<PAGE>
As filed with the Securities and Exchange Commission on February 27, 1998
Securities Act File No. 33-57732
Investment Company Act File No. 811-7462
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
POST-EFFECTIVE AMENDMENT NO. 13 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
AMENDMENT NO. 14 [X]
The Sierra Variable Trust
______________________________
(Exact Name of Registrant as Specified in Charter)
9301 Corbin Avenue, Suite 333
Northridge, California 91324
______________________________
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (818) 725-0200
Keith B. Pipes
The Sierra Variable Trust
601 West Main Street, Suite 801
Spokane, Washington 99201-0613
_______________________
(Name and Address of Agent for Service)
Copy to:
Joseph B. Kittredge, Jr.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
It is proposed that this filing will become effective (check appropriate box):
[_] immediately upon filing pursuant to paragraph (b), or
[X] on March 27, 1998 pursuant to paragraph (b), or
[_] 60 days after filing pursuant to paragraph (a)(1), or
[_] 75 days after filing pursuant to paragraph (a)(2), or
[_] on [date] pursuant to paragraph (a)(ii) of Rule 485.
________________________________________
<PAGE>
THE SIERRA VARIABLE TRUST
FORM N-1A
CROSS REFERENCE SHEET
PART A
Item No. Prospectus Heading
- -------- ------------------
1. Cover Page Cover Page
2. Synopsis........... Highlights
3. Condensed Financial
Information........ Financial Highlights
4. General Description of
Registrant......... Management of the Trust; Investment
Policies; Certain Investment Guidelines;
Special Considerations; General
Information and History
5. Management of the Fund...... Management of the Trust-Investment
Adviser,-- Sub-Advisers, -- Distributor
and-Administration; Investment
Guidelines; Special Considerations
5A. Management's Discussion of
Fund Performance......... Not Applicable
6. Capital Stock and Other
Securities............... Dividends, Distributions and Taxes;
General Information and History--The
Trust
7. Purchase of Securities
Being Offered............ General Information and History --
Purchase and Redemption, and -- Net
Asset Value; Management of the Trust --
Distributor
8. Redemption or Repurchase.. General Information and History --
Purchase and Redemption
9. Pending Legal Proceedings.. Not Applicable
PART B
Heading in Statement of
Item No. Additional Information
- -------- ----------------------
10. Cover Page......... Cover Page
11. Table of Contents...... Contents
12. General Information and
<PAGE>
History............... General Information and History;
Management of the Trust; see
Prospectus -- "General Information
and History"
13. Investment Objectives and
Policies.............. Investment Objective and Policies
of the Funds and Portfolios
14. Management of the Fund.... Management of the Trust
15. Control Persons and Principal
Holders of Securities..... Management of the Trust; see
Prospectus -- "General Information
and History"
16. Investment Advisory and
Other Service ........ Management of the Trust; see
Prospectus-- "Management of
the Trust -- Administration"
17. Brokerage Allocation and
Other Practices....... Investment Objective and Policies
of the Funds and Portfolios
18. Capital Stock and Other
Securities.......... Management of Trust; see
Prospectus -- "Dividends
Distributions and Taxes" and
"General Information and History
19. Purchase, Redemption and
Pricing of Securities Being
Offering............. Purchase and Pricing of Shares;
Net Asset Value
20. Tax Status........... Taxes; see Prospectus --
"Dividends, Distributions and
Taxes"
21. Underwriters......... Purchase and Pricing of Shares;
see Prospectus -- "Management of
the Trust -- Distributor"
22. Calculation of Performance
Data................ Performance; see Prospectus --
"Performance"
23. Financial Statements....... Financial Statements
PART C
Information required to be included in Part C is set forth under
the appropriate item, so numbered, in Part C to this Registration
Statement.
Part A and B of Post-Effective Amendments Nos. 11 and 12 to the
Registrant's Registration Statement filed with the Commission in December 15
1997, and December 31, 1997, respectively, are unchanged by this Post Effective
Amendment and are incorporation herein by reference.
<PAGE>
THE SIERRA VARIABLE TRUST
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Index to Financial Statements and Supporting Schedules
Audited financial statements as of December 31, 1997 and the report of
Price Waterhouse, LLP dated February 20, 1998 -- to be filed or
incorporated by reference in a subsequent amendment.
Statements of Assets and Liabilities -- December 31, 1997/(a)/
Statements of Operations -- period ended December 31, 1997/(a)/
Statements of Changes in Net Assets -- year ended December 31,
1996 and period ended December 31, 1997/(a)/
Statement of Cash Flows -- year ended December 31, 1997/(a)/
Financial Highlights -- year ended December 31, 1997/(a)/(b)/
Portfolio of Investments -- December 31, 1997/(a)/
Notes to Financial Statements -- December 31, 1997/(a)/
Report of Independent Accountants -- period ended December 31,
1997/(a)/
/(a)/ Incorporated by reference into Parts A and B.
/(b)/ Included in Part A.
(b) Exhibits:
1(a) Agreement and Declaration of Trust, dated January 29, 1993, originally
filed as exhibit to Registration Statement on Form N-1A February 2,
1993, is incorporated by reference to Post-Effective Amendment No. 7
filed on February 28, 1997.
1(b) Amendment No. 1 to the Trust's Agreement and Declaration of Trust,
dated April 27, 1993, originally filed as an exhibit to Post-Effective
Amendment No. 1 October 13, 1993, is incorporated by reference to
Post-Effective Amendment No. 7 filed on February 28, 1997.
1(c) Amendment No. 2 to the Trust's Agreement and Declaration of Trust,
dated September 22, 1993, originally filed as an exhibit to Post-
Effective Amendment No. 1 October 13, 1993, is incorporated by
reference to Post-Effective Amendment No. 7 filed on February 28,
1997.
2 By-Laws of the Trust, originally filed as exhibit to
<PAGE>
Registration Statement on Form N-1A February 2, 1993, is incorporated
by reference to Post-Effective Amendment No. 7 filed on February 28,
1997.
3 Not applicable.
4 See Exhibits 1(a)-(c) and 2.
5(a) Management Agreement, dated as of January 30, 1998, between the Trust
and Composite Research & Management Co. ("Composite").*
5(b) Sub-Adviser Agreement, dated as of January 30, 1998 between Composite
and Janus Capital Corporation ("Janus") with respect to the Growth
Fund and the Emerging Growth Fund.*
5(b) Sub-Adviser Agreement, dated as of January 30, 1998, between Composite
and Warburg, Pincus Counsellors, Inc. ("Warburg") with respect to the
International Growth Fund.*
6(a) Distribution Agreement, dated January 30, 1998, between the Trust and
Composite Funds Distributor, Inc.*
6(b) Participation Agreement among the Trust, Composite, Murphey Favre
Security Services, Inc., American General Life Insurance Company
("American General") and American General Securities Incorporated
("American General Securities"), dated as of January 30, 1998.*
7 Not applicable.
8 Custody Agreement, dated as of January 1, 1996, between the Trust and
Boston Safe Deposit & Trust Company is incorporated by reference to
Exhibit 8(a) of Post-Effective Amendment No. 7 filed on February 28,
1997.
9(a) Form of Transfer Agent Contract, dated as of March __, 1998, between
the Trust and Murphy Favre Securities Services, Inc. ("Murphey
Favre").*
9(b) Administration Agreement dated January 30, 1998 between the Trust and
Murphey Favre.*
10 Consent and Opinion of Counsel is incorporated by reference to
Post-Effective Amendment No. 7 filed on February 28, 1997.
11 Consent of Independent Accountants -- to be filed by amendment.
12 Not applicable.
13 Not applicable.
14 Not applicable.
<PAGE>
15 Not applicable.
16 Certain Performance Data relating to the Funds, originally filed as an
exhibit to Post-Effective Amendment No. 2 on April 22, 1994, is
incorporated by reference to Post-Effective No. 7 filed on February
28, 1997.
17 Financial data schedules -- to be filed by amendment.
* Filed herewith
Item 25. Persons Controlled by or Under Common Control with Registrant
The Trust is a business trust organized under the laws of the
Commonwealth of Massachusetts. Separate Account D of American General Life
Insurance Company is the sole shareholder of, and may be deemed to control, the
Trust. American General Life Insurance Company is a subsidiary of American
General Corporation.
The list of American General Corporation's active subsidiaries is
hereby incorporated by reference to Item 26 of the Form N-4 registration
statement of American General Life Insurance Company and its Separate Account D,
File Nos. 33-57730 and 811-2441.
The Registrant is operated under the supervision of Composite.
Composite is affiliated with Murphey Favre Securities Services, Inc., which
serves as transfer agent for the Registrant. An affiliate of Composite,
Composite Funds Distributor, Inc. serves as the principal underwriter and
distributor for the Registrant, Composite, Murphey Favre Securities Services,
Inc. and Composite Funds Distributor, Inc. serve in their same capacities for
the four other registered investment companies (constituting [_] portfolios).
Composite, Murphey Favre Securities Services, Inc. and Composite Funds
Distributor, Inc. are all wholly-owned subsidiaries of Washington Mutual, Inc.
and are all incorporated under the laws of the State of Washington.
Item 26. Number of Holders of Securities
(2)
(1) No. of Record Holders at
Title of Class December 31, 1997
- -----------------------------------------------------------------------------
Shares of the Money Market Fund, without par 5
value
- -----------------------------------------------------------------------------
Shares of the Short Term High Quality Bond 3
Fund, without par value
- -----------------------------------------------------------------------------
Bond & Stock Fund 0
- -----------------------------------------------------------------------------
Shares of the U.S. Government Fund, without 4
<PAGE>
par value
- -----------------------------------------------------------------------------
Shares of the Corporate Income Fund, without 4
par value
- -----------------------------------------------------------------------------
Shares of the Growth and Income Fund, without 2
par value
- -----------------------------------------------------------------------------
Shares of the Growth Fund, without par value 3
- -----------------------------------------------------------------------------
Shares of the Emerging Growth Fund, without 5
par value
- -----------------------------------------------------------------------------
Shares of the International Growth Fund, 1
without par value
- -----------------------------------------------------------------------------
Shares of the Northwest Fund, without par value 0
- -----------------------------------------------------------------------------
Shares of the Capital Growth Portfolio, 1
without par value
- -----------------------------------------------------------------------------
Shares of the Growth Portfolio, 1
without par value
- -----------------------------------------------------------------------------
Shares of the Balanced Portfolio, without par 1
value
- -----------------------------------------------------------------------------
Shares of the Portfolio, without 1
par value
- -----------------------------------------------------------------------------
Shares of the Income Portfolio, without 0
par value
- -----------------------------------------------------------------------------
Item 27. Indemnification
Article VIII of the Registrant's Agreement and Declaration of Trust
provides in relevant part:
The Trust shall indemnify each of its Trustees and officers (including
persons who serve at the Trust's request as directors, officers or trustees
of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise) (hereinafter referred to as a "Covered
Person") against all liabilities and expenses, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative
or legislative body, in which such Covered Person may be or may have been
involved as a party or otherwise or with which such Covered person may be
or may have been threatened, while in office or thereafter, by
<PAGE>
reason of being or having been such a Covered Person except with respect to
any matter as to which such Covered Person shall have been finally
adjudicated in any such action, suit or other proceeding to be liable to
the Trust to its Shareholders by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office. Expenses, including counsel fees
so incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties), shall
be paid from time to time by the Trust in advance of the final disposition
of any such action, suit or proceeding upon receipt of an undertaking by or
on behalf of such Covered Person to repay amounts so paid to the Trust if
it is ultimately determined that indemnification of such expenses is not
authorized under this Article; provided, however, that either (a) such
Covered Person shall have provided appropriate security for such
undertaking, (b) the Trust shall be insured against losses arising from any
such advance payments or (c) either a majority of the disinterested
Trustees acting on the matter (provided that a majority of the
disinterested Trustees then in office act on the matter), or independent
legal counsel in a written opinion, shall have determined, based upon a
review of readily available facts (as opposed to a full trial type inquiry)
that there is reason to believe that such Covered Person will be found
entitled to indemnification under this Article.
As to any matter disposed of (whether by a compromise payment, pursuant to
a consent decree or otherwise) without an adjudication by a court, or by
any other body before which the proceeding was brought, that such Covered
Person is liable to the Trust or its Shareholders by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office, indemnification shall
be provided if (a) approved, after notice that it involves such
indemnification, by at least a majority of the disinterested Trustees
acting on the matter (provided that a majority of the disinterested
Trustees then in office act on the matter) upon a determination, based upon
a review of readily available facts (as opposed to a full trial type
inquiry) that such Covered Person is not liable to the Trust or its
Shareholders by reasons of wilful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his or her
office, or (b) there has been obtained an opinion in writing of independent
legal counsel, based upon a review of readily available facts (as opposed
to a full trial type inquiry) to the effect that such indemnification would
not protect such Person against any liability to the Trust to which he or
she would otherwise be subject by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office. Any approval pursuant to this Section shall not
prevent the recovery from any Covered Person of any amount paid to such
Covered Person in accordance with this Section as indemnification if such
Covered Person is subsequently adjudicated by a court of competent
jurisdiction to have been liable to the Trust or its Shareholders by reason
of wilful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered Person's office.
Item 28. Business and Other Connections of Investment Adviser --
<PAGE>
Registrant's Investment Adviser is Composite, a wholly-owned subsidiary of
Washington Mutual, Inc., a Washington corporation. Composite serves in that
capacity for other registered investment companies (constituting [_]
portfolios).
Item 29. Principal Underwriter
(a) Composite Funds Distributor, Inc., the Distributor of the Trust,
currently acts as distributor for the The Sierra Trust Funds.
(b) Not applicable.
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 3(a) of the Investment Company Act of 1940, as amended, and the
rules thereunder are maintained at the offices of the Trust, 9301 Corbin
Avenue, Northridge, CA and 601 West Main Avenue, Suite 801, Spokane,
Washington 99201.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to Shareholders,
upon request and without charge.
<PAGE>
**********
NOTICE
**********
A copy of the Agreement and Declaration of Trust of The Sierra Variable
Trust (the "Trust") is on file with the Secretary of State of the Commonwealth
of Massachusetts and notice is hereby given that this Registration Statement has
been executed on behalf of the Trust by an officer of the Trust as an officer
and by its Trustees as trustees and not individually and the obligations of or
arising out of this Registration Statement are not binding upon any of the
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the Trust.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended, the Registrant
certifies that it meets all the requirements for effectiveness of this Post-
Effective Amendment No. 13 pursuant to Rule 485(b) of the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 13 to the Registrant's
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Northridge, in the State of California on the
23rd of February, 1998.
THE SIERRA VARIABLE TRUST
By: /s/ KEITH B. PIPES*
---------------------------
Keith B. Pipes
President
Pursuant to the requirements of the 1933 Act, as amended, this Post-
Effective Amendment No. 13 has been signed below by the following persons in
their capacities and on the date(s) indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ KEITH B. PIPES* President February 23, 1998
- -----------------------------------
Keith B. Pipes
(Principal Executive Officer)
/s/ CRAIG M. MILLER Treasurer and Chief February 23, 1998
- -----------------------------------
Craig M. Miller Financial Officer
(Principal Financial and Accounting
Officer)
/s/ DAVID E. ANDERSON* Trustee February 23, 1998
- -----------------------------------
David E. Anderson
/s/ ARTHUR H. BERNSTEIN* Trustee February 23, 1998
- -----------------------------------
Arthur H. Bernstein
/s/ EDMOND R. DAVIS* Trustee February 23, 1998
- -----------------------------------
Edmond R. Davis
/s/ JOHN W. ENGLISH* Trustee February 23, 1998
- -----------------------------------
John W. English
/s/ ALFRED E. OSBORNE, JR. PH.D.* Trustee February 23, 1998
- -----------------------------------
Alfred E. Osborne, Jr. Ph.D.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/ WILLIAM G. PAPESH* Trustee February 23, 1998
- -----------------------------------
William G. Papesh
/s/ WAYNE L. ATTWOOD. WAYNE L. Trustee February 23, 1998
- -----------------------------------
ATTWOOD. MD*
- ---------------------
Wayne L. Attwood, MD
/s/ KRISTIANNE BLAKE* Trustee February 23, 1998
- -----------------------------------
Kristianne Blake
/s/ ANNE V. FARRELL* Trustee February 23, 1998
- -----------------------------------
Anne V. Farrell
/s/ MICHAEL K. MURPHY* Trustee February 23, 1998
- -----------------------------------
Michael K. Murphy
/s/ DANIEL L. PAVELICH* Trustee February 23, 1998
- -----------------------------------
Daniel L. Pavelich
/s/ JAY ROCKEY* Trustee February 23, 1998
- -----------------------------------
Jay Rockey
/s/ RICHARD C. YANCEY* Trustee February 23, 1998
- -----------------------------------
Richard C. Yancey
</TABLE>
* By: /s/ KEITH B. PIPES
--------------------------------
Keith B. Pipes
Attorney-in-Fact pursuant to the powers of
attorney filed herewith
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
5(a) Management Agreement, dated as of January 30, 1998, between the Trust
and Composite Research & Management Co. ("Composite").
5(b) Sub-Adviser Agreement, dated as of January 30, 1998 between Composite
and Janus Capital Corporation ("Janus") with respect to the Growth
Fund and the Emerging Growth Fund.
5(b) Sub-Adviser Agreement, dated as of January 30, 1998, between Composite
and Warburg, Pincus Counsellors, Inc. ("Warburg") with respect to the
International Growth Fund.
6(a) Distribution Agreement, dated January 30, 1998, between the Trust and
Composite Funds Distributor, Inc.
6(b) Participation Agreement among the Trust, Composite, Murphey Favre
Security Services, Inc., American General Life Insurance Company
("American General") and American General Securities Incorporated
("American General Securities"), dated as of January 30, 1998.
9(a) Form of Transfer Agent Contract, dated as of March ___, 1998, between
the Trust and Murphey Favre Securities Services, Inc. ("Murphey
Favre").
9(b) Administration Agreement dated January 30, 1998 between the Trust and
Murphey Favre.
<PAGE>
THE SIERRA VARIABLE TRUST
INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT (this "Agreement"), dated January 30, 1998,
between The Sierra Variable Trust, a Massachusetts business trust, (the
"Trust"), on behalf of each of its series which are listed on the signature page
of this Agreement (each referred to herein as a "Fund" and collectively the
"Funds") and Composite Research & Management Co., a Washington corporation (the
"Manager").
W I T N E S S E T H
-------------------
WHEREAS, the Trust is an open-end series management investment company,
registered under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Trust, desires to retain the Manager to render investment
management services to each Fund, and the Manager is willing to render such
services;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
1. Appointment. The Trust hereby appoints the Manager to act as investment
manager to each Fund for the period and on the terms set forth in this
Agreement. The Manager accepts such appointment and agrees to render the
services herein described, for the compensation herein provided.
2. Management. Subject to the supervision of the Board of Trustees of the
Trust, the Manager shall manage the investment operations of each Fund and the
composition of each Fund's portfolio, including the purchase, retention and
disposition of securities therefor, in accordance with such Fund's investment
objectives, policies and restrictions as stated in the Prospectus and Statement
of Additional Information (as such terms are hereinafter defined) and
resolutions of the Trust's Board of Trustees and subject to the following
understandings:
(a) The Manager shall provide supervision of each Fund's investments,
furnish a continuous investment program for each Fund's portfolio and
determine from time to time what securities will be purchased, retained, or
sold by each Fund, and what portion of the assets will be invested or held
as cash.
(b) The Manager, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Agreement and Declaration
of Trust of the Trust and the investment policies of the Funds as
determined by the Board of Trustees of the Trust.
(c) The Manager shall determine the securities to be purchased or sold by
each Fund and shall place orders for the purchase and sale of portfolio
securities, pursuant to its determinations, with brokers or dealers
selected by the Manager. In executing
<PAGE>
portfolio transactions and selecting brokers or dealers, the Manager shall
use its best efforts to seek on behalf of each Fund the best overall terms
available. In assessing the best overall terms available for any
transaction, the Manager may consider all factors it deems relevant,
including the breadth of the market in the security, the price of the
security, the size of the transaction, the timing of the transaction, the
reputation, financial condition, experience, and execution capability of a
broker or dealer, the amount of commission, and the value of any brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934), provided by a broker or dealer. The
Manager is authorized to pay to a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for a Fund which is in excess of the amount of commission
another broker or dealer would have charged for effecting the transaction
if the Manager determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research services provided by
such broker or dealer, viewed in terms of that particular transaction or in
terms of the overall responsibilities of the Manager to the Fund and/or
other accounts over which the Manager exercises investment discretion.
(d) On occasions when the Manager deems the purchase or sale of a security
to be in the best interest of a Fund as well as other fiduciary accounts
for which it has investment responsibility, the Manager, to the extent
permitted by applicable laws and regulations, may aggregate the securities
to be so sold or purchased in order to obtain the best execution, most
favorable net price or lower brokerage commissions.
(e) Subject to the provisions of the Agreement and Declaration of Trust of
the Trust and the 1940 Act, the Manager, at its expense, may select and
contract with one or more investment sub-advisers (the "sub-adviser") for
each Fund to perform some or all of the services for which it is
responsible pursuant to this Section 2. The Manager shall be solely
responsible for the compensation of any sub-adviser of a Fund for its
services to such Fund. The Manager may terminate the services of any sub-
adviser at any time in its sole discretion, and shall, at such time, assume
the responsibilities of such sub-adviser unless and until a successor sub-
adviser is selected. To the extent that more than one sub-adviser is
selected, the Manager shall, in its sole discretion, determine the amount
of the Fund's assets allocated to each such sub-adviser.
3. Services Not Exclusive. The investment management services rendered by the
Manager hereunder to the Funds are not to be deemed exclusive, and the Manager
shall have the right to render similar services to others, including, without
limitation, other investment companies.
4. Expenses. During the term of this Agreement, the Manager shall pay all
expenses incurred by it in connection with its activities under this Agreement
including the salaries and expenses of any of the officers or employees of the
Manager who act as officers, Trustees or employees of the Trust but excluding
the cost of securities purchased for the Funds and the amount of any brokerage
fees and commissions incurred in executing portfolio transactions for the Funds,
and shall provide the Funds with suitable office space. Other expenses to be
2
<PAGE>
incurred in the operation of the Funds (other than those borne by any third
party), including without limitation, taxes, interest, brokerage fees and
commissions, fees of Trustees who are not officers, directors, or employees of
the Manager, federal registration fees and state Blue Sky qualification fees,
administration fees, bookkeeping, charges of custodians, transfer and dividend
disbursing agents' fees, certain insurance premiums, industry association fees,
outside auditing and legal expenses, costs of maintaining the Funds' or the
Trust's existence, costs of independent pricing services, costs attributable to
investor services (including, without limitation, telephone and personnel
expenses), costs of preparing, printing and distributing prospectuses to
existing shareholders, costs of stockholders' reports and meetings of
shareholders and Trustees of the Funds or the Trust, as applicable, and any
extraordinary expenses will be borne by the Funds.
5. Compensation. For the services provided pursuant to this Agreement, the
Trust shall pay to the Manager as full compensation therefor a monthly fee
computed on the average daily net assets at the annual rate for each Fund as
stated in Schedule A attached hereto. The Trust acknowledges that the Manager,
as agent for the Funds, will allocate a portion of the fee equal to the sub-
advisory fee payable to the sub-advisor, if any, under its sub-advisory
agreement to the sub-advisor for sub-advisory services. The Trust acknowledges
that the Manager, as agent for the Funds, may allocate a portion of the fee to
Murphey Favre Securities Services, Inc. for administrative services, portfolio
accounting and regulatory compliance systems. The Manager also from time to
time and in such amounts as it shall determine in its sole discretion may
allocate a portion of the fee to Composite Funds Distributor, Inc. for
facilitating distribution of the Funds. This payment would be made from revenue
which otherwise would be considered profit to the Manager for its services.
This disclosure is being made to the Trust solely for the purpose of conforming
with requirements of the Washington Department of Revenue for exclusion of
revenue from the Washington Business and Occupation Tax.
6. Limitation of Liability. The Manager shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
7. Delivery of Documents. The Trust has heretofore delivered to the Manager
true and complete copies of each of the following documents and shall promptly
deliver to it all future amendments and supplements thereto, if any:
(a) Agreement and Declaration of Trust as presently in effect and as
amended from time to time;
(b) Bylaws of the Trust;
(c) Registration Statement under the Securities Act of 1933 and under the
1940 Act of the Trust on Form N-1A, and all amendments thereto, as filed
with the Securities
3
<PAGE>
and Exchange Commission (the "Registration Statement") relating to the
Trust and the shares of the Funds;
(d) Notification of Registration of the Trust under the 1940 Act on Form
N-8A;
(e) Prospectuses of the Trust relating to shares of the Funds (such
prospectuses as presently in effect and/or as amended or supplemented from
time to time, the "Prospectus"); and
(f) Statement of Additional Information of the Trust relating to shares of
the Funds (such statement as presently in effect and/or as amended or
supplemented from time to time, the "Statement of Additional Information").
8. Duration and Termination. This Agreement shall become effective as of the
date first above-written for an initial period of two years and shall continue
thereafter so long as such continuance is specifically approved at least
annually (a) by the vote of the Board of Trustees including a majority of those
members of the Trust's Board of Trustees who are not parties to this Agreement
or "interested persons" of any such party, cast in person at a meeting called
for that purpose, or by vote of a majority of the outstanding voting securities
of each Fund. Notwithstanding the foregoing, (a) this Agreement may be
terminated with respect to any Fund at any time, without the payment of any
penalty, by either the Trust (by vote of the Trust's Board of Trustees or by
vote of a majority of the outstanding voting securities of the Fund) or the
Manager, on sixty (60) days prior written notice to the other and (b) shall
automatically terminate in the event of its assignment. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested persons" and "assignment" shall have the meanings assigned to such
terms in the 1940 Act.
9. Amendments. No provision of this Agreement may be amended, modified,
waived or supplemented except by a written instrument signed by the party
against which enforcement is sought. No amendment of this Agreement shall be
effective until approved in accordance with any applicable provisions of the
1940 Act.
10. Use of Name and Logo. The Trust agrees that it shall furnish to the
Manager, prior to any use or distribution thereof, copies of all prospectuses,
statements of additional information, proxy statements, reports to stockholders,
sales literature, advertisements, and other material prepared for distribution
to stockholders of the Trust or to the public, which in any way refer to or
describe the Manager or which include any trade names, trademarks or logos of
the Manager or of any affiliate of the Manager. The Trust further agrees that
it shall not use or distribute any such material if the Manager reasonably
objects in writing to such use or distribution within five (5) business days
after the date such material is furnished to the Manager.
The Manager and/or its affiliates own the names "Sierra", "Composite" and
any other names which may be listed from time to time on a Schedule B to be
attached hereto that they may develop for use in connection with the Trust,
which names may be used by the Trust only
4
<PAGE>
with the consent of the Manager and/or its affiliates. The Manager, on behalf of
itself and/or its affiliates, consents to the use by the Trust of such names or
any other names embodying such names, but only on condition and so long as (i)
this Agreement shall remain in full force, (ii) the Fund and the Trust shall
fully perform, fulfill and comply with all provisions of this Agreement
expressed herein to be performed, fulfilled or complied with by it, and (iii)
the Manager is the manager of each Fund of the Trust. No such name shall be used
by the Trust at any time or in any place or for any purposes or under any
conditions except as provided in this section. The foregoing authorization by
the Manager, on behalf of itself and/or its affiliates, to the Trust to use such
names as part of a business or name is not exclusive of the right of the Manager
and/or its affiliates themselves to use, or to authorize others to use, the
same; the Trust acknowledges and agrees that as between the Manager and/or its
affiliates and a Fund or the Trust, the Manager and/or its affiliates have the
exclusive right so to use, or authorize others to use, such names, and the Trust
agrees to take such action as may reasonably be requested by the Manager, on
behalf of itself and/or its affiliates, to give full effect to the provisions of
this section (including, without limitation, consenting to such use of such
names). Without limiting the generality of the foregoing, the Trust agrees that,
upon (i) any violation of the provisions of this Agreement by the Trust or (ii)
any termination of this Agreement, by either party or otherwise, the Trust will,
at the request of the Manager, on behalf of itself and/or its affiliates, made
within six months after such violation or termination, use its best efforts to
change the name of the Trust so as to eliminate all reference, if any, to such
names and will not thereafter transact any business in a name containing such
names in any form or combination whatsoever, or designate itself as the same
entity as or successor to an entity of such names, or otherwise use such names
or any other reference to the Manager and/or its affiliates, except as may be
required by law. Such covenants on the part of the Trust shall be binding upon
it, its Trustees, officers, shareholders, creditors and all other persons
claiming under or through it.
The provisions of this section shall survive termination of this Agreement.
11. Notices. Any notice or other communication required to be given pursuant
to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, if to the Trust: 601 W. Main Ave., Suite 300,
Spokane, Washington 99201; or if to the Manager: 1201 Third Avenue, Suite
1220, Seattle, Washington 98101; or to either party at such other address as
such party shall designate to the other by a notice given in accordance with the
provisions of this section.
12. Miscellaneous.
(a) Except as otherwise expressly provided herein or authorized by the
Board of Trustees of the Trust from time to time, the Manager for all
purposes herein shall be deemed to be an independent contractor and shall
have no authority to act for or represent the Trust in any way or otherwise
be deemed an agent of the Trust.
<PAGE>
(b) The Trust shall furnish or otherwise make available to the Manager
such information relating to the business affairs of the Trust as the
Manager at any time or from time to time reasonably requests in order to
discharge its obligations hereunder.
(c) This Agreement shall be governed by and construed in accordance with
the laws of The Commonwealth of Massachusetts and shall inure to the
benefit of the parties hereto and their respective successors.
(d) If any provision of this Agreement shall be held or made invalid or by
any court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13. Agreement and Declaration of Trust and Limitation of Liability. A copy of
the Agreement and Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts, and notice is hereby
given that this Agreement is executed by an officer of the Trust on behalf of
the Trustees of the Trust, as trustees and not individually, on further behalf
of the Funds, and that the obligations of this Agreement shall be binding upon
the assets and properties of each Fund, individually, and shall not be binding
upon the assets and property of any other Fund or series of the Trust or upon
any of the Trustees, officers, employees, agents or shareholders of the Funds or
the Trust individually.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first above-written.
THE SIERRA VARIABLE TRUST, on behalf of its
series
SHORT TERM HIGH QUALITY BOND FUND,
GROWTH FUND,
EMERGING GROWTH FUND ,
INTERNATIONAL GROWTH FUND,
GLOBAL MONEY FUND,
U.S. GOVERNMENT FUND,
CORPORATE INCOME FUND,
GROWTH AND INCOME FUND,
CAPITAL GROWTH PORTFOLIO,
GROWTH PORTFOLIO,
BALANCED PORTFOLIO,
VALUE PORTFOLIO, and
INCOME PORTFOLIO
By: /s/ KEITH PIPES
----------------------------------
Name: KEITH PIPES
Title: PRESIDENT
Attest:
By: /s/ MICHAEL D. GOTH
-----------------------------------
Name: MICHAEL D. GOTH
Title: SENIOR VICE PRESIDENT
COMPOSITE RESEARCH &
MANAGEMENT CO.
By: /s/ WILLIAM G. PAPESH
-----------------------------------
William G. Papesh
President
Attest:
By: /s/ SHARON L. HOWELLS
-----------------------------------
Sharon L. Howells
Secretary
<PAGE>
SCHEDULE A
THE SIERRA VARIABLE TRUST
INVESTMENT MANAGEMENT AGREEMENT
The fees to be charged to The Sierra Variable Trust for services provided under
this Agreement (including any sub-advisory fees) are as follows:
<TABLE>
<CAPTION>
FIRST OVER
$500M $500M
------- -------
<S> <C> <C> <C> <C> <C>
Global Money Fund ................. 0.500% 0.400%
U.S. Government Fund .............. 0.600% 0.500%
Corporate Income Fund ............. 0.650% 0.500%
FIRST OVER
$ 25M $ 25M
------ ------
Growth Fund ....................... 0.950% 0.875%
FIRST $200M- OVER
$200M $500M $500M
------ ------ ------
Short-Term High Quality Bond Fund . 0.500% 0.450% 0.400%
FIRST $25M- OVER
$25M $500M $500M
------ ------ ------
Emerging Growth Fund .............. 0.900% 0.850% 0.750%
FIRST $50M- OVER
$50M $125M $125M
------ ------ ------
International Growth Fund ......... 0.950% 0.850% 0.750%
FIRST $100M- $200M- $400M- OVER
$100M $200M $400M $500M $500M
------ ------ ------ ------ ------
Growth & Income Fund .............. 0.800% 0.750% 0.700% 0.650% 0.575%
</TABLE>
<TABLE>
<CAPTION>
ALL ASSET LEVELS
-----------------
<S> <C>
Capital Growth Portfolio ......... 0.10%
Growth Portfolio ................. 0.10%
Balanced Portfolio ............... 0.10%
Value Portfolio .................. 0.10%
</TABLE>
<PAGE>
INVESTMENT SUB-ADVISORY AGREEMENT
This Agreement is made and entered into this 30th day of January, 1998, by
and between Composite Research & Management Co. (the "Manager"), a corporation
organized under the laws of the State of Washington and Janus Capital
Corporation (the "Sub-Adviser"), a corporation organized under the laws of the
State of Colorado.
W I T N E S S E T H
-------------------
WHEREAS, the Manager is engaged in the business of rendering investment
advisory and management services, is registered as an investment adviser under
the Investment Advisers Act of 1940, (the "Advisers Act"), and is the investment
adviser to the Growth Fund and the Emerging Growth Fund of The Sierra Variable
Trust (the "Trust"), an unincorporated business trust organized under the laws
of the Commonwealth of Massachusetts pursuant to a Management Contract, dated as
of January 30, 1998, between the Manager and the Trust (the "Management
Contract");
WHEREAS, the Trust is engaged in business as an open-end, management
investment company and is so registered under the Investment Company Act of
1940, (the "1940 Act");
WHEREAS, the Trust offers a number of investment portfolios, each with its
own investment objective and strategies, and of which two investment portfolios
are the Growth Fund and the Emerging Growth Fund (each a "Fund" and together,
the "Funds");
WHEREAS, the Sub-Adviser is engaged in the business of rendering investment
advisory and management services and is registered as an investment adviser
under the Advisers Act;
WHEREAS, the Manager is authorized to retain sub-advisers and desires to
retain the Sub-Adviser to furnish investment advisory and management services to
the Funds and the Sub-Adviser is willing to furnish such services;
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
it is hereby agreed by and among the parties hereto as follows:
1. Investment Description; Appointment
The Manager, with the approval of the Trust, desires to employ and hereby
appoints the Sub-Adviser to act as investment sub-adviser to the Funds. The
Sub-Adviser accepts the appointment and agrees to furnish the services described
herein for the compensation set forth below.
In performance of its duties, the Sub-Adviser will comply with the
limitations specified in the Trust's Master Trust Agreement, the By-laws of the
Trust and the stated investment objectives, policies and restrictions of each
Fund as set forth in the Trust's Registration Statement
<PAGE>
on Form N-1A, File No. 33-57732, as in effect and which may be amended from time
to time (the "Registration Statement"), and in such manner and to such extent as
may from time to time be approved by the Board of Trustees of the Trust. Copies
of the Registration Statement, have been or will be submitted to the Sub-
Adviser. Copies of all amendments or supplements to the Registration Statement
and the Trust's Agreement and Declaration of Trust will be provided to the Sub-
Adviser during the continuance of this Agreement before or at the time such
amendments or supplements become effective.
The Manager agrees to furnish the Sub-Adviser with minutes of meetings of
the Board of Trustees of the Trust to the extent they may affect the duties of
the Sub-Adviser, a certified copy of any financial statements or reports
prepared by certified or independent public accountants for the Trust which
relate to the Funds, and with copies of any financial statements or reports made
by the Trust to its shareholders or to any governmental body or securities
exchange, and any further materials or information which the Sub-Adviser may
reasonably request to enable it to perform its functions under this Agreement.
2. Services as Investment Sub-Adviser
Subject to the supervision of the Board of Trustees of the Trust and of the
Manager, the Sub-Adviser will (a) maintain compliance procedures for the Funds
that the Sub-Adviser believes are adequate to ensure its compliance with the
applicable provisions of the 1940 Act and the Advisers Act, (b) make investment
decisions for the Funds in accordance with each Fund's investment objective(s)
and policies as stated in each Fund's Registration Statement and, after notice
to the Sub-Adviser, as they may be amended from time to time, (c) place purchase
and sale orders on behalf of the Funds to effectuate the investment decisions
made, (d) maintain books and records with respect to the securities transactions
of the Funds in accordance with the 1940 Act and the Advisers Act and the rules
adopted thereunder and will furnish to the Manager quarterly, annual and special
reports as the Manager may reasonably request; and (e) treat confidentially and
as proprietary information of the Trust, all records and other information
relative to the Trust and prior, present or potential shareholders; and will not
knowingly use such records and information for any purpose other than
performance of its responsibilities and duties hereunder, except after prior
notification to and approval in writing by the Trust, which approval shall not
be unreasonably withheld and such records may not be withheld where the Sub-
Adviser may be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Trust. In providing those services, the
Sub-Adviser will supervise each Fund's investments and conduct a continual
program of investment, evaluation and, if appropriate, sale and reinvestment of
each Fund's assets.
Subject to the supervision of the Manager and in accordance with the
investment objective and policies as stated in the Trust's Registration
Statement, the Sub-Adviser is authorized, in its discretion and without prior
consultation with the Manager, to buy, sell, lend and otherwise trade in any
stocks, bonds and other securities and investment instruments on
2
<PAGE>
behalf of each Fund, without regard to the length of time the securities have
been held and the resulting rate of portfolio turnover or any tax
considerations, and so long as consistent with the foregoing, the majority or
the whole of each Fund may be invested in such proportions of stocks, bonds,
other securities or investment instruments, or cash as the Sub-Adviser shall
determine. In addition, the Sub-Adviser will furnish the Funds or the Manager
with whatever statistical information the Company or the Manager may reasonably
request with respect to the instruments that a Fund may hold or contemplate
purchasing.
3. Brokerage
Subject to (i) the over-riding objective of obtaining the best possible
execution of orders; and (ii) review and approval of the Board of Trustees of
the Trust, which may be conducted as often as quarterly, the Sub-Adviser shall
place all orders for the purchase and sale of investments for the Funds with
brokers, dealers, futures commissions merchants, or other sources (hereafter,
"brokers or dealers") selected by the Sub-Adviser, which may include brokers or
dealers affiliated with the Sub-Adviser. All transactions with any affiliated
person of the Trust, or where any such affiliated person acts as broker or agent
in connection with any such transaction, shall be accomplished in compliance
with the 1940 Act, the Advisers Act, the Securities Exchange Act of 1934, as
amended, the rules adopted thereunder and the procedures adopted thereunder by
the Trust. As provided in the Management Contract, any entity or person
associated with the Manager or Sub-Adviser which is a member of a national
securities exchange is authorized to effect any transaction on such exchange for
the account of a Fund which is permitted by Section 11(a) of the Securities
Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Trust has consented
to the retention of compensation for the transactions in accordance with Rule
11a2-2(T)(2)(iv). Purchase or sell orders for the Funds may be aggregated with
contemporaneous purchase or sell orders of other clients of the Sub-Adviser;
provided that (i) no advisory account will be favored by the Sub-Adviser over
any other account; (ii) each client of the Sub-Adviser who participates in such
an aggregated order will participate at the average share price, with all
transaction costs shared on a pro rata basis; (iii) only advisory clients'
transactions will be aggregated for such an aggregated order; and (iv) the
accounts of clients whose orders are aggregated will be segregated on the Sub-
Adviser's books and records so as to identify the particular client who has the
beneficial interest therein. The Sub-Adviser shall use its best efforts to
obtain execution of Fund transactions at prices which are advantageous to such
Fund and at commission rates that are reasonable in relation to the benefits
received. However, the Sub-Adviser may select brokers or dealers on the basis
that they provide brokerage, research, or other services or products to a Fund
and/or other accounts serviced by the Sub-Adviser. The Sub-Adviser may pay a
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission or dealer spread another broker or dealer
would have charged for effecting that transaction if the Sub-Adviser determines
in good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research products and/or services provided by such
broker or dealer. This determination, with respect to brokerage and research
services or products, may be viewed in terms of either that particular
transaction or the overall responsibilities which the Sub-Adviser and its
affiliates have with
3
<PAGE>
respect to a Fund and to accounts over which they exercise investment
discretion, and not all such services or products may be used by the Sub-Adviser
in managing a Fund; provided that with respect to such transaction and such
determination the affiliates of the Sub-Adviser shall have the same
responsibilities to the Funds as the Sub-Adviser has under this Agreement.
4. Information Provided to the Trust
The Sub-Adviser will keep the Trust and the Manager informed of
developments materially affecting each Fund of which the Sub-Adviser becomes
aware and will, on its own initiative, furnish the Trust and the Manager on at
least a quarterly basis with whatever information the Sub-Adviser believes is
appropriate for this purpose.
5. Standard of Care
The Sub-Adviser shall exercise its best judgment in rendering the services
described in paragraphs 2 and 3 above. Except as may otherwise be provided by
federal or state securities laws, the Sub-Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by a Fund in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement (the conduct excepted in this
sentence shall be referred to as "Disqualifying Conduct").
6. Compensation
In consideration of the services rendered pursuant to this Agreement, the
Manager will pay the Sub-Adviser on the first business day of each month a fee
for the previous month at the annual rate of .55% of each Fund's average daily
net assets up to $25 million and .50% of each Fund's average daily net assets in
excess of $25 million. The fee for the first month shall be prorated based upon
the number of days the account was open in that month. Upon any termination of
this Agreement before the end of a month, the fee for such part of that month
shall be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Sub-Adviser, the
value of each Fund's net assets shall be computed at the times and in the manner
specified in the Registration Statement.
7. Expenses
The Sub-Adviser will bear all of its expenses in performing its services
under this Agreement, which expenses shall not include brokerage fees or
commissions in connection with the effectuation of securities transactions. The
Sub-Adviser shall bear no expenses of the Trust, a Fund or the Manager. The
Trust bears the expenses described in its Registration Statement. Any
reimbursement of advisory fees required by the Management Contract between the
Trust
4
<PAGE>
and the Manager or any voluntary or statutory expense limitation provision shall
be the sole responsibility of the Manager.
8. Services to Other Companies or Accounts
The Manager understands that the Sub-Adviser now acts, will continue to act
and may act in the future as investment adviser to fiduciary and other managed
accounts and as investment adviser to one or more other investment companies or
series of investment companies, and the Manager has no objection to the Sub-
Adviser so acting, provided that whenever a Fund and one or more other accounts
or investment companies advised by the Sub-Adviser have available funds for
investment, investments suitable and appropriate for each will be allocated in a
manner reasonably equitable to each entity. Similarly, opportunities to sell
securities will be allocated in such an equitable manner. The Manager
recognizes that in some cases this procedure may limit the size of the position
that may be acquired or disposed of for a Fund. In addition, the Manager
understands that the persons employed by the Sub-Adviser to assist in the
performance of the Sub-Adviser's duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict the right of the Sub-Adviser or any affiliate of the Sub-Adviser to
engage in and devote time and attention to other business or to render services
of whatever kind or nature. The Manager recognizes and agrees that the Sub-
Adviser may provide advice to other clients which may differ from or be
identical to advice given with respect to a Fund.
9. Term of Agreement
This Agreement shall become effective upon its execution, shall continue
for a one year term and shall continue thereafter, with respect to a Fund, so
long as such continuance is specifically approved at least annually by (i) the
Board of Trustees of the Trust or (ii) a vote of a "majority" (as defined in the
1940 Act) of the Fund's outstanding voting securities, provided that in either
event the continuance is also approved by a majority of the Board of Trustees
who are not "interested persons" (as defined in the 1940 Act) of any party to
this Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable, with respect to a Fund,
without penalty, on 60 days written notice by the Manager, the Board of Trustees
of the Trust or by vote of holders of a majority of the Fund's shares, or upon
60 days written notice, by the Sub-Adviser and will terminate automatically upon
any termination of the Management Contract. In addition, this Agreement will
also terminate automatically in the event of its assignment (as defined in the
1940 Act). The Sub-Adviser agrees to notify the Manager of any circumstances
that to its best knowledge and belief might result in this Agreement being
deemed to be assigned.
5
<PAGE>
10. Representations of the Manager and the Sub-Adviser
The Manager represents that (i) a copy of the Trust's Agreement and
Declaration of Trust, dated January 27, 1993, together with all amendments
thereto, is on file in the office of the Secretary of the Commonwealth of
Massachusetts, (ii) the appointment of the Sub-Adviser has been duly authorized;
(iii) it has acted and will continue to act in conformity with the 1940 Act and
other applicable laws; and (iv) it is authorized to perform the services herein.
The Sub-Adviser represents that it is authorized to perform the services
described herein.
11. Indemnification
The Manager shall indemnify and hold harmless the Sub-Adviser from and
against any and all claims, losses, liabilities or damages (including reasonable
attorneys' fees and other related expenses), howsoever arising from or in
connection with this Agreement or the performance by the Sub-Adviser of its
duties hereunder; provided, however, that nothing contained herein shall require
that the Sub-Adviser be indemnified for Disqualifying Conduct.
12. Amendment of this Agreement
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. No amendment of this Agreement shall be effective with respect to a
Fund until approved by vote of a majority of the outstanding voting securities
of the Fund, and by the vote, cast in person at a meeting called for the purpose
of voting on such approval, of a majority of the Trustees of the Trust who are
not interested persons of the Trust or of the Manager or of the Sub-Adviser.
13. Entire Agreement
This Agreement constitutes the entire agreement between the parties hereto.
14. Governing Law
This Agreement shall be governed in accordance with the laws of the
Commonwealth of Massachusetts.
15. Miscellaneous
(a) Unless the Manager gives the Sub-Adviser written instructions to the
contrary, the Sub-Adviser shall vote all proxies solicited by or with respect to
the issuers of securities in which assets of a Fund may be invested. The Sub-
Adviser shall use its best good faith judgment to vote such proxies in a manner
which best serves the interests of such Fund's shareholders.
6
<PAGE>
(b) The Manager shall provide the Sub-Adviser with a copy of each Fund's
agreement (the "Custody Agreement") with the Custodian (the "Custodian")
designated to hold the assets of the Fund and any modification thereto in
advance. Each Fund's assets shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement. The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian. Any assets added to a Fund shall be delivered directly to the
Custodian.
(c) The Manager agrees and acknowledges that the Sub-Adviser is the sole
owner of the name and mark "Janus" and that all use of any designation comprised
in whole or part of Janus (a "Janus Mark") under this Agreement shall inure to
the benefit of the Sub-Adviser. The use by the Trust on its own behalf or on
behalf of a Fund of any Janus Mark in any advertisement or sales literature or
other materials promoting a Fund shall be with the consent of the Sub-Adviser.
The Trust and the Manager shall not, without the consent of the Sub-Adviser,
make representations regarding the Sub-Adviser intended to be disseminated to
the investing public in any disclosure document, advertisement or sales
literature or other materials promoting a Fund. Such consent shall not be
required for any documents or other materials intended for broker-dealer use
only, for use by the Trust's trustees and for internal use by the Trust and the
Manager. Consent by the Sub-Adviser to such use of any Janus Mark and any such
representation shall not be unreasonably withheld and shall be deemed to be
given if no written objection is received by the Trust, such Fund or the Manager
within 3 business days after the request is made by the Trust, a Fund or the
Manager for such use of any Janus Mark or any such representation. Upon
termination of this Agreement for any reason, the Trust and the Manager shall
cease all use of any Janus Mark(s) as soon as reasonably practicable.
(d) The Sub-Adviser agrees and acknowledges that the Trust is the sole
owner of the name and mark "The Sierra Variable Trust" and the Manager is the
sole owner of the name and mark "Composite Research & Management Co." and that
any and all use of any designation comprised in whole or in part of "The Sierra
Variable Trust" or "Composite Research & Management Co." (a "Composite Mark")
under this Agreement shall inure to the benefit of the Trust or the Manager,
respectively. The use by the Sub-Adviser on its own behalf of any Composite
Mark in any advertisement or sales literature or other materials promoting the
Sub-Adviser shall be with the consent of the Trust or the Manager, respectively.
The Sub-Adviser shall not, without the consent of the Trust or the Manager, as
applicable, make representations regarding the Trust, a Fund or the Manager in
any disclosure document, advertisement or sales literature or other materials
promoting the Sub-Adviser. Consent by the Trust and the Manager to such use of
any Composite Mark and any such representations shall not be unreasonably
withheld and shall be deemed to be given if no written objection is received by
the Sub-Adviser within 5 business days after the request by the Sub-Adviser is
made for such use of any Composite Mark or any such representations. Upon
termination of this Agreement for any reason, the Sub-Adviser shall cease any
and all use of any Composite Mark as soon as reasonably practicable.
7
<PAGE>
(e) The Sub-Adviser may perform its services through any employee, officer
or agent of the Sub-Adviser, and the Trust and the Funds shall not be entitled
to the advice, recommendation, or judgment of any specific person.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed as of the date first written above.
ATTEST: COMPOSITE RESEARCH &
MANAGEMENT CO.
/s/ SHARON L. HOWELLS By: /s/ WILLIAM G. PADESH
- ----------------------- -----------------------------------
Name: SHARON L. HOWELLS Name: WILLIAM G. PADESH
Title: SECRETARY Title: PRESIDENT
ATTEST: JANUS CAPITAL CORPORATION
/s/ VERNA MORRIS By: /s/ BONNIE M. HOWE
- ----------------------- ------------------------------------
Name: VERNA MORRIS Name: BONNIE M. HOWE
Title: SECRETARY Title: ASSISTANT VICE PRESIDENT
8
<PAGE>
SUB-ADVISER AGREEMENT
Sub-Adviser Agreement executed as of January 30, 1998 between Composite
Research & Management Co., a Washington corporation (the "Manager"), and WARBURG
PINCUS ASSET MANAGEMENT, INC., a Delaware corporation (the "Sub-Adviser").
W I T N E S S E T H
-------------------
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. Services to Be Rendered by Sub-adviser to the Sierra Variable Trust.
(a) Subject always to the control of the Trustees of The Sierra
Variable Trust, a Massachusetts business trust (the "Trust") and to the
overall supervision of the Manager, the Sub-Adviser, at its expense as
provided herein, will render the following services to the International
Growth Fund (the "Fund") of the Trust. The Sub-Adviser will furnish
continuously an investment program for the portfolio represented by shares
of the Fund and will make investment decisions on behalf of the Fund with
respect to all of the assets of the Fund, including cash and cash
equivalents and will place all orders for the purchase and sale of
portfolio securities of the Fund and for the investment, reinvestment and
management of cash or cash equivalents of the Fund. The Sub-Adviser is
hereby appointed and shall serve as attorney-in-fact and agent of the Fund
for the limited purposes of executing account documentation, agreements,
contracts and other documents as the Sub-Adviser may be requested by
brokers, dealers, counterparties and other persons in connection with the
Sub-Adviser's management of the assets of the Fund.
(i) In the performance of its duties, the Sub-Adviser will comply
with the provisions of the Agreement and Declaration of Trust, the By-
laws of the Trust and the stated investment objectives, policies and
restrictions of the Fund as set forth in its registration statement on
Form N-1A, File No. 33-57732, and will use its best efforts to
safeguard and promote the welfare of the Fund, and to comply with
other policies which the Trustees or the Manager, as the case may be,
may from time to time determine. Copies of the Trust's Registration
Statement, including exhibits, Agreement and Declaration of Trust and
By-laws, in each case as amended to date, have been or will be
provided to the Sub-Adviser, and the Manager agrees promptly to
provide the Sub-Adviser with all amendments or supplements to the
Registration Statement, Agreement and Declaration of Trust and By-
laws.
(ii) The Sub-Adviser shall make its officers and employees
available to the Manager at reasonable times to review investment
policies of the Fund and to consult with the Manager regarding the
investment affairs of the Fund.
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(iii) The Manager agrees, on an ongoing basis, to notify the
Sub-Adviser expressly in writing of each change in the fundamental and
nonfundamental investment policies of the Fund. The Manager desires
to engage and hereby appoints the Sub-Adviser to act as investment
sub-adviser to the Fund to which appointment the Trust agrees. The
Sub-Adviser accepts the appointment and agrees to furnish the services
described herein for the compensation set forth herein.
(b) The Sub-Adviser, at its expense, will furnish all necessary office
space and equipment, bookkeeping and clerical services (excluding
shareholder accounting and transfer agency services) required for it to
perform its duties hereunder and will pay all salaries, fees and expenses
of any officer of the Trust who is an employee of, or otherwise affiliated
with, the Sub-Adviser and is not an employee of, or otherwise affiliated
with, the Manager; provided that no person who is an employee of, or
otherwise affiliated with, the Sub-Adviser shall serve as a Trustee of the
Trust.
(c) The Manager agrees to provide the Sub-Adviser with such assistance
as may be reasonably requested by the Sub-Adviser in connection with its
activities pertaining to the Fund under this Agreement, including, without
limitation, information concerning the Fund, its funds available, or to
become available, for investment and generally as to the condition of the
Fund's affairs.
(d) In fulfilling its obligations hereunder, the Sub-Adviser shall be
entitled to rely on and act in accordance with, and the Manager agrees to
hold the Sub-Adviser harmless for any act or omission taken in good faith
in reliance on, information and instructions, which may be standing
instructions, provided to the Sub-Adviser by the Manager, the Trust's
administrator, or other agent of the Manager designated by the Manager.
Such information and instructions shall be conveyed to the Sub-Adviser in a
timely manner so as to permit the Sub-Adviser to take such action as may be
required in an orderly fashion. The Manager agrees to provide or cause to
be provided to the Sub-Adviser on an ongoing basis, such information as is
reasonably requested by the Sub-Adviser for performance by the Sub-Adviser
of its obligations under this Agreement, and the Sub-Adviser shall not be
in breach of any term of this Agreement or be deemed to have acted
negligently if the Manager fails to provide or cause to be provided such
information and the Sub-Adviser relies on the information most recently
furnished to the Sub-Adviser. The Manager will promptly provide the Sub-
Adviser with any procedures applicable to the Sub-Adviser adopted from time
to time by the Board of Trustees of the Trust and agrees to promptly
provide the Sub-Adviser copies of all amendments thereto.
(e) In the selection of brokers, dealers, futures commissions
merchants or any other sources of portfolio investments for the Fund
(hereafter, "brokers or dealers") and the placing of orders for the
purchase and sale of portfolio investments for the Fund, the Sub-Adviser
shall use its best efforts to obtain the most favorable price and execution
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<PAGE>
available, except to the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described below. In
using its best efforts to obtain the most favorable price and execution
available, the Sub-Adviser, bearing in mind the Fund's best interests at
all times, shall consider all factors it deems relevant, including by way
of illustration, price, the size of the transaction, the nature of the
market for the security, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the reputation,
experience and financial stability of the broker or dealer involved and the
quality of service rendered by the broker or dealer in other transactions.
Subject to such policies as the Trustees of the Trust may determine that
are communicated in writing to the Sub-Adviser as provided in Section
1(a)(iii) hereof, the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Trust to pay, on behalf
of the Fund, a broker or dealer that provides brokerage and research
services to the Sub-Adviser an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction,
if the Sub-Adviser determines in good faith that such amount of commission
was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Sub-Adviser's overall responsibilities over
time with respect to the Trust and to other clients of the Sub-Adviser as
to which the Sub-Adviser exercises investment discretion. As provided in
the Management Contract referred to in Section 3 below, the Trust agrees
that any entity or person associated with the Manager or Sub-Adviser that
is a member of a national securities exchange is authorized to effect any
transaction on such exchange for the account of the Fund that is permitted
by Section 11(a) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or Rule 11a2-2(T) thereunder, and the Trust has consented to
the retention of compensation for such transactions in accordance with
Section 11(a) or Rule 11a2-2(T)(2)(iv) under the 1934 Act.
(f) In selecting brokers or dealers to execute a particular
transaction, and in evaluating the best price and execution available, the
Sub-Adviser is authorized to consider the brokerage and research services
(within the meaning of Section 28(e) of the 1934 Act) provided to the Sub-
Adviser or any affiliated person of the Sub-Adviser. Subject to the
requirements of Section 17(e) of the Investment Company Act of 1940, as
amended (the "1940 Act"), the Sub-Adviser is specifically authorized to
select an affiliated person of the Sub-Adviser to execute brokerage, but in
no event principal, transactions for the Fund. On occasions when the Sub-
Adviser deems the purchase or sale of a security to be in the best interest
of the Fund as well as other clients, the Sub-Adviser, to the extent
permitted by applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be purchased or sold in order to
obtain the most favorable execution and/or lower brokerage commissions, if
any, and efficient execution. In such event, allocation of securities so
sold or purchased, as well as the expenses incurred in the transaction,
will be made by the Sub-Adviser in the manner the
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Sub-Adviser considers to be the most equitable and consistent with its
fiduciary obligation over time to the Fund and to such other clients.
Furthermore, the Trust and the Manager recognize that the Sub-Adviser may
give advice, and take action, with respect to its other clients that may
differ from the advice given, or the time or nature of action taken, with
respect to the Fund.
(g) The Sub-Adviser shall not be obligated to pay any expenses of or
for the Fund not expressly assumed by the Sub-Adviser pursuant to this
Section 1 other than as provided in Section 3.
(h) The Sub-Adviser shall maintain all books and records with respect
to the Fund's portfolio transactions required by subparagraphs (b)(5) -
(b)(11) and paragraph (f) of Rule 31a-1 under the 1940 Act, and shall
render to the Board of Trustees of the Trust such periodic and special
reports as the Board may reasonably request.
2. Other Agreements, Etc.
The Manager understands that the Sub-Adviser now acts, will continue to act
and may act in the future as investment adviser to fiduciary and other managed
accounts and as investment adviser to one or more other investment companies or
series of investment companies, and the Manager has no objection to the Sub-
Adviser so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Adviser have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity over time.
Similarly, opportunities to sell securities will be allocated in an equitable
manner over time. The Manager recognizes that in some cases this procedure may
adversely affect the size of the position that may be acquired or disposed of
for the Fund. In addition, the Manager understands that the persons employed by
the Sub-Adviser to assist the performance of the Sub-Adviser's duties hereunder
will not devote their full time to such service and nothing contained herein
shall be deemed to limit or restrict the right of the Sub-Adviser or any
affiliate of the Sub-Adviser to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
3. Compensation to Be Paid by the Manager to the Sub-adviser.
The Manager will pay to the Sub-Adviser as compensation for the Sub-
Adviser's services rendered and for the expenses borne by the Sub-Adviser
pursuant to Section 1, a fee, computed and paid monthly at the annual rate of
0.50% of the Fund's average daily net assets. Such average daily net asset
value of the Fund shall be determined by taking an average of all of the
determinations of such net asset value during such month at the close of
business on each business day during such month while this contract is in
effect. For the purposes of determining fees payable to the Sub-Adviser, the
value of the net assets of the Fund shall be computed at the times and in the
manner specified in the Prospectus or Statement of Additional Information
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<PAGE>
relating to the Fund as from time to time in effect. Such fee shall be payable
for each month within 10 business days after the end of such month.
Notwithstanding the foregoing, in the event that any reduction in the fees
paid to the Manager under the investment advisory agreement between the Trust
and the Manager and relating to the Fund (the "Management Contract") shall be
required as a result of any statutory or regulatory limitation on investment
company expenses, there shall be a proportionate reduction in the fee payable to
the Sub-Adviser hereunder; provided that the Sub-Adviser will never be required
to pay more than the amount of fees it receives.
If the Sub-Adviser shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. Assignment Terminates this Agreement; Amendments of this Contract.
This Agreement shall automatically terminate, without the payment of any
penalty, in the event of its assignment or in the event that the Management
Contract shall have terminated for any reason; and this Agreement shall not be
amended unless such amendment be approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Fund, and by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager or of the Sub-Adviser.
5. Indemnifications.
(a) The Manager shall indemnify the Sub-Adviser and its controlling
persons, officers, directors, employees, agents, legal representatives and
persons controlled by it (collectively, "Sub-Adviser Related Persons") to
the fullest extent permitted by law against any and all loss, damage,
judgements, fines, amounts paid in settlement and reasonable expenses,
including attorneys' fees (collectively "Losses"), incurred by the Sub-
Adviser or Sub-Adviser Related Persons arising from or in connection with
this Agreement or the performance by the Sub-Adviser or Sub-Adviser Related
Persons of its or their duties hereunder, including, without limitation,
such Losses arising under any applicable law or that may be based upon any
untrue statement of a material fact contained in the Trust's registration
statement, or any amendment thereof or any supplement thereto, or the
omission to state therein a material fact known or which should have been
known and was required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission was
made in reliance upon written information furnished to the Manager by the
Sub-Adviser or a Sub-Adviser Related Person; except to the extent any such
Losses result from willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of the Sub-Adviser or a Sub-Adviser Related
Person in the performance of any of its duties under, or in connection
with, this Agreement.
5
<PAGE>
(b) The Sub-Adviser shall indemnify the Manager and its controlling
persons, officers, directors, employees, agents, legal representatives and
persons controlled by it (collectively, "Manager Related Persons") to the
fullest extent permitted by law against any and all Losses incurred by the
Manager or Manager Related Persons arising from or in connection with this
Agreement or the performance by the Manager or Manager Related Persons of
its or their duties hereunder so long as such Losses arise out of the Sub-
Adviser's failure to perform its responsibilities to the Manager, the Fund
or the Trust hereunder, including, without limitation, such Losses arising
under any applicable law or that may be based upon any untrue statement of
a material fact contained in the Trust's registration statement, or any
amendment thereof or any supplement thereto, or the omission to state
therein a material fact known or which should have been known and was
required to be stated therein or necessary to make the statements therein
not misleading, to the extent that such statement or omission was based on
information provided by the Sub-Adviser or a Sub-Adviser Related Person
unless such statement or omission was made in reliance upon written
information furnished to the Sub-Adviser or Sub-Adviser Related Person by
the Manager or a Manager Related Person; and except to the extent any such
Losses result from willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of the Manager or a Manager Related Person
in the performance of any of its duties under, or in connection with, this
Agreement.
(c) The indemnifications provided in this Section 5 shall survive the
termination of this Agreement.
6. Effective Period and Termination of this Agreement.
This Agreement shall become effective upon its execution, and shall remain
in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) The Trust may at any time terminate this Agreement by not more
than sixty (60) days written notice delivered or mailed by registered mail,
postage prepaid, to the Manager and the Sub-Adviser, or
(b) If (i) the Trustees of the Trust or the shareholders by the
affirmative vote of a majority of the outstanding shares of the Fund, and
(ii) a majority of the Trustees of the Trust who are not interested persons
of the Trust or of the Manager or of the Sub-Adviser, by vote cast in
person at a meeting called for the purpose of voting on such approval, do
not specifically approve at least annually the continuance of this
Agreement, then this Agreement shall automatically terminate as at the
close of business on the second anniversary of its execution, or upon the
expiration of one year from the effective date of the last such
continuance, whichever is later; provided, however, that if the continuance
of this Agreement is submitted to the shareholders of the Fund for their
approval and such shareholders fail to approve such continuance of this
Agreement as
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<PAGE>
provided herein, the Sub-Adviser may continue to serve hereunder in a
manner consistent with the 1940 Act and the Rules and Regulations
thereunder, or
(c) The Manager may at any time terminate this Agreement by not less
than sixty (60) days written notice delivered or mailed by registered mail,
postage prepaid, to the Sub-Adviser, and the Sub-Adviser may at any time
terminate this Agreement by not less than ninety (90) days written notice
delivered or mailed by registered mail, postage prepaid, to the Manager.
Action by the Trust under (a) above may be taken either (i) by vote of a
majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the Fund.
Termination of this Agreement pursuant to this Section 6 shall be without
the payment of any penalty.
7. Certain Information.
The Sub-Adviser shall promptly notify the Manager in writing of the
occurrence of any of the following events: (a) the Sub-Adviser shall fail to be
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended from time to time, or under the laws of any jurisdiction in which the
Sub-Adviser is required to be registered as an investment adviser in order to
perform its obligations under this Agreement, (b) the Sub-Adviser shall have
been served or otherwise have notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or
body, involving the affairs of the Trust and (c) there shall be any change in
the control of the Sub-Adviser.
8. Certain Definitions.
(a) For the purposes of this Agreement, the "affirmative vote of a
majority of the outstanding shares" of the Fund means the affirmative vote,
at a duly called and held meeting of shareholders, (i) of the holders of
67% or more of the shares of the Fund present (in person or by proxy) and
entitled to vote at such meeting, if the holders of more than 50% of the
outstanding shares of or the Fund entitled to vote at such meeting are
present in person or by proxy, or (ii) of the holders of more than 50% of
the outstanding shares of the Fund entitled to vote at such meeting,
whichever is less.
(b) For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the 1940 Act and the Rules and Regulations thereunder,
subject, however, to such exemptions as may be granted by the Securities
and Exchange Commission under the 1940 Act; the term "specifically approve
at least annually" shall be construed in a manner consistent with the 1940
Act and the Rules and Regulations thereunder; and the
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term "brokerage and research services" shall have the meaning given in the
1934 Act and the Rules and Regulations thereunder.
9. Nonliability of Sub-adviser.
The Sub-Adviser shall exercise its best judgment in rendering its services
under this agreement. Except as may otherwise be provided by federal or state
securities laws and in Section 5 hereof, in the absence of willful misfeasance,
bad faith or gross negligence on the part of the Sub-Adviser, or reckless
disregard of its obligations and duties hereunder, the Sub-Adviser shall not be
subject to any liability to the Trust or the Fund, or to any shareholder of the
Fund, for any act or omission in the course of, or connected with, rendering
services hereunder.
10. Limitation of Liability of the Trustees and Shareholders.
A copy of the Agreement and Declaration of Trust of the Trust is on file
with the Secretary of The Commonwealth of Massachusetts, and notice is hereby
given that this instrument is reviewed and approved on behalf of the Trust by
the Trustees of the Trust as Trustees and not individually and that the
obligations of this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets and property of
the Fund.
11. Use of Names.
(a) It is understood that the name "Warburg Pincus Asset Management,
Inc." or any derivative thereof or logo associated with that name is the
valuable property of the Sub-Adviser and its affiliates and that the Trust
and/or the Fund have the right to use such name (or derivative or logo) in
offering materials of the Trust and/or Fund only with the prior written
approval of the Sub-Adviser and for so long as the Sub-Adviser is an
investment sub-adviser to the Trust and/or the Fund; provided that the
Trust and the Fund may use such name (or derivative or logo) without such
prior written approval in offering materials of the Trust to the extent
that (i) such materials simply list the Sub-Adviser as the Sub-Adviser to
the Fund as part of a listing of the investment sub-advisers to the series
or portfolios of the Trust with a brief description of the Sub-Adviser's
experience and duties hereunder; (ii) such materials include such name (or
derivative or logo) and any related information that has been previously
approved by the Sub-Adviser or that is required to be disclosed by
applicable law or regulation, such as information disclosed in the Trust's
registration statement; or (iii) such materials are intended for broker-
dealer use only, for use by the Trust's Trustees, or for internal use by
the Trust and the Manager. Such prior written approval of the Sub-Adviser
shall not be unreasonably withheld and shall be deemed to be given if no
written objection is received by the Trust, the Fund or the Manager within
three business days after the request is made by the Trust, the Fund or the
Manager for such use. Upon termination of this Agreement, the Trust and the
Fund
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shall forthwith cease to use such name (or derivative or logo) as soon as
reasonably practicable.
(b) It is understood that the names "The Sierra Variable Trust," and
"Composite Research & Management Co." or any derivatives thereof or logos
associated with such names is the valuable property of the Trust and/or the
Manager and their affiliates and that the Sub-Adviser or its affiliates
have the right to use such names (or derivatives or logos) in marketing
materials of the Sub-Adviser or its affiliates only with the prior written
approval of the Manager or the Trust, as applicable, and for so long as the
Sub-Adviser is an investment sub-adviser to the Trust and/or the Fund;
provided that the Sub-Adviser or its affiliates may use such names (or
derivatives or logos) without such prior written approval in marketing
materials of the Sub-Adviser or its affiliates to the extent that (i) such
materials simply list the Trust or the Fund as part of a listing of the
investment companies advised by the Sub-Adviser or its affiliates with a
brief description of the Trust or the Fund; or (ii) such materials include
such names (or derivatives or logos) and any related information that has
been previously approved by the Trust or the Manager, as applicable, or
that is required to be disclosed by applicable law or regulation, such as
information disclosed in the Form ADV or Form BD of the Sub-Adviser or its
affiliates; or (iii) such materials are intended for broker-dealer use only
or for internal use by the Sub-Adviser. Such prior written approval of the
Manager or the Trust, as applicable, shall not be unreasonably withheld and
shall be deemed to be given if no written objection is received by the Sub-
Adviser within three business days after the request is made by the Sub-
Adviser for such use. Upon termination of this Agreement, the Sub-Adviser
and its affiliates shall forthwith cease to use such names (or derivatives
or logos) as soon as reasonably practicable.
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IN WITNESS WHEREOF, the Manager and the Sub-Adviser have each caused this
instrument to be signed below in duplicate on its behalf by its duly authorized
representative, all as of the day and year first above written.
COMPOSITE RESEARCH & MANAGEMENT CO.
By /s/ WILLIAM G. PAPESH
----------------------------------
Name: WILLIAM G. PAPESH
Title: PRESIDENT
WARBURG PINCUS ASSET MANAGEMENT, INC.
By /s/ EUGENE P. GRACE
----------------------------------
Name: EUGENE P. GRACE
Title: SENIOR VICE PRESIDENT
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DISTRIBUTION CONTRACT
THIS DISTRIBUTION CONTRACT (this "Agreement"), dated this 30 day of
____________, 1998, between The Sierra Variable Trust, a Massachusetts business
trust (the "Trust"), on behalf of each of its series which are listed on the
signature page of this Agreement (each a "Fund" and collectively the "Funds"),
and Composite Funds Distributor, Inc., a Washington corporation doing business
at Seattle, Washington, herein sometimes referred to as the "Distributor."
RECITALS
--------
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and the Funds are separate series of the Trust;
WHEREAS, each Fund and the Distributor desire to enter into an
agreement that sets forth standard terms and conditions for distribution and
other services for Trust shares; the shareholders of each Fund are and will be
separate accounts in unit investment trust form ("Eligible Separate Accounts")
of insurance companies or portfolios holding interests in such Funds in
connection with asset allocation programs;
WHEREAS, variable annuity and insurance product ("Variable Products")
net premiums and considerations will be allocated to Eligible Separate Accounts
for investment in each Fund;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. APPOINTMENT. The Trust hereby affirms the appointment of Composite
Funds Distributor, Inc. as the agent for distribution of Trust shares and grants
Distributor the right to sell Trust shares on behalf of each Fund and on terms
set forth in this Agreement. The Distributor accepts such appointment and agrees
to render the services herein set forth for the payments herein provided
(including reimbursement of expenses).
2. The Trust has approved a Memorandum of "Procedures for Monitoring
Potential Conflicts Among Insurance Company Shareholders" (the "Procedures").
This Distribution Contract shall be subject to the provisions of the Procedures,
the terms of which are incorporated herein by reference, made a part hereof and
controlling. The procedures may be amended or superseded, without prior notice,
and this Agreement shall be deemed amended to the extent the Procedures are
amended or superseded. The Distributor represents and warrants that it will act
in a manner consistent with such Procedures as so set forth and as they may be
amended or superseded, so long as it is a Distributor of the Trust. This
provision shall survive the termination of this Agreement.
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3. The Distributor is hereby authorized, from time to time, to enter
into separate written agreements ("Participation Agreements" or, individually, a
"Participation Agreement"), on terms and conditions not inconsistent with this
Agreement, with insurance companies which have Eligible Separate Accounts and
which agree to participate in the distribution of Trust shares, directly or
through affiliated broker-dealers (collectively, with the insurance companies
the "Participating Insurance Companies"), by means of distribution of Variable
Products and to use their best efforts to solicit applications for Variable
Products. Each Participation Agreement shall be entered into jointly with the
Participating insurance Company and the Eligible Separate Account. The
Distributor may not enter into any Participation Agreement with any
Participating Insurance Company that is more favorable than that maintained with
any other Participating Insurance Company and Eligible Separate Account.
4. Such Participating Insurance Companies and their agents or
representatives soliciting applications for Variable Products shall be duly and
appropriately licensed, registered or otherwise qualified for the sale of
Variable Products under any applicable insurance laws and any applicable
securities of one or more states or other jurisdictions in which Variable
Products may be lawfully sold. Each such Participating Insurance Company shall
be both registered as a broker-dealer under the Securities Exchange Act and a
member of the NASD. Each such Participating Insurance Company shall agree to
comply with all laws and regulations, whether federal or state, and whether
relating to insurance, securities or other general areas, including but not
limited to the record-keeping and sales supervision requirements of such laws
and regulations.
5. DELIVERY OF DOCUMENTS. The Trust and/or each Fund has furnished the
Distributor with copies of:
(a) Agreement and Declaration of Trust and all amendments thereto
for the Trust (as amended from time to time, the "Declaration of
Trust");
(b) Bylaws and all amendments thereto for the Trust (as amended from
time to time, the "Bylaws"); and
(c) The Trust's registration statement, prospectus and statement of
additional information, then in effect (the "Registration Statement")
under the Securities Act of 1933, as amended (the "1933 Act") and the
1940 Act.
From time to time, the Trust will furnish the Distributor with current
copies of all amendments or supplements to the foregoing, if any, and all
documents, notices and reports filed with the Securities and Exchange Commission
(the "SEC") and will make available, upon request, evidence of payment of
registration fees imposed from time to time by the States in which securities of
each Fund are sold by the Distributor.
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6. DUTIES OF THE DISTRIBUTOR. The Distributor shall provide each Fund
with the benefit of its best judgment, efforts and facilities in rendering its
services as Distributor. The Distributor will act as the exclusive Distributor
of the Trust's shares, subject to the supervision of the Trust's Board of
Trustees and the following understandings: (i) the Trust's Board of Trustees
shall be responsible for and control the conduct of each Fund's affairs; (ii) in
all matters relating to the performance of this Agreement, the Distributor will
act in conformity with the Declaration of Trust and Bylaws of the Trust and the
Registration Statement of each Fund and with the instructions and directions of
the Trust's Board of Trustees; (iii) the Distributor will conform to and comply
with applicable requirements of the 1940 Act, the 1933 Act and all other
applicable federal or state laws and regulations. In carrying out its
obligations hereunder, the Distributor shall:
(a) Provide to the Trust's Board of Trustees, at least quarterly, a
written report of the amounts expended in connection with all
distribution services rendered pursuant to this Agreement, including an
explanation of the purposes for which such expenditures were made; and
(b) Take, on behalf of each Fund, all actions which appear to be
necessary to carry into effect the distribution of each Fund's shares
as provided in paragraph 4.
7. DISTRIBUTION OF SHARES. It is mutually understood and agreed that
the Distributor does not undertake to sell all or any specific portion of the
Trust shares. The Trust shall not sell any of its shares except through the
Distributor. Notwithstanding the provisions of the foregoing sentence:
(a) The Distributor may, and when requested by the Trust, shall,
suspend its efforts to effectuate sales of the Trust shares at any time
when in the opinion of the Distributor or of the Trust no sales should
be made because of a need to revise a Registration Statement, or
because of market or other economic considerations or abnormal
circumstances of any kind. Either party in its sole discretion may
reject orders for the purchase of such shares;
(b) The Trust may withdraw the offering of its shares (i) at any
time with the consent of the Distributor or (ii) without such consent
when so required by the provisions of any statute or of any order, rule
or regulation of any governmental body having jurisdiction;
(c) Purchases and redemptions of Trust shares shall be at the net
asset value of the appropriate Fund, computed as set forth in the most
recent Prospectus and Statement of Additional Informations relating to
the Trust contained in its Registration Statement on Form N-1A, File
No. 33-57732, or any amendments thereto, and any supplements thereto
("Registration Statement"). Trust shares may not be sold or transferred
except to an Eligible Separate Account or a Fund with the prior
approval of the Trust's Board of Trustees.
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(d) The Distributor is not authorized by the Trust to provide any
information or to make any representations other than those contained
in the appropriate Registration Statements, or contained in shareholder
reports or other material that may be prepared by or on behalf of the
Trust for Distributor's use. This shall not be construed to prevent the
Distributor from preparing and distributing sales literature or other
material as it may deem appropriate.
8. The Trust shall not pay any compensation to the Distributor for
services as principal underwriter herein, nor shall the Trust reimburse the
Distributor for any expenses related to such services. The Distributor may, but
need not, pay or charge other Participating Insurance Companies pursuant to
agreements as described in 3.
9. EXPENSES. The expenses connected with distribution shall be
allocable between the Trust and the Distributor as follows:
(a) The Distributor shall furnish the services of personnel to the
extent that such services are required to carry out its obligations
under this Agreement.
(b) The Trust assumes and shall pay or cause to be paid the
following expenses incurred on its behalf:
Registration of shares including the expense of printing and
distributing prospectuses to existing shareholders; expenses incurred for
maintaining the Trust's or Fund's existence, taxes and expenses related to
portfolio transactions; charges and expenses of any registrar, custodian or
depository for portfolio securities and other property, and any stock transfer,
dividend or account agent or agents; all taxes, including securities issuance
and transfer taxes, and fees payable to federal, state or other governmental
agencies; costs and expenses in connection with the registration and maintenance
of registration of the Trust and its shares with the SEC and various states and
other jurisdictions (including filing fees, legal fees and disbursements of
counsel); expenses of shareholders' and directors' meetings and preparing,
printing, and mailing of proxy statements and reports to shareholders; fees and
travel expenses of directors who are not "interested persons" as that term is
defined in the 1940 Act; expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of any outside service used for pricing of the Trust's shares; fees
and expenses of legal counsel and of independent accountants; membership dues of
industry associations; postage (excluding postage for promotional and sales
literature); insurance premiums on property of personnel (including, but not
limited to legal claims and liabilities and litigation costs and any
indemnification related thereto); and all other charges and costs of the Trust's
operation unless otherwise explicitly provided herein.
(c) The Distributor will bear all expenses incurred in connection
with its performance of the services described herein and the incurring
of distribution expenses under this Agreement. For purposes of this
Agreement, "distribution expenses" of the Distributor shall mean all
expenses borne by the Distributor which represent payment for
activities primarily intended to result in the sale of Trust shares.
4
<PAGE>
10. NON-EXCLUSIVITY. The services of the Distributor are not exclusive
and the Distributor shall be entitled to render distribution or other services
to others (including other investment companies) and to engage in other
activities. It is understood and agreed that officers of the Distributor may
serve as officers or trustees of the Trust, and that officers or trustees of the
Trust may serve as officers of the Distributor to the extent permitted by law;
and that officers of the Distributor are not prohibited from engaging in any
other business activity or from rendering services to any other person, or from
serving as partners, officers or directors of any other firm or corporation,
including other investment companies and broker/dealers.
11. TERM AND APPROVAL. This Agreement shall become effective as of the
date first above written for an initial period of two years, and shall continue
in force and effect from year to year thereafter, provided that, with respect to
the Trust or the Trust shares, such continuance is specifically approved at
least annually:
(a) By the Trust's Board of Trustees, including the
affirmative vote of a majority of the Board of Trustees of the Trust
who are not (i) parties to this Agreement, (ii) interested persons of
any such party (as defined in Section 2(a)(19) of the 1940 Act), or
(iii) persons having a direct or indirect financial interest in the
operation of this Agreement or any agreement related to this Agreement
(the "Qualified Trustees") by votes cast in person at a meeting called
for the purpose of voting on such approval, or
(b) By the vote of a majority of the outstanding voting
securities of the Fund (as defined in Section 2(a)(42) of the 1940
Act).
12. TERMINATION. This Agreement may be terminated, with respect to the
Trust or the Trust share, at any time, without the payment of any penalty, on
sixty (60) days' written notice, by vote of the Board of Trustees of the Trust,
or by a vote of a majority of the Qualified Trustees, or by a vote of a majority
of the outstanding voting securities of the Fund (as defined in Section 2(a)(42)
of the 1940 Act), or by the Distributor on sixty (60) days' written notice to
the Fund. The notice provided for herein may be waived by either party. This
Agreement shall automatically terminate in the event of its assignment, the term
"assignment" for this purpose having the meaning set forth in Section (a)(4) of
the 1940 Act.
13. REPRESENTATIONS AND WARRANTIES. The Trust represents and warrants
to the Distributor that any registration statement, prospectus and statement of
additional information, when such Registration Statement becomes effective, will
include all statements required to be contained therein in conformity with the
1933 Act, the 1940 Act and the rules and regulations of the SEC; that all
statements of fact contained in any registration statement, prospectus or
statement of additional information will be true and correct when such
Registration Statement becomes effective; and that neither any registration
statement nor any prospectus or statement of additional information when such
Registration Statement becomes effective will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of
shares. The Distributor may, but shall not be obligated to, propose from time to
time such amendment or amendments to any registration statement and such
supplement or supplements
5
<PAGE>
to any prospectus or statement of additional information as, in the light of
future developments, may, in the opinion of the Distributor's counsel, be
necessary or advisable. If the Trust shall not propose such amendment or
amendments and/or supplement or supplements within fifteen (15) days after
receipt by the Trust of a written request from the Distributor to do so, the
Distributor may, at its option, terminate this Agreement. The Trust shall not
file any amendment to any registration statement or supplement to any prospectus
or statement of additional information without giving the Distributor reasonable
notice thereof in advance; provided, however, that nothing contained in this
Agreement shall in any way limit the Trust's right to file at any time such
amendments to any registration statement and/or supplements to any prospectus or
statement of additional information, of whatever character, as the Trust may
deem advisable, such right being in all respects absolute and unconditional.
14. AMENDMENTS. This Agreement may be amended, with respect to any Fund
or Class, by the parties hereto only if such amendment is specifically approved
(i) by the Board of Trustees of the Trust or by the vote of majority of
outstanding voting securities of the Fund, and (ii) by a majority of the
Qualified Trustees, which vote must be cast in person at a meeting called for
the purpose of voting on such approval.
15. INDEMNIFICATION.
15.1 The Trust authorizes the Distributor and any
dealers with whom Distributor has entered into dealer agreements to
use any prospectus or statement of additional information furnished
by the Trust from time to time, in connection with the sale of
shares of each Fund. The Trust agrees to indemnify, defend and hold
Distributor, its several officers and directors, and any person who
controls Distributor within the meaning of Section 15 of the 1933
Act, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and
any counsel fees incurred in connection therewith) which
Distributor, its officers and directors, or any such controlling
person, may incur under the 1933 Act, the 1940 Act or common law or
otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any
registration statement, any prospectus or any statement of
additional information, or arising out of or based upon any
omission or alleged omission to state a material fact required to
be stated in any registration statement, any prospectus or any
statement of additional information, or necessary to make the
statements in any of them not misleading; provided, however, that
the Trust's agreement to indemnify the Distributor, its officers or
directors, and any such controlling person shall not be deemed to
cover any claims, demands, liabilities or expenses arising out of
or based upon any statements or representations made by Distributor
or its representatives or agents other than such statements and
representations as are contained in any registration statement,
prospectus or statement of additional information and in such
financial and other statements as are furnished to the Distributor
pursuant to paragraph 2 hereof; and further
6
<PAGE>
provided that the Trust's agreement to indemnify the Distributor
and the Trust's representations and warranties shall not be deemed
to cover any liability to the Trust or its shareholders to which
Distributor would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of
its duties, or by reason of Distributor' reckless disregard of its
obligations and duties under this Agreement. The Trust's agreement
to indemnify Distributor, its officers and directors, and any such
controlling person, as aforesaid, is expressly conditioned upon the
Trust's being notified of any action brought against Distributor,
its officers or directors, or any such controlling person, such
notification to be given by letter or by telegram addressed to the
Trust at its principal office stated herein and sent to the Trust
by the person against whom such action is brought, within ten (10)
days after the summons or other first legal process shall have been
served. The failure so to notify the Trust of any such action shall
not relieve the Trust from any liability that the Trust may have to
the person against whom such action is brought by reason of any
such untrue or alleged untrue statement or omission or alleged
omission otherwise than on account of the Trust's indemnity
agreement contained in this paragraph 12.1. The Trust's
indemnification agreement contained in this paragraph 12.1 and the
Trust's representations and warranties in this Agreement shall
remain operative and in full force and effect regardless of any
investigation made by or on behalf of Distributor, its officers and
directors, or any controlling person, and shall survive the
delivery of any shares. This agreement of indemnity will inure
exclusively to Distributor's benefit, to the benefit of its several
officers and directors and their respective estates, and to the
benefit of the controlling persons and their successors. The Trust
agrees to notify Distributor promptly of the commencement of any
litigation or proceedings against the Trust or any of its officers
or trustees in connection with the issuance and sale of any shares.
15.2 Distributor agrees to indemnify, defend and hold
the Trust, its several officers and trustees, and any person who
controls the Trust within the meaning of Section 15 of the 1933
Act, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities and
any counsel fees incurred in connection therewith) that the Trust,
its officers or trustees or any such controlling person may incur
under the 1933 Act, the 1940 Act or common law or otherwise, but
only to the extent that such liability or expense incurred by the
Trust, its officers or trustees or such controlling person
resulting from such claims or demands shall arise out of or be
based upon (a) any unauthorized sales literature, advertisements,
information, statements or representations or (b) any untrue or
allegedly untrue statement of a material fact contained in
information furnished in writing by the Distributor to the Trust
and used in the answers to any of the items of the Registration
Statement or in the corresponding statements made in the prospectus
or statement of additional information, or shall arise out of or be
based upon any omission or alleged omission to state a material
fact in connection with such information furnished in writing by
Distributor to the Trust and required to be stated in such answers
or necessary to make such information
7
<PAGE>
not misleading. Distributor's agreement to indemnify the Trust, its
officers and trustees, and any such controlling person, as
aforesaid, is expressly conditioned upon Distributor being notified
of any action brought against the Trust, its officers or trustees,
or any such controlling person, such notification to be given by
letter or telegram addressed to Distributor at its principal office
as stated herein and sent to Distributor by the person against whom
such action is brought, within ten days after the summons or other
first legal process shall have been served. The failure so to
notify the Distributor of any such action shall not relieve
Distributor from any liability that the Distributor may have to the
Trust, its officers or trustees, or to such controlling person by
reason of any such untrue or alleged untrue statement or omission
or alleged omission otherwise than on account of Distributor's
indemnity agreement contained in this paragraph 12.2. The
Distributor agrees to notify the Trust promptly of the commencement
of any litigation or proceedings against Distributor or any of its
officers or directors in connection with the issuance and sale of
any shares.
15.3 In case any action shall be brought against any
indemnified party under paragraph 12.1 or 12.2, and it shall notify
the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and, to the
extent that it shall wish to do so, to assume the defense thereof
with counsel satisfactory to such indemnified party. If the
indemnifying party opts to assume the defense of such action, the
indemnifying party will not be liable to the indemnified party for
any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than
(a) reasonable costs of investigation or the furnishing of
documents or witnesses and (b) all reasonable fees and expenses of
separate counsel to such indemnified party if (i) the indemnifying
party and the indemnified party shall have agreed to the retention
of such counsel or (ii) the indemnified party shall have concluded
reasonably that representation of the indemnifying party and the
indemnified party by the same counsel would be inappropriate due to
actual or potential differing interests between them in the conduct
of the defense of such action.
16. LIABILITY OF THE DISTRIBUTOR. In the performance of its duties
hereunder, the Distributor shall be obligated to exercise care and diligence and
to act in good faith and to use its best efforts within reasonable limits to
insure the accuracy of all services performed under this Agreement, but the
Distributor shall not be liable for any act or omission which does not
constitute willful misfeasance, bad faith or gross negligence on the part of the
Distributor or reckless disregard by the Distributor of its duties under this
Agreement.
17. NOTICES. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Trust
shall be 601 West Main Avenue, Spokane, WA 99201, and the address of the
Distributor shall be 1201 Third Avenue, Seattle, WA 98101.
8
<PAGE>
18. DECLARATION OF TRUST AND LIMITATION OF LIABILITY. A copy of the
Declaration of Trust of the Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts, and notice is hereby given that this Agreement is
executed by an officer of the Trust on behalf of the trustees of the Trust, as
trustees and not individually, on further behalf of each Fund, and that the
obligations of this Agreement with respect to each Fund shall be binding upon
the assets and properties of the Fund only and shall not be binding upon the
assets and properties of any other Fund or series of the Trust or upon any of
the trustees, officers, employees, agents or shareholders of the Fund or the
Trust individually.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
THE SIERRA VARIABLE TRUST, on behalf of its series
SHORT TERM HIGH QUALITY BOND FUND,
GROWTH FUND,
EMERGING GROWTH FUND
INTERNATIONAL GROWTH FUND
MONEY MARKET FUND
U.S. GOVERNMENT FUND
CORPORATE INCOME FUND
GROWTH AND INCOME FUND
BOND & STOCK FUND
NORTHWEST FUND
CAPITAL GROWTH PORTFOLIO
GROWTH PORTFOLIO
BALANCED PORTFOLIO
VALUE PORTFOLIO
INCOME PORTFOLIO
By: /s/ KEITH PIPES
-----------------------------
Name: KEITH PIPES
Title: PRESIDENT
Attest:
By: /s/ CRAIG M. MILLER
----------------------------
Name: CRAIG M. MILLER
Title: TREASURER
9
<PAGE>
COMPOSITE FUNDS DISTRIBUTOR, INC.
By: /s/ WILLIAM G. PAPESH
----------------------------------
William G. Papesh
President
Attest:
By: /s/ SHARON L. HOWELLS
-----------------------------
Sharon L. Howells
Secretary
10
<PAGE>
PARTICIPATION AGREEMENT
AMONG
AMERICAN GENERAL LIFE INSURANCE COMPANY,
AMERICAN GENERAL SECURITIES INCORPORATED,
THE SIERRA VARIABLE TRUST
AND
COMPOSITE FUNDS DISTRIBUTOR, INC.
DATED AS OF
January 30, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 1. Introduction................................................... 2
1.1 Availability of Separate Account Divisions.................... 2
------------------------------------------
1.2 Broker-Dealer Registration.................................... 3
--------------------------
Section 2. Processing Transactions........................................ 3
2.1 Timely Pricing and Orders..................................... 3
-------------------------
2.2 Timely Payments............................................... 4
---------------
2.3 Redemption in Kind............................................ 4
------------------
2.4 Applicable Price.............................................. 4
----------------
Section 3. Costs and Expenses............................................. 5
3.1 General....................................................... 5
-------
3.2 Registration.................................................. 5
------------
3.3 Other (Non-Sales-Related)..................................... 5
-------------------------
3.4 Sales-Related................................................. 6
-------------
3.5 Parties to Cooperate.......................................... 7
--------------------
Section 4. Legal Compliance............................................... 7
4.1 Tax Laws...................................................... 7
--------
4.2 Insurance and Certain Other Laws..............................10
--------------------------------
4.3 Securities Laws...............................................11
---------------
4.4 Notice of Certain Proceedings and Other Circumstances.........13
-----------------------------------------------------
4.5 AGL to Provide Documents......................................13
------------------------
4.6 Trust to Provide Documents....................................14
--------------------------
Section 5. Mixed and Shared Funding.......................................14
5.1 General.......................................................14
-------
5.2 Disinterested Trustees........................................15
----------------------
5.3 Monitoring for Material Irreconcilable Conflicts..............15
------------------------------------------------
5.4 Conflict Remedies.............................................16
-----------------
5.5 Notice to AGL.................................................18
-------------
5.6 Information Requested by Board of Trustees....................18
------------------------------------------
5.7 Compliance with SEC Rules.....................................19
-------------------------
5.8 Requirements for Other Insurance Companies....................19
------------------------------------------
Section 6. Termination....................................................20
6.1 Events of Termination.........................................20
---------------------
6.2 Funds to Remain Available.....................................22
-------------------------
6.3 Survival of Warranties and Indemnifications...................22
-------------------------------------------
6.4 Continuance of Agreement for Certain Purposes.................22
---------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 7. Parties to Cooperate Respecting Termination....................23
Section 8. Assignment.....................................................23
Section 9. Notices........................................................23
Section 10. Voting Procedures.............................................24
Section 11. Foreign Tax Credits...........................................25
Section 12. Indemnification...............................................25
12.1 Indemnification of Trust and Distributor by AGL...............25
-----------------------------------------------
12.2 Indemnification of AGL and AGSI by Distributor................28
----------------------------------------------
12.3 Effect of Notice..............................................32
----------------
Section 13. Applicable Law................................................32
Section 14. Execution in Counterparts.....................................32
Section 15. Severability..................................................33
Section 16. Rights Cumulative.............................................33
Section 17. Restrictions on Sales of Trust Shares.........................33
Section 18. Scope of Liability............................................34
Section 19. Headings......................................................34
</TABLE>
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 30th day of January, 1998
("Agreement"), by and among American General Life Insurance Company, a Texas
life insurance company ("AGL") (on behalf of itself and its "Separate Account,"
defined below), American General Securities Incorporated, a Texas corporation
("AGSI"), the principal underwriter with respect to the Contracts referred to
below, The Sierra Variable Trust, a Massachusetts business trust (the "Trust"),
and Composite Funds Distributor, Inc., a Washington corporation (the
"Distributor"), the Trust's principal underwriter (collectively, the "Parties"),
WITNESSETH THAT:
WHEREAS the Distributor and the Trust desire that shares of the investment
funds of the Trust set forth in Exhibit A to the Agreement (the "Funds";
---------
reference herein to the "Trust" includes reference to each Fund to the extent
the context requires) be made available by the Distributor to serve as
underlying investment media for those combination fixed and variable annuity
contracts of AGL that are the subject of AGL's Form N-4 registration statements
filed with the Securities and Exchange Commission (the "SEC"), File Nos. 33-
57730 and 333-25549 (the "Contracts").
<PAGE>
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Trust and the Distributor will make shares in the Funds
available to AGL for this purpose at net asset value and with no sales charges,
all subject to the following provisions:
Section 1. Introduction
------------------------
1.1 Availability of Separate Account Divisions.
------------------------------------------
AGL represents that American General Life Insurance Company Separate
Account D (the "Separate Account") is and will continue to be available to serve
as an investment vehicle for its Contracts. The Contracts provide for the
allocation of net amounts received by AGL to separate series (the "Divisions";
reference herein to the "Separate Account" includes reference to each Division
to the extent the context requires) of the Separate Account for investment in
the shares of corresponding Funds of the Trust that are made available through
the Separate Account to act as underlying investment media. The Trust may from
time to time add additional Funds, which will become subject to this Agreement,
if they are made available as investment media for the Contracts. The investment
funds of the Trust which are subject to this Agreement are set forth in Exhibit
-------
A to the Agreement. Exhibit A shall be amended from time to time as necessary
- - ---------
to identify all investment funds offered under this Agreement. AGL will not
unreasonably deny any request by the Distributor to create new Divisions
corresponding to such new Funds.
<PAGE>
1.2 Broker-Dealer Registration.
--------------------------
The Distributor and AGSI each represents and warrants that it is registered
as a broker dealer with the SEC under the Securities Exchange Act of 1934, as
amended, and is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD").
Section 2. Processing Transactions
-----------------------------------
2.1 Timely Pricing and Orders.
-------------------------
The Trust or its designated agent will provide closing net asset value,
dividend and capital gain information for each Fund to AGL at the close of
trading on each day (a "Business Day") on which (a) the New York Stock Exchange
is open for regular trading, (b) the Trust calculates its net asset value and
(c) AGL is open for business. The Trust or its designated agent will use its
best efforts to provide this information by 5:00 p.m., Houston time. AGL will
use these data to calculate unit values, which in turn will be used to process
transactions that receive that same Business Day's Separate Account unit value.
The Separate Account processing will be done the same evening, and corresponding
orders with respect to Trust shares will be placed the morning of the following
Business Day. AGL will use its best efforts to place such orders with the Trust
by 9:00 a.m., Houston time.
<PAGE>
2.2 Timely Payments.
---------------
AGL will transmit orders for purchases and redemptions of Trust shares to
the Distributor, and will wire payment for net purchases to a custodial account
designated by the Trust on the same day as the order for Trust shares is placed,
to the extent practicable. Payment for net redemptions will be wired by the
Trust to an account designated by AGL on the same day as the order is placed, to
the extent practicable, and in any event be made within six calendar days after
the date the order is placed in order to enable AGL to pay redemption proceeds
within the time specified in Section 22(e) of the Investment Company Act of
1940, as amended (the "1940 Act").
2.3 Redemption in Kind.
------------------
The Trust reserves the right to pay any portion of a redemption in kind of
portfolio securities, if the Trust's board of trustees (the "Board of Trustees")
determines that it would be detrimental to the best interests of shareholders to
make a redemption wholly in cash.
2.4 Applicable Price.
----------------
The Parties agree that orders resulting from purchase payments,
surrenders, partial withdrawals, routine withdrawals of charges, or other
transactions under Contracts will be executed at the net asset values as
determined as of the close of regular trading on the New York Stock Exchange on
the Business Day that AGL processes such transactions, which will be the
Business Day prior to the Distributor's receipt of such orders. All other
purchases and redemptions will be effected at the net asset values next computed
after receipt by the Trust of the order therefor, and such orders will be
irrevocable. AGL hereby elects to reinvest all dividends and capital gains
<PAGE>
distributions in additional shares of the corresponding Fund at the record-date
net asset values until AGL otherwise notifies the Trust in writing, it being
agreed by the Parties that the record date and the payment date with respect to
any dividend or distribution will be the same Business Day.
Section 3. Costs and Expenses
------------------------------
3.1 General.
-------
Except as otherwise specifically provided herein, each Party will bear all
expenses incident to its performance under this Agreement.
3.2 Registration.
------------
The Trust will pay the cost of its registering as a management investment
company under the 1940 Act and registering its shares under the Securities Act
of 1933, as amended (the "1933 Act"), and keeping such registrations current and
effective. AGL will pay the cost of registering the Separate Account as a unit
investment trust under the 1940 Act and registering units of interest under the
Contracts under the 1933 Act and keeping such registrations current and
effective.
3.3 Other (Non-Sales-Related).
-------------------------
As among the Parties, the Trust will bear the costs of preparing, filing
with the SEC and setting for printing the Trust's prospectus, statement of
additional information and any supplements thereto (collectively, the "Trust
Prospectus"), periodic reports to shareholders, Trust proxy material and other
shareholder communications. AGL will bear the costs of preparing, filing with
the SEC
<PAGE>
and setting for printing, the Separate Account's prospectus, statement of
additional information and any supplements thereto (collectively, the "Separate
Account Prospectus"), periodic reports to owners, annuitants or participants
under the Contracts (collectively, "Participants"), voting instruction
solicitation material, and other Participant communications. As among the
Parties, the Trust and AGL each will bear the costs of printing and delivering
to existing Participants the documents as to which it bears the cost of
preparation as set forth above in this Section 3.3, it being understood that
reasonable cost allocations will be made in cases where any such Trust and AGL
documents are printed or mailed on a combined or coordinated basis.
3.4 Sales-Related.
-------------
Except as may otherwise be agreed to by the Parties relating to an initial
period of time after the Contracts are first offered for sale, the Distributor
or, where required by applicable federal or state law, its designee, will bear
the cost of preparing, printing and distributing all Trust and Separate Account
sales literature and advertising and filing it with the SEC and NASD, printing
and delivering to offerees Trust and Separate Account Prospectuses, Trust and
Separate Account periodic reports and Trust and AGL sales literature, and
placing any advertisements. AGL will bear the cost of filing any Trust or AGL
sales materials with, and obtaining approval from, any state insurance
regulatory authorities, to the extent required.
<PAGE>
3.5 Parties to Cooperate.
--------------------
The Trust, AGL, AGSI and the Distributor each agrees to cooperate with the
others, as applicable, in arranging to print, mail and/or deliver combined or
coordinated prospectuses or other materials of the Trust and Separate Account.
Section 4. Legal Compliance
----------------------------
4.1 Tax Laws.
--------
(a) The Trust represents that it will make every effort to qualify and to
maintain qualification of each Fund as a regulated investment company ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Trust or the Distributor will notify AGL immediately upon
having a reasonable basis for believing that a Fund has ceased to so qualify or
that it might not so qualify in the future.
(b) AGL represents that it believes, in good faith, that the Contracts
will be treated as annuity contracts under applicable provisions of the Code and
that it will make every effort to maintain such treatment; AGL will notify the
Trust and the Distributor immediately upon having a reasonable basis for
believing that any of the Contracts have ceased to be so treated or that they
might not be so treated in the future.
(c) The Trust represents that it will make every effort to comply and to
maintain each Fund's compliance with the diversification requirements set forth
in Section 817(h) of the Code and
<PAGE>
Section 1.817- 5(b) of the regulations under the Code, and the Trust or the
Distributor will notify AGL immediately upon having a reasonable basis for
believing that a Fund has ceased to so comply or that a Fund might not so comply
in the future.
(d) AGL represents that it believes, in good faith, that the Separate
Account is a "segregated asset account" and that interests in the Separate
Account are offered exclusively through the purchase of or transfer into a
"variable contract," within the meaning of such terms under Section 817(h) of
the Code and the regulations thereunder. AGL will make every effort to continue
to meet such definitional requirements, and it will notify the Trust and the
Distributor immediately upon having a reasonable basis for believing that such
requirements have ceased to be met or that they might not be met in the future.
Within 10 Business Days after the end of each calendar quarter, AGL will certify
in writing that such definitional requirements were met during the preceding
calendar quarter.
(e) The Trust represents that, under the terms of its investment advisory
agreements with Composite Research & Management Co. (the "Adviser"), the Adviser
is and will be responsible for managing the Trust in compliance with the Trust's
investment objectives, policies and restrictions as set forth in the Trust
Prospectus. The Trust represents that these objectives, policies and
restrictions do and will include operating as a RIC in compliance with
Subchapter M of the Code and Section 817(h) of the Code and regulations
thereunder. The Trust has adopted and will maintain procedures for ensuring that
the Trust is managed in compliance with Subchapter M and Section 817(h) and
regulations thereunder. On request, the Trust shall also provide AGL with such
<PAGE>
materials, cooperation and assistance as may be reasonably necessary for AGL or
any person designated by AGL to review from time to time the procedures and
practices of the Adviser, each sub-adviser or other provider of services to the
Trust for ensuring that the Trust is managed in compliance with Subchapter M and
Section 817(h) and regulations thereunder.
(f) Independent public accountants (the "Auditors") will prepare a report
("Report") for each Fund of the Trust in which the Separate Account invests,
within 15 Business Days after the end of each calendar quarter, regarding
whether any matter (the "Matter") has come to the attention of the Auditors that
has caused the Auditors to believe that the Trust was not a RIC in compliance
with Subchapter M of the Code and/or was not in compliance with Section 817(h)
of the Code and the regulations thereunder as of the last day of such calendar
quarter. A Report of no such Matter is referred to herein as a "Non-Actionable
Report," and a Report of such a Matter is referred to herein as an "Actionable
Report." Each Report will be prepared by Price Waterhouse or other independent
public accountants selected by the Trust. If such other independent public
accountants are not also the auditors approved with respect to the Trust
pursuant to Section 32(a) of the 1940 Act, such other independent public
accountants must be approved by AGL, which approval shall not be unreasonably
withheld. Each Report will be in a form and based on specified procedures and
work sheets agreed upon by the Trust and AGL, such agreement not to be
unreasonably withheld.
(g) The Trust will deliver to AGL a letter confirming any Non-Actionable
Report within 20 Business Days after the end of the quarter to which it relates.
On request, the Trust will also deliver to AGL a copy of any Non-Actionable
Report.
<PAGE>
(h) Any Actionable Report shall be furnished immediately to AGL. In the
event of an Actionable Report, the Trust will take such action as is necessary
or appropriate to cure any noncompliance during a grace period of 30 calendar
days after the end of the calendar quarter covered by the Report. If the Trust
so cures the noncompliance, it will furnish AGL with a Non-Actionable Report by
the last day of such grace period. If the Trust does not so cure the
noncompliance regarding its status as a RIC, the Trust will pursue those efforts
necessary to enable each affected Fund to qualify once again for treatment as a
RIC in compliance with Subchapter M, including cooperation in good faith with
AGL. If the Trust does not so cure the noncompliance regarding its status under
Section 817(h), the Trust will cooperate in good faith with AGL's efforts to
obtain a ruling and closing agreement, as provided in Revenue Procedure 92-95
issued by the Internal Revenue Service (or any applicable ruling or procedure
subsequently issued by the Internal Revenue Service), that the Trust satisfies
Section 817(h) for the period or periods covered by the Actionable Report.
4.2 Insurance and Certain Other Laws.
--------------------------------
(a) The Trust will use its best efforts to comply with any applicable
state insurance laws or regulations, to the extent specifically requested in
writing by AGL.
(b) AGL represents and warrants that (i) it is an insurance company duly
organized, validly existing and in good standing under the laws of the State of
Texas and has full corporate power, authority and legal right to execute,
deliver and perform its duties and comply with its obligations under this
Agreement, (ii) it has legally and validly established and maintains the
<PAGE>
Separate Account as a segregated asset account under Article 3.75 of the Texas
Insurance Code, and (iii) the Contracts comply in all material respects with all
other applicable federal and state laws and regulations.
(c) AGL and AGSI represent and warrant that AGSI is a business corporation
duly organized, validly existing, and in good standing under the laws of the
State of Texas and has full corporate power, authority and legal right to
execute, deliver, and perform its duties and comply with its obligations under
this Agreement.
(d) The Distributor represents and warrants that it is a business
corporation duly organized, validly existing, and in good standing under the
laws of the State of Washington and has full corporate power, authority and
legal right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
(e) The Distributor and the Trust represent and warrant that the Trust is
a business trust duly organized, validly existing, and in good standing under
the laws of the Commonwealth of Massachusetts and has full power, authority, and
legal right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
4.3 Securities Laws.
---------------
(a) AGL represents and warrants that (i) it has registered the Separate
Account as a unit investment trust in accordance with the provisions of the 1940
Act to serve as a segregated
<PAGE>
investment account for its variable annuity contracts, including the Contracts,
(ii) the Separate Account does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, (iii) the Separate
Account's 1933 Act registration statement relating to the Contracts, together
with any amendments thereto, will at all times comply in all material respects
with the requirements of the 1933 Act and the rules thereunder, and (iv) the
Separate Account Prospectus will at all times comply in all material respects
with the requirements of the 1933 Act and the rules thereunder.
(b) The Trust and the Distributor represent and warrant that (i) Trust
shares sold pursuant to this Agreement will be registered under the 1933 Act to
the extent required by the 1933 Act and duly authorized for issuance and sold in
compliance with Massachusetts law, (ii) the Trust is and will remain registered
under the 1940 Act to the extent required by the 1940 Act, and (iii) the Trust
will amend the registration statement for its shares under the 1933 Act and
itself under the 1940 Act from time to time as required in order to effect the
continuous offering of its shares.
(c) The Trust represents and warrants that (i) the Trust does and will
comply in all material respects with the requirements of the 1940 Act and the
rules thereunder, including the exemptive order issued by the Commission as
Release No. IC-22047, which the Trust further represents and warrants is
applicable to the Trust, (ii) its 1933 Act registration statement, together with
any amendments thereto, will at all times comply in all material respects with
the requirements of the 1933 Act and rules thereunder, and (iii) the Trust
Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
<PAGE>
(d) The Trust will register and qualify its shares for sale in accordance
with the laws of any state or other jurisdiction only if and to the extent
reasonably deemed advisable by the Trust, AGL or any other life insurance
company utilizing the Trust.
4.4 Notice of Certain Proceedings and Other Circumstances.
-----------------------------------------------------
The Distributor or the Trust shall immediately notify AGL of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to the Trust's registration statement
under the 1933 Act or the Trust Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or Trust Prospectus, (iii) the
initiation of any proceedings for that purpose or for any other purpose relating
to the registration or offering of the Trust's shares, or (iv) any other action
or circumstances that may prevent the lawful offer or sale of Trust shares in
any state or jurisdiction, including, without limitation, any circumstances in
which (x) the Trust's shares are not registered and, in all material respects,
issued and sold in accordance with applicable state and federal law or (y) such
law precludes the use of such shares as an underlying investment medium of the
Contracts issued or to be issued by AGL. The Distributor and the Trust will
make every reasonable effort to prevent the issuance of any stop order, cease
and desist order or similar order and, if any such order is issued, to obtain
the lifting thereof at the earliest possible time.
4.5 AGL to Provide Documents.
------------------------
AGL will provide to the Trust one complete copy of all SEC registration
statements, Separate Account Prospectuses, reports, any preliminary and final
voting instruction solicitation
<PAGE>
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Separate Account or the
Contracts, contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
4.6 Trust to Provide Documents.
--------------------------
The Trust will provide to AGL one complete copy of all SEC registration
statements, Trust Prospectuses, reports, any preliminary and final proxy
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Trust or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
Section 5. Mixed and Shared Funding
------------------------------------
5.1 General.
-------
The Trust may apply for an order exempting it from certain provisions of
the 1940 Act and rules thereunder so that, subject to compliance with Section 17
of this Agreement, the Trust may be available for investment by certain other
entities, including, without limitation, separate accounts funding variable life
insurance policies, separate accounts of insurance companies unaffiliated with
AGL and trustees of qualified pension and retirement plans ("Mixed and Shared
Funding"). The Parties recognize that the SEC has imposed terms and conditions
for such orders that are substantially identical to many of the provisions of
this Section 5. If the Trust implements Mixed and Shared Funding, pursuant to
such an exemptive order or otherwise, Sections 5.2 through 5.8 below shall
apply, but not otherwise.
<PAGE>
5.2 Disinterested Trustees.
----------------------
The Trust agrees that the Board of Trustees shall at all times consist of
trustees a majority of whom (the "Disinterested Trustees") are not interested
persons of the Adviser or the Distributor within the meaning of Section 2(a)(19)
of the 1940 Act.
5.3 Monitoring for Material Irreconcilable Conflicts.
------------------------------------------------
The Trust agrees that the Board of Trustees will monitor for the existence
of any material irreconcilable conflict between the interests of the
Participants of all separate accounts of life insurance companies utilizing the
Trust, including the Separate Account. AGL agrees to inform the Board of
Trustees of the Trust of the existence of or any potential for any such material
irreconcilable conflict of which it is aware. The concept of a "material
irreconcilable conflict" is not defined by the 1940 Act or the rules thereunder,
but the Parties recognize that such a conflict may arise for a variety of
reasons, including, without limitation:
(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, 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 Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract
and variable life insurance contract participants or by participants
of different life insurance companies utilizing the Trust; or
<PAGE>
(f) a decision by a life insurance company utilizing the Trust to
disregard the voting instructions of participants.
Consistent with the SEC's requirements in connection with exemptive
proceedings of the type referred to in Section 5. 1 hereof, AGL will assist the
Board of Trustees in carrying out its responsibilities by providing the Board of
Trustees with all information reasonably necessary for the Board of Trustees to
consider any issue raised, including information as to a decision by AGL to
disregard voting instructions of Participants.
5.4 Conflict Remedies.
-----------------
(a) It is agreed that if it is determined by a majority of the members of
the Board of Trustees or a majority of the Disinterested Trustees that a
material irreconcilable conflict exists, AGL and the other life insurance
companies utilizing the Trust will, at their own expense and to the extent
reasonably practicable (as determined by a majority of the Disinterested
Trustees), take whatever steps are necessary to remedy or eliminate the material
irreconcilable conflict, which steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the separate
accounts from the Trust or any Fund and reinvesting such assets in a
different investment medium, including another Fund of the Trust, or
submitting the question whether such segregation should be implemented
to a vote of all affected participants and, as appropriate,
segregating the assets of any particular group (e.g., annuity contract
owners or participants, life insurance contract owners or all contract
owners and participants of one or more life insurance companies
utilizing the Trust) that votes
<PAGE>
in favor of such segregation, or offering to the affected contract
owners or participants the option of making such a change; and
(ii) establishing a new registered investment company of the type defined
as a "Management Company" in Section 4(3) of the 1940 Act or a new
separate account that is operated as a Management Company.
(b) If the material irreconcilable conflict arises because of AGL's
decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, AGL may be
required, at the Trust's election, to withdraw the Separate Account's investment
in the Trust. No charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal must take place within six months after the
Trust gives notice to AGL that this provision is being implemented, and until
such withdrawal the Distributor and Trust shall continue to accept and implement
orders by AGL for the purchase and redemption of shares of the Trust.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to AGL conflicts with the
majority of other state regulators, then AGL will withdraw the Separate
Account's investment in the Trust within six months after the Trust's Board of
Trustees informs AGL that it has determined that such decision has created a
material irreconcilable conflict, and until such withdrawal the Distributor and
Trust shall continue to accept and implement orders by AGL for the purchase and
redemption of shares of the Trust.
<PAGE>
(d) AGL agrees that any remedial action taken by it in resolving any
material irreconcilable conflict will be carried out at its expense and with a
view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Trustees will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will the Trust or the Distributor
be required to establish a new funding medium for any of the Contracts. AGL will
not be required by the terms hereof to establish a new funding medium for any of
the Contracts if an offer to do so has been declined by vote of a majority of
Participants materially adversely affected by the material irreconcilable
conflict.
5.5 Notice to AGL.
-------------
The Trust will promptly make known in writing to AGL the Board of Trustees'
determination of the existence of a material irreconcilable conflict, a
description of the facts that give rise to such conflict and the implications of
such conflict.
5.6 Information Requested by Board of Trustees.
------------------------------------------
AGL and the Trust will at least annually submit to the Board of Trustees of
the Trust such reports, materials or data as the Board of Trustees may
reasonably request so that the Board of Trustees may fully carry out the
obligations imposed upon them by the provisions hereof, and said reports,
materials and data will be submitted at any reasonable time deemed appropriate
by the Board of Trustees. All reports received by the Board of Trustees of
potential or existing conflicts, and all Board of Trustees actions with regard
to determining the existence of a conflict, notifying life
<PAGE>
insurance companies utilizing the Trust of a conflict, and determining whether
any proposed action adequately remedies a conflict, will be properly recorded in
the minutes of the Board of Trustees or other appropriate records, and such
minutes or other records will be made available to the SEC upon request.
5.7 Compliance with SEC Rules.
-------------------------
If, at any time during which the Trust is serving an investment medium for
variable life insurance policies, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2
are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to
mixed and shared funding, the Parties agree that they will comply with the terms
and conditions thereof and that the terms of this Section 5 shall be deemed
modified if and only to the extent required in order also to comply with the
terms and conditions of such exemptive relief that is afforded by any of said
rules that are applicable.
5.8 Requirements for Other Insurance Companies.
------------------------------------------
The Trust will require that each insurance company utilizing the Trust
enter into an agreement with the Trust that contains in substance the same
provisions as are set forth in Sections 2.3, 4. 1 (b), 4. 1 (d), 4.4, 4.3 (a),
4.5, 5, 10 and 18 of this Agreement. This provision is not intended to limit in
any way the obligations of the Trust and Distributor under Section 17 of this
Agreement.
<PAGE>
Section 6. Termination
-----------------------
6.1 Events of Termination.
---------------------
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of AGL, the Distributor or the Trust upon (i) at least
six months' advance written notice to the other Parties, and (ii) the approval
by (x) a majority of the Disinterested Trustees or (y) a majority vote of the
shares of the affected Fund that are held in the corresponding Divisions of the
Separate Account (pursuant to the procedures set forth in Section 10 of this
Agreement for voting Trust shares in accordance with Participant instructions);
provided, however, that the approvals described in clauses (x) and (y) above
shall not be required if (1) the aggregate account value under the Contracts is
less than $300 million at the date the notice of termination is delivered, (2)
the aggregate month-end account value under the Contracts has averaged less than
$300 million for the 24 full calendar months immediately preceding the date the
notice of termination is delivered and (3) the notice of termination is
delivered no earlier than the end of the 60th full calendar month following the
date the first Contract is issued; or
(b) at the option of the Trust upon institution of formal proceedings
against AGL by the SEC, any state insurance regulator or any other regulatory
body regarding AGL's duties under this Agreement or related to the sale of the
Contracts, the operation of the Separate Account, or the purchase of the Trust
shares, if, in each case, the Trust reasonably determines that such proceedings,
or the facts on which such proceedings may be based, have a material likelihood
of imposing material adverse consequences on the Fund to be terminated; or
<PAGE>
(c) at the option of AGL upon institution of formal proceedings against
the Trust, the Adviser or any sub-adviser to the Trust, or the Distributor by
the NASD, the SEC, or any state securities or insurance department or any other
regulatory body, if, in each case, AGL reasonably determines that such
proceedings, or the facts on which such proceedings may be based, have a
material likelihood of imposing material adverse consequences on AGL, AGSI or
the Division corresponding to the Fund to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's shares are
not registered and, in all material respects, issued and sold in accordance with
applicable state and federal law or (ii) such law precludes the use of such
shares as an underlying investment medium of the Contracts issued or to be
issued by AGL; or
(e) upon termination of the corresponding Division's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of AGL if the Fund ceases to qualify as a RIC under
Subchapter M of the Code or under successor or similar provisions, or if AGL
reasonably believes that the Fund may fail to so qualify; or
(g) at the option of AGL if the Fund fails to comply with Section 817(h)
of the Code or with successor or similar provisions, or if AGL reasonably
believes that the Fund may fail to so comply.
<PAGE>
6.2 Funds to Remain Available.
-------------------------
Except (i) as necessary to implement Participant initiated transactions,
(ii) as required by state insurance laws or regulations, (iii) as required
pursuant to Section 5 of this Agreement, or (iv) with respect to any Fund as to
which this Agreement has terminated, AGL shall not (x) redeem Trust shares
attributable to the Contracts (as opposed to Trust shares attributable to AGL's
assets held in the Separate Account), or (y) prevent Participants from
allocating payments to or transferring amounts from a Fund that was otherwise
available under the Contracts, until, in either case, 90 calendar days after AGL
shall have notified the Trust or Distributor of its intention to do so.
6.3 Survival of Warranties and Indemnifications.
-------------------------------------------
All warranties and indemnifications will survive the termination of this
Agreement.
6.4 Continuance of Agreement for Certain Purposes.
---------------------------------------------
If any Party terminates this Agreement with respect to any Fund pursuant to
Sections 6.1 (b), 6.1 (c), 6.1 (d), 6.1 (f), or 6.1 (g) hereof, this Agreement
shall nevertheless continue in effect as to any shares of that Fund that are
outstanding as of the date of such termination (the "Initial Termination Date").
This continuation shall extend to the earlier of the date as of which the
Separate Account owns no shares of the affected Fund or a date (the "Final
Termination Date") six months following the Initial Termination Date, except
that AGL may, by written notice to the other Parties, shorten said six month
period in the case of a termination pursuant to Sections 6.1 (d), 6.1 (f) or 6.1
(g).
<PAGE>
Section 7. Parties to Cooperate Respecting Termination
-------------------------------------------------------
The Parties agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that the Separate Account owns no shares of a Fund after the Final
Termination Date with respect thereto, or, in the case of a termination pursuant
to Section 6. 1 (a), the termination date specified in the notice of
termination.
Section 8. Assignment
----------------------
This Agreement may not be assigned, except with the written consent of each
other Party.
Section 9. Notices
-------------------
Notices and communications required or permitted by Section 2 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
American General Life
Insurance Company
2727 Allen Parkway
Houston, Texas 77019
Attn: Steven A. Glover
FAX: 713-831-3071
<PAGE>
American General Securities
Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attn: Steven A. Glover
FAX: 713-831-3071
The Sierra Variable Trust
888 South Figueroa Street
Suite 1100
Los Angeles, California 90017
Attn: Keith B. Pipes
FAX: 213-623-3783
Composite Funds Distributor, Inc.
1631 Broadway
Sacramento, California 95818
Attn: Sandra Cavanaugh
FAX: 916-552-5769
Section 10. Voting Procedures
------------------------------
Subject to the cost allocation procedures set forth in Section 3 hereof,
AGL will distribute all proxy material furnished by the Trust to Participants
and will vote Trust shares in accordance with instructions received from
Participants. AGI, will vote Trust shares that are (a) not attributable to
Participants or (b) attributable to Participants, but for which no instructions
have been received, in the same proportion as Trust shares for which said
instructions have been received from Participants. AGL agrees that it will
disregard Participant voting instructions only to the extent it would be
permitted to do so pursuant to Rule 6e-3(T)(b)(15)(iii) under the 1940 Act if
the Contracts were variable life insurance policies subject to that rule. Other
participating life insurance companies
<PAGE>
utilizing the Trust will be responsible for calculating voting privileges in a
manner consistent with that of AGL, as prescribed by this Section 10.
Section 11. Foreign Tax Credits
--------------------------------
The Trust agrees to consult in advance with AGL concerning any decision to
elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
Section 12. Indemnification
----------------------------
12.1 Indemnification of Trust and Distributor by AGL.
-----------------------------------------------
(a) Except to the extent provided in Sections 12.l(b) and 12.l(c), below,
AGL agrees to indemnify and hold harmless the Trust and the Distributor, each of
their trustees, directors and officers, and each person, if any, who controls
the Trust or the Distributor within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 12.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of AGL) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
actions are related to the sale or acquisition of the Trust's shares and:
<PAGE>
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Separate Account's
1933 Act registration statement, the Separate Account Prospectus, the
Contracts or, to the extent prepared by AGL or AGSI, sales literature
or advertising for the Contracts (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading; provided that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to AGL or AGSI by or on behalf
of the Trust, the Distributor or the Adviser for use in the Separate
Account's 1933 Act registration statement, the Separate Account
Prospectus, the Contracts, or sales literature or advertising (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained
in the Trust's 1933 Act registration statement, Trust Prospectus,
sales literature or advertising of the Trust, or any amendment or
supplement to any of the foregoing, not supplied for use therein by
or on behalf of AGL or AGSI) or wrongful conduct of AGL or AGSI or
persons under their control (including, without limitation, their
employees and "Associated Persons," as that term is defined in
paragraph (m) of Article I of the NASD's By-Laws), in connection with
the sale or distribution of the Contracts or Trust shares; or
<PAGE>
(iii) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Trust's 1933 Act
registration statement, Trust Prospectus, sales literature or
advertising of the Trust, or any amendment or supplement to any of
the foregoing, 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 and in conformity with information furnished to
the Trust by or on behalf of AGL or AGSI for use in the Trust's 1933
Act registration statement, Trust Prospectus, sales literature or
advertising of the Trust, or any amendment or supplement to any of
the foregoing; or
(iv) arise as a result of any failure by AGL or AGSI to perform the
obligations, provide the services and furnish the materials required
of them under the terms of this Agreement.
(b) AGL shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of its reckless disregard of obligations or duties under
this Agreement or to the Distributor or to the Trust.
<PAGE>
(c) AGL shall not be liable under this indemnification provision with
respect to any action against an Indemnified Party unless the Trust or the
Distributor shall have notified AGL in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AGL of any such action shall not relieve AGL from
any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against an Indemnified Party, AGL shall be
entitled to participate, at its own expense, in the defense of such action. AGL
also shall be entitled to assume the defense thereof, with counsel approved by
the Indemnified Party named in the action, which approval shall not be
unreasonably withheld. After notice from AGL to such Indemnified Party of AGL's
election to assume the defense thereof, the Indemnified Party will cooperate
fully with AGL and shall bear the fees and expenses of any additional counsel
retained by it, and AGL will not be liable to such Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such
Indemnified Party independently in connection with the defense thereof, other
than reasonable costs of investigation.
12.2 Indemnification of AGL and AGSI by Distributor.
----------------------------------------------
(a) Except to the extent provided in Sections 12.2(b) and 12.2(c) hereof,
the Distributor agrees to indemnify and hold harmless AGL, AGSI, and the Trust,
each of their trustees, directors and officers, and each person, if any, who
controls AGL, AGSI or the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
<PAGE>
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Distributor) or actions in respect
thereof (including, to the extent reasonable, legal and other expenses) to which
the Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions are
related to the sale or acquisition of the Trust's shares and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Trust's 1933 Act
registration statement, Trust Prospectus, sales literature or
advertising of the Trust or, to the extent not prepared by AGL or
AGSI, sales literature or advertising for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided that this agreement
to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information furnished to the
Distributor or Trust by or on behalf of AGL or AGSI for use in the
Trust's 1933 Act registration statement, Trust Prospectus, or in
sales literature or advertising (or any amendment or supplement to
any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained
in the Separate Account's 1933 Act
<PAGE>
registration statement, Separate Account Prospectus, sales literature
or advertising for the Contracts, or any amendment or supplement to
any of the foregoing, not supplied for use therein by or on behalf of
the Distributor, Trust or Adviser) or wrongful conduct of the Trust
or Distributor or persons under their control (including, without
limitation, their employees and Associated Persons), in connection
with the sale or distribution of the Contracts or Trust shares; or
(iii) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Separate Account's
1933 Act registration statement, Separate Account Prospectus, sales
literature or advertising covering the Contracts, or any amendment or
supplement to any of the foregoing, 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 in
conformity with information furnished to AGL or AGSI by or on behalf
of the Trust, the Adviser or the Distributor for use in the Separate
Account's 1933 Act registration statement, Separate Account
Prospectus, sales literature or advertising covering the Contracts,
or any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by the Trust or the Distributor to
perform the obligations, provide the services and furnish the
materials required of them under the terms of this Agreement;
<PAGE>
(b) The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or actions to
which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of its reckless disregard of
obligations and duties under this Agreement or to AGL, AGSI or the Separate
Account.
(c) The Distributor shall not be liable under this indemnification
provision with respect to any action against an Indemnified Party unless AGL or
AGSI 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 action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify the Distributor of any such action 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 an
Indemnified Party, the Distributor will be entitled to participate, at its own
expense, in the defense of such action. The Distributor also shall be entitled
to assume the defense thereof, with counsel approved by the Indemnified Party
named in the action, which approval shall not be unreasonably withheld. After
notice from the Distributor to such Indemnified Party of the Distributor's
election to assume the defense thereof, the Indemnified Party will cooperate
fully with the Distributor and shall bear the fees and expenses of any
additional counsel retained by it, and the Distributor will not be liable to
such Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred
<PAGE>
by such Indemnified Party independently in connection with the defense thereof,
other than reasonable costs of investigation.
12.3 Effect of Notice.
----------------
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Section 12.1 or 12.2 above of participation in or control of any action by
the indemnifying Party will in no event be deemed to be an admission by the
indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
Section 13. Applicable Law
---------------------------
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Massachusetts law, without regard for that state's
principles of conflict of laws.
Section 14. Execution in Counterparts
--------------------------------------
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
<PAGE>
Section 15. Severability
-------------------------
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
Section 16. Rights Cumulative
------------------------------
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
Section 17. Restrictions on Sales of Trust Shares
--------------------------------------------------
The Trust and the Distributor agree that, for a period of 24 months
following the initial sale of Contracts, shares of the Trust will not be made
available to any separate account of any other insurance company without AGL's
specific written consent. AGL agrees that the Trust thereafter will be permitted
(subject to the other terms of this Agreement) to make its shares available to
separate accounts of other life insurance companies. Without AGL's express
written consent, neither the Trust nor the Distributor, nor any of their related
persons and entities, will enter into any arrangement for utilization of the
Trust by any other life insurance company under which the terms granted to that
insurance company or its related persons and entities are more favorable than
those granted to AGL and its related persons and entities hereunder. Other than
as set forth above in this Section 17, neither the Trust nor the Distributor
will offer or issue Trust shares to any person or entity, other than the
Separate Account, without AGL's specific written consent, which shall not be
unreasonably withheld.
<PAGE>
Section 18. Scope of Liability
-------------------------------
It is understood and expressly agreed that the obligations and liabilities
of the Trust hereunder will not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the Trust, as provided
in the Declaration of Trust. The execution and delivery of this Agreement have
been authorized by the Board of Trustees and this Agreement has been signed by
an authorized officer of the Trust, acting as such, and neither such
authorization by the Board of Trustees nor such execution and delivery by such
officer will be deemed to have been made by any of the Trustees individually or
to impose any liability on any of them personally, but will bind only the assets
and property of the Trust, as provided in its Declaration of Trust.
Section 19. Headings
---------------------
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
By: Royce G. Imhoff, Sr. II
------------------------------------
Title: Senior Vice President
Chief Marketing Officer
AMERICAN GENERAL SECURITIES INCORPORATED
By: F. Paul Kovach
------------------------------------
Title: President
THE SIERRA VARIABLE TRUST
By:_____________________________________
Title:
COMPOSITE FUNDS DISTRIBUTOR, INC.
By:_____________________________________
Title:
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
By:_____________________________________
Title:
AMERICAN GENERAL SECURITIES INCORPORATED
By:_____________________________________
Title:
THE SIERRA VARIABLE TRUST
By: /s/ Craig M. Miller
-------------------------------------
Title: Treasurer
COMPOSITE FUNDS DISTRIBUTOR, INC.
By: /s/ Monte D. Calvin
-------------------------------------
Title: Vice President
<PAGE>
EXHIBIT A
---------
INVESTMENT FUNDS OF THE TRUST
AS OF JANUARY 30, 1998
. Money Market Fund
. Short-Term High Quality Bond Fund
. U.S. Government Fund
. Corporate Income Fund
. Growth and Income Fund
. Growth Fund
. Emerging Growth Fund
. International Growth Fund
. Capital Growth Portfolio
. Growth Portfolio
. Balanced Portfolio
. Value Portfolio
. Income Portfolio
<PAGE>
TRANSFER AGENT CONTRACT
-----------------------
TRANSFER AGENT CONTRACT (this "AGREEMENT"), dated, March __, 1998,
between The Sierra Variable Trust (the "Trust"), a Massachusetts business
trust, and Murphey Favre Securities Services, Inc. (the "Transfer Agent"), a
Washington corporation.
W I T N E S S E T H
-------------------
WHEREAS, the Trust is authorized to issue shares in separate series, with
each series representing a separate portfolio of securities and other assets
(each a "Series");
WHEREAS, the Trust initially intends to offer shares in those Series
identified in the attached Exhibit 1, each such Series, together with all other
Series subsequently established by the Trust shall be subject to this Agreement
in accordance with Section 8;
WHEREAS, the Trust desires the Transfer Agent to perform the services set
forth in Schedule A attached hereto and incorporated herein by reference, and
the Transfer Agent is willing to perform such services;
NOW THEREFORE, in consideration of the premises and the mutual agreements
set forth herein, the parties hereto agree as follows:
1. The Transfer Agent shall perform for the Trust the services set forth
in Schedule A for a monthly fee as set forth in Schedule B attached hereto and
incorporated herein by reference.
2. The Trust agrees to reimburse the Transfer Agent for postage, the
procurement and/or printing of statements, envelopes, checks, reports, tax
forms, proxies, or other forms of printed material required in the performance
of its services to the Trust under this Agreement.
3. The Trust agrees to reimburse the Transfer Agent for all freight and
other delivery charges and insurance or bonding charges incurred by the Transfer
Agent in delivering materials to and from the Trust and its shareholders
("Shareholders").
4. The Trust agrees to reimburse the Transfer Agent for all direct
telephone expenses incurred by the Trust in calling Shareholders regarding their
Trust transactions, accounts, and for any other Trust business.
5. The Trust agrees that all computer programs and procedures developed
to perform services required under this Agreement are the property of the
Transfer Agent and the Transfer Agent agrees that all records and other data,
except computer programs and procedures, are the property of the Trust. The
Transfer Agent agrees that it will furnish
<PAGE>
all records and other data as may be requested to the Trust immediately upon
termination of this Agreement for any reason whatsoever.
6. The Transfer Agent agrees to treat all records and other information
relative to the Trust with utmost confidence and further agrees that all records
maintained by the Transfer Agent for the Trust shall be open to inspection and
audit at reasonable times by the officers, agents or auditors employed by the
Trust and that such records shall be preserved and retained by the Transfer
Agent so long as this agreement shall remain in effect.
7. The Transfer Agent shall not be liable for any damage, loss of data,
delay or any other loss caused by any such power failure or machine breakdown,
except that the Transfer Agent shall be liable for actual out-of-pocket costs
caused by any such power failure or machine breakdown, and the Transfer Agent
shall recover the data in process that is assumed lost during any power failure
or machine breakdown.
8. In the event that the Trust establishes one or more Series in addition
to those identified in Exhibit 1, with respect to which the Trust desires to
have Transfer Agent render services as transfer agent under the terms hereof,
the Trust shall so notify Transfer Agent in writing, and Exhibit 1 shall be
amended to include such additional Series.
9. The Transfer Agent will maintain in force through the duration of this
Agreement a fidelity bond in a face amount not less than $1,000,000 written by a
reputable insurance company, covering theft, embezzlement, forgery and other
acts of malfeasance by the Transfer Agent, its employees, or agents in
connection with services performed for the Trust.
10. This agreement may be terminated without the payment of any penalty by
either party upon (180) days' written notice thereof given by the Trust to the
Transfer Agent and upon one hundred eighty (180) days' written notice thereof
given by the Transfer Agent to the Trust.
11. Any notice shall be officially given when sent by registered or
certified mail by either party to the appropriate address listed in the Trust's
current registration statement, provided that either party may notify the other
by regular mail of any changed address to which such notices should be sent.
12. This Agreement constitutes the entire Agreement between the parties
and shall be governed by, and construed in accordance with, the laws of the
Commonwealth of Massachusetts and shall inure to the benefit of the parties
hereto and their respective successors.
13. A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of the Commonwealth of Massachusetts, and notice is hereby
given that this Agreement is executed by an officer of the Trust on behalf of
the trustees of the Trust, as trustees and not individually, on further behalf
of the Trust, and that the obligations of this
2
<PAGE>
Agreement shall be binding upon the assets and properties of the Trust only and
shall not be binding upon the assets and properties of any other series of the
Trust or upon any of the trustees, officers, employees, agents or shareholders
of the Trust or the Trust individually.
IN WITNESS WHEREOF, the parties hereto cause this Agreement to be executed
by their officers designated below as of the date first above-written.
THE SIERRA VARIABLE TRUST
By:___________________________________
President
MURPHEY FAVRE SECURITIES SERVICES, INC.
By:____________________________________
Executive Vice President
3
<PAGE>
SCHEDULE A
I. Shareholder Services
A. Maintain all Shareholder records on electronic data processing equipment,
including:
1. Share balances
2. Account transaction history
3. Names and addresses
4. Distribution records
5. Transfer records
6. Overall control records
B. New Accounts
1. Deposit all monies received into a Trust custody account maintained by
the Trust's custodian.
2. Set up account according to Shareholders' instructions
3. Issue and mail shareholder confirmations
C. Additional Purchases
1. Deposit monies received into a Trust custody account maintained by the
Trust's custodian.
2. Issue Shareholder confirmations
D. Redemptions
1. Liquidate shares upon Shareholder request
2. Make payments of redemption proceeds in accordance with the Trust's
then current prospectus.
3. Issue and mail Shareholder confirmation
E. Transfer shares as requested, including obtaining necessary papers and
documents to satisfy transfer requirements. On irregular transfers requiring
4
<PAGE>
special legal opinions, such special legal fees, if any, are to be paid for
by the Trust.
F. Process changes, corrections of addresses and registrations
G. Maintain service with Shareholders as follows:
1. Activity required to receive, process and reply to Shareholders'
correspondence regarding account matters
2. Refer correspondence regarding investment matters to the Trust with
sufficient account data to answer
3. Contact Shareholders directly to settle problems and answer questions
H. Compute distributions, dividends and capital gains
1. Make payment or reinvest in additional shares as directed by
shareholders according to provisions of the Trust's then current
prospectus
2. Advise each Shareholder of the amount of dividends received and tax
status annually
I. Produce transcripts of shareholder account history as required
J. Maintain the controls associated with the computer programs and manual
systems to arrive at the Trust's total shares outstanding
K. Receive mail and perform other administrative functions relating to
transfer agent work
II. Other Services
A. Mailing services to shareholders
B. Services in connection with any stock splits
C. Develop special reports for Trust officers regarding statistical and
accounting data pertaining to the Trust. Trust shall pay for out-of-
pocket expenses charged by vendors to develop such reports or portions
thereof
D. Voice response unit
E. NSCC support
5
<PAGE>
SCHEDULE B: MONTHLY SHAREHOLDER SERVICING FEES
January , 1998
Fee Per Account Per Month
-------------------------
Global Money Fund
US Government Fund
Growth and Income Fund
Corporate Income Fund
Emerging Growth Fund
International Growth Fund
Growth Fund
Short Term High Quality Bond Fund
Capital Growth Portfolio
Growth Portfolio
Balanced Portfolio
Value Portfolio
Income Portfolio
Fees Include
Shareholder and Broker Servicing
Transaction Processing, Correspondence, and Research
. Settlement and Reconciliation
. Corporate Actions
. Tax Reporting and Compliance
. NSCC Support
. Management Company and Broker/Dealer Support
. Asset Allocation Processing for all distribution channels
Additional charges will be made for out-of-pocket expenses according to
Schedule C.
6
<PAGE>
SCHEDULE C
OUT-OF-POCKET EXPENSES
The Trust shall reimburse the Transfer Agent monthly for applicable out-of-
pocket expenses, including, but not limited to the following items:
. NSCC charges
. Banking fees
. Voice response unit
. Microfiche/Microfilm/Image production
. Magnetic media tapes and freight
. Printing costs, including certificates, envelopes, checks and stationery
. Postage (bulk, presort, ZIP+4, bar coding, first class) direct pass through to
the Funds
. Due diligence mailings
. Telephone and telecommunication costs, including all lease, maintenance and
line costs
. Ad hoc reports
. Shareholder transcripts
. Proxy solicitations, mailings and tabulations
. Daily & Distribution advice mailings
. Shipping, Certified and Overnight mail and insurance
. Year-end form production and mailings
. Terminals, communication lines, printers and other equipment and any expenses
incurred in connection with such terminals and lines
. Duplicating services
. Courier services
. Incoming and outgoing wire charges
. Federal Reserve charges for check clearance
. Overtime, as approved by the Funds
. Temporary staff, as approved by the Funds
. Travel and entertainment, as approved by the Funds
. Record retention, retrieval and destruction costs, including, but not limited
to exit fees charged by third party record keeping vendors
. Third party audit reviews
. Ad hoc programming time
. Insurance
. Such other miscellaneous expenses reasonably incurred by the Transfer Agent in
performing its duties and responsibilities under this Agreement
7
<PAGE>
EXHIBIT 1
LIST OF SERIES
--------------
Global Money Fund
US Government Fund
Growth and Income Fund
Corporate Income Fund
Emerging Growth Fund
International Growth Fund
Growth Fund
Short Term High Quality Bond Fund
Capital Growth Portfolio
Growth Portfolio
Balanced Portfolio
Value Portfolio
Income Portfolio
8
<PAGE>
THE SIERRA VARIABLE TRUST
ADMINISTRATION AGREEMENT
January 30, 1998
Murphey Favre Securities Services, Inc.
601 W. Main Avenue, Suite 300
Spokane, WA 99201
Ladies and Gentlemen:
The Sierra Variable Trust (the "Trust"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, confirms its
agreements with Murphey Favre Securities Services, Inc. ("Murphey Favre"), a
corporation organized under the laws of the state of Washington, regarding
administration services to be provided by Murphey Favre in connection with each
of the investment funds offered from time to time by the Trust (individually, a
"Fund" and together, the "Funds"). Murphey Favre agrees to provide services upon
the following terms and conditions:
1. Investment Description: Appointment
-----------------------------------
The Trust desires to employ the Trust's capital by investing and
reinvesting (a) in investments of the kind, and in accordance with the
limitations, specified in (i) the Trust's Agreement and Declaration of Trust
dated January 27, 1993, as amended from time to time (the "Declaration of
Trust"), and (ii) the prospectuses (the "Prospectus") and statement of
additional information (the "Statement") relating to the Trust contained in the
Trust's Registration statement on Form N-1A, File No. 33-57732, filed with the
Securities and Exchange Commission (the "Registration Statement") and (b) in
such manner and to such extent as may from time to time be approved by the
Trust's Board of Trustees. Copies of the Prospectus, the Statement and the
Declaration of Trust have been submitted to Murphey Favre. The Trust desires to
employ and hereby appoints Murphey Favre to act as the Trust's administrator.
Murphey Favre accepts this appointment and agrees to furnish the services
described herein for the compensation set forth below.
2. Services as Administrator.
--------------------------
Subject to the supervision and direction of the Board of Trustees of the
Trust, Murphey Favre is responsible for all administrative functions with
respect to the Trust and will (a) assist in supervising all aspects of the
operations of the Trust except those performed by the Trust's investment adviser
and sub-advisers under their respective investment management and sub-advisory
agreements; (b) supply the Trust with office facilities (which may be in Murphey
Favre's own offices, statistical and research data, data processing services,
clerical, accounting and bookkeeping services (including, but not limited to,
the calculation of the net asset values of shares of the Trust), internal
auditing and legal services, internal executive and administrative
<PAGE>
services, and stationery and office supplies; (c) prepare reports to the Trust's
shareholders and materials for the Board of Trustees of the Trust; (d) prepare
tax returns; (e) prepare reports to and filings with the Securities and Exchange
Commission and state regulatory authorities; (f) cooperate with the Trust's
transfer agent for the purpose of establishing and implementing procedures to
ensure that the Trust's transfer agency and shareholder relations functions are
efficiently carried out; and (g) provide such other similar services as the
Trust may reasonably request to the extent permitted under application statutes,
rules and regulations. The services to be performed by Murphey Favre hereunder
may be delegated by it, in whole or in part, to one or more sub-administrators
provided that any delegation of duties to a sub-administrator shall not relieve
Murphey Favre of its responsibilities hereunder. Notwithstanding anything to the
contrary in this Agreement, Murphey Favre shall not be responsible for the
performance of any duties which are required to be performed by the Trust's
transfer agent.
3. Compensation
------------
a. In consideration of services rendered pursuant to this Agreement, the
Trust will pay Murphey Favre on the first business day of each month a fee for
the previous month at an annual rate of 0.18% of each Fund's average daily net
assets, out of which fee Murphey Favre shall pay expenses as described in
Section 4 including, without limitation, fees of any sub-administrator engaged
by Murphey Favre and the base fees and charges (but not transaction based fees
and out-of-pocket expenses) of the Trust's custodian. The fee for the period
from the date a Fund commences operations to the end of that month shall be
prorated according to the proportion such period bears to the full monthly
period.
b. Upon any termination of this Agreement before the end of any month,
the fee such part of a month shall be prorated according to the proportion for
which such period bears to the full monthly period and shall be payable upon the
date of termination of this Agreement. For the purpose of determining fees
payable to Murphey Favre, the value of each Fund's net assets shall be computed
at the times and in the manner specified in the Prospectus and/or the Statement
relating to the Fund as from time to time in effect.
4. Expenses
--------
Murphey Favre will bear all expenses in connection with the performance of
its services under this Agreement, including, without limitation, payment of the
fee to the custodian, and any sub-administrator described in Paragraph 2 above.
The Trust will bear certain other expenses to be incurred in its operation,
including: organizational expenses; taxes, interest, brokerage fees and
commissions, if any; fees of trustees of the Trust who are not officers,
director, or employees of Composite Research & Management Co., each Fund's sub-
adviser or sub-administrator, sub-transfer agent or any of their affiliates;
federal regulatory fees and state Blue Sky qualification fees; out-of-pocket
expenses of custodians, transfer and dividend disbursing agents and the Trust's
sub-administrator or sub-transfer agent and transaction charges of custodians;
insurance premiums; outside auditing and legal expenses; costs of maintenance of
the Trust's existence; costs attributable to investor services, including,
without limitation, telephone and
2
<PAGE>
personnel expenses; costs of preparing and printing prospectuses and statements
of additional information for regulatory purposes and for distribution to
existing shareholders; costs of shareholders' reports and meetings of the
shareholders of the Trust and of the officers or Board of Trustees of the Trust;
and any extraordinary expenses.
5. Standard of Care
----------------
Murphey Favre shall exercise its best judgment in rendering the services
listed in Paragraph 2 above. Murphey Favre shall not be liable for any error of
judgment or mistake of law or for any loss suffered by a Fund in connection with
the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
6. Term of Agreement
-----------------
This Agreement shall become effective as of the execution date and shall
continue for an initial two-year term and shall continue automatically from
year-to-year thereafter unless terminated in accordance with the following
sentence. This Agreement is terminable at any time, without penalty, on 60 days'
written notice, by the Board of Trustees of the Trust or upon 90 days' written
notice, by Murphey Favre.
7. Service to Other Companies or Accounts
--------------------------------------
The Trust understands that Murphey Favre may act in the future as
administrator to other investment companies or series of investment companies,
and the Trust has no objection to Murphey Favre's so acting. The Trust
understands that the persons employed by Murphey Favre to assist in the
performance of Murphey Favre's duties under this Agreement will not devote their
full time to such service and nothing contained in this Agreement shall be
deemed to limit or restrict the right of Murphey Favre or any affiliate of
Murphey Favre to engage in and devote time and attention to other businesses or
to render services of whatever kind or nature.
8. Representations of the Trust and Murphey Favre
----------------------------------------------
The Trust represents that (a) a copy of the Declaration of Trust is on file
in the office of the Secretary of the Commonwealth of Massachusetts, (b) the
appointment of Murphey Favre has been duly authorized and (c) it has acted and
will continue to act in conformity with the 1940 Act and other applicable laws.
Murphey Favre represents that it is authorized to perform the services described
herein.
3
<PAGE>
9. Limitation of Liability
-----------------------
This Agreement has been executed on behalf of the Trust by the undersigned
officer of the Trust in his capacity as an officer of the Trust. The obligations
of this Agreement shall be binding only upon the assets and property of the
Trust and shall not be binding upon any Trustee, officer, or shareholder of the
Trust individually.
10. Entire Agreement
----------------
This Agreement constitutes the entire agreement between the parties hereto.
11. Governing Law
-------------
This Agreement shall be governed in accordance with the laws of the
Commonwealth of Massachusetts.
If the foregoing accurately sets forth our agreement, kindly indicate your
acceptance hereof by signing and returning the enclosed copy hereof
Very truly yours,
THE SIERRA VARIABLE TRUST
By /s/ KEITH B.PIPES
--------------------------
Name: Keith B. Pipes
Title: PRESIDENT
Accepted:
MURPHEY FAVRE SECURITIES SERVICES, INC.
By /s/ WILLIAM G. PAPESH
-----------------------
Name:
Title: PRESIDENT
4
