SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
T0
FORM
N-8B-2
REGISTRATION STATEMENT OF UNIT INVESTMENT TRUSTS
WHICH ARE CURRENTLY ISSUING SECURITIES
PURSUANT TO SECTION 8(B) OF THE
INVESTMENT COMPANY ACT OF 1940
BMA VARIABLE LIFE ACCOUNT A
______________________________________________________________________
(NAME OF UNIT INVESTMENT TRUST)
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Furnish name of the trust and the Internal Revenue Service Employer
Identification Number.
BMA Variable Life Account A ("Separate Account").
IRS Employer Identification Number: N/A
(b) Furnish title of each class or series of securities issued by the trust.
Flexible Premium Adjustable Variable Life Insurance Policy ("Policy").
2. Furnish name and principal business address and ZIP Code and the Internal
Revenue Service Employer Identification Number of each depositor of the trust.
Business Men's Assurance Company of America ("Company")
BMA Tower
700 Karnes Boulevard
Kansas City, MO 64108
800-423-9398
IRS Employer Identification Number: 44-0188050
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3. Furnish name and principal business address and ZIP Code and the Internal
Revenue Service Employer Identification Number of each custodian or trustee of
the trust indicating for which class or series of securities each custodian or
trustee is acting.
Not Applicable
4. Furnish name and principal business address and ZIP Code and the Internal
Revenue Service Employer Identification Number of each principal underwriter
currently distributing securities of the trust.
The Policy is not currently being distributed. When such distribution
commences, Jones and Babson, Inc. and Conseco Equity Sales, Inc. will be the
"Principal Underwriters."
Jones & Babson, Inc.
BMA Tower
700 Karnes Boulevard
Kansas City, MO 64108
IRS Employer Identification Number: 44-0646133
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Conseco Equity Sales, Inc.
11815 N. Pennsylvania Street
Carmel, Indiana 46032
IRS Employer Identification Number: 75-1301573
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5. Furnish name of state or sovereign power, the laws of which govern with
respect to the organization of the trust.
Missouri
6. (a) Furnish the dates of execution and termination of any indenture or
agreement currently in effect under the terms of which the trust was organized
and issued or proposes to issue securities.
The Separate Account was established pursuant to a resolution of the Board
of Directors of the Company on September 9, 1996. The Separate Account will
continue in existence until its complete liquidation and the distribution of its
assets to the persons entitled to received them.
(b) Furnish the dates of execution and termination of any indenture or agreement
currently in effect pursuant to which the proceeds of payments on securities
issued or to be issued by the trust are held by the custodian or trustee.
Not Applicable.
7. Furnish in chronological order the following information with respect to each
change of name of the trust since January 1, 1930. If the name has never been
changed, so state.
The Separate Account has never been known by any other name.
8. State the date on which the fiscal year of the trust ends.
The fiscal year of the Separate Account ends on December 31.
9. MATERIAL LITIGATION. Furnish a description of any pending legal proceedings,
material with respect to the security holders of the trust by reason of the
nature of the claim or the amount thereof, to which the trust, the depositor, or
the principal underwriter is a party or of which the assets of the trust are the
subject, including the substance of the claims involved in such proceeding and
the title of the proceeding. Furnish a similar statement with respect to any
pending administrative proceeding commenced by a governmental authority or any
such proceeding or legal proceeding known to be contemplated by a governmental
authority. Include any proceeding which, altogether immaterial itself, is
representative of, or one of, a group which in the aggregate is material.
There are no legal proceedings to which the Separate Account or the Principal
Underwriters are a party. The Company is engaged in various kinds of routine
litigation, which in its judgment are not of material importance in relation to
the total capital and surplus of the Company.
II. GENERAL DESCRIPTION OF THE TRUST
AND SECURITIES OF THE TRUST
GENERAL INFORMATION CONCERNING THE SECURITIES OF THE TRUST AND THE RIGHTS OF
HOLDERS.
10. Furnish a brief statement with respect to the following matters for each
class or series of securities issued by the trust:
(a) Whether the securities are of the registered or bearer type;
The Policy which is to issued is of the registered type insofar as the Policy is
personal to the Owner, and the records concerning the Owner are maintained by
the Company.
(b) Whether the securities are of the cumulative or distributive type;
The Policy is of the cumulative type.
(c) The rights of security holders with respect to withdrawal or redemption;
The Owner may make withdrawals from the Policy for its Cash Surrender
Value.
(d) The rights of security holders with respect to conversion, transfer,
partial redemption, and similar matters;
The Owner may transfer a Policy's Account Value from one Sub-Account to
another Sub-Account.
(e) If the trust is the issuer of periodic payment plan certificates, the
substance of the provisions of any indenture or agreement with respect to
lapses or defaults by security holders in making principal payments, and
with respect to reinstatement;
Not Applicable
(f) The substance of the provisions of any indenture or agreement with respect
to voting rights, together with the names of any persons other than
security holders given the right to exercise voting rights pertaining to
the trust's securities or the underlying securities and the relationship of
such persons to the trust;
The underlying securities of the Separate Account are shares issued by:
Investors Mark Series Fund, Inc.; Berger Institutional Products Trust; Conseco
Series Trust; The Alger American Fund; American Century Variable Portfolios,
Inc.; The Dreyfus Socially Responsible Growth Fund, Inc.; Dreyfus Stock Index
Fund; Dreyfus Variable Investment Fund; Federated Insurance Series; INVESCO
Variable Investment Funds, Inc.; Lazard Retirement Series, Inc.; Neuberger &
Berman Advisers Management Trust; Strong Opportunity Fund II, Inc.; Strong
Variable Insurance Funds, Inc.; and Van Eck Worldwide Insurance Trust, together,
the Funds.
The Company will vote the shares held in the Separate Account in accordance
with instructions received from persons having a voting interest in the Separate
Account. The Company will vote shares for which it has not received instructions
in the same proportion as it votes shares for which it has received
instructions. The Company will vote shares it owns in the same proportion as it
votes shares for which it has received instructions.
(g) Whether security holders must be given notice of any change in:
(1) the composition of the assets of the trust;
Notice must be given of any such proposed change.
(2) the terms and conditions of the securities issued by the trust;
Notice must be given of any such proposed change.
(3) the provisions of any indenture or agreement of the trust;
Notice must be given of any such proposed change.
(4) the identity of the depositor, trustee or custodian;
There is no provision requiring notice to or consent of Owners with respect
to any change in the identity of the Separate Account's depositor. The Company's
obligations under the Policy, however, cannot be transferred to any other entity
without notice to the Owner.
(h) Whether the consent of the security holders is required in order for action
to be taken concerning any change in:
(1) the composition of the assets of the trust;
Consent of Owners is not required when substituting the underlying
securities of the Separate Account. However, to substitute such securities,
approval of the Securities and Exchange Commission is required in compliance
with Section 26(b) of the Investment Company Act of 1940. The Company may,
however, add additional Sub-Accounts without the consent of Owners. Except as
required by federal or state law or regulation, no action will be taken by the
Company which will adversely affect the rights of Owners without their consent.
(2) the terms and conditions of the securities issued by the trust;
No change in the terms and conditions of the Policy can be made without the
consent of the Owners except as required by federal or state law or regulation.
(3) the provisions of any indenture or agreement of the trust;
Not Applicable.
(4) the identity of the depositor, trustee or custodian;
There is no provision requiring notice to or consent of Owners with respect
to any change in the identity of the Separate Account's depositor. The Company's
obligations under the Policy, however, cannot be transferred to any other entity
without compliance with state insurance law, which may under some circumstances,
require the Owner's consent.
(i) Any other principal feature of the securities issued by the trust or any
other principal right, privilege or obligation not covered by subdivisions
(a) to (g) or by any other item in this form.
In return for the payment of premiums, the Policy provides insurance
coverage on the life of the insured.
The Policy provides for the right to borrow from the Company using the
Policy's Cash Value as collateral.
INFORMATION CONCERNING THE SECURITIES UNDERLYING THE TRUST'S SECURITIES.
11. Describe briefly the kind or type of securities comprising the unit of
specified securities in which security holders have an interest.
The securities held in the Separate Account will be shares of Investors Mark
Series Fund, Inc.; Berger Institutional Products Trust; Conseco Series Trust;
The Alger American Fund; American Century Variable Portfolios, Inc.; The Dreyfus
Socially Responsible Growth Fund, Inc.; Dreyfus Stock Index Fund; Dreyfus
Variable Investment Fund; Federated Insurance Series; INVESCO Variable
Investment Funds, Inc.; Lazard Retirement Series, Inc.; Neuberger & Berman
Advisers Management Trust; Strong Opportunity Fund II, Inc.; Strong Variable
Insurance Funds, Inc.; and Van Eck Worldwide Insurance Trust, all of which are
open-end, management investment companies.
12. If the trust is the issuer of periodic payment plan certificates and if any
underlying securities were issued by another investment company, furnish the
following information for each such company:
(a) Name of company;
Investors Mark Series Fund, Inc.; Berger Institutional Products Trust; Conseco
Series Trust; The Alger American Fund; American Century Variable Portfolios,
Inc.; The Dreyfus Socially Responsible Growth Fund, Inc.; Dreyfus Stock Index
Fund; Dreyfus Variable Investment Fund; Federated Insurance Series; INVESCO
Variable Investment Funds, Inc.; Lazard Retirement Series, Inc.; Neuberger &
Berman Advisers Management Trust; Strong Opportunity Fund II, Inc.; Strong
Variable Insurance Funds, Inc.; and Van Eck Worldwide Insurance Trust.
(b) Name and principal business address of depositor;
Not Applicable.
(c) Name and principal business address of trustee or custodian;
UMB Bank, N.A. and Investors Fiduciary Trust Company are the custodians for
Investors Mark Series Fund, Inc. Their addresses are: 928 Grand Avenue, Kansas
City, MO 64141 and 127 West 10th Street, Kansas City, MO 64105, respectively.
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, MO 64105 is
the custodian for Berger Institutional Products Trust.
Bank of New York, 90 Washington Street, 22nd Floor, New York, NY 10826 is the
custodian for Conseco Series Trust.
Custodial Trust Co., 101 Carnegie Center, Princeton, NJ 08540 is the custodian
for The Alger American Fund.
Chase Manhattan Bank, 770 Broadway, 10th Floor, New York NY 10003-9598 and
Commerce Bank, N.A., 1000 Walnut, Kansas City, MO 64105 are the custodians for
the American Century Variable Portfolios, Inc.
Mellon Bank, N.A., One Mellon Bank Center, Pittsburgh, PA 15258 is the custodian
for The Dreyfus Socially Responsible Growth Fund, Inc. and the Disciplined Stock
Portfolio of Dreyfus Variable Investment Fund.
Boston Safe Deposit and Trust Company, One Boston Place, Boston, MA 02108 is the
custodian for the Dreyfus Stock Index Fund.
The Bank of New York, 90 Washington Street, New York, NY 10286 is the custodian
for the International Value Portfolio of Dreyfus Variable Investment Fund.
State Street Bank and Trust Company, P.O. Box 8600, Boston, MA 02266-8600 is the
custodian for Federated Insurance Series.
State Street Bank and Trust Company, P.O. Box 1713, Boston, MA 02121 is the
custodian for INVESCO Variable Investment Funds, Inc.
State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02110 is
the custodian for Lazard Retirement Series, Inc.
State Street Bank and Trust Company, P.O. Box 1978, Boston, MA 02105 is the
custodian for Neuberger & Berman Advisers Management Trust.
Firstar Bank, 777 East Wisconsin Ave., Milwaukee, WI 53202 is the custodian for
Strong Opportunity Fund II, Inc.
Firstar Bank, 777 East Wisconsin Ave., Milwaukee, WI 53202 is the custodian for
Strong Variable Insurance Funds, Inc.
The Chase Manhattan Bank, Chase Metrotech Center, Brooklyn, NY 11245 is the
custodian for Van Eck Worldwide Insurance Trust.
(d) Name and principal business address of principal underwriter;
Jones & Babson, Inc. acts as the principal underwriter for Investors Mark Series
Fund, Inc.
Berger Distributors, Inc., 210 University Boulevard, Suite 900, Denver, CO 80206
acts as the principal underwriter for Berger Institutional Products Trust.
Conseco Equity Sales, Inc., 11815 N. Pennsylvania Street, Carmel, Indiana 46032
is the principal underwriter for Conseco Series Trust.
Fred Alger & Company, Incorporated, 30 Montgomery Street, Jersey City, NJ 07302
acts as the principal underwriter for The Alger American Fund.
FDI, 60 State Street, Suite 1300, Boston, MA 02109 acts as the principal
underwriter for American Century Variable Portfolios, Inc.
Premier Mutual Fund Services, Inc., 60 State Street, Boston, MA 02109 acts as
the principal underwriter for The Dreyfus Socially Responsible Growth Fund, Inc.
Premier Mutual Fund Services, Inc., 60 State Street, Boston, MA 02109 acts as
the principal underwriter for Dreyfus Stock Index Fund.
Premier Mutual Fund Services, Inc., 60 State Street, Boston, MA 02109 acts as
the principal underwriter for Dreyfus Variable Investment Fund.
Federated Securities Corp., Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA 15222-3779 acts as the principal underwriter for Federated
Insurance Series.
INVESCO Distributors, Inc., 7800 East Union Avenue, Denver, CO 80237 acts as the
principal underwriter for INVESCO Variable Investment Funds, Inc.
Lazard Freres & Co. LLC, 30 Rockefeller Plaza, New York, NY 10112 acts as the
principal underwriter for Lazard Retirement Series, Inc.
N&B Management, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180 acts as the
principal underwriter for Neuberger & Berman Advisers Management Trust.
Strong Funds Distributors, Inc., P.O. Box 2936, Milwaukee, WI 53201 acts as the
principal underwriter for Strong Opportunity Fund II, Inc.
Strong Funds Distributors, Inc., P.O. Box 2936, Milwaukee, WI 53201 acts as the
principal underwriter for Strong Variable Insurance Funds, Inc.
Van Eck Securities Corporation, 99 Park Avenue, New York, NY 10016 acts as the
principal underwriter for Van Eck Worldwide Insurance Trust.
(e) The period during which the securities of such company have been the
underlying securities.
No underlying securities have yet been acquired by the Separate Account.
INFORMATION CONCERNING LOADS, FEES, CHARGES AND EXPENSES.
13. (a)Furnish the following information with respect to each load, fee, expense
or charge to which: (1) principal payments; (2) underlying securities; (3)
distributions; (4) cumulated or reinvested distributions or income; and (5)
redeemed or liquidated assets of the trust's securities are subject; (A) the
nature of such load, fee, expense, or charge; (B) the amount thereof; (C) the
name of the person to whom such amounts are paid and his relationship to the
trust; (D) the nature of the services performed by such person in consideration
for such load, fee, expense or charge.
1. Principal Payments
PREMIUM CHARGE. For the first ten years, the Company deducts a charge equal, on
an annual basis, to 5.5% of all Premiums. For the eleventh year and after, the
charge is 4.0% of all Premiums. This compensates the Company for costs incurred
in selling the Policy and in issuing it, such as commissions, premium tax,
deferred acquisition costs and administrative costs.
MONTHLY RIDER CHARGE. The Company charges separately for any riders attached to
the Policy. The cost of riders for a Policy Month are deducted as part of the
Monthly Deduction on each Monthly Anniversary Day.
RISK CHARGE. The Company assesses a Risk Charge which is deducted as part of the
Monthly Deduction. The Risk Charge is as follows: for the first ten years, the
Company deducts a charge equal, on an annual basis, to .80% of the Accumulation
Value in the Separate Account. For the eleventh year and after, the charge is
.40%. This compensates the Company for some of the mortality risks and
administrative costs under the Policy.
COST OF INSURANCE CHARGE. Each month the Company deducts a charge for the cost
of insurance which provides the Death Benefit for the following month.
POLICY CHARGE. Every month on the anniversary of the Policy Date, BMA deducts
$25 for Policy Year 1 and currently $5 for Policy Years 2 and later (this charge
is not guaranteed and may be increased, but it will not exceed $10) as a policy
maintenance fee. Under some circumstances, this charge is waived. This
compensates the Company for some of the administrative costs incurred.
2. Underlying Securities
The Funds are charged management fees by their respective investment adviser and
incur operating expenses.
3. Distributions
Not Applicable.
4. Cumulated or reinvested distributions or income.
All investment income and other distributions are reinvested in Fund shares at
net asset value.
5. Redeemed or liquidated assets.
SURRENDER CHARGE. The surrender charge is taken out of the Account Value
surrendered during the first ten years which is not part of the Annual
Withdrawal Amount. The Surrender Charge depends upon your Specified Amount, the
year of Surrender, issue age, sex and rate class. The Surrender Charge for total
surrenders is level for the first four Policy Years then grades down linearly
each month beginning in the fifth Policy Year and is zero at the end of Policy
Year ten.
This compensates the Company for the expenses incurred in distributing the
Policy.
(b) For each installment payment type of periodic payment plan certificate of
the trust, furnish the following information with respect to sales load and
other deductions from principal payments.
(c) State the amount of total deductions as a percentage of the net amount
invested for each type of security issued by the trust. State each different
sales charge available as a percentage of the public offering price and as a
percentage of the net amount invested. List any special purchase plans or
methods established by rule or exemptive order that reflect scheduled variations
in, or elimination of, the sales load, and identify each class of individuals or
transactions to which such plans apply.
The sales load is assessed as a percentage of premiums paid and as a surrender
charge. The sales load is 3.5% of premiums paid during the first ten policy
years and 2.0% of premiums paid thereafter. The portion of the surrender charge
that does not recover issue and underwriting expenses is assessed as a sales
load but only if the policy is surrendered during the first ten policy years.
The surrender charge varies by issue age, sex, rate class, policy duration and
specified amount.
The Company may reduce or eliminate the amount of the surrender charge where the
Policies are sold under circumstances which reduce its sales expenses. In
addition, the surrender charge may be reduced or eliminated when a Policy is
issued to an officer, director or employee of the Company or any of its
affiliates.
(d) Explain fully the reasons for any difference in the price at which
securities are offered generally to the public, and the price at which
securities are offered for any class of transactions to any class or group of
individuals, including officers, directors, or employees of the depositor,
trustee, custodian or principal underwriter.
Not Applicable.
(e) Furnish a brief description of any loads, fees, expenses or charges not
covered in Item 13(a) which may be paid by security holders in connection with
the trust or its securities.
None.
(f) State whether the depositor, principal underwriter, custodian or trustee, or
any affiliated person of the foregoing may receive profits or other benefits not
included in answer to Item 13(a) or 13 (d) through the sale or purchase of the
trust's securities or interests in such securities, or underlying securities or
interests in underlying securities, and describe fully the nature and extent of
such profits or benefits.
None.
(g) State the percentage that the aggregate annual charges and deductions for
maintenance and other expenses of the trust bear to the dividend and interest
income from the trust property during the period covered by the financial
statements filed herewith.
Not Applicable
INFORMATION CONCERNING THE OPERATIONS OF THE TRUST.
14. Describe the procedure with respect to applications (if any) and the
issuance and authentication of the trust's securities, and state the substance
of the provisions of any indenture or agreement pertaining thereto.
A person desiring to purchase a Policy must complete an application on a form
provided by the Company. The Company will underwrite the Policy before it is
issued and, if the applicant meets the underwriting standards of the Company,
the Policy will be issued.
15. Describe the procedure with respect to the receipt of payments from
purchasers of the trust's securities and the handling of the proceeds thereof,
and state the substance of the provisions of any indenture or agreement
pertaining thereto.
When a Policy is purchased, the Company will initially invest the premium in the
Money Market Portfolio. After 15 days from the Policy Date (or the period
required in the Owner's state plus five days), the Company will allocate the
Accumulation Value to the Investment Option(s) as requested in the application.
16. Describe the procedure with respect to the acquisition of underlying
securities and the disposition thereof, and state the substance of the
provisions of any indenture or agreement pertaining thereto.
The Company applies premiums to the purchase of Investment Option shares at
their net asset value. Redemption of Investment Option shares may be made by the
Company to permit the payment of benefits or amounts in connection with requests
for surrender or for other purposes contemplated by the Policy.
17. (a) Describe the procedure with respect to withdrawal or redemption by
security holders.
Any surrender by an owner may be made by submitting an Authorized Request
to the Company at its service center office. Upon receipt of such request, the
Company will cancel accumulation units in the Policy and redeem Investment
Option shares in sufficient amount to meet any requests. See Item 10.
(b) Furnish the names of any persons who may redeem or repurchase, or are
required to redeem or repurchase, the trust's securities or underlying
securities from security holders, and the substance of the provisions of any
indenture or agreement pertaining thereto.
The Company is required to honor surrender requests as described in Items
10(c) and 17(a). With respect to the Separate Account's underlying securities,
the Investment Options are required to redeem their shares at net asset value
and to make payment therefore within seven business days.
(c) Indicate whether repurchased or redeemed securities will be canceled or may
be resold.
When there is a total withdrawal from a Policy, it is canceled.
18. (a) Describe the procedure with respect to the receipt, custody and
disposition of the income and other distributable funds of the trust and state
the substance of the provisions of any indenture or agreement pertaining
thereto.
All income and other distributable funds of the Separate Account are
reinvested in Investment Option shares and are added to the assets of the
Separate Account.
(b) Describe the procedure, if any, with respect to the reinvestment of
distributions to security holders and state the substance of the provisions of
any indenture or agreement pertaining thereto.
Not Applicable.
(c) If any reserves or special funds are created out of income or principal,
state with respect to each such reserve or fund the purpose and ultimate
disposition thereof, and describe the manner of handling of same.
Not Applicable.
(d) Submit a schedule showing the periodic and special distributions which have
been made to security holders during the three years covered by the financial
statements filed herewith. State for each distribution the aggregate amount and
amount per share. If distributions from sources other than current income have
been made, identify each such other source and indicate whether such
distribution represents the return of principal payments to security holders. If
payments other than cash were made describe the nature thereof, the account
charged and the basis of determining the amount of such charge.
No distributions have been made.
19. Describe the procedure with respect to the keeping of records and accounts
of the trust, the making of reports and the furnishing of information to
security holders, and the substance of the provisions of any indenture or
agreement pertaining thereto.
The Company provides confirmations with respect to all premiums received, any
transfers between Investment Options, loan transactions, any surrenders,
exercise of the free-look privilege and payment of the death benefit under the
Policy. The Company also provides each Policy owner with an annual statement
which will show the current amount of death benefit payable under the Policy,
the current Accumulation Value, the current Cash Surrender Value, current Loans
and will show all transactions previously confirmed. The statement will also
show all premiums paid and all charges deducted during the policy year.
The Company has hired NAVISYS (formerly GENELCO, Incorporated), 9735 Landmark
Parkway Drive, St. Louis, Missouri, to perform certain administrative services
regarding the Policies.
20. State the substance of the provisions of any indenture or agreement
concerning the trust with respect to the following:
(a) Amendments to such indenture or agreement;
Not Applicable.
(b) The extension or termination of such indenture or agreement;
Not Applicable.
(c) The removal or resignation of the trustee or custodian, or the failure of
the trustee or custodian to perform its duties, obligations and functions;
Not Applicable.
(d) The appointment of a successor trustee and the procedure if a successor
trustee is not appointed;
The Separate Account has no trustees.
(e) The removal or resignation of the depositor, or the failure of the depositor
to perform its duties, obligations and functions;
There are no provisions relating to the removal or resignation of the
depositor or the failure of the depositor to perform its duties, obligations and
functions.
(f) The appointment of a successor depositor and the procedure if a successor
depositor is not appointed.
There are no provisions relating to the appointment of a successor
depositor or the procedure if a successor depositor is not appointed.
21. (a) State the substance of the provisions of any indenture or agreement with
respect to loans to security holders.
Policy owners may borrow from the Company using the Policy as the sole
security.
(b) Furnish a brief description of any procedure or arrangement by which loans
are made available to security holders by the depositor, principal underwriter,
trustee or custodian, or any affiliated person of the foregoing.
The following items should be covered.
(1) the name of each person who makes such agreements or arrangements with
security holders;
The Company will make a loan to an Owner with the Policy as the sole
security.
(2) the rate of interest payable on such loans;
The interest rate for a Policy loan is approximately equal to 6% per
annum.
(3) the period for which loans may be made;
Loans can be made while the Policy is in force.
(4) costs or charges for default in repayment at maturity;
Not applicable.
(5) other material provisions of the agreements or arrangements;
A policy loan will result in accumulation units being transferred from the
Investment Options to the Loan Account. The Company will pay interest on the
Loan Account at an annual rate not less than 4.0%. An outstanding loan reduces
the amount of death benefits and Policy values.
(c) If such loans are made, furnish the aggregate amount of loans outstanding at
the end of the last fiscal year, the amount of interest collected during the
last fiscal year allocated to the depositor, principal underwriter, trustee or
custodian or affiliated person of the foregoing and the aggregate amount of
loans in default at the end of the last fiscal year covered by financial
statements filed herewith.
Not Applicable.
22. State the substance of the provisions of any indenture or agreement with
respect to limitations on the liabilities of the depositor, trustee or
custodian, or any other party to such indenture or agreement.
There is no such provision or agreement.
23. Describe any bonding arrangement for officers, directors, partners or
employees of the depositor or principal underwriter of the trust, including the
amount of coverage and the type of bond.
The Company maintains a Financial Institution Bond in the amount of $1.5 million
and an Excess Bond in the amount of $1 million.
24. State the substance of any other material provisions of any indenture or
agreement concerning the trust or its securities and a description of any other
material functions or duties of the depositor, trustee or custodian not stated
in Item 10 or Items 14 to 23 inclusive.
The Owner may assign the Policy. The Owner may change owners during the life
time of the Insured while the Policy is in force.
III. ORGANIZATION, PERSONNEL AND AFFILIATED
PERSONS OF DEPOSITOR
ORGANIZATION AND OPERATIONS OF DEPOSITOR.
25. State the form of organization of the depositor of the trust, the name of
the state or other sovereign power under the laws of which the depositor was
organized and the date of organization.
The Company was incorporated in Missouri in 1909 as a stock life insurance
company.
26. (a) Furnish the following information with respect to all fees received by
the depositor of the trust in connection with the exercise of any functions or
duties concerning securities of the trust during the period covered by the
financial statements filed herewith.
Not Applicable.
(b) Furnish the following information with respect to any fee or any
participation in fees received by the depositor from any underlying investment
company or any affiliated person or investment adviser of such company.
See Item 13(a).
27. Describe the general character of the business engaged in by the depositor
including a statement as to any business other than that of depositor of the
trust. If the depositor acts or has acted in any capacity with respect to any
investment company or companies other than the trust, state the name or names of
such company or companies, their relationship, if any, to the trust, and the
nature of the depositor's activities therewith. If the depositor has ceased to
act in such named capacity, state the date of and circumstances surrounding such
cessation.
The Company conducts a life insurance business in the District of Columbia,
Puerto Rico and all states except New York. It acts as the depositor of BMA
Variable Life Account A and Investors Mark Series Fund, Inc. The portfolios of
Investors Mark Series Fund, Inc. represent some of the Investment Options under
the Policies.
OFFICIALS AND AFFILIATED PERSONS OF DEPOSITOR.
28. (a) Furnish as at latest practicable date the following information with
respect to the depositor of the trust, with respect to each officer, director,
or partner of the depositor, and with respect to each natural person directly or
indirectly owning, controlling or holding with power to vote five percent or
more of the outstanding voting securities of the depositor.
See Item 29.
(b) Furnish a brief statement of the business experience during the last five
years of each officer, director or partner of the depositor.
The directors and executive officers of the Company are listed below:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Depositor and
Business Address * Business Experience for the Past Five Years
- ------------------ -------------------------------------------
<S> <C>
Giorgio Balzer Director, Chairman of the Board and
Chief Executive Officer of BMA; U.S.
Representative - Generali - US Branch.
Robert Thomas Rakich Director, President and Chief Operating
Officer of BMA from 1995 to present; President
and Chief Executive Officer, Laurentian Capital
Corp., 1988 to October, 1995.
Dennis Keith Cisler Senior Vice President - Information
Systems of BMA from 1991 - present.
David Lee Higley Senior Vice President and Chief Financial
Officer of BMA from 1989 - present.
Stephen Stanley Soden Senior Vice President - Financial Group from
1994 to present; President & Executive Vice
President from 1985 to 1996, BMA Financial
Services, Inc.
Michael Kent Deardorff Vice President - BMA Financial Group
Marketing from 1996 - present; Vice
President Annuity from 1994 to 1996;
Vice President - Advance Markets from
1990 to 1994.
James Evan Kilmer Vice President of BMA - Taxes.
Edward Scott Ritter Senior Vice President - Corporate Development
of BMA from 1998 to present; Vice President
from 1990 to 1998.
David Allen Gates Vice President and General Counsel of BMA
from 1998 to present; Regulatory Affairs
Vice President from 1991 to 1998.
Martin Jefferson Fuller Senior Vice President - Insurance Distribution
of BMA from 1996 to present; Vice President-
Sales Employee Benefits Division from 1993
to 1996.
Robert Noel Sawyer Senior Vice President and Chief Investment
Officer of BMA from 1990 to present.
Vernon Wirt Voorhees II Director, Senior Vice President - Corporate
Services and Secretary of BMA since 1995;
Senior Vice President - Corporate Services
and Secretary 1990 to present; Senior Vice
President - Finance 1983 - 1990.
Margaret Mary Heidkamp Vice President - Operations, Variable and
Accumulation Products of BMA from 1998 to
present; Vice President, Management
Services from 1986 to 1998.
Jay Brian Kinnamon Vice President and Corporate Actuary of BMA
from 1991 to present.
Susan Annette Sweeney Vice President - Treasurer & Controller of BMA
from 1995 to present; Chief Financial
Officer - Dean Machinery 1995; Manager of
Finance - Jackson County, Missouri from
1991 to 1995.
Gerald Wayne Selig Vice President and Actuary - Accumulation
Products of BMA from 1998 to present; Actuary-
Accumulation Products from 1996 to 1998;
Actuary - Qualified Plan Services from
1989 to 1996.
Thomas Morton Bloch Director of BMA since 1993; Teacher, St.
Francis Xavier School from August 1995 to
present; President and Chief Executive Officer
-H & R Block, Inc. until 1995.
Gianguido Castagno Director of BMA since 1990; Vice President-Head
of Valuations Department-Assicurazioni Generali,
S.p.A., Trieste, Italy; Vice President-Head of
Corporate Operations Control Department
to December 1997 - Assicurazioni Generali.
William Thomas Grant II Director of BMA since 1990; President and
Chief Executive Officer, Chairman of the Board
-Labone, from 1997 to present; Chairman and
Chief Executive Officer Seafield Capital
Corporation from 1993 to 1997.
Donald Joyce Hall, Jr. Director of BMA since 1990; Hallmark Vice
President-Creative - Hallmark Cards, Inc.;
Hallmark Vice President - Product Development
-Hallmark; Hallmark Vice President - Creative
-Hallmark; General Manager - Keepsakes -
Hallmark; Executive Assistant to Executive
Vice President-Hallmark; Director, Specialty
Store Development-Hallmark.
Allan Drue Jennings Director of BMA since 1990; Chairman of the
Board, President and Chief Executive Officer -
Kansas City Power & Light Company.
David Woods Kemper Director of BMA since 1991; Chairman of the
Board, President and Chief Executive officer -
Commerce Bancshares, Inc.
Giorgio Liveris Director of BMA since 1990; Head of Life
Branch-Assicurazioni Generali, S.p.A.,
Trieste, Italy.
John Kessander Lundberg Director of BMA since 1990; Retired.
John Pierre Mascotte Director of BMA since 1990; President and
Chief Executive Officer - Blue Cross Blue
Shield of Kansas City, Chairman -Johnson &
Higgins of Missouri, Inc.; Chairman and Chief
Executive Officer - The Continental
Corporation.
Giovanni Perissinotto Director of BMA since 1990; Manager of the
Accounting and Investment Department -
Assicurazioni Generali, S.p.A., Trieste,
Italy; General Manager - Assicurazioni
Generali - 1997; Deputy General Manager,
Assicurazioni Generali - 1996; Manager
of the Accounting and Investment Department -
Assicurazioni Generali - 1995; Joint
Manager of the Accounting and Investment
Department - Assicurazioni Generali - 1993.
</TABLE>
* Principal Business Address is BMA Tower, 700 Karnes Blvd., Kansas City, MO
64108-3306
COMPANIES OWNING SECURITIES OF DEPOSITOR.
29. Furnish as at latest practicable date the following information with respect
to each company which directly or indirectly owns, controls or holds with power
to vote five percent or more of the outstanding voting securities of the
depositor.
The Company is a wholly owned subsidiary of Assicurazioni Generali S.p.A.,
Pirezione Centrale e Sede Legale: Piazza Duca degli Abruzzi, 2-34132 Trieste.
CONTROLLING PERSONS.
30. Furnish as at latest practicable date the following information with respect
to any person, other than those covered by Items 28, 29, and 42 who directly or
indirectly controls the depositor.
None.
COMPENSATION OF OFFICERS AND DIRECTORS OF DEPOSITOR:
COMPENSATION OF OFFICERS OF DEPOSITOR.
31. Furnish the following information with respect to the remuneration for
services paid by the depositor during the last fiscal year covered by financial
statements filed herewith:
(a) Directly to each of the officers or partners of the depositor directly
receiving the three highest amounts of remuneration.
Not Applicable. As of the date hereof, the Separate Account had not yet
commenced operations.
(b) Directly to all officers or partners of the depositor as a group exclusive
of persons whose remuneration is included under Item 31(a), stating separately
the aggregate amount paid by the depositor itself and the aggregate amount paid
by all the subsidiaries.
Not Applicable. As of the date hereof, the Separate Account had not yet
commenced operations.
(c) Indirectly or through subsidiaries to each of the officers or partners of
the depositor.
Not Applicable. As of the date hereof, the Separate Account had not yet
commenced operations.
COMPENSATION OF DIRECTORS
32. Furnish the following information with respect to the remuneration for
services, exclusive of remuneration reported under Item 31, paid by the
depositor during the last fiscal year covered by financial statements filed
herewith:
(a) The aggregate direct remuneration to directors;
Not Applicable. See Item 31.
(b) Indirectly through subsidiaries to directors.
Not Applicable. See Item 31.
COMPENSATION TO EMPLOYEES.
33. (a) Furnish the following information with respect to the aggregate amount
of remuneration for services of all employees of the depositor (exclusive of
persons whose remuneration is reported in Items 31 and 32) who received
remuneration in excess of $10,000 during the last fiscal year covered by
financial statements filed herewith from the depositor and any of its
subsidiaries.
Not Applicable. See Item 31.
(b) Furnish the following information with respect to the remuneration for
services paid directly during the last fiscal year covered by financial
statements filed herewith to the following classes of persons (exclusive of
those person covered by Item 33(a)): (1) sales managers, branch managers,
district managers and other persons supervising the sale of registrant's
securities; (2) salesmen, sales agents, canvassers and other persons making
solicitations but not in a supervisory capacity; (3) administrative and clerical
employees; and (4) others (specify). If a person is employed in more than one
capacity, classify according to predominant type of work.
Not Applicable. See Item 31.
COMPENSATION TO OTHER PERSONS.
34. Furnish the following information with respect to the aggregate amount of
compensation for services paid any person (exclusive of persons whose
remuneration is reported in Items 31, 32, and 33), whose aggregate compensation
in connection with services rendered with respect to the trust in all capacities
exceeded $10,000 during the last fiscal year covered by financial statements
filed herewith from the depositor and any of its subsidiaries:
Not Applicable. See Item 31.
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
DISTRIBUTION OF SECURITIES.
35. Furnish the names of the States in which sales of the trust's securities:
(a) are currently being made, (b) are presently proposed to be made, and (c)
have been discontinued, indicating by appropriate letter the status with respect
to each State.
No sales of the Policy have been made or are currently being made. It is
presently proposed to sell the Policy in the states where the Company is
licensed to do business.
36. If sales of the trust's securities have at any time since January 1, 1936
been suspended for more than a month describe briefly the reasons for such
suspension.
Not Applicable.
37. (a) Furnish the following information with respect to each instance where
subsequent to January 1, 1937, any Federal or State governmental officer,
agency, or regulatory body denied authority to distribute securities of the
trust, excluding a denial which was merely a procedural step prior to any
determination by such officer, etc. and which denial was subsequently rescinded:
(1) name of officer, agency or body; (2) date of denial; (3) brief statement of
reason given for denial.
Not Applicable.
(b) Furnish the following information with regard to each instance where,
subsequent to January 1, 1937, the authority to distribute securities of the
trust has been revoked by any Federal or State governmental officer, agency or
regulatory body: (1) name of officer, agency or body; (2) date of revocation;
(3) brief statement of reason given for revocation.
Not Applicable.
38. (a) Furnish a general description of the method of distribution of
securities of the trust.
The Policy issued by the Separate Account will be sold by licensed
insurance agents in those states where the Policy may be lawfully sold. Such
agents will be registered representatives of a broker-dealer registered under
the Securities Exchange Act of 1934 which is a member of the National
Association of Securities Dealers, Inc.
(b) State the substance of any current selling agreement between each principal
underwriter and the trust or the depositor, including a statement as to the
inception and termination dates of the agreement, any renewal and termination
provisions, and any assignment provisions.
The Company intends to execute an agreement with the Co-Principal
Underwriters whereby they will distribute the Policy by executing selling
agreements with other broker-dealers. The agreements will be effective on the
date executed and will remain effective until terminated by any party thereto
upon sixty (60) days notice, and may not be assigned.
(c) State the substance of any current agreements or arrangements of each
principal underwriter with dealers, agents, salesmen, etc. with respect to
commissions and overriding commissions, territories, franchises, qualifications
and revocations. If the trust is the issuer of periodic payment plan
certificates, furnish schedules of commissions and the bases thereof. In lieu of
a statement concerning schedules of commissions, such schedules of commissions
may be filed as Exhibit A(3)(c).
See Exhibit A(3)(c).
INFORMATION CONCERNING PRINCIPAL UNDERWRITER.
39. (a) State the form of organization of each principal underwriter of
securities of the trust, the name of the State or other sovereign power under
the laws of which each underwriter was organized and the date of the
organization.
Jones & Babson, Inc. is a corporation organized under the laws of Missouri
on February 23, 1959.
Conseco Equity Sales, Inc. is a corporation organized under the laws of
Texas on July 12, 1965.
(b) State whether any principal underwriter currently distributing securities of
the trust is a member of the National Association of Securities Dealers, Inc.
Jones & Babson, Inc. and Conseco Equity Sales, Inc. are members of the
National Association of Securities Dealers, Inc.
40. a) Furnish the following information with respect to all fees received by
each principal underwriter of the trust from the sale of securities of the trust
and any other functions in connection therewith exercised by such underwriter in
such capacity or otherwise during the period covered by the financial statements
filed herewith.
Not Applicable.
(b) Furnish the following information with respect to any fee or any
participation in fees received by each principal underwriter from any underlying
investment company or any affiliated person or investment adviser of such
company: (1) the nature of such fee or participation; (2) the name of the person
making payment; (3) the nature of the services rendered in consideration for
such fee or participation; (4) the aggregate amount received during the last
fiscal year covered by the financial statements filed herewith.
Not Applicable.
41. (a) Describe the general character of the business engaged in by each
principal underwriter, including a statement as to any business other than the
distribution of securities of the trust. If a principal underwriter acts or has
acted in any capacity with respect to any investment company or companies other
than the trust, state the name or names of such company or companies, their
relationship, if any, to the trust and the nature of such activities. If a
principal underwriter has ceased to act in such named capacity, state the date
of and the circumstances surrounding such cessation.
Jones & Babson, Inc. also acts as the principal underwriter of variable
annuity contracts issued by the Company. Jones & Babson, Inc. also acts as the
principal underwriter for David L. Babson Growth Fund, Inc., D.L. Babson Money
Market Fund, Inc., D.L. Babson Tax-Free Income Fund, Inc., Babson Enterprise
Fund, Inc., Babson Enterprise Fund II, Inc., Babson ValueFund, Inc., Shadow
Stock Fund, Inc., D.L. Babson Bond Trust, Scout Stock Fund, Inc., Scout Bond
Fund, Inc., Scout Money Market Fund, Inc., Scout Tax-Free Money Market Fund,
Inc., Scout Regional Fund, Inc., Scout WorldWide Fund, Inc., Scout Balanced
Fund, Inc., Buffalo Balanced Fund, Inc., Buffalo Equity Fund, Inc., Buffalo High
Yield Fund, Inc., Buffalo USA Global Fund, Inc. and AFBA Five Star Fund, Inc.
Conseco Equity Sales, Inc. also acts as the principal underwriter of
variable annuity contracts issued by Great American Reserve Insurance Company
and of Conseco Fund Group.
(b) Furnish as at latest practicable date the address of each branch office of
each principal underwriter currently selling securities of the trust and furnish
the name and residence address of the person in charge of such office.
Not Applicable.
(c) Furnish the number of individual salesmen of each principal underwriter
through whom any of the securities of the trust were distributed for the last
fiscal year of the trust covered by the financial statements filed herewith and
furnish the aggregate amount of compensation received by such salesmen in such
year.
Not Applicable.
42. Furnish as at latest practicable date the following information with respect
to each principal underwriter currently distributing securities of the trust and
with respect to each of the officers, directors, or partners of such
underwriter.
Not Applicable.
43. Furnish, for the last fiscal year covered by the financial statements filed
herewith, the amount of brokerage commissions received by any principal
underwriter who is a member of a national securities exchange and who is
currently distributing the securities of the trust or effecting transactions for
the trust in the portfolio securities of the trust.
None.
OFFERING PRICE OR ACQUISITION VALUATION OF SECURITIES OF THE TRUST.
44. (a) Furnish the following information with respect to the method of
valuation used by the trust for purposes of determining the offering price to
the public of securities issued by the trust or the valuation of shares or
interests in the underlying securities acquired by the holder of a periodic
payment plan certificate.
Accumulation Values allocated to the Separate Account are invested at net
asset value in the Investment Options in accordance with the selection made by
the owner.
Accumulation Values will fluctuate in accordance with investment results of
the Investment Options selected. In order to determine how these fluctuations
affect Accumulation Value, accumulation units are used. Every business day the
Company determines the value of an accumulation unit for each of the Investment
Options. The value of an accumulation unit for any given business day is
determined by multiplying a factor referred to as the net investment factor
times the value of an Accumulation unit for the previous business day. The net
investment factor is a number that reflects the change (up or down) in an
underlying Investment Option share.
(b) Furnish a specimen schedule showing the components of the offering price of
the trust's securities as at the latest practicable date.
Not Applicable.
(c) If there is any variation in the offering price of the trust's securities to
any person or classes of persons other than underwriters, state the nature and
amount of such variation and indicate the person or classes of persons to whom
such offering is made.
Not Applicable.
45. Furnish the following information with respect to any suspension of the
redemption rights of securities issued by the trust during the three fiscal
years covered by the financial statements filed herewith: (a) by whose action
redemption rights were suspended; (b) the number of days' notice given to
security holders prior to suspension of redemption rights; (c) reason for
suspension; (d) period during which suspension was in effect.
Not Applicable.
REDEMPTION VALUATION OF SECURITIES OF THE TRUST.
46. (a) Furnish the following information with respect to the method of
determining the redemption or withdrawal valuation of securities issued by the
trust:
(1) the source of quotations used to determine the value of portfolio
securities;
The Custodians for the underlying series Funds.
(2) whether opening, closing bid, asked or any other price is used;
Net asset value is used.
(3) whether price is as of the day of sale or as of any other time;
As of the next computed price.
(4) a brief description of the methods used by registrant for determining
other assets and liabilities including accrual for expenses and taxes (including
taxes on unrealized appreciation);
See item 13(a).
(5) other items which registrant deducts from the net asset value in
computing redemption value of its securities; and
See item 13(a).
(6) whether adjustments are made for fractions.
Not applicable.
(b) Furnish a specimen schedule showing the components of the redemption price
to the holders of the trust's securities as at the latest practicable date.
Not applicable.
PURCHASE AND SALE OF INTERESTS IN UNDERLYING SECURITIES FROM AND TO SECURITY
HOLDERS.
47. Furnish a statement as to the procedure with respect to the maintenance of a
position in the underlying securities or interests in the underlying securities,
the extent and nature thereof and the person who maintains such a position.
Include a description of the procedure with respect to the purchase of
underlying securities or interest in the underlying securities from security
holders who exercise redemption or withdrawal rights and the sale of such
underlying securities and interests in the underlying securities to other
security holders. State whether the method of valuation of such underlying
securities or interests in the underlying securities differs from that set forth
in Items 44 and 46. If any item of expenditure included in the determination of
the valuation is not or may not actually be incurred or expended, explain the
nature of such item and who may benefit from the transaction.
The Company will maintain a position in Investment Option shares by purchasing
Investment Option shares at net asset value in connection with premiums
allocated to the Separate Account in accordance with instructions from the
Owners and to redeem Investment Option shares at net asset value for the
purposes of making Policy obligations, or making adjustments in the reserves
held in the Separate Account. There are no procedures for the purchase of
underlying securities or interests therein from Owners who exercise surrender
rights in that Owners have no direct interest therein.
V. INFORMATION CONCERNING THE TRUSTEE
OR CUSTODIAN
48. Furnish the following information as to each trustee or custodian of the
trust:
(a) Name and principal business address;
None.
(b) Form of organization;
Not Applicable.
(c) State or other sovereign power under the laws of which the trustee or
custodian was organized;
Not Applicable.
(d) Name of governmental supervising or examining authority.
Not Applicable.
49. State the basis for payment of fees or expenses of the trustee or custodian
for services rendered with respect to the trust and its securities, and the
aggregate amount thereof for the last fiscal year. Indicate the person paying
such fees or expenses. If any fees or expenses are prepaid, state the unearned
amount.
Not Applicable.
50. State whether the trustee or custodian or any other person has or may create
a lien on the assets of the trust, and if so, give full particulars, outlining
the substance of the provisions of any indenture or agreement with respect
thereto.
Not Applicable.
VI. INFORMATION CONCERNING THE INSURANCE OF
HOLDERS OF SECURITIES
51. Furnish the following information with respect to insurance holders of
securities:
(a) The name and address of the insurance company;
Business Men's Assurance Company of America
BMA Tower
700 Karnes Boulevard
Kansas City, MO 64108
(b) The types of policies and whether individual or group policies;
The Policy is a flexible premium adjustable variable life insurance policy.
(c) The types of risks insured and excluded;
The Policy provides for a death benefit upon the death of the Insured. Under
some circumstances, a portion of the death benefit will be paid out if the
Insured is terminally ill. The death benefit is the only insurance benefit
offered.
(d) The coverage of the policies;
While the Policy remains in force, it provides for a death benefit on the life
of the Primary Insured.
(e) The beneficiaries of such policies and the uses to which the proceeds of
policies must be put;
The Owner designates one or more persons to be the beneficiaries of the
death benefit. There are no limitations on the use of the proceeds.
(f) The terms and manner of cancellation and of reinstatement;
The Policy will terminate if (1) the Owner makes a total surrender of the
Policy, (2) the grace period has ended, or (3) the Insured has died. The Policy
can be reinstated if the Owner did not make a total surrender and of the Insured
is still alive within five years after the end of the grace period. To reinstate
the Policy, the Insured must provide evidence of insurability and either repay
any outstanding loan and accrued interest or reinstate the loan plus interest.
The Owner must make a payment of all past due premiums.
(g) The method of determining the amount of premiums to be paid by holders of
securities;
See Item 13(a) for information on the types of charges and methods of
assessing them.
(h) The amount of aggregate premiums paid to the insurance company during the
last fiscal year;
Not Applicable.
(i) Whether any person other than the insurance company receives any part of
such premiums, the name of each such person and the amounts involved, and
the nature of the services rendered therefor;
The Company may from time to time, enter into reinsurance treaties with
other insurers whereby such insurers may agree to reimburse the Company for
mortality expenses.
(j) The substance of any other material provisions of any indenture or
agreement of the trust relating to insurance.
Not Applicable.
VII. POLICY OF REGISTRANT
52. (a) Furnish the substance of the provisions of any indenture or agreement
with respect to the conditions upon which and the method of selection by which
particular portfolio securities must or may be eliminated from assets of the
trust or must or may be replaced by other portfolio securities. If an investment
adviser or other person is to be employed in connection with such selection,
elimination or substitution, state the name of such person, the nature of any
affiliation to the depositor, trustee or custodian, any principal underwriter,
and the amount of remuneration to be received for such services. If any
particular person is not designated in the indenture or agreement, describe
briefly the method of selection of such person.
The Company will not substitute another security for the underlying
securities of the trust unless the Securities and Exchange Commission shall have
approved such substitution.
(b) Furnish the following information with respect to each transaction involving
the elimination of any underlying security during the period covered by the
financial statements filed herewith.
Not Applicable.
(c) Describe the policy of the trust with respect to the substitution and
elimination of the underlying securities of the trust with respect to: (1) the
grounds for elimination and substitution; (2) the type of securities which may
be substituted for any underlying security; (3) whether the acquisition of such
substituted security or securities would constitute the concentration of
investment in a particular industry or group of industries or would conform to a
policy of concentration of investment in a particular industry or group of
industries; (4) whether such substituted securities may be the securities of
another investment company; and (5) the substance of the provisions of any
indenture or agreement which authorize or restrict the policy of the registrant
in this regard.
Not Applicable.
(d) Furnish a description of any policy (exclusive of policies covered by
paragraphs (a) and (b) herein) of the trust which is deemed a matter of
fundamental policy and which is elected to be treated as such.
None.
REGULATED INVESTMENT COMPANY.
53. (a) State the taxable status of the trust.
The Company is taxed as a life insurance company under the Internal Revenue
Code. Since the Separate Account is not a separate entity from the Company and
its operations form a part of the company, it will not be taxed separately as a
"regulated investment company" under the Subchapter M of the Code.
(b) State whether the trust qualified for the last taxable year as a regulated
investment company as defined in Section 851 of the Internal Revenue Code of
1954, and state its present intention with respect to such qualifications during
the current taxable year.
Not Applicable.
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. If the trust is not the issuer of periodic payment plan certificates,
furnish the following information with respect to each class or series of its
securities.
Not Applicable.
55. If the trust is the issuer of periodic payment plan certificates, a
transcript of a hypothetical account shall be filed in approximately the
following form on the basis of the certificate calling for the smallest amount
of payments. The schedule shall cover a certificate of the type currently being
sold assuming that such certificate had been sold at a date approximately 10
years prior to the date of registration or at the approximate date of
organization of the trust.
Not Applicable.
56. If the trust is the issuer of periodic payment plan certificates, furnish by
years for the period covered by the financial statements filed herewith in
respect of certificates sold during such period, the following information for
each fully paid type and each installment payment type of periodic payment plan
certificate currently being issued by the trust.
Not Applicable.
57. If the trust is the issuer of periodic payment plan certificates, furnish by
years for the period covered by the financial statements filed herewith the
following information for each installment payment type of periodic payment plan
certificate currently being issued by the trust.
Not Applicable.
58. If the trust is the issuer of periodic payment plan certificates, furnish
the following information for each installment payment type of periodic payment
plan certificate outstanding as at the latest practicable date.
Not Applicable.
59. Financial statements:
Financial Statements of the Trust
The financial statements have not been filed for the Separate Account. It
has not yet commenced operations, has no assets or liabilities and has received
no income nor incurred any expense.
Financial Statements of the Depositor are filed herewith.
<TABLE>
<CAPTION>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Balance Sheets
JUNE 30, 1998 DECEMBER 31, 1997
(UNAUDITED)
---------------------------------------
(In Thousands)
ASSETS
Investments:
Securities available-for-sale, at fair value:
Fixed maturities (amortized cost - $1,200,870 in 1998
<S> <C> <C>
and $1,308,458 in 1997) $1,219,618 $1,326,018
Equity securities (cost - $53,381 in 1998 and $46,807 in
1997) 61,438 57,806
Mortgage loans on real estate, net of allowance for losses
of $9,185 in 1998 and $8,435 in 1997 834,253 842,149
Policy loans 61,139 62,207
Short-term investments 63,105 47,507
Other 4,007 3,424
--------------------------------------
Total investments 2,243,560 2,339,111
Cash 9,646 -
Accrued investment income 17,863 18,520
Premium and other receivables 11,852 10,606
Deferred policy acquisition costs 121,145 125,065
Property, equipment and software 16,527 16,753
Reinsurance recoverables:
Paid benefits 8,372 6,588
Benefits and claim reserves ceded 76,798 72,000
Other assets 15,685 16,216
Assets held in separate accounts 206,875 76,964
--------------------------------------
Total assets $2,728,323 $2,681,823
======================================
</TABLE>
See accompanying notes to unaudited financial statements.
<TABLE>
<CAPTION>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Balance Sheets
JUNE 30, 1998 DECEMBER 31, 1997
(UNAUDITED)
---------------------------------------
(In Thousands)
LIABILITIES AND STOCKHOLDER'S EQUITY
Future policy benefits:
<S> <C> <C>
Life and annuity $1,244,302 $1,259,319
Health 88,909 87,883
Contract account balances 626,768 699,244
Policy and contract claims 62,653 58,381
Unearned revenues 13,311 11,284
Other policyholder funds 15,111 14,286
Outstanding checks in excess of bank balances - 2,669
Current income taxes payable 3,291 2,158
Deferred income taxes 14,539 12,244
Payable to affiliate 505 799
Other liabilities 48,601 72,858
Liabilities related to separate accounts 206,875 76,964
---------------------------------------
Total liabilities 2,324,865 2,298,089
Commitments and contingencies -- -
Stockholder's equity:
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 40,106
Net unrealized gains on securities 13,237 14,364
Retained earnings 338,115 317,264
---------------------------------------
Total stockholder's equity 403,458 383,734
---------------------------------------
Total liabilities and stockholder's equity $2,728,323 $2,681,823
=======================================
</TABLE>
See accompanying notes to unaudited financial statements.
<TABLE>
<CAPTION>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Operations
(Unaudited)
SIX MONTHS ENDED JUNE 30
1998 1997
-----------------------------------
(In Thousands)
Revenues:
Premiums:
<S> <C> <C>
Life and annuity $81,754 $75,405
Health 16,207 24,935
Other insurance considerations 19,525 19,064
Net investment income 89,960 82,754
Realized gains, net 9,233 3,661
Other income 22,370 16,669
-----------------------------------
Total revenues 239,049 222,488
Benefits and expenses:
Life and annuity benefits 76,081 62,277
Health benefits 8,572 17,071
Increase in policy liabilities including
interest credited to account balances 46,780 49,828
Real estate expense, net - 819
Commissions 26,807 26,674
(Increase) decrease in deferred policy acquisition costs 3,457 (1,814)
Taxes, licenses and fees 2,061 2,593
Other operating costs and expenses 44,500 41,949
-----------------------------------
Total benefits and expenses 208,258 199,397
-----------------------------------
Earnings before taxes on income 30,791 23,091
Income tax expense 9,940 8,303
-----------------------------------
Net earnings $ 20,851 $ 14,788
===================================
</TABLE>
See accompanying notes to unaudited financial statements.
<TABLE>
<CAPTION>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Stockholder's Equity
(Unaudited)
SIX MONTHS ENDED JUNE 30
1998 1997
-----------------------------------
(In Thousands)
Common stock:
<S> <C> <C>
Balance at beginning and end of year $ 12,000 $ 12,000
Paid-in capital:
Balance at beginning of year 40,106 40,106
Net unrealized gains on securities:
Balance at beginning of year: 14,364 3,686
Change in net unrealized gains (1,127) (1,522)
-----------------------------------
Balance at end of period 13,237 2,164
Retained earnings:
Balance at beginning of year: 317,264 281,075
Net earnings 20,851 14,788
Dividends declared - -
-----------------------------------
Balance at end of period 338,115 295,863
-----------------------------------
Total stockholder's equity $ 403,458 $ 350,133
===================================
</TABLE>
See accompanying notes to unaudited financial statements.
<TABLE>
<CAPTION>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Cash Flows
(Unaudited)
SIX MONTHS ENDED JUNE 30
1998 1997
----------------------------------
(In Thousands)
OPERATING ACTIVITIES
<S> <C> <C>
Net earnings $ 20,851 $ 14,788
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Deferred income tax 2,870 4,301
Realized gains, net (9,233) (3,661)
Premium amortization (discount accretion), net (560) (514)
Policy loans lapsed in lieu of surrender benefits 1,826 2,352
Depreciation 1,404 1,850
Amortization 391 391
Changes in assets and liabilities:
(Increase) decrease in accrued investment income 657 (818)
Increase in receivables and reinsurance recoverables (8,122) (5,912)
Policy acquisition costs deferred (11,508) (14,625)
Deferred policy acquisition costs amortized 14,964 12,811
(Increase) decrease in income taxes recoverable 1,110 (2,510)
Increase in accrued policy benefits, claim reserves,
unearned revenues and policyholder funds 20,870 13,808
Interest credited to policyholder accounts 38,494 38,338
Increase in outstanding checks in excess of bank balances (2,669) (2,922)
(Increase) decrease in other assets and other (3,532) 634
liabilities, net
Other, net (1,679) (806)
----------------------------------
Net cash provided by operating activities 66,134 57,505
INVESTING ACTIVITIES Purchases of investments:
Securities available-for-sale
Fixed Maturities (257,275) (259,428)
Equity (20,416) (11,332)
Mortgage and policy loans (129,592) (127,648)
Sales, calls or maturities of investments:
Maturities and calls of securities available-for-sale
Sales of securities available-for-sale:
Fixed Maturities 143,873 88,020
Fixed Maturities 227,053 108,208
Equity 16,967 7,514
Mortgage and policy loans 137,924 49,999
Real estate - 1,544
Purchase of property, equipment and software (560) (858)
Net (increase) decrease in short-term investments (15,598) 7,348
Distributions from unconsolidated related parties 653 983
----------------------------------
Net cash provided (used) in investing activities 103,029 (135,650)
</TABLE>
<TABLE>
<CAPTION>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Cash Flows (continued)
(Unaudited)
SIX MONTHS ENDED JUNE 30
1998 1997
-------------------------------
(In Thousands)
FINANCING ACTIVITIES
<S> <C> <C>
Net proceeds (disbursements) of interest sensitive and
investment type contracts $ (138,654) $ 78,145
Net proceeds from reverse repurchase borrowing 20,031
Retirement of reverse repurchase borrowing (20,863) (20,031)
-------------------------------
Net cash provided (used) by financing activities (159,517) 78,145
-------------------------------
Net increase in cash 9,646 -
Cash at beginning of year - -
-------------------------------
Cash at end of period $ 9,646 $ -
===============================
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.
Cash paid (received) during the year for:
Income taxes $ 4,352 $ 5,579
Interest paid on reverse repurchase borrowing 299 370
-------------------------------
$ 4,651 $ 5,949
===============================
</TABLE>
See accompanying notes to unaudited financial statements.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Unaudited Consolidated Financial Statements
June 30, 1998
1. These Financial Statements are unaudited but, in management's opinion,
include all adjustments necessary for a fair presentation of the results.
2. These interim financial statements should be read in conjunction with the
Company's financial statements for the year ended December 31, 1997. The
results of operations for any interim period are not necessarily indicative
of the Company's operating results for a full year.
3. Certain amounts from the prior period's financial statements have been
reclassified to conform with the current period's presentation.
4. In 1998, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes
standards for the reporting and display of comprehensive income and its
components. Comprehensive income includes all changes in equity during a
period except those due to owner investments and distributions. It includes
unrealized gains and losses on available-for-sale securities. This standard
does not change the display or components of net income; rather,
comprehensive income is displayed as a separate statement in the
Consolidated Statement of Comprehensive Income and as a component in the
Consolidated Balance Sheet, and the Consolidated Statement of Stockholders'
Equity.
Total comprehensive income amounted to $19,724,000 during the first six
months of 1998 and $13,266,000 during the first six months of 1997.
CONSOLIDATED FINANCIAL STATEMENTS
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A MEMBER OF THE GENERALI GROUP OF COMPANIES)
YEARS ENDED DECEMBER 31, 1997 AND 1996
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, 1997 and 1996
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, 1997 and 1996, 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, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated 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, 1997 and 1996, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ERNST & YOUNG LLP
[GRAPHIC OMITTED]
Kansas City, Missouri
February 6, 1998
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
------------------------------------
(In Thousands)
ASSETS
Investments (Notes 1 and 3): Securities available-for-sale, at fair value:
Fixed maturities (amortized cost - $1,308,458 in 1997
<S> <C> <C> <C> <C>
and $1,286,888 in 1996) $1,326,018 $1,288,934
Equity securities (cost - $46,807 in 1997 and $28,644 in
1996) 57,806 32,350
Mortgage loans on real estate, net of allowance for losses
of $8,435 in 1997 and $6,879 in 1996 842,149 704,356
Real estate (Note 1) - 5,498
Policy loans 62,207 65,225
Short-term investments 47,507 39,991
Other 3,424 3,830
------------------------------------
Total investments 2,339,111 2,140,184
Accrued investment income 18,520 18,539
Premium and other receivables 10,606 11,817
Deferred policy acquisition costs 125,065 131,025
Property, equipment and software (Note 6) 16,753 18,890
Reinsurance recoverables:
Paid benefits 6,588 3,948
Benefits and claim reserves ceded 72,000 58,177
Other assets (Note 1) 16,216 16,923
Assets held in separate accounts (Note 1) 76,964 -
------------------------------------
Total assets $2,681,823 $2,399,503
====================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
------------------------------------
(In Thousands)
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C> <C>
Future policy benefits:
Life and annuity (Note 10) $1,259,319 $1,192,497
Health 87,883 75,914
Contract account balances 699,244 636,656
Policy and contract claims 58,381 58,617
Unearned revenues 11,284 13,813
Other policyholder funds 14,286 15,429
Outstanding checks in excess of bank balances 2,669 4,673
Current income taxes payable (Note 7) 2,158 4,345
Deferred income taxes (Note 7) 12,244 14,912
Payable to affiliate (Note 10) 799 972
Other liabilities 72,858 44,808
Liabilities related to separate accounts (Note 1) 76,964 -
------------------------------------
Total liabilities 2,298,089 2,062,636
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 40,106
Net unrealized gains (losses) on securities 14,364 3,686
Retained earnings 317,264 281,075
------------------------------------
Total stockholder's equity 383,734 336,867
------------------------------------
Total liabilities and stockholder's equity $2,681,823 $2,399,503
====================================
See accompanying notes.
</TABLE>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------------
(In Thousands)
Revenues:
Premiums:
<S> <C> <C> <C>
Life and annuity $154,602 $142,461 $130,360
Health 43,518 60,491 47,294
Other insurance considerations 37,928 38,780 37,183
Net investment income (Note 3) 167,346 145,629 124,605
Realized gains, net (Note 3) 5,121 5,906 4,290
Other income 35,941 26,802 23,394
---------------------------------------------------
Total revenues 444,456 420,069 367,126
Benefits and expenses:
Life and annuity benefits 126,345 122,915 111,734
Health benefits 27,812 42,224 40,132
Increase in policy liabilities including
interest credited to account balances 104,581 94,530 65,017
Real estate expense, net 932 551 649
Commissions 53,622 55,180 54,176
Increase in deferred policy acquisition costs (1,229) (5,459) (16,366)
Taxes, licenses and fees 4,654 5,229 5,251
Other operating costs and expenses 89,018 76,647 82,604
---------------------------------------------------
Total benefits and expenses 405,735 391,817 343,197
---------------------------------------------------
Earnings from continuing operations before income
tax expense 38,721 28,252 23,929
Income tax expense (Note 7) 2,532 10,168 8,503
---------------------------------------------------
Earnings from continuing operations 36,189 18,084 15,426
Discontinued operations (Note 12):
Gain on sale of discontinued operations, net of
income tax expense of $735 in 1996 and $3,352
in 1995 - 1,416 6,355
---------------------------------------------------
Earnings from discontinued operations - 1,416 6,355
---------------------------------------------------
Net earnings $ 36,189 $ 19,500 $ 21,781
===================================================
</TABLE>
See accompanying notes.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Stockholder's Equity
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------------
(In Thousands)
Common stock:
<S> <C> <C> <C>
Balance at beginning and end of year $ 12,000 $ 12,000 $ 12,000
Paid-in capital:
Balance at beginning of year 40,106 25,106 25,106
Additional paid-in capital - 15,000 -
----------------------------------------------------
Balance at end of year 40,106 40,106 25,106
Net unrealized gains (losses) on securities:
Balance at beginning of year 3,686 15,297 (28,865)
Change in net unrealized gains (losses) 10,678 (11,611) 44,162
----------------------------------------------------
Balance at end of year 14,364 3,686 15,297
Retained earnings:
Balance at beginning of year 281,075 266,575 252,794
Net earnings 36,189 19,500 21,781
Dividends declared (Note 2) - (5,000) (8,000)
----------------------------------------------------
Balance at end of year 317,264 281,075 266,575
----------------------------------------------------
Total stockholder's equity $383,734 $336,867 $318,978
====================================================
</TABLE>
See accompanying notes.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------
(In Thousands)
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net earnings $ 36,189 $ 19,500 $ 21,781
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Deferred income tax (benefit) (8,416) 4,146 7,025
Realized gains, net (5,121) (5,906) (4,290)
Gain on disposal of discontinued segment - (2,151) (7,417)
Discount accretion, net (975) (1,246) (1,090)
Policy loans lapsed in lieu of surrender benefits 1,021 2,996 3,201
Depreciation 3,778 4,153 4,817
Amortization 782 782 782
Changes in assets and liabilities:
(Increase) decrease in accrued investment income 19 (1,392) (1,719)
(Increase) decrease in receivables and reinsurance
recoverables (15,425) 2,761 (19,425)
Policy acquisition costs deferred (28,449) (31,745) (40,510)
Policy acquisition costs amortized 27,220 26,286 24,144
(Increase) decrease in income taxes recoverable (2,187) 5,518 (4,546)
Increase in accrued policy benefits, claim
reserves, unearned revenues and policyholder funds 30,777 32,331 4,574
Interest credited to policyholder accounts 79,312 69,494 56,358
Increase (decrease) in outstanding checks in excess of
bank balances (2,004) 805 3,868
Decrease in other assets and other liabilities, net 7,269 412 1,133
Decrease in net asset of discontinued operations - - 1,335
Other, net (433) (1,208) (179)
-----------------------------------------
Net cash provided by operating activities 123,357 125,536 49,842
INVESTING ACTIVITIES
Purchases of investments:
Securities available-for-sale:
Fixed maturities (464,419) (527,172) (592,373)
Equity securities (31,625) (17,586) (12,537)
Mortgage and policy loans (237,990) (259,438) (159,521)
Other - - (269)
Sales, calls or maturities of investments:
Maturities and calls of securities
available-for-sale:
Fixed maturities 167,000 117,057 108,472
Equity securities - - 2,031
Sales of securities available-for-sale:
Fixed maturities 284,124 238,051 263,650
Equity securities 14,379 12,444 6,223
Mortgage and policy loans 98,554 66,934 41,753
Real estate 5,854 2,194 502
</TABLE>
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------
(In Thousands)
INVESTING ACTIVITIES (CONTINUED)
<S> <C> <C> <C>
Purchase of property, equipment and software $ (1,949) $ (290) $ (2,659)
Net (increase) decrease in short-term investments (7,516) 36,272 13,264
Proceeds from sale of discontinued operations - 632 5,426
Distributions from unconsolidated related parties 1,514 718 2
-----------------------------------------
Net cash used in investing activities (172,074) (330,184) (326,036)
FINANCING ACTIVITIES
Dividends paid - (5,000) (8,000)
Additional paid-in capital - 15,000 -
Deposits from interest sensitive and investment type contracts 323,487 381,865 401,681
Withdrawals from interest sensitive and investment type contracts (295,633) (187,217) (120,956)
Net proceeds from reverse repurchase borrowing 40,925 35,173 -
Retirement of reverse repurchase borrowing (20,062) (35,173) -
-----------------------------------------
Net cash provided by financing activities 48,717 204,648 272,725
-----------------------------------------
Net decrease in cash - - (3,469)
Cash at beginning of year - - 3,469
=========================================
Cash at end of year $ - $ -$ -
=========================================
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
Cash paid during the year for:
Income taxes $ 13,135 $ 1,239 $ 9,376
=========================================
Interest paid on reverse repurchase borrowing $ 369 $ 620 $ -
=========================================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Real estate acquired through foreclosure $ 1,236 $ 3,033 $ 5,156
=========================================
</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, 1997
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, primarily distributed through general agencies, and through
reinsurance assumptions. 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's entire investment portfolio is designated 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 offset to the unrealized gains or losses
represents 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.
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, 1997,
no real estate was owned; at December 31, 1996, real estate was carried net of a
valuation allowance of $2,344,000. Profit is recognized on real estate sales
when down payment,
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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
other insurance considerations revenue 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.
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.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, 1997 and 1996 was $47,211,000 and $38,694,000,
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.
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 unrealized investment
gains and losses.
SEPARATE ACCOUNTS
These accounts arise from two lines of business, variable annuities and MBIA
insured guaranteed investment contracts (GIC). The separate account assets are
legally segregated and are not subject to the claims which may arise from any
other business of the Company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The assets and liabilities of the variable line of business are reported at fair
value since the underlying investment risks are assumed by the policyowners.
Investment income and gains or losses arising from the variable line of business
accrue directly to the policy owners and are, therefore, not included in
investment earnings in the accompanying consolidated statement of operations.
Revenues to the Company from variable products consist primarily of contract
maintenance charges and administration fees. Separate account assets and
liabilities for the variable line of business totaled $30,000 on December 31,
1997.
The assets of the MBIA GIC line of business are maintained at an amount equal to
the related liabilities. These assets related to the MBIA GIC line of business
include securities available-for-sale reported at fair value and mortgage loans
carried at unpaid balances. Changes in fair values of available-for-sale
securities, net of deferred income taxes, are reported as unrealized gains or
losses directly in stockholders equity.
The liabilities are reported at the original deposit amount plus accrued
interest guaranteed to the contractholders. Investment income and gains or
losses arising from MBIA GIC investments are included in investment earnings in
the accompanying consolidated statement of operations. The guaranteed interest
payable is included in the increase in policy liabilities in the accompanying
consolidated statement of operations. Separate account assets and liabilities
for the MBIA GIC line of business totaled $76,934,000 on December 31, 1997.
INTANGIBLE ASSETS
Goodwill of $12,323,000, net of accumulated amortization of $3,325,000 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, 1997,
1996 and 1995.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board (FASB) Statement of Financial Accounting
Standards (SFAS) No. 107, "Disclosures about Fair Value of Financial
Instruments," requires disclosure of fair value information about financial
instruments, whether or not
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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, 1997 DECEMBER 31, 1996
--------------------------------- ---------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------------------------------- ---------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Fixed maturities (Note 3) $1,326,018 $1,326,018 $1,288,934 $1,288,934
Equity securities (Note 3) 57,806 57,806 32,350 32,350
Mortgage loans 842,149 867,552 704,356 707,915
Policy loans 62,207 57,491 65,225 60,735
Short-term investments 47,507 47,507 39,991 39,991
Reinsurance recoverables:
Paid benefits 6,588 6,588 3,948 3,948
Benefits and claim reserves 72,000 72,000 58,177 58,177
Assets held in separate accounts 76,964 77,061 - -
Mortgage loan commitments (Note 5) - 74,469 - 46,735
Investment-type insurance
contracts (Note 4) 1,277,362 1,256,129 1,097,821 1,078,326
</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.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, the Company becomes a party to various
financial transactions to reduce its exposure to fluctuations in interest rates.
In 1997, the Company entered into interest rate swap contracts for the purpose
of converting the variable interest
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
rate characteristics of certain investments to fixed rates to match those of the
related insurance liabilities (guaranteed investment contracts) that the
investments are supporting. The net interest effect of such swap transactions is
reported as an adjustment of interest income as incurred. The notional amount of
these contracts were $25,000,000 at December 31, 1997.
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. 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 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.
PENDING ACCOUNTING STANDARD
SFAS No. 130, "Reporting Comprehensive Income," will be adopted in 1998 and will
require disclosure of comprehensive income which includes the change in
unrealized investment gains and losses. The comprehensive income amount is
expected to be more volatile than net income.
RECLASSIFICATION
Certain amounts for 1996 and 1995 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, 1997 and 1996, the Company's statutory stockholder's equity
was $188,193,000 and $171,240,000, respectively. Statutory net gain from
operations and net income for each of the three years in the period ended
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Net gain from operations $18,545 $10,898 $8,309
Net income 14,540 10,381 9,418
</TABLE>
3. INVESTMENT OPERATIONS
The Company's investments in securities are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------------------------------------------------------------
(In Thousands)
Fixed maturities:
U.S. Treasury securities and obligations
of U.S. government corporations and
<S> <C> <C> <C> <C>
agencies $ 67,406 $ 1,233 $ (46) $ 68,593
Obligations of states and political
subdivisions 36,053 1,472 (9) 37,516
Debt securities issued by foreign
governments 3,975 121 (126) 3,970
Corporate securities 427,242 8,955 (2,004) 434,193
Mortgage-backed securities 755,467 10,153 (2,330) 763,290
Redeemable preferred stocks 18,315 206 (65) 18,456
---------------------------------------------------------------
Total 1,308,458 22,140 (4,580) 1,326,018
Equity securities 46,807 12,419 (1,420) 57,806
---------------------------------------------------------------
$1,355,265 $34,559 $(6,000) $1,383,824
===============================================================
</TABLE>
3. INVESTMENT OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------------------------------------------------------------
(In Thousands)
Fixed maturities:
U.S. Treasury securities and obligations
of U.S. government corporations and
<S> <C> <C> <C> <C>
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>
The amortized cost and estimated fair value of fixed maturity securities at
December 31, 1997, 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>
AMORTIZED COST FAIR VALUE
------------------------------------
(In Thousands)
<S> <C> <C>
Due in one year or less $ 59,899 $ 59,517
Due after one year through five years 140,594 142,573
Due after five years through 10 years 266,145 271,715
Due after 10 years 86,353 88,923
------------------------------------
552,991 562,728
Mortgage-backed securities 755,467 763,290
------------------------------------
Total fixed maturity securities $1,308,458 $1,326,018
====================================
</TABLE>
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:
<TABLE>
<CAPTION>
CARRYING AMOUNT AS OF DECEMBER 31,
1997 1996
------------------------------------
(In Thousands)
State:
<S> <C> <C>
California $ 71,675 $ 68,399
Arizona 65,030 51,515
Texas 60,821 59,404
Missouri 51,839 34,400
Oklahoma 47,569 32,809
Florida 42,549 30,790
Washington 39,824 34,614
Utah 37,821 25,383
Kansas 34,267 34,069
Other 390,754 332,973
------------------------------------
$842,149 $704,356
====================================
</TABLE>
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>
1997 1996 1995
------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Impaired mortgage loans $1,069 $2,516 $5,160
Allowance for credit losses 244 691 1,651
-------------------------------------------
Net recorded investment in impaired loans $ 825 $1,825 $3,509
===========================================
Average recorded investment in impaired loans $1,325 $2,667 $2,902
===========================================
Interest income on impaired loans $ 57 $ 115 $ 403
===========================================
</TABLE>
3. INVESTMENT OPERATIONS (CONTINUED)
Bonds, mortgage loans, preferred stocks and common stocks approximating
$4,600,000 and $4,200,000 were on deposit with regulatory authorities at
December 31, 1997 and 1996, respectively.
Set forth below is a summary of consolidated net investment income for the years
ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------------------
(In Thousands)
Fixed maturities:
<S> <C> <C> <C>
Bonds $ 92,741 $ 86,066 $ 73,930
Redeemable preferred stocks 1,309 814 1,176
Equity securities:
Common stocks 793 579 521
Nonredeemable preferred stocks 541 438 330
Mortgage loans on real estate 66,053 52,973 41,770
Policy loans 3,906 3,953 3,952
Short-term investments 2,955 3,016 4,779
Other 1,223 269 340
-------------------------------------------------
169,521 148,108 126,798
Less:
Investment income from discontinued operations - - 211
Investment expenses 2,175 2,479 1,982
=================================================
Net investment income from continuing operations $167,346 $145,629 $124,605
=================================================
</TABLE>
3. INVESTMENT OPERATIONS (CONTINUED)
Realized gains (losses) on securities disposed of during 1997, 1996 and 1995
consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------------------
(In Thousands)
Fixed maturity securities:
<S> <C> <C> <C>
Gross realized gains $10,499 $7,953 $10,246
Gross realized losses (4,690) (1,622) (4,388)
Equity securities:
Gross realized gains 3,204 2,001 1,789
Gross realized losses (777) - (376)
Other investments (3,115) (2,426) (2,981)
--------------------------------------------------------
Net realized gains $ 5,121 $5,906 $ 4,290
========================================================
</TABLE>
Sales of investments in securities in 1997, 1996 and 1995, excluding maturities
and calls, resulted in gross realized gains of $8,362,000, $9,798,800 and
$11,887,000 and gross realized losses of $1,017,000, $1,290,500 and $4,564,000
respectively.
The net carrying value of nonincome-producing investments at December 31, 1996,
which were nonincome producing during the year, consisted of mortgage loans of
$1,293,000 and bonds of $1,200,000. There were no nonincome producing
investments at December 31, 1997.
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>
1997 1996
-------------------------------- --------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------------------------------- --------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Guaranteed investment contracts $ 660,782 $ 662,281 $ 596,499 $ 598,241
Flexible and single premium
deferred annuities 539,616 516,343 501,322 480,085
Separate accounts 76,964 77,505 - -
-----------------------------------------------------------------
Total investment-type insurance
contracts $1,277,362 $1,256,129 $1,097,821 $1,078,326
=================================================================
</TABLE>
4. INVESTMENT CONTRACTS (CONTINUED)
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 $2,137,000, $2,117,000 and $2,742,000 for
the years ended December 31, 1997, 1996 and 1995, respectively. As of December
31, 1997, the minimum future payments under noncancelable operating leases for
each of the next five years and in the aggregate subsequent to 2002 are as
follows:
1998 $1,093,000
1999 945,000
2000 491,000
2001 386,000
2002 168,000
Subsequent to 2002 2,000
===================
Total $3,085,000
===================
Total outstanding commitments to fund mortgage loans were $74,496,000 and
$46,735,000 at December 31, 1997 and 1996, 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 1997 1996
------------------- ------------------------------------
(In Thousands)
Home office building, including land with
<S> <C> <C> <C> <C>
a cost of $425,000 2% $23,158 $23,158
Other real estate not held-for-sale or
rental 4% 973 1,126
Less accumulated depreciation (12,530) (11,963)
------------------------------------
11,601 12,321
Equipment and software 5%-33% 23,937 29,010
Less accumulated depreciation (18,785) (22,441)
------------------------------------
5,152 6,569
------------------------------------
Total property, equipment and software $16,753 $18,890
====================================
</TABLE>
7. FEDERAL INCOME TAXES
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>
1997 1996 1995
-----------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Current $10,948 $ 6,757 $ 4,830
Deferred:
Deferred policy acquisition costs 143 1,322 4,139
Future policy benefits 3,783 2,424 4,010
Accrual of discount 197 408 494
Tax on realized gains greater than book 571 (1,076) (1,034)
Recognition of tax effect previously deferred on sale of
affiliate stock in prior period (11,169) - -
Employee benefit plans (2,206) 86 (148)
Other, net 265 982 (436)
-----------------------------------------------
(8,416) 4,146 7,025
-----------------------------------------------
Total 2,532 10,903 11,855
Less taxes from discontinued operations:
Current - (149) 1,539
Deferred - 884 1,813
-----------------------------------------------
- 735 3,352
-----------------------------------------------
Total taxes from continuing operations $ 2,532 $10,168 $ 8,503
===============================================
</TABLE>
The Company did not record any valuation allowances against deferred tax assets
at December 31, 1995, 1996 or 1997.
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>
1997 1996 1995
-----------------------------------------
(In Thousands)
Application of statutory rate to earnings before taxes
<S> <C> <C> <C>
on income $13,552 $ 9,888 $8,375
Tax-exempt municipal bond interest and dividends
received deductions (361) (291) (293)
Recognition of tax effect previously deferred on sale of
affiliate stock in a prior period (11,169) - -
Other 510 571 421
-----------------------------------------
$ 2,532 $10,168 $8,503
=========================================
</TABLE>
The significant components comprising the Company's deferred tax assets and
liabilities as of December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------------------
Deferred tax liabilities:
<S> <C> <C>
Deferred acquisition costs $29,641 $27,426
Tax effect of sale of affiliates stock - 14,169
Unrealized investment gains and losses 7,735 1,987
Other 9,655 5,532
------------------------------------------
Total deferred tax liability 47,031 49,114
Deferred tax assets:
Reserve for future policy benefits 21,411 23,012
Accrued expenses 8,504 6,636
Other 4,872 4,554
------------------------------------------
Total deferred tax assets 34,787 34,202
==========================================
Net deferred tax liability $12,244 $14,912
==========================================
</TABLE>
7. FEDERAL INCOME TAXES (CONTINUED)
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 $87,000,000. 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 $30,000,000.
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 $247,000,000 at December 31, 1997.
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 1997, approximately $4.3 million of
annual benefits were covered by a group pension investment contract 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., had 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 were the same as provided in the
previous Jones & Babson, Inc. pension plan. Effective January 1, 1997, the
benefit formula for the Jones & Babson, Inc.
8. BENEFIT PLANS (CONTINUED)
employees was changed to be identical with the benefit formula used for BMA
employees. All benefits accrued prior to January 1, 1997 have been preserved.
Employees of the Company's subsidiary, BMA Financial Services, Inc., became
eligible to participate in the Company's plan effective January 1, 1995.
The following table sets forth the plan's funded status at December 31:
<TABLE>
<CAPTION>
1997 1996
------------------------------
(In Thousands)
Actuarial present value of accumulated benefit obligations:
<S> <C> <C>
Vested $ 50,968 $ 45,377
Non-vested 1,397 1,296
------------------------------
Total $ 52,365 $ 46,673
==============================
Projected benefit obligation for service rendered to date $(62,683) $(57,186)
Plan assets at fair value 85,605 79,679
------------------------------
Plan assets in excess of projected benefit obligation 22,922 22,493
Unrecognized net gain from past experience different from that assumed
and effects of changes in assumptions (23,519) (24,732)
Prior service cost not yet recognized in net periodic
pension cost 2,034 2,607
Unrecognized net asset at January 1, 1987 being recognized over
15 years (1,177) (1,471)
Adjustment to recognize minimum liability (50) (57)
------------------------------
Prepaid (accrued) pension cost $ 210 $ (1,160)
==============================
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------
Net pension cost included the following components:
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 1,767 $1,797 $ 1,758
Interest cost on projected benefit obligation 4,374 4,195 4,089
Actual return on plan assets (10,316) (9,745) (12,888)
Net amortization and deferral 2,812 3,102 7,019
--------------------------------------------
Net pension benefit $ (1,363) $ (651) $ (22)
============================================
</TABLE>
8. BENEFIT PLANS (CONTINUED)
In determining the actuarial present value of the projected benefit obligation,
the weighted-average discount rate utilized was 7.5% for 1997, 8% for 1996 and
7.5% for 1995, and the rate of increase in future compensation levels used was
5% for 1997, 5.5% for 1996 and 5% for 1995. The expected long-term rate of
return on assets was 8% in 1997, 1996 and 1995.
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.
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>
1997 1996
-----------------------------
(In Thousands)
Actuarial present value of accumulated benefit obligations:
<S> <C> <C>
Vested $ 9,964 $ 8,535
Non-vested 136 234
-----------------------------
Total $ 10,100 $ 8,769
=============================
Projected benefit obligation for service rendered to date $(11,281) $(10,178)
Unrecognized net loss from past experience different from that assumed
and effects of changes in assumptions 2,260 1,319
Prior service cost not yet recognized in net periodic pension
cost 678 856
Unrecognized net obligation at January 1, 1987 being recognized
over 15 years 729 911
Adjustment required to recognize minimum liability (2,486) (1,677)
-----------------------------
Accrued pension liability $(10,100) $ (8,769)
=============================
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------
Net pension cost included the following components:
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 190 $ 189 $ 197
Interest cost on projected benefit obligation 783 761 651
Net amortization and deferral 469 513 371
------------------------------------------
Net pension cost $1,442 $1,463 $1,219
==========================================
</TABLE>
In determining the actuarial present value of the projected benefit obligation,
the weighted-average discount rate utilized was 7.5% for 1997, 8% for 1996 and
7.5% for 1995. The rate of increase in future compensation levels used was 5%
for 1997, 5.5% for 1996 and 5% for 1995.
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 $1,099,000 in
1997, $1,284,000 in 1996 and $1,336,000 in 1995. 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
$230,000 in 1997, $225,000 in 1996 and $420,000 in 1995.
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.
8. BENEFIT PLANS (CONTINUED)
The following table presents the plan's funded status at December 31:
<TABLE>
<CAPTION>
1997 1996
---------------------------------
(In Thousands)
Accumulated postretirement benefit obligation:
<S> <C> <C>
Retirees $ 9,636 $10,199
Active plan participants 1,854 2,054
---------------------------------
11,490 12,253
Plan assets at fair value - -
---------------------------------
Accumulated postretirement benefit obligation in excess of plan
assets 11,490 12,253
Unrecognized net loss (268) (125)
Unrecognized transition obligation (4,872) (5,199)
Unrecognized prior service costs (2,808) (4,008)
---------------------------------
Accrued postretirement benefit cost $ 3,542 $ 2,921
=================================
</TABLE>
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------
(In Thousands)
<S> <C> <C> <C>
Service cost $ 122 $ 118 $ 153
Interest cost 878 867 771
Amortization of transition obligation over 20 years 327 327 511
Amortization of past service costs 407 407 -
-----------------------------------------
Net periodic postretirement benefit cost $1,734 $1,719 $1,435
=========================================
</TABLE>
The weighted-average annual assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) varies 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.
8. BENEFIT PLANS (CONTINUED)
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25%, 7.5% and 7.5% at December 31, 1997,
1996 and 1995 respectively.
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>
1997 1996 1995
----------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Direct $118,192 $124,912 $153,476
Assumed 134,541 116,154 102,212
Ceded (54,613) (38,114) (77,604)
----------------------------------------------
Total net premium 198,120 202,952 178,084
Less net premium from discontinued operations - - 430
----------------------------------------------
Total net premium from continuing operations $198,120 $202,952 $177,654
==============================================
</TABLE>
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, 1997, the Company had ceded to other life
insurance companies individual life insurance in force of approximately $24.1
billion and group life of approximately $654 million.
9. REINSURANCE (CONTINUED)
Benefits and reserves ceded to other insurers amounted to $42,069,000,
$28,132,000 and $53,672,000 during the years ended December 31, 1997, 1996 and
1995, respectively. At December 31, 1997 and 1996, policy reserves ceded to
other insurers were $55,568,000 and $43,573,000, respectively. Claim reserves
ceded amounted to $16,432,000 and $14,604,000 at December 31, 1997 and 1996,
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 1997, 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 $873,000,
$1,035,000 and $1,023,000 during 1997, 1996 and 1995, respectively. The Company
ceded no claims during 1997, 1996 or 1995.
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, $35 million, $60 million and $137 million in
account balances were ceded to Generali in 1997, 1996 and 1995, respectively,
and Generali loaned such amounts back to the Company. Account balances ceded and
loaned back at December 31, 1997 and 1996 were $213 million and $193 million,
respectively. The recoverable amount from Generali was offset against the loan.
The net expense related to this agreement was $1,895,000, $1,344,000 and
$136,000 for the years ended December 31, 1997, 1996 and 1995, respectively. The
Company held payables to Generali of $799,000 and $972,000 at December 31, 1997
and 1996, respectively.
11. STOCKHOLDER'S EQUITY
The components of the balance sheet caption "net unrealized gain on securities"
in stockholder's equity are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------------
(In Thousands)
Net unrealized gains (losses) on securities:
<S> <C> <C>
Fixed maturities $17,560 $2,046
Equity securities 10,999 3,706
Securities held in separate account 334 -
------------------------------------
Net unrealized gains (losses) 28,893 5,752
Adjustment to deferred policy acquisition costs (7,224) (35)
Adjustment to unearned revenue reserve 430 (44)
Deferred income taxes (7,735) (1,987)
------------------------------------
Net unrealized gains (losses) $14,364 $3,686
====================================
</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 was considered a
discontinued operation for the years ended 1996 and 1995, 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. The
estimated gain on disposal of this business was recorded in 1994. An additional
gain of $661,000, net of tax, was recorded in 1995 reflecting various
adjustments to initial estimates.
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
12. DISCONTINUED OPERATIONS (CONTINUED)
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. 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.
13. IMPACT OF YEAR 2000 (UNAUDITED)
Some of the Company's computer systems were written using two digits rather than
four to define the applicable year. As a result, those computer systems will not
recognize the year 2000 which, if not corrected, could cause disruptions of
operations, including, among other things, an inability to process transactions
or engage in similar normal business activities.
The Company has developed a plan to modify its information technology to be
ready for the year 2000 and has begun converting critical data processing
systems. The Company currently expects the project to be substantially complete
by late 1998 which is prior to any anticipated impact on its operating systems.
Based on this plan, the Company does not believe that the costs to complete such
system modifications or replacements will be material to the Company's financial
statements.
IX. EXHIBITS
A. (1) Resolution of Board of directors of the Company authorizing the Separate
Account.*
(2) None.
(3) (a) Form of Co-Principal Underwriter's Agreement
(b) Form of Selling Agreements
(c) Schedule of sales commissions referred to in Item 38(c)
(4) None
(5) Flexible Premium Adjustable Variable Life Insurance Policy*
(6) (a) Articles of Incorporation of the Company*
(b) Bylaws of the Company*
(7) Not Applicable
(8) Form of Fund Participation Agreements
(9) Form of Reinsurance Agreement
(10) Form of application
B. Furnish copies of each of the following:
(1) Not Applicable
(2) Not Applicable
C. Not Applicable
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940 the depositor
of the Registrant has caused this registration statement to be duly signed on
behalf of the Registrant in the City of Kansas City and State of Missouri on the
10th day of August, 1998.
[SEAL]
BMA VARIABLE LIFE ACCOUNT A
By: BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
__________________________________________
By: /S/ DAVID A. GATES
______________________________
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
By: /S/ STEPHEN A. SODEN
______________________________
Attest: /S/ VERNON W. VOORHEES II
______________________
(Name)
Senior Vice President
________________________
(Title)
INDEX TO EXHIBITS
EX-99.A.(3)(a) Form of Co-Principal Underwriter's Agreement
EX-99.A.(3)(b) Form of Selling Agreements
EX-99.A.(3)(c) Schedule of Sales Commissions
EX-99.A.(8) Form of Fund Participation Agreements
EX-99.A.(9) Form of Reinsurance Agreement
EX-99.A.(10) Form of Application
CO-PRINCIPAL UNDERWRITERS' AGREEMENT
Between
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
and
JONES & BABSON, INC.
and
CONSECO EQUITY SALES, INC.
AGREEMENT dated as of ______________, 1998 by and between BUSINESS MEN'S
ASSURANCE COMPANY OF AMERICA ("BMA"), a Missouri corporation, on its own behalf
and on behalf of BMA Variable Life Account A (the "Separate Account"), Jones &
Babson, Inc. ("J&B"), a Missouri corporation, and Conseco Equity Sales, Inc.
(ACES@), a Texas corporation.
WITNESSETH:
WHEREAS, the Separate Account is a segregated asset account established and
maintained by BMA pursuant to the laws of the State of Missouri for variable
life insurance policies to be issued by BMA and herein defined (the "Contracts")
under which income, gains and losses, whether or not realized, from assets
allocated to such accounts are, in accordance with the Contracts, credited to or
charged against the Separate Account without regard to other income, gains, or
losses of BMA or any other segregated asset accounts established by BMA;
WHEREAS, J&B and CES are each registered as broker-dealers under the
Securities Exchange Act of 1934, as amended, and are members in good standing of
the National Association of Securities Dealers, Inc., and are willing to serve
as co-principal underwriters of the Contracts; and
WHEREAS, BMA proposes to register interests in the Contracts by registering
the Separate Account under the Investment Company Act of 1940, as amended, and
interests in the Contracts under the Securities Act of 1933, as amended, and to
issue and sell the Contracts through the Separate Account to the public through
J&B and CES each acting as a co-principal underwriter for the Contracts; and to
that end has filed a registration statement with the Securities and Exchange
Commission.
NOW, THEREFORE, in consideration of their mutual promises, BMA, J&B and CES
hereby agree as follows:
1. Additional Definitions
(a) Contracts - The variable life insurance policies which BMA proposes to
issue and the premiums for which will be deposited in the Separate
Account and BMA's general account, including any riders to such
contracts.
(b) Registration Statement - At any time that this Agreement is in effect
the currently effective registration statement, or currently effective
post-effective amendment thereto, relating to the Separate Account,
including financial statements included in and all exhibits to such
registration statement or post-effective amendment.
(c) Prospectus - The prospectus included within the Registration
Statement, except that if the most recently filed prospectus filed
pursuant to Rule 497(c) or 497(e) under the 1933 Act subsequent to the
date on which the Registration Statement became effective differs from
the prospectus included within the Registration Statement at the time
it became effective, the term "Prospectus" shall refer to the most
recently filed prospectus filed under Rule 497(c) or 497(e) from and
after the date on which they each shall have been filed.
(d) Investment Company - The underlying open-end management investment
companies which the Separate Account invests in.
(e) 1933 Act - The Securities Act of 1933, as amended.
(f) 1934 Act - The Securities Exchange Act of 1934, as amended.
(g) 1940 Act - The Investment Company Act of 1940, as amended.
(h) SEC - The Securities and Exchange Commission.
(i) NASD - The National Association of Securities Dealers, Inc.
(j) Regulations - The rules and regulations promulgated by the SEC under
the 1933 Act, the 1934 Act and the 1940 Act as in effect at the time
this Agreement is executed or hereinafter promulgated.
(k) Territory - Each of the fifty states of the United States including
the District of Columbia and Puerto Rico except New York. It is
recognized that BMA is not qualified to transact a variable insurance
business in New York. In the event, however, that BMA becomes so
qualified and the Contracts are approved for sale in New York,
"Territory" shall then be deemed to include New York.
(l) Dealer - An entity registered as a broker-dealer and licensed as a
life insurance agent or affiliated with an entity so licensed, and
authorized to sell the Contracts and/or to recruit other Dealers to
sell the Contracts pursuant to a sales agreement as provided for in
this Agreement.
(m) Applications - Applications for the Contracts.
(n) Premium - A payment made under a Contract by an applicant or purchaser
to purchase benefits under the Contract.
(o) Service Center - BMA, ______________________________, or such other
location as may be designated in writing from time to time by BMA.
2. Co-Principal Underwriters
(a) BMA grants to J&B and CES the right, and J&B and CES each accept such
grant, during the term of this Agreement, subject to the registration
requirements of the 1933 Act and the 1940 Act and the provisions of
the 1934 Act for each to be the co-distributor and co-principal
underwriter of the Contracts in the Territory. It is hereby understood
that J&B and CES will each develop distribution systems for the
distribution of the Contracts. J&B and CES each undertake to offer and
use its best efforts to market Contracts actively through Dealers and
will provide a dealer marketing staff to answer telephone inquiries
with respect to the Contracts from registered representatives of
Dealers that have executed a sales agreement with either J&B or CES.
(b) BMA authorizes J&B and CES to each enter into separate written sales
agreements with broker-dealers that thereby will become Dealers on
terms and conditions that are consistent with this Agreement. J&B and
CES each agree that each sales agreement shall require the Dealer and
its agents or representatives soliciting applications for the
Contracts or otherwise engaging in solicitation activities on behalf
of the Dealer to be duly and appropriately licensed, registered or
otherwise qualified for the sale and distribution of the Contracts
under the federal securities laws and the insurance laws and any
applicable securities or blue-sky laws of each state or other
jurisdiction in the Territory in which the Dealer offers the Contracts
for sale, and in which BMA informs J&B and CES that BMA is licensed to
sell the Contracts. Each sales agreement also shall require that the
Dealer be registered as both a broker-dealer under the 1934 Act and a
member of the NASD, or if not so registered or not such a member, then
the agents and representatives of such Dealer soliciting applications
for the Contracts shall be agents and registered persons of a
registered broker-dealer and NASD member which is an affiliate of such
Dealer and is also a party to such sales agreement and which maintains
full responsibility for the training, supervision, and control of the
securities activities of the agents and representatives distributing
the Contracts.
(c) BMA shall forward to J&B and CES Applications and other materials for
use by J&B and CES and the Dealers in their solicitation of the
Contracts. J&B and CES each agree that all Applications shall be made
only on application forms and other materials provided by BMA.
(d) All Premiums paid by check or money order that are collected by J&B
and/or CES or any Dealer shall be remitted promptly in full, together
with any Applications, forms and any other required documentation, to
the Service Center. Checks or money orders in payment of Premiums
shall be drawn to the order of "Business Men's Assurance Company of
America." Initial and additional Premiums may be transmitted by wire
order from J&B or CES or any Dealer to the Service Center in
accordance with the procedures set forth by BMA. Acceptance by BMA of
a wire order does not create a contractual obligation with BMA until
the receipt of a properly completed Application within 10 days of
transmittal of the wire order by J&B or CES or the Dealer. If any
Premium is held at any time by J&B or CES, J&B and CES agrees that
such Premium shall be held in a fiduciary capacity and shall be
remitted promptly to BMA. All such Premiums, whether by check, money
order or wire, shall be the property of BMA.
(e) J&B and CES each acknowledge that BMA shall have the unconditional
right to reject, in whole or in part, any Application. In the event an
Application is rejected, any Premium submitted will be returned by or
on behalf of BMA to the applicant. J&B or CES and, if applicable, the
Dealer that submitted the Premium, will be notified of such action. In
the event that a purchaser exercises his or her rescission privilege
provided by law, any amount to be refunded as provided in the Contract
will be so refunded to the purchaser by or on behalf of BMA. J&B and
CES and, if applicable, the Dealer who solicited the Contract, will be
notified of such action and will refund any commissions paid on such
rescinded Contract.
(f) J&B and CES shall each act as independent contractors in the
performance of their duties and obligations under this Agreement and
nothing herein contained shall make either J&B or CES or their
representatives or employees, or the Dealers or their respective
representatives or employees, employees of BMA in connection with the
distribution of the Contracts.
(g) J&B and CES each agrees to train, supervise and be solely responsible
for the conduct of their respective employees, if any, of J&B and CES
in their solicitation of applications and Premiums for the Contracts,
and to supervise their compliance with applicable rules and
regulations of any securities regulatory agencies that have
jurisdiction over variable contracts activities, including the
requirement that the Contracts be suitable for J&B's or CES's
customers.
(h) BMA, as agent for J&B and CES, will confirm the purchase of the
Contract to each purchaser of a Contract in accordance with the 1934
Act and the rules thereunder. BMA will maintain and preserve such
books and records with respect to such confirmations in conformity
with the requirements of the 1934 Act and the rules thereunder. BMA
agrees that all such books and records will be maintained and held on
behalf of and as agent for J&B and CES whose property they are and
shall remain, and that such books and records are at all times subject
to inspection by the SEC.
3. Representations and Warranties of BMA BMA makes the following
representations and warranties:
(a) BMA will notify J&B and CES when the Registration Statement has been
declared effective by the SEC or has become effective in accordance
with the Regulations.
(b) The Registration Statement and the Prospectus comply in all material
respects with the provisions of the 1933 Act and the 1940 Act and the
Regulations, and neither of the Registration Statement nor the
Prospectus contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, in light of the
circumstances in which they were made; provided, however that none of
the representations and warranties in Section 3(b) shall apply to
statements or omissions from the Registration Statement or Prospectus
made in reliance upon and in conformity with the information furnished
to BMA in writing by J&B and CES expressly for use in the Registration
Statement.
(c) BMA has not received any notice from the SEC with respect to the
Registration Statements pursuant to Section 8(e) of the 1940 Act and
no stop order under the 1933 Act has been issued and no proceeding
therefor has been instituted or threatened by the SEC.
(d) BMA will notify J&B and CES promptly upon learning the Registration
Statement have ceased to be effective.
(e) The accountants who certified the financial statements included in the
Registration Statement and Prospectus are independent public
accountants as required by the 1993 Act and the Regulations.
(f) The financial statements included in the Registration Statement
present fairly the financial condition of BMA at the dates indicated.
Such financial statements have been prepared in conformity with
generally accepted accounting principles.
(g) Subsequent to the respective dates as of which information is given in
the Registration Statement or the Prospectus through the date of this
Agreement, there has not been any material adverse change in the
condition, financial or otherwise, of BMA which would cause
information to be misleading.
(h) BMA has been duly organized and is validly existing as a corporation
in good standing under the laws of the State of Missouri with full
power and authority to own, lease and operate its properties and
conduct its business in the manner described in the Prospectus and is
duly qualified to transact the business of a life, health and accident
insurance company, and is in good standing in each state or other
jurisdiction in the Territory.
(i) The Contracts have been approved to the extent required by the
Missouri Insurance Commissioner and by the governmental agency
responsible for regulating insurance companies in each other state or
jurisdiction in which BMA has indicated to J&B and CES that the
Contracts may be offered for sale.
(j) The execution and delivery of this Agreement and the consummation of
the transactions contemplated herein have been duly authorized by all
necessary corporate action by BMA and when so executed and delivered
this Agreement will be the valid and binding obligation of BMA
enforceable in accordance with its terms.
(k) The consummation of the transactions contemplated by this Agreement,
and the fulfillment of the terms of this Agreement, will not conflict
with, result in any breach of any of the terms and provisions of or
constitute (with our without notice or lapse of time) a default under
the charter or by-laws of BMA, or any indenture, agreement, mortgage,
deed of trust, or other instrument to which BMA is party or by which
it is bound, or violate any law, or, to the bet of BMA's knowledge,
any order, rule or regulation applicable to BMA of any court or any
federal or state regulatory body, administrative agency or any other
governmental instrumentality having jurisdiction over BMA or any of
its properties.
(l) No consent, approval, authorization or order of any court or
governmental authority or agency is required for the issuance or sale
of the Contracts or for the consummation of the transactions
contemplated by this Agreement, that has not been obtained, except
with respect to the states or jurisdictions in which BMA has informed
J&B and CES that such consent is still being sought, or with respect
to which the parties have agreed that such consent is not being
sought.
(m) BMA has filed with the SEC all statements and other documents required
for registration of the Separate Account under the provisions of the
1940 Act and the Regulations thereunder and such registration is
expected to be or has been effective.
(n) The Contracts conform to the descriptions thereof in the Registration
Statement and the Prospectus and, when issued as contemplated by the
Registration Statement, will constitute legal, validly issued and
binding obligations of BMA in accordance with their terms.
4. Additional Obligations of BMA
(a) BMA shall use its best efforts: (1) to maintain the registration of
the Contracts with the SEC and any state securities commissions of any
state or other jurisdiction in the Territory where the securities or
blue-sky laws of such state or other jurisdiction require registration
of the Contracts, including without limitation using its best efforts
to prevent a stop order from being issued or if a stop order has been
issued to cause such a stop order to be withdrawn: (2) to gain
approval of the Contract or forms where required under the insurance
laws and regulations of each state or other jurisdiction in the
Territory; and (3) to keep such registration and approval in effect
thereafter so long as they are required and the Contracts are
outstanding.
(b) BMA agrees to provide J&B and CES, at any time upon J&B's and/or CES's
request, with a list of all states and jurisdiction in which the
Contracts lawfully may be sold. To the extent that BMA is not
authorized to issue the Contracts in any state or other jurisdiction
in the Territory, BMA shall make all reasonable efforts to obtain such
authorization in such state or jurisdiction. BMA agrees to notify J&B
and CES promptly of any change in the status of its application for
Contract approval in any jurisdiction where such approval has not been
obtained.
(c) During the term of this Agreement, BMA agrees that it will take all
action which is required to cause the Contracts to comply, and to
continue to comply, as annuity contracts and as registered securities
under applicable laws and regulations, and to cause the Registration
Statement and the Prospectus to comply, and to continue to comply,
with:
i. all applicable federal laws and regulations; and
ii. all applicable laws and regulations of each state and other
jurisdiction in the Territory.
(d) During the term of this Agreement, BMA will notify each J&B and CES as
soon as possible under the circumstances: i. When the Registration
Statement has become effective or any post-effective amendments with
respect to the Registration Statement thereafter becomes effective or
ceases to be effective;
ii. Of any request by the SEC for any amendments to the Registration
Statement or supplements to the Prospectus or for additional
information;
iii. Of any event which makes any material statement made in the
Registration Statement or the Prospectus untrue in any material
respect or results in material omission in the Registration
Statement or the Prospectus;
iv. Of the issuance by the SEC of any stop order with respect to the
Registration Statement or any amendment thereto or the initiation
of any proceedings for that purpose or for any other purpose
relating to the registration and/or offering of the Contracts.
(e) BMA will furnish to J&B and CES without charge promptly after filing a
copy of the Registration Statement as originally filed and any
pre-effective or post-effective amendments thereto, including
financial statements and all exhibits not incorporated therein by
reference, Contractholder reports, and proxy statements and materials
in the form mailed to Contractholders.
(f) During the term of this Agreement, no amendment or rider will be made
or added to the Contracts, no amendment will be made to the
Registration Statement and no amendment or supplement will be made to
the Prospectus, without J&B and CES each having been previously so
advised and having not objected to any such amendment, rider or
supplement. J&B and CES shall not object unreasonably to any such
amendment or rider, and BMA may effect an amendment or rider despite
any objection of J&B and/or CES if required by law or regulation.
(g) BMA will be obligated to pay all expenses in connection with: (i) the
preparation and filing of the Registration Statement, each preliminary
Prospectus and final Prospectus; (ii) the preparation and issuance of
the Contracts; (iii) any registration, qualification or approval of
the Contracts for offer and sale required under the securities,
blue-sky laws or insurance laws of the states and other jurisdictions
in the Territory; (iv) registration fees for the Contracts payable to
the SEC and the NASD; (v) the costs of designing, typesetting of the
different versions of the prospectuses to be distributed by J&B and
CES for the Separate Account and any supplements thereto; (vi) the
costs of any advertisements and sales material which J&B and CES
develop for their use in connection with the sale of the Contracts;
(vii) the cost of printing the different versions of the prospectuses
of the Separate Accounts and the Funds for distribution to potential
Contractholders and broker-dealers; (viii) designing and printing
periodic reports for the Separate Account and printing periodic
reports for the Funds to be provided to existing Contractholders; (ix)
taxes (if any) payable by the Separate Account and the cost of
preparing tax returns for the Separate Account; (x) the cost of
printing and mailing one set of proxy materials a year for existing
Contractholders; (xi) the cost of conducting meetings of
Contractholders for the purpose of conducting insurance company or
Separate Account business; (xii) all costs of necessary licensing,
registration, and qualification of BMA or its personnel in states in
which the Contracts are sold; (xiii) all legal, accounting and other
professional fees incurred by BMA in connection with the foregoing;
and (xiv) any other expenses related to the distribution of the
Contracts except those set forth in Section 6(g) below, or as mutually
agreed by the parties from time-to-time.
(h) BMA agrees that the names and addresses of all customers and
prospective customers of J&B and CES and their affiliates, or of any
Dealer which may come to the attention of BMA or any company or person
affiliated with BMA as a result of its relationship with J&B or CES or
their affiliates or any Dealer and not from any independent source,
are confidential and shall not be used by BMA or any company or person
affiliated with BMA for any purpose whatsoever except as may be
necessary in connection with the administration of the Contracts sold
by or through J&B or CES, including responses to specific requests to
BMA for service by Contractholders or efforts to prevent the
replacement of such Contracts or to encourage the exercise of options
under the terms of the Contracts. In no event shall the names and
addresses of such customers and prospective customers be furnished by
BMA to any other company or person. The intent of this paragraph is
that neither BMA nor companies or persons affiliated with BMA shall
utilize, or permit to be utilized, their knowledge of J&B or CES,
their affiliates or any Dealer, including the identity and all other
information concerning their customers, which is derived as a result
of the relationship created under this Agreement.
(i) BMA agrees to file in a timely manner all reports, statements and
amendments required to be filed by or for the Separate Account under
the 1933 Act and/or the 1940 Act or the Regulations.
(j) BMA agrees to deliver to J&B and CES as soon as practicable after it
becomes available, the Annual Statement for BMA and for the Separate
Account in the form filed with the State of Missouri and to supply
copies of all other financial reports at such time any such reports
are filed with the regulators or sent to Contractholders.
(k) BMA agrees to provide J&B and CES access to such records, officers and
employees of BMA at reasonable times as necessary to enable J&B and
CES to fulfill their obligations as co-principal underwriters under
the 1933 Act for the Contracts.
(l) BMA shall have the responsibility for maintaining the appointment
records of all agents appointed by BMA to distribute the Contracts.
(m) BMA shall have the responsibility for the ongoing operation and
administration of the Contracts and the Separate Account in accordance
with the terms of the Contracts and the Prospectus and all applicable
laws and regulations.
5. Representation and Warranties of J&B and CES
J&B and CES each make the following representations and warranties:
(a) J&B and CES have each taken all action including, without limitation,
those necessary under its articles of incorporation, by-laws and
applicable state corporate law, necessary to authorize the execution,
delivery and performance of this Agreement and all transactions
contemplated hereunder.
(b) J&B and CES are each and shall remain registered during the term of
this Agreement as broker-dealers under the 1934 Act, are members in
good standing with the NASD, and are duly registered, if required, as
broker-dealers under applicable state securities laws.
(c) J&B and CES shall solicit, and shall instruct Dealers to solicit,
sales of the Contracts only in those states or jurisdictions in which
BMA has indicated that the Contracts may be offered for sale.
(d) J&B and CES will each require each Dealer to be duly registered as a
broker-dealer under the 1934 Act and to be a member in good standing
with the NASD (or, if not so registered or such a member, to be
affiliated with a person so registered and such a member), and to
represent that it is duly in compliance with applicable state
securities and insurance laws. J&B and CES shall each require each
Dealer to sell the Contracts only through those associated persons (as
that term is defined in the 1934 Act) who are duly and appropriately
licensed, registered and otherwise qualified to sell the Contracts
under the 1934 Act, applicable rules of the NASD and applicable state
securities and insurance law, and who are appointed by BMA agents for
the sale of the Contracts.
(e) No statement or representation concerning the Contracts shall be made
by either J&B or CES or any associated person thereof in connection
with the Contracts other than those contained in the Registration
Statement or Prospectus or any other promotional, sales or advertising
material utilized in accordance with this Agreement.
6. Additional Obligations of J&B and CES
(a) It is understood that J&B and CES will each be responsible for the
design and preparation of all promotional, sales and advertising
material in connection with their own marketing and sales activities
in connection with the Contracts. It is further understood that BMA
may perform this function on behalf of J&B relating to its
distribution efforts in connection with the Contracts. J&B and CES
shall each initiate and design forms of promotional, sales and
advertising material for the Contracts. J&B and CES shall each provide
to BMA and each other copies of all promotional sales and advertising
material developed by them for BMA's and each others review and
approval. Upon receipt of such material from the other party, the
receiving party(ies) shall be given a reasonable amount of time to
complete its review. The parties hereby agree to respond on a prompt
and timely basis in reviewing any such material. Each party shall be
responsible for filing the material it develops, as required, with the
NASD and any state securities regulatory authorities. BMA shall be
responsible for filing all such material, as required with any state
insurance regulatory authorities. BMA/J&B and CES will approve
promotional, sales or advertising material for use in any state or
other jurisdiction in the Territory only upon notifying the other
party(ies) that such material has been submitted to all appropriate
state and regulatory authorities and reviewed and approved by such
authorities to the extent required by applicable law. J&B and CES
shall each require in each sales agreement with a Dealer that the
individuals associated with such Dealer and appointed as agents of BMA
to solicit the sale of the Contracts shall not use, develop or
distribute any promotional, sales or advertising material which has
not been approved in writing by BMA/J&B and/or CES and filed with the
appropriate regulatory agencies.
(b) Solicitation and other applicable activities of J&B and CES relating
to the Contracts shall be undertaken only in accordance with
applicable laws, and regulations and rules of the NASD, including the
rules on suitability of investments. J&B and CES each understands and
acknowledges that neither it nor its agents or representatives is
authorized by BMA to give any information or make any representation
in connection with this Agreement or the offering of the Contracts
other than those contained in the Registration Statement or Prospectus
or other promotional, sales or advertising material utilized in
accordance with this Agreement.
(c) J&B and CES shall each require that no agent or representative of J&B
or CES shall solicit applications for the Contracts until duly
licensed and appointed by BMA as a life insurance agent of BMA in the
appropriate states or other jurisdictions in the Territory. It is
understood that BMA reserves the right, which right shall not be
exercised unreasonably, to refuse to appoint any proposed agent, or
once an appointment is made, to terminate such appointment. J&B and
CES shall each require that agents or representatives of J&B or CES
distributing the Contracts have variable insurance contract licenses
where required.
(d) J&B and CES shall not directly or by means of their agents or
representatives offer, nor attempt to offer, nor solicit Applications
or deliver Contracts in any state or jurisdiction in the Territory in
which BMA has advised them prior to such solicitation or offer that
the Contracts may not legally be sold or offered for sale.
(e) J&B and CES shall not have authority, and shall not grant authority to
Dealers, on behalf of BMA: to make, alter or discharge any Contract;
to waive any Contract forfeiture provision; to extend the time of
paying any Premium; or to receive any monies or Premiums (except for
the sole purpose of forwarding monies or Premiums to BMA). J&B and CES
shall not expend nor contract for the expenditure of the funds of BMA
nor shall J&B or CES possess or exercise any authority on behalf of
BMA other than that expressly conferred on each by this Agreement.
(f) J&B and CES shall each require that its agents and representatives
appointed by BMA as agents not make recommendations to an applicant to
purchase a Contract in the absence of reasonable grounds to believe
that the purchase of the Contract is suitable for the applicant. In
any sales agreement with a Dealer, J&B and CES shall each require that
any agent or representative of the Dealer appointed by BMA as an
insurance agent not make any recommendation to an applicant to
purchase a Contract in the absence of reasonable grounds to believe
that the purchase of the Contract is suitable for the applicant. While
not limited to the following, a determination of suitability shall be
based on information supplied to an agent or representative after a
reasonable inquiry concerning the applicant's insurance and investment
objectives and financial situation and needs.
(g) J&B and CES will each be obligated to pay the following expenses
related to each of their distribution activities of the Contracts: (i)
the compensation of J&B's and CES's own registered representatives, if
any; (ii) expenses associated with the initial licensing and training
of their registered representatives and other employees involved in
the distribution of the Contracts; (iii) all legal and other
professional fees incurred by J&B and/or CES in connection with the
foregoing; and (iv) any other expenses incurred by J&B and/or CES or
their agents, representatives or employees for the purpose of carrying
out the obligations of J&B and CES hereunder.
7. Records
BMA, J&B and CES each shall maintain such accounts, books and other
documents as are required to be maintained by each of them by applicable
laws and regulations and shall preserve such accounts, books and other
documents for the periods prescribed by such laws and regulations. The
accounts, books and records of BMA, the Separate Account, the Investment
Companies, J&B and CES as to all transactions hereunder shall be maintained
to clearly and accurately disclose the nature and details of the
transactions, including such accounting information as necessary to
demonstrate the reasonableness of the amounts paid by either party
hereunder. Each party shall have the right to inspect and audit such
accounts, books and records of the other party during normal business hours
upon reasonable written notice to the other party(ies). Each party shall
keep confidential all information obtained pursuant to such an inspection
or audit, and shall disclose such information to third parties only upon
receipt of written authorization from the other parties, except as required
by law. J&B and CES shall each include in the sales agreement with each
Dealer a requirement that the Dealer promptly furnish to BMA or its
authorized agent any reports and information which BMA reasonably may
request for the purpose of meeting BMA's reporting and recordkeeping
requirements under the insurance laws of any state, and under any
applicable federal and state securities laws, rules and regulations and
under the rules of the NASD.
8. Compensation
BMA shall pay commissions on Premiums paid under Contracts sold pursuant to
this Agreement as follows:___________________________________ . J&B and CES
shall each be responsible for all tax reporting information which J&B and
CES are required to provide under applicable tax law to their agents,
representatives or employees with respect to the Contracts, and each sales
agreement with a Dealer shall require the Dealer to be responsible for all
tax reporting information which such Dealer is required to provide under
applicable tax law to its agents, representatives and employees with
respect to the Contracts. Nothing contained in this Agreement or any sales
agreement is to be construed to require BMA to provide any tax reporting
information directly or indirectly to any Dealer or its agents,
representatives or employees.
9. Investigation and Proceedings
(a) BMA, J&B and CES each agree to cooperate fully in any insurance
regulatory investigation or proceeding or judicial proceeding arising
in connection with the offering, sale or distribution of the Contracts
distributed under this Agreement. The parties further agree to
cooperate fully in any securities regulatory investigation or
proceeding or judicial proceeding with respect to BMA, J&B and/or CES,
their affiliates and their agents or representatives to the extent
that such investigation or proceeding is in connection with the
offering, sale or distribution of the Contracts distributed under this
Agreement. Without limiting the foregoing, each party agrees to notify
the other parties promptly of any written customer complaint or notice
of any regulatory investigation or proceeding or judicial proceeding
received by any party with respect to the Contracts, Investment
Companies, BMA, J&B and CES, or any agent or representative which may
affect the sale of the Contracts under this Agreement.
(b) In the case of a substantive customer complaint, all parties will
cooperate in investigating such complaint and any response by a party
to such complaint will be sent to the other parties for approval not
less than five business days prior to its being sent to the customer
or any regulatory authority, except that if a more prompt response is
required, the proposed response shall be communicated by telephone,
facsimile or electronic mail. No party will release any such response
without the other parties' prior written approval.
10. Indemnification
(a) Each party hereto (the "indemnifier") shall defend, indemnify and hold
harmless the other parties and their affiliated companies, and each
person who controls or is associated with them within the meaning of
such terms under the federal securities laws and any officers,
directors, employees and agents, with respect to any and all losses,
damages, claims or expenses (including any investigative, legal or
other expenses reasonably incurred in connection with, and any amounts
paid in settlement of, any action, suit or proceeding or any claim
asserted) which may be incurred as a result of any acts or omissions
of the indemnifier, its officers, directors, employees and agents.
This section 10 shall survive termination of this Agreement. This
indemnification shall be in addition to any liability which the
parties hereto may otherwise have.
11. Term
(a) Unless otherwise terminated pursuant to this Section 11, this
Agreement shall remain in effect for a period of one year following
its execution. This Agreement shall remain in effect thereafter unless
(i) terminated at the option of any party, upon sixty days written
notice to the other party(ies), or (ii) terminated pursuant to
subparagraph (b) of this Paragraph 11. Termination of this Agreement
with respect to any one co-principal underwriter shall not affect its
continued effectiveness with respect to the other co-principal
underwriter.
(b) This Agreement shall terminate automatically if it is assigned.
Without limiting the generality of the foregoing, the term "assigned"
shall not include any transaction exempted from Section 15(b)(2) of
the 1940 Act. This Agreement may be terminated upon ten days written
notice to the other party(ies), without payment of any penalty. This
Agreement may be terminated at the option of any party upon the other
parties' material breach of any provision of this Agreement or
immediately upon written notice in the event any party: files a
petition for reorganization or liquidation under the U.S. Bankruptcy
Code; becomes subject to the jurisdiction of the U.S. Bankruptcy
Court; has a liquidator or trustee appointed to oversee its affairs;
or is adjudged insolvent.
(c) Upon termination of this Agreement all authorizations, rights and
obligations shall cease except: (i) the obligation to settle accounts
hereunder, including commissions on Premiums subsequently received for
Contracts in effect at the time of termination or issued pursuant to
applications received by BMA prior to termination; (ii) the provisions
contained in Sections 4(h), 8 and 9 hereof; (iii) the indemnification
provisions set forth in Section 10 hereof; and (iv) a mutual
obligation to refrain from replacing, directly or indirectly, existing
Contracts with new variable annuity contracts resulting from new
affiliations of any party, except as otherwise agreed in writing.
12. 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 any 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, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver.
13. Notices
All notices hereunder are to be made in writing and shall be given:
if to BMA, to:
--------------------
--------------------
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if to J&B, to:
--------------------
--------------------
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if to CES, to:
--------------------
--------------------
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or such other address as such party may hereafter specify in writing. Each
such notice to a party shall be either hand delivered or transmitted by
registered or certified United States mail with return receipt requested,
and shall be effective upon delivery.
14. Interpretation, Jurisdiction, Etc.
This Agreement constitutes the whole agreement between the parties hereto
and supersedes all prior oral or written negotiations between the parties
with respect to the subject matter hereof. This Agreement shall be
construed and its provisions interpreted under and in accordance with the
internal laws of the State of _________________ without giving effect to
principles of conflict of laws.
15. 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.
16. Counterparts
This Agreement may be executed in counterparts, each of which taken
together shall constitute one and the same instrument.
17. Severability
This is a severable agreement and in the event that any part or parts of
this Agreement shall be held to be unenforceable to its or their full
extent, then it is the intention of the parties hereto that such part or
parts shall be enforced to the extent permitted under the law, and, in any
event, that all other parts of this Agreement shall remain valid and duly
enforceable as if the unenforceable part or parts had never been a part
hereof.
18. Regulation
This Agreement shall be subject to the provisions of the 1933 Act, 1934 Act
and 1940 Act and the Regulations and the rules and regulations of the NASD,
from time to time in effect, including such exemptions from the 1940 Act as
the SEC may grant, and the terms hereof shall be interpreted and construed
in accordance therewith. IN WITNESS WHEREOF, each party hereto represents
that the officer signing this Agreement on the party's behalf is duly
authorized to execute this Agreement; and the parties hereto have caused
this Agreement to be duly executed by such authorized officers on the date
specified below.
BUSINESS MEN'S ASSURANCE
COMPANY OF AMERICA
Date:_______________ By:____________________________
JONES & BABSON, INC.
Date:_______________ By:____________________________
CONSECO EQUITY SALES, INC.
Date:_______________ By:____________________________
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
Missouri corporation ("Distributor"); , a corporation ("Broker/Dealer") and ,
("Insurance Agent").
RECITALS:
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." 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: Phone 1-800-423-9398.
Mailing address for non-cash administrative mail:
BMA Service Center, P.O. Box 66821, St. Louis, MO 63166-6821
Mailing Address for cash and paperwork with cash:
BMA Service Center, P.O. Box 795066, St. Louis, MO 63179-0795
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 in those states requiring a refund of purchase payment 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
written complaint or notice received at the BMA Service Center 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 BMA Tower
P.O. Box 419458 P.O. Box 412879
Kansas City, MO 64141 Kansas City, 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 Missouri 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:___________________________
SCHEDULE 1
Operational Requirements
SCHEDULE 2
Compensation -- Variable Annuity
SCHEDULE 2A
Compensation -- Variable Life
[Broker/Dealer]
By:______________________________
Name:____________________________
Title:___________________________
[Insurance Agent]
By:______________________________
Name:____________________________
Title:___________________________
BMA CLARITY
SELLING AGREEMENT
SCHEDULE 1 - OPERATIONAL REQUIREMENTS
Remittance: Please check whether the Broker/Dealer will be remitting gross
premium or net of commissions:
Gross Premium Net of Commissions
Commission Payment: Please check whether the Broker/Dealer prefers to be paid
through the automated check clearinghouse (ACH) method or a physical check.
ACH* Physical Check
*If the ACH method is chosen, please complete the following and attach a voided
check:
Name of Bank:
Bank Routing:
Account Name:
Please provide the following contacts for your broker/dealer:
General operational issues:
Name:
Phone Number:
Fax Number:
E-Mail Number:
Banking:
Name:
Phone Number:
Fax Number:
E-Mail Number:
Licensing/appointing:
Name:
Phone Number:
Fax Number:
E-Mail Number:
Marketing:
Name:
Phone Number:
Fax Number:
E-Mail Number:
Compliance:
Name:
Phone Number:
Fax Number:
E-Mail Number:
SELLING AGREEMENT
SCHEDULE 2 - COMPENSATION ELECTION FORM FOR CLARITY VARIABLE ANNUITY
Commission Options: Please check the commission option(s) you would like to
provide to your representatives at the point of sale and on a contract by
contract basis. (Check one or more boxes below).
Option A - 6% of purchase payments paid up front (no trails).
Option B - 4.5% of purchase payments paid up front with .25% immediate
trail paid on a quarterly basis.
Option C - 1% of purchase payments paid up front with .80% immediate trail
paid on a quarterly basis.
Default Commission: Please check the commission option you would like to be the
default commission paid to any registered representative that does not indicate
the commission option desired on the contract information sheet. There is only
one default Option allowed. Once a policy is issued, the commission option
cannot be changed.
Option A - 6% of purchase payments paid up front (no trails).
Option B - 4.5% of purchase payments paid up front with .25% immediate
trail paid on a quarterly basis.
Option C - 1% of purchase payments paid up front with .80% immediate trail
paid on a quarterly basis.
Commission Charge Back Rules: If the policy is less than six months old, 100% of
the commission is charged back to the Broker/Dealer; if the policy is greater
than six month but less than 12 months old, 50% of the commission is charged
back. No charge backs on policies greater than 12 months. Triggering events for
a charge back is a full surrender. Death claims are not a triggering event for
charge backs.
BMA CLARITY
SELLING AGREEMENT
SCHEDULE 2A - COMPENSATION ELECTION FORM FOR CLARITY VARIABLE LIFE
Total Compensation:
Year 1 115% of Target Premium
3% of Excess Premium
Years 2-10 5% of Target Premium
3% of Excess Premium
Year 11+ .25% annual rate of Accumulation Value, paid quarterly on
average balance.
Commission Chargeback Rules:
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
CONSECO EQUITY SALES, INC.
GROUP SELLING AGREEMENT
This Agreement is made Business Men's Assurance Company of America ("Company"),
Conseco Equity Sales, Inc. ("Underwriter") with Administrative Offices in
Carmel, Indiana, and the Broker-Dealer named herein registered as a
Broker-Dealer ("Broker") and a member of the National Association of Securities
Dealers, Inc. (the "NASD"). The parties do hereby agree as follows:
1. AUTHORIZATION.
Broker, either an individual, partnership, or corporation, is hereby authorized
by Company and Underwriter to solicit applications for variable annuity and
variable life policies ("Policies"), as set forth in the Compensation Schedule
which is made a part of the Group Selling Agreement, to collect and remit
initial required premiums to Company, and to deliver Policies issued by Company:
a. only in jurisdictions where Broker is duly licensed and appointed by the
appropriate regulatory agencies, and;
b. only in states or territories in which Company is admitted to do
business and only for those Policies offered by Company that have been
approved by the appropriate regulatory agencies.
Broker shall supply Company with copies of all certificates of qualification or
licenses required of Broker under this Agreement.
1.1. LIMITATION OF AUTHORITY.
Broker has no authority during the time this Agreement is in effect, or after
termination, to:
a. make or modify Policies on behalf of Company or waive any of Company's
rights or requirements;
b. collect or receive premiums or renewals other than the initial required
premium;
c. endorse, cash or deposit any checks or drafts payable to Company;
d. open any bank account or trust account on behalf of, for the benefit of,
or containing the name of, Company;
e. advertise or publish any matter or thing, including use of the names or
logos of Company or those of its subsidiaries or affiliates, concerning
Company or its Policies without prior written permission of Company;
f. directly or indirectly cause or endeavor to cause any Broker of Company
and Underwriter or registered representatives of Underwriter to terminate
or alter its/his contract with Company, or induce or attempt to induce any
policyholder of Company to relinquish, surrender, replace or lapse a
Policy; or
g. do or perform any acts or things other than expressly authorized herein.
This Agreement shall not create an employer-employee relationship. The
relationship of Broker to Company shall be that of independent contractor.
Broker shall indemnify and hold harmless Company, Underwriter, and their
affiliates from any and all claims, demands, penalties, suits, or actions, and
from any and all losses, costs, and expenses in connection therewith, including
attorney's fees and expenses, arising out of or resulting from sales of the
Policies by or through the Broker, or from the default in the performance of, or
in the negligent performance of, by Broker or Broker's partners, directors,
officers, employees or agents, the obligations of Broker under this Agreement.
In addition, Broker agrees to furnish and maintain a satisfactory bond of
indemnity when requested by Company, a copy of such bond to be submitted to
Company within 30 days of request. The provisions of this paragraph shall
survive the termination of this Agreement.
1.2. REPRESENTATION AND SERVICE.
Broker agrees:
a. that Broker will supervise the securities activities of Broker's with
respect to the sale of the Policies and agrees to establish such rules and
procedures as are necessary to insure compliance with applicable federal
and state securities laws and to accept such supervision;
b. to observe the rules, procedures and other directives established, and
given by Underwriter relating to the sale of the Policies by Broker, as
initially set forth in the Broker-Dealer Manual which Underwriter must
provide, provided, however, that provision of the Broker-Dealer Manual
shall not be deemed to imply a duty of supervision by Company or
Underwriter over Broker, or to relieve Broker of it's duty to supervise its
personnel. Broker will also comply with the rules and regulations of the
Securities and Exchange Commission and the NASD relating to the sale and
distribution of the Policies and will observe all applicable federal and
state laws relating to the Policies;
c. that all solicitations for Policies are accompanied by the appropriate
current prospectuses for the Policies conforming to the requirements of the
Securities Act of 1933;
d. no representations concerning the Policies will be made except those
contained in the appropriate current prospectuses and in information
supplemental to the prospectuses, which may be supplied by Underwriter and
designated for use with the public. In this regard, Broker further agrees
to refrain from using advertising or sales literature concerning the
Policies unless and until it has been approved by Underwriter;
e. to become fully informed as to the provisions and benefits of each
Policy offered by Company for which Broker solicits applications;
f. to represent such Policies adequately and fairly to prospects;
g. to provide all usual and customary service to policyholders and effort
to maintain in force any business placed with Company; and
h. to hold in a fiduciary capacity all premiums received with any
applications for Policies solicited for Company.
1.3. BROKER'S AGENTS.
Broker will recruit, train and supervise registered representatives
("Representatives") for the sale of the Policies. Appointment of each
Representative shall be subject to Company's prior approval. Company may require
termination of any Representative's authority to sell the Policies. Broker is
responsible for the Representatives' compliance with the terms and conditions of
this Agreement and for the Representatives being duly licensed pursuant to
applicable state and federal laws.
1.4. DELIVERY OF POLICY.
Broker shall promptly deliver all issued Policies in accordance with Company
rules.
1.5. ADMINISTRATIVE GUIDELINES AND COMPLIANCE.
Company's administrative guidelines, including bulletins, product and procedure
updates, the revisions, additions and amendments thereto, from the time made by
Company, shall be for all purposes a part of this Agreement as fully as if set
out word for word herein and shall be complied with by Broker provided, however,
that this shall not be deemed to imply a duty of supervision by Company or
Underwriter over Broker, or to relieve Broker of its duty to supervise its
personnel. Broker agrees to comply fully with all applicable regulations,
bulletins, rulings, circular letters, proclamations and statutes, now or
hereafter in force, and to promptly notify Company in writing of all contacts
and/or correspondence received from insurance regulatory or other governmental
authorities, and to cooperate fully with Company in making responses to those
authorities.
2. COMPENSATION.
All compensation payable for sales of the Policies shall be paid by Company to
Broker through Underwriter and nothing contained herein shall create any right,
title or interest in Underwriter to such compensation nor any responsibility on
the part of Underwriter for payment of such compensation. Company agrees to pay
compensation in the form of commissions and service fees as provided in the
Compensation Schedule(s) delivered to Broker by Company and incorporated herein
by reference, upon any cash premiums received by Company for Policies issued on
applications submitted by Broker. Such compensation shall be payment in full for
all services performed and all expenses incurred by Broker. Company reserves the
right to accrue compensation under this Agreement until a minimum of $25.00 has
become due. If this Agreement is terminated for any reason, regardless of what
the Compensation Schedule(s) might provide, no compensation of any kind shall
thereafter be payable.
2.1. COMPENSATION SCHEDULE(S).
The Compensation Schedule(s) attached, or which may hereafter be added, is
incorporated herein and made a part of this Agreement. Company reserves the
right to change such Compensation Schedule(s) at any time upon written notice to
Broker. However, no such change shall be applicable to Policies for which
Company has accepted premiums prior to the effective date of such change.
2.2. ACCOUNTING.
Company will give to Broker a monthly statement of all compensation becoming due
and payable since the date of the previous monthly statement. Unless Company
receives written objection to such monthly statement from Broker, within 90 days
after the date it is mailed to Broker's last known address or delivered to
Broker in person, the same shall be deemed final and binding upon Broker.
2.3. EXCHANGES.
If in the sole discretion of Company a new Policy is issued to replace a
terminated or in force policy of Company or its affiliates or subsidiaries, the
new Policy shall be regarded as an exchanged Policy, and any compensation
payable shall be determined and adjusted by Company in accordance with Company's
then current exchange rules, independent of the Compensation Schedule(s).
2.4. RETURN OF PREMIUM.
If no Policy is issued on an application, the whole amount of all monies
collected by Broker will be immediately returned to the applicant. If Company
finds it necessary, for any reason, to cancel a Policy and refund premiums, any
compensation paid to Broker on the amount refunded shall be repaid to Company,
or may be deducted from any compensation payable to Broker under this Agreement.
2.5. LOCAL TAXES.
Broker is responsible for any county or municipal occupational or privilege fee,
tax or license which may be required of Broker or Representatives as a result of
business submitted hereunder.
3. INDEBTEDNESS.
Company shall have a first lien upon any amounts due, or to become due, Broker
for indebtedness to Company or its affiliates and subsidiaries, whether due or
contingent, of Broker or Broker's assigns under this Agreement. Such
indebtedness may be deducted by Company from such amounts due or to become due.
3.1. GUARANTEE.
If Broker is a corporation or partnership, the principal(s) signing this
Agreement on behalf of Broker jointly and severally guarantee to repay to
Company any indebtedness Company is unable to collect from Broker. Should it
become necessary to take legal action to recover such indebtedness, the
principal(s) jointly and severally agree to be responsible for the reasonable
attorney fees and expenses of Company.
4. TERMINATION.
Termination of this Agreement is effected as follows:
a. Cause. This Agreement may be terminated for cause by Company,
immediately upon written notice to Broker, when Broker or Broker's partner,
director, officer, employee or agent has, or is reasonably believed to
have: (i) misappropriated funds from any policyowner or from Company; (ii)
endeavored to induce Brokers of Company and Underwriter or registered
representatives of Underwriter to leave its services or policyowners of
Company to relinquish their policies; (iii) interfered with the collection
of renewal premiums; (iv) engaged in fraudulent acts or any other act
violative of federal or state law or other applicable rules or regulations,
including the Conduct Rules of the NASD; (v) been adjudged a bankrupt or
executed a general assignment for benefit of creditors or committed an act
of bankruptcy; or (vi) otherwise acted to prejudice materially the interest
of Company in breach of this Agreement. If Company does not terminate this
Agreement for any such cause, a waiver shall not result and this Agreement
may be terminated under this subparagraph for any subsequent cause.
b. Death or Dissolution. If Broker is not a corporation or partnership,
this Agreement will terminate on the date of Broker's death. If Broker is a
corporation or partnership, this Agreement will terminate on the date that
the corporation or partnership is dissolved or otherwise judged by
appropriate regulatory agencies to no longer be a legal entity.
c. License Suspension or Revocation. This Agreement will terminate
immediately in the event of any order of suspension, revocation or
termination of Broker's license by any regulatory authority.
d. Default. This Agreement will terminate immediately upon notice in the
event of:
1. default under this Agreement; or
2. Broker or Broker's associated person's failure to timely and fully
comply with Company directives, rules, regulations or manuals.
e. Ownership Change. This Agreement will terminate if Broker is not a
natural person and in the event of a significant change in Broker's
ownership or management, or in the event of the execution of an agreement
of sale, transfer or merger of Broker, without prior notice and consent of
Company.
f. Notice. This Agreement may be terminated by either party for any reason
by giving the other party at least 30 days advance written notice delivered
personally or mailed to the last known address of the other party.
g. Indebtedness. Upon termination of this Agreement, any indebtedness to
Company becomes immediately due and payable.
5. PREVIOUS AGREEMENT.
By execution of this Agreement, any prior agreement between the Company,
Underwriter and the Broker or between Company and the signing principal(s)
related specifically to the business transacted under this Agreement is
terminated as of the effective date of this Agreement; but while this Agreement
remains in force, any rights of Broker to receive compensation under the terms
and conditions of the prior agreement are continued hereunder, and such earned
compensation shall be payable at the rate, for the remainder of the period, and
on the basis applicable as if that agreement remained in force.
6. ENTIRE AGREEMENT.
This Agreement, including any supplements and the Compensation Schedule(s), is
the entire Agreement between the parties for all dealings after its effective
date. This Agreement shall not be assigned without the prior written consent of
Company. No amendment of this Agreement shall be valid unless made in writing by
Company.
7. WAIVER.
No waiver by Company of rights arising from wrongdoing or failure by Broker
shall occur by Company's election not to enforce any provision of this
Agreement, nor reduce or affect Company's rights arising from subsequent
wrongdoing or failure by Broker. Broker releases Company from any liability for
providing social security numbers and tax data to authorized governmental
agencies.
8. NOTICE.
Any written notice given under any provision of this Agreement shall be complete
upon deposit, postage paid, in the U.S. Mail addressed to Broker at Broker's
last known address according to Company's records or to Company or Underwriter
at its Administrative Offices.
9. ARBITRATION.
Any dispute, claim or controversy arising out of or relating to this Agreement,
performance hereunder or the breach hereof, or otherwise arising between Broker
and Company or Underwriter, shall be subject to mandatory arbitration under the
auspices, rules and by-laws of the NASD, as may be amended from time to time,
and any arbitration award may be entered as a judgment in a court of competent
jurisdiction. Notwithstanding the foregoing arbitration requirement, at its
option, Company and/or Underwriter may seek injunctive relief either within the
arbitration process or from a court of competent jurisdiction. Venue for any
such injunctive action shall be in a court located in Noblesville, Hamilton
County, Indiana. Venue for arbitration hearing shall be in Hamilton County,
Indiana.
10. CONSTRUCTION
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
INDIANA EXCLUSIVE OF CHOICE OF LAWS PROVISIONS.
The effective date of this Group Selling Agreement with Business Men's Assurance
Company of America and Conseco Equity Sales, Inc., shall be:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
______________________________ _______________, _______________.
(Month) (Day) (Year)
_____________________________________________ Check Type of Legal Entity:
Contract Account Number (Assigned by Company) [ ] Individual [ ] Partnership
[ ] Corporation (NOTE: IF PARTNERSHIP OR
CORPORATION TWO DIFFERENT
SIGNATURES ARE NECESSARY)
_____________________________________________
Type or Print Name of Broker/Dealer
______________________________________________
Taxpayer Identification Number of Broker/Dealer
_____________________________________________ _____________________________________________
Type or Print Name of Principal Type or Print Name of Principal
______________________________________________ ______________________________________________
Signature of Principal Signature of Principal
______________________________________________ ______________________________________________
Social Security Number of Principal Social Security Number of Principal
BUSINESS MEN'S ASSURANCE CONSECO EQUITY SALES, INC.
COMPANY OF AMERICA
By: ________________________________________ By: ________________________________________
Authorized Signature Authorized Signature
________________________________________ ________________________________________
Type or Print Name Type or Print Name
________________________________________ ________________________________________
Title Title
________________________________________ ________________________________________
Date Date
</TABLE>
COMPENSATION FOR VARIABLE LIFE
Year 1 115% of Target Premium
3% of Excess Premium
Years 2-10 5% of Target Premium
3% of Excess Premium
Year 11+ .25% annual rate of Accumulation Value,
paid quarterly on average balance.
Commission Chargeback Rules: During the 1st 12 months, seventy-five percent
(75%) of the compensation paid will be charged
back for full surrenders if compensation was
annualized.
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this day of , 1998, by and among The Alger American
Fund (the "Trust"), an open-end management investment company organized as a
Massachusetts business trust, Business Men's Assurance Company of America, a
life insurance company organized as a corporation under the laws of the State of
Missouri, (the "Company"), on its own behalf and on behalf of each segregated
asset account of the Company set forth in Schedule A, as may be amended from
time to time (the "Accounts"), and Fred Alger and Company, Incorporated, a
Delaware corporation, the Trust's distributor (the "Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, the Trust and the Distributor desire that Trust shares be used as
an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, shares of beneficial interest in the Trust are divided into the
following series which are available for purchase by the Company for the
Accounts: Alger American Small Capitalization Portfolio, Alger American Growth
Portfolio, Alger American Income & Growth Portfolio, Alger American Balanced
Portfolio, Alger American MidCap Growth Portfolio, and Alger American Leveraged
AllCap Portfolio;
WHEREAS, the Trust has received an order from the Commission, dated
February 17, 1989 (File No. 812-7076), granting Participating Insurance
Companies and their separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Portfolios of the Trust to be sold to and held by variable annuity and variable
life insurance separate accounts of both affiliated and unaffiliated life
insurance companies (the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies and variable annuity contracts to be
issued by the Company under which the Portfolios are to be made available as
investment vehicles (the "Contracts");
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act unless an exemption from registration under
the 1940 Act is available and the Trust has been so advised;
WHEREAS, the Company desires to use shares of one or more Portfolios as
investment vehicles for the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties agree
as follows:
ARTICLE I.
PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
1.1. For purposes of this Article I, the Company shall be the Trust's agent for
the receipt from each account of purchase orders and requests for
redemption pursuant to the Contracts relating to each Portfolio, provided
that the Company notifies the Trust of such purchase orders and requests
for redemption by 9:30 a.m. Eastern time on the next following Business
Day, as defined in Section 1.3.
1.2. The Trust shall make shares of the Portfolios available to the Accounts at
the net asset value next computed after receipt of a purchase order by the
Trust (or its agent), as established in accordance with the provisions of
the then current prospectus of the Trust describing Portfolio purchase
procedures. The Company will transmit orders from time to time to the Trust
for the purchase and redemption of shares of the Portfolios. The Trustees
of the Trust (the "Trustees") may refuse to sell shares of any Portfolio to
any person, or suspend or terminate the offering of shares of any Portfolio
if such action is required by law or by regulatory authorities having
jurisdiction or if, in the sole discretion of the Trustees acting in good
faith and in light of their fiduciary duties under federal and any
applicable state laws, such action is deemed in the best interests of the
shareholders of such Portfolio.
1.3. The Company shall pay for the purchase of shares of a Portfolio on behalf
of an Account with federal funds to be transmitted by wire to the Trust,
with the reasonable expectation of receipt by the Trust by 2:00 p.m.
Eastern time on the next Business Day after the Trust (or its agent)
receives the purchase order. Upon receipt by the Trust of the federal funds
so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Trust for this purpose.
"Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Trust calculates its net asset value
pursuant to the rules of the Commission.
1.4. The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at the
net asset value next computed after receipt by the Trust (or its agent) of
the request for redemption, as established in accordance with the
provisions of the then current prospectus of the Trust describing Portfolio
redemption procedures. The Trust shall make payment for such shares in the
manner established from time to time by the Trust. Proceeds of redemption
with respect to a Portfolio will normally be paid to the Company for an
Account in federal funds transmitted by wire to the Company by order of the
Trust with the reasonable expectation of receipt by the Company by 2:00
p.m. Eastern time on the next Business Day after the receipt by the Trust
(or its agent) of the request for redemption. Such payment may be delayed
if, for example, the Portfolio's cash position so requires or if
extraordinary market conditions exist, but in no event shall payment be
delayed for a greater period than is permitted by the 1940 Act. The Trust
reserves the right to suspend the right of redemption, consistent with
Section 22(e) of the 1940 Act and any rules thereunder.
1.5. Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of the
Trust's Portfolios under Section 1.4 on any Business Day may be netted
against one another for the purpose of determining the amount of any wire
transfer.
1.6. Issuance and transfer of the Trust's Portfolio shares will be by book entry
only. Stock certificates will not be issued to the Company or the Accounts.
Portfolio Shares purchased from the Trust will be recorded in the
appropriate title for each Account or the appropriate subaccount of each
Account.
1.7. The Trust shall furnish, on or before the ex-dividend date, notice to the
Company of any income dividends or capital gain distributions payable on
the shares of any Portfolio of the Trust. The Company hereby elects to
receive all such income dividends and capital gain distributions as are
payable on a Portfolio's shares in additional shares of that Portfolio. The
Trust shall notify the Company of the number of shares so issued as payment
of such dividends and distributions.
1.8. The Trust shall calculate the net asset value of each Portfolio on each
Business Day, as defined in Section 1.3. The Trust shall make the net asset
value per share for each Portfolio available to the Company or its
designated agent on a daily basis as soon as reasonably practical after the
net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available to the Company by 6:30 p.m.
Eastern time each Business Day.
1.9. The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their segregated asset accounts, to
the Fund Sponsor or its affiliates and to such other entities as may be
permitted by Section 817(h) of the Code, the regulations hereunder, or
judicial or administrative interpretations thereof. No shares of any
Portfolio will be sold directly to the general public. The Company agrees
that it will use Trust shares only for the purposes of funding the
Contracts through the Accounts listed in Schedule A, as amended from time
to time.
1.10.The Trust agrees that all Participating Insurance Companies shall have the
obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding materially to those contained in
Section 2.9 and Article IV of this Agreement.
ARTICLE II.
OBLIGATIONS OF THE PARTIES
2.1. The Trust shall prepare and be responsible for filing with the Commission
and any state regulators requiring such filing all shareholder reports,
notices, proxy materials (or similar materials such as voting instruction
solicitation materials), prospectuses and statements of additional
information of the Trust. The Trust shall bear the costs of registration
and qualification of shares of the Portfolios, preparation and filing of
the documents listed in this Section 2.1 and all taxes to which an issuer
is subject on the issuance and transfer of its shares.
2.2. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Trust to the Contract owners as required to be
distributed to such Contract owners under applicable federal or state law.
2.3. The Trust shall provide such documentation (including a final copy of the
Trust's prospectus as set in type or in camera-ready copy) and other
assistance as is reasonably necessary in order for the Company to print
together in one document the current prospectus for the Contracts issued by
the Company and the current prospectus for the Trust. The Trust shall bear
the expense of printing copies of its current prospectus that will be
distributed to existing Contract owners, and the Company shall bear the
expense of printing copies of the Trust's prospectus that are used in
connection with offering the Contracts issued by the Company.
2.4. The Trust and the Distributor shall provide (1) at the Trust's expense, one
copy of the Trust's current Statement of Additional Information ("SAI") to
the Company and to any Contract owner who requests such SAI, (2) at the
Company's expense, such additional copies of the Trust's current SAI as the
Company shall reasonably request and that the Company shall require in
accordance with applicable law in connection with offering the Contracts
issued by the Company.
2.5. The Trust, at its expense, shall provide the Company with copies of its
proxy material, periodic reports to shareholders and other communications
to shareholders in such quantity as the Company shall reasonably require
for purposes of distributing to Contract owners. The Trust, at the
Company's expense, shall provide the Company with copies of its periodic
reports to shareholders and other communications to shareholders in such
quantity as the Company shall reasonably request for use in connection with
offering the Contracts issued by the Company. If requested by the Company
in lieu thereof, the Trust shall provide such documentation (including a
final copy of the Trust's proxy materials, periodic reports to shareholders
and other communications to shareholders, as set in type or in camera-ready
copy) and other assistance as reasonably necessary in order for the Company
to print such shareholder communications for distribution to Contract
owners.
2.6. The Company agrees and acknowledges that the Distributor is the sole owner
of the name and mark "Alger" and that all use of any designation comprised
in whole or part of such name or mark under this Agreement shall inure to
the benefit of the Distributor. Except as provided in Section 2.5, the
Company shall not use any such name or mark on its own behalf or on behalf
of the Accounts or Contracts in any registration statement, advertisement,
sales literature or other materials relating to the Accounts or Contracts
without the prior written consent of the Distributor. Upon termination of
this Agreement for any reason, the Company shall cease all use of any such
name or mark as soon as reasonably practicable.
2.7. The Company shall furnish, or cause to be furnished, to the Trust or its
designee a copy of each Contract prospectus and/or statement of additional
information describing the Contracts, each report to Contract owners, proxy
statement, application for exemption or request for no-action letter in
which the Trust or the Distributor is named contemporaneously with the
filing of such document with the Commission. The Company shall furnish, or
shall cause to be furnished, to the Trust or its designee each piece of
sales literature or other promotional material in which the Trust or the
Distributor is named, at least five Business Days prior to its use. No such
material shall be used if the Trust or its designee reasonably objects to
such use within three Business Days after receipt of such material.
2.8. The Company shall not give any information or make any representations or
statements on behalf of the Trust or concerning the Trust or the
Distributor in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from the
registration statement or prospectus for the Trust shares (as such
registration statement and prospectus may be amended or supplemented from
time to time), annual and semi-annual reports of the Trust, Trust-sponsored
proxy statements, or in sales literature or other promotional material
approved by the Trust or its designee, except as required by legal process
or regulatory authorities or with the prior written permission of the
Trust, the Distributor or their respective designees. The Trust and the
Distributor agree to respond to any request for approval on a prompt and
timely basis. The Company shall adopt and implement procedures reasonably
designed to ensure that "broker only" materials including information
therein about the Trust or the Distributor are not distributed to existing
or prospective Contract owners.
2.9. The Trust shall use its best efforts to provide the Company, on a timely
basis, with such information about the Trust, the Portfolios and the
Distributor, in such form as the Company may reasonably require, as the
Company shall reasonably request in connection with the preparation of
registration statements, prospectuses and annual and semi-annual reports
pertaining to the Contracts.
2.10.The Trust and the Distributor shall not give, and agree that no affiliate
of either of them shall give, any information or make any representations
or statements on behalf of the Company or concerning the Company, the
Accounts or the Contracts other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Contracts (as such registration statement and prospectus
may be amended or supplemented from time to time), or in materials approved
by the Company for distribution including sales literature or other
promotional materials, except as required by legal process or regulatory
authorities or with the prior written permission of the Company. The
Company agrees to respond to any request for approval on a prompt and
timely basis.
2.11.So long as, and to the extent that, the Commission interprets the 1940 Act
to require pass- through voting privileges for Contract owners, the Company
will provide pass-through voting privileges to Contract owners whose cash
values are invested, through the registered Accounts, in shares of one or
more Portfolios of the Trust. The Trust shall require all Participating
Insurance Companies to calculate voting privileges in the same manner and
the Company shall be responsible for assuring that the Accounts calculate
voting privileges in the manner established by the Trust. With respect to
each registered Account, the Company will vote shares of each Portfolio of
the Trust held by a registered Account and for which no timely voting
instructions from Contract owners are received in the same proportion as
those shares for which voting instructions are received. The Company and
its agents will in no way recommend or oppose or interfere with the
solicitation of proxies for Portfolio shares held to fund the Contacts
without the prior written consent of the Trust, which consent may be
withheld in the Trust's sole discretion. The Company reserves the right, to
the extent permitted by law, to vote shares held in any Account in its sole
discretion.
2.12.The Company and the Trust will each provide to the other information about
the results of any regulatory examination relating to the Contracts or the
Trust, including relevant portions of any "deficiency letter" and any
response thereto.
2.13.No compensation shall be paid by the Trust to the Company, or by the
Company to the Trust, under this Agreement (except for specified expense
reimbursements). However, nothing herein shall prevent the parties hereto
from otherwise agreeing to perform, and arranging for appropriate
compensation for, other services relating to the Trust, the Accounts or
both.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. The Company represents and warrants that it is an insurance company duly
organized and in good standing under the laws of the State of Missouri and
that it has legally and validly established each Account as a segregated
asset account under such law as of the date set forth in Schedule A, and
that Jones & Babson, Inc. and Conseco Equity Sales, Inc., the co-principal
underwriters for the Contracts, are registered as broker-dealers under the
Securities Exchange Act of 1934 and are members in good standing of the
National Association of Securities Dealers, Inc.
3.2. The Company represents and warrants that it has registered or, prior to any
issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act and
cause each Account to remain so registered to serve as a segregated asset
account for the Contracts, unless an exemption from registration is
available.
3.3. The Company represents and warrants that the Contracts will be registered
under the 1933 Act unless an exemption from registration is available prior
to any issuance or sale of the Contracts; the Contracts will be issued and
sold in compliance in all material respects with all applicable federal and
state laws; and the sale of the Contracts shall comply in all material
respects with state insurance law suitability requirements.
3.4. The Trust represents and warrants that it is duly organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act and the
rules and regulations thereunder.
3.5. The Trust and the Distributor represent and warrant that the Portfolio
shares offered and sold pursuant to this Agreement will be registered under
the 1933 Act and sold in accordance with all applicable federal and state
laws, and the Trust shall be registered under the 1940 Act prior to and at
the time of any issuance or sale of such shares. The Trust shall amend its
registration statement under the 1933 Act and the 1940 Act from time to
time as required in order to effect the continuous offering of its shares.
The Trust shall register and qualify its shares for sale in accordance with
the laws of the various states only if and to the extent deemed advisable
by the Trust.
3.6. The Trust represents and warrants that the investments of each Portfolio
will comply with the diversification requirements for variable annuity,
endowment or life insurance contracts set forth in Section 817(h) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations thereunder, including without limitation Treasury Regulation
1.817-5, and will notify the Company immediately upon having a reasonable
basis for believing any Portfolio has ceased to comply or might not so
comply and will immediately take all reasonable steps to adequately
diversify the Portfolio to achieve compliance within the grace period
afforded by Regulation 1.817-5.
3.7. The Trust represents and warrants that it is currently qualified as a
"regulated investment company" under Subchapter M of the Code, that it will
make every effort to maintain such qualification and will notify the
Company immediately upon having a reasonable basis for believing it has
ceased to so qualify or might not so qualify in the future.
3.8. The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of a
Portfolio shall at all times be covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount not less than
the minimum coverage required by Rule 17g-1 or other applicable regulations
under the 1940 Act. Such bond shall include coverage for larceny and
embezzlement and be issued by a reputable bonding company.
3.9. The Distributor represents that it is duly organized and validly existing
under the laws of the State of Delaware and that it is registered, and will
remain registered, during the term of this Agreement, as a broker-dealer
under the Securities Exchange Act of 1934 and is a member in good standing
of the National Association of Securities Dealers, Inc.
ARTICLE IV.
POTENTIAL CONFLICTS
4.1. The parties acknowledge that a Portfolio's shares may be made available for
investment to other Participating Insurance Companies. In such event, the
Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. A material irreconcilable conflict may
arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any similar
action by insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Portfolio are being managed; (e) a
difference in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by an insurer to
disregard the voting instructions of contract owners. The Trust shall
promptly inform the Company of any determination by the Trustees that a
material irreconcilable conflict exists and of the implications thereof.
4.2. The Company agrees to report promptly any potential or existing conflicts
of which it is aware to the Trustees. The Company will assist the Trustees
in carrying out their responsibilities under the Shared Funding Exemptive
Order by providing the Trustees with all information reasonably necessary
for and requested by the Trustees to consider any issues raised including,
but not limited to, information as to a decision by the Company to
disregard Contract owner voting instructions. All communications from the
Company to the Trustees may be made in care of the Trust.
4.3. If it is determined by a majority of the Trustees, or a majority of the
disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of contract owners, the Company shall, in cooperation
with other Participating Insurance Companies whose contract owners are also
affected, at its own expense and to the extent reasonably practicable (as
determined by the Trustees) take whatever steps are necessary to remedy or
eliminate the material irreconcilable conflict, which steps could include:
(a) withdrawing the assets allocable to some or all of the Accounts from
the Trust or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Trust, or submitting the question of whether or not such segregation should
be implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e., annuity
contract owners, life insurance contract owners, or variable contract
owners of one or more Participating Insurance Companies) that votes in
favor of such segregation, or offering to the affected Contract owners the
option of making such a change; and (b) establishing a new registered
management investment company or managed separate account.
4.4. If a material irreconcilable conflict arises because of a decision by the
Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the
Company may be required, at the Trust's election, to withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect
to such Account; provided, however that such withdrawal and termination
shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Any such withdrawal and termination must take place within six
(6) months after the Trust gives written notice that this provision is
being implemented. Until the end of such six (6) month period, the Trust
shall continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Trust.
4.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Trust and terminate this Agreement
with respect to such Account within six (6) months after the Trustees
inform the Company in writing that the Trust has determined that such
decision has created a material irreconcilable conflict; provided, however,
that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by
a majority of the disinterested Trustees. Until the end of such six (6)
month period, the Trust shall continue to accept and implement orders by
the Company for the purchase and redemption of shares of the Trust.
4.6. For purposes of Section 4.3 through 4.6 of this Agreement, a majority of
the disinterested Trustees shall determine whether any proposed action
adequately remedies any material irreconcilable conflict, but in no event
will the Trust be required to establish a new funding medium for any
Contract. The Company shall not be required to establish a new funding
medium for the Contracts if an offer to do so has been declined by vote of
a majority of Contract owners materially adversely affected by the material
irreconcilable conflict. In the event that the Trustees determine that any
proposed action does not adequately remedy any material irreconcilable
conflict, then the Company will withdraw the Account's investment in the
Trust and terminate this Agreement within six (6) months after the Trustees
inform the Company in writing of the foregoing determination; provided,
however, that such withdrawal and termination shall be limited to the
extent required by any such material irreconcilable conflict as determined
by a majority of the disinterested Trustees.
4.7. The Company shall at least annually submit to the Trustees such reports,
materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Shared
Funding Exemptive Order, and said reports, materials and data shall be
submitted more frequently if reasonably deemed appropriate by the Trustees.
4.8. If and to the extent that Rule 6e-3(T) is amended, or Rule 6e-3 is adopted,
to provide exemptive relief from any provision of the 1940 Act or the rules
promulgated thereunder with respect to mixed or shared funding (as defined
in the Shared Funding Exemptive Order) on terms and conditions materially
different from those contained in the Shared Funding Exemptive Order, then
the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rule 6e-3(T), as
amended, or Rule 6e-3, as adopted, to the extent such rules are applicable.
ARTICLE V.
INDEMNIFICATION
5.1. Indemnification By the Company. The Company agrees to indemnify and hold
harmless the Distributor, the Trust and each of its Trustees, officers,
employees and agents and each person, if any, who controls the Trust within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 5.1) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of the Company, which consent shall not be unreasonably
withheld) or expenses (including the reasonable costs of investigating or
defending any alleged loss, claim, damage, liability or expense and
reasonable legal counsel fees incurred in connection therewith)
(collectively, "Losses"), to which the Indemnified Parties may become
subject under any statute or regulation, or at common law or otherwise,
insofar as such Losses are related to the sale or acquisition of the
Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in a registration statement
or prospectus for the Contracts or in the Contracts themselves or in
sales literature generated or approved by the Company on behalf of the
Contracts or Accounts (or any amendment or supplement to any of the
foregoing) (collectively, "Company Documents" for the purposes of this
Article V), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately
derived from written information furnished to the Company by or on
behalf of the Trust for use in Company Documents or otherwise for use
in connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations (other than
statements or representations contained in and accurately derived from
Trust Documents as defined in Section 5.2(a)) or wrongful conduct of
the Company or persons under its control, with respect to the sale or
acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Trust Documents as defined
in Section 5.2(a) or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written information
furnished to the Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company to provide the
services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise out of
or result from any other material breach of this Agreement by the
Company; or
(f) arise out of or result from the provision by the Company to the Trust
of insufficient or incorrect information regarding the purchase or
sale of shares of any Portfolio, or the failure of the Company to
provide such information on a timely basis.
5.2. Indemnification by the Distributor. The Distributor agrees to indemnify and
hold harmless the Company and each of its directors, officers, employees,
and agents and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for the purposes of this Section 5.2) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of the Distributor, which consent shall not be unreasonably
withheld) or expenses (including the reasonable costs of investigating or
defending any alleged loss, claim, damage, liability or expense and
reasonable legal counsel fees incurred in connection therewith)
(collectively, "Losses"), to which the Indemnified Parties may become
subject under any statute or regulation, or at common law or otherwise,
insofar as such Losses are related to the sale or acquisition of the
Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration
statement or prospectus for the Trust (or any amendment or supplement
thereto) (collectively, "Trust Documents" for the purposes of this
Article V), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately
derived from written information furnished to the Distributor or the
Trust by or on behalf of the Company for use in Trust Documents or
otherwise for use in connection with the sale of the Contracts or
Trust shares and; or
(b) arise out of or result from statements or representations (other than
statements or representations contained in and accurately derived form
Company Documents) or wrongful conduct of the Distributor or persons
under its control, with respect to the sale or acquisition of the
Contracts or Portfolio shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading if such statement
or omission was made in reliance upon and accurately derived
from written information furnished to the Company by or on
behalf of the Trust; or
(d) arise out of or result from any failure by the Distributor or
the Trust to provide the services or furnish the materials
required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or the
Trust in this Agreement or arise out of or result from any
other material breach of this Agreement by the Distributor or
the Trust.
5.3. None of the Company, the Trust or the Distributor shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with
respect to any Losses incurred or assessed against an Indemnified Party
that arise from such Indemnified Party's willful misfeasance, bad faith or
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement.
5.4. None of the Company, the Trust or the Distributor shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with
respect to any claim made against an Indemnified party unless such
Indemnified Party shall have notified the other party in writing within a
reasonable time after the summons, or other first written notification,
giving information of the nature of the claim shall have been served upon
or otherwise received by such Indemnified Party (or after such Indemnified
Party shall have received notice of service upon or other notification to
any designated agent), but failure to notify the party against whom
indemnification is sought of any such claim shall not relieve that party
from any liability which it may have to the Indemnified Party in the
absence of Sections 5.1 and 5.2.
5.5. In case any such action is brought against an Indemnified Party, the
indemnifying party shall be entitled to participate, at its own expense, in
the defense of such action. The indemnifying party also shall be entitled
to assume the defense thereof, with counsel reasonably satisfactory to the
party named in the action. After notice from the indemnifying party to the
Indemnified Party of an election to assume such defense, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained
by it, and the indemnifying party will not be liable to the Indemnified
Party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
ARTICLE VI.
TERMINATION
6.1. This Agreement shall terminate:
(a) at the option of any party upon 60 days advance written notice to the
other parties, unless a shorter time is agreed to by the parties;
(b) at the option of the Trust or the Distributor if the Contracts issued
by the Company cease to qualify as annuity contracts or life insurance
contracts, as applicable, under the Code or if the Contracts are not
registered, issued or sold in accordance with applicable state and/or
federal law; or
(C) at the option of any party upon a determination by a majority of the
Trustees of the Trust, or a majority of its disinterested Trustees,
that a material irreconcilable conflict exists; or
(d) at the option of the Company upon institution of formal proceedings
against the Trust or the Distributor by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body
regarding the Trust's or the Distributor's duties under this Agreement
or related to the sale of Trust shares or the operation of the Trust;
or
(e) at the option of the Company if the Trust or a Portfolio fails to meet
the diversification requirements specified in Section 3.6 hereof; or.
(f) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Variable
Contracts issued by the Company, as determined by the Company, and
upon prompt notice by the Company to the other parties; or
(g) at the option of the Company in the event any of the shares of the
Portfolio are not registered, issued or sold in accordance with
applicable state and/or federal law, or such law precludes the use of
such shares as the underlying investment media of the Variable
Contracts issued or to be issued by the Company; or
(h) at the option of the Company, if the Portfolio fails to qualify as a
Regulated Investment Company under Subchapter M of the Code; or
(i) at the option of the Distributor if it shall determine in its sole
judgment exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in its
business, operations, financial condition or prospects since the date
of this Agreement or is the subject of material adverse publicity.
6.2. Notwithstanding any termination of this Agreement, the Trust shall, at the
option of the Company, continue to make available additional shares of any
Portfolio and redeem shares of any Portfolio pursuant to the terms and
conditions of this Agreement for all Contracts in effect on the effective
date of termination of this Agreement.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.9 shall survive
the termination of this Agreement as long as shares of the Trust are held
on behalf of Contract owners in accordance with Section 6.2.
ARTICLE VII.
NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust or its Distributor:
Fred Alger Management, Inc.
30 Montgomery Street
Jersey City, NJ 07302
Attn: Gregory S. Duch
If to the Company:
Business Men's Assurance Company of America
700 Karnes Blvd.
Kansas City, MO 64108
Attn.:
ARTICLE VIII.
MISCELLANEOUS
8.1. The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2. This Agreement may be executed in two or more counterparts, each of which
taken together shall constitute one and the same instrument.
8.3. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of ________. It shall
also be subject to the provisions of the federal securities laws and the
rules and regulations thereunder and to any orders of the Commission
granting exemptive relief therefrom and the conditions of such orders.
Copies of any such orders shall be promptly forwarded by the Trust to the
Company.
8.5. All liabilities of the Trust arising, directly or indirectly, under this
Agreement, of any and every nature whatsoever, shall be satisfied solely
out of the assets of the Trust and no Trustee, officer, agent or holder of
shares of beneficial interest of the Trust shall be personally liable for
any such liabilities.
8.6. Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Commission, the
National Association of Securities Dealers, Inc. and state insurance
regulators) and shall permit such authorities reasonable access to its
books and records in connection with any investigation or inquiry relating
to this Agreement or the transactions contemplated hereby.
8.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
8.8. This Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other
party.
8.10.No provisions of this Agreement may be amended or modified in any manner
except by a written agreement properly authorized and executed by both
parties.
8.11.Each party hereto shall, except as required by law or otherwise permitted
by this Agreement, treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto, and shall not disclose
such confidential information without the written consent of the affected
party unless such information has become publicly available.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Participation Agreement as of the date and year first above
written.
Fred Alger and Company, Incorporated
By:
-----------------------
Name:
Title:
The Alger American Fund
By:
-----------------------
Name:
Title:
Business Men's Assurance Company of America
By:
------------------------
Name:
Title:
SCHEDULE A
SEGREGATED ASSET ACCOUNTS
PARTICIPATION AGREEMENT PRIVATE
Among
BERGER INSTITUTIONAL PRODUCTS TRUST
BBOI WORLDWIDE LLC
and
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
THIS AGREEMENT, made and entered into this day of , 1998 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 shares of the Trust will be sold only to
Accounts of Participating Insurance Companies and to Qualified Plans. No shares
of any Fund will be sold 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 agrees to purchase and redeem the shares of each
Fund offered by the then-current prospectus of the Trust in accordance with the
provisions of that prospectus. The Insurance Company agrees that all net amounts
available under the Contracts shall be invested in the Trust, or in the
Insurance Company's general account, provided that such amounts may also be
invested in an investment company other than the Trust if (a) the other
investment company, or series thereof, has investment objectives or policies
that are substantially different from the investment objectives and policies of
any Fund of the Trust in which the Account may invest; or (b) the other
investment company was available as a funding vehicle for the Contracts prior to
the date of this Agreement and the Insurance Company so informs the Trust and
BBOI Worldwide prior to their signing this Agreement; or (c) the Trust and BBOI
Worldwide consent in advance in writing to the use of the other investment
company.
1.7. 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.
1.8. 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.
1.9. 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.
1.10. 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.
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 the Texas 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 make all reasonable
efforts to 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 th 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 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 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
for entities subject to the requirements of Rule 17g-1 of the 1940 Act or
related provisions or may be promulgated from time to time. The aforesaid bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
ARTICLE III. Disclosure Documents and Voting
3.1. BBOI Worldwide shall provide the Insurance Company (at the Insurance
Company's expense) with as many copies of the Trust's current prospectus as the
Insurance Company may reasonably request. If requested by the Insurance Company
in lieu thereof, the Trust shall provide such documentation (including a final
copy of the new prospectus as set in type at the Trust's expense) and other
assistance as is reasonably necessary in order for the Insurance Company once
each year (or more frequently if the prospectus for the Trust is amended) to
have the prospectus for the Contracts and the Trust's prospectus printed
together in one document (at the Insurance Company's expense).
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 an amount equal to ________ per
annum of the average aggregate amount invested by the Insurance Company in the
Trust under this Agreement. Such payments will be made only when the average
aggregate amount invested exceeds $_________. 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.
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
fro 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 or to the Insurance Company or the Account,
whichever is applicable.
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 result from the gross
negligence, bad faith or willful misconduct of any trustee(s) of the Trust,
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 or to the Insurance Company, the Trust, BBOI
Worldwide or the Account, whichever is applicable.
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 cas
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 _____________.
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 one year 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; or
(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.
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), 10.1(j), or
10.1(k) of this Agreement, the prior written notice shall be given in
advance of the effective date of termination as required by those
provisions; and
(b) in the event that any termination is based upon the provisions of
Section 10.1(c) or 10.1(d) of this Agreement, the prior written notice
shall be given at least ninety (90) days before the effective date of
termination.
10.4. 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.
10.5. The Insurance Company shall not redeem Trust shares attributable to
the Contracts (as opposed to Trust shares attributable to the Insurance
Company's assets held in the Account) except (i) as necessary to implement
Contract-owner-initiated transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (a "Legally Required Redemption"). Upon request, the Insurance
Company will promptly furnish to the Trust and BBOI Worldwide the opinion of
counsel for the Insurance Company (which counsel shall be reasonably
satisfactory to the Trust and BBOI Worldwide) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore, the
Insurance Company shall not prevent new Contract owners from allocating payments
to a Fund that formerly was available under the Contracts without first giving
the Trust or BBOI Worldwide 90 days notice of its intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of 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:
700 Karnes Blvd.
Kansas City, Missouri 64108
Attention:
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.
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
Schedule B
Contracts
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.
FUND PARTICIPATION AGREEMENT
This AGREEMENT is made this day of , 1998, by and between Business Men's
Assurance Company of America (the "Insurer"), a life insurance company domiciled
in Missouri, on its behalf and on behalf of the segregated asset accounts of the
Insurer listed on Exhibit A to this Agreement (the "Separate Accounts");
Insurance Management Series (the "Fund"), a Massachusetts business trust; and
Federated Securities Corp. (the "Distributor"), a Pennsylvania corporation.
W I T N E S S E T H
WHEREAS, the Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended ("1940 Act") and the Fund is authorized to issue
separate classes of shares of beneficial interests ("shares"), each representing
an interest in a separate portfolio of assets known as a "portfolio" and each
portfolio has its own investment objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its
portfolios to separate accounts of insurance companies that fund variable
annuity contracts ("Variable Contracts") and to serve as an investment medium
for Variable Contracts offered by insurance companies that have entered into
participation agreements substantially similar to this agreement ("Participating
Insurance Companies"), and the Fund will be made available in the future to
offer shares of one or more of its portfolios to separate accounts of insurance
companies that fund variable life insurance policies (at which time such
policies would also be "Variable Contracts" hereunder), and
WHEREAS, the Fund is currently comprised of five separate portfolios, and
other portfolios may be established in the future; and
WHEREAS, the Fund has obtained an order from the SEC dated December 29,
1993 (File No. 812-8620), granting Participating Insurance Companies and
variable annuity and variable life insurance separate accounts exemptions from
the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of life insurance companies that may
or may not be affiliated with one another (hereinafter the "Shared Funding
Exemptive Order"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended ("1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurer wishes to purchase shares of one or more of the Fund's
portfolios on behalf of its Separate Accounts to serve as an investment medium
for Variable Contracts funded by the Separate Accounts, and the Distributor is
authorized to sell shares of the Fund's portfolios;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Distributor agrees to sell to the Insurer those shares of the
portfolios offered and made available by the Fund and identified on Exhibit B
("Portfolios") that the Insurer orders on behalf of its Separate Accounts, and
agrees to execute such orders on each day on which the Fund calculates its net
asset value pursuant to rules of the SEC ("business day") at the net asset value
next computed after receipt and acceptance by the Fund or its agent of the order
for the shares of the Fund.
1.2 The Fund agrees to make available on each business day shares of the
Portfolios for purchase at the applicable net asset value per share by the
Insurer on behalf of its Separate Accounts; provided, however, that the Board of
Trustees of the Fund may refuse to sell shares of any Portfolio to any person,
or suspend or terminate the offering of shares of any Portfolio, if such action
is required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Trustees, acting in good faith and in light of the
Trustees' fiduciary duties under applicable law, necessary in the best interests
of the shareholders of any Portfolio.
1.3 The Fund and the Distributor agree that shares of the Portfolios of the
Fund will be sold only to Participating Insurance Companies, their separate
accounts, and other persons consistent with each Portfolio being adequately
diversified pursuant to Section 817(h) of the Internal Revenue Code of 1986, as
amended ("Code"), and the regulations thereunder. No shares of any Portfolio
will be sold directly to the general public to the extent not permitted by
applicable tax law.
1.4 The Fund and the Distributor will not sell shares of the Portfolios to
any insurance company or separate account unless an agreement containing
provisions substantially the same as the provisions in Article IV of this
Agreement is in effect to govern such sales.
1.5 Upon receipt of a request for redemption in proper form from the
Insurer, the Fund agrees to redeem any full or fractional shares of the
Portfolios held by the Insurer, ordinarily executing such requests on each
business day at the net asset value next computed after receipt and acceptance
by the Fund or its agent of the request for redemption, except that the Fund
reserves the right to suspend the right of redemption, consistent with Section
22(e) of the 1940 Act and any rules thereunder. Such redemption shall be paid
consistent with applicable rules of the SEC and procedures and policies of the
Fund as described in the current prospectus.
1.6 For purposes of Sections 1.2 and 1.5, the Insurer shall be the agent of
the Fund for the limited purpose of receiving and accepting purchase and
redemption orders from each Separate Account and receipt of such orders by 4:00
p.m. Eastern time by the Insurer shall be deemed to be receipt by the Fund for
purposes of Rule 22c-1 of the 1940 Act; provided that the Fund receives notice
of such orders on the next following business day prior to 4:00 p.m. Eastern
time on such day, although the Insurer will use its best efforts to provide such
notice by 12:00 noon Eastern time.
1.7 The Insurer agrees to purchase and redeem the shares of each Portfolio
in accordance with the provisions of the current prospectus for the Fund.
1.8 The Insurer shall pay for shares of the Portfolio on the next business
day after it places an order to purchase shares of the Portfolio. Payment shall
be in federal funds transmitted by wire.
1.9 Issuance and transfer of shares of the Portfolios will be by book entry
only unless otherwise agreed by the Fund. Stock certificates will not be issued
to the Insurer or the Separate Accounts unless otherwise agreed by the Fund.
Shares ordered from the Fund will be recorded in an appropriate title for the
Separate Accounts or the appropriate subaccounts of the Separate Accounts.
1.10 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Insurer of any income dividends or capital gain
distributions payable on the shares of the Portfolios. The Insurer hereby elects
to reinvest in the Portfolio all such dividends and distributions as are payable
on a Portfolio's shares and to receive such dividends and distributions in
additional shares of that Portfolio. The Insurer reserves the right to revoke
this election in writing and to receive all such dividends and distributions in
cash. The Fund shall notify the Insurer of the number of shares so issued as
payment of such dividends and distributions.
1.11 The Fund shall instruct its recordkeeping agent to advise the Insurer
on each business day of the net asset value per share for each Portfolio as soon
as reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share available by
7:00 p.m. Eastern time.
ARTICLE II. Representations and Warranties
2.1 The Insurer represents and warrants that it is an insurance company
duly organized and in good standing under applicable law and that it is taxed as
an insurance company under Subchapter L of the Code.
2.2 The Insurer represents and warrants that it has legally and validly
established each of the Separate Accounts as a segregated asset account under
the Missouri Insurance Code, and that each of the Separate Accounts is a validly
existing segregated asset account under applicable federal and state law.
2.3 The Insurer represents and warrants that the Variable Contracts issued
by the Insurer or interests in the Separate Accounts under such Variable
Contracts (1) are or, prior to issuance, will be registered as securities under
the Securities Act of 1933 ("1933 Act") or, alternatively, (2) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act.
2.4 The Insurer represents and warrants that each of the Separate Accounts
(1) has been registered as a unit investment trust in accordance with the
provisions of the 1940 Act or, alternatively, (2) has not been registered in
proper reliance upon an exclusion from registration under the 1940 Act.
2.5 The Insurer represents that it believes, in good faith, that the
Variable Contracts issued by the Insurer are currently treated as annuity
contracts or life insurance policies (which may include modified endowment
contracts), whichever is appropriate, under applicable provisions of the Code.
2.6 The Fund represents and warrants that it is duly organized as a
business trust under the laws of the Commonwealth of Massachusetts, and is in
good standing under applicable law.
2.7 The Fund represents and warrants that the shares of the Portfolios are
duly authorized for issuance in accordance with applicable law and that the Fund
is registered as an open-end management investment company under the 1940 Act.
2.8 The Fund represents, in good faith, that the Portfolios currently
comply with the diversification provisions of Section 817(h) of the Code and the
regulations issued thereunder relating to the diversification requirements for
variable life insurance policies and variable annuity contracts.
2.9 The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
ARTICLE III. General Duties
3.1 The Fund shall take all such actions as are necessary to permit the
sale of the shares of each Portfolio to the Separate Accounts, including
maintaining its registration as an investment company under the 1940 Act, and
registering the shares of the Portfolios sold to the Separate Accounts under the
1933 Act for so long as required by applicable law. The Fund shall amend its
Registration Statement filed with the SEC under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of the
shares of the Portfolios. The Fund shall register and qualify the shares for
sale in accordance with the laws of the various states to the extent deemed
necessary by the Fund or the Distributor.
3.2 The Fund shall make every effort to maintain qualification of each
Portfolio as a Regulated Investment Company under Subchapter M of the Code (or
any successor or similar provision) and shall notify the Insurer immediately
upon having a reasonable basis for believing that a Portfolio has ceased to so
qualify or that it might not so qualify in the future.
3.3 The Fund shall make every effort to enable each Portfolio to comply
with the diversification provisions of Section 817(h) of the Code and the
regulations issued thereunder relating to the diversification requirements for
variable life insurance policies and variable annuity contracts and any
prospective amendments or other modifications to Section 817 or regulations
thereunder, and shall notify the Insurer immediately upon having a reasonable
basis for believing that any Portfolio has ceased to comply.
3.4 The Insurer shall take all such actions as are necessary under
applicable federal and state law to permit the sale of the Variable Contracts
issued by the Insurer, including registering each Separate Account as an
investment company to the extent required under the 1940 Act, and registering
the Variable Contracts or interests in the Separate Accounts under the Variable
Contracts to the extent required under the 1933 Act, and obtaining all necessary
approvals to offer the Variable Contracts from state insurance commissioners.
3.5 The Insurer shall make every effort to maintain the treatment of the
Variable Contracts issued by the Insurer as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code, and
shall notify the Fund and the Distributor immediately upon having a reasonable
basis for believing that such Variable Contracts have ceased to be so treated or
that they might not be so treated in the future.
3.6 The Insurer shall offer and sell the Variable Contracts issued by the
Insurer in accordance with applicable provisions of the 1933 Act, the 1934 Act,
the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the
offering of variable life insurance policies and variable annuity contracts.
3.7 The Distributor shall sell and distribute the shares of the Portfolios
of the Fund in accordance with the applicable provisions of the 1933 Act, the
1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and state law.
3.8 During such time as the Fund engages in Mixed Funding or Shared
Funding, a majority of the Board of Trustees of the Fund shall consist of
persons who are not "interested persons" of the Fund ("disinterested Trustees"),
as defined by Section 2(a)(19) of the 1940 Act and the rules thereunder, and as
modified by any applicable orders of the SEC, except that if this provision of
this Section 3.8 is not met by reason of the death, disqualification, or bona
fide resignation of any Trustee or Trustees, then the operation of this
provision shall be suspended (a) for a period of 45 days if the vacancy or
vacancies may be filled by the Fund's Board; (b) for a period of 60 days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
3.9 The Insurer and its agents will not in any way recommend any proposal
or oppose or interfere with any proposal submitted by the Fund at a meeting of
owners of Variable Contracts or shareholders of the Fund, and will in no way
recommend, oppose, or interfere with the solicitation of proxies for Fund shares
held by Contract Owners, without the prior written consent of the Fund, which
consent may be withheld in the Fund's sole discretion.
3.10 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
ARTICLE IV. Potential Conflicts
4.1 During such time as the Fund engages in Mixed Funding or Shared
Funding, the parties hereto shall comply with the conditions in this Article IV.
4.2 The Fund's Board of Trustees shall monitor the Fund for the existence
of any material irreconcilable conflict (1) between the interests of owners of
variable annuity contracts and variable life insurance policies, and (2) between
the interests of owners of Variable Contracts ("Variable Contract Owners")
issued by different Participating Life Insurance Companies that invest in the
Fund. A material irreconcilable conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio of
the Fund are being managed; (e) a difference in voting instructions given by
variable annuity and variable life insurance contract owners; or (f) a decision
by a Participating Insurance Company to disregard the voting instructions of
Variable Contract Owners.
4.3 The Insurer agrees that it shall report any potential or existing
conflicts of which it is aware to the Fund's Board of Trustees. The Insurer will
be responsible for assisting the Board of Trustees of the Fund in carrying out
its responsibilities under the Mixed and Shared Funding Exemptive Order, or, if
the Fund is engaged in Mixed Funding or Shared Funding in reliance on Rule 6e-2,
6e-3(T), or any other regulation under the 1940 Act, the Insurer will be
responsible for assisting the Board of Trustees of the Fund in carrying out its
responsibilities under such regulation, by providing the Board with all
information reasonably necessary for the Board to consider any issues raised.
This includes, but is not limited to, an obligation by the Insurer to inform the
Board whenever Variable Contract Owner voting instructions are disregarded. The
Insurer shall carry out its responsibility under this Section 4.3 with a view
only to the interests of the Variable Contract Owners.
4.4 The Insurer agrees that in the event that it is determined by a
majority of the Board of Trustees of the Fund or a majority of the Fund's
disinterested Trustees that a material irreconcilable conflict exists, the
Insurer shall, at its expenses and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees of the Board of the
Fund), take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (1) withdrawing the
assets allocable to some or all of the Separate Accounts from the Fund or any
Portfolio and reinvesting such assets in a different investment medium,
including another portfolio of the Fund, or submitting the question as to
whether such segregation should be implemented to a vote of all affected
Variable Contract Owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners or life insurance contract
owners of contracts issued by one or more Participating Insurance Companies),
that votes in favor of such segregation, or offering to the affected Variable
Contract Owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account. If a
material irreconcilable conflict arises because of the Insurer's decision to
disregard Variable Contract Owners' voting instructions and that decision
represents a minority position or would preclude a majority vote, the Insurer
shall be required, at the Fund's election, to withdraw the Separate Accounts'
investment in the Fund, provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees, and no
charge or penalty will be imposed as a result of such withdrawal. These
responsibilities shall be carried out with a view only to the interests of the
Variable Contract Owners. A majority of the disinterested Trustees of the Fund
shall determine whether or not any proposed action adequately remedies any
material irreconcilable conflict, but in no event will the Fund or its
investment adviser or the Distributor be required to establish a new funding
medium for any Variable Contract. The Insurer shall not be required by this
Section 4.4 to establish a new funding medium for any Variable Contract if any
offer to do so has been declined by vote of a majority of Variable Contract
Owners materially adversely affected by the material irreconcilable conflict.
4.5 The Insurer, at least annually, shall submit to the Fund's Board of
Trustees such reports, materials, or data as the Board reasonably may request so
that the Trustees of the Fund may fully carry out the obligations imposed upon
the Board by the conditions contained in the application for the Mixed and
Shared Funding Exemptive Order and said reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
4.6 All reports of potential or existing conflicts received by the Fund's
Board of Trustees, and all Board action with regard to determining the existence
of a conflict, notifying Participating Insurance Companies of a conflict, and
determining whether any proposed action adequately remedies a conflict, shall be
properly recorded in the minutes of the Board of Trustees of the Fund or other
appropriate records, and such minutes or other records shall be made available
to the SEC upon request.
4.7 The Board of Trustees of the Fund shall promptly notify the Insurer in
writing of its determination of the existence of an irreconcilable material
conflict and its implications.
ARTICLE V. Prospectuses and Proxy Statements; Voting
5.1 The Insurer shall distribute such prospectuses, proxy statements and
periodic reports of the Fund to the owners of Variable Contracts issued by the
Insurer as required to be distributed to such Variable Contract Owners under
applicable federal or state law.
5.2 The Distributor shall provide the Insurer with as many copies of the
current prospectus of the Fund as the Insurer may reasonably request. If
requested by the Insurer in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type or
in camera-ready copy) and other assistance as is reasonably necessary in order
for the Insurer to either print a stand-alone document or print together in one
document the current prospectus for the Variable Contracts issued by the Insurer
and the current prospectus for the Fund, or a document combining the Fund
prospectus with prospectuses of other funds in which the Variable Contracts may
be invested. The Fund shall bear the expense of printing copies of its current
prospectus that will be distributed to existing Variable Contract Owners, and
the Insurer shall bear the expense of printing copies of the Fund's prospectus
that are used in connection with offering the Variable Contracts issued by the
Insurer.
5.3 The Fund and the Distributor shall provide, at the Fund's expense, such
copies of the Fund's current Statement of Additional Information ("SAI") as may
reasonably be requested, to the Insurer and to any owner of a Variable Contract
issued by the Insurer who requests such SAI.
5.4 The Fund, at its expense, shall provide the Insurer with copies of its
proxy materials, periodic reports to shareholders, and other communications to
shareholders in such quantity as the Insurer shall reasonably require for
purposes of distributing to owners of Variable Contracts issued by the Insurer.
The Fund, at the Insurer's expense, shall provide the Insurer with copies of its
periodic reports to shareholders and other communications to shareholders in
such quantity as the Insurer shall reasonably request for use in connection with
offering the Variable Contracts issued by the Insurer. If requested by the
Insurer in lieu thereof, the Fund shall provide such documentation (including a
final copy of the Fund's proxy materials, periodic reports to shareholders, and
other communications to shareholders, as set in type or in camera-ready copy)
and other assistance as reasonably necessary in order for the Insurer to print
such shareholder communications for distribution to owners of Variable Contracts
issued by the Insurer.
5.5 For so long as the SEC interprets the 1940 Act to require pass-through
voting by Participating Insurance Companies whose Separate Accounts are
registered as investment companies under the 1940 Act, the Insurer shall vote
shares of each Portfolio of the Fund held in a Separate Account or a subaccount
thereof, whether or not registered under the 1940 Act, at regular and special
meetings of the Fund in accordance with instructions timely received by the
Insurer (or its designated agent) from owners of Variable Contracts funded by
such Separate Account or subaccount thereof having a voting interest in the
Portfolio. The Insurer shall vote shares of a Portfolio of the Fund held in a
Separate Account or a subaccount thereof that are attributable to the Variable
Contracts as to which no timely instructions are received, as well as shares
held in such Separate Account or subaccount thereof that are not attributable to
the Variable Contracts and owned beneficially by the Insurer (resulting from
charges against the Variable Contracts or otherwise), in the same proportion as
the votes cast by owners of the Variable Contracts funded by that Separate
Account or subaccount thereof having a voting interest in the Portfolio from
whom instructions have been timely received. The Insurer shall vote shares of
each Portfolio of the Fund held in its general account, if any, in the same
proportion as the votes cast with respect to shares of the Portfolio held in all
Separate Accounts of the Insurer or subaccounts thereof, in the aggregate.
5.6 During such time as the Fund engages in Mixed Funding or Shared
Funding, the Fund shall disclose in its prospectus that (1) the Fund is intended
to be a funding vehicle for variable annuity and variable life insurance
contracts offered by various insurance companies, (2) material irreconcilable
conflicts possibly may arise, and (3) the Board of Trustees of the Fund will
monitor events in order to identify the existence of any material irreconcilable
conflicts and to determine what action, if any, should be taken in response to
any such conflict. The Fund hereby notifies the Insurer that prospectus
disclosure may be appropriate regarding potential risks of offering shares of
the Fund to separate accounts funding both variable annuity contracts and
variable life insurance policies and to separate accounts funding Variable
Contracts of unaffiliated life insurance companies.
ARTICLE VI. Sales Material and Information
6.1 The Insurer shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material in
which the Fund (or any Portfolio thereof) or its investment adviser or the
Distributor is named at least 15 days prior to the anticipated use of such
material, and no such sales literature or other promotional material shall be
used unless the Fund and the Distributor or the designee of either approve the
material or do not respond with comments on the material within 10 days from
receipt of the material.
6.2 The Insurer agrees that neither it nor any of its affiliates or agents
shall give any information or make any representations or statements on behalf
of the Fund or concerning the Fund other than the information or representations
contained in the Registration Statement or prospectus for the Fund shares, as
such registration statement and prospectus may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its designee
and by the Distributor or its designee, except with the permission of the Fund
or its designee and the Distributor or its designee.
6.3 The Fund or the Distributor or the designee of either shall furnish to
the Insurer or its designee, each piece of sales literature or other promotional
material in which the Insurer or its Separate Accounts are named at least 15
days prior to the anticipated use of such material, and no such material shall
be used unless the Insurer or its designee approves the material or does not
respond with comments on the material within 10 days from receipt of the
material.
6.4 The Fund and the Distributor agree that each and the affiliates and
agents of each shall not give any information or make any representations on
behalf of the Insurer or concerning the Insurer, the Separate Accounts, or the
Variable Contracts issued by the Insurer, other than the information or
representations contained in a registration statement or prospectus for such
Variable Contracts, as such registration statement and prospectus may be amended
or supplemented from time to time, or in reports for the Separate Accounts or
prepared for distribution to owners of such Variable Contracts, or in sales
literature or other promotional material approved by the Insurer or its
designee, except with the permission of the Insurer.
6.5 The Fund will provide to the Insurer at least one complete copy of the
Mixed and Shared Funding Exemptive Application and any amendments thereto, all
prospectuses, Statements of Additional Information, reports, proxy statements
and other voting solicitation materials, and all amendments and supplements to
any of the above, that relate to the Fund or its shares, promptly after the
filing of such document with the SEC or other regulatory authorities.
6.6 The Insurer will provide to the Fund all prospectuses (which shall
include an offering memorandum if the Variable Contracts issued by the Insurer
or interests therein are not registered under the 1933 Act), Statements of
Additional Information, reports, solicitations for voting instructions relating
to the Fund, and all amendments or supplements to any of the above that relate
to the Variable Contracts issued by the Insurer or the Separate Accounts which
utilize the Fund as an underlying investment medium, promptly after the filing
of such document with the SEC or other regulatory authority.
6.7 For purposes of this Article VI, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use, in a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, computerized media, or other public
media), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees.
ARTICLE VII. Indemnification
7.1 Indemnification by the Insurer
7.1(a) The Insurer agrees to indemnify and hold harmless the Fund, each of
its Trustees and officers, any affiliated person of the Fund within the meaning
of Section 2(a)(3) of the 1940 Act, and the Distributor (collectively, the
"Indemnified Parties" for purposes of this Section 7.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Insurer) or litigation expenses (including legal and
other expenses), to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Insurer
and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus (which shall include an offering
memorandum) for the Variable Contracts issued by the Insurer or sales
literature for such Variable Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Insurer by or
on behalf of the Fund for use in the registration statement or
prospectus for the Variable Contracts issued by the Insurer or sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of such Variable Contracts or Fund shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations contained in
the registration statement, prospectus or sales literature of the Fund
not supplied by the Insurer or persons under its control) or wrongful
conduct of the Insurer or any of its affiliates, employees or agents
with respect to the sale or distribution of the Variable Contracts
issued by the Insurer or the Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Insurer; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Insurer in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Insurer;
except to the extent provided in Sections 7.1(b) and 7.1(c) hereof.
7.1(b) The Insurer shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation expenses to which an Indemnified Party would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of the Indemnified Party's duties or by reason of the
Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Fund.
7.1(c) The Insurer shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Party shall have notified the Insurer in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Party shall have received notice of such
service on any designated agent), but failure to notify the Insurer of any
such claim shall not relieve the Insurer from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action
is brought against the Indemnified Parties, the Insurer shall be entitled
to participate, at its own expense, in the defense of such action. The
Insurer also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the
Insurer to such party of the Insurer's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Insurer will not be liable to
such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
7.1(d) The Indemnified Parties shall promptly notify the Insurer of
the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Variable
Contracts issued by the Insurer or the operation of the Fund.
7.2 Indemnification By the Distributor
7.2(a) The Distributor agrees to indemnify and hold harmless the
Insurer, its affiliated principal underwriter of the Variable Contracts,
and each of their directors and officers and any affiliated person of the
Insurer within the meaning of Section 2(a)(3) of the 1940 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Distributor) or
litigation expenses (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or litigation expenses are related to the sale or acquisition
of the Fund's shares or the Variable Contracts issued by the Insurer and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the Fund
(or any amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Distributor or the Fund or the designee of either by or on behalf
of the Insurer for use in the registration statement or prospectus for
the Fund or in sales literature (or any amendment or supplement) or
otherwise for use in the registration statement or prospectus for the
Fund or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Variable
Contracts issued by the Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or
representations (other than statements or representations contained in
the registration statement, prospectus or sales literature for the
Variable Contracts not supplied by the Distributor or any employees or
agents thereof) or wrongful conduct of the Fund or Distributor, or the
affiliates, employees, or agents of the Fund or the Distributor with
respect to the sale or distribution of the Variable Contracts issued
by the Insurer or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature covering the Variable Contracts issued
by the Insurer, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Insurer by or on behalf of
the Fund; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Distributor;
except to the extent provided in Sections 7.2(b) and 7.2(c) hereof.
7.2(b) The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation expenses to which an Indemnified Party would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of the Indemnified Party's duties or by reason of the
Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Insurer or the Separate Accounts.
7.2(c) The Distributor shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Party shall have notified the Distributor in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Party shall have received notice of such
service on any designated agent), but failure to notify the Distributor of
any such claim shall not relieve the Distributor from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Distributor
will be entitled to participate, at is own expense, in the defense thereof.
The Distributor also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from
the Distributor to such party of the Distributor's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and the Distributor will not be
liable to such party under this Agreement for any legal or other expense
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
7.2(d) The Insurer shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the
Variable Contracts issued by the Insurer or the operation of the Separate
Accounts.
7.3 Indemnification by the Fund
7.3(a) The Fund agrees to indemnify and hold harmless the Insurer, its
affiliated principal underwriter of the Variable Contracts, and each of
their directors and officers and any affiliated person of the Insurer
within the meaning of Section 2(a)(3) of the 1940 Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Fund) or litigation expenses (including
legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or litigation expenses
are related to the sale or acquisition of the Fund's shares or the Variable
Contracts issued by the Insurer and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the Fund
(or any amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Distributor or the Fund or the designee of either by or on behalf
of the Insurer for use in the registration statement or prospectus for
the Fund or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Variable
Contracts issued by the Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations contained in
the registration statement, prospectus or sales literature for the
Variable Contracts not supplied by the Distributor or any employees or
agents thereof) or wrongful conduct of the Fund, or the affiliates,
employees, or agents of the Fund, with respect to the sale or
distribution of the Variable Contracts issued by the Insurer or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus or sales literature covering the Variable Contracts issued
by the Insurer, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Insurer by or on behalf of
the Fund; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Fund;
except to the extent provided in Sections 7.3(b) and 7.3(c) hereof.
7.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation expenses to which an Indemnified Party would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of the Indemnified Party's duties or by reason of the
Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Insurer or the Separate Accounts.
7.3(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Party shall have received notice of such
service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have
to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Fund will be entitled to
participate, at its own expense, in the defense thereof. The Fund also
shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the Fund to such party
of the Fund's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it,
and the Fund will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently
in connection with the defense thereof other than reasonable costs of
investigation.
7.3(d) The Insurer shall promptly notify the Fund of the commencement
of any litigation or proceedings against it or any of its officers or
directors in connection with the issuance or sale of the Variable Contracts
issued by the Insurer or the sale of the Fund's shares.
ARTICLE VIII. Applicable Law
8.1 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of ______________.
8.2 This Agreement shall be subject to the provisions of the 1933, 1934,
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Mixed and Shared Funding Exemptive Order),
and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE IX. Termination
9.1 This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written notice to
the other parties; or
(b) at the option of the Insurer if shares of the Portfolios are not
reasonably available to meet the requirements of the Variable Contracts
issued by the Insurer, as determined by the Insurer, and upon prompt notice
by the Insurer to the other parties; or
(c) at the option of the Fund or the Distributor upon institution of
formal proceedings against the Insurer or its agent by the NASD, the SEC,
or any state securities or insurance department or any other regulatory
body regarding the Insurer's duties under this Agreement or related to the
sale of the Variable Contracts issued by the Insurer, the operation of the
Separate Accounts, or the purchase of the Fund shares; or
(d) at the option of the Insurer upon institution of formal
proceedings against the Fund or the Distributor by the NASD, the SEC, or
any state securities or insurance department or any other regulatory body;
or
(e) upon requisite vote of the Variable Contract Owners having an
interest in the Separate Accounts (or any subaccounts thereof) to
substitute the shares of another investment company for the corresponding
shares of the Fund or a Portfolio in accordance with the terms of the
Variable Contracts for which those shares had been selected or serve as the
underlying investment media; or
(f) in the event any of the shares of a Portfolio are not registered,
issued or sold in accordance with applicable state and/or federal law, or
such law precludes the use of such shares as the underlying investment
media of the Variable Contracts issued or to be issued by the Insurer; or
(g) by any party to the Agreement upon a determination by a majority
of the Trustees of the Fund, or a majority of its disinterested Trustees,
that an irreconcilable conflict, as described in Article IV hereof, exists;
or
(h) at the option of the Insurer if the Fund or a Portfolio fails to
meet the requirements under Subchapter M of the Code for qualification as a
Regulated Investment Company specified in Section 3.2 hereof or the
diversification requirements specified in Section 3.3 hereof.
9.2 Each party to this Agreement shall promptly notify the other parties to
the Agreement of the institution against such party of any such formal
proceedings as described in Sections 9.1(c) and (d) hereof. The Insurer shall
give 60 days prior written notice to the Fund of the date of any proposed vote
of Variable Contract Owners to replace the Fund's shares as described in Section
9.1(e) hereof.
9.3 Except as necessary to implement Variable Contract Owner initiated
transactions, or as required by state insurance laws or regulations, the Insurer
shall not redeem Fund shares attributable to the Variable Contracts issued by
the Insurer (as opposed to Fund shares attributable to the Insurer's assets held
in the Separate Accounts), and the Insurer shall not prevent Variable Contract
Owners from allocating payments to a Portfolio, until 60 days after the Insurer
shall have notified the Fund or Distributor of its intention to do so.
9.4 Notwithstanding any termination of this Agreement, the Fund and the
Distributor shall at the option of the Insurer continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Variable Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, based upon instructions from the owners of the
Existing Contracts, the Separate Accounts shall be permitted to reallocate
investments in the Portfolios of the Fund and redeem investments in the
Portfolios, and shall be permitted to invest in the Portfolios in the event that
owners of the Existing Contracts make additional purchase payments under the
Existing Contracts. If this Agreement terminates, the parties agree that
Sections 3.10, 7.1, 7.2, 7.3, 8.1, and 8.2, and, to the extent that all or a
portion of the assets of the Separate Accounts continue to be invested in the
Fund or any Portfolio of the Fund, Articles I, II, and IV and Sections 5.5 and
5.6 will remain in effect after termination.
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
Insurance Management Series
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Distributor:
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Insurer:
Business Men's Assurance Company of America
700 Karnes Blvd.
Kansas City, Missouri 64108
Attn.:
ARTICLE XI: Miscellaneous
11.1 The Fund and the Insurer agree that if and to the extent Rule 6e-2 or
Rule 6e-3(T) under the 1940 Act is amended or if Rule 6e-3 is adopted in final
form, to the extent applicable, the Fund and the Insurer shall each take such
steps as may be necessary to comply with the Rule as amended or adopted in final
form.
11.2 A copy of the Fund's Agreement and Declaration of Trust is on file
with the Secretary of the Commonwealth of Massachusetts and notice is hereby
given that any agreements that are executed on behalf of the Fund by any Trustee
or officer of the Fund are executed in his or her capacity as Trustee or officer
and not individually. The obligations of this Agreement shall only be binding
upon the assets and property of the Fund and shall not be binding upon any
Trustee, officer or shareholder of the Fund individually.
11.3 Nothing in this Agreement shall impede the Fund's Trustees or
shareholders of the shares of the Fund's Portfolios from exercising any of the
rights provided to such Trustees or shareholders in the Fund's Agreement and
Declaration of Trust, as amended, a copy of which will be provided to the
Insurer upon request.
11.4 Administrative services to Variable Contract Owners shall be the
responsibility of Insurer. Insurer, on behalf of its separate accounts will be
the sole shareholder of record of Fund shares. Fund and Distributor recognize
that they will derive a substantial savings in administrative expense by virtue
of having a sole shareholder rather than multiple shareholders. In consideration
of the administrative savings resulting from having a sole shareholder rather
than multiple shareholders, Distributor agrees to pay to Insurer an amount
computed at an annual rate of .25 of 1% of the average daily net asset value of
shares held in subaccounts for which Insurer provides administrative services.
Distributor's payments to Insurer are for administrative services only and do
not constitute payment in any manner for investment advisory services.
11.5 It is understood that the name "Federated" or any derivative thereof
or logo associated with that name is the valuable property of the Distributor
and its affiliates, and that the Insurer has the right to use such name (or
derivative or logo) only so long as this Agreement is in effect. Upon
termination of this Agreement the Insurer shall forthwith cease to use such name
(or derivative or logo).
11.6 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.7 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.8 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
11.9 This Agreement may not be assigned by any party to the Agree-ment
except with the written consent of the other parties to the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
INSURANCE MANAGEMENT
SERIES
ATTEST:____________________ BY:____________________________
Name: ____________________ Name:__________________________
Title: ____________________ Title:_________________________
FEDERATED SECURITIES CORP.
ATTEST:____________________ BY:____________________________
Name: ____________________ Name:__________________________
Title: ____________________ Title:_________________________
BUSINESS MEN'S ASSURANCE
COMPANY OF AMERICA
ATTEST:____________________ BY:____________________________
Name: ____________________ Name:__________________________
Title: ____________________ Title:_________________________
FUND PARTICIPATION AGREEMENT
Business Men's Assurance Company of America ("Insurance Company"), Van Eck
Worldwide Insurance Trust ("Trust") and the Trust's investment adviser, Van Eck
Associates Corporation ("Adviser") hereby agree that shares of the series of the
Trust as listed on Exhibit A, as it may, from time to time, be amended
("Portfolios"), shall be made available to serve as an underlying investment
medium for Individual and Group Deferred Variable Annuity and Variable Life
Contracts ("Contracts") to be offered by Insurance Company subject to the
following provisions:
1. Insurance Company represents that it has established the segregated asset
accounts listed in Exhibit B (the "Variable Account"), each a separate
account under Missouri law, and has registered each as a unit investment
trust under the Investment Company Act of 1940 ("1940 Act") to serve as an
investment vehicle for the Contracts. The Contracts provide for the
allocation of net amounts received by Insurance Company to separate series
of the Variable Account for investment in the shares of specified
investment companies selected among those companies available through the
Variable Account to act as underlying investment media. Selection of a
particular investment company is made by the Contract owner who may change
such selection from time to time in accordance with the terms of the
applicable Contract.
2. Insurance Company agrees to make every reasonable effort to market its
Contracts. It will use its best efforts to give equal emphasis and
promotion to shares of the Trust as is given to other underlying
investments of the Variable Account. In marketing its Contracts, Insurance
Company will comply with all applicable state or Federal laws.
3. The Trust or the Adviser will provide closing net asset value, dividend and
capital gain information at the close of trading each business day to
Insurance Company. Insurance Company will use this data to calculate unit
values, which will in turn be used to process that same business day's
Variable Account unit value. The Variable Account processing will be done
the same evening, and orders will be placed the morning of the following
business day. Orders will be sent directly to the Trust or its specified
agent, and payment for purchases will be wired to a custodial account
designated by the Trust or the Adviser, so as to coincide with the order
for Trust shares. The Trust will execute the orders at the net asset value
as determined as of the close of trading on the prior day. Dividends and
capital gains distributions shall be reinvested in additional shares at the
ex-date net asset value.
4. All expenses incident to the performance by the Trust under this Agreement
shall be paid by the Trust. The Trust shall pay the cost of registration of
Trust shares with the Securities and Exchange Commission ("SEC"). The Trust
shall distribute, to the Variable Account, proxy material, periodic Trust
reports to shareholders and other material the Trust may require to be sent
to Contract owners. The Trust shall pay the cost of qualifying Trust shares
in states where required. The Trust will provide Insurance Company with a
reasonable quantity of the Trust's Prospectus and the reports to be used in
contemplation of this Agreement. The Trust will provide Insurance Company
with a copy of the Statement of Additional Information suitable for
duplication.
5. Insurance Company and its agents shall make no representations concerning
the Trust or Trust shares except those contained in the then current
prospectuses of the Trust and in current printed sales literature of the
Trust.
6. Administrative services to Contract owners shall be the responsibility of
Insurance Company, and shall not be the responsibility of the Trust or the
Adviser. The Trust and Adviser recognize that Insurance Company will be the
sole shareholder of Trust shares issued pursuant to the Contracts. Such
arrangement will result in multiple share orders.
7. The Trust shall comply with Sections 817(h) and 851 of the Internal Revenue
Code of 1986, if applicable, and the regulations thereunder, and the
applicable provisions of the 1940 Act relating to the diversification
requirements for variable annuity, endowment, and life insurance contracts.
Upon request, the Trust shall provide Insurance Company with a letter from
the appropriate Trust officer certifying the Trust's compliance with the
diversification requirements and qualification as a regulated investment
company.
8. Insurance Company agrees to inform the Board of Trustees of the Trust of
the existence of, or any potential for, any material irreconcilable
conflict of interest between the interests of the Contract owners of the
Variable Account investing in the Trust and/or any other separate account
of any other insurance company investing in the Trust.
A material irreconcilable conflict may arise for a variety of reasons,
including:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, or any
similar action by insurance, tax or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Portfolio are being
managed;
(e) a difference in voting instructions given by Contract owners and
variable annuity insurance contract owners or by variable annuity or
life insurance contract owners of different life insurance companies
utilizing the Trust; or
(f) a decision by Insurance Company to disregard the voting instructions
of contract owners.
Insurance Company will be responsible for assisting the Board of
Trustees of the Trust in carrying out its responsibilities by
providing the Board with all information reasonably necessary for the
Board to consider any issue raised, including information as to a
decision by Insurance Company to disregard voting instructions of
Contract owners.
It is agreed that if it is determined by a majority of the members of
the Board of Trustees of the Trust or a majority of its disinterested
Trustees that a material irreconcilable conflict exists affecting
Insurance Company, Insurance Company shall, at its own expense, take
whatever steps are necessary to remedy or eliminate the irreconcilable
material conflict, which steps may include, but are not limited to,
(a) withdrawing the assets allocable to some or all of the separate
accounts from the Trust or any Portfolio and reinvesting such assets
in a different investment medium, including another Portfolio of the
Trust or submitting the questions of whether such segregation should
be implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any particular group (i.e.,
annuity Contract owners, life insurance Contract owners or qualified
Contract owners) that votes in favor of such segregation, or offering
to the affected Contract owners the option of making such a change;
(b) establishing a new registered management investment company or managed
separate account.
If a material irreconcilable conflict arises because of Insurance
Company's decision to disregard Contract owner voting instructions and
that decision represents a minority position or would preclude a
majority vote, Insurance Company may be required, at the Trust's
election, to withdraw the Variable Account's investment in the Trust.
No charge or penalty will be imposed against the Variable Account as a
result of such withdrawal. Insurance Company agrees that any remedial
action taken by it in resolving any material conflicts of interest
will be carried out with a view only to the interests of Contract
owners.
For purposes hereof, a majority of the disinterested members of the
Board of Trustees of the Trust shall determine whether any proposed
action adequately remedies any material irreconcilable conflict. In no
event will the Trust be required to establish a new funding medium for
any Contracts. Insurance Company shall not be required by the terms
hereof to establish a new funding medium for any Contracts if an offer
to do so has been declined by vote of a majority of affected Contract
owners.
The Trust will undertake to promptly make known to Insurance Company
the Board of Trustees' determination of the existence of a material
irreconcilable conflict and its implications.
9. This Agreement shall terminate as to the sale and issuance of new
Contracts:
(a) at the option of Insurance Company, the Adviser or the Trust upon six
months' advance written notice to the other parties;
(b) at the option of Insurance Company, if Trust shares are not available
for any reason to meet the requirements of Contracts as determined by
Insurance Company. Reasonable advance notice of election to terminate
shall be furnished by Insurance Company;
(c) at the option of Insurance Company, the Adviser or the Trust, upon
institution of formal proceedings against the Broker-Dealer or
Broker-Dealers marketing the Contracts, the Variable Account,
Insurance Company or the Trust by the National Association of
Securities Dealers ("NASD"), the SEC or any other regulatory body;
(d) upon a decision by Insurance Company, in accordance with regulations
of the SEC, to substitute such Trust shares with the shares of another
investment company for Contracts for which the Trust shares have been
selected to serve as the underlying investment medium. Insurance
Company will give 60 days' written notice to the Trust and the Adviser
of any proposed vote to replace Trust shares;
(e) upon assignment of this Agreement unless made with the written consent
of each other party;
(f) in the event Trust shares are not registered, issued or sold in
conformance with Federal law or such law precludes the use of Trust
shares as an underlying investment medium of Contracts issued or to be
issued by Insurance Company. Prompt notice shall be given by either
party to the other in the event the conditions of this provision
occur.
10. Termination as the result of any cause listed in the preceding paragraph
shall not affect the Trust's obligation to furnish Trust shares for
Contracts then in force for which the shares of the Trust serve or may
serve as an underlying medium, unless such further sale of Trust shares is
proscribed by law or the SEC or other regulatory body.
11. Each notice required by this Agreement shall be given by wire and confirmed
in writing to:
Business Men's Assurance Company of America
700 Karnes Blvd.
Kansas City, Missouri 64108
Attn:
Van Eck Worldwide Insurance Trust
99 Park Avenue, 8th Floor
New York, New York 10016
Attn: President
Van Eck Associates Corporation
99 Park Avenue, 8th Floor
New York, New York 10016
Attn: President
12. Advertising and sales literature with respect to the Trust prepared by
Insurance Company or its agents for use in marketing its Contracts will be
submitted to the Trust for review before such material is submitted to the
SEC or NASD for review.
13. Insurance Company will distribute all proxy material furnished by the Trust
and will vote Trust shares in accordance with instructions received from
the Contract owners of such Trust shares. Insurance Company shall vote the
Trust shares for which no instructions have been received in the same
proportion as Trust shares for which said instructions have been received
from Contract owners. Insurance Company and its agents will in no way
recommend action in connection with or oppose or interfere with the
solicitation of proxies for the Trust shares held for such Contract owners.
14. (a) Insurance Company agrees to indemnify and hold harmless the Trust, the
Adviser, and each of its trustees, directors, officers, employees,
agents and each person, if any, who controls the Trust within the
meaning of the Securities Act of 1933 (the "Act") (the Trust and such
persons collectively, "Trust Indemnified Person") against any losses,
claims, damages or liabilities to which a Trust Indemnified Person may
become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in information furnished by
Insurance Company for use in the Registration Statement or prospectus
of the Trust or in the Registration Statement or prospectus for the
Variable Account, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or arise out of or as a result of conduct, statements or
representations (other than statements or representations contained in
the prospectus and Trust-prepared sales literature of the Trust) of
Insurance Company or its agents with respect to the sale and
distribution of contracts for which Trust shares are an underlying
investment or arise out of a breach of this Agreement; and Insurance
Company will reimburse any legal or other expenses reasonably incurred
by a Trust Indemnified Person in connection with investigating or
defending any such loss, claim, damage, liability or action. This
indemnity agreement will be in addition to any liability which
Insurance Company may otherwise have.
(b) The Trust agrees to indemnify and hold harmless Insurance Company and
each of its directors, officers, employees, agents and each person, if
any, who controls Insurance Company within the meaning of the Act
(Insurance Company and such persons collectively, "Insurance Company
Indemnified Person") against any losses, claims, damages or
liabilities to which an Insurance Company Indemnified Person may
become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) 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 Trust-prepared sales literature of the Trust, or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arise out
of or are based upon the Trust's failure to keep each of the Trust
options fully diversified and qualified as a regulated investment
company as required by the applicable provisions of the Internal
Revenue Code, the Investment Company Act of 1940, and any other law or
regulation, or arise out of a breach of this Agreement and the Trust
will reimburse any legal or other expenses reasonably incurred by an
Insurance Company Indemnified Person in connection with investigating
or defending any such loss, claim, damage, liability or action;
provided, however, that the Trust will not be liable in any such case
to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or omission or alleged
omission made in such Registration Statement or prospectus in
conformity with written information furnished to the Trust by
Insurance Company specifically for use therein or in Insurance
Company-prepared sales literature. This indemnity agreement will be in
addition to any liability which the Trust may otherwise have.
(c) The Adviser agrees to indemnify and hold harmless each Insurance
Company Indemnified Person against any losses, claims, damages or
liabilities to which an Insurance Company Indemnified Person may
become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) 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 Adviser-prepared sales literature of the Trust, or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arise out
of or are based upon the Adviser's failure to keep each of the Trust
and its Portfolios fully diversified and qualified as a regulated
investment company as required by the applicable provisions of the
Internal Revenue Code, the 1940 Act, and any other law or regulation,
or arise out of a breach of this Agreement and the Adviser will
reimburse any legal or other expenses reasonably incurred by each
Insurance Company Indemnified Person in connection with investigating
or defending any such loss, claim, damage, liability or action;
provided, however, that the Adviser will not be liable in any such
case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or omission or
alleged omission made in such Registration Statement or prospectus in
conformity with written information furnished to the Adviser by
Insurance Company specifically for use therein or Insurance
Company-prepared sales literature. This indemnity agreement will be in
addition to any liability which the Adviser may otherwise have.
(d) The Trust and the Adviser shall indemnify and hold Insurance Company
harmless against any and all liability, loss, damages, costs or
expenses which Insurance Company may incur, suffer or be required to
pay directly due to the Trust's or Adviser's (or their designated
agent's) (1) incorrect calculation of the daily net asset value,
dividend rate or capital gain distribution rate; (2) incorrect
reporting of the daily net asset value, dividend rate or capital gain
distribution rate; or (3) untimely reporting of the net asset value,
dividend rate or capital gain distribution rate. Any gain to Insurance
Company attributable to the Trust's, or Adviser's (or their designated
agent's) incorrect calculation or reporting of the daily net asset
value shall be immediately returned to the Trust.
(e) Promptly after receipt by an indemnified party under this paragraph of
notice of the commencement of action, such indemnified party will, if
a claim in respect thereof is to be made against the indemnifying
party under this paragraph, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this paragraph. In case any
such action is brought against any indemnified party, and it notified
the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that
it may wish, assume the defense thereof, with counsel satisfactory to
such indemnified party, after notice from the indemnifying party to
such indemnified party under this paragraph for any legal or other
expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation.
(f) Nothing herein shall entitle an indemnified party to special,
consequential or exemplary damages or damages of like kind or nature
and with respect to section 14(d) hereof all liability, loss and
damages shall be limited to the amount required to correct the value
of the account as if there had been no incorrect calculation or
reporting or untimely reporting of net asset value, dividend rate or
capital gain distribution rate.
15. If, in the course of future marketing of the Contracts, Insurance Company
or its agents shall request the continued assistance of the Trust's sales
personnel, compensation (which will be negotiated by the Trust and
Insurance Company) shall be paid by Insurance Company to the Trust.
BUSINESS MEN'S ASSURANCE COMPANY
OF AMERICA
_____________________________ By _______________________________
Date
VAN ECK WORLDWIDE INSURANCE TRUST
_____________________________ By _______________________________
Date
VAN ECK ASSOCIATES CORPORATION
_____________________________ By _______________________________
Date
EXHIBIT A
EXHIBIT B
FUND PARTICIPATION AGREEMENT
THIS FUND PARTICIPATION AGREEMENT is made and entered into as of , 1998 by
and between BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA (the "Company"), and
AMERICAN CENTURY INVESTMENT SERVICES, INC. (the "Distributor").
WHEREAS, the Company offers to the public certain group variable annuity
contracts and group variable life insurance contracts (the "Contracts"); and
WHEREAS, the Company wishes to offer as investment options under the
Contracts, __________________________________________ (the "Funds"), each of
which is a series of mutual fund shares registered under the Investment Company
Act of 1940, as amended, and issued by TCI Portfolios, Inc. (the "Issuer"); and
WHEREAS, on the terms and conditions hereinafter set forth Distributor and
the Issuer desire to make shares of the Funds available as investment options
under the Contracts and to the Company to perform certain administrative
services on behalf of the Funds;
NOW, THEREFORE, the Company and Distributor agree as follows:
1. TRANSACTIONS IN THE FUNDS. Subject to the terms and conditions of this
Agreement, Distributor will make shares of the Funds available to be purchased,
exchanged, or redeemed, by the Company on behalf of the Accounts (defined in
SECTION 6(A) below) through a single account per Fund at the net asset value
applicable to each order. The Funds' shares shall be purchased and redeemed on a
net basis in such quantity and at such time as determined by the Company to
satisfy the requirements of the Contracts for which the Funds serve as
underlying investment media. Dividends and capital gains distributions will be
automatically reinvested in full and fractional shares of the Funds.
2. ADMINISTRATIVE SERVICES. The Company shall be solely responsible for
providing all administrative services for the Contracts owners. The Company
agrees that it will maintain and preserve all records as required by law to be
maintained and preserved, and will otherwise comply with all laws, rules and
regulations applicable to the marketing of the Contracts and the provision of
administrative services to the Contract owners.
3. PROCESSING AND TIMING OF TRANSACTIONS.
(a) Distributor hereby appoints the Company as its agent for the
limited purpose of accepting purchase and redemption orders for Fund shares
from the Plans and/or Participants, as applicable. On each day the New York
Stock Exchange (the "Exchange") is open for business (each, a "Business
Day"), the Company may receive instructions from the Plans and/or
Participants for the purchase or redemption of shares of the Funds
("Orders"). Orders received and accepted by the Company prior to the close
of regular trading on the Exchange (the "Close of Trading") on any given
Business Day (currently, 3:00 p.m. Central time) and transmitted to the
Issuer by 9:00 a.m. Central time on the next following Business Day will be
executed by the Issuer at the net asset value determined as of the Close of
Trading on the previous Business Day ("Day 1"). Any Orders received by the
Company after the Close of Trading, and all Orders that are transmitted to
the Issuer after 9:00 a.m. Central time on the next following Business Day,
will be executed by the Issuer at the net asset value next determined
following receipt of such Order. The day as of which an Order is executed
by the Issuer pursuant to the provisions set forth above is referred to
herein as the "Effective Trade Date".
(b) By 5:30 p.m. Central time on each Business Day, Distributor will
provide to the Company, via facsimile or other electronic transmission
acceptable to the Company, the Funds' net asset value, dividend and capital
gain information and, in the case of income funds, the daily accrual for
interest rate factor (mil rate), determined at the Close of Trading.
(c) By 9:00 a.m. Central time on each Business Day, the Company will
provide to Distributor via facsimile or other electronic transmission
acceptable to Distributor a report stating whether the Orders received by
the Company from Participants by the Close of Trading on the preceding
Business Day resulted in the Plan being a net purchaser or net seller of
shares of the Funds. As used in this Agreement, the phrase "other
electronic transmission acceptable to Distributor" includes the use of
remote computer terminals located at the premises of the Company, its
agents or affiliates, which terminals may be linked electronically to the
computer system of Distributor, its agents or affiliates (hereinafter,
"Remote Computer Terminals").
(d) Upon the timely receipt from the Company of the report described
in (c) above, Distributor will execute the purchase or redemption
transactions (as the case may be) at the net asset value computed as of the
Close of Trading on Day l. Payment for net purchase transactions shall be
made by wire transfer to the custodial account designated the Funds on the
Business Day next following the Effective Trade Date. Such wire transfers
shall be initiated by the Company's bank prior to 3:00 p.m. Central time
and received by the Funds prior to 5:00 p.m. Central time on the Business
Day next following the Effective Trade Date. If payments for a purchase
Order is not timely received, such Order will be executed at the net asset
value next computed following receipt of payment. Payments for net
redemption transactions shall be made by wire transfer by the Issuer to the
account designated by the appropriate receiving party within the time
period set forth in the applicable Fund's then-current prospectus;
provided, however, Distributor will use all reasonable efforts to settle
all redemption's on the Business Day following the Effective Trade Date. On
any Business Day when the Federal Reserve Wire Transfer System is closed,
all communication and processing rules will be suspended for the settlement
of Orders. Orders will be settled on the next Business Day on which the
Federal Reserve Wire Transfer System is open and the Effective Trade Date
will apply.
4. PROSPECTUS AND PROXY MATERIALS.
(a) Distributor shall provide to the shareholder of record copies of
the Issuer's proxy materials, periodic fund reports to shareholders and
other materials that are required by law to be sent to the Issuer's
shareholders. In addition, Distributor shall provide the Company with a
sufficient quantity of prospectuses of the Funds to be used in conjunction
with the transactions contemplated by this Agreement, together with such
additional copies of the Issuer's prospectuses as may be reasonably
requested by Company. If the Company provides for pass-through voting by
the Contract owners, Distributor will provide the Company with a sufficient
quantity of proxy materials for each Contract owner.
(b) The cost of preparing, printing and shipping of the prospectuses,
proxy materials periodic fund reports and other materials of the Issuer to
the Company shall be paid by Distributor or its agents or affiliates;
provided, however, that if at any time Distributor or its agent reasonably
deems the usage by the Company of such items to be excessive, it may, prior
to the delivery of any quantity of materials in excess of what is deemed
reasonable, request that the Company demonstrate the reasonableness of such
usage. If the Distributor believes the reasonableness of such usage has not
been adequately demonstrated, it may request that the Company pay the cost
of printing (including press time) and delivery of any excess copies of
such materials. Unless the Company agrees to make such payments,
Distributor may refuse to supply such additional materials and this section
shall not be interpreted as requiring delivery by Distributor or Issuer of
any copies in excess of the number of copies required by law.
(c) The cost of distribution, if any, of any prospectuses, proxy
materials, periodic fund reports and other materials of the Issuer to the
Contract owners shall be paid by the Company and shall not be the
responsibility of Distributor or the Issuer.
5. COMPENSATION AND EXPENSES.
(a) The Accounts shall be the sole shareholder of Fund shares
purchased for the Contract owners pursuant to this Agreement (the "Record
Owners"). The Company and the Record Owners shall properly complete any
applications or other forms required by Distributor or the Issuer from time
to time.
(b) Distributor acknowledges that it will derive a substantial savings
in administrative expenses, such as a reduction in expenses related to
postage, shareholder communications and recordkeeping, by virtue of having
a single shareholder account per Fund for the Accounts rather than having
each Contract owner as a shareholder. In consideration of the
Administrative Services and performance of all other obligations under this
Agreement by the Company, Distributor will pay the Company a fee (the
"Administrative Services fee") equal to _________ points per annum of the
average aggregate amount invested by the Company under this Agreement,
commencing with the month in which the average aggregate market value of
investments by the Company (on behalf of the Contract owners) in the Funds
exceeds $_________. No payment obligation shall arise until the Company's
average aggregate investment in the Funds reaches $___________, and such
payment obligation, once commenced, shall be suspended with respect to any
month during which the Company's average aggregate investment in the Funds
drops below $__________.
(c) The parties understand that Distributor customarily pays, out of
its management fee, another affiliated corporation for the type of
administrative services to be provided by the Company to the Contract
owners. The parties agree that the payments by Distributor to the Company,
like Distributor's payments to its affiliated corporation, are for
administrative services only and do not constitute payment in any manner
for investment advisory services or for costs of distribution.
(d) For the purposes of computing the payment to the Company
contemplated by this SECTION 5, the average aggregate amount invested by
the Accounts in the Funds over a one month period shall be computed by
totaling the Company's aggregate investment (share net asset value
multiplied by total number of shares of the Funds held by the Company) on
each Business Day during the month and dividing by the total number of
Business Days during such month.
(e) Distributor will calculate the amount of the payment to be made
pursuant to this SECTION 5 at the end of each calendar quarter and will
make such payment to the Company within 30 days thereafter. The check for
such payment will be accompanied by a statement showing the calculation of
the amounts being paid by Distributor for the relevant months and such
other supporting data as may be reasonably requested by the Company and
shall be mailed to:
Business Men's Assurance Company of America
700 Karnes Blvd.
Kansas City, Missouri 64108
Attention: __________________
(f) In the event Distributor reduces its management fee with respect
to any Fund after the date hereof, Distributor may amend the Administrative
Services fee payable with regard to such Fund by providing the Company 30
days' advance written notice of any such adjustment. The revised
Administrative Services fee shall become effective as of the latter of 30
days from the date of delivery of the notice or the date prescribed in the
notice.
6. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and warrants that: (i) this Agreement has
been duly authorized by all necessary corporate action and, when executed
and delivered, shall constitute the legal, valid and binding obligation of
the Company, enforceable in accordance with its terms; (ii) it has
established the Separate Account C and the Separate Account E (the
"Accounts"), each of which is a separate account under Texas Insurance law,
and has registered each Account as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act") to serve as an investment
vehicle for the Contracts; (iii) each Contract provides for the allocation
of net amounts received by the Company to an Account for investment in the
shares of one of more specified investment companies selected among those
companies available through the Account to act as underlying investment
media; (iv) selection of a particular investment company is made by the
Contract owner under a particular Contract, who may change such selection
from time to time in accordance with the terms of the applicable Contract;
and (v) the activities of the Company contemplated by the Agreement comply
with all provisions of federal and state insurance, securities, and tax
laws applicable to such activities.
(b) Distributor represents that: (i) this Agreement has been duly
authorized by all necessary corporate action and, when executed and
delivered, shall constitute the legal, valid and binding obligation of
Distributor enforceable in accordance with its terms; and (ii) the
investments of the Funds will at all times be adequately diversified within
the meaning of Section 817(h) of the Internal Revenue Service Code of 1986,
as amended (the "Code"), and the regulations thereunder, and that at all
times while this Agreement is in effect, all beneficial interests in each
of the Funds will be owned by one or more insurance companies or by any
other party permitted under Section 1.817-5(f)(3) of the Regulations
promulgated under the Code.
7. ADDITIONAL COVENANTS AND AGREEMENTS.
(a) Each party shall comply with all provisions of federal and state
laws applicable to its respective activities under this Agreement.
(b) Each party shall promptly notify the other parties in the event
that it is, for any reason, unable to perform any of its obligations under
this Agreement.
(c) The Company covenants and agrees that all Orders accepted and
transmitted by it hereunder with respect to each Account on any Business
Day will be based upon instructions that it received from the Contract
owners in proper form prior to the Close of Trading of the Exchange on that
Business Day.
(d) The Company covenants and agrees that all Orders transmitted to
the Issuer, whether by telephone, telecopy, or other electronic
transmission acceptable to Distributor, shall be sent by or under the
authority and direction of a person designated by the Company as being duly
authorized to act on behalf of the owner of the Accounts. Absent actual
knowledge to the contrary, Distributor shall be entitled to rely on the
existence of such authority and to assume that any person transmitting
Orders for the purchase, redemption or transfer of Fund shares on behalf of
the Company is "an appropriate person" as used in Sections 8-107 and 8-401
of the Uniform Commercial Code with respect to the transmission of
instructions regarding Fund shares on behalf of the owner of such Fund
shares. The Company shall maintain the confidentiality of all passwords and
security procedures issued, installed or otherwise put in place with
respect to the use of Remote Computer Terminals and assumes full
responsibility for the security therefor. The Company further agrees to be
solely responsible for the accuracy, propriety and consequences of all data
transmitted to Distributor by the Company by telephone, telecopy or other
electronic transmission acceptable to Distributor.
(e) The Company agrees to make every reasonable effort to market its
Contracts. It will use its best efforts to give equal emphasis and
promotion to shares of the Funds as is given to other underlying
investments of the Accounts.
(f) The Company shall not, without the written consent of Distributor,
make representations concerning the Issuer or the shares of the Funds
except those contained in the then current prospectus and in current
printed sales literature approved by Distributor or the Issuer.
(g) Advertising and sales literature with respect to the Issuer or the
Funds prepared by the Company or its agents, if any, for use in marketing
shares of the Funds as underlying investment media to Contract owners shall
be submitted to Distributor for review investment media to Contract owners
shall be subject to review and: before such material is used.
(h) The Company will provide to Distributor at least one complete copy
of all registration statements, prospectuses, statements of additional
information, annual and semi-annual reports, proxy statements, and all
amendments or supplements to any of the above that include a description of
or information regarding the Funds promptly after the filing of such
document with the SEC or other regulatory authority.
8. USE OF NAMES. Except as otherwise expressly provided for in this
Agreement, neither Distributor nor the Funds shall use any trademark, trade
name, service mark or logo of the Company, or any variation of any such
trademark, trade name, service mark or logo, without the Company's prior written
consent, the granting of which shall be at the Company's sole option. Except as
otherwise expressly provided for in this Agreement, the Company shall not use
any trademark, trade name, service mark or logo of the Issuer or Distributor, or
any variation of any such trademarks, trade names, service marks, or logos,
without the prior written consent of either the Issuer or Distributor, as
appropriate, the granting of which shall be at the sole option of Distributor
and/or the Issuer.
9. PROXY VOTING.
(a) The Company shall provide pass-through voting privileges to all
Contract owners so long as the SEC continues to interpret the 1940 Act as
requiring such privileges. It shall be the responsibility of the Company to
assure that it and the separate accounts of the other Participating
Companies (as defined in SECTION 11(A) below) participating in any Fund
calculate voting privileges in a consistent manner.
(b) The Company will distribute to Contract owners all proxy material
furnished by Distributor and will vote shares in accordance with
instructions received from such Contract owners. The Company shall vote
Fund shares for which no instructions have been received in the same
proportion as shares for which such instructions have been received. The
Company and its agents shall not oppose or interfere with the solicitation
of proxies for Fund shares held for such Contract owners.
10. INDEMNITY.
(a) Distributor agrees to indemnify and hold harmless the Company and
its officers, directors, employees, agents, affiliates and each person, if
any, who controls the Company within the meaning of the Securities Act of
1933 (collectively, the "Indemnified Parties" for purposes of this SECTION
10(A)) against any losses, claims, expenses, damages or liabilities
(including amounts paid in settlement thereof or litigation expenses
(including legal and other expenses) (collectively, "Losses"), to which the
Indemnified Parties may become subject, insofar as such Losses result from
a breach by Distributor of a material provision of this Agreement.
Distributor will reimburse any legal or other expenses reasonably incurred
by the Indemnified Parties in connection with investigating or defending
any such Losses. Distributor shall not be liable for indemnification
hereunder if such Losses are attributable to the negligence or misconduct
of the Company in performing its obligations under this Agreement.
(b) The Company agrees to indemnify and hold harmless Distributor and
the Issuer and their respective officers, directors, employees, agents,
affiliates and each person, if any, who controls the Issuer or Distributor
within the meaning of the Securities Act of 1933 (collectively. the
"Indemnified Parties" for purposes of this Section 10(b)) against any
Losses to which Indemnified Parties may become subject, insofar as such
Losses (i) result from a breach by the Company of a material-provision of
this Agreement, or (ii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any
registration statement or prospectus of the Company regarding the
Contracts, if any, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
(iii) result from the use by any person of a Remote Computer Terminal, The
Company will reimburse any legal or other expenses reasonably incurred by
the Indemnified Parties in connection with investigating or defending any
such Losses. The Company shall not be liable for indemnification hereunder
if such Losses are attributable to the negligence or misconduct of
Distributor or the Issuer in performing their obligations under this
Agreement.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party of the commencement thereof; but the omission
so to notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party otherwise than under this
SECTION 10. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate therein and, to the
extent that it may wish to, assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election to assume the
defense thereof, the indemnifying party will not be liable to such
indemnified party under this SECTION 10 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
(d) If the indemnifying party assumes the defense of any such action,
the indemnifying party shall not, without the prior written consent of the
indemnified parties in such action, settle or compromise the liability of
the indemnified parties in such action, or permit a default or consent to
the entry of any judgment in respect thereof, unless in connection with
such settlement, compromise or consent, each indemnified party receives
from such claimant an unconditional release from all liability in respect
of such claim.
11. POTENTIAL CONFLICTS.
(a) The Company has received a copy of an application for exemptive
relief, as amended, filed by Distributor on December 21, 1987, with the SEC
and the order issued by the SEC in response thereto (the "Shared Funding
Exemptive Order"). The Company has reviewed the conditions to the requested
relief set forth in such application for exemptive relief As set forth in
such application, the Board of Directors of the Issuer (the "Board") will
monitor the Issuer for the existence of any material irreconcilable
conflict between the interests of the contract owners of all separate
accounts ("Participating Companies") investing in funds of the Issuer. An
irreconcilable material conflict may arise for a variety of reasons,
including: (i) an action by any state insurance regulatory authority; (ii)
a change in applicable federal or state insurance, tax, or securities laws
or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar actions by insurance, tax or
securities regulatory authorities; (iii) an administrative or judicial
decision in any relevant proceeding; (iv) the manner in which the
investments of any portfolio are being managed; (v) a difference in voting
instructions given by variable annuity contract owners and variable life
insurance contract owners; or (vi) a decision by an insurer to disregard
the voting instructions of contract owners. The Board shall promptly inform
the Company if it determines that an irreconcilable material conflict
exists and the implications thereof.
(b) The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in
carrying out its responsibilities under the Shared Funding Exemptive Order
by providing the Board with all information reasonably necessary for the
Board to consider any issues raised. This includes, but is not limited to,
an obligation by the Company to inform the Board whenever contract owner
voting instructions are disregarded.
(c) If a majority of the Board, or a majority of its disinterested
Board members, determines that a material irreconcilable conflict exists
with regard to contract owner investments in a Fund, the Board shall give
prompt notice to all Participating Companies. If the Board determines that
the Company is responsible for causing or creating said conflict, the
Company shall at its sole -cost and expense, and to the extent reasonably
practicable (as determined by a majority of the disinterested Board
members), take such action as is necessary to remedy or eliminate the
irreconcilable material conflict. Such necessary action may include but
shall not be limited to:
(i) withdrawing the assets allocable to the Accounts from the
Fund and reinvesting such assets in a different investment medium or
submitting the question of whether such segregation should be
implemented to a vote of all affected contract owners and as
appropriate, segregating the assets of any appropriate group (i.e.,
annuity contract owners, life insurance contract owners, or variable
contract owners of one or more Participating Companies) that votes in
favor of such segregation, or offering to the affected contract owners
the option of making such a change; and/or
(ii) establishing a new registered management investment company
or managed separate account.
(d) If a material irreconcilable conflict arises as a result of a
decision by the Company to disregard its contract owner voting instructions
and said decision represents a minority position or would preclude a
majority vote by all of its contract owners having an interest in the
Issuer, the Company at its sole cost, may be required, at the Board's
election, to withdraw an Account's investment in the Issuer and terminate
this Agreement; provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
members of the Board.
(e) For the purpose of this SECTION 11, a majority of the
disinterested Board members shall determine whether or not any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Issuer be required to establish a new funding medium for any
Contract. The Company shall not be required by this SECTION 11 to establish
a new funding medium for any Contract if an offer to do so has been
declined by vote of a majority of the Contract owners materially adversely
affected by the irreconcilable material conflict.
12. TERMINATION; WITHDRAWAL OF OFFERING. This Agreement may be terminated
by either party upon 180 days' prior written notice to the other parties.
Notwithstanding the above, each Issuer reserves the right, without prior notice,
to suspend sales of shares of any Fund, in whole or in part, or to make a
limited offering of shares of any of the Funds in the event that (A) any
regulatory body commences formal proceedings against the Company, Distributor,
affiliates of Distributor, or any of the Issuers, which proceedings Distributor
reasonably believes may have a material adverse impact on the ability
of-Distributor, the Issuers or the Company to perform its obligations under this
Agreement or (B) in the judgment of Distributor, declining to accept any
additional instructions for the purchase or sale of shares of any such Fund is
warranted by market, economic or terminated immediately (i) by any party as a
result of any other breach of this Agreement by another party, which breach is
not cured within 30 days after receipt of notice from the other party, or (ii)
by any party upon a determination that continuing to perform under this
Agreement would, in the reasonable opinion of the terminating party's counsel,
violate any applicable federal or state law, rule, regulation or judicial order.
Termination of this Agreement shall not affect the obligations of the parties to
make payments under SECTION 3 for Orders received by the Company prior to such
termination and shall not affect the Issuers' obligation to maintain the
Accounts in the name of the Plans or any successor trustee or recordkeeper for
the Plans. Following termination, Distributor shall not have any Administrative
Services payment obligation to the Company (except for payment obligations
accrued but not yet paid as of the termination date).
13. CONTINUATION OF AGREEMENT. Termination as the result of any cause
listed in SECTION 12 shall not affect the Distributor's obligation to cause the
Issuer to furnish its shares to Contracts then in force for which its shares
serve or may serve as the underlying medium (unless such further sale of Fund
shares is proscribed by law or the SEC or other regulatory body). Following
termination, Distributor shall not have any Administrative Services payment
obligation to the Company (except for payment obligations accrued but not yet
paid as of the termination date).
14. NON-EXCLUSIVITY. Each of the parties acknowledges and agrees that this
Agreement and the arrangement described herein are intended to be non-exclusive
and that each of the parties is free to enter into similar agreements and
arrangements with other entities.
15. SURVIVAL. The provisions of SECTION 8 (use of names) and SECTION 10
(indemnity) of this Agreement shall survive termination of this Agreement.
16. AMENDMENT. Neither this Agreement, nor any provision hereof, may be
amended, waived, discharged or terminated orally, but only by an instrument in
writing signed by all of the parties hereto.
17. NOTICES. All notices and other communications hereunder shall be given
or made in writing and shall be delivered personally, or sent by telex,
telecopier, express delivery or registered or certified mail, postage prepaid,
return receipt requested, to the party or parties to whom they are directed at
the following addresses, or at such other addresses as may be designated by
notice from such party to all other parties.
Business Men's Assurance Company of America
700 Karnes Blvd.
Kansas City, Missouri 64108
Attention:
(office number)
(telecopy number)
To the Issuer or Distributor:
American Century Mutual Funds
4500 Main Street
Kansas City, Missouri 641 11
Attention: Charles A. Etherington, Esq.
(816) 340-4051 (office number)
(816) 340-4964 (telecopy number)
Any notice, demand or other communication given in a manner prescribed in this
SECTION 17 shall be deemed to have been delivered on receipt.
18. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned without the
written consent of all parties to the Agreement at the time of such assignment.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any party hereto may execute this Agreement by signing any such counterpart.
20. SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
21. ENTIRE AGREEMENT. This Agreement, including the Attachments hereto,
constitutes the entire agreement between the parties with respect to the matters
dealt with herein, and supersedes all previous agreements, written or oral, with
respect to such matters.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth above.
AMERICAN CENTURY INVESTMENT BUSINESS MEN'S ASSURANCE
SERVICES, INC. COMPANY OF AMERICA
By:____________________________ By:___________________________
FORM OF FUND PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT
______________________
AMONG
_____
INVESCO VARIABLE INVESTMENT FUNDS, INC.
______________________________________
INVESCO FUNDS GROUP, INC.
_______________________
AND
___
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
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"), INVESCO VARIABLE INVESTMENT FUNDS, INC., a
Maryland corporation (the "Company") and INVESCO FUNDS GROUP, INC. ("INVESCO"),
a Delaware corporation.
WHEREAS, the Company engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable annuity and life insurance contracts
to be offered by insurance companies which have entered into participation
agreements substantially identical to this Agreement ("Participating Insurance
Companies"),and
WHEREAS, the beneficial interest in the Company is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Company has obtained an order from the Securities and Exchange
Commission (the "Commission"), dated December 29, 1993 (File No. 812-8590),
granting Participating Insurance Companies and their separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a), and 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 Company to be sold to and held by variable annuity and variable
life insurance separate accounts of life insurance companies that may or may not
be affiliated with one another (the "Mixed and Shared Funding Exemptive Order");
and
WHEREAS, the Company is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, INVESCO is duly registered as an investment adviser under the
Investment Advisers Act of 1940 and any applicable state securities law and as a
broker dealer under the Securities Exchange Act of 1934, as amended, (the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Insurance Company has registered under the 1933 Act, or will
register under the 1933 Act, certain variable [annuity / 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 on
behalf of the Accounts to fund the Contracts and INVESCO is authorized to sell
such shares to unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Insurance
Company, the Company and INVESCO agree as follows:
ARTICLE I. SALE OF COMPANY SHARES
1.1. INVESCO agrees to sell to the Insurance Company those shares of the
Company which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Company or its designee of
the order for the shares of the Company. For purposes of this Section 1.1, the
Insurance Company shall be the designee of the Company for receipt of such
orders from the Accounts and receipt by such designee shall constitute receipt
by the Company; provided that the Company receives notice of such order by 8:00
a.m., Mountain Time, on the next following Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which the Company calculates its net asset value pursuant to the rules of the
Commission.
1.2. The Company agrees to make its shares available for purchase at the
applicable net asset value per share by the Insurance Company and its Accounts
on those days on which the Company calculates its Funds' net asset values
pursuant to rules of the Commission and the Company shall use reasonable efforts
to calculate its Funds' net asset values on each day on which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the board of
directors of the Company (hereinafter the "Board") may refuse to sell shares of
any Fund to any person, or suspend or terminate the offering of shares of any
Fund if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in good faith and
in light of their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of that Fund.
1.3. The Company and INVESCO agree that shares of the Company will be sold
only to Participating Insurance Companies and their separate accounts. No shares
of any Fund will be sold to the general public.
1.4. The Company and INVESCO will not sell Company shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Sections 2.1, 3.4, 3.5 and Article VII of this
Agreement is in effect to govern such sales.
1.5. The Company agrees to redeem, on the Insurance Company's request, any
full or fractional shares of the Company held by the Insurance Company,
executing such requests on a daily basis at the net asset value next computed
after receipt by the Company or its designee of the request for redemption. For
purposes of this Section 1.5, the Insurance Company shall be the designee of the
Company for receipt of requests for redemption from each Account and receipt by
that designee shall constitute receipt by the Company; provided that the Company
receives notice of the request for redemption by 8:00 a.m., Mountain Time, on
the next following Business Day.
1.6. The Insurance Company agrees to purchase and redeem the shares of each
Fund offered by the then-current prospectus of the Company in accordance with
the provisions of that prospectus. The Insurance Company agrees that all net
amounts available under the Contracts shall be invested in the Company, in such
other Funds advised by INVESCO as may be mutually agreed to in writing by the
parties hereto, or in the Insurance Company's general account, provided that
such amounts may also be invested in an investment company other than the
Company if (a) the other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of all the Funds of the Company; or (b) the Insurance
Company gives the Company and INVESCO 45 days written notice of its intention to
make the other investment company available as a funding vehicle for the
Contracts; or (c) the other investment company was available as a funding
vehicle for the Contracts prior to the date of this Agreement and the Insurance
Company so informs the Company and INVESCO prior to their signing this
Agreement; or (d) the Company or INVESCO consents to the use of the other
investment company.
1.7. The Insurance Company shall pay for Company shares by 9:00 a.m.,
Mountain Time, on the next Business Day after an order to purchase Company
shares is made in accordance with the provisions of Section 1.1 hereof. Payment
shall be in federal funds transmitted by wire. For the purpose of Sections 2.10
and 2.11, upon receipt by the Company of the federal funds so wired, such funds
shall cease to be the responsibility of the Insurance Company and shall become
the responsibility of the Company. Payment of 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 seven days
after receipt of the redemption request. Notwithstanding the foregoing, in the
event that one or more Funds has insufficient cash on hand to pay net
redemptions on the next Business Day, and if such Fund has determined to settle
redemption transactions for all of its shareholders on a delayed basis (more
than one Business Day, but in no event more than seven calendar days, after the
date on which the redemption order is received, unless otherwise permitted by an
order of the Commission under Section 22(e) of the 1940 Act), the Company shall
be permitted to delay sending redemption proceeds to the Insurance Company by
the same number of days that the Company is delaying sending redemption proceeds
to the other shareholders of the Fund.
Redemptions of up to the lesser of $250,000 or 1% of the net asset value of
the Fund whose shares are to be redeemed in any 90-day period will be made in
cash. Redemptions in excess of that amount in any 90-day period may, in the sole
discretion of the Company, be in-kind redemptions, with the securities to be
delivered in payment of redemptions selected by the Company and valued at the
value assigned to them in computing the Fund's net asset value per share.
1.8. Issuance and transfer of the Company's shares will be by book entry
only. Stock certificates will not be issued to the Insurance Company or any
Account. Shares ordered from the Company will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account.
1.9. The Company shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurance Company of any income,
dividends or capital gain distributions payable on the Funds' shares. The
Insurance Company hereby elects to receive all income dividends and capital gain
distributions payable on a Fund's shares in additional shares of that Fund. The
Insurance Company reserves the right to revoke this election and to receive all
such income dividends and capital gain distributions in cash. The Company shall
notify the Insurance Company of the number of shares issued as payment of
dividends and distributions.
1.10. The Company shall make the net asset value per share for each Fund
available to the Insurance Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make those per-share net asset values available by 6:00 p.m.,
Mountain Time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Insurance Company represents and warrants that the Contracts are,
or will be, registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable federal and
state laws and that the sale of the Contracts shall comply in all material
respects with applicable state insurance suitability requirements. The Insurance
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established the Account prior to any issuance or sale thereof as a
segregated asset account under Section _____ of the Missouri Insurance Code and
has registered, or prior to any issuance or sale of the Contracts will register,
the Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Company represents and warrants that Company shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sale in compliance with the laws of the State of Maryland and all
applicable federal securities laws and that the Company is and shall remain
registered under the 1940 Act. The Company shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The
Company shall register and qualify the shares for sale in accordance with the
laws of the various states only if and to the extent deemed advisable by the
Company or INVESCO.
2.3. The Company represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain that
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Insurance Company immediately upon having a reasonable
basis for believing that it has ceased to so qualify or that it might not so
qualify in the future.
2.4. The Insurance Company represents and warrants that the Contracts are
currently treated as [annuity / life insurance / endowment / modified endowment]
contracts, under applicable provisions of the Code and that it will make every
effort to maintain such treatment and that it will notify the Company and
INVESCO immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.5. The Company currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Company undertakes
to have a board of directors, a majority of whom are not interested persons of
the Company, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Company makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7. INVESCO represents and warrants that it is a member in good standing
of the NASD and is registered as a broker-dealer with the Commission. INVESCO
further represents that it will sell and distribute the Company shares in
accordance with the laws of the __________ of __________ and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8. The Company represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.9. INVESCO represents and warrants that it is and shall remain duly
registered in all material respects under all applicable federal and state
securities laws and that it shall perform its obligations for the Company in
compliance in all material respects with the laws of the __________ of
__________ and any applicable state and federal securities laws.
2.10. The Company and INVESCO represent and warrant that all of their
officers, employees, investment advisers, investment sub-advisers, and other
individuals or entities dealing with the money and/or securities of the Company
are, and shall continue to be at all times, covered by a blanket fidelity bond
or similar coverage for the benefit of the Company in an amount not less than
the minimum coverage required currently by Section 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. That fidelity bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Insurance Company represents and warrants that all of its
officers, employees, investment advisers, and other individuals or entities
dealing with the money and/or securities of the Company are and shall continue
to be at all times covered by a blanket fidelity bond or similar coverage for
the benefit of the Company, in an amount not less than the minimum coverage
required currently for entities subject to the requirements of Rule 17g-1 of the
1940 Act or related provisions or may be promulgated from time to time. The
aforesaid Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company. The Insurance Company further represents
and warrants that the employees of Insurance Company, or such other persons
designated by Insurance Company, listed on Schedule C have been authorized by
all necessary action of Insurance Company to give directions, instructions and
certifications to the Company and INVESCO on behalf of Insurance Company. The
Company and INVESCO are authorized to act and rely upon any directions,
instructions and certifications received from such persons unless and until they
have been notified in writing by the Insurance Company of a change in such
persons, and the Company and INVESCO shall incur no liability in doing so.
2.12. The Insurance Company represents and warrants that it will not
purchase Company shares with Account assets derived from tax-qualified
retirement plans except indirectly, through Contracts purchased in connection
with such plans.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. INVESCO shall provide the Insurance Company (at the Insurance
Company's expense) with as many copies of the Company's current prospectus as
the Insurance Company may reasonably request. If requested by the Insurance
Company in lieu thereof, the Company shall provide such documentation (including
a final copy of the new prospectus as set in type at the Company's expense) and
other assistance as is reasonably necessary in order for the Insurance Company
once each year (or more frequently if the prospectus for the Company is amended)
to have the prospectus for the Contracts and the Company's prospectus printed
together in one document (at the Insurance Company's expense).
3.2. The Company's prospectus shall state that the Statement of Additional
Information for the Company (the "SAI") is available from INVESCO (or in the
Company's discretion, the Prospectus shall state that the SAI is available from
the Company), and INVESCO (or the Company), 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 Company, at its expense, shall provide the Insurance Company with
copies of its proxy material, reports to stockholders and other communications
to stockholders in such quantity as the Insurance Company shall reasonably
require for distributing to Contract owners.
3.4. If and to the extent required by law, the Insurance Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Company shares in accordance with instructions received
from Contract owners; and
(iii)vote Company shares for which no instructions have been received
in the same proportion as Company shares of such portfolio for
which instructions have been received:
so long as and to the extent that the Commission continues to interpret the 1940
Act to require pass-through voting privileges for variable contract owners. The
Insurance Company reserves the right to vote Company shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each of
their separate accounts participating in the Company calculates voting
privileges in a manner consistent with the standards set forth on Schedule D
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 obligations under, and abide by the terms and
conditions of, the Mixed and Shared Funding Exemptive Order.
3.5. The Company will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Company will either provide for
annual meetings (except insofar as the Commission may interpret Section 16 of
the 1940 Act not to require such meetings) or, as the Company currently intends,
comply with Section 16(c) of the 1940 Act (although the Company is not one of
the trusts described in Section 16(c) of that Act) as well as with Sections
16(a) and, if and when applicable, 16(b). Further, the Company will act in
accordance with the Commission's interpretation of the requirements of Section
16(a) with respect to periodic elections of directors and with whatever rules
the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Insurance Company shall furnish, or shall cause to be furnished,
to the Company or its designee, each piece of sales literature or other
promotional material in which the Company, a sub-adviser of one of the Funds, or
INVESCO is named, at least fifteen calendar days prior to its use. No such
material shall be used if the Company 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 Company or concerning the Company
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Company's shares, as such registration statement and prospectus may be amended
or supplemented from time to time, or in reports or proxy statements for the
Company, or in sales literature or other promotional material approved by the
Company or its designee or by INVESCO, except with the permission of the Company
or INVESCO.
4.3. The Company, INVESCO, or its designee shall furnish, or shall cause to
be furnished, to the Insurance Company or its designee, each piece of sales
literature or other promotional material in which the Insurance Company and/or
its separate account(s), is named at least fifteen calendar days prior to its
use. No such material shall be used if the Insurance Company or its designee
object to such use within ten calendar days after receipt of that material.
4.4. The Company and INVESCO shall not give any information or make any
representations on behalf of the Insurance Company or concerning the Insurance
Company, the Account, or the Contracts other than the information or
representations contained in a registration statement or prospectus for the
Contracts, as that registration statement and prospectus may be amended or
supplemented from time to time, or in published reports for the Account which
are in the public domain or approved by the 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 Company 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 Company or its
shares, contemporaneously with the filing of the document with the Commission,
the NASD, or other regulatory authorities.
4.6. The Insurance Company will provide to the Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, solicitation for voting instructions, piece of
sales literature and other promotional material, application for exemption,
request for no action letter, and any amendment to any of the above, that
relates to the Contracts or the Account, contemporaneously with the filing of
the document with the Commission, the NASD, or other regulatory authorities.
4.7. For purposes of this Agreement, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements,
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media, sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, and registration
statements, prospectuses, statements of additional information, shareholder
reports, and proxy materials.
4.8. At the request of any party to this Agreement, each other party will
make available to the other party's independent auditors and/or representative
of the appropriate regulatory agencies, all records, data and access to
operating procedures that may be reasonably requested. Company agrees that
Insurance Company shall have the right to inspect, audit and copy all records
pertaining to the performance of services under this Agreement pursuant to the
requirements of the California Insurance Department. However, Company and
INVESCO shall own and control all of their respective records pertaining to
their performance of the services under this Agreement.
ARTICLE V. FEES AND EXPENSES
5.1. The Company and INVESCO shall pay no fee or other compensation to the
Insurance Company under this agreement, except that if the Company or any Fund
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then INVESCO may make payments to the Insurance Company if and in
amounts agreed to by INVESCO in writing, subject to review by the board of
directors of the Company. No such payments shall be made directly by the
Company.
5.2. All expenses incident to performance by the Company under this
Agreement shall be paid by the Company. The Company shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Company or
INVESCO, in accordance with applicable state laws prior to their sale. The
Company shall bear the expenses for the cost of registration and qualification
of the Company's shares, preparation and filing of the Company's prospectus and
registration statement, proxy materials and reports, setting the prospectus in
type, setting in type and printing the proxy materials and reports to
shareholders (including the costs of printing a prospectus that constitutes an
annual report), the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Company'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 Company's prospectus, proxy materials and reports.
ARTICLE VI. DIVERSIFICATION
6.1. The Company will, at the end of each calendar quarter, comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5 relating to the
diversification requirements for variable annuity, endowment, modified endowment
or life insurance contracts and any amendments or other modifications to that
Section or Regulation.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Company for the existence of any material
irreconcilable conflict between the interests of the variable contract owners of
all separate accounts investing in the Company. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretive letter, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding) (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by a Participating Insurance Company to
disregard the voting instructions of variable contract owners. The Board shall
promptly inform the Insurance Company if it determines that an irreconcilable
material conflict exists and the implications thereof. The Board shall have sole
authority to determine whether an irreconcilable material conflict exists and
such determination shall be binding upon the Insurance Company.
7.2 The Insurance Company will report promptly any potential or existing
conflicts of which it is aware to the Board. The Insurance Company will assist
the Board in carrying out its responsibilities under the Mixed and Shared
Funding Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Insurance Company to inform the Board whenever
Contract owner voting instructions are to be disregarded. Such responsibilities
shall be carried out by Insurance Company with a view only to the interests of
the Contract owners.
7.3. If it is determined by a majority of the Board, or a majority of its
directors who are not interested persons of the Company, INVESCO, or any
sub-adviser to any of the Funds (the "Independent Directors"), that a material
irreconcilable conflict exists, the Insurance Company and/or other Participating
Insurance Companies shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the Independent Directors), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1), withdrawing the assets allocable to some or
all of the separate accounts from the Company or any Fund and reinvesting those
assets in a different investment medium, including (but not limited to) another
Fund of the Company, or submitting the question whether such segregation should
be implemented to a vote of all affected variable contract owners and, as
appropriate, segregating the assets of any appropriate group (e.g., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected variable contract owners the option of
making such a change; and (2), establishing a new registered management
investment company or managed separate account and obtaining approval thereof by
the Commission.
7.4. If a material irreconcilable conflict arises because of a decision by
the Insurance Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Insurance Company may be required, at the Company's election, to withdraw the
affected Account's investment in the Company and terminate this Agreement with
respect to that Account; provided, however that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the Independent Directors. Any such
withdrawal and termination must take place within six (6) months after the
Company gives written notice that this provision is being implemented, and until
the end of that six month period INVESCO and the Company shall continue to
accept and implement orders by the Insurance Company for the purchase (and
redemption)of shares of the Company.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Insurance Company
conflicts with the majority of other state regulators, then the Insurance
Company will withdraw the affected Account's investment in the Company and
terminate this Agreement with respect to that Account within six months after
the Board informs the Insurance Company in writing that it has determined that
the state insurance regulator's decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the Independent Directors. Until the end of the
foregoing six month period, INVESCO and the Company shall continue to accept and
implement orders by the Insurance Company for the purchase (and redemption) of
shares of the Company.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the Independent Directors shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Company be required to establish a new funding medium for the Contracts. The
Insurance Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Insurance Company will withdraw the Account's investment in
the Company and terminate this Agreement within six (6) months after the Board
informs the Insurance Company in writing of the foregoing determination,
provided, however, that the withdrawal and termination shall be limited to the
extent required by the material irreconcilable conflict, as determined by a
majority of the Independent Directors.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Actor 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 (as the Company and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent those rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3,
7.4, and 7.5 of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to those Sections are contained in
the Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE INSURANCE COMPANY
8.1(a). The Insurance Company agrees to indemnify and hold harmless the
Company and each director of the Board and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
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 or acquisition of the
Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration
statement 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 Company 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 Company;
(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 Company not supplied
by the Insurance Company, or persons under its control) or wrongful
conduct of the Insurance Company or persons under its control, with
respect to the sale or distribution of the Contracts or Company
Shares; or
(iii)arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or
sales literature of the Company or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission was
made in reliance upon information furnished in writing to the Company
by or on behalf of the Insurance Company: or
(iv) arise as a result of any failure by the Insurance Company to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Insurance Company in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Insurance Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Insurance Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party that
may arise from that Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of that Indemnified Party's duties or by reason of
that Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Company, whichever is applicable.
8.1(c). The Insurance Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless that Indemnified Party shall have notified the Insurance Company in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon that
indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Insurance Company of its obligations hereunder except to the extent
that the Insurance Company has been prejudiced by such failure to give notice.
In addition, any failure by the Indemnified Party to notify the Insurance
Company of any such claim shall not relieve the Insurance Company from any
liability which it may have to the Indemnified Party against whom the action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Insurance Company
shall be entitled to participate, at its own expense, in the defense of the
action. The Insurance Company also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action; PROVIDED,
HOWEVER, that if the Indemnified Party shall have reasonably concluded that
there may be defenses available to it which are different from or additional to
those available to the Insurance Company, the Insurance Company shall not have
the right to assume said defense, but shall pay the costs and expenses thereof
(except that in no event shall the Insurance Company be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances). After notice from
the Insurance Company to the Indemnified Party of the Insurance Company's
election to assume the defense thereof, and in the absence of such a reasonable
conclusion that there may be different or additional defenses available to the
Indemnified Party, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Insurance Company will not be liable
to that party under this Agreement for any legal or other expenses subsequently
incurred by the party independently in connection with the defense thereof other
than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Insurance Company
of the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Company's shares or the Contracts or the
operation of the Company.
8.2. INDEMNIFICATION BY INVESCO
8.2(a). INVESCO agrees to indemnify and hold harmless the Insurance Company
and each of its directors and officers 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 INVESCO) 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 or acquisition of the Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement
or prospectus or sales literature of the Company (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if the statement or
omission or alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing to INVESCO or
the Company by or on behalf of the Insurance Company for use in the
registration statement or prospectus for the Company or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Company shares: or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus or sales literature for the Contracts not
supplied by INVESCO or persons under its control) or wrongful conduct
of the Company, INVESCO or persons under their control, with respect
to the sale or distribution of the Contracts or shares of the Company;
or
(iii)arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or
sales literature covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
in writing to the Insurance Company by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified
in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any representation
and/or warranty made by INVESCO in this Agreement or arise out of or
result from any other material breach of this Agreement by INVESCO; as
limited by and in accordance with the provisions of Sections 8.2(b)
and 8.2(c) hereof.
8.2(b) INVESCO shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party that may arise from the Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of the Indemnified Party's duties or by reason of the Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Insurance Company or the Account, whichever is applicable.
8.2(c) INVESCO shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified INVESCO in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any Indemnified
Party to give notice as provided herein shall not relieve INVESCO of its
obligations hereunder except to the extent that INVESCO has been prejudiced by
such failure to give notice. In addition, any failure by the Indemnified Party
to notify INVESCO of any such claim shall not relieve INVESCO from any liability
which it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, INVESCO will be entitled to
participate, at its own expense, in the defense thereof. INVESCO also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action; PROVIDED, HOWEVER, that if the Indemnified Party shall have
reasonably concluded that there may be defenses available to it which are
different from or additional to those available to INVESCO, INVESCO shall not
have the right to assume said defense, but shall pay the costs and expenses
thereof (except that in no event shall INVESCO be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances). After notice from
INVESCO to the Indemnified Party of INVESCO's election to assume the defense
thereof, and in the absence of such a reasonable conclusion that there may be
different or additional defenses available to the Indemnified Party, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and INVESCO will not be liable to that party under this
Agreement for any legal or other expenses subsequently incurred by that party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.2(d) The Insurance Company agrees to notify INVESCO promptly of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3 INDEMNIFICATION BY THE COMPANY
8.3(a). The Company agrees to indemnify and hold harmless the Insurance
Company, and each of its directors and officers 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 amounts paid
in settlement with the written consent of the Company) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as those losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
result from the gross negligence, bad faith or willful misconduct of the Board
or any member thereof, are related to the operations of the Company and:
(i) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise out of
or result from any other material breach of this Agreement by the
Company;
as limited by, and in accordance with the provisions of, Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party that may arise from the
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of the Indemnified Party's duties or by reason of the Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Insurance Company, the Company, INVESCO or the Account, whichever is
applicable.
8.3(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Company of its
obligations hereunder except to the extent that the Company has been prejudiced
by such failure to give notice. In addition, any failure by the Indemnified
Party to notify the Company of any such claim shall not relieve the Company from
any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, the Company
will be entitled to participate, at its own expense, in the defense thereof. The
Company also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action; PROVIDED, HOWEVER, that if the
Indemnified Party shall have reasonably concluded that there may be defenses
available to it which are different from or additional to those available to the
Company, the Company shall not have the right to assume said defense, but shall
pay the costs and expenses thereof (except that in no event shall the Company be
liable for the fees and expenses of more than one counsel for Indemnified
Parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances). After notice from the Company to the Indemnified Party of the
Company's election to assume the defense thereof, and in the absence of such a
reasonable conclusion that there may be different or additional defenses
available to the Indemnified Party, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the Company will not
be liable to that party under this Agreement for any legal or other expenses
subsequently incurred by that party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Insurance Company and INVESCO agree promptly to notify the
Company of the commencement of any litigation or proceedings against it or any
of its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Company.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and provisions hereof interpreted
under and in accordance with the laws of the State of Colorado.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934,
and 1940 acts, and the rules and regulations and rulings thereunder, including
any exemptions from those statutes, rules and regulations the Commission may
grant (including, but not limited to, the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon one year 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; or
(c) at the option of the Company in the event that formal administrative
proceedings are instituted against the Insurance Company by the NASD,
the Commission, an insurance commissioner or any other regulatory body
regarding the Insurance Company's duties under this Agreement or
related to the sale of the Contracts, the operation of any Account, or
the purchase of the Company's shares, provided, however, that the
Company determines in its sole judgment exercised in good faith, that
any such administrative proceedings will have a material adverse
effect upon the ability of the Insurance Company to perform its
obligations under this Agreement; or
(d) at the option of the Insurance Company in the event that formal
administrative proceedings are instituted against the Company or
INVESCO by the NASD, the Commission, or any state securities or
insurance department or any other regulatory body, provided, however,
that the Insurance Company determines in its sole judgement exercised
in good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Company or INVESCO to
perform its obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the Contract
owners having an interest in that Account (or any subaccount) to
substitute the shares of another investment company for the
corresponding Fund shares in accordance with the terms of the
Contracts for which those Fund shares had been selected to serve as
the underlying investment media. The Insurance Company will give at
least 30 days' prior written notice to the Company of the date of any
proposed vote to replace the Company's shares; or
(f) at the option of the Insurance Company, in the event any of the
Company's shares are not registered, issued or sold in accordance with
applicable state and/or federal law or exemptions therefrom, or such
law precludes the use of those shares as the underlying investment
media of the Contracts issued or to be issued by the Insurance
Company; or
(g) at the option of the Insurance Company, if the Company ceases to
qualify as a regulated investment company under Subchapter M of the
Code or under any successor or similar provision, or if the Insurance
Company reasonably believes that the Company may fail to so qualify;
or
(h) at the option of the Insurance Company, if the Company fails to meet
the diversification requirements specified in Article VI hereof; or
(i) at the option of either the Company or INVESCO, if (1) the Company or
INVESCO, respectively, shall determine, in their sole judgment
reasonably exercised in good faith, that the Insurance Company has
suffered a material adverse change in its business or financial
condition or is the subject of material adverse publicity and that
material adverse change or material adverse publicity will have a
material adverse impact upon the business and operations of either the
Company or INVESCO, (2) the Company or INVESCO shall notify the
Insurance Company in writing of that determination and its intent to
terminate this Agreement, and (3) after considering the actions taken
by the Insurance Company and any other changes in circumstances since
the giving of such a notice, the determination of the Company or
INVESCO shall continue to apply on the sixtieth (60th) day following
the giving of that notice, which sixtieth day shall be the effective
date of termination; or
(j) at the option of the Insurance Company, if (1) the Insurance Company
shall determine, in its sole judgment reasonably exercised in good
faith, that either the Company or INVESCO has suffered a material
adverse change in its business or financial condition or is the
subject of material adverse publicity and that material adverse change
or material adverse publicity will have a material adverse impact upon
the business and operations of the Insurance Company, (2) the
Insurance Company shall notify the Company and INVESCO in writing of
the determination and its intent to terminate the Agreement, and (3)
after considering the actions taken by the Company and/or INVESCO and
any other changes in circumstances since the giving of such a notice,
the determination shall continue to apply on the sixtieth (60th) day
following the giving of the notice, which sixtieth day shall be the
effective date of termination; or
(k) at the option of either the Company or INVESCO, if the Insurance
Company gives the Company and INVESCO the written notice specified in
Section 1.6(b) hereof and at the time that notice was given there was
no notice of termination outstanding under any other provision of this
Agreement; provided, however any termination under this Section
10.1(k) shall be effective forty five (45) days after the notice
specified in Section 1.6(b) was given.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3 NOTICE REQUIREMENT. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate, which notice shall set forth the basis for the termination.
Furthermore,
(a) in the event that any termination is based upon the provisions of
Article VII, or the provisions of Section 10.1(a), 10.1(i), 10.1(j),
or 10.1(k) of this Agreement, the prior written notice shall be given
in advance of the effective date of termination as required by those
provisions; and
(b) in the event that any termination is based upon the provisions of
Section 10.1(c) or 10.1(d) of this Agreement, the prior written notice
shall be given at least ninety (90) days before the effective date of
termination.
10.4. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Company and INVESCO shall at the option of the Insurance Company,
continue to make available additional shares of the Company pursuant to the
terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement ("Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Company, redeem investments in the
Company and/or invest in the Company upon the making of additional purchase
payments under the Existing Contracts. The parties agree that this Section 10.4
shall not apply to any terminations under Article VII and the effect of Article
VII terminations shall be governed by Article VII of this Agreement.
10.5. The Insurance Company shall not redeem Company shares attributable to
the Contracts (as opposed to Company shares attributable to the Insurance
Company's assets held in the Account) except (i) as necessary to implement
Contract-owner-initiated transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (a "Legally Required Redemption"). Upon request, the Insurance
Company will promptly furnish to the Company and INVESCO the opinion of counsel
for the Insurance Company (which counsel shall be reasonably satisfactory to the
Company and INVESCO) to the effect that any redemption pursuant to clause
(ii)above is a Legally Required Redemption.
ARTICLE XI. NOTICES.
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of that other party set forth below or at
such other address as the other party may from time to time specify in writing.
If to the Company:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
If to the Insurance Company:
700 Karnes Blvd.
Kansas City, Missouri 64108
Attention: __________________
If to INVESCO:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
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
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.6. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.7. No party may assign this Agreement without the prior written consent
of the others.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
Insurance Company:
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
By its authorized officer,
SEAL By:__________________________
Title:_______________________
Date:________________________
Company:
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By its authorized officer,
SEAL By:___________________________
Title:________________________
Date:_________________________
INVESCO:
INVESCO FUNDS GROUP, INC.
By its authorized officer,
SEAL By:___________________________
Title:________________________
Date:_________________________
SCHEDULE A
CONTRACTS
1. Contract Form________________________
SCHEDULE B
ACCOUNTS
Name of Account Date of Resolution of Insurance Company's
Board which Established the Account
SCHEDULE C
PERSONS AUTHORIZED TO GIVE INSTRUCTIONS TO THE COMPANY AND INVESCO
NAME ADDRESS AND PHONE NUMBER
(1)______________________________ ____________________________
Print or Type Name
______________________________ Phone:______________________
Signature
(2)______________________________ ____________________________
Print or Type Name
______________________________ Phone:______________________
Signature
(3)______________________________ ____________________________
Print or Type Name
______________________________ Phone:______________________
Signature
(4)______________________________ ____________________________
Print or Type Name
______________________________ Phone:______________________
Signature
SCHEDULE D
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Company by INVESCO, the Company 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 INVESCO
as early as possible before the date set by the Company for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time INVESCO 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 contract owner/policyholder
(the "Customer") as of the Record Date. Allowance should be made for
account adjustments made after this date that could affect the status of
the Customers' accounts 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 INVESCO, as soon as possible, but no later than one
week after the Record Date.
3. The Company's Annual Report must be sent to each Customer by the Insurance
Company either before or together with the Customers' receipt of a proxy
statement. INVESCO will provide at least one copy of the last Annual Report
to the Insurance Company.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Insurance Company by the Company. The Insurance Company, at
its expense, shall produce and personalize the Voting Instruction cards.
The Legal Department of INVESCO ("INVESCO Legal") must approve the Card
before it is printed. Allow approximately 2-4 business days for printing
information on the Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and
verification of votes (already on Cards as printed
by the Company).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, INVESCO Legal will develop, produce, and the Company 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
Company.)
e. Cover letter - optional, supplied by Insurance Company and reviewed
and approved in advance by INVESCO Legal.
6. 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
INVESCO Legal.
7. Package mailed by the Insurance Company.
* The Company 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.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note:Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure.
9. 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.
10. There are various control procedures used to ensure proper tabulation of
votes and accuracy of the 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.
11. The actual tabulation of votes is done in units which are then converted to
shares. (It is very important that the Company receives the tabulations
stated in terms of a percentage and the number of shares.) INVESCO Legal
must review and approve tabulation format.
12. Final tabulation in shares is verbally given by the Insurance Company to
INVESCO Legal on the morning of the meeting not later than 10:00 a.m.
Denver time. INVESCO Legal may request an earlier deadline if required to
calculate the vote in time for the meeting.
13. 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.
INVESCO Legal will provided a standard form for each Certification.
14. 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, INVESCO
Legal will be permitted reasonable access to such Cards.
15. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
AUTOMATIC
REINSURANCE AGREEMENT
(YEARLY RENEWABLE TERM)
Effective August 1, 1998
Between
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(CEDING COMPANY)
BMA Tower
P.O. Box 419458
Kansas City, MO 64141
And
CONSECO LIFE INSURANCE COMPANY
(REINSURER)
11815 North Pennsylvania Street
Carmel, Indiana 46032
AUTOMATIC
REINSURANCE AGREEMENT
("Agreement")
This Agreement is between BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA, (CEDING
COMPANY), BMA Tower, P.O. Box 419458, Kansas City, MO 64141 and CONSECO LIFE
INSURANCE COMPANY (REINSURER), 11815 North Pennsylvania Street, Carmel, Indiana
46032.
The effective date of this Agreement is September 1, 1998. On or after the
effective date, the REINSURER agrees to reinsure certain portions of the CEDING
COMPANY's life insurance contracts' risk as described in the terms and
conditions of this Agreement.
This reinsurance Agreement constitutes the entire reinsurance agreement between
the parties. The parties have entered into that certain ~ which, as it may be
applicable, is incorporated by reference. In terms of the reinsurance that is
the subject of this Agreement, there are no understandings between the parties
other than as expressed in this Agreement.
Changes or modifications to this Agreement must be in writing and signed by both
parties.
1. REINSURANCE BASIS.
This Agreement is applicable to the reinsurance of life insurance policies,
on a Yearly Renewable Term basis, identified on Schedule A, that are
directly written by the CEDING COMPANY and which are insured by the CEEDING
COMPANY in conformity with the provisions of this Agreement ("Reinsured
Policies"). Each such policy shall be automatically reinsured so long as
the requirements of Section 2 are met.
2. AUTOMATIC REINSURANCE TERMS.
The REINSURER'S automatic acceptance of Reinsured Policies requires that
they be issued in conformity with the following:
a) UNDERWRITING.
Reinsured policies must be underwritten by the CEDING COMPANY in
accordance with the underwriting standards specified in Schedule A.
b) RETENTION.
The CEDING COMPANY must retain an amount of insurance on each life
equal to the retention amount shown in Schedule A. If the CEDING
COMPANY's scheduled retention is zero, automatic reinsurance is not
available.
c) AUTOMATIC ACCEPTANCE LIMITS.
On any one life, the amount automatically reinsured in conjunction with
any other reinsurance agreements that may be applicable, shall not
exceed the Automatic Acceptance Limits shown in Schedule A.
d) AUTOMATIC IN FORCE AND APPLIED FOR LIMIT.
On any one life, the total life insurance in force or applied for with
any company (of which the CEDING COMPANY is aware) cannot exceed the In
Force or Applied For Limits shown in Schedule A.
e) RESIDENCE.
Each insured must be a resident of the United States or Canada at the
time of issue.
f) MINIMUM CESSION.
On any one life, the minimum amount of reinsurance that the REINSURER
will accept is $10,000 and reinsurance will be terminated when the
amount reinsured is less than $10,000.
g) CURRENCY
All premiums must be paid in US dollars.
3. AUTOMATIC REINSURANCE NOTICE PROCEDURE.
After the policy has been paid for and delivered, the CEDING COMPANY shall
submit all relevant individual policy information, as defined in Schedule
C, in its next statement to the REINSURER.
4. TERM OF REINSURANCE COVERAGE.
The term of the REINSURER'S reinsurance coverage on any policy or pre-issue
risk under this Agreement is described below:
a) REINSURANCE.
The REINSURER'S reinsurance coverage for a Reinsurance Policy shall
begin simultaneously with the CEDING COMPANY's contractual liability
but not earlier than the effective date of this Agreement. The
reinsurance under this agreement shall remain in force as long as the
CEEDING COMPANIES contractual liability remains in force or as
specified in Section 15.b), entitled Recapture.
b) PRE-ISSUE COVERAGE.
If the CEDING COMPANY issues a conditional receipt or temporary
insurance agreement, the REINSURER reinsurance for such benefits will
be provided under this Agreement if:
i) The REINSUER has agreed to the form and format of the conditional
receipt or temporary insurance agreement.
ii) The conditions for automatic reinsurance coverage under Section 2
of this Agreement are met.
iii) The pre-issue liability applies only once on any given life
regardless of how many receipts were issued or initial premiums
were accepted by the CEDING COMPANY.
iv) After a policy has been issued, no reinsurance benefits are
payable under this pre-issue coverage provision.
v) The REINSURER'S liability under the CEDING COMPANY's conditional
receipt or temporary insurance agreement is limited to the lesser
of i. or ii. below:
(1) The Automatic Acceptance Limits with the REINSURER as shown
in Schedule A.
(2) The amount for which the CEDING COMPANY is liable less its
retention shown in Schedule A, less any amount of
reinsurance with other reinsurers.
5. BASIS OF REINSURANCE AMOUNT AND REINSURANCE PREMIUM RATES.
a) LIFE REINSURANCE.
The amount reinsured for a Reinsured Policy is the automatic portion of
the policy's net amount at risk, as shown in Schedule A. The retention
on each life, or both lives for joint policies, is shown in Schedule A.
The net amount at risk is defined in Schedule A. The reinsurance
premiums per $1000 are shown in Schedule B.
b) PRELIMINARY TERM INSURANCE.
Premiums for reinsurance of preliminary term insurance, covered in
accordance with Section 4.b) are at the second year rate for the
insured's attained age, as shown in Schedule B, for the fraction of a
year covered.
c) TABLE RATED SUBSTANDARD PREMIUMS.
If the CEDING COMPANY's policy is issued with a table rated substandard
premium, the reinsurance premiums shown in Schedule B will apply.
d) FLAT EXTRA PREMIUMS.
If the CEDING COMPANY's policy is issued with a flat extra premium, the
reinsurance premiums shown in Schedule B will apply.
e) RATES NOT GUARANTEED.
The reinsurance premium rates are not guaranteed. The REINSURER
reserves the right to change the rates at any time upon 180 days prior
written notice. Any such change applies only to Reinsured Policies
effective on or after the expiration of the notice period.
f) CASH VALUES OR LOANS.
This Agreement does not provide reinsurance for cash surrender values.
In addition, the REINSURER will not participate in policy loans or
other forms of indebtedness on reinsured business.
6. PAYMENT OF REINSURANCE PREMIUMS
a) PREMIUM DUE.
Reinsurance premiums for each reinsurance cession are due as shown in
Schedule A.
b) FAILURE TO PAY PREMIUMS.
If reinsurance premiums are 60 days past due, for reasons other than
those due to error or omission as defined below in Section 19, the
premiums will be considered in default and the REINSURER may terminate
the reinsurance upon 30 days prior written notice. The REINSURER will
have no further liability as of the termination date. The CEDING
COMPANY will be liable for the prorated reinsurance premiums to the
termination date. The CEDING COMPANY agrees that it will not force
termination under the provisions of this paragraph solely to avoid the
recapture requirements or to transfer the block of business reinsured
to another reinsurer.
c) PREMIUM ADJUSTMENT.
If the CEDING COMPANY overpays in regards any Reinsured Policy the
reinsurance premium and the REINSURER accepts the overpayment, such
acceptance does not create any additional reinsurance liability nor
constitute an acceptance additional reinsurance risk with regard to
such Reinsured policy. In that instance, the REINSURER will only be
liable to the CEDING COMPANY for a credit in the amount of the
overpayment. If a Reinsured Policy terminates, the REINSURER will
refund a portion of the reinsurance premium. This refund will be on a
prorated basis, without interest, from the date of termination of the
policy to the date to which a reinsurance premium has been paid.
7. PREMIUM TAX REIMBURSEMENT. Premium taxes shall not be reimbursed.
8. DAC TAX AGREEMENT.
The CEDING COMPANY and the REINSURER herein collectively called, for the
purposes of Section 8 the "Parties", or singularly the "Party", hereby
enter into an election under Treasury Regulations Section 1.848-2(g) (8)
whereby:
a) For each taxable year under this Agreement, the Party with the net
positive consideration, as defined in the regulations promulgated under
Treasury Code Section 848, will capitalize specified policy acquisition
expenses with respect to this Agreement without regard to general
deductions limitation of Section 848 (c) (1);
b) The Parties agree to exchange information pertaining to the net
consideration under this Agreement each year to insure consistency or
as otherwise required by the Internal Revenue Service;
c) The CEDING COMPANY will submit to the REINSURER by May 1 of each year
its calculation of the net consideration for the preceding calendar
year. This schedule of calculations will be accompanied by a statement
signed by an officer of the CEDING COMPANY stating that the CEDING
COMPANY will report such net consideration in its tax return for the
preceding calendar year;
d) The REINSURER may contest such calculation by providing an alternative
calculation to the CEDING COMPANY in writing within 30 days of the
REINSURER'S receipt of the CEDING COMPANY's calculation. If the
REINSURER does not so notify the CEDING COMPANY, the REINSURER will
report the net consideration as determined by the CEDING COMPANY in the
REINSURER'S tax return for the previous calendar year;
e) If the REINSURER contests the CEDING COMPANY's calculation of the net
consideration, the Parties will act in good faith to reach an agreement
as to the correct amount within 30 days of the date the REINSURER
submits its alternative calculation. If the CEDING COMPANY and the
REINSURER reach agreement on the net amount of consideration, each
party shall report such amount in their respective tax returns for the
previous calendar year.
Both Parties represent and warrant that they are subject to U.S. taxation
under either Subchapter L of Chapter 1, or Subpart F of Subchapter N of
Chapter 1 of the Internal Revenue Code of 1986, as amended.
9. REPORTS.
The reporting period shall be monthly. The CEDING COMPANY shall be
responsible for administering this Agreement. For each reporting period,
the CEDING COMPANY will submit a statement to the REINSURER with
information that is substantially similar to the information displayed in
Schedule C. The statement will include information on the risks reinsured
with the REINSURER, premiums owed, policy exhibit activity, and an
accounting summary. Within fifteen days after the end of each calendar
quarter, the CEDING COMPANY will submit a reserve credit summary similar to
that shown in Schedule C.
10. RESERVES FOR REINSURANCE.
The statutory reserve basis for the reinsurance will be shown on the
reserve credit summary provided each quarter.
11. CLAIMS.
a) NOTICE.
The CEDING COMPANY will notify the REINSURER, as soon as reasonably
possible, after it receives a claim for benefits under a Reinsured
Policy.
b) CLAIM INFORMATION.
The CEDING COMPANY will promptly provide the REINSURER with all
information submitted as a "proof of claim," and any other relevant
information concerning the claim including an itemized statement of the
benefits paid by the CEDING COMPANY. The CEEDING COMPANY shall promptly
provide the REINSURER such other information concerning the claim that
the REINSURER shall reasonably request.
c) AMOUNT AND PAYMENT OF BENEFITS.
Upon receipt by REINSURER of the information specified in Section
11.b), the REINSURER will determine if the information is complete. If
additional information is required, the REINSURER shall promptly
request such information. If the information is sufficient, the
REINSURER shall promptly pay the reinsurance benefits due the CEDING
COMPANY.
The CEDING COMPANY's contractual liability for claims is binding on the
REINSURER. However, the maximum benefit payable to the CEDING COMPANY
under each Reinsured Policy is the amount specifically reinsured with
the REINSURER. The CEDING COMPANY shall enter into a situation where
the total reinsurance applicable to a Reinsured Policy, from any
reinsurer, exceeds the CEDING COMPANY's total contractual liability on
the policy, less the amount of risk it retains for such policy. If this
occurs, the excess reinsurance of the total reinsurance in all
companies plus the CEDING COMPANY's retention used on the policy over
its contractual liability under the Reinsured Policy will first be
applied to reduce all reinsurance on the policy. This reduction in
reinsurance will be shared among all the reinsurers in proportion to
their respective amounts of reinsurance prior to the reduction.
d) CONTESTED CLAIMS.
The CEDING COMPANY will notify the REINSURER of its intention to
contest, compromise, or litigate a claim involving a Reinsured Policy.
The REINSURER may elect to participate in such contest not. If the
REINSURER participates and the CEDING COMPANY's contest, compromise, or
litigation results in a reduction in its liability, the REINSURER will
share in the reduction in the proportion that the REINSURER's net
liability bears to the sum of the net liability of all reinsurers on
the insured's date of death. Alternatively, if "extra-contractual"
damages are awarded, the REINSURER shall share in them in the same
fashion as any reductions.
If the REINSURER declines to participate in the contest, compromise or
litigation, the REINSURER will pay the CEDING COMPANY its full share of
reinsurance. The REINSURER shall then be released from all of its
liability with regard such Reinsured Policy and shall not share in any
subsequent reduction or increase in liability.
e) CLAIM EXPENSES.
If the REINSURER has not been released from liability pursuant to
Section 11.e), it will share in the cost of reasonable investigation
and legal expenses specifically attributable to the litigation or
settlement of the Reinsured Policy claim. If the REINSURER has been
released, it will participate in those expenses incurred up to the
date of release. Such claim expenses do not include routine claim and
administration operational expenses, including the CEDING COMPANY's
home office expenses. Expenses incurred in connection with a dispute
or contest arising out of conflicting claims of entitlement to policy
proceeds or benefits that the CEDING COMPANY admits are payable may
not be included as claim expense under this Agreement.
f) PUNITIVE OR EXEMPLARY DAMAGES.
In no event will the REINSURER'S obligations pursuant to this Agreement
include participating in the payment of any punitive or exemplary
damages awarded against the CEDING COMPANY as a result of any act,
omission, or course of conduct committed by the CEDING COMPANY in
connection with a Reinsured Policy subject to this Agreement. Routine
expenses incurred in the normal settlement of uncontested claims,
including the salaries of employees of the CEDING COMPANY, are also
excluded from this provision. For purposes of this provision, "Punitive
or Exemplary Damages" are those damages awarded over and above that,
which will compensate for a loss and are awarded as penalties for the
defendant's behavior.
12. MISREPRESENTATION, MISSTATEMENT AND SUICIDE.
If a misrepresentation or misstatement on an application or a death of an
insured by suicide results in the CEDING COMPANY rescinding the policy, the
REINSURER will refund all of the reinsurance premiums it received on that
policy to the CEDING COMPANY. This refund given by the REINSURER will be in
lieu of all other reinsurance benefits payable on that policy under this
Agreement. If there is an adjustment to the policy benefits due to a
misrepresentation or misstatement of age or sex, a corresponding adjustment
will be made to the reinsurance benefits.
13. POLICY CHANGES.
a) NOTICE.
If a Reinsured Policy is changed, a corresponding change will be made
in the reinsurance for that policy. The CEDING COMPANY will notify the
REINSURER of the change in the CEDING COMPANY's next accounting
statement.
b) INCREASES.
If life insurance on a Reinsured Policy is increased and the increase
is subject to a new underwriting review, then the increase of life
insurance on the Reinsured Policy will be handled the same fashion as
the issuance of a new policy. If the increase is not subject to a new
underwriting review, then the increase shall be automatically accepted
by the REINSURER. Such an increase may not exceed the Automatic
Acceptance Limits shown in Schedule A. Reinsurance rates for an
increase will be based on the original issue age, duration since
issuance of the original policy and the original underwriting
classification.
c) REDUCTION OR TERMINATION.
If life insurance on a Reinsured Policy is reduced, then reinsurance
will be reduced by the amount of the reduction on the date of such
change. If more than one reinsurer participates in the reinsurance, the
reinsurance with each reinsurer will be reduced proportionately. If
life insurance on a Reinsured Policy is terminated, then reinsurance
will cease on the date of such termination.
d) EXTENDED TERM AND REDUCED PAID-UP INSURANCE.
When a Reinsured Policy changes to "extended term" or "reduced paid-up"
insurance, the CEDING COMPANY will notify the REINSURER of the new
amount of reinsurance. Reinsurance rates will remain the same as the
rates used for the original policy and will be based on the original
issue age, duration since issuance of the original policy and the
original underwriting classification.
14. REINSTATEMENTS.
a) AUTOMATIC REINSTATEMENT.
If the CEDING COMPANY reinstates a policy that was originally ceded to
the REINSURER as automatic reinsurance, the REINSURER's reinsurance for
that policy shall be reinstated.
b) PREMIUM ADJUSTMENT.
Reinsurance premiums for the interval during which the policy was
lapsed will be paid to the REINSURER on the same basis as the CEDING
COMPANY charged its policy owner for the reinstatement.
c) NONFORFEITURE REINSURANCE TERMINATION.
If the CEDING COMPANY receives a request to reinstate a policy that was
reinsured while on "extended term" or "reduced paid-up" then such
reinsurance will terminate and either automatic or facultative
reinstatement procedures shall be followed.
15. INCREASE IN RETENTION.
a) NEW BUSINESS.
If the CEDING COMPANY increases its retention limits, then it may, at
its option and with written notice to the REINSURER, increase its
retention shown in Schedule A for policies issued after the effective
date of the retention increase.
b) RECAPTURE.
If the CEDING COMPANY elects to increases its retention limits, then it
may, with 90 days prior written notice to the REINSURER, reduce the
reinsurance in force ("Recapture") subject to the following
requirements:
i) A Reinsured Policy is not eligible for Recapture until it has been
reinsured for the minimum number of years shown in Schedule A. The
effective date for a Reinsured Policy's Recapture shall be the
first policy anniversary following the expiration of the Recapture
notice period and the required minimum number of years is
attained.
ii) On all policies eligible for recapture, reinsurance will be
reduced by the amount necessary to increase the total insurance
retained up to the new retention limits.
iii) If more than one policy per life is eligible for Recapture, then
the eligible policies may be Recaptured beginning with the policy
with the earliest issue date and continuing in chronological order
according to the remaining policies' issue dates.
iv) Recapture of Reinsured Policies automatically reinsured pursuant
to Section 2 is not allowed if the CEDING COMPANY did not keep its
maximum retention (Section 3 of Schedule A) at time of issue. This
does not apply reinsurance was provided on a "facultative" basis.
v) If any policy eligible for recapture is also eligible for
recapture from other reinsurers, the reduction in the REINSURER'S
reinsurance on that policy shall be in proportion to the total
amount of reinsurance on the life with all reinsurers.
16. ERRORS AND OMISSIONS.
Inadvertent delays, errors or omissions made in connection with this
Agreement shall not relieve either party from any liability or duty which
would have attached had such delay, error or omission not occurred,
provided always that such error or omission shall be rectified as soon as
possible after discovery. Failure of either party to complain of any act or
omission on the part of the other party, no matter how long the act or
omission may continue, shall not be deemed to be a waiver of said party of
any of its rights under this Agreement. A waiver by either party at any
time, express or implied, of any breach of any conditions of this Agreement
shall not be deemed a waiver of a breach of any other conditions of this
Agreement nor a consent to any subsequent breach of the same or any other
conditions of this Agreement.
17. INDEMNITY
Regardless of any other provision of this Agreement, both parties agree to
indemnify and hold harmless the other against any and all claims, demands,
causes of action, losses, costs and expenses, including reasonable
attorney's fees, arising out of any willful or negligent act or omission on
the part of itself or its officers, directors or employees.
18. INSOLVENCY.
In the event of the insolvency of CEDING COMPANY, all reinsurance will be
payable directly to the liquidator, receiver or statutory successor of
CEDING COMPANY without diminution because of the insolvency of CEDING
COMPANY.
In the event of the insolvency of CEDING COMPANY, the liquidator, receiver,
or statutory successor will immediately give written notice to REINSURER of
all pending claims against CEDING COMPANY on any policies reinsured. While
a claim is pending, REINSURER may investigate and interpose, at its own
expense, in the proceedings where the claim is adjudicated, any defense or
defenses which it may deem available to CEDING COMPANY or its liquidator,
receiver or statutory successor. The expense incurred by REINSURER will be
chargeable, subject to court approval, against CEDING COMPANY as part of
the expense of liquidation to the extent of a proportionate share of the
benefit which may accrue to CEDING COMPANY solely as a result of the
defense undertaken by REINSURER. Where Two or more reinsurers are
participating in the same claim and a majority in interest elect to
interpose a defense or defenses to any such claim, the expense will be
apportioned in accordance with the terms of the reinsurance agreement as
though such expense had been incurred by CEDING COMPANY.
Any debts or credits, matured or unmatured, liquidated or unliquidated in
favor of or against either the REINSURER or the CEDING COMPANY with respect
to this Agreement or with respect to any other claim of one party against
the other are deemed mutual debts or credits, as the case may be, and will
be offset, and only the balance will be allowed or paid.
In the event of the insolvency of REINSURER, REINSURER will be bound by any
legal directions imposed by its liquidator, receiver or statutory
successor. However, if not in conflict with such legal directions, CEDING
COMPANY shall have the right to cancel this Agreement as respects
occurrences taking place on or after the date REINSURER first evidences
insolvency, by giving to REINSURER (or its liquidator, receiver or
statutory successor) written notice stating that such recapture is thereby
effected and REINSURER (or its liquidator, receiver or statutory
successor), in lieu of a premature recapture fee, will not be required to
reimburse CEDING COMPANY any unearned premium hereunder.
19. ARBITRATION.
a) GENERAL.
All disputes and differences under this Agreement that cannot be agreed
upon by the parties will be decided by arbitration. The arbitrators
will have the authority to interpret this Agreement and, in doing so,
will consider the customs and practices of the life and life
reinsurance industries. The arbitrators will consider this Agreement an
honorable engagement rather than merely a legal obligation, and they
are relieved of all judicial formalities and may abstain from following
the strict rules of the law.
b) NOTICE.
To initiate arbitration, one of the parties will notify the other, in
writing, of its desire to arbitrate. The notice will state the nature
of the dispute and the desired remedies. The party to which the notice
is sent will respond to the notification in writing within 10 days of
receipt of the notice. At that time, the responding party will state
any additional dispute it may have regarding the subject of
arbitration.
c) PROCEDURE.
Arbitration will be heard by a panel of three arbitrators. The
arbitrators will be executive officers of life insurance or reinsurance
companies that are not a party, an affiliate of a party or involved in
a joint-venture with a party. Each party will appoint one arbitrator.
Notice of the appointment of these arbitrators will be given by each
party to the other party within 30 days of the date of mailing of the
notification initiating the arbitration. These two arbitrators will, as
soon as possible, but no longer than 45 days after the day of the
mailing of the notification initiating the arbitration, then select the
third arbitrator. Should either party fail to appoint an arbitrator or
should the two initial arbitrators be unable to agree on the choice of
a third arbitrator, each arbitrator will nominate three candidates, two
of whom the other will decline, and the decision will be made by
drawing lots on the final selection. Once chosen, the three arbitrators
will have the authority to decide all substantive and procedural issues
by a majority vote. The arbitration hearing will be held on the date
fixed by the arbitrators at a location agreed upon by the parties. The
arbitrators will issue a written decision from which there will be no
appeal. Either party may reduce this decision to a judgment before any
court which has jurisdiction of the subject of the arbitration.
d) COSTS.
Each party will pay the fees of its own attorneys, the arbitrator
appointed by that party, and all other expenses connected with the
presentation of its own case. The two parties will share equally in the
cost of the third arbitrator.
20. TERM OF THIS AGREEMENT.
The CEDING COMPANY will maintain and continue the reinsurance provided in
this Agreement as long as the policy to which it relates is in force or has
not been fully Recaptured. This Agreement may be terminated, without cause,
for the acceptance of new reinsurance after 180 days written notice of
termination by either party to the other. The REINSURER will continue to
accept reinsurance during this 180 day period. The REINSURER'S acceptance
will be subject to both the terms of this Agreement and the CEDING
COMPANY's payment of applicable reinsurance premiums. In addition, this
Agreement may be terminated immediately for the acceptance of new
reinsurance by either party if one of the parties materially breaches this
Agreement, or becomes insolvent or financially impaired.
21. MISCELLANEOUS.
a) Audit
Either party, as the case may be, shall have the right, at any
reasonable time, to inspect and audit all books and documents of the
other party regarding the business or policies reinsured hereunder.
b) MEDICAL INFORMATION BUREAU.
The parties agree to adhere to the Medical Information Bureau Rules as
they are amended from time to time.
c) Non-Transferable
Neither party shall, without prior consent of the other, sell, assign,
transfer, or otherwise dispose of this Agreement or any interest in
this Agreement by voluntary or involuntary act, and any such purported
action shall be null and void and of no force and effect.
d) Status of Reinsurer
REINSURER shall at all times be licensed to conduct insurance business
and to act as a reinsurer in CEEDING COMPANY'S state of domicile and in
any other state where failure of REINSURER to be so licensed or
accredited would cause CEEDING COMPANY to be ineligible for reserve
credit for the reinsurance ceded under this Agreement
e) Notices
Any notice or other communication made or contemplated by this
Agreement shall be in writing and shall be deemed given when delivered
by hand or when mailed by United States mail, postage prepaid and
addressed as follows, unless otherwise provided herein:
CEEDING COMPANY: Business Men's Assurance Company of America
Attn: Treasurer
P.O. Box 419458
Kansas City, Missouri 64141
REINSURER: CONSECO LIFE INSURANCE COMPANY
Attn:
11815 North Pennsylvania Street
Carmel, Indiana 46032
f) Severability
If any provision of this Agreement proves to be or is held by any
court, tribunal, or other entity of competent jurisdiction to be
invalid, then such invalid provision shall be null and void, but
invalidation of any provision shall not otherwise impair or affect this
Agreement or any of its provisions or terms.
g) Headings
The headings used herein are for information purposes only and are not
a part of this Agreement.
h) Singular and Plural
Whenever an item is referred to in the singular, it includes the
plural.
i) Counterparts
This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers duly authorized so to do as of the date set forth
above.
<TABLE>
<CAPTION>
<S> <C>
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA CONSECO LIFE INSURANCE COMPANY
By: __________________________________ By: __________________________________
Title:__________________________________ Title:__________________________________
Date:___________________________________ Date:__________________________________
</TABLE>
SCHEDULE A
1. PLANS REINSURED:
2. AUTOMATIC PORTION REINSURED:
3. AUTOMATIC RETENTION LIMITS:
4. AUTOMATIC ACCEPTANCE LIMITS:
The amount to be ceded automatically shall not exceed the following limits:
5. AUTOMATIC IN FORCE AND APPLIED FOR LIMITS:
6. PREMIUM DUE:
7. RECAPTURE PERIOD:
NET AMOUNT AT RISK:
The net amount at risk for purposes of this agreement is the death benefit
amount less the policy account value.
8. ADDITIONAL UNDERWRITING REQUIREMENTS:
SCHEDULE B
AUTOMATIC REINSURANCE PREMIUMS - YEARLY RENEWABLE TERM BASIS
1. LIFE INSURANCE:
SCHEDULE C
REPORTING INFORMATION
INFORMATION ON RISKS REINSURED
1. Type of Transaction
2. Effective Date of Transaction
3. Automatic/Facultative Indicator
4. Policy Number
5. Full Name of Insured
6. Date of Birth
7. Sex
8. Smoker/Nonsmoker
9. Policy Plan Code
10. Insured's State of Residence
11. Issue Age
12. Issue Date
13. Duration from Original Policy Date
14. Face Amount Issued
15. Reinsured Amount (Initial Amount)
16. Reinsured Amount (Current Amount at Risk)
17. Change in Amount at Risk Since Last Report
18. Death Benefit Option (For Universal Life Type Plans)
19. ADB Amount (If Applicable)
20. Substandard Rating
21. Flat Extra Amount Per Thousand
22. Duration of Flat Extra
23. Premiums
SCHEDULE C, CONTINUED
SAMPLE
POLICY EXHIBIT SUMMARY
(Life Reinsurance Only)
CEDING COMPANY:_________________________________________________________________
REINSURER:______________________________________________________________________
ACCOUNT NO:_____________________________________________________________________
PREPARED BY:________________________________Phone:( )_________________________
DATE PREPARED:__________________________________________________________________
TYPE OF REINSURANCE:
Yearly Renewable Term __________________________________
Coinsurance __________________________________
Modified Coinsurance __________________________________
Other __________________________________
VALUATION DATE: _____________________
NUMBER OF AMOUNT OF
POLICIES REINSURANCE
A. In Force Beginning _________ ____________
of Period / /
B. New Paid Reinsurance Ceded _________ ____________
C. Reinstatements _________ ____________
D. Revivals _________ ____________
E. Increases (Net) _________ ____________
F. Conversion In _________ ____________
G. Transfers In _________ ____________
H. Total Increases (B - G) _________ ____________
I. Deaths _________ ____________
J. Maturities _________ ____________
K. Cancellations _________ ____________
L. Expiries _________ ____________
M. Surrenders _________ ____________
N. Lapses _________ ____________
O. Recaptures _________ ____________
P. Other Decreases (Net) _________ ____________
Q. Reductions _________ ____________
R. Conversions Out _________ ____________
S. Transfers Out _________ ____________
T. Total Decreases (I - S) _________ ____________
U. Current In Force / / _________ ____________
(A + H - T)
SCHEDULE C, CONTINUED
SAMPLE
RESERVE CREDIT SUMMARY
CEDING COMPANY:_________________________________________________________________
REINSURER:______________________________________________________________________
ACCOUNT NO:_____________________________________________________________________
PREPARED BY:________________________________Phone:( )_________________________
DATE PREPARED:__________________________________________________________________
TYPE OF REINSURANCE:
Yearly Renewable Term __________________________________
Coinsurance __________________________________
Modified Coinsurance __________________________________
Other __________________________________
VALUATION DATE: _____________________
TYPE OF RESERVES:
Statutory __________________________________
GAAP __________________________________
Tax __________________________________
<TABLE>
<CAPTION>
ISSUE
VALUATION BASIS YEAR IN FORCE IN FORCE RESERVE
MORTALITY INTEREST VALUATION RANGE COUNT AMOUNT CREDIT
<S> <C> <C> <C> <C> <C> <C> <C>
A. Life Insurance
-------------- ------------- -------------- ------------- ------------- ------------- ------
-------------- ------------- -------------- ------------- ------------- ------------- ------
B. Accidental
Death Benefit
-------------- ------------- -------------- ------------- ------------- ------------- ------
C. Disability
Active Lives
-------------- ------------- -------------- ------------- ------------- ------------- ------
D. Disability
Disabled Lives
-------------- ------------- -------------- ------------- ------------- ------------- ------
E. Other
Please Explain
-------------- ------------- -------------- ------------- ------------- ------------- ------
GRAND TOTAL:
-------------
</TABLE>
SCHEDULE C, CONTINUED
SAMPLE
ACCOUNTING SUMMARY
CEDING COMPANY:_________________________________________________________________
REINSURER:______________________________________________________________________
ACCOUNT NO:_____________________________________________________________________
PREPARED BY:________________________________Phone:( )_________________________
DATE PREPARED:__________________________________________________________________
TYPE OF REINSURANCE:
Yearly Renewable Term __________________________________
Coinsurance __________________________________
Modified Coinsurance __________________________________
Other __________________________________
VALUATION DATE: _____________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
LIFE WP AD TOTAL
Premiums
First Year _____ ______ _______ __________
Renewal _____ ______ _______ __________
Allowances
First Year _____ ______ _______ __________
Renewal _____ ______ _______ __________
Adjustments
First Year _____ ______ _______ __________
Renewal _____ ______ _______ __________
Net Due REINSURER
First Year _____ ______ _______ __________
Renewal _____ ______ _______ __________
TOTAL DUE _____ ______ _______ __________
</TABLE>
(The above information should be a summary of the detail
information provided to REINSURER.)
Make check payable to:
Business Men's Assurance Company of America (BMA)
BMA Service Center, P.O. Box 795066, St. Louis, MO 63179-0795
(800) 423-9398 Fax: (314) 525-9941
Overnight deliveries: BMA Service Center, SW-04
9735 Landmark Parkway, St. Louis, MO 63127
Variable Life Application
<TABLE>
<CAPTION>
<S> <C>
1. Proposed Insured
_______________________________________________________________ ________________________________________________________________
Name (First, Middle, Last) [ ] Male [ ] Female Social Security Number
_______________________________________________________________ ( ) ( )
Street Address ________________________________________________________________
Home Telephone Business Telephone
_______________________________________________________________
City, State, Zip ________________________________________________________________
E-Mail Address
_______________________________________________________________
Birthdate (M/D/Y) State of Birth
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
2. Owner (if different from Insured)
_______________________________________________________________ ________________________________________________________________
Name (First, Middle, Last) [ ] Male [ ] Female Social Security Number/Tax Identification Number
_______________________________________________________________ ( ) ( )
Street Address ________________________________________________________________
Home Telephone Business Telephone
_______________________________________________________________
City, State, Zip ________________________________________________________________
E-Mail Address
_______________________________________________________________
Birthdate (M/D/Y) State of Birth
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
3. Contingent Owner
_______________________________________________________________ ________________________________________________________________
Name (First, Middle, Last) [ ] Male [ ] Female Social Security Number/Tax Identification Number
_______________________________________________________________ ( ) ( )
Street Address ________________________________________________________________
Home Telephone Business Telephone
_______________________________________________________________
City, State, Zip ________________________________________________________________
E-Mail Address
_______________________________________________________________
Birthdate (M/D/Y) State of Birth
</TABLE>
4a. Primary Beneficiary Designation
________________________________________________________________________________
Name Relationship to Insured %
________________________________________________________________________________
Name Relationship to Insured %
________________________________________________________________________________
Name Relationship to Insured %
4b. Contingent Beneficiary
________________________________________________________________________________
Name Relationship to Insured %
________________________________________________________________________________
Name Relationship to Insured %
________________________________________________________________________________
Name Relationship to Insured %
5. Initial Premium Payment
Paid with Application $ ____________ Estimated 1035 Exchange Amount $ __________
A1015 C (5/98)
Variable Life Application - Page 2
<TABLE>
<CAPTION>
6. Portfolio Selection (Please select Portfolio(s) and use only whole number percentages.
Subadvisors shown in parenthesis.)
<S> <C>
[Balanced (Kornitzer Capital Management) (265) _________% Large Cap Value (Babson) (268) _________%
Global Fixed Income Mid Cap Equity (Standish, Ayer & Wood) (263) _________%
(Standish International Management) (264) _________%
Growth & Income (Lord Abbett) (269) _________% Small Cap Equity (Stein Roe) (266) _________%
Intermediate Fixed Income
(Standish, Ayer & Wood) (262) _________% Money Market (Standish, Ayer & Wood) (261) _________%
Large Cap Growth (Stein Roe) (267) _________% Berger/BIAM IPT-International Fund (270) _________%
Fixed _________%
Total _____100_%]
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
7. Insurance $ ____________ amount of life insurance coverage.
Additional Benefits:
Payment Mode (Check one.) [ ] Accelerated Death Benefit Rider
[ ] Annual [ ] Semiannual [ ] Monthly (Only with PAC/EFT) [ ] Accidental Death Benefit Rider
[ ] Children's Term Rider
Method of Payment: [ ] Notice [ ] PAC/EFT [ ] Covered Insured Rider
[ ] Extension Maturity Rider
Payment: Premium Quoted $ ________________ [ ] Future Purchase Option Rider
Premium Received $ ______________ [ ] Guaranteed Minimum Death Benefit Rider
[ ] Primary Insured Rider
Choose one: [ ] Waiver of Monthly Deductions Rider
[ ] Level-Death Benefit remains constant. [ ] Waiver of Planned Premium Rider
[ ] Adjustable-Death Benefit changes with the accumlation [ ] Other ___________________________________
value. (If not checked, option will automatically be level.)
</TABLE>
8. Replacement of Other Contracts
Will the proposed policy replace any existing annuity or life insurance
contract? [ ] Yes [ ] No
If yes, list company name and policy number:
________________________________________________________________________________
How much life insurance coverage do you currently have in force?
________________________________________________________________________________
9. Information About the Insured
a. Current Employment
Name of Employer _______________________________________________________________
Occupation and Responsibilities ________________________________________________
________________________________________________________________________________
b. Have you ever been told you had or been treated for diabetes, cancer, heart
disease, or high blood pressure? (If yes, preferred rates are unlikely.) [ ] Yes
[ ] No If yes, please explain:
________________________________________________________________________________
c. Has or does any proposed insured:
a) Drink alcoholic beverages? If yes, provide amount per week.
(One drink equals 12 oz. beer, 4 oz. wine, or 1 oz. hard liquor.) [ ] Yes [ ] No
If yes, please explain:
________________________________________________________________________________
b) Ever had or been advised by a physician, practitioner, or court of law to
have treatment for alcohol, drug or substance use? [ ] Yes [ ] No If yes, please
explain:
________________________________________________________________________________
c) Now use or ever used cocaine, marijuana, or other drugs (except as prescribed
by a physician)? [ ] Yes [ ] No If yes, please explain:
________________________________________________________________________________
d. During the past three years, have you had a motor vehicle license suspended
or revoked or been convicted of driving while intoxicated? [ ] Yes [ ] No If
yes, please explain:
________________________________________________________________________________
e. During the past three years, have you participated in or do you intend to
participate in: [ ] Scuba Diving [ ] Skydiving [ ] Motor Racing [ ] Hang gliding
or similar flying activity
f. During the past three years, have you flown as or do you intend to fly as a
trainee, pilot, or crew member? [ ] Yes [ ] No
g. During the past two years, have you used any type of tobacco? [ ] Yes [ ] No
If yes, please specify
________________________________________________________________________________
h. Have you had any insurance or reinstatement refused, postponed, limited,
offered, or quoted on a substandard or rated basis? [ ] Yes [ ] No
Variable Life Application - Page 3
10. Telephone Transfer Authorization
[ ] I hereby authorize and direct BMA to accept telephone asset transfer
instructions from any person who can furnish proper identification. This
authorization is subject to the terms and provisions in the policy 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 liable for any losses due to unauthorized or fraudulent
transfers.
11. Dollar Cost Averaging
You need a total cash surrender value of at least $5,000 to participate. The
transfers will occur over a minimum of six months into the Portfolios designated
below on the 15th day of the month (or next business day if the 15th falls on a
weekend or holiday). The DCA program automatically terminates if the
accumulation value in the selected transfer portfolio is zero. This program
cannot be done at the same time as the Asset Rebalancing program.
A. Select the amount to transfer monthly (minimum $250) $____________
B. Indicate total amount to be transferred (minimum $1,500) $____________
C. Select the Portfolios and indicate how total is to be allocated in whole
dollars.
<TABLE>
<CAPTION>
<S> <C> <C>
Balanced (265) $ ________ Intermediate Fixed Small Cap Equity (266) $ __________
Income (262) $ __________
Global Fixed Income (264) $ ________ Large Cap Growth (267) $ __________ Berger/BIAM IPT-International
Fund (270) $ __________
Growth & Income (269) $ ________ Large Cap Value (268) $ __________
Mid Cap Equity (263) $ __________
</TABLE>
12. Asset Rebalancing
(Rebalanced quarterly; minimum period: 6 months; $5,000 cash surrender value
minimum)
[ ] Yes, I choose to participate in the asset rebalancing program. This program
allows you to automatically rebalance your policy each quarter to your original
percentage allocations. 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 is not part of
asset rebalancing. This program cannot be done at the same time as the Dollar
Cost Averaging program.
13. Anti-Fraud Statement
Any person who knowingly and with intent to defraud any insurance company or
other person files an application for insurance or statement of claim containing
any materially false information or conceals for the purpose of misleading,
information concerning any fact material thereto commits a fraudulent insurance
act, which is a crime and subjects such person to criminal and civil penalties.
SPECIAL REQUEST BOX
________________________________________________________________________________
________________________________________________________________________________
Variable Life Application - Page 4
14. Signatures
I acknowledge receipt of the current Prospectus, Medical Information Bureau, and
Fair Credit Report Act notices.
I UNDERSTAND THAT ANY DEATH BENEFITS IN EXCESS OF THE SPECIFIED AMOUNT AND ANY
POLICY VALUE OF THE FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY APPLIED FOR,
MAY INCREASE OR DECREASE TO REFLECT THE INVESTMENT EXPERIENCE OF THE SUBACCOUNTS
OF THE VARIABLE ACCOUNT AND THAT THE DEATH BENEFIT MAY BE VARIABLE OR FIXED
UNDER SPECIFIED CONDITIONS. The policy value allocated to the Fixed Account will
accumulate interest at a rate set by the Company which will not be less than the
minimum guaranteed rate of 4% annually. There is no guaranteed minimum policy
value. The policy value may decrease to the point where the policy will lapse
and provide no further death benefit without additional payments. The policy
values may also be affected by any changes in monthly deductions, the investment
performance of the selected Subaccounts and the amount of interest the company
credits to the Fixed Account depending upon my selections.
It is agreed: (1 ) The application consists of this application form, the
Medical History Statement, and any supplemental application to apply for
insurance on family members, if it applies; (2) All statements in this
application are, to the best of my (our) knowledge and belief, complete and
true. This application and any amendments to it, with the answers made to the
medical examiner (should an exam be required), shall be the basis of any
insurance issued. (3) All information given to the registered
representative/agent in response to the questions in this application has been
correctly recorded herein. (4) Unless otherwise stated in a Conditional Coverage
Receipt or Deduction Order for Insurance bearing the date of this application,
no liability exists until a policy is delivered to and accepted by the owner and
the first premium is paid while the health and occupations of all persons
proposed for health coverage are as described in this application. (5) The
acceptance of any policy issued on this application shall be an acceptance and
ratification of all corrections, additions, or changes made by BMA. The changes
made by BMA are shown in the space below. However, any change in amount, class,
plan of insurance, benefits, or the age at issue shall be subject to written
ratification by the applicant. THIS AGREEMENT (or a copy of it) authorizes any
person or business listed as follows to give BMA, or its reinsurers, any records
or knowledge of me (us) or my (our) health: a) any licensed physician, medical
practitioner, hospital, clinic or other medical or medically related facility;
b) any insurance company; or c) the Medical Information Bureau or other agency
employed by BMA.
If the owner is different from the proposed insured, the proposed insured agrees
that the owner alone is entitled to all privileges incident to the ownership of
the policy. It is agreed that the application by the proposed insured is made on
behalf of the owner and that the owner agrees to all statements, answers, and
agreements by the proposed insured in the application.
<TABLE>
<CAPTION>
<S> <C>
Proposed Insured (Owner unless otherwise specified) Proposed Owner (if other than Proposed Insured)
X ____________________________________________________ X ____________________________________________________
Completed at: City ___________________________________ Completed at: City ___________________________________
State __________________________ Date ________________ State __________________________ Date ________________
Spouse (if coverage applied for) Child (if age 18 or older and coverage applied for)
X ____________________________________________________ X ____________________________________________________
Completed at: City ___________________________________ Completed at: City ___________________________________
State __________________________ Date ________________ State __________________________ Date ________________
</TABLE>
[ ] I consent to the delivery of the following documents to me in electronic
format, if available electronically: Profiles, prospectuses, prospectus
supplements, annual reports, semi-annual reports and proxy statements/materials.
I understand that BMA will send me the above documents in electronic format,
when available, until I revoke this consent.
[ ] I prefer to receive printed copies of profiles, prospectuses, prospectus
supplements, annual reports and semi-annual reports.
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, if required, and submit with this form.
<TABLE>
<CAPTION>
<S> <C>
Representative's Signature ____________________________ Broker-Dealer/Branch _____________________ / ID#________
Print Name ___________________________________________ Address ________________________________________________
Broker Number ____________________ /SSN ______________ ________________________________________________
Compensation Option [ ] A [ ] B [ ] C Telephone ______________________________________________
Authorized B/D Signature ______________________________
</TABLE>
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This space is for the use of BMA's Service Center.
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