate Fixed Income Portfolio and
60% to be in the Mid Cap Equity Portfolio. Over the next 2 1/2 months the bond
market does very well while the stock market performs poorly. At the end of the
first quarter, the Intermediate Fixed Income Portfolio now represents 50% of
your holdings because of its increase in value. If you had chosen to have your
holdings rebalanced quarterly, on the first day of the next quarter, BMA would
sell some of your units in the Intermediate Fixed Income Portfolio to bring its
value back to 40% and use the money to buy more units in the Mid Cap Equity
Portfolio to increase those holdings to 60%.
ASSET ALLOCATION OPTION
BMA recognizes the value to certain owners of having available, on a continuous
basis, advice for the allocation of your money among the investment options
available under the Contracts.
Even though BMA may allow the use of approved asset allocation programs, the
contract was not designed for professional market timing organizations. Repeated
patterns of frequent transfers are disruptive to the operations of the
investment portfolios, and should BMA become aware of such disruptive practices,
we may modify the transfer provisions of the contract.
If you participate in an approved asset allocation program, the transfers made
under the program will not be taken into account in determining any transfer
fee.
VOTING RIGHTS
BMA is the legal owner of the investment portfolio shares. However, BMA believes
that when an investment portfolio solicits proxies in conjunction with a vote of
shareholders, it is required to obtain from you and other owners instructions as
to how to vote those shares. When we receive those instructions, we will vote
all of the shares we own in proportion to those instructions. This will also
include any shares that BMA owns on its own behalf. Should BMA determine that it
is no longer required to comply with the above, we will vote the shares in our
own right.
SUBSTITUTION
BMA may be required to substitute one of the investment portfolios you have
selected with another portfolio. We would not do this without the prior approval
of the Securities and Exchange Commission. We will give you notice of our intent
to do this.
5. EXPENSES
There are charges and other expenses associated with the contracts that reduce
the return on your investment in the contract. These charges and expenses are:
COVERAGE CHARGE
Each day, BMA makes a deduction for its coverage charge. BMA does this as part
of its calculation of the value of the accumulation units and the annuity units.
The coverage charge is equal, on an annual basis, to 1.40% of the average daily
value of the contract invested in an investment portfolio, after expenses have
been deducted. We reserve the right to increase this charge but it will never be
more than 1.75% of the average daily value of the contract invested in an
investment portfolio, after expenses have been deducted.
This charge is for all the insurance benefits provided under the contracts and
certain administrative expenses associated with the contract.
CONTRACT MAINTENANCE CHARGE
During the accumulation phase, every year on the anniversary of the date when
your contract was issued, BMA deducts $35 from your contract as a contract
maintenance charge. If you make a complete withdrawal from your contract, the
charge will also be deducted. A pro rata portion of the charge will be deducted
if the annuity date is other than an anniversary. We reserve the right to
increase this charge but it will never be more than $60 each year. This charge
is for administrative expenses.
BMA will not deduct this charge, if when the deduction is to be made, the value
of your contract is $100,000 or more. If you own more than one BMA contract, we
will determine the total value of all your contracts. If the owner is a
non-natural person (e.g., a corporation), we will look to the annuitant to
determine this information. BMA may some time in the future discontinue this
practice and deduct the charge.
After the annuity date, the charge will be collected monthly out of each annuity
payment regardless of the size of the contract.
WITHDRAWAL CHARGE
During the accumulation phase, you can make withdrawals from your contract. BMA
keeps track of each purchase payment. After the first contract year, the first
10% of the contract value withdrawn (free withdrawal amount) is not subject to
the withdrawal charge (unless you have already made another withdrawal during
that same contract year), if on the day you make your withdrawal, the value of
your contract is $10,000 or more. A withdrawal charge will be deducted from any
withdrawals in excess of the free withdrawal amount. The withdrawal charge and
the free withdrawal amount are calculated at the time of each withdrawal. The
withdrawal charge compensates us for expenses associated with selling the
contract.
The withdrawal charge is:
<TABLE>
<CAPTION>
Number of Complete Years
from Date of Purchase Payment Withdrawal Charge
----------------------------- -----------------
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 and thereafter 0%
</TABLE>
After BMA has had a purchase payment for 7 years, there is no charge when you
withdraw that purchase payment. When the withdrawal is for only part of the
value of your contract, the withdrawal charge is deducted from the remaining
value in your contract.
NOTE: For tax purposes, withdrawals are considered to have come from the last
money into the contract. Thus, for tax purposes, earnings are considered to come
out first.
BMA does not assess the withdrawal charge on any amounts paid out as death
benefits or as annuity payments if a life annuity option or another option with
an annuity payment period of more than 5 years is selected.
WAIVER OF WITHDRAWAL CHARGE BENEFITS
Under certain circumstances, after the first year, BMA will allow you to take
your money out of the contract without deducting the withdrawal charge: 1) if
you become confined to a long term care facility, nursing facility or hospital
for at least 90 consecutive days; 2) if you become totally disabled; or 3) if
you become terminally ill (which means that you are not expected to live more
than 12 months); (4) if you are involuntarily unemployed for at least 90
consecutive days; or (5) if you get divorced. These benefits may not be
available in your state.
REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE
BMA will reduce or eliminate the amount of the withdrawal charge when the
contract is sold under circumstances which reduce its sales expense. Some
examples are: if there is a large group of individuals that will be purchasing
the contract or a prospective purchaser already had a relationship with BMA. BMA
will not deduct a withdrawal charge under a contract issued to an officer,
director or employee of BMA or any of its affiliates.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. BMA is responsible for the payment of these
taxes and will make a deduction from the value of the contract for them. Some of
these taxes are due when the contract is issued, others are due when annuity
payments begin. It is BMA's current practice, for all states except South
Dakota, to not charge anyone for these taxes until annuity payments begin. In
South Dakota, BMA will assess a charge equal to the amount of the premium tax at
the time each purchase payment is made. BMA may some time in the future
discontinue this practice and assess the charge when the tax is due. Premium
taxes generally range from 0% to 4%, depending on the state.
TRANSFER FEE
You can make 12 free transfers every year during the accumulation phase and 4
free transfers every year during the income phase. We measure a year from the
day we issue your contract. If you make more than 12 transfers a year during the
accumulation phase or more than 4 transfers a year during the income phase, we
will deduct a transfer fee of $25. The transfer fee is for expenses in
connection with transfers.
If the transfer is part of the dollar cost averaging option, the asset
rebalancing option or an approved asset allocation program, it will not count in
determining the transfer fee.
INCOME TAXES
BMA will deduct from the contract for any income taxes which it incurs because
of the contract. At the present time, we are not making any such deductions.
INVESTMENT PORTFOLIO EXPENSES
There are deductions from and expenses paid out of the assets of the various
investment portfolios, which are described in the attached fund prospectuses.
6. TAXES
NOTE: BMA has prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any individual.
You should consult your own tax adviser about your own circumstances. BMA has
included in the Statement of Additional Information an additional discussion
regarding taxes.
ANNUITY CONTRACTS IN GENERAL
Annuity contracts are a means of setting aside money for future needs usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated, these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules as to how you will be
taxed depending on how you take the money out and the type of contract
(qualified or non-qualified, see the following sections).
You, as the owner, will not be taxed on increases in the value of your contract
until a distribution occurs - either as a withdrawal or as annuity payments.
When you make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For annuity payments, different rules apply. A portion of each annuity
payment is treated as a partial return of your purchase payments and will not be
taxed. The remaining portion of the annuity payment will be treated as ordinary
income. How the annuity payment is divided between taxable and non-taxable
portions depends upon the period over which the annuity payments are expected to
be made. Annuity payments received after you have received all of your purchase
payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,
corporation or certain other entities other than tax-qualified trusts), the
contract will generally not be treated as an annuity for tax purposes.
QUALIFIED AND NON-QUALIFIED CONTRACTS
If you purchase the contract as an individual and not an Individual Retirement
Annuity (IRA), your contract is referred to as a non-qualified contract.
If you purchase the contract under an IRA, your contract is referred to as a
qualified contract.
WITHDRAWALS - NON-QUALIFIED CONTRACTS
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. Such
withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include any amounts: (1) paid on or after the
taxpayer reaches age 59 1/2; (2) paid after you die; (3) paid if the taxpayer
becomes totally disabled (as that term is defined in the Code); (4) paid in a
series of substantially equal payments made annually (or more frequently) under
a lifetime annuity, (5) paid under an immediate annuity; or (6) which come from
purchase payments made prior to August 14, 1982.
WITHDRAWALS - QUALIFIED CONTRACTS
The above information describing the taxation of non-qualified contracts does
not apply to qualified contracts. There are special rules that govern with
respect to qualified contracts. We have provided a more complete discussion in
the Statement of Additional Information.
DEATH BENEFITS
Any death benefits paid under the contract are taxable to the beneficiary. The
rules governing the taxation of payments from an annuity contract, as discussed
above, generally apply to the payment of death benefits and depend on whether
the death benefits are paid as a lump sum or as annuity payments.
DIVERSIFICATION
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. BMA believes that the investment portfolios are being managed
so as to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not BMA, would be
considered the owner of the shares of the investment portfolios. If this occurs,
it will result in the loss of the favorable tax treatment for the contract. It
is unknown to what extent under federal tax law owners are permitted to select
investment portfolios, to make transfers among the investment portfolios or the
number and type of investment portfolios owners may select from. If any guidance
is provided which is considered a new position, then the guidance would
generally be applied prospectively. However, if such guidance is considered not
to be a new position, it may be applied retroactively. This would mean that you,
as the owner of the contract, could be treated as the owner of the investment
portfolios.
Due to the uncertainty in this area, BMA reserves the right to modify the
contract in an attempt to maintain favorable tax treatment.
7. ACCESS TO YOUR MONEY
You can have access to the money in your contract: (1) by making a withdrawal
(either a partial or a complete withdrawal); (2) by electing to receive annuity
payments; or (3) when a death benefit is paid to your beneficiary. Withdrawals
can only be made during the accumulation phase.
When you make a complete withdrawal you will receive the value of the contract
on the day you made the withdrawal less any applicable withdrawal charge, less
any premium tax, less any contract maintenance charge and less an interest
adjustment, if applicable. (See Section 5. Expenses for a discussion of the
charges.)
Unless you instruct BMA otherwise, any partial withdrawal will be made pro rata
from all the investment portfolio(s) and the fixed account option(s) you
selected. Under most circumstances the amount of any partial withdrawal must be
for at least $1,000 (withdrawals made pursuant to the automatic withdrawal
program and the minimum distribution option are not subject to this minimum).
BMA requires that after a partial withdrawal is made you keep at least $1,000 in
any investment portfolio and $5,000 in Fixed Account I or any guarantee period
of Fixed Account II. BMA also requires that after a partial withdrawal is made
you keep at least $10,000 in your contract.
We will pay the amount of any withdrawal from the investment portfolios within 7
days of a receipt in good order of your request unless the suspension or
deferral of payments or transfers provision is in effect (see Section 10 - Other
Information-Suspension of Payments or Transfers). Use of a certified check to
purchase the contract may expedite the payment of your withdrawal request if the
withdrawal request is soon after your payment by certified check.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL
YOU MAKE.
AUTOMATIC WITHDRAWAL PROGRAM
This program provides periodic payments to you of up to 10% of the value of your
contract each year. No withdrawal charge will be deducted for these payments.
Each payment must be for at least $250. You may select to have payments made
monthly, quarterly, semi-annually or annually. If you use this program, you may
not also make the single 10% free withdrawal allowed each year. For a discussion
of the withdrawal charge and the 10% free withdrawal, see Section 5. Expenses.
All automatic withdrawals will be made on the 15th day of the month unless that
day is not a business day. If it is not, then the payment will be the next
business day.
No minimum distribution payments and/or dollar cost averaging transfers will be
allowed if you are participating in the automatic withdrawal program.
INCOME TAXES AND TAX PENALTIES MAY APPLY TO AUTOMATIC WITHDRAWALS.
MINIMUM DISTRIBUTION PROGRAM
If you own an IRA contract, you may select the minimum distribution program.
Under this program, BMA will make payments to you from your contract that are
designed to meet the applicable minimum distribution requirements imposed by the
Internal Revenue Code for qualified plans. BMA will make payments to you
periodically (currently, monthly, quarterly, semi-annually or annually). The
payments will not be subject to the withdrawal charge and will be instead of the
10% single free withdrawal amount each year.
No dollar cost averaging transfers or automatic withdrawals will be allowed if
you are participating in the minimum distribution program.
8. PERFORMANCE
BMA may periodically advertise performance of the various investment portfolios.
BMA will calculate performance by determining the percentage change in the value
of an accumulation unit by dividing the increase (decrease) for that unit by the
value of the accumulation unit at the beginning of the period. This performance
number reflects the deduction of the coverage charge and the fees and expenses
of the investment portfolio. It does not reflect the deduction of any applicable
contract maintenance charge and withdrawal charge. The deduction of any
applicable contract maintenance charge and withdrawal charge would reduce the
percentage increase or make greater any percentage decrease. Any advertisement
will also include average annual total return figures which will reflect the
deduction of the coverage charge, contract maintenance charges, withdrawal
charges as well as the fees and expenses of the investment portfolio.
BMA may also advertise yield information. If it does, it will provide you with
information regarding how yield is calculated.
BMA may, from time to time, include in its advertising and sales materials, tax
deferred compounding charts and other hypothetical illustrations, which may
include comparisons of currently taxable and tax deferred investment programs,
based on selected tax brackets.
More detailed information regarding how performance is calculated is found in
the SAI.
9. DEATH BENEFIT
UPON YOUR DEATH
If you die during the accumulation phase, BMA will pay a death benefit to your
beneficiary (see below). If you have a joint owner, the death benefit will be
paid when the first of you dies. The surviving joint owner will be treated as
the beneficiary.
The death benefit will be the greater of:
1. Total purchase payments, less withdrawals (and any withdrawal charges
paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid.
The entire death benefit must be paid within 5 years of the date of death unless
the beneficiary elects to have the death benefit payable under an annuity
option. The death benefit payable under an annuity option must be paid over the
beneficiary's lifetime or for a period not extending beyond the beneficiary's
life expectancy. Payment must begin within one year of the date of death. If the
beneficiary is the spouse of the owner, he/she can continue the contract in
his/her own name and the contract value will become the currently payable death
benefit. Payment to the beneficiary (other than a lump sum) may only be elected
during the 60 day period beginning with the date we receive proof of death. If a
lump sum payment is elected and all the necessary requirements are met, the
payment will be made within 7 days.
If you or any joint owner dies during the income phase (and you are not the
annuitant) any remaining payments under the annuity option chosen will continue
at least as rapidly as under the method of distribution in effect at the time of
death. If you die during the income phase, the beneficiary becomes the owner.
See Section 6. Taxes - Death Benefits regarding the tax treatment of death
proceeds.
DEATH OF ANNUITANT
If the annuitant, not an owner or joint owner, dies during the accumulation
phase, you can name a new annuitant. If no annuitant is named within 30 days of
the death of the annuitant, you will become the annuitant. However, if the owner
is a non-natural person (for example, a corporation), then the death of
annuitant will be treated as the death of the owner, and a new annuitant may not
be named.
Upon the death of the annuitant during the income phase, the death benefit, if
any, will be as provided for in the annuity option selected. The death benefits
will be paid at least as rapidly as under the method of distribution in effect
at the annuitant's death.
10. OTHER INFORMATION
BMA
Business Men's Assurance Company of America (BMA), BMA Tower, One Penn Valley
Park, Kansas City, Missouri 64108 was incorporated in 1909 under the laws of the
state of Missouri. BMA is authorized to do business in all states and the
District of Columbia. BMA is a wholly owned subsidiary of Assicurazioni Generali
SPA, which is the largest insurance organization in Italy.
BMA's obligations arising under the contracts are general obligations of BMA.
THE SEPARATE ACCOUNT
BMA has established a separate account, BMA Variable Annuity Account A (Separate
Account), to hold the assets that underlie the contracts. The Board of Directors
of BMA adopted a resolution to establish the Separate Account under Missouri
insurance law on September 9, 1996. We have registered the Separate Account with
the Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940.
The assets of the Separate Account are held in BMA's name on behalf of the
Separate Account and legally belong to BMA. However, those assets that underlie
the contracts, are not chargeable with liabilities arising out of any other
business BMA may conduct. All the income, gains and losses (realized or
unrealized) resulting from these assets are credited to or charged against the
contracts and not against any other contracts BMA may issue.
DISTRIBUTOR
Jones & Babson, Inc., acts as the distributor of the contracts. Jones & Babson,
Inc. is a wholly-owned subsidiary of BMA.
Commissions will be paid to broker-dealers who sell the contracts.
Broker-dealers will be paid commissions of up to 6% of purchase payments.
Sometimes, BMA may enter into an agreement with the broker-dealer to pay the
broker-dealer commissions as a combination of a certain amount of the commission
at the time of sale and a trail commission (which when totaled will not exceed
6% of purchase payments).
ADMINISTRATION
BMA has hired GENELCO, Incorporated, 9735 Landmark Parkway Drive, St. Louis,
Missouri to perform certain administrative services regarding the contracts. The
administrative services include issuance of the contracts and maintenance of
contract owners' records.
OWNERSHIP
OWNER. You, as the owner of the contract, have all the rights under the
contract. The owner is as designated at the time the contract is issued, unless
changed. The beneficiary becomes the owner upon the death of the owner.
JOINT OWNER. The contract can be owned by joint owners. Any joint owner must be
the spouse of the other owner. Upon the death of either joint owner, the
surviving owner will be the primary beneficiary. Any other beneficiary
designation will be treated as a contingent beneficiary unless otherwise
indicated.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued unless
changed at a later date. Unless an irrevocable beneficiary has been named, you
can change the beneficiary at any time before you die.
ASSIGNMENT
You can assign the contract at any time during your lifetime. BMA will not be
bound by the assignment until it receives the written notice of the assignment.
BMA will not be liable for any payment or other action we take in accordance
with the contract before we receive notice of the assignment. AN ASSIGNMENT MAY
BE A TAXABLE EVENT.
If the contract is issued pursuant to a qualified plan, there may be limitations
on your ability to assign the contract.
SUSPENSION OF PAYMENTS OR TRANSFERS
BMA may be required to suspend or postpone payments for withdrawal or transfers
for any period when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
investment portfolios is not reasonably practicable or BMA cannot reasonably
value the shares of the investment portfolios;
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of owners.
BMA has reserved the right to defer payment for a withdrawal or transfer from
the fixed accounts for the period permitted by law but not for more than six
months.
FINANCIAL STATEMENTS
The financial statements of BMA have been included in the Statement of
Additional Information.
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
Company
Experts
Legal Opinions
Distributor
Calculation of Performance Data
Tax Status
Annuity Provisions
Mortality and Expense Guarantee
Financial Statements
__________________________________________________________________
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FRONT
Business Men's Assurance Company of America
9735 Landmark Parkway Drive
St. Louis, MO 63127-1690
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Please send me, at no charge, the Statement of Additional
Information dated _____________, for the Annuity Contract issued
by BMA.
(Please print or type and fill in all information)
BACK _________________________________________________________________
Name
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Address
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City State Zip Code
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Form #
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS
ISSUED BY
BMA VARIABLE ANNUITY ACCOUNT A
AND
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
____________________, 1997
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, CALL OR WRITE THE
COMPANY AT: 1-888-262-8131, 9735 Landmark Parkway Drive, St. Louis, MO
63127-1690.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE PROSPECTUS ARE DATED
____________, 1997.
TABLE OF CONTENTS
COMPANY
EXPERTS
LEGAL OPINIONS
DISTRIBUTOR
CALCULATION OF PERFORMANCE DATA
TAX STATUS
ANNUITY PROVISIONS
MORTALITY AND EXPENSE GUARANTEE
FINANCIAL STATEMENTS
COMPANY
Business Men's Assurance Company of America ("BMA" or the "Company"), BMA Tower,
One Penn Valley Park, Kansas City, Missouri, 64108 was incorporated in 1909
under the laws of the state of Missouri. BMA is authorized to do business in all
states and the District of Columbia. BMA is a wholly owned subsidiary of
Assicurazioni Generali SPA, which is the largest insurance organization in
Italy.
EXPERTS
The consolidated financial statements of Business Men's Assurance Company of
America at December 31, 1996 and 1995, and for each of the three years in the
period ended December 31, 1996, appearing in this Statement of Additional
Information have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
LEGAL OPINIONS
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut, has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the contracts.
DISTRIBUTOR
Jones & Babson, Inc., acts as the distributor. The offering is on a continuous
basis.
CALCULATION OF PERFORMANCE DATA
TOTAL RETURN
From time to time, the Company may advertise performance data. Such data will
show the percentage change in the value of an accumulation unit based on the
performance of an investment portfolio over a period of time, usually a calendar
year, determined by dividing the increase (decrease) in value for that unit by
the accumulation unit value at the beginning of the period.
Any such advertisement will include total return figures for the time periods
indicated in the advertisement. Such total return figures will reflect the
deduction of a 1.40% coverage charge, the expenses for the underlying investment
portfolio being advertised and any applicable contract maintenance charges and
withdrawal charges.
The hypothetical value of a Contract purchased for the time periods described in
the advertisement will be determined by using the actual accumulation unit
values for an initial $1,000 purchase payment, and deducting any applicable
contract maintenance charges and any applicable withdrawal charges to arrive at
the ending hypothetical value. The average annual total return is then
determined by computing the fixed interest rate that a $1,000 purchase payment
would have to earn annually, compounded annually, to grow to the hypothetical
value at the end of the time periods described. The formula used in these
calculations is:
n
P ( 1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the time periods used (or
fractional portion thereof) of a hypothetical $1,000 payment made at
the beginning of the time periods used.
The Company may also advertise performance data which will be calculated in the
same manner as described above but which will not reflect the deduction of any
withdrawal charge and contract maintenance charge. The deduction of any
withdrawal charge and contract maintenance charge would reduce any percentage
increase or make greater any percentage decrease.
Owners should note that the investment results of each investment portfolio will
fluctuate over time, and any presentation of the investment portfolio's total
return for any period should not be considered as a representation of what an
investment may earn or what an Owner's total return may be in any future period.
YIELD
THE MONEY MARKET PORTFOLIO. The Company may advertise yield and effective
information for the Money Market Portfolio. Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the subaccount refers to the income generated by an investment in the
subaccount over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the subaccount is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
The Money Market Portfolio's current yield is computed on a base period return
of a hypothetical Contract having a beginning balance of one accumulation unit
for a particular period of time (generally seven days). The return is determined
by dividing the net change (exclusive of any capital changes) in such
accumulation unit by its beginning value, and then multiplying it by 365/7 to
get the annualized current yield. The calculation of net change reflects the
value of additional shares purchased with the dividends paid by the Portfolio,
and the deduction of the coverage charge and contract maintenance charge. The
effective yield reflects the effects of compounding and represents an
annualization of the current return with all dividends reinvested.
(Effective yield = [(Base Period Return + 1)365/7]-1.)
The Company does not currently advertise any yield information for the Money
Market Portfolio.
OTHER PORTFOLIOS. The Company may also quote current yield in sales literature,
advertisements and Owner communications for the other Portfolios. Each Portfolio
(other than the Money Market Portfolio) will publish standardized total return
information with any quotation of current yield.
The yield computation is determined by dividing the net investment income per
accumulation unit earned during the period (minus the deduction for the coverage
charge and the contract maintenance charge) by the accumulation unit value on
the last day of the period, according to the following formula:
6
Yield = 2 [[(a-b) + 1] - 1]
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cd
Where:
a = net investment income earned during the period by the Portfolio
attributable to shares owned by the subaccount.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of accumulation units outstanding during
the period.
d = the maximum offering price per accumulation unit on the last day
of the period.
The above formula will be used in calculating quotations of yield, based on
specified 30-day periods identified in the advertisement or communication. Yield
calculations assume no withdrawal charge. The Company does not currently
advertise any yield information for any Portfolio.
HISTORICAL UNIT VALUES
The Company may also show historical accumulation unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual accumulation unit values.
In addition, the Company may distribute sales literature which compares the
percentage change in accumulation unit values for any of the investment
portfolios against established market indices such as the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average or other
management investment companies which have investment objectives similar to the
investment portfolio being compared. The Standard & Poor's 500 Composite Stock
Price Index is an unmanaged, unweighted average of 500 stocks, the majority of
which are listed on the New York Stock Exchange. The Dow Jones Industrial
Average is an unmanaged, weighted average of thirty blue chip industrial
corporations listed on the New York Stock Exchange. Both the Standard & Poor's
500 Composite Stock Price Index and the Dow Jones Industrial Average assume
quarterly reinvestment of dividends.
REPORTING AGENCIES
The Company may also distribute sales literature which compares the performance
of the accumulation unit values of the Contracts with the unit values of
variable annuities issued by other insurance companies. Such information will be
derived from the Lipper Variable Insurance Products Performance Analysis
Service, the VARDS Report or from Morningstar.
The Lipper Variable Insurance Products Performance Analysis Service is published
by Lipper Analytical Services, Inc., a publisher of statistical data which
currently tracks the performance of almost 4,000 investment companies. The
rankings compiled by Lipper may or may not reflect the deduction of asset-based
insurance charges. The Company's sales literature utilizing these rankings will
indicate whether or not such charges have been deducted. Where the charges have
not been deducted, the sales literature will indicate that if the charges had
been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking may address the question as to which funds
provide the highest total return with the least amount of risk. Other ranking
services may be used as sources of performance comparison, such as
CDA/Weisenberger.
Morningstar rates a variable annuity against its peers with similar investment
objectives. Morningstar does not rate any variable annuity that has less than
three years of performance data.
TAX STATUS
GENERAL
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE POSSIBILITY
OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE CONTRACTS.
PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS
"ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE FURTHER
UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT SPECIAL
RULES NOT DESCRIBED HEREIN MAY BE APPLICABLE IN CERTAIN SITUATIONS. MOREOVER, NO
ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS.
Section 72 of the Code governs taxation of annuities in general. An Owner is not
taxed on increases in the value of a Contract until distribution occurs, either
in the form of a lump sum payment or as annuity payments under the Annuity
Option selected. For a lump sum payment received as a total withdrawal (total
surrender), the recipient is taxed on the portion of the payment that exceeds
the cost basis of the Contract. For Non-Qualified Contracts, this cost basis is
generally the purchase payments, while for Qualified Contracts there may be no
cost basis. The taxable portion of the lump sum payment is taxed at ordinary
income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includible in taxable income. The exclusion amount for payments based on a
fixed annuity option is determined by multiplying the payment by the ratio that
the cost basis of the Contract (adjusted for any period or refund feature) bears
to the expected return under the Contract. The exclusion amount for payments
based on a variable annuity option is determined by dividing the cost basis of
the Contract (adjusted for any period certain or refund guarantee) by the number
of years over which the annuity is expected to be paid. Payments received after
the investment in the Contract has been recovered (i.e. when the total of the
excludable amount equals the investment in the Contract) are fully taxable. The
taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract within the meaning of
Section 72 of the Code. Owners, Annuitants and Beneficiaries under the Contracts
should seek competent financial advice about the tax consequences of any
distributions. The Company is taxed as a life insurance company under the Code.
For federal income tax purposes, the Separate Account is not a separate entity
from the Company, and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in the imposition of federal income
tax to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contract meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas.
Reg.1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contract. The Regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the Regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Company intends that all investment portfolios underlying the Contracts will
be managed in such a manner as to comply with these diversification
requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered as the owner of the assets of the Separate
Account resulting in the imposition of federal income tax to the Owner with
respect to earnings allocable to the Contract prior to receipt of payments under
the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owners being
retroactively determined to be the owners of the assets of the Separate Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the Owner is a non-natural
person, e.g., a corporation or certain other entities. Such Contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to a Contract held by a trust or other entity as an
agent for a natural person nor to Contracts held by Qualified Plans. Purchasers
should consult their own tax counsel or other tax adviser before purchasing a
Contract to be owned by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross income
of the Owner are subject to federal income tax withholding. Generally, amounts
are withheld from periodic payments at the same rate as wages and at the rate of
10% from non-periodic payments. However, the Owner, in most cases, may elect not
to have taxes withheld or to have withholding done at a different rate.
Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 or Section 403(b) of the Code, which are not directly rolled
over to another eligible retirement plan or individual retirement account or
individual retirement annuity, are subject to a mandatory 20% withholding for
federal income tax. The 20% withholding requirement generally does not apply to:
a) a series of substantially equal payments made at least annually for the life
or life expectancy of the participant or joint and last survivor expectancy of
the participant and a designated beneficiary or for a specified period of 10
years or more; or b) distributions which are required minimum distributions; or
c) the portion of the distributions not includible in gross income (i.e. returns
of after-tax contributions). Participants should consult their own tax counsel
or other tax adviser regarding withholding requirements.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of the
Owner; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his or her Beneficiary; (e) under an immediate
annuity; or (f) which are allocable to purchase payments made prior to August
14, 1982.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
QUALIFIED PLANS
The Contracts offered herein may also be used as Qualified Contracts. Owners,
Annuitants and Beneficiaries are cautioned that benefits under a Qualified
Contract may be subject to the terms and conditions of the plan regardless of
the terms and conditions of the Contracts issued pursuant to the plan. The
following discussion of Qualified Contracts is not exhaustive and is for general
informational purposes only. The tax rules regarding Qualified Contracts are
very complex and will have differing applications depending on individual facts
and circumstances. Each purchaser should obtain competent tax advice prior to
purchasing Qualified Contracts.
Qualified Contracts include special provisions restricting Contract provisions
that may otherwise be available as described herein. Generally, Qualified
Contracts are not transferable except upon surrender or annuitization.
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. Qualified Contracts will utilize annuity tables
which do not differentiate on the basis of sex. Such annuity tables will also be
available for use in connection with certain non-qualified deferred compensation
plans.
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity (IRA).
Under applicable limitations, certain amounts may be contributed to an IRA which
will be deductible from the individual's gross income. These IRAs are subject to
limitations on eligibility, contributions, transferability and distributions.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.) Under certain
conditions, distributions from other IRAs and other Qualified Plans may be
rolled over or transferred on a tax-deferred basis into an IRA. Sales of
Contracts for use with IRAs are subject to special requirements imposed by the
Code, including the requirement that certain informational disclosure be given
to persons desiring to establish an IRA. Purchasers of Contracts to be qualified
as Individual Retirement Annuities should obtain competent tax advice as to the
tax treatment and suitability of such an investment.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS
Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of
any distribution from qualified retirement plans, including Contracts issued and
qualified under Code Section 408(b) (Individual Retirement Annuities). To the
extent amounts are not includible in gross income because they have been rolled
over to an IRA or to another eligible Qualified Plan, no tax penalty will be
imposed. The tax penalty will not apply to the following distributions: (a)
if distribution is made on or after the date on which the Annuitant reaches age
59 1/2; (b) distributions following the death or disability of the Annuitant
(for this purpose disability is as defined in Section 72(m)(7) of the Code); (c)
distributions that are part of substantially equal periodic payments made not
less frequently than annually for the life (or life expectancy) of the Annuitant
or the joint lives (or joint life expectancies) of the Annuitant and his or her
designated Beneficiary; (d) distributions made to the Owner or Annuitant (as
applicable) to the extent such distributions do not exceed the amount allowable
as a deduction under Code Section 213 to the Owner or Annuitant (as applicable)
for amounts paid during the taxable year for medical care; or (e) distributions
from an Individual Retirement Annuity for the purchase of medical insurance (as
described in Section 213(d)(1)(D) of the Code) for the Owner or Annuitant (as
applicable) and his or her spouse and dependents if the Owner or Annuitant (as
applicable) has received unemployment compensation for at least 12 weeks. This
exception will no longer apply after the Owner or Annuitant (as applicable) has
been re-employed for at least 60 days.
Generally, distributions from a qualified plan must commence no later than April
1 of the calendar year following the year in which the employee attains age 70
1/2. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
ANNUITY PROVISIONS
FIXED ANNUITY
A fixed annuity is an annuity with payments which are guaranteed as to dollar
amount by the Company and do not vary with the investment experience of the
Separate Account. The dollar amount of each fixed annuity will be determined in
accordance with annuity tables contained in the contract.
VARIABLE ANNUITY
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount; and (2) will vary in amount with the net investment results
of the applicable investment portfolio(s) of the Separate Account.
ANNUITY UNIT VALUE:
On the Annuity Date a fixed number of Annuity Units will be purchased as
follows:
For each Subaccount the fixed number of Annuity Units is equal to the Adjusted
Contract Value for all Subaccounts, divided first by $1000, then multiplied by
the appropriate Annuity Payment amount from the Annuity Table contained in the
Contract for each $1000 of value for the Annuity Option selected, and then
divided by the Annuity Unit value for that Subaccount on the Annuity Date. After
that, the number of Annuity Units in each Subaccount remains unchanged unless
you elect to transfer between Subaccounts. All calculations will appropriately
reflect the Annuity Payment frequency selected.
On each Annuity Payment date, the total Variable Annuity Payment is the sum of
the Annuity Payments for each Subaccount. The Variable Annuity Payment in each
Subaccount is determined by multiplying the number of Annuity Units then
allocated to such Subaccount by the Annuity Unit value for that Subaccount.
On each subsequent business day, the value of an Annuity Unit is determined in
the following way:
First: The net Investment Factor is determined as described in the Prospectus
under "Accumulation Units".
Second: The value of an Annuity Unit for a business day is equal to:
a. the value of the Annuity Unit for the immediately preceding
business day;
b. multiplied by the Net Investment Factor for current business day;
c. divided by the Assumed Net Investment Factor (see below) for the
business day.
The Assumed Net Investment Factor is equal to one plus the Assumed Investment
Return which is used in determining the basis for the purchase of an Annuity,
adjusted to reflect the particular business day. The Assumed Investment Return
that we will use is 3 1/2%. However, we may agree with you to use a different
value.
BMA may elect to determine the amount of each annuity payment up to 10 business
days prior to the elected payment date. The value of your contract less any
applicable premium tax is applied to the applicable annuity table to determine
the initial annuity payment.
MORTALITY AND EXPENSE GUARANTEE
We guarantee that the dollar amount of each Annuity Payment after the first will
not be affected by variations in mortality or expense experience.
FINANCIAL STATEMENTS
The audited consolidated financial statements of the Company as of December 31,
1996 included herein should be considered only as bearing upon the ability of
the Company to meet its obligations under the Contracts.
CONSOLIDATED FINANCIAL STATEMENTS
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A MEMBER OF THE GENERALI GROUP OF COMPANIES)
YEARS ENDED DECEMBER 31, 1996 AND 1995
WITH REPORT OF INDEPENDENT AUDITORS
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Financial Statements
Years ended December 31, 1996 and 1995
CONTENTS
Report of Independent Auditors.................................................1
Audited Consolidated Financial Statements
Consolidated Balance Sheets....................................................2
Consolidated Statements of Operations..........................................4
Consolidated Statements of Stockholder's Equity................................5
Consolidated Statements of Cash Flows..........................................6
Notes to Consolidated Financial Statements.....................................8
Report of Independent Auditors
The Board of Directors
Business Men's Assurance Company of America
We have audited the accompanying consolidated balance sheets of Business Men's
Assurance Company of America (an ultimate subsidiary of Assicurazioni Generali,
S.p.A.) (the Company) as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholder's equity and cash flows for
each of the three years in the period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Business Men's
Assurance Company of America at December 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the financial statements, in 1994, the Company changed
its method of accounting for investments.
Ernst & Young LLP
Kansas City, Missouri
February 7, 1997
<TABLE>
<CAPTION>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Balance Sheets
DECEMBER 31
1996 1995
------------------------------------
(In Thousands)
<S> <C> <C>
ASSETS
Investments (Notes 1 and 3): Securities available-for-sale, at fair value:
Fixed maturities (amortized cost - $1,286,888 in 1996
and $1,107,356 in 1995) $1,288,934 $1,141,017
Equity securities (cost - $28,644 in 1996 and $21,501 in
1995) 32,350 22,789
Mortgage loans on real estate, net of allowance for losses
of $6,879 in 1996 and $6,082 in 1995 704,356 519,172
Real estate (Note 1) 5,498 5,412
Policy loans 65,225 65,262
Short-term investments 39,991 76,263
Other 3,830 4,315
---------- ---------
Total investments 2,140,184 1,834,230
Accrued investment income 18,539 17,147
Premium and other receivables 11,817 14,344
Current income taxes recoverable (Note 7) - 1,173
Deferred policy acquisition costs 131,025 112,148
Property, equipment and software (Note 6) 18,890 22,496
Reinsurance recoverables:
Paid benefits 3,948 4,776
Benefits and claim reserves ceded 58,177 50,243
Receivable from affiliate (Note 10) - 6,368
Other assets (Note 1) 16,923 20,790
---------- ----------
Total assets $2,399,503 $2,083,715
=========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
------------------------------------
(In Thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY:
Future policy benefits:
Life and annuity (Note 10) $1,192,497 $1,056,831
Health 75,914 65,835
Contract account balances 636,656 494,091
Policy and contract claims 58,617 48,010
Unearned revenues 13,813 13,658
Other policyholder funds 15,429 15,948
Outstanding checks in excess of bank balances 4,673 3,868
Current income taxes payable (Note 7) 4,345 -
Deferred income taxes (Note 7) 14,912 17,016
Payable to affiliate (Note 10) 972 -
Other liabilities 44,808 49,480
--------- ---------
Total liabilities 2,062,636 1,764,737
Commitments and contingencies (Note 5)
Stockholder's equity (Notes 2 and 11):
Preferred stock of $1 par value; authorized 3,000,000
shares, none issued and outstanding - -
Common stock of $1 par value; authorized 24,000,000
shares, 12,000,000 shares issued and outstanding
12,000 12,000
Paid-in capital 40,106 25,106
Net unrealized gains (losses) on securities 3,686 15,297
Retained earnings 281,075 266,575
--------- --------
Total stockholder's equity 336,867 318,978
---------- --------
Total liabilities and stockholder's equity $2,399,503 $2,083,715
=========== ==========
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Operations
YEAR ENDED DECEMBER 31
1996 1995 1994
-----------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Revenues:
Premiums:
Life and annuity $142,461 $130,360 $116,976
Health 60,491 47,294 40,898
Other insurance considerations 38,780 37,183 36,162
Net investment income (Note 3) 145,629 124,605 102,094
Realized gains, net (Note 3) 5,906 4,290 1,319
Other income 26,802 23,394 19,083
------ ------ ------
Total revenues 420,069 367,126 316,532
Benefits and expenses:
Life and annuity benefits 122,915 111,734 107,589
Health benefits 42,224 40,132 23,774
Increase in policy liabilities including
interest credited to account balances 94,530 65,017 56,047
Real estate expense, net 551 649 746
Commissions 55,180 54,176 31,049
Increase in deferred policy acquisition costs (5,459) (16,366) (6,477)
Taxes, licenses and fees 5,229 5,251 4,196
Other operating costs and expenses 76,647 82,604 79,050
------ ------ ------
Total benefits and expenses 391,817 343,197 295,974
------- ------- -------
Earnings from continuing operations, before
income tax expense 28,252 23,929 20,558
Income tax expense (Note 7) 10,168 8,503 7,374
------ ----- -----
Earnings from continuing operations 18,084 15,426 13,184
Discontinued operations (Note 12):
Earnings from discontinued operations, net of
income tax expense of $2,058 in 1994 - - 3,822
Gain on sale of discontinued operations, net of
income tax expense of $735 in 1996, $3,352 in
1995 and $2,437 in 1994 1,416 6,355 4,526
----- ----- -----
Earnings from discontinued operations 1,416 6,355 8,348
----- ----- -----
Net earnings $ 19,500 $ 21,781 $ 21,532
========= ========= =========
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Stockholder's Equity
YEAR ENDED DECEMBER 31
1996 1995 1994
-----------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Common stock:
Balance at beginning and end of year $ 12,000 $ 12,000 $ 12,000
Paid-in capital:
Balance at beginning of year 25,106 25,106 25,106
Additional paid-in capital 15,000 - -
------ ------ ------
Balance at end of year 40,106 25,106 25,106
Net unrealized gains (losses) on securities:
Balance at beginning of year 15,297 (28,865) 596
Cumulative effect of change in
accounting principle (Note 1) - - 20,469
Change in net unrealized gains (losses) (11,611) 44,162 (49,930)
------- ------ -------
Balance at end of year 3,686 15,297 (28,865)
Retained earnings:
Balance at beginning of year 266,575 252,794 239,262
Net earnings 19,500 21,781 21,532
Dividends declared (Note 2) (5,000) (8,000) (8,000)
- ------ ------ ------
Balance at end of year 281,075 266,575 252,794
------- ------- -------
Total stockholder's equity $336,867 $318,978 $261,035
======== ======== ========
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31
1996 1995 1994
-----------------------------------------
(In Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 19,500 $ 21,781 $ 21,532
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Deferred income tax (benefit) 4,146 7,025 (875)
Realized gains, net (5,906) (4,290) (1,319)
Gain on disposal of discontinued segment (2,151) (7,417) (6,963)
Premium amortization (discount accretion), net (1,246) (1,090) 787
Policy loans lapsed in lieu of surrender benefits 2,996 3,201 4,063
Depreciation 4,153 4,817 5,454
Amortization 782 782 782
Changes in assets and liabilities:
Increase in accrued investment income (1,392) (1,719) (1,182)
(Increase) decrease in receivables and reinsurance
recoverables 2,761 (19,425) 1,674
Policy acquisition costs deferred (31,745) (40,510) (28,471)
Policy acquisition costs amortized 26,286 24,144 21,994
(Increase) decrease in income taxes recoverable 5,518 (4,546) 5,609
Increase in accrued policy benefits, claim
reserves, unearned revenues and policyholder funds 32,331 4,574 19,464
Interest credited to policyholder accounts 69,494 56,358 43,420
Increase in outstanding checks in excess of bank balances 805 3,868 -
(Increase) decrease in other assets and other 412 1,133 (1,910)
liabilities, net
Decrease in net asset of discontinued operations - 1,335 678
Other, net (1,208) (179) 423
------ ---- ---
Net cash provided by operating activities 125,536 49,842 85,160
INVESTING ACTIVITIES Purchases of investments:
Securities available-for-sale:
Fixed maturities (527,172) (592,373) (372,680)
Equity (17,586) (12,537) (5,175)
Mortgage and policy loans (259,438) (159,521) (123,264)
Other - (269) (3,316)
Sales, calls or maturities of investments: Maturities and calls
of securities available-for-sale:
Fixed maturities 117,057 108,472 148,436
Equity - 2,031 4,474
Sales of securities available-for-sale:
Fixed maturities 238,051 263,650 137,018
Equity 12,444 6,223 5,614
Mortgage and policy loans 66,934 41,753 77,045
Real estate 2,194 502 3,437
</TABLE>
<TABLE>
<CAPTION>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Cash Flows (continued)
YEAR ENDED DECEMBER 31
1996 1995 1994
-----------------------------------------
(In Thousands)
<S> <C> <C> <C>
INVESTING ACTIVITIES (CONTINUED)
Purchase of property, equipment and software $ (290) $ (2,659) $ (2,418)
Net (increase) decrease in short-term investments 36,272 13,264 (58,838)
Proceeds from sale of discontinued operations 632 5,426 10,593
Distributions from unconsolidated related parties 718 2 25
--- ----- ------
Net cash used in investing activities (330,184) (326,036) (179,049)
FINANCING ACTIVITIES
Dividends paid (5,000) (8,000) (8,000)
Additional paid-in capital 15,000 - -
Net proceeds of interest sensitive and investment type contracts 194,648 280,725 101,894
Net proceeds from reverse repurchase borrowing 35,173 - -
Retirement of reverse repurchase borrowing (35,173) - -
------- ------- -------
Net cash provided by financing activities 204,648 272,725 93,894
------- ------- ------
Net increase (decrease) in cash - (3,469) 5
Cash at beginning of year - 3,469 3,464
======= ===== =====
Cash at end of year $ - $ - $ 3,469
========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
For purposes of the statements
of cash flows, Business Men's Assurance
Company of America considers only cash
on hand and demand deposits to be cash
<S> <C> <C> <C>
Cash paid during the year for:
Income taxes $ 1,239 $ 9,376 $ 7,135
Interest paid on reverse repurchase borrowing 620 - -
--- ---- ----
$ 1,859 $ 9,376 $ 7,135
========== ========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Real estate acquired through foreclosure $ 3,033 $ 5,156 $ 1,525
========== ========== ==========
Mortgage loans extended from sale of real estate $ - $ - $ 2,720
============ ============ ==========
Accrual of direct costs of disposal of discontinued operations $ - $ - $ 3,631
============ ============ ==========
</TABLE>
See accompanying notes.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements
December 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Business Men's Assurance Company of America (the Company) is a
Missouri-domiciled life insurance company licensed to sell insurance products in
49 states and the District of Columbia. The Company offers a diversified
portfolio of individual and group insurance and investment products both
directly and through reinsurance assumptions, distributed primarily through
general agencies. Assicurazioni Generali S.p.A. (Generali), an Italian insurer,
is the ultimate parent company.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and all majority-owned subsidiaries. All significant intercompany
transactions have been eliminated in consolidation.
INVESTMENTS
The Company adopted Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," as of January 1, 1994, with no
effect on income and a $20,469,000 increase in stockholder's equity (net of a
$2,475,000 allowance against deferred policy acquisition costs and unearned
revenue reserve and net deferred taxes of $11,022,000) to reflect the net
unrealized gains on fixed maturity securities classified as available-for-sale
that were previously carried at amortized cost.
The Company has designated its entire investment portfolio as
available-for-sale. Changes in fair values of available-for-sale securities,
after adjustment of deferred policy acquisition costs (DPAC) and deferred income
taxes, are reported as unrealized gains or losses directly in stockholder's
equity and, accordingly, have no effect on net income. The DPAC offsets to the
unrealized gains or losses represent valuation adjustments or reinstatements of
DPAC that would have been required as a charge or credit to operations had such
unrealized amounts been realized.
The amortized cost of fixed maturity investments classified as
available-for-sale is adjusted for amortization of premiums and accretion of
discounts. That amortization or accretion is included in net investment income.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Mortgage loans and mortgage-backed securities are carried at unpaid balances
adjusted for accrual of discount and allowances for other than temporary decline
in value. Policy loans are carried at unpaid balances.
Real estate is stated at the lower of cost or fair value. At December 31, 1996
and 1995, real estate was carried net of a valuation allowance of $2,344,000 and
$3,515,000, respectively. Profit is recognized on real estate sales when down
payment, continuing investment and transfer of risk criteria have been
satisfied. Property, equipment and software, and the home office building are
generally valued at cost, including development costs, less allowances for
depreciation and other than temporary decline in value.
Property, equipment and software are being depreciated over the estimated useful
lives of the assets, principally on a straight-line basis. Depreciation rates on
these assets are set forth in Note 6.
Realized gains and losses on sales of investments and declines in value
considered to be other than temporary are recognized in net earnings on the
specific identification basis.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
DEFERRED POLICY ACQUISITION COSTS
Certain commissions, expenses of the policy issue and underwriting departments
and other variable expenses have been deferred. For limited payment and other
traditional life insurance policies, these deferred acquisition costs are being
amortized over a period of not more than 25 years in proportion to the ratio of
the expected annual premium revenue to the expected total premium revenue.
Expected premium revenue was estimated with the same assumptions used for
computing liabilities for future policy benefits for these policies.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
For universal life-type insurance and investment-type products, the deferred
policy acquisition costs are amortized over a period of not more than 25 years
in relation to the present value of estimated gross profits arising from
estimates of mortality, interest, expense and surrender experience. The
estimates of expected gross profits are evaluated regularly and are revised if
actual experience or other evidence indicates that revision is appropriate. Upon
revision, total amortization recorded to date is adjusted by a charge or credit
to current earnings.
Deferred policy acquisition costs are evaluated to determine that the
unamortized portion of such costs does not exceed recoverable amounts, after
considering anticipated investment income.
RECOGNITION OF INSURANCE PREMIUM REVENUE AND RELATED EXPENSES
For limited payment and other traditional life insurance policies, premium
income is reported as earned when due, with past-due premiums being reserved.
Profits are recognized over the life of these contracts by associating benefits
and expenses with insurance in force for limited payment policies and with
earned premiums for other traditional life policies. This association is
accomplished by a provision for liability for future policy benefits and the
amortization of policy acquisition costs. Accident and health premium revenue is
recognized on a pro rata basis over the terms of the policies.
For universal life and investment-type policies, contract charges for mortality,
surrender and expense, other than front-end expense charges, are reported as
income when charged to policyholders' accounts. Expenses consist primarily of
benefit payments in excess of policyholder account values and interest credited
to policyholder accounts. Profits are recognized over the life of universal
life-type contracts through the amortization of policy acquisition costs and
deferred front-end expense charges with estimated gross profits from mortality,
interest, surrender and expense.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
POLICY LIABILITIES AND CONTRACT VALUES
The liability for future policy benefits for limited payment and other
traditional life insurance contracts has been computed primarily by a net level
premium reserve method based on estimates of future investment yield, mortality
and withdrawals made at the time gross premiums were calculated. Assumptions
used in computing future policy benefits are as follows: interest rates range
from 3.25% to 8.50%, depending on the year of issue; withdrawal rates for
individual life policies issued in 1966 and after are based on Company
experience, and policies issued prior to 1966 are based on industry tables; and
mortality rates are based on mortality tables that consider Company experience.
The liability for future policy benefits is graded to reserves stipulated by the
policy over a period of 20 to 25 years or the end of the premium paying period,
if less.
For universal life and investment-type contracts, the account value before
deduction of any surrender charges is held as the policy liability. An
additional liability is established for deferred front-end expense charges on
universal life-type policies. These expense charges are recognized in income as
insurance considerations, using the same assumptions as are used to amortize
deferred policy acquisition costs.
Claims and benefits payable for reported disability income claims have been
computed as the present value of expected future benefit payments based on
estimates of future investment yields and claim termination rates. The amount of
benefits payable included in the future policy benefit reserves and policy and
contract claims for December 31, 1996 and 1995 was $40,392,000 and $36,164,000,
respectively. Interest rates used in the calculation of future investment yields
vary based on the year the claim was incurred and range from 3% to 8.75%. Claim
termination rates are based on industry tables.
Other accident and health claims and benefits payable for reported claims and
incurred but not reported claims are estimated using prior experience. The
methods of calculating such estimates and establishing the related liabilities
are periodically reviewed and updated. Any adjustments needed as a result of
periodic reviews are reflected in current operations.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FEDERAL INCOME TAXES
Deferred federal income taxes have been provided in the consolidated financial
statements to recognize temporary differences between the financial reporting
and tax bases of assets and liabilities measured using enacted tax rates and
laws (Note 7). Temporary differences are principally related to deferred policy
acquisition costs, the provision for future policy benefits, accrual of
discounts on investments, accelerated depreciation and allowance for investment
losses.
INTANGIBLE ASSETS
Goodwill of $13,106,000, net of accumulated amortization of $2,542,000 resulting
from the acquisition of a subsidiary, is included in other assets. Goodwill is
being amortized over a period of 20 years on a straight-line basis, and
amortization amounted to $782,000 for each of the years ended December 31, 1996,
1995 and 1994.
FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires
disclosure of fair value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to estimate that
value. In cases where quoted market prices are not available, fair values are
based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in immediate settlement
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of the instruments. SFAS No. 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value of
the Company:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------------------- --------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------------------------------- --------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturities (Note 3) $1,288,934 $1,288,934 $1,141,017 $1,141,017
Equity securities (Note 3) 32,350 32,350 22,789 22,789
Mortgage loans 704,356 707,915 519,172 550,455
Policy loans 65,225 60,735 65,262 60,733
Short-term investments 39,991 39,991 76,263 76,263
Investment-type insurance
contracts (Note 4) 1,097,821 1,078,326 841,954 833,370
</TABLE>
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts reported in the
balance sheet for these instruments approximate their fair values.
Investment securities: Fair values for fixed maturity securities are based
on quoted market prices, where available. For fixed maturity securities not
actively traded, fair values are estimated using values obtained from
independent pricing services or, in the case of private placements, by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the investments.
The fair value for equity securities is based on quoted market prices.
Off-balance-sheet instruments: The fair value for outstanding loan
commitments approximates the amount committed, as all loan commitments were
made within the last 60 days of the year.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Mortgage loans and policy loans: The fair value for mortgage loans and
policy loans is estimated using discounted cash flow analyses, using
interest rates currently being offered for loans with similar terms to
borrowers of similar credit quality. Loans with similar characteristics are
aggregated for purposes of the calculations. The carrying amount of accrued
interest approximates its fair value.
Flexible and single premium deferred annuities: The cash surrender value of
flexible and single premium deferred annuities approximates their fair
value.
Guaranteed investment contracts: The fair value for the Company's
liabilities under guaranteed investment contracts is estimated using
discounted cash flow analyses, using interest rates currently being offered
for similar contracts with maturities consistent with those remaining for
the contracts being valued.
Supplemental contracts without life contingencies: The carrying amounts of
supplemental contracts without life contingencies approximate their fair
values.
Reinsurance recoverables: The carrying values of reinsurance recoverables
approximate their fair values.
POSTRETIREMENT BENEFITS
The projected future cost of providing postretirement benefits, such as health
care and life insurance, is recognized as an expense as employees render service
instead of when the benefits are paid. See Note 8 for further disclosures with
respect to postretirement benefits other than pensions.
IMPAIRMENT OF LOANS
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," and SFAS No.
118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures," require that an impaired mortgage loan's fair value be measured
based on the present value of future cash flows discounted at the loan's
effective interest rate, at the loan's observable market price or at the fair
value of the collateral if the loan is
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
collateral dependent. If the fair value of a mortgage loan is less than the
recorded investment in the loan, the difference is recorded as an allowance for
mortgage loan losses. The change in the allowance for mortgage loan losses is
reported with realized gains or losses on investments. Interest income on
impaired loans is recognized on a cash basis.
RECLASSIFICATION
Certain amounts for 1995 and 1994 have been reclassified to conform to the
current year presentation.
2. DIVIDEND LIMITATIONS
Missouri has legislation that requires prior reporting of all dividends to the
Director of Insurance. The Company, as a regulated life insurance company, may
pay a dividend from unassigned surplus without the approval of the Missouri
Department of Insurance, if the aggregate of all dividends paid during the
preceding 12-month period does not exceed the greater of 10% of statutory
stockholder's equity at the end of the preceding calendar year or the statutory
net gain from operations for the preceding calendar year. A portion of the
statutory equity of the Company that is available for dividends would be subject
to additional federal income taxes should distribution be made from
"policyholders' surplus" (see Note 7).
As of December 31, 1996 and 1995, the Company's statutory stockholder's equity
was $171,240,000 and $155,465,000, respectively. Statutory net gain from
operations and net income for each of the three years in the period ended
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
-----------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Net gain from operations $10,898 $8,309 $12,764
Net income 10,381 9,418 13,447
</TABLE>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
3. INVESTMENT OPERATIONS
The Company's investments in available-for-sale securities are summarized as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
Fixed maturities:
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies $ 119,125 $ 1,571 $ (802) $ 119,894
Obligations of states and political
subdivisions 40,052 773 (93) 40,732
Debt securities issued by foreign
governments 4,471 166 (267) 4,370
Corporate securities 426,286 6,472 (3,786) 428,972
Mortgage-backed securities 687,455 6,031 (8,147) 685,339
Redeemable preferred stocks 9,499 157 (29) 9,627
----- --- --- -----
Total 1,286,888 15,170 (13,124) 1,288,934
Equity securities 28,644 4,875 (1,169) 32,350
------ ----- ------ ------
$1,315,532 $20,045 $(14,293) $1,321,284
========== ======= ======== ==========
</TABLE>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
3. INVESTMENT OPERATIONS (CONTINUED)
DECEMBER 31, 1995
---------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
Fixed maturities:
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies $ 123,483 $ 5,483 $ (84) $ 128,882
Obligations of states and political
subdivisions 34,480 1,694 - 36,174
Debt securities issued by foreign
governments 4,243 195 - 4,438
Corporate securities 393,852 15,992 (2,205) 407,639
Mortgage-backed securities 538,692 13,833 (1,323) 551,202
Redeemable preferred stocks 12,606 170 (94) 12,682
------ --- --- ------
Total 1,107,356 37,367 (3,706) 1,141,017
Equity securities 21,501 2,293 (1,005) 22,789
------ ----- ------ ------
$1,128,857 $39,660 $(4,711) $1,163,806
========== ======= ======= ==========
</TABLE>
The amortized cost and estimated fair value of available-for-sale fixed maturity
securities at December 31, 1996, by contractual maturity, are as follows.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties. Maturities of mortgage-backed securities have not been set
forth in the following table, as such securities are not due at a single
maturity date:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------------
AMORTIZED COST FAIR VALUE
------------------------------------
(In Thousands)
<S> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
Due in one year or less $ 54,645 $ 54,700
Due after one year through five years 209,733 210,833
Due after five years through 10 years 268,002 269,095
Due after 10 years 67,053 68,967
------ ------
599,433 603,595
Mortgage-backed securities 687,455 685,339
------- -------
Total fixed maturity securities $1,286,888 $1,288,934
========== ==========
</TABLE>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
3. INVESTMENT OPERATIONS (CONTINUED)
The majority of the Company's mortgage loan portfolio is secured by real estate.
The following table presents information about the location of the real estate
that secures mortgage loans in the Company's portfolio:
CARRYING AMOUNT AS OF DECEMBER 31
1996 1995
------------------------------------
(In Thousands)
State:
California $ 68,399 $ 62,462
Texas 59,404 41,883
Arizona 51,515 32,460
Washington 34,614 30,189
Missouri 34,400 25,328
Kansas 34,069 33,494
Massachusetts 33,420 14,503
Oklahoma 32,809 32,506
Florida 30,790 30,440
Other 324,936 215,907
------- -------
$704,356 $519,172
======== ========
The following table lists the Company's investment in impaired mortgage loans
and related allowance for credit losses at December 31. The table also includes
the average recorded investment in impaired loans and interest income on
impaired loans.
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Impaired mortgage loans $2,516 $5,160 $3,218
Allowance for credit losses 691 1,651 922
--- ----- ---
Net recorded investment in impaired loans $1,825 $3,509 $2,296
====== ====== ======
Average recorded investment in impaired loans $2,667 $2,902 $2,757
====== ====== ======
Interest income on impaired loans $ 115 $ 403 $ 46
======= ======= ========
</TABLE>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
3. INVESTMENT OPERATIONS (CONTINUED)
Bonds, mortgage loans, preferred stocks and common stocks approximating
$4,200,000 and $9,000,000 were on deposit with regulatory authorities at
December 31, 1996 and 1995, respectively.
Set forth below is a summary of consolidated net investment income for the years
ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities:
Bonds $ 86,066 $ 73,930 $ 59,458
Redeemable preferred stocks 814 1,176 2,862
Equity securities:
Common stocks 579 521 463
Nonredeemable preferred stocks 438 330 531
Mortgage loans on real estate 52,973 41,770 37,475
Policy loans 3,953 3,952 3,971
Short-term investments 3,016 4,779 2,225
Other 269 340 137
--- --- ---
148,108 126,798 107,122
Less:
Investment income from discontinued operations - 211 2,718
Investment expenses 2,479 1,982 2,310
----- ----- -----
Net investment income from continuing operations
$145,629 $124,605 $102,094
======== ======== ========
</TABLE>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
3. INVESTMENT OPERATIONS (CONTINUED)
Realized gains (losses) on available-for-sale securities disposed of during 1996
and 1995 consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Available-for-sale:
Fixed maturity securities:
Gross realized gains $7,953 $10,246 $6,911
Gross realized losses (1,622) (4,388) (4,118)
Equity securities:
Gross realized gains 2,001 1,789 329
Gross realized losses - (376) (108)
Other investments (2,426) (2,981) (1,695)
------ ------ ------
Net realized gains $5,906 $ 4,290 $1,319
====== ======== ======
</TABLE>
Sales of investments in securities available-for-sale in 1996, 1995 and 1994,
excluding maturities and calls, resulted in gross realized gains of $9,798,800,
$11,887,000 and $5,443,000 and gross realized losses of $1,290,500, $4,564,000
and $3,926,000, respectively.
The net carrying value of non-income-producing investments at December 31, 1996
and 1995, which were non-income-producing during the year, consisted of mortgage
loans of $1,293,000 and $1,270,000 and bonds of $1,200,000 and $-0-,
respectively.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
4. INVESTMENT CONTRACTS
The carrying amounts and fair values of the Company's liabilities for
investment-type insurance contracts (included with future policy benefits and
contract account balances in the balance sheet) at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Guaranteed investment contracts $ 596,499 $ 598,241 $451,809 $461,858
Flexible and single premium
deferred annuities 501,322 480,085 390,145 371,512
------- ------- ------- -------
Total investment-type insurance contracts $1,097,821 $1,078,326 $841,954 $833,370
========== ========== ======== ========
</TABLE>
Fair values of the Company's insurance contracts other than investment contracts
are not required to be disclosed. However, the fair values of liabilities under
all insurance contracts are taken into consideration in the Company's overall
management of interest rate risk, which minimizes exposure to changing interest
rates through the matching of investment maturities with amounts due under
insurance contracts.
5. COMMITMENTS AND CONTINGENCIES
The Company leases equipment and certain office facilities from others under
operating leases through 2003. Certain other equipment and facilities are rented
monthly. Rental expense amounted to $2,117,000, $2,742,000 and $2,861,000 for
the years ended December 31, 1996, 1995 and 1994, respectively. As of December
31, 1996, the minimum future payments under noncancelable operating leases for
each of the next five years and in the aggregate subsequent to 2001 are as
follows:
1997 $1,403,000
1998 881,000
1999 739,000
2000 404,000
2001 276,000
Subsequent to 2001 120,000
=======
Total $3,823,000
==========
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Total outstanding commitments to fund mortgage loans were $46,735,000 and
$36,620,000 at December 31, 1996 and 1995, respectively.
The Company and its subsidiaries are parties to certain claims and legal actions
arising during the ordinary course of business. In the opinion of management,
after consulting with legal counsel, these matters will not have a materially
adverse effect on the operations or financial position of the Company.
6. PROPERTY, EQUIPMENT AND SOFTWARE
A summary of property, equipment and software at December 31 and their
respective depreciation rates is as follows:
<TABLE>
<CAPTION>
RATE OF
DEPRECIATION 1996 1995
------------------- ------------------------------------
(In Thousands)
<S> <C> <C> <C>
Home office building, including land with
a cost of $425,000 2% $23,158 $23,155
Other real estate not held-for-sale or
rental 4% 1,126 2,044
Less accumulated depreciation (11,963) (11,390)
------- -------
12,321 13,809
Equipment and software 5%-33% 29,010 29,662
Less accumulated depreciation (22,441) (20,975)
------- -------
6,569 8,687
----- -----
Total property, equipment and software $18,890 $22,496
======= =======
</TABLE>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
7. FEDERAL INCOME TAXES
Certain amounts that were not currently taxed under pre-1984 tax law were
credited to a "policyholders' surplus" account. This account is frozen under the
1984 Tax Act and is taxable only when distributed to stockholders, at which time
it is taxed at regular corporate rates. The "policyholders' surplus" of the
Company approximates $88 million. The Company has no present plan for
distributing the amount in "policyholders' surplus." Consequently, no provision
has been made in the consolidated financial statements for the taxes thereon.
However, if such taxes were assessed, the amount of taxes payable would be
approximately $31 million.
Earnings taxed on a current basis are accumulated in a "shareholder's surplus"
account and can be distributed to the shareholder without tax. The shareholder's
surplus amounted to approximately $219 million, $212 million and $213 million at
December 31, 1996, 1995 and 1994, respectively.
The significant components comprising the Company's deferred tax assets and
liabilities as of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Deferred acquisition costs $27,426 $26,104
Sale of BMA Corporation stock 14,169 14,169
Unrealized investment gains and losses 1,987 8,237
Other 5,532 6,164
----- -----
Total deferred tax liability 49,114 54,674
Deferred tax assets:
Reserve for future contractowner benefits 23,012 25,436
Accrued expenses 6,636 7,794
Other 4,554 4,428
----- -----
Total deferred tax assets 34,202 37,658
====== ======
Net deferred tax liability $14,912 $17,016
======= =======
</TABLE>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
7. FEDERAL INCOME TAXES (CONTINUED)
The components of the provision for income taxes and the temporary differences
generating deferred income taxes for the years ended December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Current $ 6,757 $ 4,830 $12,744
Deferred:
Deferred policy acquisition costs 1,322 4,139 16
Future policy benefits 2,424 4,010 587
Accrual of discount 408 494 497
Tax on realized gains greater than book (1,076) (1,034) (2,474)
Employee benefit plans 86 (148) 440
Other, net 982 (436) 59
--- ---- --
4,146 7,025 (875)
----- ----- ----
Total 10,903 11,855 11,869
Less taxes from discontinued operations:
Current (149) 1,539 6,858
Deferred 884 1,813 (2,363)
--- ----- ------
735 3,352 4,495
--- ----- -----
Total taxes from continuing operations $10,168 $ 8,503 $ 7,374
======= ======== ========
</TABLE>
At December 31, 1994, the Company recorded a $3,000,000 valuation allowance
against deferred tax assets resulting from cumulative unrealized losses on
available-for-sale securities. The Company did not record any valuation
allowances against deferred tax assets at December 31, 1995 or December 31,
1996.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
7. FEDERAL INCOME TAXES (CONTINUED)
Total taxes vary from the amounts computed by applying the federal income tax
rate of 35% to earnings from continuing operations for the following reasons:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------
(In Thousands)
<S> <C> <C> <C>
Application of statutory rate to earnings before taxes
on income $ 9,888 $8,375 $7,195
Tax-exempt municipal bond interest and dividends
received deductions (291) (293) (437)
Other 571 421 616
--- --- ---
$10,168 $8,503 $7,374
======= ====== ======
</TABLE>
8. BENEFIT PLANS
TRUSTEED EMPLOYEE RETIREMENT PLAN AND JONES & BABSON, INC. PENSION PLAN
The Company has a trusteed employee retirement plan for the benefit of salaried
employees who have reached age 21 and who have completed one year of service.
The plan, which is administered by an Employees' Retirement Committee consisting
of at least three officers appointed by the Board of Directors of the Company,
provides for normal retirement at age 65, or earlier retirement based on minimum
age and service requirements. Retirement may be deferred to age 70. Upon
retirement, the retirees receive monthly benefit payments from the plan's BMA
group pension investment contract. During 1996, approximately $3.0 million of
annual benefits were covered by group pension investment contracts issued by the
Company. Assets of the plan, primarily equities, are held by three trustees
appointed by the Board of Directors.
The Company's subsidiary, Jones & Babson, Inc., has a pension plan covering
substantially all employees. As of January 5, 1995, that plan was merged into
the trusteed plan for BMA salaried employees. The benefits for the Jones &
Babson, Inc. employees in the merged plan are the same as provided in the
previous Jones & Babson, Inc. pension plan.
Employees of the Company's subsidiary, BMA Financial Services, Inc., became
eligible to participate in the Company's plan effective January 1, 1995.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
The following table sets forth the plan's funded status at December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Actuarial present value of accumulated benefit obligations:
Vested $ 45,377 $ 46,983 $ 41,757
Non-vested 1,296 2,403 2,357
----- ----- -----
Total $ 46,673 $ 49,386 $ 44,114
======== ======== ========
Projected benefit obligation for service rendered to date
$(57,186) $(57,359) $(54,385)
Plan assets at fair value 79,679 72,926 62,539
------ ------ ------
Plan assets in excess of projected benefit obligation 22,493 15,567 8,154
Unrecognized net gain from past experience different from
that assumed and effects of changes in assumptions
(24,732) (18,717) (14,380)
Prior service cost not yet recognized in net periodic
pension cost 2,607 3,161 5,365
Unrecognized net asset at January 1, 1987 being recognized
over 15 years (1,471) (1,765) (2,058)
------ ------ ------
Accrued pension cost $ (1,103) $ (1,754) $ (2,919)
========= ========= =========
Net pension cost included the following components:
Service cost - benefits earned during the period $ 1,797 $ 1,758 $ 2,368
Interest cost on projected benefit obligation 4,195 4,089 3,938
Actual return on plan assets (9,745) (12,888) (574)
Net amortization and deferral 3,102 7,019 (5,194)
----- ----- ------
Net pension cost (benefit) $ (651) $ (22) $ 538
========= =========== ==========
</TABLE>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
In determining the actuarial present value of the projected benefit obligation,
the weighted-average discount rate utilized was 8% for 1996, 7.5% for 1995 and
8% for 1994 (6.5% for the Jones & Babson plan in 1994), and the rate of increase
in future compensation levels used was 5.5% for 1996, 5.0% for 1995 and 5.5% for
1994 (5.26% for the Jones and Babson plan in 1994). The expected long-term rate
of return on assets was 8% in 1996, 1995 and 1994 (7.75% for the Jones and
Babson plan in 1994).
SUPPLEMENTAL RETIREMENT PROGRAMS AND DEFERRED COMPENSATION PLAN
The Company has supplemental retirement programs for senior executive officers
and for group sales managers and group sales persons who are participants in the
trusteed retirement plan. These programs are not qualified under Section 401(a)
of the Internal Revenue Code and are not prefunded. Benefits are paid directly
by the Company as they become due. Benefits are equal to an amount computed on
the same basis as under the trusteed retirement plan (except incentive
compensation is included and limitations under Sections 401 and 415 of the
Internal Revenue Code are not considered) less the actual benefit payable under
the trusteed plan.
The Company also has a deferred compensation plan for the Company's managers
that provides retirement benefits based on renewal premium income at retirement
resulting from the sales unit developed by the manager. This program is not
qualified under Section 401(a) of the Internal Revenue Code and is not
prefunded. As of January 1, 1987, the plan was frozen with respect to new
entrants. Currently, there are two managers who have not retired and will be
entitled to future benefits under the program. The actuarial present value of
benefits shown below includes these active managers, as well as all managers who
have retired and are entitled to benefits under the program.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
The following table sets forth the combined supplemental retirement programs'
and deferred compensation plan's funded status at December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Actuarial present value of accumulated benefit obligations:
Vested $ 8,535 $ 8,773 $ 6,418
Non-vested 234 294 188
--- --- ---
Total $ 8,769 $ 9,067 $ 6,606
========= ========= =======
Projected benefit obligation for service rendered to
date $(10,178) $(10,583) $(8,405)
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions
1,319 2,037 160
Prior service cost not yet recognized in net
periodic pension cost 856 1,034 1,210
Unrecognized net obligation at January 1, 1987
being recognized over 15 years 911 1,093 1,276
Adjustment required to recognize minimum liability (1,677) (2,648) (870)
------ ------ ----
Accrued pension liability $ (8,769) $ (9,067) $(6,629)
========= ========= =======
Net pension cost included the following components:
Service cost - benefits earned during the period $ 189 $ 197 $ 178
Interest cost on projected benefit obligation 761 651 592
Net amortization and deferral 513 371 367
--- --- ---
Net pension cost $ 1,463 $ 1,219 $ 1,137
========= ========= =======
</TABLE>
In determining the actuarial present value of the projected benefit obligation,
the weighted-average discount rate utilized was 8% for 1996, 7.5% for 1995 and
8% for 1994. The rate of increase in future compensation levels used was 5.5%
for 1996, 5.0% for 1995 and 5.5% for 1994.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
SAVINGS AND INVESTMENT PLANS
The Company has savings and investment plans qualifying under Section 401(k) of
the Internal Revenue Code. Employees and sales representatives are eligible to
participate after one year of service. Participant contributions are invested by
the trustees for the plans at the direction of the participant in any one or
more of four investment funds. The Company makes matching contributions in
varying amounts. The Company's matching contributions amounted to $1,284,000 in
1996, $1,336,000 in 1995 and $1,586,000 in 1994. Participants are fully vested
in the company match after five years of service.
The Company has a field force retirement plan for the benefit of agents and
managers. The plan is a defined contribution plan with contributions made
entirely by the Company. Each agent or manager under a standard contract with
one year of service with the Company is eligible to participate. The Company
makes an annual contribution for each participant equal to 3% of eligible
earnings up to the Social Security wage base and 6% of eligible earnings which
are in excess of the Social Security wage base. Each participant is fully vested
in his retirement account after five years of service. Assets of the plan are
deposited in a retirement trust fund and maintained by the plan trustees who are
appointed by the Company. The Company incurred costs related to this plan of
$225,000 in 1996, $420,000 in 1995 and $270,000 in 1994.
DEFINED BENEFIT HEALTH CARE PLAN
In addition to the Company's other benefit plans, the Company sponsors an
unfunded defined benefit health care plan that provides postretirement medical
benefits to full-time employees for whom the sum of the employee's age and years
of service equals or exceeds 75, with a minimum age requirement of 50 and at
least 10 years of service. The plan is contributory, with retiree contributions
adjusted annually, and contains other cost-sharing features such as deductibles
and coinsurance. The accounting for the plan anticipates a future cost-sharing
arrangement with retirees that is consistent with the Company's past practices.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
The following table presents the plan's funded status at December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $10,199 $ 9,843 $ 6,906
Active plan participants 2,054 2,222 3,800
----- ----- -----
12,253 12,065 10,706
Plan assets at fair value - - -
------- ------ ------
Accumulated postretirement benefit obligation in
excess of plan assets 12,253 12,065 10,706
Unrecognized net gain (125) 464 499
Unrecognized transition obligation (5,199) (5,526) (9,202)
Unrecognized prior service costs (4,008) (4,415) -
------ ------ ------
Accrued postretirement benefit cost $ 2,921 $ 2,588 $ 2,003
======== ======== ========
</TABLE>
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------
(In Thousands)
<S> <C> <C> <C>
Service cost $ 118 $ 153 $ 176
Interest cost 867 771 744
Amortization of transition obligation over 20 years 327 511 511
Amortization of past service costs 407 - -
---- ---- -----
Net periodic postretirement benefit cost $1,719 $1,435 $1,431
====== ====== ======
</TABLE>
The weighted-average annual assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) is 4% per year, equal to
the maximum contractual increase of the Company's contribution. Because the
Company's future contributions are contractually limited as discussed above, an
increase in the health care cost trend rate has a minimal impact on expected
benefit payments.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% at December 31, 1996, 1995 and 1994.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
During the year ended December 31, 1994, the Company adopted material plan
amendments that resulted in a reduction of the accumulated postretirement
benefit obligation of approximately $3,309,000. The most significant amendments
were transfer of coverage for Medicare-eligible retirees to a fully insured
program provided by another independent insurance company and limitation of the
increase of the Company's contribution for other retirees to 4% each year. These
changes are considered "negative" plan amendments under SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," and,
accordingly, have been reflected as a reduction of the remaining transition
obligation.
During the year ended December 31, 1995, the Company recognized a reduction in
the accumulated postretirement benefit obligation of approximately $3,165,000
from a curtailment of the plan due to the disposal of its medical line of
business. The decrease in the accumulated postretirement benefit obligation has
been directly offset by a reduction of the remaining unrecognized transition
obligation. The Company also adopted certain plan amendments during 1995 that
resulted in an increase to the accumulated postretirement benefit obligation of
approximately $4,415,000 related to prior service rendered by plan participants.
This amount has been deferred and will be amortized over the remaining service
period of active plan participants.
9. REINSURANCE
The Company actively solicits reinsurance from other companies. The Company also
cedes portions of the insurance it writes as described in the next paragraph.
The effect of reinsurance on premiums earned from continuing operations was as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Direct $124,912 $153,476 $223,957
Assumed 116,154 102,212 88,279
Ceded (38,114) (77,604) (29,297)
------- ------- -------
Total net premium 202,952 178,084 282,939
Less net premium from discontinued operations - 430 125,065
------ --- -------
Total net premium from continuing operations $202,952 $177,654 $157,874
======== ======== ========
</TABLE>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
9. REINSURANCE (CONTINUED)
The Company reinsures with other companies portions of the insurance it writes,
thereby limiting its exposure on larger risks. Normal retentions without
reinsurance are $750,000 on an individual life policy, $750,000 on individual
life insurance assumed and $200,000 on an individual life insured under a single
group life policy. As of December 31, 1996, the Company had ceded to other life
insurance companies individual life insurance in force of approximately $18.3
billion and group life of approximately $588 million. Benefits and reserves
ceded to other insurers amounted to $28,132,000, $53,672,000 and $19,088,000
during the years ended December 31, 1996, 1995 and 1994, respectively. At
December 31, 1996 and 1995, policy reserves ceded to other insurers were
$43,573,000 and $41,171,000, respectively. Claim reserves ceded amounted to
$14,604,000 and $9,072,000 at December 31, 1996 and 1995, respectively. The
Company remains contingently liable on all reinsurance ceded by it to others.
This contingent liability would become an actual liability in the event an
assuming reinsurer should fail to perform its obligations under its reinsurance
agreement with the Company.
10. RELATED-PARTY TRANSACTIONS
The Company reimburses Generali's U.S. branch for certain expenses incurred on
the Company's behalf. These expenses were not material in either 1996 or 1995.
The Company retrocedes a portion of the life insurance it assumes to Generali.
In accordance with this agreement, the Company ceded premiums of $1,035,000,
$1,023,000 and $472,000 during 1996, 1995 and 1994, respectively. The Company
ceded no claims during 1996 and 1995 and ceded claims of $300,000 during 1994.
In 1995, the Company entered into a modified coinsurance agreement with Generali
to cede 50% of certain single-premium deferred annuity contracts issued. In
accordance with this agreement, $60 million and $137 million in account balances
were ceded to Generali in 1996 and 1995, respectively, and Generali loaned such
amounts back to the Company. The recoverable amount from Generali was offset
against the loan. The net expense related to this agreement was $1,344,000 and
$136,000 for the years ended December 31, 1996 and 1995, respectively. The
Company held a payable to Generali of $972,000 at December 31, 1996 and a
receivable from Generali of $6,368,000 at December 31, 1995 related to this
agreement.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
11. STOCKHOLDER'S EQUITY
The components of the balance sheet caption "net unrealized gain (loss) on
securities" in stockholder's equity are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Net unrealized gain (loss) on securities:
Fixed maturities $2,046 $33,661 $(45,797)
Equity securities 3,706 1,288 (2,099)
----- ----- ------
Net unrealized gain (loss) 5,752 34,949 (47,896)
Adjustment to deferred policy acquisition
costs (35) (13,453) 11,204
Adjustment to unearned revenue reserve (44) 2,038 (3,100)
Deferred income taxes (1,987) (8,237) 10,927
------ ------ ------
Net unrealized gain (loss) $3,686 $15,297 $(28,865)
====== ======= ========
</TABLE>
12. DISCONTINUED OPERATIONS
In June of 1994, the Company adopted a plan to dispose of its medical line of
business. Accordingly, the medical line of business is considered to be a
discontinued operation at December 31, 1996, 1995 and 1994, and the consolidated
financial statements report separately the net assets and operating results of
the discontinued operations.
During 1994, the Company entered into an agreement to dispose of the Company's
Kansas and Missouri group medical business and sell the Company's wholly-owned
HMO, BMA Selectcare. The transaction closed on December 31, 1994. The agreement
provided for the full reinsurance of the Company's Kansas and Missouri group
medical business through the renewal dates of the related group contracts. Under
the agreement, the Company continued to remain primarily liable for claims,
billing and receipts through the next anniversary dates of the policies
reinsured. Accordingly, all related assets and liabilities of this business are
reflected in the Company's balance sheet with the net amount of cash paid
related to the transfer of the assets and liabilities reflected as "funds held"
of $1,990,000 included in other assets in the December 31, 1995 balance sheet.
The estimated gain on disposal of this business of $4,526,000, net of income
taxes, was recorded in 1994. An additional gain of $661,000, net of tax, was
recorded in 1995, reflecting various adjustments to initial estimates.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements (continued)
12. DISCONTINUED OPERATIONS (CONTINUED)
The Company also entered into an agreement during 1994 to dispose of the
remainder of its medical line of business, effective January 1, 1995. This
transaction closed January 31, 1995 and, accordingly, was reflected in the 1995
financial statements. The agreement provided for the reinsurance of
substantially all of the Company's remaining group and individual medical
business through the renewal dates of the related contracts. Under the
agreement, the Company continued to remain primarily liable for claims, billing
and receipts through the next anniversary dates of the policies reinsured.
Accordingly, all related assets and liabilities of this business are reflected
in the Company's balance sheet. The estimated gain on disposal of this business
of $5,694,000, net of income taxes, was recorded in 1995. An additional gain of
$1,416,000, net of income taxes, was recorded in 1996, reflecting various
adjustments to initial estimates.
A summary of operating results of the discontinued operations for the year ended
December 31, 1994 is as follows:
1994
--------------------
(In Thousands)
Premium revenues $125,065
Total revenues 128,779
Income before tax 5,880
Tax expense 2,058
Net income 3,822
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. Financial Statements
The following financial statements of the Company are included in Part
B hereof:
1. Report of Independent Auditors.
2. Consolidated Balance Sheets as of December 31, 1996 and 1995.
3. Consolidated Statements of Operations for the Years Ended December
31, 1996, 1995 and 1994.
4. Consolidated Statements of Stockholder's Equity for the Years Ended
December 31, 1996, 1995 and 1994.
5. Consolidated Statements of Cash Flows for the Years Ended December
31, 1996, 1995 and 1994.
6. Notes to Financial Statements - December 31, 1996.
b. Exhibits
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Variable Account*
2. Not Applicable
3.(a) Principal Underwriter's Agreement
3.(b) Form of Selling Agreement
4.(a) Individual Variable Annuity Contract*
4.(b) Waiver of Withdrawal Charge and Interest Adjustment Rider
5. Application for Individual Variable Annuity Contract
6. (i) Copy of Articles of Incorporation of the Company
(ii) Copy of the Bylaws of the Company
7. Not Applicable
8. Form of Fund Participation Agreement
9. Opinion and Consent of Counsel
10. Independent Auditors' Consent
11. Not Applicable
12. Not Applicable
13. Not Applicable
14. Company Organizational Chart
27. Not Applicable
*Incorporated by reference to Registrant's Form N-4, as electronically
filed on August 5, 1997.
Item 25. Directors and Officers of the Depositor
The following are the Officers and Directors of the Company:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
<S> <C>
Giorgio Balzer Director, Chairman of the Board and
BMA Tower Chief Executive Officer
700 Karnes Blvd.
Kansas City, MO 64108-3306
Robert Thomas Rakich Director, President and Chief Operating Officer
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
Dennis Keith Cisler Senior Vice President - Information
BMA Tower Systems
700 Karnes Blvd.
Kansas City, MO 64108-3306
David Lee Higley Senior Vice President & Chief Financial
BMA Tower Officer
700 Karnes Blvd.
Kansas City, MO 64108-3306
Stephen Stanley Soden Senior Vice President - BMA Financial
BMA Tower Group
700 Karnes Blvd.
Kansas City, MO 64108-3306
Michael Kent Deardorff Vice President - BMA Financial Group
BMA Tower Marketing
700 Karnes Blvd.
Kansas City, MO 64108-3306
James Evan Kilmer Vice President - Taxes
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
Edward Scott Ritter Vice President - Corporate Development
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
David A. Gates Director - Regulatory Affairs
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
Martin Jefferson Fuller Senior Vice President - Insurance
BMA Tower Distribution
700 Karnes Blvd.
Kansas City, MO 64108-3306
Robert Noel Sawyer Senior Vice President & Chief Investment
BMA Tower Officer
700 Karnes Blvd.
Kansas City, MO 64108-3306
Vernon Wirt Voorhees II Director, Senior Vice President -
BMA Tower Corporate Services & Secretary
700 Karnes Blvd.
Kansas City, MO 64108-3306
Margaret Mary Heidkamp Vice President - Management Services
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
Jay Brian Kinnamon Vice President & Corporate Actuary
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
Susan Annette Sweeney Vice President - Treasurer & Controller
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
Gerald W. Selig Actuary - Accumulation Products
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
Thomas Morton Bloch Director
Gianguido Castagno Director
William Thomas Grant II Director
Donald Joyce Hall, Jr. Director
Allan Drue Jennings Director
David Woods Kemper Director
Giorgio Liveris Director
John Kessander Lundberg Director
John Pierre Mascotte Director
Giovanni Perissinotto Director
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the Depositor
or Registrant
The Company organizational chart is filed herewith as Exhibit 14.
Item 27. Number of Contract Owners
Not Applicable
Item 28. Indemnification
The Bylaws of the Company (Article IV) provide that:
Section 1: Indemnification. Each person who is or was a Director, officer or
employee of the Corporation or is or was serving at the request of the
Corporation as a Director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise (including the heirs,
executors, administrators or estate of such person) shall be indemnified by the
Corporation as a right to the full extent permitted or authorized by the laws of
the State of Missouri, as now in effect and as hereafter amended, against any
liability, judgment, fine, amount paid in settlement, cost and expense
(including attorneys' fees) asserted or threatened against and incurred by such
person in his capacity as or arising out of his status as a Director, officer or
employee of the Corporation, or if serving at the request of the Corporation, as
a Director, officer or employee of another corporation, partnership, joint
venture, trust or other enterprise. The indemnification provided by this Bylaw
provision shall not be exclusive of any other rights to which those indemnified
may be entitled under any other bylaw or under any agreement, vote of
shareholders or disinterested directors or otherwise, and shall not limit in any
way any right which the Corporation may have to make different or further
indemnifications with respect to the same or different persons or classes of
persons.
Without limiting the foregoing, the Corporation is authorized to enter into an
agreement with any Director, officer or employee of the Corporation providing
indemnification for such person against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement that result from any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including any action by or in the right of the
Corporation, that arises by reason of the fact that such person is or was a
Director, officer or employee of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, to the full
extent allowed by law, whether or not such indemnification would otherwise be
provided for in this Bylaw, except that no such agreement shall indemnify any
person from or on account of such person's conduct which was finally adjudged to
have been knowingly fraudulent, deliberately dishonest or willful misconduct.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted for directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company 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, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company 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
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Item 29. Principal Underwriters
a. Jones & Babson, Inc. is the principal underwriter for the Contracts.
b. The following are the officers and directors of Jones & Babson, Inc.:
<TABLE>
<CAPTION>
Name and Positions and Offices
Business Address with Underwriter
- ------------------------- ---------------------
<S> <C>
Larry D. Armel President,
5540 Belinder Director and CEO
Shawnee Mission, KS 66205
P. Bradley Adams Vice President, Chief
12019 Cherokee Lane Financial Officer and
Leawood, KS 66209 Treasurer
Michael A. Brummel Vice President
1304 NE Oakwood Drive Asst. Sec. and Asst. Treas.
Lee's Summit, MO 64086
Martin A. Cramer Vice President and
13885 S. Brougham Drive Secretary
Olathe, KS 66062
John G. Dyer Asst. Secretary and
36-L Street Legal Counsel
Lake Latowana, MO 64086
Constance B. Martin Asst. Vice President
2305 W 95th Street
Leawood, KS 66206
Stephen S. Soden Chairman of the Board and
BMA Tower Director
One Penn Valley Park
Kansas City, MO 64141
Giorgio Balzer Director
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Robert T. Rakich Director
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Edward S. Ritter Director
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Robert N. Sawyer Director
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Vernon W. Voorhees Director
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
</TABLE>
Item 30. Location of Accounts and Records
The physical possession of the accounts, books or documents of the Separate
Account which are required to be maintained by Section 31(a) of the Investment
Company Act of 1940, as amended, and the rules promulgated thereunder will be
maintained by the Company at 700 Karnes Boulevard, Kansas City Missouri 64108.
Item 31. Management Services
Not Applicable
Item 32. Undertakings
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payment under the variable annuity contracts may
be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
d. Business Men's Assurance Company of America ("Company") hereby
represents that the fees and charges deducted under the Contracts described in
the Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, as amended, the Registrant has caused this Registration Statement to be
signed on its behalf in the City of Kansas City and the State of Missouri, on
this 15th day of October, 1997.
BMA VARIABLE ANNUITY ACCOUNT A
(Registrant)
By: BUSINESS MEN'S ASSURANCE COMPANY
OF AMERICA
(Depositor)
By: /S/EDWARD S. RITTER
--------------------------------
BUSINESS MEN'S ASSURANCE COMPANY
OF AMERICA
(Depositor)
By: /S/ MICHAEL K. DEARDORFF
---------------------------------
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE AND TITLE
<TABLE>
<CAPTION>
<S> <C> <C>
Giorgio Balzer*
- --------------------- Director, Chairman of the Board 10/15/97
Giorgio Balzer and Chief Executive Officer ---------
Date
Thomas Morton Bloch* 10/15/97
- --------------------- Director ---------
Thomas Morton Bloch Date
Gianguido Castagno* 10/15/97
- -------------------------- Director ---------
Gianguido Castagno Date
William Thomas Grant II * 10/15/97
- --------------------------- Director ---------
William Thomas Grant II Date
Donald Joyce Hall, Jr.* 10/15/97
- --------------------------- Director --------
Donald Joyce Hall, Jr. Date
Allan Drue Jennings* 10/15/97
- --------------------------- Director --------
Allan Drue Jennings Date
David Woods Kemper* 10/15/97
- --------------------------- Director ---------
David Woods Kemper Date
Giorgio Liveris* 10/15/97
- --------------------------- Director --------
Giorgio Liveris Date
John Kessander Lundberg* 10/15/97
- --------------------------- Director --------
John Kessander Lundberg Date
John Pierre Mascotte* 10/15/97
- ---------------------------- Director --------
John Pierre Mascotte Date
Giovanni Perissinotto* 10/15/97
- --------------------------- Director --------
Giovanni Perissinotto Date
/S/Robert Thomas Rakich 10/15/97
- --------------------------- Director, President and Chief --------
Robert Thomas Rakich Operating Officer Date
/S/Vernon Wirt Voorhees II 10/15/97
- --------------------------- Director, Senior Vice President - --------
Vernon Wirt Voorhees II Corporate Services & Secretary Date
/S/David Lee Higley 10/15/97
- -------------------------- Senior Vice President & Chief --------
David Lee Higley Financial Officer Date
/S/Susan Annette Sweeney 10/15/97
- -------------------------- Vice President - Treasurer & --------
Susan Annette Sweeney Controller Date
</TABLE>
*By: /S/ Robert T. Rakich
--------------------
Attorney-in-Fact
*By: /S/ Vernon W. Voorhees
----------------------
Attorney-in-Fact
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Giorgio Balzer, a Director of Business
Men's Assurance Company of America (the "Company"), a corporation duly organized
under the laws of the state of Missouri, do hereby appoint Robert T. Rakich and
Vernon W. Voorhees, each individually, as my attorney and agent, for me, and in
my name as a Director of the Company on behalf of the Company or otherwise, with
full power to execute, deliver and file with the Securities and Exchange
Commission all documents required for registration of a security under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, and to do and perform each and every act that said attorney may deem
necessary or advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this, 31st day of July, 1997.
WITNESS:
/S/David A. Gates /s/ Giorgio Balzer
- ----------------- ------------------
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Thomas Morton Bloch, a Director of
Business Men's Assurance Company of America (the "Company"), a corporation duly
organized under the laws of the state of Missouri, do hereby appoint Robert T.
Rakich and Vernon W. Voorhees, each individually, as my attorney and agent, for
me, and in my name as a Director of the Company on behalf of the Company or
otherwise, with full power to execute, deliver and file with the Securities and
Exchange Commission all documents required for registration of a security under
the Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended, and to do and perform each and every act that said attorney may
deem necessary or advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this, 8th day of August, 1997.
/s/Thomas Morton Bloch
-----------------------
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Gianguido Castagno, a Director of
Business Men's Assurance Company of America (the "Company"), a corporation duly
organized under the laws of the state of Missouri, do hereby appoint Robert T.
Rakich and Vernon W. Voorhees, each individually, as my attorney and agent, for
me, and in my name as a Director of the Company on behalf of the Company or
otherwise, with full power to execute, deliver and file with the Securities and
Exchange Commission all documents required for registration of a security under
the Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended, and to do and perform each and every act that said attorney may deem
necessary or advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this, 8th day of August, 1997.
WITNESS:
/S/ signature illegible /s/ Gianguido Castagno
- ----------------------- -----------------------
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, William Thomas Grant II, a Director of
Business Men's Assurance Company of America (the "Company"), a corporation duly
organized under the laws of the state of Missouri, do hereby appoint Robert T.
Rakich and Vernon W. Voorhees, each individually, as my attorney and agent, for
me, and in my name as a Director of the Company on behalf of the Company or
otherwise, with full power to execute, deliver and file with the Securities and
Exchange Commission all documents required for registration of a security under
the Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended, and to do and perform each and every act that said attorney may deem
necessary or advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this, 8th day of August, 1997.
/s/ William Thomas Grant II
-----------------------------
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Donald Joyce Hall, Jr., a Director of
Business Men's Assurance Company of America (the "Company"), a corporation duly
organized under the laws of the state of Missouri, do hereby appoint Robert T.
Rakich and Vernon W. Voorhees, each individually, as my attorney and agent, for
me, and in my name as a Director of the Company on behalf of the Company or
otherwise, with full power to execute, deliver and file with the Securities and
Exchange Commission all documents required for registration of a security under
the Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended, and to do and perform each and every act that said attorney may deem
necessary or advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this, 8th day of August, 1997.
/s/ Donald Joyce Hall, Jr.
--------------------------
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Allan Drue Jennings, a Director of
Business Men's Assurance Company of America (the "Company"), a corporation duly
organized under the laws of the state of Missouri, do hereby appoint Robert T.
Rakich and Vernon W. Voorhees, each individually, as my attorney and agent, for
me, and in my name as a Director of the Company on behalf of the Company or
otherwise, with full power to execute, deliver and file with the Securities and
Exchange Commission all documents required for registration of a security under
the Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended, and to do and perform each and every act that said attorney may deem
necessary or advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this, 8th day of August, 1997.
/s/ Allan Drue Jennings
-----------------------
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, David Woods Kemper, a Director of
Business Men's Assurance Company of America (the "Company"), a corporation duly
organized under the laws of the state of Missouri, do hereby appoint Robert T.
Rakich and Vernon W. Voorhees, each individually, as my attorney and agent, for
me, and in my name as a Director of the Company on behalf of the Company or
otherwise, with full power to execute, deliver and file with the Securities and
Exchange Commission all documents required for registration of a security under
the Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended, and to do and perform each and every act that said attorney may deem
necessary or advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this, 8th day of August, 1997.
WITNESS:
/s/ Nellie R. Cox /s/ David Woods Kemper
- ----------------- ----------------------
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Giorgio Liveris, a Director of Business
Men's Assurance Company of America (the "Company"), a corporation duly organized
under the laws of the state of Missouri, do hereby appoint Robert T. Rakich and
Vernon W. Voorhees, each individually, as my attorney and agent, for me, and in
my name as a Director of the Company on behalf of the Company or otherwise, with
full power to execute, deliver and file with the Securities and Exchange
Commission all documents required for registration of a security under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, and to do and perform each and every act that said attorney may deem
necessary or advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this, 8th day of August, 1997.
WITNESS:
/s/ Renzo Isler /s/ Giorgio Liveris
- --------------- -------------------
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, John Kessander Lundberg, a Director of
Business Men's Assurance Company of America (the "Company"), a corporation duly
organized under the laws of the state of Missouri, do hereby appoint Robert T.
Rakich and Vernon W. Voorhees, each individually, as my attorney and agent, for
me, and in my name as a Director of the Company on behalf of the Company or
otherwise, with full power to execute, deliver and file with the Securities and
Exchange Commission all documents required for registration of a security under
the Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended, and to do and perform each and every act that said attorney may deem
necessary or advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this, 22nd day of August, 1997.
WITNESS:
/s/ Dara Collins /s/ John Kessander Lundberg
- ---------------- ---------------------------
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, John Pierre Mascotte, a Director of
Business Men's Assurance Company of America (the "Company"), a corporation duly
organized under the laws of the state of Missouri, do hereby appoint Robert T.
Rakich and Vernon W. Voorhees, each individually, as my attorney and agent, for
me, and in my name as a Director of the Company on behalf of the Company or
otherwise, with full power to execute, deliver and file with the Securities and
Exchange Commission all documents required for registration of a security under
the Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended, and to do and perform each and every act that said attorney may deem
necessary or advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this, 11th day of August, 1997.
WITNESS:
/s/ Nancy Sims /s/ John Pierre Mascotte
- -------------- ------------------------
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Giovanni Perissinotto, a Director of
Business Men's Assurance Company of America (the "Company"), a corporation duly
organized under the laws of the state of Missouri, do hereby appoint Robert T.
Rakich and Vernon W. Voorhees, each individually, as my attorney and agent, for
me, and in my name as a Director of the Company on behalf of the Company or
otherwise, with full power to execute, deliver and file with the Securities and
Exchange Commission all documents required for registration of a security under
the Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended, and to do and perform each and every act that said attorney may deem
necessary or advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this, 8th day of August, 1997.
WITNESS:
/s/ Raffaela Crisciani /s/ Giovanni Perissinotto
- ---------------------- --------------------------
Witness Giovanni Perissinotto
EXHIBITS
TO
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM N-4
BMA VARIABLE ANNUITY ACCOUNT A
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
INDEX TO EXHIBITS
Exhibit Page
EX-99.B3(a) Principal Underwriter's Agreement
EX-99.B3(b) Form of Selling Agreement
EX-99.B4(b) Endorsement
EX-99.B5 Application for Individual Variable Annuity Contract
EX-99.B6(i) Articles of Incorporation of the Company
EX-99.B6(ii) Bylaws of the Company
EX-99.B8 Form of Fund Participation Agreement
EX-99.B9 Opinion and Consent of Counsel
EX-99.B10 Independent Auditors' Consent
EX-99.B14 Organizational Chart
PRINCIPAL UNDERWRITER'S AGREEMENT
IT IS HEREBY AGREED by and between BUSINESS MEN'S ASSURANCE COMPANY OF
AMERICA ("INSURANCE COMPANY") on behalf of BMA VARIABLE ANNUITY ACCOUNT A (the
"Variable Account") and JONES & BABSON, INC. ("PRINCIPAL UNDERWRITER") as
follows:
I
INSURANCE COMPANY proposes to issue and sell Individual Fixed and Variable
Deferred Annuity Contracts (the "Contracts") of the Variable Account to the
public through PRINCIPAL UNDERWRITER. The PRINCIPAL UNDERWRITER agrees to
provide sales service subject to the terms and conditions hereof. The Contracts
to be sold are more fully described in the registration statement and prospectus
hereinafter mentioned. Such Contracts will be issued by INSURANCE COMPANY
through the Variable Account.
II
INSURANCE COMPANY grants PRINCIPAL UNDERWRITER the exclusive right, during
the term of this Agreement, subject to registration requirements of the
Securities Act of 1933 and the Investment Company Act of 1940 and the provisions
of the Securities Exchange Act of 1934, to be the distributor of the Contracts
issued through the Variable Account. PRINCIPAL UNDERWRITER will sell the
Contracts under such terms as set by INSURANCE COMPANY and will make such sales
to purchasers permitted to buy such Contracts as specified in the prospectus.
III
PRINCIPAL UNDERWRITER shall be compensated for its distribution services in
such amount as to meet all of its obligations to selling broker-dealers with
respect to all Purchase Payments accepted by INSURANCE COMPANY on the Contracts
covered hereby.
IV
On behalf of the Variable Account, INSURANCE COMPANY shall furnish
PRINCIPAL UNDERWRITER with copies of all prospectuses, financial statements and
other documents which PRINCIPAL UNDERWRITER reasonably requests for use in
connection with the distribution of the Contracts. INSURANCE COMPANY shall
provide to PRINCIPAL UNDERWRITER such number of copies of the current effective
prospectuses as PRINCIPAL UNDERWRITER shall request.
V
PRINCIPAL UNDERWRITER is not authorized to give any information, or to make
any representations concerning the Contracts or the Variable Account of
INSURANCE COMPANY other than those contained in the current registration
statements or prospectuses relating to the Variable Account filed with the
Securities and Exchange Commission or such sales literature as may be authorized
by INSURANCE COMPANY.
VI
Both parties to this Agreement agree to keep the necessary records as
indicated by applicable state and federal law and to render the necessary
assistance to one another for the accurate and timely preparation of such
records.
VII
This Agreement shall be effective upon the execution hereof and will remain
in effect unless terminated as hereinafter provided. This Agreement shall
automatically be terminated in the event of its assignment by PRINCIPAL
UNDERWRITER.
This Agreement may at any time be terminated by either party hereto upon 60
days' written notice to the other party.
VIII
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been given on the date
of service if served personally on the party to whom notice is to be given, or
on the date of mailing if sent by First Class Mail, Registered or Certified,
postage prepaid and properly addressed.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
signed on their behalf by their respective officers thereunto duly authorized.
EXECUTED this ____ day of ___________, 199_.
INSURANCE COMPANY
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
BY:_______________________________
ATTEST:______________________
PRINCIPAL UNDERWRITER
JONES & BABSON, INC.
BY:_______________________________
ATTEST:______________________
SELLING AGREEMENT
Agreement dated as of __________________, 199_, by and among Business Men's
Assurance Company of America, a Missouri corporation ("Life Company"); Jones &
Babson, Inc. a corporation ("Distributor"); ___________________, a
____________________ corporation ("Broker/Dealer") and ______________________,
("Insurance Agent").
RECITALS:
A. Pursuant to a distribution agreement with Distributor, Life Company has
appointed Distributor as the principal underwriter of the variable annuity
contracts identified in Schedule 1 to this Agreement at the time that this
Agreement is executed, and such other variable annuity contracts or
variable life insurance contracts that may be added to Schedule 1 from time
to time in accordance with Section 2(f) of this Agreement. Such contracts
together with any fixed annuity contracts shown on Schedule 1 shall be
referred to herein as "Contracts".
B. The parties to this Agreement desire that Broker/Dealer and Insurance Agent
be authorized to solicit applications for the sale of the Contracts to the
general public subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual promises and
covenants hereinafter set forth, the parties agree as follows:
1. ADDITIONAL DEFINITIONS
(a) Affiliate - With respect to a person, any other person controlling,
controlled by, or under common control with, such person.
(b) Agent - An individual associated with Insurance Agent and
Broker/Dealer who is appointed by Life Company as an agent for the
purpose of soliciting applications.
(c) NASD - The National Association of Securities Dealers, Inc.
(d) 1933 Act - The Securities Act of 1933, as amended.
(e) 1934 Act - The Securities and Exchange Act of 1934, as amended.
(f) 1940 Act - The Investment Company Act of 1940, as amended.
(g) Premium - A payment made under a Contract to purchase benefits under
such Contract.
(h) Prospectus - With respect to each Contract, the prospectus for such
Contract included within the Registration Statement for such Contract;
provided, however, that, if the most recently filed prospectus, filed
pursuant to Rule 497 under the 1933 Act subsequent to the date on
which the Registration Statement became effective differs from the
prospectus on file at the time the Registration Statement became
effective, the term "Prospectus" shall refer to the most recently
filed prospectus filed under Rule 497 from and after the date on which
it shall have been filed.
(i) Registration Statement - With respect to each Contract, the most
recent effective registration statement(s) filed with the SEC or the
most recent effective post-effective amendment(s) thereto with respect
to such Contract, including financial statements included therein and
all exhibits thereto. There may be more than one Registration
Statement in effect at a time for a Contract; in such case, any
reference to "the Registration Statement" for a Contract shall refer
to any or all, depending on the context, of the Registration
Statements for such Contract.
(j) SEC - The Securities and Exchange Commission.
(k) Service Center - Policy Service Office:
2. AUTHORIZATION OF BROKER/DEALER AND INSURANCE AGENT
(a) Distributor hereby authorizes Broker/Dealer under the securities laws,
and Life Company hereby authorizes and appoints Insurance Agent under
the insurance laws, each in a non-exclusive capacity, to distribute
the Contracts. Broker/Dealer and Insurance Agent accept such
authorization and appointment and shall use their best efforts to find
purchasers for the Contracts, in each case acceptable to Life Company.
(b) Life Company shall notify Broker/Dealer and Insurance Agent in writing
of all states and jurisdictions in which Life Company is licensed to
sell the Contracts. Broker/Dealer and Insurance Agent acknowledge that
no territory is exclusively assigned hereunder, and Life Company
reserves the right in its sole discretion to establish or appoint one
or more agencies in any jurisdiction in which Insurance Agent
transacts business hereunder.
(c) Insurance Agent is vested under this Agreement with power and
authority to select and recommend individuals associated with
Insurance Agent for appointment as Agents of Life Company, and only
individuals so recommended by Insurance Agent shall become Agents,
provided that Life Company reserves the right in its sole discretion
to refuse to appoint any proposed agent or, once appointed, to
terminate the same at any time with or without cause.
(d) Neither Broker/Dealer nor Insurance Agent shall expend or contract for
the expenditure of the funds of Life Company. Broker/Dealer and
Insurance Agent each shall pay all expenses incurred by each of them
in the performance of this Agreement, unless otherwise specifically
provided for in this Agreement or unless Life Company and Distributor
shall have agreed in advance in writing to share the cost of certain
expenses. Initial and renewal state appointment fees for Insurance
Agent and appointees of Insurance Agent as Agents of Life Company will
be paid by Life Company according to the terms set forth in the rules
and regulations as may be adopted by Life Company from time to time.
Neither Broker/Dealer nor Insurance Agent shall possess or exercise
any authority on behalf of Distributor or Life Company other than that
expressly conferred on Broker/Dealer or Insurance Agent by this
Agreement. In particular, and without limiting the foregoing, neither
Broker/Dealer nor Insurance Agent shall have any authority, nor shall
either grant such authority to any Agent, on behalf of Distributor or
Life Company: to make, alter or discharge any Contract or other
contract entered into pursuant to a Contract; to waive any Contract
forfeiture provision; to extend the time of paying any Premiums; or to
receive any monies or Premiums from applicants for or purchasers of
the Contracts (except for the sole purpose of forwarding monies or
Premiums to Life Company).
(e) Broker/Dealer and Insurance Agent acknowledge that Life Company has
the right in its sole discretion to reject any applications or
Premiums received by it and to return or refund to an applicant such
applicant's Premium.
(f) Schedule 1 to this Agreement may be amended by Distributor and Life
Company in their sole discretion from time to time to include other
variable annuity contracts, fixed annuity contracts, or variable life
insurance contracts, or to delete contracts from the Schedule.
(g) Distributor and Life Company acknowledge that Broker/Dealer and
Insurance Agent are each an independent contractor. Accordingly,
Broker/Dealer and Insurance Agent are not obliged or expected to give
full time and energies to the performance of their obligations
hereunder, nor are Broker/Dealer and Insurance Agent obliged or
expected to represent Distributor or Life Company exclusively. Nothing
herein contained shall constitute Broker/Dealer, Insurance Agent, the
Agents or any agents or representatives of Broker/Dealer or Insurance
Agent as employees of Distributor or Life Company in connection with
solicitation of applications for the Contracts.
3. LICENSING AND REGISTRATION OF BROKER/DEALER, INSURANCE AGENT AND AGENTS
(a) Broker/Dealer represents and warrants that it is a Broker/Dealer
registered with the SEC under the 1934 Act, and is a member of the
NASD in good standing. Broker/Dealer must, at all times when
performing its functions and fulfilling its obligations under this
Agreement, be duly registered as a Broker/Dealer under the 1934 Act
and as required by applicable law, in each state or other jurisdiction
in which Broker/Dealer intends to perform its functions and fulfill
its obligations hereunder.
(b) Insurance Agent represents and warrants that it is a licensed life
insurance agent where required to solicit applications. Insurance
Agent must, at all times when performing its functions and fulfilling
its obligations under this Agreement, be duly licensed to sell the
Contracts in each state or other jurisdiction in which Insurance Agent
intends to perform its functions and fulfill its obligations
hereunder.
(c) Broker/Dealer shall ensure that no individual shall offer or sell the
Contracts on its behalf in any state or other jurisdiction in which
the Contracts may lawfully be sold unless such individual is an
associated person of Broker/Dealer (as that term is defined in Section
3(a)(18) of the 1934 Act) and duly registered with the NASD and any
applicable state securities regulatory authority as a registered
person of Broker/Dealer qualified to distribute the Contracts in such
state or jurisdiction. Broker/Dealer shall be solely responsible for
the background investigations of the Agents to determine their
qualifications and will provide Life Company upon request with copies
of such investigations.
(d) Insurance Agent shall ensure that no individual shall offer or sell
the Contracts on behalf of Insurance Agent in any state or other
jurisdiction unless such individual is duly affiliated as an agent of
Insurance Agent, duly licensed and appointed as an agent of Life
Company, and appropriately licensed, registered or otherwise qualified
to offer and sell the Contracts to be offered and sold by such
individual under the insurance laws of such state or jurisdiction.
Insurance Agent shall be responsible for investigating the character,
work experience and background of any proposed agent prior to
recommending appointment as agent of Life Company. Upon request, Life
Company shall be provided with copies of such investigation. All
matters concerning the licensing of any individuals recommended for
appointment by Insurance Agent under any applicable state insurance
law shall be a matter directly between Insurance Agent and such
individual, and the Insurance Agent shall furnish Life Company with
proof of proper licensing of such individual or other proof,
reasonably acceptable to Life Company. Broker/Dealer and Insurance
Agent shall notify Distributor and Life Company immediately upon
termination of an Agent's association with Broker/Dealer or Insurance
Agent.
(e) Without limiting the foregoing, Broker/Dealer and Insurance Agent
represent that they are in compliance with the terms and conditions of
letters issued by the Staff of the SEC with respect to the
non-registration as a broker/dealer of an insurance agency associated
with a registered broker/dealer. Broker/Dealer and Insurance Agent
shall notify Distributor immediately in writing if Broker/Dealer
and/or Insurance Agent fail to comply with any such terms and
conditions and shall take such measures as may be necessary to comply
with any such terms and conditions.
4. BROKER/DEALER AND INSURANCE AGENT COMPLIANCE
(a) Broker/Dealer and Insurance Agent hereby represent and warrant that
they are duly in compliance with all applicable federal and state
securities laws and regulations, and all applicable insurance laws and
regulations. Broker/Dealer and Insurance Agent each shall carry out
their respective obligations under this Agreement in continued
compliance with such laws and regulations. Broker/Dealer shall be
responsible for securities training, supervision and control of the
Agents in connection with their solicitation activities with respect
to the Contracts and shall supervise Agents' compliance with
applicable federal and state securities law and NASD requirements in
connection with such solicitation activities. Broker/Dealer and
Insurance Agent shall comply, and shall ensure that Agents comply,
with the rules and procedures established by Life Company from time to
time, and the rules set forth below, and Broker/Dealer and Insurance
Agent shall be solely responsible for such compliance.
(b) Broker/Dealer, Insurance Agent and Agents shall not offer or attempt
to offer the Contracts, nor solicit applications for the Contracts,
nor deliver Contracts, in any state or jurisdiction in which the
Contracts may not lawfully be sold or offered for sale.
(c) Broker/Dealer, Insurance Agent and Agents shall not solicit
applications for the Contracts without delivering the Prospectus for
the Contracts, the then-currently effective prospectus(es) for the
underlying fund(s) and, where required by state insurance law, the
then-currently effective statement of additional information for the
Contracts.
(d) Broker/Dealer, Insurance Agent and Agents shall not recommend the
purchase of a Contract to an applicant unless each has reasonable
grounds to believe that such purchase is suitable for the applicant in
accordance with, among other things, applicable regulations of any
state insurance commission, the SEC and the NASD.
(e) Insurance Agent shall return promptly to Life Company all receipts for
delivered Contracts, all undelivered contracts and all receipts for
cancellation, in accordance with the requirements established by Life
Company and/or as required under state insurance law. Upon issuance of
a Contract by Life Company and delivery of such Contract to Insurance
Agent, Insurance Agent shall promptly deliver such Contract to its
purchaser. For purposes of this provision "promptly" shall be deemed
to mean not later than five calendar days. Life Company will assume
that a Contract will be delivered by Insurance Agent to the purchaser
of such Contract within five calendar days for purposes of determining
when to transfer premiums initially allocated to the Money Market
Account available under such Contracts to the particular investment
options specified by such purchaser. As a result, if purchasers
exercise the free look provisions under such Contracts, Broker/Dealer
shall indemnify Life Company for any loss incurred by Life Company
that results from Insurance Agent's failure to deliver such Contracts
to the purchasers within the contemplated five calendar day period.
(f) In the event that Premiums are sent to Insurance Agent or
Broker/Dealer, rather than to the Service Center, Insurance Agent and
Broker/Dealer shall promptly (and in any event, not later than two
business days) remit such Premiums to Life Company at the Service
Center. Insurance Agent and Broker/Dealer acknowledge that if any
Premium is held at any time by either of them, such Premium shall be
held on behalf of the customer, and Insurance Agent or Broker/Dealer
shall segregate such premium from their own funds and promptly (and in
any event, within 2 business days) remit such Premium to Life Company.
All such Premiums, whether by check, money order or wire, shall at all
times be the property of Life Company.
(g) Neither Broker/Dealer nor Insurance Agent, nor any of their directors,
partners, officers, employees, registered persons, associated persons,
agents or affiliated persons, in connection with the offer or sale of
the Contracts, shall give any information or make any representations
or statements, written or oral, concerning the Contracts, the
underlying funds or fund Shares, other than information or
representations contained in the Prospectuses, statements of
additional information and Registration Statements for the Contracts,
or a fund prospectus, or in reports or proxy statements therefor, or
in promotional, sales or advertising material or other information
supplied and approved in writing by Distributor and Life Company.
(h) Broker/Dealer and Insurance Agent shall not use or implement any
promotional, sales or advertising material relating to the Contracts
without the prior written approval of Distributor and Life Company.
(i) Broker/Dealer and Insurance Agent shall be solely responsible under
applicable tax laws for the reporting of compensation paid to Agents.
(j) Broker/Dealer and Insurance Agent each represent that it maintains and
shall maintain such books and records concerning the activities of the
Agents as may be required by the SEC, the NASD and any appropriate
insurance regulatory agencies that have jurisdiction and that may be
reasonably required by Life Company. Broker/Dealer and Insurance Agent
shall make such books and records available to Life Company upon
written request.
(k) Broker/Dealer and Insurance Agent shall promptly furnish to Life
Company or its authorized agent any reports and information that Life
Company may reasonably request for the purpose of meeting Life
Company's reporting and record keeping requirements under the
insurance laws of any state, under any applicable federal and state
securities laws, rules and regulations, and the rules of the NASD.
(l) Broker/Dealer shall secure and maintain a fidelity bond (including
coverage for larceny and embezzlement), issued by a reputable bonding
company, covering all of its directors, officers, agents and employees
who have access to funds of Insurance Company. This bond shall be
maintained at Broker/Dealer's expense in at least the amount
prescribed by the NASD rules. Broker/Dealer shall upon request provide
Distributor with a copy of said bond. Broker/Dealer shall also secure
and maintain errors and omissions insurance acceptable to Distributor
and covering Broker/Dealer, Insurance Agent and Agents. Broker/Dealer
hereby assigns any proceeds received from a fidelity bonding company,
errors and omissions or other liability coverage, to Distributor or
Life Company as their interests may appear, to the extent of their
loss due to activities covered by the bond, policy or other liability
coverage. If there is any deficiency amount, whether due to a
deductible or otherwise, Broker/Dealer shall promptly pay such amount
on demand. Broker/Dealer hereby indemnifies and holds harmless
Distributor or Life Company from any such deficiency and from the
costs of collection thereof, including reasonable attorneys' fees.
5. SALES MATERIALS
(a) During the term of this Agreement, Distributor and Life Company will
provide Broker/Dealer and Insurance Agent, without charge, with as
many copies of Prospectuses (and any supplements thereto), current
fund prospectus(es) (and any supplements thereto), and applications
for the Contracts, as Broker/Dealer or Insurance Agent may reasonably
request. Upon termination of this Agreement, Broker/Dealer and
Insurance Agent will promptly return to Distributor any Prospectuses,
applications, fund prospectuses, and other materials and supplies
furnished by Distributor or Life Company to Broker/Dealer or Insurance
Agent or to the Agents.
(b) During the term of this Agreement, Distributor will be responsible for
providing and approving all promotional, sales and advertising
material to be used by Broker/Dealer and Insurance Agent. Distributor
will file such materials or will cause such materials to be filed with
the SEC, the NASD, and/or with any state securities regulatory
authorities, as appropriate.
6. COMMISSIONS
(a) During the term of this Agreement, Distributor and Life Company shall
pay to Broker/Dealer or Insurance Agent, as applicable, commissions
and fees set forth in Schedule 2 to this Agreement. The payment of
such commissions and fees shall be subject to the terms and conditions
of this Agreement and those set forth on Schedule 2. Schedule 2,
including the commissions and fees therein, may be amended at any
time, in any manner, and without prior notice, by Distributor or Life
Company. Any amendment to Schedule 2 will be applicable to any
Contract for which any application or Premium is received by the
Service Center on or after the effective date of such amendment.
However, Life Company reserves the right to amend such Schedule with
respect to subsequent premiums and renewal commissions. Compensation
with respect to any Contract shall be paid to Insurance Agent only for
so long as Insurance Agent is the agent-of-record and maintains
compliance with applicable state insurance laws and only while this
Agreement is in effect.
(b) No compensation shall be payable, and Broker-Dealer and Insurance
Agent agree to reimburse Distributor and Life Company for any
compensation that may have been paid to Broker-Dealer, Insurance Agent
or any Agents in any of the following situations: (i) Insurance
Company, in its sole discretion, determines not to issue the Contract
applied for; (ii) Insurance company refunds the premiums upon the
applicant's surrender or withdrawal pursuant to any "free-look"
privilege; (iii) Insurance Company refunds the premiums paid by
applicant as a result of a complaint by applicant; (iv) Insurance
Company determines that any person soliciting an application who is
required to be licensed or any other person or entity receiving
compensation for soliciting applications or premiums for the Contracts
is not or was not duly licensed as an insurance agent; or (v) any
other situation listed on Schedule 2.
(c) Agents shall have no interest in this Agreement or right to any
commissions to be paid by Distributor or Life Company to Insurance
Agent. Insurance Agent shall be solely responsible for the payment of
any commission or consideration of any kind to Agents. Insurance Agent
shall have no right to withhold or deduct any commission from any
Premiums which it may collect unless and only to the extent that
Schedule 2 of this Agreement permits Insurance Agent to net its
commissions against Premiums collected. Insurance Agent shall have no
interest in any compensation paid by Life Company to Distributor or
any affiliate, now or hereafter, in connection with the sale of any
Contracts hereunder.
7. TERM AND TERMINATION
This Agreement may not be assigned except by written consent of the
parties hereto and shall continue for an indefinite term, subject to
the termination by any party hereto upon thirty days' advance written
notice to the other parties, except that in the event Distributor or
Broker/Dealer ceases to be a registered broker/dealer or a member of
the NASD, or Insurance Agent ceases to be properly licensed, this
Agreement shall immediately terminate. Upon its termination, all
authorizations, rights and obligations under this Agreement shall
cease, except the agreements in Sections 6, 8, 10 and 15 which shall
survive any such termination.
8. COMPLAINTS AND INVESTIGATIONS
(a) Distributor, Life Company, Broker/Dealer and Insurance Agent shall
cooperate fully in any insurance regulatory investigation or
proceeding or judicial proceeding arising in connection with the
Contracts marketed under this Agreement. In addition, Distributor,
Life Company, Broker/Dealer and Insurance Agent shall cooperate fully
in any securities regulatory investigation or proceeding or judicial
proceeding with respect to Distributor, Broker/Dealer, their
Affiliates and their agents, to the extent that such investigation or
proceeding related to the Contracts marketed under this Agreement.
Without limiting the foregoing:
(i) Broker/Dealer and Insurance Agent will be notified promptly of
any customer complaint or notice of any regulatory investigation
or proceeding or judicial proceeding received by Distributor or
Life Company with respect to Insurance Agent or any Agent which
may affect the issuance of any Contract marketed under this
Agreement.
(ii) Broker/Dealer and Insurance Agent will promptly notify
Distributor and Life Company of any written customer complaint or
notice of any regulatory investigation or proceeding or judicial
proceeding received by Broker/Dealer or Insurance Agent or their
Affiliates with respect to themselves, their Affiliates, or any
Agent in connection with any Contract marketed under this
Agreement or any activity in connection with any such Contract.
(b) In the case of a customer complaint, Distributor, Life Company,
Broker/Dealer and Insurance Agent will cooperate in investigating such
complaint and any response by Broker/Dealer or Insurance Agent to such
complaint will be sent to Distributor and Life Company for approval
not less than five business days prior to its being sent to the
customer or regulatory authority, except that if a more prompt
response is required, the proposed response shall be communicated by
telephone or facsimile.
9. MODIFICATION OF AGREEMENT
This Agreement supersedes all prior agreements, either oral or written,
between the parties relating to the Contracts and except for any
amendment of Schedule 2 pursuant to the terms of this Agreement, may
not be modified in any way unless by written agreement signed by all of
the parties to this Agreement.
10. INDEMNIFICATION
(a) Broker/Dealer and Insurance Agent, jointly and severally, shall
indemnify and hold harmless Distributor and Life Company and each
person who controls or is associated with Distributor or Life Company
within the meaning of such terms under the federal securities laws,
and any officer, director, employee or agent of the foregoing, against
any and all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably
incurred in connection with, and any reasonable amounts paid in
settlement of, any action, suit or proceeding or any claim asserted),
to which they or any of them may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities arise out of or are based upon any
actual or alleged:
(i) violation(s) by Broker/Dealer, Insurance Agent or an Agent of
federal or state securities law or regulations, insurance law or
regulation(s), or any rule or requirement of the NASD;
(ii) unauthorized use of sales or advertising material, any oral or
written misrepresentations, or any unlawful sales practices
concerning the Contracts, by Broker/Dealer, Insurance Agent or an
Agent;
(iii)claims by the Agents or other agents or representatives of
Insurance Agent or Broker//Dealer for commissions or other
compensation or remuneration of any type;
(iv) any failure on the part of Broker/Dealer, Insurance Agent, or an
Agent to submit Premiums or applications to Life Company, or to
submit the correct amount of a Premium, on a timely basis and in
accordance with this Agreement;
(v) any failure on the part of Broker/Dealer, Insurance Agent, or an
Agent to deliver Contracts to purchasers thereof on a timely
basis as set forth in Section 4(e) of this Agreement; or
(vi) a breach by Broker/Dealer or Insurance Agent of any provision of
this Agreement.
This indemnification will be in addition to any liability which
Broker/Dealer and Insurance Agent may otherwise have.
(b) Distributor and Life Company, jointly and severally, shall indemnify
and hold harmless Broker/Dealer and Insurance Agent and each person
who controls or is associated with Broker/Dealer or Insurance Agent
within the meaning of such terms under the federal securities laws,
and any officer, director, employee or agent of the foregoing, against
any and all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably
incurred in connection with, and any reasonable amounts paid in
settlement of, any action, suit or proceeding or any claim asserted),
to which they or any of them may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities arise out of or are based upon a breach
by Distributor or Life Company of any provision of this Agreement.
This indemnification will be in addition to any liability which
Distributor and Life Company may otherwise have.
(c) After receipt by a party entitled to indemnification ("indemnified
party") under this Section 10 of notice of the commencement of any
action, if a claim in respect thereof is to be made against any person
obligated to provide indemnification under this Section 10
("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as
practicable thereafter, provided that the omission to so notify the
indemnifying party will not relieve it from any liability under this
Section 10, except to the extent that the omission results in a
failure of actual notice to the indemnifying party and such
indemnifying party is damaged as a result of the failure to give such
notice. The indemnifying party will be entitled to participate in the
defense of the indemnified party but such participation will not
relieve such indemnifying party of the obligation to reimburse the
indemnified party for reasonable legal and other expenses incurred by
such indemnified party in defending himself or itself. The
indemnification provisions contained in this Section 10 shall remain
operative in full force and effect, regardless of any termination of
this Agreement. A successor by law of Distributor or Life Company, as
the case may be, shall be entitled to the benefits of the
indemnification provisions contained in this Section 10.
11. RIGHTS, REMEDIES, ETC. ARE CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are
entitled to under state and federal laws. Failure of either party to
insist upon strict compliance with any of the conditions of this
Agreement shall not be construed as a waiver of any of the conditions,
but the same shall remain in full force and effect. No waiver of any
of the provisions of this Agreement shall be deemed, nor shall
constitute, a waiver of any other provisions, whether or not similar,
nor shall any waiver constitute a continuing waiver.
12. NOTICES
All notices hereunder are to be made in writing and shall be given:
IF TO DISTRIBUTOR, TO : IF TO LIFE COMPANY, TO:
Jones & Babson, Inc. Business Men's Assurance Company
of America
Attention: Attention:
BMA Tower
P.O. Box 419458
Kansas, MO 64141
IF TO BROKER/DEALER, TO IF TO INSURANCE AGENT, TO:
---------------------- -------------------------
---------------------- --------------------------
---------------------- -------------------------
or such other address as such party may hereafter specify in writing.
Each such notice to a party shall be either hand delivered,
transmitted by registered or certified United States mail with return
receipt requested or by express courier, and shall be effective upon
delivery.
13. INTERPRETATION, JURISDICTION, ETC.
This Agreement constitutes the whole agreement between the parties
hereto with respect to the subject matter hereof, and supersedes all
prior oral or written understandings, agreements or negotiations
between the parties with respect to the subject matter hereof. No
prior writings by or between the parties hereto with respect to the
subject matter hereof shall be used by either party in connection with
the interpretation of any provision of this Agreement. This Agreement
shall be construed and its provisions interpreted under and in
accordance with the internal laws of the State of Illinois without
giving effect to principles of conflict of laws.
14. ARBITRATION
Any controversy or claim arising out of or relating to this Agreement,
or the breach hereof, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.
15. SETOFFS; CHARGEBACKS
Broker/Dealer and Insurance Agent hereby authorize Distributor and
Life Company to set off from all amounts otherwise payable to
Broker/Dealer and Insurance Agent all liabilities of Broker/Dealer,
Insurance Agent or Agent. Broker/Dealer and Insurance Agent shall be
jointly and severally liable for the payment of all monies due to
Distributor and/or Life Company which may arise out of this Agreement
or any other agreement between Broker/Dealer, Insurance Agent and
Distributor or Life Company including, but not limited to, any
liability for any chargebacks or for any amounts advanced by or
otherwise due Distributor or Life Company hereunder. All such amounts
shall be paid to the Distributor and Life Company within thirty days
of written request therefore. Distributor and Life Company do not
waive any of its other rights to pursue collection of any indebtedness
owed by Broker/Dealer or Insurance Agent or its Agents to Distributor
or Life Company. In the event Distributor or Life Company initiates
legal action to collect any indebtedness of Broker/Dealer, Insurance
Agent or its Agents, Broker/Dealer and Insurance Agent shall reimburse
Distributor and Life Company for reasonable attorney fees and expenses
in connection therewith.
16. HEADINGS
The headings in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
17. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
18. SEVERABILITY
This is a severable Agreement. In the event that any provision of this
Agreement would require a party to take action prohibited by
applicable federal or state law or prohibit a party from taking action
required by applicable federal or state law, then it is the intention
of the parties hereto that such provision shall be enforced to the
extent permitted under the law, and, in any event, that all other
provisions of this Agreement shall remain valid and duly enforceable
as if the provision at issue had never been part hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BUSINESS MEN'S ASSURANCE COMPANY
OF AMERICA
By:______________________________________
Name:____________________________________
Title:_____________________________________
JONES & BABSON, INC.
By:______________________________________
Name:____________________________________
Title:_____________________________________
[Broker/Dealer]
By:_______________________________________
Name:_____________________________________
Title:______________________________________
[Insurance Agent]
By:_______________________________________
Name:_____________________________________
Title:______________________________________
SCHEDULE 1
List of Contracts
SCHEDULE 2
Commissions and Fees
WAIVER OF WITHDRAWAL CHARGES & INTEREST ADJUSTMENT RIDER
RIDER ISSUE DATE: [XX-XX-XX]
This Rider forms a part of the Contract and is subject to its terms except to
the extent this Rider changes the terms. The effective date of this Rider is the
Issue Date shown on the Contract Schedule unless another date is shown above.
WAIVER OF WITHDRAWAL CHARGES
After the first Contract Anniversary, the Withdrawal Charge may be waived in the
following circumstances. These circumstances are in addition to the waiver
situations set forth in the Contract.
a) CONFINEMENT: The Withdrawal Charge will not apply if: (1) you are confined in
a long term care facility, skilled or intermediate nursing facility or hospital;
(2) you have so confined for at least [90 consecutive days]; (3) a physician
certifies that confinement is required because of sickness or injury; and (4)
you were not confined on the Issue Date. Proof of confinement will be required
in a form satisfactory to us.
b) TOTAL DISABILITY: The Withdrawal Charge will not apply if: (1) you are
totally disabled; (2) you have been so disabled for at least [90 days]; (3) a
physician certifies that you are totally disabled; and (4) you were not so
disabled on the Issue Date. Proof of disability will be required in a form
satisfactory to us.
c) TERMINAL ILLNESS: The Withdrawal Charge will not apply if: (1) you are
terminally ill and not excepted to live more than [12 months]; (2) a physician
certifies to your illness; (3) you were not diagnosed with the terminal illness
as of the Issue Date; and (4) you make a total withdrawal. Proof of your
terminal illness will be required in a form satisfactory to us.
d) INVOLUNTARY UNEMPLOYMENT: The Withdrawal Charge will not apply if: (1) you
were employed on a "full time" basis (working at least 17 hours per week) on the
Issue Date; (2) your employment was terminated by your employer; (3) you remain
unemployed for at least [90 days]; and (4) you certify in writing at the time
you make your withdrawal request that you are still unemployed.
(e) DIVORCE: The Withdrawal Charge will not apply if: (1) you were married on
the Contract Issue Date; (2) subsequent to the Issue Date a divorce proceeding
is filed; and (3) you certify in writing a the time you make your withdrawal
request that you are now divorced.
(f) ANNUITY OPTION: The Withdrawal Charge will not apply if, upon annuitization,
a life annuity option or another annuity option with an annuity payment period
of more than five (5) years is selected.
The proof required for circumstances a through c above will include, but is not
limited to, certification by a licensed medical practitioner performing within
the scope of his/her license. The licensed medical practitioner must not be you,
the Annuitant or your spouse, or your parent or child or that of the Annuitant,
your spouse or your Joint Owner.
WAIVER OF INTEREST ADJUSTMENT
The Interest Adjustment applied to each withdrawal or transfer from a Guaranteed
Period of Fixed Account II during the Accumulation Phase may be waived in the
following circumstances:
a) DEATH: The Interest Adjustment will not apply if, pursuant to the terms of
the Contract, a death benefit is paid.
a) ANNUITY OPTION: The Interest Adjustment will not apply if, upon
annuitization, a life annuity option or another annuity option with an annuity
payment period of more than five (5) is selected.
Signed for the Business Men's Assurance Company of America.
Clarity Variable Annuity
Information Sheet
Make check payable to:
Business Men's Assurance Company of America (BMA)
[BMA Service Center
9735 Landmark Parkway Drive
St. Louis, Missouri 63127-1690
(800) 423-9398]
Please Print
[1.] Owner (If no Annuitant is specified, the Owner will be the Annuitant. If
Owner is nonnatural person, complete 72(u)).
Name (First, Middle, Last) Male Female
Address Street Number or P. O. Box City State Zip
Birthdate (M/D/Y) Maximum issue age is 85.
Social Security Number / Tax Identification Number
Home Telephone Business Telephone
[2.] Annuitant (Complete only if different from the Owner in Section 1.)
Name (First, Middle, Last) Male Female
Address Street Number or P. O. Box City State Zip
Birthdate (M/D/Y)
Social Security Number
Home Telephone Business Telephone
[3.] Joint Owner (For non-qualified plans only. Must be spouse.)
Name (First, Middle, Last)
Relationship to Owner
Birthdate
Social Security Number
[4.] Beneficiary Designation (Surviving Joint Owner will become primary
beneficiary.)
Beneficiary Percentage:
Social Security Number
Beneficiary Percentage:
Social Security Number
[5.] Type of Contract
A. Non-qualified ..... New 1035 Exchange
B. Tax-qualified Plan... New Plan, Tax Year _______ Transfer
Rollover
C. Annuity Date
[6.] Complete if Tax Qualified Plan
IRA Simple IRA SEP (Employer Contribution) SEP (Employee Contribution)
Other
[7.] Initial Purchase Payment
Paid with Application $__________
1035 Exchange Amount $________
Qualified Transfer/Rollover $________
[8.]. Portfolio Selection (Please check selected Portfolio(s) and use only whole
number percentages.)
[Balanced
Global Fixed Income
Growth & Income
Intermediate Fixed Income
Large Cap Growth
Large Cap Value
Mid Cap Equity
Small Cap Equity
Money Market
Berger/BIAM IPT-International Fund
Fixed I ($5,000 Min.)
Fixed II Guaranty Periods (5,000 Min.)
3 Year
5 Year
7 Year
Total 100%]
[9. Telephone Transfer Authorization
Yes No BMA (and its Administrator) is authorized to honor telephone
instructions from the Owner(s) to transfer account values among the Portfolios
and to and from the Fixed Accounts. By initialing here, ___, the Owner gives
the Registered Rep/Agent who signs this form the authority to transfer on behalf
of the Owner, account values among the Portfolios including the Fixed Accounts.
This authority is subject to the terms and provisions in the contract and
prospectus. I agree that BMA will not be responsible for any loss, liability,
cost, or expense for acting on the telephone instructions. BMA will employ
reasonable procedures to confirm that telephone instructions are genuine. If BMA
does not do so, it may be liable for losses due to unauthorized or fraudulent
transfers.]
[10. Dollar Cost Averaging
Yes No You need a total contract value of at least $25,000 to
participate. The transfers will occur over a six-month period into the
Portfolios designated below on the 15th day of a month (or next business day if
the 15th falls on a weekend or holiday). If you select a DCA program you may not
select either an Automatic Withdrawal or Minimum Distribution Program. The DCA
program automatically terminates if the contract value in the selected transfer
Portfolio is zero.
A. Select Portfolio to transfer FROM: Money Market Fixed Account I
B. Select the amount to transfer monthly (minimum $250) $
C. Select the Portfolios and indicate how total is to be allocated in whole
dollars or percentages (percentages must total 100%).
Balanced % $
Global Fixed Income % $
Growth & Income % $
Intermediate Fixed Income % $
Large Cap Growth % $
Large Cap Value % $
Mid Cap Equity % $
Small Cap Equity % $
Berger/BIAM IPT-International Fund % $
11. Rebalancing (Rebalanced quarterly; minimum period: 6 months; minimum amount
$250.)
Yes, I choose to participate in the asset rebalancing program. This program
allows you to automatically rebalance your contract each quarter to return to
your original percentage allocations. The program will terminate if you make any
transfer in addition to the asset rebalancing option. The minimum period to
participate in this program is 6 months. The transfer date will be the 15th of
the month (or the next business day if the 15th falls on a weekend or holiday).
The fixed account options are not part of asset rebalancing.
12. Automatic Withdrawal (Maximum Withdrawal amount is 10% of premium payments.)
Start Date: ________
Frequency of Payments Monthly Quarterly Semi-Annually Annually
BMA automatically sends the check to address of record. You may specify an
alternate address. (You will need a Signature Guarantee.)
Enter One: From each withdrawal Withhold taxes Do not withhold taxes
Pro Rata OR Withdraw from Portfolio(s) listed below ($100 minimum)
$
$
$ ]
[13.] Anti-Fraud Statement
Any person who knowingly, and with intent to injure, defraud or deceive any
insurance company, files a statement of claim or provides false, incomplete or
misleading information as part of the information provided to obtain coverage
commits a fraudulent act, which is a crime and maybe subject to criminal and
civil penalties.
[14.] Signatures
I declare that, to the best of my knowledge, the information and statements on
this form are complete and true. I further represent that the Social Security or
Tax Identification number(s) shown on the form are correct.
I have received a copy of the prospectus and understand that (a) annuity
payments or surrender values, when based on the investment experience of the
separate account, are variable and not guaranteed as to a dollar amount; and (b)
payments and values for Fixed Account II may be subject to an interest
adjustment, the operation of which may result in either an upward or downward
adjustment.
This policy does does not replace any existing insurance or annuities.
Owner Joint Owner (if applicable)
Signed at: City State Date
[15.] Replacement
Do you have any knowledge or reason to believe that replacement of existing
insurance or annuities may be involved? Yes No If yes, complete replacement form
and submit with this form.
Representative's Signature
Broker Number / SSN
Compensation Option A B C
Authorized B/D Signature
Broker-Dealer/Branch / ID #
Address
Telephone
This space if for the use of BMA's Annuity Service Center
A1012 (5/97)
ARTICLES OF INCORPORATION
OF
BUSINESS MEN'S ASSURANCE
COMPANY OF AMERICA
ARTICLE I
The name of this Corporation is Business Men's Assurance Company of America.
ARTICLE II
The principal office of the Corporation shall be located in Kansas City,
Missouri.
ARTICLE III
The duration of the Corporation is perpetual.
ARTICLE IV
The Corporation is formed for the purpose of making insurance upon the lives of
individuals and every assurance pertaining thereto or connected therewith, and
to grant, purchase and dispose of annuities and endowments of every kind and
description whatsoever, and to provide an indemnity against death, and for
weekly or other periodic indemnity for disability occasioned by accident or
sickness to the person of the insured, and generally to do all such other things
as shall be permitted a Corporation of this kind by law, and not expressly
prohibited by applicable provisions of Missouri law. The accident and health
insurance and life insurance shall be made separate departments of the
Corporation.
In order to carry out the purpose for which it is organized, the Corporation
shall have the following rights and powers to the extent not inconsistent with
or expressly prohibited by applicable provisions of Missouri law:
A. To enter into any lawful contract or contracts with person, firms,
corporations, other entities, governments or any agencies or subdivisions
thereof, including guaranteeing the performance of any contract or any
obligation of any person, firm, corporation or other entity.
B. To purchase and acquire, as a going concern or otherwise, and to carry
on, maintain and operate all or any part of the property or business of any
corporation, firm, association, entity, syndicate or person whatsoever, deemed
to be of benefit to the Corporation, or for use in any manner in connection with
any of its purposes; and to dispose thereof upon such terms as may seem
advisable to the Corporation.
C. To purchase or otherwise acquire, hold, sell, pledge, reissue, transfer
or otherwise deal in, shares of the Corporation's own stock, provided that it
shall not use its funds or property for the purchase of its own shares of stock
when such use would be prohibited by law, by the Articles of Incorporation, or
by the Bylaws of the Corporation; and, provided further, that shares of its own
stock belonging to it shall not be voted upon directly or indirectly.
D. To invest, lend and deal with moneys of the Corporation in any lawful
manner, and to acquire by purchase, by the exchange of stock or other securities
of the Corporation, by subscription or otherwise, and to invest in, to hold for
investment or for any other purpose, and to use, sell, pledge or otherwise
dispose of, and in general to deal in any interest concerning, or enter into any
bonds, notes, debentures, certificates, receipts and other securities and
obligations of any government, state, municipality, corporation, association or
other entity, including individuals and partnerships and, while owner thereof,
to exercise all of the rights, powers and privileges of ownership, including
among other things, the right to vote thereon for any and all purposes, and to
give consents with respect thereto.
E. To borrow or raise money for any purpose of the Corporation, and to
secure any loan, indebtedness or obligation of the Corporation and the interest
accruing thereon, and for that or any other purpose to mortgage, pledge,
hypothecate or charge all or any part of the present or hereafter acquired
property, rights and franchises of the Corporation, real, personal, mixed or of
any character whatever, subject only to limitations specifically imposed by law.
F. To advise and counsel others, and to act for and on behalf of others
concerning the acquisition, organization, promotion, development, financing,
operation, management, disposition and termination of corporations,
associations, partnerships, firms and investments of all kinds, and to perform
any and all services relating to the foregoing and otherwise, and to enter into
and perform contracts, agreements and undertakings in connection therewith.
G. To buy, lease, rent or otherwise acquire, own, hold, use, divide,
partition, develop, improve, operate and sell, lease, mortgage or otherwise
dispose of, deal in and turn to account real estate, leaseholds, and any and all
interests or estates therein or appertaining thereto; and to construct, acquire,
manage, operate, improve, maintain, own, sell, lease or otherwise dispose of or
deal in buildings, structures and improvements situated or to be situated on any
real estate or leasehold.
H. To do any and all of the things hereinabove enumerated alone for its own
account, or for the account of others, or as the agent for others, or in
association with others, or by or through others, and to enter into all lawful
contracts and undertakings in respect thereof.
I. In general, to carry on any other business in connection with each and
all of the foregoing or incidental thereto, and to carry on, transact and engage
in any and every lawful business or other lawful things calculated to be of
gain, profit or benefit to the Corporation as fully and freely as a natural
person might do, to the extent and in the manner, and anywhere within and
without the State of Missouri, as it may from time to time determine; and to
have and exercise each and all of the powers and privileges, either direct or
incidental, which are given and provided by or are available under the laws of
the State of Missouri applicable to life insurance companies or applicable to
all insurance companies.
None of the purposes and powers specified in any of the paragraphs of this
Article IV shall be in any way limited or restricted by reference to or
inference from the terms of any other paragraph, and the purposes and powers
specified in each of the paragraphs of this Article IV shall be regarded as
independent purposes and powers. The enumeration of specific purposes and powers
in this Article IV shall not be construed to restrict in any manner the general
purposes and powers of this Corporation, nor shall the expression of one thing
be deemed to exclude another, although it be of like nature. The enumeration of
purposes or powers herein shall not be deemed to exclude, or in any way limit by
inference, any purposes or powers which this Corporation has power to exercise,
whether expressly by the laws of the State of Missouri now or hereafter in
effect, or impliedly by any reasonable construction of such laws.
ARTICLE V
The aggregate number of shares of Capital Stock which the Company is authorized
to issue is 27,000,000, divided into the following classes:
3,000,000 shares of Preferred Stock of the par value of $1.00 per
share, which is hereinafter referred to as "Preferred Stock," and
24,000,000 shares of Common Stock of the par value of $1.00 per share,
which is hereinafter referred to as "Common Stock."
The designations, preferences and relative, participating, optional or other
special rights or each class of stock, and the qualifications, limitations or
restrictions of such preferences and/or rights are, or shall be determined, as
follows:
A. Provisions Applicable to Preferred Stock
1. Issuance of Shares
(a) Shares of Preferred Stock may be issued form time to time in
one or more series as provided herein. Each such series shall be
designated so as to distinguish the shares thereof from the shares of
all other series, and shall have such voting powers, full, special or
limited, or no voting powers, and such designations, preferences and
relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the Articles of Incorporation or any amendment
thereto, or in the resolution or resolutions providing for the issue
of such stock adopted by the Board of Directors pursuant to authority
expressly vested in it by the provisions of these Articles of
Incorporation. The shares of Preferred Stock of all series shall be of
equal rank, and all shares of any particular series of Preferred Stock
shall be identical, except that if the dividends thereon are
cumulative, the date or dates from which they shall be cumulative may
differ. The terms of any series of Preferred Stock may vary from the
terms of any other series of Preferred Stock to the full extent now or
hereafter permitted by Missouri law, and the terms of each series
shall be fixed, prior to the issuance thereof, in the manner provided
in subparagraph (b) of this paragraph 1. Without limiting the
generality of the foregoing, shares of Preferred Stock of different
series may, subject to any applicable provisions of law, vary with
respect to the following terms:
(1) The distinctive designation of such series and the
number of shares of such series;
(2) The rate or rates at which shares of such series shall
be entitled to receive dividends, the conditions upon, and the
times of payment of such dividends, the relationship and
preference, if any, of such dividends to dividends payable on any
other class or classes or any other series of stock, and whether
such dividends shall be cumulative or non-cumulative, and if
cumulative, the date or dates from which such dividends shall be
cumulative;
(3) The right, if any, to exchange or convert the shares of
such series into shares of any other class or classes, or of any
other series of the same or any other class or classes of stock
of the Company, and if so convertible or exchangeable, the
conversion price or prices, or the rates of exchange, and the
adjustments, if any, at which such conversion or exchange may be
made;
(4) If shares of such series are subject to redemption, the
time or times and the price or prices at which, and the terms and
conditions on which, such shares shall be redeemable;
(5) The preference of the shares of such series as to both
dividends and assets in the event of any voluntary or involuntary
liquidation or dissolution, or winding up or distribution of
assets of the Company;
(6) The obligation, if any, of the Company to purchase,
redeem or retire shares of such series, and/or maintain a fund
for such purposes and the amount or amounts to be payable from
time to time for such purposes or into such fund, the number of
shares to be purchased, redeemed or retired, and the other terms
and conditions of any such obligation;
(7) The voting rights, if any, full, special or limited, to
be given the shares of such series, including without limiting
the generality of the foregoing, the right, if any, as a series
or in conjunction with other series or classes, to elect one or
more members of the Board of Directors either generally or at
certain specified times, or under certain circumstances and
restrictions, if any, on particular corporate acts without a
specified vote or consent of holders of such shares (such as,
among others, restrictions on modifying the terms of such series
of Preferred Stock, authorizing or issuing additional shares of
Preferred Stock, or creating any class of stock ranking prior to
or on a parity with the Preferred Stock as to dividends or
assets); and
(8) Any other preferences and relative, participating,
optional or other special rights and qualifications, limitations
or restrictions thereof.
(b) Authority is hereby expressly granted to and vested in the Board
of Directors at any time, or from time to time, to issue the Preferred
Stock as Preferred Stock of any series, and in connection with the creation
of each such series, so far as not inconsistent with the provisions of this
Article V applicable to all series of Preferred Stock, to fix, prior to the
issuance thereof, by resolution or resolutions providing for the issue of
shares thereof, the authorized number of shares of such series, which
number may be increased, unless otherwise provided by the Board of
Directors in creating such series, or decreased, but not below the number
of shares thereof then outstanding, from time to time by like action of the
Board of Directors, the voting powers of such series and the designations,
rights, preferences, and relative, participating, option or other special
rights, and the qualifications, limitations or restrictions thereof, of
such series.
II. Provisions Applicable to Common Stock
1. Dividends. Subject to the provisions of law and the rights of the
Preferred Stock, and any other class or series of stock having a preference
as to dividends over the Common Stock then outstanding, the holders of
Common Stock shall be entitle to receive dividends at such times and in
such amounts as the Board of Directors shall determine.
2. Liquidation Rights. In the event of any voluntary or involuntary
dissolution, liquidation or winding up of the Company, the holders of
Common Stock, after payment in full to the holders of Preferred Stock, or
after provision for such payment shall have been made, all in accordance
with the terms governing such Preferred Stock, shall be entitled to payment
and distribution of the assets of the Company ratably in accordance with
the number of shares held by them respectively.
III. General Provisions
1. Voting Rights. Except as may be provided pursuant to paragraph 1 of
section A. of this Article V, the holders of outstanding stock, regardless
of class, shall be entitled to one vote for each share held on each matter
submitted to a vote at a meeting of stockholders.
2. Preemptive Rights. No holder of any of the shares of any class or
series of stock or of options, warrants or other rights to purchase shares
of any class or series of stock, or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any unissued
stock of any class or series, or any additional shares of any class or
series to be issued by reason of any increase in the authorized Capital
Stock of the corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any such
unissued stock, additional authorized issue of shares of any class or
series of stock, or securities convertible into or exchangeable for stock,
or carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Shareholders to such persons, firms,
corporations or associations, whether such holders or others, and upon such
terms as may be deemed advisable by the Shareholders in the exercise of
their sole discretion.
3. The relative powers, preferences and rights of each series of
Preferred Stock in relation to the powers, preferences and rights of each
other series of Preferred Stock shall, in each case, be as fixed from time
to time by the Board of Directors in the resolution or resolutions adopted
pursuant to authority granted in subparagraph (b) of paragraph 1, section
A. of this Article V, and the consent, by class or series vote or
otherwise, of the holders of such of the series of Preferred Stock as are
from time to time outstanding shall not be required for the issuance by the
Board of Directors of any other series of Preferred Stock whether or not
the powers, preferences and rights of such other series shall be fixed by
the Board of Directors as senior to, or on a parity with, the powers,
preferences and rights of such outstanding series, or any of them;
provided, however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock adopted
pursuant to subparagraph (b) of section A of this Article V that the
consent of the holders of a majority (or such greater proportion as shall
be therein fixed) of the outstanding shares of such series voting thereon
shall be required for the issuance of any or all other series of Preferred
Stock.
4. Subject to the provisions of paragraph 3 of this section C, shares
of any series of Preferred Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine, and on such terms
and for such consideration as shall be fixed by the Board of Directors.
5. Shares of Common Stock may be issued from time to time as the Board
of Directors of the Corporation shall determine, and on such terms and for
such consideration as shall be fixed by the Board of Directors.
6. The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased from
time to time by the affirmative vote of the holders of a majority of the
stock of the Corporation entitled to vote thereon.
ARTICLE VI
The number of Directors to constitute the present Board of Directors of the
Corporation is fifteen. Hereafter, the number of Directors of the Corporation
shall be fixed by, or in the manner provided in, and elected in the manner
provided in, the Bylaws of the Corporation, the applicable provisions of which
shall be consistent with those provisions of The General and Business
Corporation Law of Missouri relating to election of Directors, and not
prohibited by applicable insurance law. Vacancies in the Board of Directors may
be filled by vote of a majority of Directors at any annual or special meeting.
Directors need not be shareholders unless the Bylaws of the Corporation require
them to be shareholders.
ARTICLE VII
1. Except as may be otherwise specifically provided by statute or the Articles
of Incorporation or Bylaws of the Corporation, as from time to time amended, all
powers of management, direction and control of the Corporation shall be, and
hereby are, vested in the Board of Directors, and shall be exercised by them and
by such officers and agents as they may from time to time appoint and empower.
The Board shall have the power to make such bylaws, rules and regulations for
the transaction of the business of the Corporation as are not inconsistent with
these Articles of Incorporation or the laws of the State of Missouri.
2. The Bylaws of the Corporation may from time to time be altered, amended,
suspended or repealed, or new bylaws may be adopted, either of the following
ways: (i) by the affirmative vote, at any annual or special meeting of the
shareholders, of the holders of a majority of the outstanding shares of stock of
the Corporation entitled to vote; or (ii) by resolution adopted by a majority of
the full Board of Directors; provided, however, that the power of the Directors
to alter, amend, suspend or repeal the Bylaws or any portion thereof may be
denied as to any bylaws or portion thereof enacted by the shareholders if at the
time of such enactment the shareholders shall so expressly provide.
ARTICLE VIII
The Corporation reserves the right at any annual or special meeting of the
shareholders to alter, amend or repeal any provision contained in its Articles
of Incorporation in the manner now or hereafter prescribed by the statutes of
Missouri, and all rights and powers conferred herein are granted, subject to
this reservation.
BYLAWS OF
BUSINESS MEN'S ASSURANCE
COMPANY OF AMERICA
ARTICLE I
SHAREHOLDERS
Section 1: Place of Meetings. All meetings of the shareholders shall be held at
the principal office of the Corporation in Missouri, except such meetings as the
Board of Directors, to the extent permissible by law, expressly determines shall
be held elsewhere, in which case such meetings may be held, upon notice thereof
as hereinafter provided, at such other place or places, within or without the
State of Missouri, as the Board of Directors shall have determined, and as shall
be stated in such notice; and unless specifically prohibited by law, any meeting
may be held at any place and time and for any purpose, if consented to in
writing by all the shareholders entitled to vote thereat.
Section 2: Annual Meetings. An annual meeting of the shareholders to elect
directors and to transact such other business as may properly be brought before
the meeting shall be held each year on a date to be determined by the Board of
Directors.
Section 3: Special Meetings. Special meetings of the shareholders may be called
by the Chairman of the Board, the President, the Secretary, the Board of
Directors or the holders of, or any officer or shareholder upon the written
request of the holders of, not less than four-fifths (4/5ths) of the outstanding
shares entitled to vote at any such meeting, and shall be called by any officer
directed to do so by the Board of Directors. Shareholders' requests for such
special meeting shall be in writing and shall state the nature of the business
desired to be transacted. The "call" and the "notice" of any such meeting shall
be deemed to be synonymous.
Section 4: Consent of Shareholders in Lieu of Meeting. Any action required to be
taken on which may be taken at a meeting of the shareholders may be taken
without a meeting if consents in writing, setting forth the action so taken,
shall be signed by all the shareholders entitled to vote with respect to the
action so taken. The Secretary shall file such consents with the minutes of the
meetings of the shareholders.
Section 5: Notice. Written or printed notice of each meeting of the
shareholders, whether annual or special, stating the place, day and hour of the
meeting and, in case of a special meeting, the purpose or purposes thereof,
shall be delivered or given to each shareholder entitled to vote thereat, either
personally or by mail, not less than ten (10) days or more than fifty (50) days
prior to the meeting unless, as to a particular matter, other or further notice
shall be given. In addition to such written or printed notice, published notice
shall be given if (and in the manner) then required by law.
Any notice of a shareholders' meeting sent by mail shall be deemed to be
delivered when deposited in the United States mail, with postage thereon prepaid
addressed to the shareholder at his address as it appears on the records of the
Corporation.
Section 6: Waiver of Notice. Whenever any notice is required to be given under
the provisions of these Bylaws, or the Articles of Incorporation or of any law,
a waiver thereof in writing signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed the
equivalent to the giving of such notice.
To the extent provided by law, attendance of a shareholder at any meeting shall
constitute a waiver of notice of such meeting.
Section 7: Presiding Officials. Every meeting of the shareholders, for whatever
object, shall be convened by either the Chairman of the Board or the President,
or by the officer or person who called the meeting by notice as above provided.
Section 8: Business which may be Transacted at Annual Meeting. At each annual
meeting of the shareholders, the shareholders shall elect a Board of Directors
to hold office until the end of the term for which they have been elected or
until their successors shall have been elected and qualified, and they may
transact such other business as may be desired, whether or not the same was
specified in the notice of the meeting, unless the consideration of such other
business without its having been specified in the notice of the meeting as one
of the purposes thereof, is prohibited by law.
Section 9: Business which may be Transacted at Special Meetings. Business
transacted at all special meetings shall be confined to the purposes stated in
the notice of such meeting, unless the transaction of other business is
consented to by the holders of all of the outstanding shares of stock of the
Corporation entitled to vote thereat.
Section 10: Quorum of Shareholders. Except as otherwise provided by law or by
the Articles of Incorporation, a majority of the outstanding shares entitled to
vote at any meeting represented in person or by proxy shall constitute a quorum
at a meeting of the shareholders, but less than a quorum shall have the right
successively to adjourn the meeting to a specified date not longer than ninety
(90) days after such adjournment, and no notice need be given of such
adjournment to shareholders not present at the meeting.
Section 11: Voting of Shareholders. Each shareholder shall be entitled to as
many votes on any proposition as he has shares of stock in the Corporation, and
he may vote them in person or by proxy. Such proxy shall be in writing, or in
such other transmitted form as may be acceptable to the Secretary, and shall
state the name of the person authorized to cast such vote and the date of the
meeting at which such vote shall be cast.
Section 12: Registered Shareholders - Exceptions - Stock Ownership Presumed. The
Corporation shall be entitled to treat the holders of the shares of stock of the
Corporation, as recorded in the stock record or transfer books of the
Corporation, as the holders of record and as the holders and owners in fact
thereof, and accordingly, the Corporation shall not be required to recognize any
equitable or other claim to or interest in any such shares on the part of any
other person, firm, partnership, corporation or association, whether or not the
Corporation shall have express or other notice thereof, except as is otherwise
expressly required by law, and the term "shareholder," as used in these Bylaws,
means one who is a holder of record of shares of the Corporation.
ARTICLE II
DIRECTORS
Section 1: Directors - Number. The number of directors which shall constitute
the whole Board of Directors of the Corporation shall not be less than nine (9)
nor greater than fifteen (15). The number of Directors within the minimum and
maximum limitations specified in the preceding sentence that shall constitute
the Board of Directors at any time shall be fixed from time to time by the Board
of Directors pursuant to a resolution adopted by a majority of the entire Board
of Directors. Directors need not be shareholders unless the Articles of
Incorporation at any time so provide.
Section 2: Directors - Age Qualifications. No person shall be eligible for
election as a Director after attaining age 75.
Section 3. Powers of the Board. The property and business of the Corporation
shall be controlled and managed by the Directors, acting as a Board. The Board
shall have and is vested with all and unlimited powers and authorities, except
as may be expressly limited by law, the Articles of Incorporation or these
Bylaws, to do or cause to be done any and all lawful things for and in behalf of
the Corporation, to exercise or cause to be exercised any or all of its powers,
privileges and franchises, and to seek the effectuation of its objects and
purposes.
Section 4: Regular Meetings - Notice. Regular meetings of the Board of Directors
may be held on such dates and at such places, either within or without the State
of Missouri shall from time to time be fixed by the Chairman of the Board of
Directors. Notice of such meetings shall be mailed or sent by facsimile to each
Director at least two days prior thereto. Notice of any such meetings of the
Board of Directors may be waived in writing or by facsimile before or after the
meeting, and attendance of a Director at a meeting shall be deemed a waiver of
notice, except where a Director attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purposes
of, any regular meeting of the Board of Directors need be specified in the
notice or waiver of notice of a meeting. Any business may be transacted at a
regular meeting.
Section 5: Special Meetings. Special meetings of the Board may be called at any
time by the Chairman of the Board, the President or the Secretary, or by any one
or more of the Directors. The place may be within or without the State of
Missouri, as designated in the notice.
Written or printed notice of each special meeting of the Board, stating the
place, day and hour of the meeting and the purpose or purposes thereof, shall be
mailed to each Director at least three (3) days before the day on which the
meeting is to be held, or shall be sent to him by facsimile, or be delivered, at
least two (2) days before the day on which the meeting is to be held. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail with postage thereon, addressed to the Director at his residence or usual
place of business. If notice be given by facsimile, such notice shall be deemed
to be delivered when the facsimile confirmation of completion is received. The
notice may be given by any officer having authority to call the meeting or by
any Director.
"Notice" and "call" with respect to such meetings shall be deemed to be
synonymous.
Section 6: Quorum. A majority of the full Board of Directors shall constitute a
quorum for the transaction of business, but less than a quorum may adjourn from
time to time until a quorum is obtained. The act of the majority of the
Directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
Section 7: Action Without a Meeting. If all the Directors severally or
collectively consent in writing to any action to be taken by the Directors, such
consents shall have the same force and effect as a unanimous vote of the
Directors at a meeting duly held. The Secretary shall file such consents with
the minutes of the meetings of the Board of Directors.
Section 8: Consulting Directors. The Board of Directors may appoint to the
office of consulting director any person whose abilities and interest in the
Corporation, in the opinion of the Board, qualify him to render service to the
Board. Such consulting Directors may receive notice of and attend meetings of
the Board of Directors, shall have no vote in the affairs of the Corporation,
and shall not be counted for the purposes of determining a quorum a majority of
the Board for any purpose. Such consulting directors shall serve in an advisory
capacity to the Board of Directors only, and no action of the Board shall be
invalid because of the failure of any such consulting director to receive notice
of or to attend any meeting of the Board, or to be informed of or to approve of
any action taken by the Board of Directors.
Section 9: Executive Committee. The Board of Directors may, by resolution or
resolutions adopted by a majority of the whole Board of Directors, designate an
Executive Committee, such Committee to consist of two or more Directors of the
Corporation, which Committee, to the extent provided in said resolution or
resolutions, shall have and may exercise all of the authority of the Board of
Directors in the management of the Corporation; provided, however, that the
designation of such Committee and the delegation thereto of authority shall not
operate to relieve the Board of Directors, or any member thereof, of any
responsibility imposed upon it or him by law.
The Executive Committee shall keep regular minutes of its proceedings, which
minutes shall be recorded in the minutes of the Corporation. The Secretary or an
Assistant Secretary of the Corporation may act as Secretary for the Committee if
the Committee so requests.
Section 10: Investment Committee. The Board of Directors shall appoint an
Investment Committee which shall consist of not less than three members nor more
than eight members who may, but need not be, Directors of the Corporation, and
who shall serve until their successors are selected. The Investment Committee
shall establish the investment policies of the Corporation, and shall have
overall responsibility for the execution of the Corporation's investment
program. The Investment Committee shall have regular meetings at least once each
quarter, and two members of the Committee shall constitute a quorum at any
regular or special meeting of the Committee. Between meetings of the Committee,
any two members thereof may authorize the acquisition or disposition of any
investment by the Corporation.
Section 11. Other Committees. The Board of Directors may, from time to time,
appoint and fix the duties of such additional committees as they, in their
discretion, shall deem necessary or advisable for the proper operation of the
Corporation.
Section 12: Compensation of Directors and Committee Members. Each Director, as
such, shall be entitled to receive reimbursement for his reasonable expenses
incurred in attending meetings of the Board of Directors or any committee
thereof or otherwise in connection with his attention to the affairs of the
Corporation. In addition, each Director shall be entitled to such fee for his
services as a Director (and if a member of any committee of the Board of
Directors, such fee for his services as such member), as may be fixed from time
to time by the shareholders of the Corporation. Such fees may be fixed both for
meetings attended and on an annual basis, or either thereof, and may be payable
currently or deferred. Nothing herein contained shall be construed to preclude
any Director or committee member from serving the Corporation or any of its
subsidiaries in any other capacity and receiving compensation therefor.
ARTICLE III
OFFICERS
Section 1: Officers - Who Shall Constitute. The officers of the Corporation
shall be a Chairman of the Board, a President, one or more Vice Presidents, a
Secretary, a Treasurer, one or more Assistant Secretaries, and one or more
Assistant Treasurers. The Board shall elect or appoint a President and Secretary
at its annual meeting held after each annual meeting of the shareholders. The
Board then, or from time to time, may also elect or appoint one or more of the
other prescribed officers or any other officers as it shall deem advisable, but
need not elect or appoint any officers other than a President and a Secretary.
The Board may, if it desires, further identify or describe any one or more of
such officers. Additionally, one or more appointed vice presidents, assistant
secretaries or assistant treasurers may be appointed from time to time by the
Chairman, the President or the Senior Vice President responsible for the
division to which such appointees are assigned.
The Officers of the Corporation need not be members of the Board of Directors.
Any two or more offices may be held by the same person, except the office of
President and Secretary.
An officer shall be deemed qualified when he enters upon the duties of the
office to which he has been elected or appointed, and furnishes any bond
required by the Board; but the Board may also require of such person his written
acceptance and promise to faithfully discharge the duties of such office.
Section 2: Term of Office. Each officer of the Corporation shall hold his office
at the pleasure of the Board of Directors or for such other period as the Board
may specify at the time of his election or appointment, or until his death,
resignation or removal by the Board, whichever first occurs. In any event, the
term of office of each officer of the Corporation holding his office at the
pleasure of the Board shall terminate at the annual meeting of the Board next
succeeding his election or appointment, and at which any officer of the
Corporation is elected or appointed, unless the Board provides otherwise at the
time of his election or appointment.
Section 3: Removal. Any officer or agent elected or appointed by the Board of
Directors, and any employee, may be removed or discharged by the Board whenever
in its judgment the best interests of the Corporation would be served thereby,
but such removal shall be without prejudice to the contract rights, if any, of
the person so removed.
Section 4. Authority to Hire, Discharge and Designate Duties. The Chairman of
the Board, the President or other executive employees of the Corporation shall
have the authority to hire, discharge and fix and modify the duties, salary or
other compensation of employees of the Corporation under their jurisdiction, and
such officers or executive employees shall have similar authority with respect
to obtaining and retaining for the Corporation the services of attorneys,
accountants and other experts.
Section 5: Chairman of the Board. The Chairman of the Board shall be the chief
executive officer of the Corporation, with such general executive powers and
duties of supervision and management as are usually vested in the office of the
chief executive officer of a corporation, and he shall carry into effect all
directions and resolutions of the Board. The Chairman shall preside at all
meetings of the shareholders and Board of Directors, at which he may be present
and shall have such other duties, powers and authority as may be prescribed
elsewhere in these Bylaws. The Board of Directors may delegate such other
authority and assign such additional duties to the Chairman of the Board, other
than those conferred by law exclusively upon the President, as it may, from time
to time, determine.
Section 6: The President. The President shall perform such duties as may be
specifically delegated to him by the Board of Directors or the Chairman of the
Board, and as are conferred by law exclusively upon him. In the absence,
disability or inability to act of the Chairman of the Board, the President shall
perform the duties and exercise the powers of the Chairman of the Board.
Section 7: Vice President. The Vice Presidents in the order of their seniority,
as determined by the Board, shall, in the absence, disability or inability to
act of the President, perform the duties and exercise the powers of the
President, and shall perform such other duties as the Board of Directors shall
from time to time prescribe.
Section 8: The Secretary and Assistant Secretaries. The Secretary shall attend
all meetings of the shareholders, and shall record or cause to be recorded all
votes taken and the minutes of all proceedings in a minute book of the
Corporation to be kept for that purpose. He shall perform like duties for the
executive and other standing committees when requested by the Board or any such
committee to do so.
He shall see that all books, records, lists and information, or duplicates
required to be maintained at the principal office for the transaction of the
business of the Corporation in Missouri, or elsewhere, are so maintained.
He shall keep in safe custody the seal of the Corporation, and when duly
authorized to do so, shall affix the same to any instrument requiring it, and
when so affixed, he shall attest the same by his signature.
He shall perform such other duties and have such other authority as may be
prescribed elsewhere in these Bylaws or from time to time by the Board of
Directors or the chief executive officer of the Corporation, under whose direct
supervision he shall be.
He shall have the general duties, powers and responsibilities of a secretary of
the Corporation.
Any Assistant Secretary, in the absence, disability or inability to act of the
Secretary, may perform the duties and exercise the powers of the Secretary, and
shall perform such other duties and have such other authority as the Board of
Directors may, from time to time, prescribe.
Section 9: The Treasurer and Assistant Treasurers. The Treasurer shall have the
responsibility for the safekeeping of the funds and securities of the
Corporation, shall keep or cause to be kept full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall keep,
or cause to be kept, all other books of account and accounting records of the
Corporation. He shall deposit or cause to be deposited all moneys and other
valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors or by any officers
of the Corporation to whom such authority has been granted by the Board of
Directors.
He shall disburse, or permit to be disbursed, the funds of the Corporation as
may be ordered or authorized generally, by the Board, and shall render to the
chief executive officer of the Corporation and the Directors whenever they may
require it, an account of all his transactions as Treasurer and of those under
his jurisdiction, and of the financial condition of the Corporation.
He shall perform such other duties and shall have such other responsibility and
authority, as may be prescribed elsewhere in these Bylaws or from time to time
by the Board of Directors.
He shall have the general duties, powers and responsibility of a treasurer of a
corporation, and shall, unless otherwise provided by the Board, be the chief
financial and accounting officer of the Corporation.
Any Assistant Treasurer, in the absence, disability or inability to act of the
Treasurer, may perform the duties and exercise the powers of the Treasurer, and
shall perform such other duties and have such other authority as the Board of
Directors may, from time to time, prescribe.
Section 10: Duties of Officers may be Delegated. If any officer of the
Corporation be absent or unable to act, or for any other reason that the Board
may deem sufficient, the Board may delegate, for the time being, some or all of
the functions, duties, powers and responsibilities of any officer to any other
officer, or to any other agent or employee of the Corporation or other
responsible person, provided a majority of the whole Board of Directors concurs
therein.
ARTICLE IV
INDEMNIFICATION AND LIABILITY OF
DIRECTORS, OFFICERS AND EMPLOYEES
Section 1: Indemnification. Each person who is or was a Director, officer or
employee of the Corporation or is or was serving at the request of the
Corporation as a Director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise (including the heirs,
executors, administrators or estate of such person) shall be indemnified by the
Corporation as a right to the full extent permitted or authorized by the laws of
the State of Missouri, as now in effect and as hereafter amended, against any
liability, judgment, fine, amount paid in settlement, cost and expense
(including attorneys' fees) asserted or threatened against and incurred by such
person in his capacity as or arising out of his status as a Director, officer or
employee of the Corporation, or if serving at the request of the Corporation, as
a Director, officer or employee of another corporation, partnership, joint
venture, trust or other enterprise. The indemnification provided by this Bylaw
provision shall not be exclusive of any other rights to which those indemnified
may be entitled under any other bylaw or under any agreement, vote of
shareholders or disinterested directors or otherwise, and shall not limit in any
way any right which the Corporation may have to make different or further
indemnifications with respect to the same or different persons or classes of
persons.
Without limiting the foregoing, the Corporation is authorized to enter into an
agreement with any Director, officer or employee of the Corporation providing
indemnification for such person against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement that result from any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including any action by or in the right of the
Corporation, that arises by reason of the fact that such person is or was a
Director, officer or employee of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, to the full
extent allowed by law, whether or not such indemnification would otherwise be
provided for in this Bylaw, except that no such agreement shall indemnify any
person from or on account of such person's conduct which was finally adjudged to
have been knowingly fraudulent, deliberately dishonest or willful misconduct.
Section 2: Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a Director, officer or employee of the
Corporation, or is or was serving at the request of the Corporation as a
Director, officer or employee of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of these Bylaws.
Section 3: Liability. No person shall be liable to the Corporation for any loss,
damage, liability or expense suffered by it on account of any action taken or
omitted to be taken by him as a Director, officer or employee of the corporation
or of any other corporation which he serves as a Director, officer or employee
at the request of the Corporation, if such person (i) exercised the same degree
of care and skill as a prudent man would have exercised under the circumstances
in the conduct of his own affairs, or (ii) took or omitted to take such action
in reliance upon advice of counsel for the Corporation, or for such other
corporation, or upon statements made or information furnished by Directors,
officers, employees or agents of the Corporation, or of such other corporation
which he had no reasonable grounds to disbelieve.
ARTICLE V
CAPITAL STOCK
Section 1: Issuance of Certificates. Shares of the capital stock of the
Corporation may be represented by entry on the stock record or transfer books of
the Corporation and need not be represented by certificates. When shares of
stock of the Corporation are represented by certificates, such certificates
shall be numbered, shall be in such form as may be prescribed by the Board of
Directors in conformity with law, and shall be entered in the stock books of the
Corporation as they are issued. Such entries shall show the name and address of
the person, firm, partnership, corporation or association to whom each
certificate is issued. Each certificate shall have printed, typed or written
thereon the name of the person, firm, partnership, corporation or association to
whom it is issued and the number of shares represented thereby. It shall be
signed by the Chairman of the Board of the President or a Vice President and the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer
of the Corporation, provided each certificate is signed by two officers who are
not the same person, and sealed with the seal of the Corporation, which seal may
be facsimile, engraved or printed. If the Corporation has a transfer agent or a
transfer clerk who signs such certificates, the signatures of any of the other
officers above mentioned may be facsimile, engraved or printed. In case any such
officer who has signed or whose facsimile signature has been placed upon any
such certificate shall have ceased to be such officer before such certificate is
issued, such certificate may, nevertheless, be issued by the Corporation with
the same effect as if such officer were an officer at the date of its issue.
Section 2: Transfers of Shares - Transfer Agent - Registrar. Transfers of shares
of stock shall be made on the stock record or transfer books of the Corporation
only by the person named in the stock certificate, or by his attorney lawfully
constituted in writing, and upon surrender of the certificate therefor. The
stock record book and other transfer records shall be in the possession of the
Secretary or of a transfer agent or transfer clerk for the Corporation. The
Corporation, by resolution of the Board, may from time to time, appoint a
transfer agent or transfer clerk, and if desired, a registrar, under such
arrangements and upon such terms and conditions as the Board deems advisable,
but until and unless the Board appoints some other person, firm or corporation
as its transfer agent or transfer clerk (and upon the revocation of any such
appointment, thereafter until a new appointment is similarly made), the
Secretary of the Corporation shall be the transfer agent or transfer clerk of
the Corporation without the necessity of any formal action of the Board, and the
Secretary, or any person designated by him, shall perform all of the duties
thereof.
Section 3: Lost Certificates. In the case of the loss or destruction of any
certificate for shares of stock of the Corporation, another may be issued in its
place upon proof of such loss or destruction and upon the giving of a
satisfactory bond of indemnity to the Corporation and the transfer agent and
registrar of such stock, if any, in such sum as the Board of Directors may
provide; provided, however, that a new certificate may be issued without
requiring a bond when, in the judgment of the Board, it is proper so to do.
Section 4. Regulations. The Board of Directors shall have power and authority to
make all such rules and regulations as it may deem expedient concerning the
issue, transfer, conversion and registration of and all other rights pertaining
to certificates for shares of stock of the Corporation, not inconsistent with
the laws of Missouri, the Articles of Incorporation or these Bylaws.
ARTICLE VI
GENERAL
Section 1: Fixing of Capital - Transfers of Surplus. Except as may be
specifically otherwise provided in the Articles of Incorporation, the Board of
Directors is expressly empowered to exercise all authority conferred upon it or
the Corporation by any law or statute, and in conformity therewith, relative to:
1. the determination of what part of the consideration received for
shares of the Corporation shall be stated capital;
2. increasing stated capital;
3. transferring surplus to stated capital;
4. the consideration to be received by the Corporation for its shares;
and
5. all similar or related matters
provided that any concurrent action or consent by or of the Corporation and its
shareholders required to be taken or given pursuant to law, shall be duly taken
or given in connection therewith.
Section 2: Dividends. Dividends upon the outstanding shares of the Corporation,
subject to the provision of the Articles of Incorporation and of any applicable
law, may be declared by the Board of Directors at any meeting. Dividends may be
paid in cash, in property, or in shares of the Corporation's stock.
Liquidating dividends or dividends representing a distribution of paid-in
surplus or a return of capital shall be made only when and in the manner
permitted by law.
Section 3: Checks. All checks and similar instruments for the payment of money
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate. If no such designation
is made, and unless and until the Board otherwise provides, the President and
Secretary or the President and Treasurer shall have the power to sign all such
instruments for, in behalf and in the name of the Corporation which are executed
or made in the ordinary course of the Corporation's business.
Section 4: Records. The Corporation shall keep at its principal place of
business in Missouri, original or duplicate books in which shall be recorded the
number of its shares subscribed, the names of the owners of its shares, the
numbers owned of record by them respectively, the amount of shares paid, and by
whom, the transfer of said shares with the date of transfer, the amount of its
assets and liabilities, and the names and places of residence of its officers,
and from time to time, such other or additional records, statements, lists and
information as may be required by law, including shareholders' lists.
Section 5: Inspection of Records. A shareholder, if he be entitled and demands
to inspect the records of the Corporation pursuant to any statutory or other
legal right, shall be privileged to inspect such records only during the usual
and customary hours of business and in such manner as will not unduly interfere
with the regular conduct of the business of the Corporation. A shareholder may
delegate his right of inspection to a certified or public accountant on the
condition, to be enforced at the option of the Corporation, that the shareholder
and accountant agree with the Corporation to furnish to the Corporation promptly
a true and correct copy of each report with respect to such inspection made by
such accountant. No shareholder shall use, permit to be used or acquiesce in the
use by others of any information so obtained to the detriment competitively of
the Corporation, nor shall he furnish or permit to be furnished any information
so obtained to any competitor or prospective competitor of the Corporation. The
Corporation, as a condition precedent to any shareholder's inspection of the
records of the Corporation, may require the shareholder to indemnify the
Corporation, in such manner and for such amount as may be determined by the
Board of Directors, against any loss or damage which may be suffered by it
arising out of or resulting from any unauthorized disclosure made or permitted
to be made by such shareholder of information obtained in the course of such
inspection.
Section 6: Corporate Seal. The Corporate Seal shall have inscribed thereon the
name of the Corporation and the words: Corporate Seal - Missouri. Said seal may
be used by causing it or a facsimile thereof to be impressed or affixed or in
any manner reproduced.
Section 7: Amendments. The Bylaws of the Corporation may, from time to time, be
suspended, repealed, amended or altered, or new Bylaws may be adopted, in the
manner provided in the Articles of Incorporation.
PARTICIPATION AGREEMENT
Among
BERGER INSTITUTIONAL PRODUCTS TRUST
BBOI WORLDWIDE LLC
and
[NAME OF THE INSURANCE COMPANY]
THIS AGREEMENT, made and entered into this _____ day of , 199 by and among
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA, (hereinafter the "Insurance
Company"), a Missouri corporation, on its own behalf and on behalf of each
segregated asset account of the Insurance Company set forth on Schedule A hereto
as may be amended from time to time (each such account hereinafter referred to
as the "Account"), BERGER INSTITUTIONAL PRODUCTS TRUST, a Delaware business
trust (the "Trust") and BBOI WORLDWIDE LLC, a Delaware limited liability company
("BBOI Worldwide").
WHEREAS, the Trust engages in business as an open-end management investment
company and is available to act as the investment vehicle for variable annuity
and life insurance contracts to be offered by separate accounts of insurance
companies which have entered into participation agreements substantially
identical to this Agreement ("Participating Insurance Companies") and for
qualified retirement and pension plans ("Qualified Plans"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Trust has obtained an order from the Securities and Exchange
Commission (the "Commission"), dated April 24, 1996 (File No. 812-9852),
granting Participating Insurance Companies and their separate accounts
exemptions from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (the "1940 Act") and Rules
6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit
shares of the Trust to be sold to and held by Qualified Plans and by variable
annuity and variable life insurance separate accounts of life insurance
companies that may or may not be affiliated with one another (the "Mixed and
Shared Funding Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and the offering of its shares is registered under
the Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, BBOI Worldwide is duly registered as an investment adviser under
the Investment Advisers Act of 1940 and any applicable state securities law; and
WHEREAS, the Insurance Company has registered under the 1933 Act, or will
register under the 1933 Act, certain variable annuity or variable life insurance
contracts identified by the form number(s) listed on Schedule B to this
Agreement, as amended from time to time hereafter by mutual written agreement of
all the parties hereto (the "Contracts"); and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the board of directors of the
Insurance Company on the date shown for that Account on Schedule A hereto, to
set aside and invest assets attributable to the Contracts; and
WHEREAS, the Insurance Company has registered or will register each Account
as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurance Company intends to purchase shares in the Funds at
net asset value on behalf of each Account to fund the Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the Insurance
Company, the Trust and BBOI Worldwide agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Insurance Company those shares of the
Trust which each Account orders, 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 of the Trust. For purposes of this Section 1.1, the
Insurance Company shall be the designee of the Trust for receipt of such orders
from the Accounts and receipt by such designee shall constitute receipt by the
Trust; provided that the Trust receives notice of such order by 7:00 a.m.,
Mountain Time, on the next following Business Day. In this Agreement, "Business
Day" shall mean any day on which the New York Stock Exchange is open for trading
and on which the Trust calculates its net asset value pursuant to the rules of
the Commission.
1.2. The Trust agrees to make its shares available for purchase at the
applicable net asset value per share by the Insurance Company and its Accounts
on those days on which the Trust calculates its Funds' net asset values pursuant
to rules of the Commission and the Trust shall use reasonable efforts to
calculate its Funds' net asset values on each day on which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the trustees of the
Trust may refuse to sell shares of any Fund to any person, or suspend or
terminate the offering of shares of any Fund if such action is required by law
or by regulatory authorities having jurisdiction or is, in the sole discretion
of the trustees of the Trust acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of that Fund.
1.3. The Trust agrees that all shares of the Funds will be sold only to
Insurance Companies which have agreed to participate in the Trust to fund their
separate accounts and/or to qualified plans, all in accordance with the
requirements of Section 817(h) of the Internal Revenue Code of 1986, as amended
("Code") and Treasury Regulation 1.817-5. Shares of the Funds will not be sold
directly to the general public.
1.4. The Trust will not sell its shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Sections 2.4, 3.4, 3.5, and Sections 7.1 - 7.7 of this Agreement is in
effect to govern such sales.
1.5. The Trust agrees to redeem, on the Insurance Company's request, any
full or fractional shares of the Trust held by the Account, 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. However, if one or more
Funds has determined to settle redemption transactions for all of its
shareholders on a delayed basis (more than one business day, but in no event
more than three Business Days, after the date on which the redemption order is
received, unless otherwise permitted by an order of the Commission under Section
22(e) of the 1940 Act), the Trust shall be permitted to delay sending redemption
proceeds to the Insurance Company by the same number of days that the Trust is
delaying sending redemption proceeds to the other shareholders of the Fund. For
purposes of this Section 1.5, the Insurance Company shall be the designee of the
Trust for receipt of requests for redemption from each Account and receipt by
that designee shall constitute receipt by the Trust; provided that the Trust
receives notice of the request for redemption by 7:00 a.m., Mountain Time, on
the next following Business Day.
1.6. The Insurance Company shall pay for Trust shares by 1:00 p.m.,
Mountain Time, on the next Business Day after an order to purchase Trust shares
is made in accordance with the provisions of Section 1.1 hereof. Payment shall
be in federal funds transmitted by wire. For the purpose of Sections 2.9 and
2.10, upon receipt by the Trust of the federal funds so wired, such funds shall
cease to be the responsibility of the Insurance Company and shall become the
responsibility of the Trust. Payment of net redemption proceeds (aggregate
redemptions of a Fund's shares by an Account minus aggregate purchases of that
Fund's shares by that Account) of less than $1 million for a given Business Day
will be made by wiring federal funds to the Insurance Company on the next
Business Day after receipt of the redemption request. Payment of net redemption
proceeds of $1 million or more will be by wiring federal funds within three
Business Days after receipt of the redemption request. However, payment may be
postponed under unusual circumstances, such as when normal trading is not taking
place on the New York Stock Exchange, an emergency as defined by the Securities
and Exchange Commission exists, or as permitted by the Securities and Exchange
Commission.
1.7. Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Insurance Company or any
Account. Shares ordered from the Trust will be recorded in an appropriate title
for each Account or the appropriate subaccount of each Account.
1.8. The Trust shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurance Company of any income,
dividends or capital gain distributions payable on the Funds' shares. The
Insurance Company hereby elects to receive all income dividends and capital gain
distributions payable on a Fund's shares in additional shares of that Fund. The
Insurance Company reserves the right to revoke this election and to receive all
such income dividends and capital gain distributions in cash. The Trust shall
notify the Insurance Company of the number of shares issued as payment of
dividends and distributions.
1.9. The Trust shall make the net asset value per share for each Fund
available to the Insurance Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make those per-share net asset values available by 5:00 p.m.,
Mountain Time. If the Trust provides the Insurance Company with materially
incorrect share net asset value information through no fault of the Insurance
Company, the insurance Company on behalf of the Account, shall be entitled to an
adjustment to the number of shares purchased or redeemed to reflect the correct
share net asset value. Any material error in the calculation of net asset value
per share, dividend or capital gain information shall be reported promptly upon
discovery to the Insurance Company.
ARTICLE II. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
2.1. The Insurance Company represents, warrants and agrees that the
offerings of the Contracts are, or will be, registered under the 1933 Act; that
the Contracts will be issued and sold in compliance in all material respects
with all applicable federal and state laws and that the sale of the Contracts
shall comply in all material respects with applicable state insurance
suitability requirements. The Insurance Company further represents that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established the Account prior to any issuance or
sale thereof as a segregated asset account under Section 376.309 RSMo of the
Missouri insurance code and has registered, or warrants and agrees that prior to
any issuance or sale of the Contracts it will register, the Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts.
2.2. The Trust warrants and agrees that Trust shares sold pursuant to this
Agreement shall be registered under the 1933 Act, duly authorized for issuance
and sale in compliance with the laws of the State of Delaware and all applicable
federal securities laws and that the Trust is and shall remain registered under
the 1940 Act. The Trust warrants and agrees that it 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 advisable by the Trust or
BBOI Worldwide.
2.3. The Trust 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 warrants and agrees that it will maintain its
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Insurance Company immediately upon having a reasonable
basis for believing that it has ceased to so qualify or that it might not so
qualify in the future.
2.4. The Insurance Company represents that the Contracts are currently
treated as annuity or life insurance contracts under applicable provisions of
the Code and warrants and agrees that it will make every effort to maintain such
treatment and that it will notify the Trust and BBOI Worldwide immediately upon
having a reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.5. The Trust may elect to make payments to finance distribution expenses
pursuant to Rule 12b-1 under the 1940 Act. To the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1, the Trust undertakes to
have a board of trustees, a majority of whom are not interested persons of the
Trust, formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.6. The Trust makes no representation nor warranties as to whether any
aspect of its operations (including, but not limited to, fees and expenses and
investment policies) complies or will comply with the insurance laws or
regulations of the various states.
2.7. The Trust represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and represents, warrants and
agrees that it does and will comply in all material respects with the 1940 Act.
2.8. BBOI Worldwide represents that it is and warrants that it shall remain
duly registered as an investment adviser under all applicable federal and state
securities laws and agrees that it shall perform its obligations for the Trust
in compliance in all material respects with the laws of the State of Colorado
and any applicable state and federal securities laws.
2.9. The Trust and BBOI Worldwide represent and warrant that all of their
officers, employees, investment advisers, investment sub-advisers, and other
individuals or entities described in Rule 17g-1 under the 1940 Act dealing with
the money and/or securities of the Trust are, and shall continue to be at all
times, covered by a blanket fidelity bond or similar coverage for the benefit of
the Trust in an amount not less than the minimum coverage required currently by
Rule 17g-1 under the 1940 Act or related provisions as may be promulgated from
time to time. That fidelity bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.10. The Insurance Company represents and warrants that all of its
officers, employees, investment advisers, and other individuals or entities
described in Rule 17g-1 under the 1940 Act shall to the extent required by Rule
17g-1 be at all times covered by a blanket fidelity bond or similar coverage for
the benefit of the Trust.
ARTICLE III. DISCLOSURE DOCUMENTS AND VOTING
3.1. At least annually, the Trust or its designee shall provide the
Insurance Company, free of charge, with as many copies of the current prospectus
for the shares of the Funds as the Insurance Company may reasonably request for
distribution to existing Contract owners whose Contracts are funded by such
shares. The Trust or its designee shall provide the Insurance Company, at the
Insurance Companies expense, with as many more copies of the current prospectus
for the shares as the Insurance Company may reasonably request for distribution
to prospective purchasers of Contracts. If requested by the Insurance Company in
lieu thereof, the Trust or its designee shall provide such documentation
(including a "Camera ready" copy of the prospectus as set in type or, at the
request of the Insurance Company, as a diskette in the form sent to the
financial printer) and other assistance as is reasonably necessary in order for
the parties hereto once a year (or more frequently if the prospectus for the
shares is supplemented or amended) to have the prospectus for the Contracts and
the prospectus for the Trust shares and any other fund shares offered as
investments for the Contracts printed together in one document. The expenses of
such printing shall be apportioned between (a) the Insurance Company and (b) the
Trust in proportion to the number of pages of the Contract, other fund shares
prospectuses and the Trust shares prospectus, taking account of other relevant
factors affecting the expense of printing' such as covers, columns, graphs and
charts; the Trust to bear the cost of printing the shares' prospectus portion of
such document for distribution only to owners of existing Contracts funded by
the Trust shares and the Insurance Company to bear the expense of printing the
portion of such documents relating to the Account; provided, however, the
Insurance Company shall bear all printing expenses of such combined documents
where used for distribution to prospective purchasers or to owners of existing
Contracts not funded by the shares.
3.2. The Trust's prospectus shall state that the Statement of Additional
Information for the Trust (the "SAI") is available from the Trust, and BBOI
Worldwide (or the Trust), at its expense, shall print and provide the SAI free
of charge to the Insurance Company and to any owner of a Contract or prospective
owner who requests the SAI.
3.3. The Trust, at its expense, shall provide the Insurance Company with
copies of its proxy material, reports to shareholders and other communications
to shareholders in such quantity as the Insurance Company shall reasonably
require for distributing to Contract owners.
3.4. If and to the extent required by law, the Insurance Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Trust shares in accordance with instructions received
from Contract owners; and
(iii)vote Trust shares for which no instructions have been received
in the same proportion as Trust shares of that Fund for which
instructions have been received;
so long as and to the extent that the Commission continues to interpret the 1940
Act to require pass-through voting privileges for variable contract owners. The
Insurance Company reserves the right to vote Trust shares held in any segregated
asset account in its own right, to the extent permitted by law. Participating
Insurance Companies shall be responsible for assuring that each of their
separate accounts participating in the Trust calculates voting privileges in a
manner consistent with the standards set forth on Schedule C attached hereto and
incorporated herein by this reference, which standards will also be provided to
the other Participating Insurance Companies. The Insurance Company shall fulfill
its obligation under, and abide by the terms and conditions of, the Mixed and
Shared Funding Exemptive Order.
3.5. The Trust will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Trust will either provide for
annual meetings (except insofar as the Commission may interpret Section 16 of
the 1940 Act not to require such meetings) or, as the Trust currently intends,
comply with Section 16(c) of the 1940 Act (although the Trust is not one of the
trusts described in Section 16(c) of that Act) as well as with Sections 16(a)
and, if and when applicable, 16(b). Further, the Trust will act in accordance
with the Commission's interpretation of the requirements of Section 16(a) with
respect to periodic elections of trustees and with whatever rules the Commission
may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Insurance 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, a sub-adviser of one of the Funds, or
BBOI Worldwide is named, at least fifteen calendar days prior to its use. No
such material shall be used if the Trust or its designee objects to such use
within ten calendar days after receipt of such material.
4.2. The Insurance Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust in
connection with the sale of the Contracts other than the information or
representations contained in the Trust's registration statement, prospectus or
SAI, as that registration statement, prospectus or SAI 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 or
its designee or by BBOI Worldwide or its designee, except with the permission of
the Trust or BBOI Worldwide or their designees.
4.3. The Trust, BBOI Worldwide, or its designee shall furnish, or shall
cause to be furnished, to the Insurance Company or its designee, each piece of
sales literature or other promotional material in which the Insurance Company or
the Account is named at least fifteen calendar days prior to its use. No such
material shall be used if the Insurance Company or its designee objects to such
use within ten calendar days after receipt of that material.
4.4. The Trust and BBOI Worldwide, or their designees, shall not give any
information or make any representations on behalf of the Insurance Company or
concerning the Insurance Company, any Account, or the Contracts other than the
information or representations contained in a registration statement, prospectus
or statement of additional information for the Contracts, as that registration
statement, prospectus or statement of additional information may be amended or
supplemented from time to time, or in published reports for any Account which
are in the public domain or approved by the Insurance Company for distribution
to Contract owners, or in sales literature or other promotional material
approved by the Insurance Company or its designee, except with the permission of
the Insurance Company.
4.5. The Trust will provide to the Insurance Company at least one complete
copy of each registration statement, prospectus, statement of additional
information, report, proxy statement, piece of sales literature or other
promotional material, application for exemption, request for no-action letter,
and any amendment to any of the above, that relate to the Trust or its shares,
contemporaneously with the filing of the document with the Commission, the
National Association of Securities Dealers, Inc. ("NASD"), or other regulatory
authorities.
4.6. The Insurance Company will provide to the Trust at least one complete
copy of each registration statement, prospectus, statement of additional
information, report, solicitation for voting instructions, piece of sales
literature and other promotional material, application for exemption, request
for no-action letter, and any amendment to any of the above, that relates to the
Contracts or the Account, contemporaneously with the filing of the document with
the Commission, the NASD, or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements,
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media, sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, shareholder
newsletters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials or
other communications distributed or made generally available to some or all
agents or employees, and registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy materials.
4.8. At the request of any party to this Agreement, each other party will
make available to the other party's independent auditors and/or representative
of the appropriate regulatory agencies, all records, data and access to
operating procedures that may be reasonably requested.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust and BBOI Worldwide shall pay no fee or other compensation to
the Insurance Company under this agreement, except as set forth in Section 5.4
and except that if the Trust or any Fund adopts and implements a plan pursuant
to Rule 12b-1 to finance distribution expenses, BBOI Worldwide or the Trust may
make payments to the Insurance Company in amounts consistent with that 12b-1
plan, subject to review by the trustees of the Trust.
5.2. All expenses incident to performance by the Trust under this Agreement
shall be paid by the Trust. The Trust shall see to it that any offering of its
shares is registered and that all of its shares are authorized for issuance in
accordance with applicable federal law and, if and to the extent deemed
advisable by the Trust or BBOI Worldwide, in accordance with applicable state
laws prior to their sale. The Trust shall bear the cost of registration and
qualification of the Trust's shares, preparation and filing of the Trust's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, setting in type and printing the proxy materials and reports
to shareholders, the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Trust's
shares.
5.3. The Insurance Company shall bear the expenses of printing and
distributing to Contract owners the Contract prospectuses and of distributing to
Contract owners the Trust's prospectus, proxy materials and reports.
5.4. The Insurance Company bears the responsibility and correlative expense
for administrative and support services for Contract owners. BBOI Worldwide
recognizes the Insurance Company as the sole shareholder of shares of the Trust
issued under this Agreement. From time to time, BBOI Worldwide may pay amounts
from its past profits to the Insurance Company for providing certain
administrative services for the Trust or for providing other services that
relate to the Trust. In consideration of the savings resulting from such
arrangement, and to compensate the Insurance Company for its costs, BBOI
Worldwide agrees to pay to the Insurance Company quarterly an amount equal to
___ basis points (0. %) per annum of the prior quarter's average aggregate
amount invested by the Account in the Trust under this Agreement. Such payments
will be made only when the average aggregate amount invested exceeds for the
prior quarter $1,000,000 and shall be made for as long as the Account invests in
the Trust. The parties agree that such payments are for administrative services
and investor support services, and do not constitute payment for investment
advisory, distribution or other services. Payment of such amounts by BBOI
Worldwide shall not increase the fees paid by the Trust or its shareholders. The
obligation to pay the amounts provided for in this Section 5.4 may be assigned
by BBOI Worldwide in its discretion to Berger Associates, Inc., or other entity
acceptable to the Insurance Company.
ARTICLE VI. DIVERSIFICATION
6.1. The Trust will comply with Section 817(h) of the Code and Treasury
Regulation 1.817-5 relating to the diversification requirements for variable
annuity, endowment, modified endowment or life insurance contracts and any
amendments or other modifications to that Section or Regulation at all times
necessary to satisfy those requirements. The Trust will notify the Insurance
Company immediately if it has or should have a reasonable basis for believing
any Fund has ceased to comply or might cease to comply and will immediately take
all reasonable steps to adequately diversify the Fund to achieve compliance.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The trustees of the Trust will monitor the Trust for the existence of
any material irreconcilable conflict between the interests of the variable
Contract owners of all separate accounts investing in the Trust and the
participants of all Qualified Plans investing in the Trust. An irreconcilable
material conflict may arise for a variety of reasons, including: (a) an action
by any state insurance regulatory authority; (b) a change in applicable federal
or state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretive letter, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by a Participating Insurance Company to
disregard the voting instructions of variable contract owners. The trustees of
the Trust shall promptly inform the Insurance Company if they determine that an
irreconcilable material conflict exists and the implications thereof. The
trustees of the Trust shall have sole authority to determine whether an
irreconcilable material conflict exists and their determination shall be binding
upon the Insurance Company.
7.2. The Insurance Company and BBOI Worldwide each will report promptly any
potential or existing conflicts of which it is aware to the trustees of the
Trust. The Insurance Company and BBOI Worldwide each will assist the trustees of
the Trust in carrying out their responsibilities under the Mixed and Shared
Funding Exemptive Order, by providing the trustees of the Trust with all
information reasonably necessary for them to consider any issues raised. This
includes, but is not limited to, an obligation by the Insurance Company to
inform the trustees of the Trust whenever Contract owner voting instructions are
to be disregarded. These responsibilities shall be carried out by the Insurance
Company with a view only to the interests of the Contract owners and by BBOI
Worldwide with a view only to the interests of Contract holders and Qualified
Plan participants.
7.3. If it is determined by a majority of the trustees of the Trust, or a
majority of the trustees who are not interested persons of the Trust, any of its
Funds, or BBOI Worldwide (the "Independent Trustees"), that a material
irreconcilable conflict exists, the Insurance Company and/or other Participating
Insurance Companies or Qualified Plans that have executed participation
agreements shall, at their expense and to the extent reasonably practicable (as
determined by a majority of the Independent Trustees), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, up to and
including: (1) withdrawing the assets allocable to some or all of the separate
accounts from the Trust or any Fund and reinvesting those assets in a different
investment medium, including (but not limited to) another Fund of the Trust, or
submitting the question whether such segregation should be implemented to a vote
of all affected variable contract owners and, as appropriate, segregating the
assets of any appropriate group (e.g., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to the
affected variable contract owners the option of making such a change; and (2)
establishing a new registered management investment company or managed separate
account and obtaining any necessary approvals or orders of the Commission in
connection therewith.
7.4. If a material irreconcilable conflict arises because of a decision by
the Insurance Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Insurance Company may be required, at the Trust's election, to withdraw the
affected Account's investment in the Trust and terminate this Agreement with
respect to that Account; provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the Independent Trustees. Any such
withdrawal and termination must take place within six (6) months after the Trust
gives written notice that this provision is being implemented, and, until the
end of that six month period, the Trust shall continue to accept and implement
orders by the Insurance Company for the purchase (and redemption) of shares of
the Trust.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Insurance Company
conflicts with the majority of other state regulators, then the Insurance
Company will withdraw the affected Account's investment in the Trust and
terminate this Agreement with respect to that Account within six months after
the trustees of the Trust inform the Insurance Company in writing that they have
determined that the state insurance regulator's decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the Independent Trustees.
Until the end of the foregoing six month period, the Trust shall continue to
accept and implement orders by the Insurance Company for the purchase (and
redemption) of shares of the Trust.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the Independent Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Trust be required to establish a new funding medium for the Contracts. The
Insurance Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the trustees of the Trust
determine that any proposed action does not adequately remedy any irreconcilable
material conflict, then the Insurance Company will withdraw the Account's
investment in the Trust and terminate this Agreement within six (6) months after
the trustees of the Trust inform the Insurance Company in writing of the
foregoing determination, provided, however, that the withdrawal and termination
shall be limited to the extent required by the material irreconcilable conflict,
as determined by a majority of the Independent Trustees.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Mixed and Shared Funding
Exemptive Order, then (a) the Trust and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent those rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3,
7.4, and 7.5 of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to those Sections are contained in
the Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE INSURANCE COMPANY
8.1(a). The Insurance Company agrees to indemnify and hold harmless the
Trust and each trustee, officer, employee or agent of the Trust, and each
person, if any, who controls the Trust within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Insurance Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale, acquisition,
or redemption of the Trust's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement or prospectus for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished in writing to the
Insurance Company by or on behalf of the Trust for use in the
registration statement or prospectus for the Contracts or in the
Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
shares of the Trust;
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature of the Trust
not supplied by the Insurance Company, or persons under its control)
or wrongful conduct of the Insurance Company or persons under its
control, with respect to the sale or distribution of the Contracts or
Trust Shares;
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus, or
sales literature of the 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
statements therein not misleading if such a statement or omission was
made in reliance upon information furnished in writing to the Trust by
or on behalf of the Insurance Company;
(iv) arise as a result of any failure by the Insurance Company to
provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation, warranty or agreement made by the Insurance Company in
this Agreement or arise out of or result from any other material
breach of this Agreement by the Insurance Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Insurance Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party that
may arise from that Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of that Indemnified Party's duties or by reason of
that Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Trust, whichever is applicable.
8.1(c). The Insurance Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless that Indemnified Party shall have notified the Insurance Company in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon that
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Insurance Company of its obligations hereunder except to the extent
that the Insurance Company has been prejudiced by such failure to give notice.
In addition, any failure by the Indemnified Party to notify the Insurance
Company of any such claim shall not relieve the Insurance Company from any
liability which it may have to the Indemnified Party against whom the action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Insurance Company
shall be entitled to participate, at its own expense, in the defense of the
action. The Insurance Company also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action; provided,
however, that if the Indemnified Party shall have reasonably concluded that
there may be defenses available to it which are different from or additional to
those available to the Insurance Company, the Insurance Company shall not have
the right to assume said defense, but shall pay the costs and expenses thereof
(except that in no event shall the Insurance Company be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances). After notice from
the Insurance Company to the Indemnified Party of the Insurance Company's
election to assume the defense thereof, and in the absence of such a reasonable
conclusion that there may be different or additional defenses available to the
Indemnified Party, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Insurance Company will not be liable
to that party under this Agreement for any legal or other expenses subsequently
incurred by the party independently in connection with the defense thereof other
than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Insurance Company
of the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Trust's shares or the Contracts or the
operation of the Trust.
8.2. INDEMNIFICATION BY BBOI WORLDWIDE
8.2(a). BBOI Worldwide agrees to indemnify and hold harmless the Insurance
Company and each of its directors, officers, employees or agents, and each
person, if any, who controls the Insurance Company within the meaning of Section
15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.2) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of BBOI Worldwide) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale, acquisition or redemption of
the Trust's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the 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
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if the statement
or omission or alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing to BBOI
Worldwide or the Trust by or on behalf of the Insurance Company for
use in the registration statement or prospectus for the Trust or in
sales literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Trust shares;
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Contracts not supplied by BBOI Worldwide or persons under its control)
or wrongful conduct of the Trust, BBOI Worldwide or persons under
their control, with respect to the sale or distribution of the
Contracts or shares of the Trust;
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus, or
sales literature covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
in writing to the Insurance Company by or on behalf of the Trust;
(iv) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified
in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation, warranty or agreement made by BBOI Worldwide in this
Agreement or arise out of or result from any other material breach of
this Agreement by BBOI Worldwide;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b) BBOI Worldwide shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party that may arise from the
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of the Indemnified Party's duties or by reason of the Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
8.2(c) BBOI Worldwide shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified BBOI Worldwide in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve BBOI Worldwide of its obligations hereunder except to the extent that
BBOI Worldwide has been prejudiced by such failure to give notice. In addition,
any failure by the Indemnified Party to notify BBOI Worldwide of any such claim
shall not relieve BBOI Worldwide from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this indemnification provision. In case any such action is brought against
the Indemnified Parties, BBOI Worldwide will be entitled to participate, at its
own expense, in the defense thereof. BBOI Worldwide also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action; provided, however, that if the Indemnified Party shall have reasonably
concluded that there may be defenses available to it which are different from or
additional to those available to BBOI Worldwide, BBOI Worldwide shall not have
the right to assume said defense, but shall pay the costs and expenses thereof
(except that in no event shall BBOI Worldwide be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances). After notice from
BBOI Worldwide to the Indemnified Party of BBOI Worldwide's election to assume
the defense thereof, and in the absence of such a reasonable conclusion that
there may be different or additional defenses available to the Indemnified
Party, the Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and BBOI Worldwide will not be liable to that party
under this Agreement for any legal or other expenses subsequently incurred by
that party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.2(d) The Insurance Company agrees to notify BBOI Worldwide promptly of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of the Account.
8.3 INDEMNIFICATION BY THE TRUST
8.3(a). The Trust agrees to indemnify and hold harmless the Insurance
Company, and each of its directors, officers, employees and agents, and each
person, if any, who controls the Insurance Company within the meaning of Section
15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.3) against any and all losses, claims, damages, liabilities (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as those losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the operations of the Trust and:
(i) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation, warranty or agreement made by the Trust in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Trust;
as limited by, and in accordance with the provisions of, Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Trust shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party that may arise from the Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of the Indemnified Party's duties or by reason of the Indemnified Party's
reckless disregard of obligations and duties under this Agreement.
8.3(c). The Trust shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified the Trust in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Trust of its
obligations hereunder except to the extent that the Trust has been prejudiced by
such failure to give notice. In addition, any failure by the Indemnified Party
to notify the Trust of any such claim shall not relieve the Trust from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Trust will be
entitled to participate, at its own expense, in the defense thereof. The Trust
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action; provided, however, that if the Indemnified
Party shall have reasonably concluded that there may be defenses available to it
which are different from or additional to those available to the Trust, the
Trust shall not have the right to assume said defense, but shall pay the costs
and expenses thereof (except that in no event shall the Trust be liable for the
fees and expenses of more than one counsel for Indemnified Parties in connection
with any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances).
After notice from the Trust to the Indemnified Party of the Trust's election to
assume the defense thereof, and in the absence of such a reasonable conclusion
that there may be different or additional defenses available to the Indemnified
Party, the Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and the Trust will not be liable to that party under
this Agreement for any legal or other expenses subsequently incurred by that
party independently in connection with the defense thereof other than reasonable
costs of investigation.
8.3(d). The Insurance Company and BBOI Worldwide agree promptly to notify
the Trust of the commencement of any litigation or proceedings against it or any
of its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Trust.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and provisions hereof interpreted
under and in accordance with the laws of the State of Delaware.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934,
and 1940 Acts, and the rules and regulations and rulings thereunder, including
any exemptions from those statutes, rules and regulations the Commission may
grant (including, but not limited to, the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon nine (9) months advance written
notice to the other parties; provided, however, such notice shall not
be given earlier than one year following the date of this Agreement;
or
(b) at the option of the Insurance Company to the extent that shares
of Funds are not reasonably available to meet the requirements of the
Contracts as determined by the Insurance Company, provided, however,
that such a termination shall apply only to the Fund(s) not reasonably
available. Prompt written notice of the election to terminate for such
cause shall be furnished by the Insurance Company to the Trust and
BBOI Worldwide; or
(c) at the option of the Trust or BBOI Worldwide, in the event that
formal administrative proceedings are instituted against the Insurance
Company by the NASD, the Commission, an insurance commissioner or any
other regulatory body regarding the Insurance Company's duties under
this Agreement or related to the sale of the Contracts, the operation
of any Account, or the purchase of the Trust's shares, provided,
however, that the Trust determines in its sole judgment exercised in
good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Insurance Company to
perform its obligations under this Agreement; or
(d) at the option of the Insurance Company in the event that formal
administrative proceedings are instituted against the Trust or BBOI
Worldwide by the NASD, the Commission, or any state securities or
insurance department or any other regulatory body, provided, however,
that the Insurance Company determines in its sole judgement exercised
in good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Trust or BBOI
Worldwide to perform its obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the Contract
owners having an interest in that Account (or any subaccount) to
substitute the shares of another investment company for the
corresponding Fund shares in accordance with the terms of the
Contracts for which those Fund shares had been selected to serve as
the underlying investment media. The Insurance Company will give at
least 30 days' prior written notice to the Trust of the date of any
proposed vote to replace the Trust's shares; or
(f) at the option of the Insurance Company, in the event any of the
Trust's shares are not registered, issued or sold in accordance with
applicable state and/or federal law or exemptions therefrom, or such
law precludes the use of those shares as the underlying investment
media of the Contracts issued or to be issued by the Insurance
Company; or
(g) at the option of the Insurance Company, if the Trust ceases to
qualify as a regulated investment company under Subchapter M of the
Code or under any successor or similar provision, or if the Insurance
Company reasonably believes that the Trust may fail to so qualify; or
(h) at the option of the Insurance Company, if the Trust fails to meet
the diversification requirements specified in Article VI hereof; or
(i) at the option of either the Trust or BBOI Worldwide, if (1) the
Trust or BBOI Worldwide, respectively, shall determine, in their sole
judgment reasonably exercised in good faith, that the Insurance
Company has suffered a material adverse change in its business or
financial condition or is the subject of material adverse publicity
and that material adverse change or material adverse publicity will
have a material adverse impact upon the business and operations of
either the Trust or BBOI Worldwide, (2) the Trust or BBOI Worldwide
shall notify the Insurance Company in writing of that determination
and its intent to terminate this Agreement, and (3) after considering
the actions taken by the Insurance Company and any other changes in
circumstances since the giving of such a notice, the determination of
the Trust or BBOI Worldwide shall continue to apply on the sixtieth
(60th) day following the giving of that notice, which sixtieth day
shall be the effective date of termination;
(j) at the option of the Insurance Company, if (1) the Insurance
Company shall determine, in its sole judgment reasonably exercised in
good faith, that either the Trust or BBOI Worldwide has suffered a
material adverse change in its business or financial condition or is
the subject of material adverse publicity and that material adverse
change or material adverse publicity will have a material adverse
impact upon the business and operations of the Insurance Company, (2)
the Insurance Company shall notify the Trust and BBOI Worldwide in
writing of the determination and its intent to terminate the
Agreement, and (3) after considering the actions taken by the Trust
and/or BBOI Worldwide and any other changes in circumstances since the
giving of such a notice, the determination shall continue to apply on
the sixtieth (60th) day following the giving of the notice, which
sixtieth day shall be the effective date of termination;
(k) at the option of the Insurance Company, upon the Trust's breach of
any material provision of this Agreement, which breach has not been
cured to the satisfaction of the Insurance Company within ten days
after written notice of such breach is delivered to the Trust; or,
(l) at the option of the Trust, upon the Insurance Company's breach of
any material provision of this Agreement, which breach has not been
cured to the satisfaction of the Trust within ten days after written
notice of such breach is delivered to the Insurance Company.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3.No termination of this Agreement shall be effective unless and until
the party terminating this Agreement gives prior written notice to all other
parties to this Agreement of its intent to terminate, which notice shall set
forth the basis for the termination. Furthermore,
(a) In the event that any termination is based upon the provisions of
Article VII, or the provision of Section 10.1(a), 10.1(i), or 10.1(j) of
this Agreement, the prior written notice shall be given in advance of the
effective date of termination as required by those provisions; and
(b) in the event that any termination is based upon the provisions of
Section 10.1(c) or 10.1(d) of this Agreement, the prior written notice
shall be given at least sixty (60) days before the effective date of
termination.
10.4. Notwithstanding any termination of this Agreement, subject to Section
1.2 of this Agreement and for so long as the Trust continues to exist, the Trust
and BBOI Worldwide shall at the option of the Insurance Company, continue to
make available additional shares of the Trust pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement ("Existing Contracts"). Specifically, without
limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Trust, redeem investments in the Trust and/or
invest in the Trust upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 10.4 shall not apply to
any terminations under Article VII and the effect of Article VII terminations
shall be governed by Article VII of this Agreement.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of that other party set forth below or at
such other address as the other party may from time to time specify in writing.
If to the Trust:
210 University Boulevard, Suite 900
Denver, Colorado 80206
Attention: Kevin R. Fay, Vice President
If to the Insurance Company:
Investors Mark Advisers LLC
700 Karnes Blvd.
Kansas City, MO, 64XXX
Attention: President
If to BBOI Worldwide:
210 University Boulevard, Suite 900
Denver, Colorado 80206
Attention: Kevin R. Fay
ARTICLE XII. MISCELLANEOUS
12.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party unless and until that information may come into the public
domain.
12.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Commission, the NASD and state insurance regulators) and shall permit those
authorities reasonable access to its books and records in connection with any
lawful investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.6. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.7. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns; provided, that no party may
assign this Agreement without the prior written consent of the others.
12.8. If the Agreement terminates, the parties agree that Article VIII, and
to the extent that all or a portion of assets of the Account continue to be
invested in the Trust, Articles I, II, III, V, VI and VII, will survive the
termination and remain in effect until such time as the assets of the Account
are not so invested.
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
as of the date specified below.
Insurance Company:
Business Men's Assurance Company
of America
By its authorized officer,
By:_________________________________
Title:______________________________
Date:_______________________________
Trust:
BERGER INSTITUTIONAL PRODUCTS TRUST
By its authorized officer,
By:_________________________________
Title:______________________________
Date:_______________________________
BBOI Worldwide:
BBOI WORLDWIDE LLC
By its authorized officer,
By:_________________________________
Title:______________________________
Date:_______________________________
SCHEDULE A
ACCOUNTS
NAME OF ACCOUNT
DATE OF RESOLUTION OF INSURANCE COMPANY'S BOARD WHICH ESTABLISHED THE ACCOUNT
SCHEDULE B
CONTRACTS
1. Contract Form ___________________________________
SCHEDULE C
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Trust by BBOI Worldwide, the Trust and the
Insurance Company. The defined terms herein shall have the meanings assigned in
the Participation Agreement except that the term "Insurance Company" shall also
include the department or third party assigned by the Insurance Company to
perform the steps delineated below.
1. The number of proxy proposals is given to the Insurance Company by BBOI
Worldwide as early as possible before the date set by the Trust for the
shareholder meeting to facilitate the establishment of tabulation
procedures. At this time BBOI Worldwide will inform the Insurance Company
of the Record, Mailing and Meeting dates. This will be done verbally
approximately two months before meeting.
2. Promptly after the Record Date, the Insurance Company will perform a "tape
run", or other activity, which will generate the names, addresses and
number of units which are attributed to each contractowner/policyholder
(the "Customer") as of the Record Date. Allowance should be made for
account adjustments made after this date that could affect the status of
the Customers' accounts of the Record Date.
Note:The number of proxy statements is determined by the activities
described in Step #2. The Insurance Company will use its best efforts to
call in the number of Customers to BBOI Worldwide, as soon as possible, but
no later than one week after the Record Date.
3. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Insurance Company by the Trust. The Insurance Company, at
its expense, shall produce and personalize the Voting Instruction cards.
BBOI Worldwide must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Trust).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
4. During this time, BBOI Worldwide will develop, produce, and the Trust will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Insurance Company for
insertion into envelopes (envelopes and return envelopes are provided and
paid for by the Insurance Company). Contents of envelope sent to customers
by Insurance Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. Return envelope (postage pre-paid by Insurance Company)
addressed to the Insurance Company or its tabulation agent
d. "Urge buckslip" - optional, but recommended. (This is a
small, single sheet of paper that requests Customers to vote
as quickly as possible and that their vote is important. One
copy will be supplied by the Trust.)
e. Cover letter - optional, supplied by Insurance Company and
reviewed and approved in advance by BBOI Worldwide.
5. The above contents should be received by the Insurance Company
approximately 3-5 business days before mail date. Individual in charge at
Insurance Company reviews and approves the contents of the mailing package
to ensure correctness and completeness. Copy of this approval sent to BBOI
Worldwide.
6. Package mailed by the Insurance Company.
* The Trust must allow at least a 15-day solicitation time to the Insurance
Company as the shareowner. (A 5-week period is recommended.) Solicitation
time is calculated as calendar days from (but not including) the meeting,
counting backwards.
7. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note:Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure.
8. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to the Customer with an explanatory letter, a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be not received for purposes of vote
tabulation. Such mutilated or illegible Cards are "hand verified," i.e.,
examined as to why they did not complete the system. Any questions on those
Cards are usually remedied individually.
9. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
10. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Trust receives the tabulations
stated in terms of a percentage and the number of shares.) BBOI Worldwide
must review and approve tabulation format.
11. Final tabulation in shares is verbally given by the Insurance Company to
BBOI Worldwide on the morning of the meeting not later than 10:00 a.m.
Denver time. BBOI Worldwide may request an earlier deadline if required to
calculate the vote in time for the meeting.
12. A Certificate of Mailing and Authorization to Vote Shares will be required
from the Insurance Company as well as an original copy of the final vote.
BBOI Worldwide will provide a standard form for each Certification.
13. The Insurance Company will be required to box and archive the Cards
received from the Customers. In the event that any vote is challenged or if
otherwise necessary for legal, regulatory, or accounting purposes, BBOI
Worldwide will be permitted reasonable access to such Cards.
14. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
October 17, 1997
Board of Directors
Business Men's Assurance Company of America
700 Karnes Boulevard
Kansas City, MO 64108
Re: Opinion of Counsel - BMA Variable Annuity Account A
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission of a Pre-Effective Amendment to a
Registration Statement on Form N-4 for the Individual Flexible Payment Deferred
Variable Annuity Contract (the "Contract") to be issued by Business Men's
Assurance Company of America and its separate account, BMA Variable Annuity
Account A.
We have made such examination of the law and have examined such records and
documents as in our judgment are necessary or appropriate to enable us to render
the opinions expressed below.
We are of the following opinions:
1. BMA Variable Annuity Account A is a Unit Investment Trust as the
term is defined in Section 4(2) of the Investment Company Act of 1940 ( the
"Act"), and is currently registered with the Securities and Exchange Commission,
pursuant to Section 8(a) of the "Act".
2. Upon the acceptance of purchase payments made by a Contract Owner
pursuant to a Contract issued in accordance with the Prospectus contained in the
Registration Statement and upon compliance with applicable law, such a Contract
Owner will have a legally-issued, fully-paid, non-assessable contractual
interest under such Contract.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration Statement.
We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Statement of Additional Information which forms a part of the
Registration Statement.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By: /S/ LYNN KORMAN STONE
__________________________
Lynn Korman Stone
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 7, 1997, with respect to the consolidated
financial statements of Business Men's Assurance Company of America included in
the Registration Statement on Form N-4 and the related Statement of Additional
Information accompanying the Prospectus of Variable Annuity Account A.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Kansas City, Missouri
October 17, 1997
Generali owns the indicated percentage of each of the following:
Flandria Ins Hold (100%)
Gefina S.p.A. (100%)
Graafschap Holland (74.96)
Gefina S.p.A. owns the indicated percentage of each of the following:
Graafschap Holland (25.04%)
Graafschap Holland owns the indicated percentage of each of the following:
Belgica (100%)
GME (60%)
Flandria Ins Hold owns 25.04% of GME
GME owns 100% of BMA
Graafschap Holland N.V. owns 60% of GME
Mutual Companies own 4.73% of AXA S.A.
Finaxa owns the indicated percentage of each of the following:
AXA S.A. (4.08%)
MIDI Participations (60%)
Generali (40%)
AXA S.A. owns the indicated percentage of each of the following:
AXA ASS. IARD S.A. (93.49%)
UNI Europe ASS. S.A. (89.1%)
AXA ASS. IARD S.A. owns the indicated percentage of each of the following:
GME (26.67%)
UNI Europe ASS. S.A. ((10.9%)
AXA Group owns the indicated percentage of each of the following:
CRA Torino (99.96%)
AXA RE Asia (99.84%)
CGR Monte Carlo (99.63%)
CRA Torino owns 1.65% of GME
AXA RE Asia owns 0.59% of GME
CGR Montecarlo owns 2.38% of GME
UNI Europe ASS. S.A. owns 10.36% of GME
