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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
(Exact Name of Registrant)
AMERICAN NATIONAL INSURANCE COMPANY
(Exact Name of Depositor)
One Moody Plaza
Galveston, Texas 77550
(Address of Depositor's Principal Executive Offices)
(409) 763-4661
(Depositor's Telephone Number, including Area Code)
Rex Hemme Jerry L. Adams
Vice President, Actuary Greer, Herz & Adams, L.L.P.
American National Insurance Company With copy to: One Moody Plaza
One Moody Plaza Galveston, Texas 77550
Galveston, Texas 77550
(Name and Address of Agent for Service)
----------------------------------------------------
Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement.
Securities being offered: Variable Annuity Contracts
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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WEALTHQUEST III VARIABLE ANNUITY
ISSUED BY AMERICAN NATIONAL INSURANCE COMPANY
HOME OFFICE ONE MOODY PLAZA GALVESTON TX 77550-7999
PROSPECTUS (DATE) 1-800-306-2959
This prospectus describes a deferred variable annuity contract.
You can allocate your contract value to American National Variable Annuity
Separate Account, which reflects the investment performance of mutual fund
portfolios selected by you, and our Fixed Account which earns a guaranteed
minimum rate. At this time, you can allocate your contract value to the
following mutual fund portfolios:
AMERICAN NATIONAL FUND . Limited-Term Bond Portfolio
. Growth Portfolio MFS FUND
. Balanced Portfolio . Capital Opportunities Portfolio
. Equity Income Portfolio . Emerging Growth Portfolio
. High Yield Bond Portfolio . Research Portfolio
. International Stock Portfolio . Growth With Income Portfolio
. Small-Cap/Mid-Cap Portfolio FEDERATED FUND
. Government Bond Portfolio . Utility Fund II Portfolio
. Money Market Portfolio . Growth Strategies Portfolio
FIDELITY FUNDS . U.S. Government Bond Portfolio
. Asset Manager Portfolio . High Income Bond Portfolio
. Index 500 Portfolio . Equity Income Fund II Portfolio
. Contrafund Portfolio ALGER AMERICAN FUND
. Asset Manager: Growth Portfolio . Small Capitalization Portfolio
. Growth Opportunities Portfolio . Growth Portfolio
T. ROWE PRICE FUNDS . MidCap Growth Portfolio
. Equity Income Portfolio . Leveraged AllCap Portfolio
. Mid-Cap Growth Portfolio . Income & Growth Portfolio
. International Stock Portfolio . Balanced Portfolio
THIS PROSPECTUS CONTAINS INFORMATION THAT YOU SHOULD KNOW BEFORE PURCHASING A
CONTRACT. ADDITIONAL INFORMATION ABOUT THE CONTRACT IS CONTAINED IN A STATEMENT
OF ADDITIONAL INFORMATION ("SAI") FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, ("SEC") WHICH IS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
YOU MAY OBTAIN A FREE COPY OF THE SAI, WHICH IS DATED THE SAME DATE AS THIS
PROSPECTUS, BY WRITING OR CALLING US AT OUR HOME OFFICE. THE TABLE OF CONTENTS
OF THE SAI IS ON PAGE XX OF THIS PROSPECTUS. THE SEC MAINTAINS AN INTERNET
WEBSITE (http://www.sec.gov) THAT CONTAINS MATERIAL INCORPORATED BY REFERENCE
INTO THIS PROSPECTUS, SAI, AND OTHER INFORMATION REGARDING COMPANIES THAT FILE
ELECTRONICALLY WITH THE SEC.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY CURRENT PROSPECTUSES OR
PROSPECTUS PROFILES FOR THE AMERICAN NATIONAL FUND, FIDELITY FUNDS, T. ROWE
PRICE FUNDS, MFS FUND, FEDERATED FUND, AND ALGER AMERICAN FUND. THE SECURITIES
AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR
PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
INTERESTS IN THE CONTRACT ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, NOR IS THE CONTRACT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THE CONTRACT INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
Please Read This Prospectus Carefully and Keep It For Future Reference
Form (new number)
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TABLE OF CONTENTS
Page
Glossary x
Introduction x
What is the Purpose of the Contract? x
What are my Investment Options? x
How do I Purchase a Contract? x
How do I Allocate Purchase Payments? x
Can I Transfer Amounts Between the Investment Alternatives? x
What is the Death Benefit under the Contract? x
Can I Get My Money if I need It? x
How Can I Receive Annuity Payments? x
What are the Charges and Deductions under the Contract? x
What are the Tax Consequences Associated with the Contract? x
If I have Questions, Where can I Go? x
Contract Owner Transaction Expenses x
Expenses Before the Annuity Date x
Sales Load as a Percentage of Purchase Payments x
Deferred Sales Load ("Surrender Charge") x
Expenses During the Annuity Period xx
Contract xx
Type of Contract xx
Contract Application and Purchase Payments xx
Allocation of Purchase Payments xx
Crediting of Accumulation Units xx
Allocation of Charges and Other Deductions to the Subaccounts
and the Fixed Account xx
Determining Accumulation Unit Values xx
Transfers Before Annuity Date xx
Special Programs xx
Charges and Deductions Before the Annuity Date xx
Surrender Charge xx
Other Charges xx
Deduction of Fees xx
Exception to Charges xx
Distributions Under the Contract xx
Distributions Before Annuity Date xx
Surrenders xx
Systematic Withdrawal Program xx
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Waiver of Surrender Charge xx
Death Benefit Before Annuity Date xx
Distributions During the Annuity Period xx
Election of Annuity Date and Form of Annuity xx
Allocation of Benefits xx
Annuity Options xx
Value of Variable Annuity Payments: Assumed Investment Rates xx
Annuity Provisions xx
The Company, Separate Account, Funds and Fixed Account xx
American National Insurance Company xx
The Separate Account xx
The Funds xx
Changes in Investment Options xx
Fixed Account xx
Federal Tax Matters xx
Introduction xx
Tax Status of the Contracts xx
Taxation of Annuities in General xx
Withdrawals xx
Penalty Tax xx
Annuity Payments xx
Taxation of Death Benefit Proceeds xx
Transfers or Assignments of a Contract xx
Required Distributions xx
Withholding xx
Multiple Contracts xx
Exchanges xx
Taxation of Qualified Contracts xx
Distributions from Qualified Contracts xx
Possible Changes in Taxation xx
All Contracts xx
Performance xx
Distributor of the Contract xx
Legal Matters xx
Legal Proceedings xx
Experts xx
Additional Information xx
Financial Statements xx
Table of Contents of Statement of Additional Information xx
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GLOSSARY
ACCUMULATION PERIOD. The time between the date Accumulation Units are first
purchased by us and the earliest of (1) the Annuity Date; (2) the date the
Contract is surrendered; or (3) the date of the Contract Owner's death.
ACCUMULATION UNIT. A unit used by us to calculate a Contract's value during the
Accumulation Period.
ACCUMULATION VALUE. The sum of (1) the value of your Accumulation Units and (2)
value in the Fixed Account.
ALGER AMERICAN FUND. The Alger American Fund.
AMERICAN NATIONAL FUND. American National Investment Accounts, Inc.
ANNUITANT. The person or persons who will receive annuity payments.
ANNUITY DATE. The date annuity payments begin.
ANNUITY PERIOD. The time during which annuity payments are made.
ANNUITY UNIT. A unit used by us to calculate the dollar amount of annuity
payments.
COMPANY ("WE", "OUR" OR "US" ). American National Insurance Company.
CONTRACT. The contract described in this Prospectus.
CONTRACT OWNER ("YOU" OR "YOUR"). Unless changed by notice to us, the Contract
Owner is as stated in the application.
CONTRACT ANNIVERSARY. An anniversary of the Date of Issue.
CONTRACT YEAR. A one-year period, commencing on either the Date of Issue or a
Contract Anniversary.
DATE OF ISSUE. The date a Contract is issued.
ELIGIBLE PORTFOLIO. A Portfolio which corresponds to a subaccount.
ENHANCED DEATH BENEFIT RIDERS. Optional death benefits available at an
additional cost.
Federated Fund. Federated Insurance Series.
FIDELITY FUNDS. Variable Insurance Products Fund II and Variable Insurance
Products Fund III.
FIXED ACCOUNT. A part of our General Account which will accumulate interest at a
fixed rate.
GENERAL ACCOUNT. All of our assets except those segregated in separate accounts.
MFS FUND. MFS Variable Insurance Trust.
NON-QUALIFIED CONTRACT. A Contract that does not receive favorable tax treatment
under the Internal Revenue Code.
PORTFOLIO. A series of a mutual fund designed to meet specified investment
objectives.
PURCHASE PAYMENT. A payment made to us during the Accumulation Period less any
premium tax charges.
QUALIFIED CONTRACT. A Contract issued in connection with a retirement plan that
receives favorable tax treatment under the Internal Revenue Code.
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T. ROWE PRICE FUNDS. T. Rowe Price Equity Series, Inc., T. Rowe Price
International Series, Inc. and T. Rowe Price Fixed Income Series, Inc.
VALUATION DATE. Each day the New York Stock Exchange is open for regular
trading.
VALUATION PERIOD. The close of business on one Valuation Date to the close of
business on another.
VARIABLE ANNUITY. An annuity with payments and value that vary in dollar amount
based on performance of the investments you chose.
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INTRODUCTION
WHAT IS THE PURPOSE OF THE CONTRACT?
The Contract allows you to accumulate funds, on a tax-deferred basis, that will
increase or decline in value based on the performance of investments you choose.
You should use the Contract for retirement planning or other long-term goals.
WHAT ARE MY INVESTMENT OPTIONS?
You can invest your Purchase Payments in one or more of the following
subaccounts of the separate account, each of which invests exclusively in shares
of a corresponding Eligible Portfolio:
. American National Growth . T. Rowe Price Limited-Term Bond
. American National Balanced . MFS Capital Opportunities
. American National Equity Income . MFS Emerging Growth
. American National Money Market . MFS Research
. American National High Yield Bond . MFS Growth With Income
. American National International Stock . Federated Utility Fund II
. American National Small-Cap/Mid-Cap . Federated Growth Strategies
. American National Government Bond . Federated U.S. Government Bond
. Fidelity Asset Manager . Federated High Income Bond
. Fidelity Index 500 . Federated Equity Income Fund II
. Fidelity Contrafund . Alger American Small Capitalization
. Fidelity Asset Manager: Growth . Alger American MidCap Growth
. Fidelity Growth Opportunities . Alger American Growth
. T. Rowe Price Equity Income . Alger American Balanced
. T. Rowe Price Mid-Cap Growth . Alger American Leveraged AllCap
. T. Rowe Price International Stock . Alger American Income & Growth
Each such subaccount and corresponding Eligible Portfolio has its own investment
objective. Some of the Eligible Portfolios have similar investment objectives.
(See "Funds" beginning on page xx.) There is no assurance that Eligible
Portfolios will achieve their investment objectives. Accordingly, you could
lose some or all of your Contract value.
You can also invest in our Fixed Account.
HOW DO I PURCHASE A CONTRACT?
You can purchase a Contract by completing an application and paying the minimum
Purchase Payment to our home office. You must make at least a $5,000 minimum
initial Purchase Payment and any subsequent Purchase Payments must be at least
$2,000. We may change these amounts.
Without our prior approval, the maximum Purchase Payment under a Contract is
$1,000,000.
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For a limited time, usually ten days after you receive the Contract, you can
return the Contract to our home office and receive a refund. (See, "Contract
Application and Purchase Payments" on page xx.)
HOW DO I ALLOCATE PURCHASE PAYMENTS?
Your can allocate your Purchase Payments among the 32 currently available
subaccounts and the Fixed Account. You cannot allocate less than 1% of a
Purchase to any one investment option. The minimum initial deposit in any
subaccount and the Fixed Account is $500.
CAN I TRANSFER AMOUNTS BETWEEN THE INVESTMENT ALTERNATIVES?
You can make transfers between subaccounts and to our Fixed Account at any time.
Transfers from our Fixed Account before the Annuity Date are limited. (See
"Transfers Before Annuity Date" on page xx for additional limitations.)
Transfers from our Fixed Account after the Annuity Date are not permitted. (See
"Allocation of Benefits" on page xx for additional limitations.) Before the
Annuity Date, you can make twelve transfers each Contract Year at no charge.
Additional transfers will be subject to a $10.00 exchange fee. Transfers after
the Annuity Date are unlimited and free. You should periodically review your
allocations among the subaccounts and the Fixed Account to make sure they fit
your current situation and financial goals.
You can make allocation changes in writing or during our normal business hours
by telephone if a telephone authorization form is on file with us. We will
employ reasonable procedures to confirm that telephone instructions are genuine.
If we follow those procedures, we will not be liable for losses due to
unauthorized or fraudulent instructions. We may be liable for such losses if we
do not follow those procedures.
WHAT IS THE DEATH BENEFIT UNDER THE CONTRACT?
If you or the Annuitant die before the Annuity Date, the death benefit will be
at least that amount of the Accumulation Value on the date notice of death is
received at our home office. The death benefit may be more if you selected an
Enhanced Death Benefit Rider. (See "Death Benefit Before Annuity Date" on page
xx.
CAN I GET MY MONEY IF I NEED IT?
By written request to us, you can withdraw all or part of your Accumulation
Value at any time before the Annuity Date. Such withdrawal may be subject to a
Surrender Charge, an IRS penalty tax and income tax. If your contract was
purchased in connection with a retirement plan, such withdrawal may also be
subject to plan restrictions. Withdrawals from a Contract qualified under
Section 403(b) of the Internal Revenue Code may be restricted. (See "Taxation
of Qualified Contracts" under "Federal Tax Matters" at age xx.)
HOW CAN I RECEIVE ANNUITY PAYMENTS?
You can choose from a number of annuity payment options, which include
. monthly payments for a number of years
. payments for life
. payments made jointly
You can also choose to receive your Annuity Payments on a fixed or variable
basis. Variable payments will increase or decrease based on the investment
performance of the Eligible Portfolios. (See "Annuity Options", page xx.)
WHAT ARE THE CHARGES AND DEDUCTIONS UNDER THE CONTRACT?
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We do not currently deduct a sales charge when you purchase your Contract. We
may deduct a surrender charge up to 7% of Purchase Payments withdrawn.
You will also be charged an annual contract fee of $35 unless
. all of your Accumulation Value is in the Fixed Account, or
. your Accumulation Value is greater than $50,000 on the last day of a Contract
Year.
We charge a mortality risk fee and an expense risk fee to meet our death benefit
obligations and to pay expenses not covered by the annual contract fee. The
mortality risk fee is 0.80% and the expense risk fee is 0.35% on an annual
basis. If you select an Enhanced Death Benefit Rider, we will charge you a
higher mortality risk fee and expense risk fee.
We also charge a daily administrative fee equal, on an annual basis, to 0.10% of
the Contract's daily Accumulation Value.
We may make additional charges for premium taxes when incurred.
WHAT ARE THE TAX CONSEQUENCES ASSOCIATED WITH THE CONTRACT?
You are generally required to pay taxes on amounts earned in a Non-Qualified
Contract only when they are withdrawn. When you take distributions or
withdrawals from a Contract, taxable earnings are considered to be paid out
first, followed by the investment in the Contract. All or a portion of each
annuity payment you receive under a Non-Qualified Contract will be taxable.
Distributions from a Contract are taxed as ordinary income. You may owe a 10%
federal income tax penalty for distributions or withdrawals taken before age
59 1/2.
You are generally required to pay taxes on all amounts withdrawn from a
Qualified Contract because Purchase Payments were made with before-tax dollars.
Restrictions and penalties may apply to withdrawals from Qualified Contracts.
(See "Federal Tax Matters", page xx.)
IF I HAVE QUESTIONS, WHERE CAN I GO?
If you have any questions about the Contract, you can contact your registered
representative or write us at One Moody Plaza, Galveston, Texas, 77550-7999 or
call us at 1-800-306-2959.
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CONTRACT OWNER TRANSACTION EXPENSES
EXPENSES BEFORE THE ANNUITY DATE
The following table summarizes the charges we will make before the Annuity Date.
The table also summarizes the fees and expenses of the Eligible Portfolios. You
should consider this information with the information under the heading "Charges
and Deductions Before Annuity Date" on page xx.
SALES LOAD AS A PERCENTAGE OF PURCHASE PAYMENTS 0%
DEFERRED SALES LOAD ("SURRENDER CHARGE")
. Free Withdrawal Amount
In any Contract Year, you can withdraw the greater of (1) 10% of your
Accumulation Value or (2) your Accumulation Value less total Purchase Payments
(the "Free Withdrawal Amount") penalty free. The portion of a withdrawal in
excess of the Free Withdrawal Amount is a withdrawal of Purchase Payments and
is subject to a Surrender Charge.
When you make a withdrawal, we will divide such withdrawal by your
Accumulation Value and convert such result to a percentage. We will then
reduce percentage used in the first part of the formula for calculating the
Free Withdrawal Amount (i.e., the 10% of Accumulation Value) by that
percentage and will use the reduced percentage in the formula for calculating
the Free Withdrawal Amount for additional withdrawals in that same Contract
Year.
. Calculation of Surrender Charges
Surrender Charges vary depending on the number of complete years elapsed since
the Purchase Payment being withdrawn was paid, on a first paid, first
withdrawn basis. The Surrender Charge will be deducted from your Accumulation
Value, if sufficient. If your Accumulation Value is not sufficient, your
withdrawal will be reduced accordingly. Surrender Charges will be a percentage
of each Purchase Payment or portion thereof withdrawn as illustrated in the
following table:
COMPLETE YEARS APPLICABLE
ELAPSED SINCE SURRENDER CHARGE
PURCHASE PAYMENT AS A
MADE PERCENTAGE
- -------------------------------------------------------------------------------
Less than 1 7.0
1 7.0
2 6.0
3 5.0
4 4.0
5 3.0
6 2.0
7 and thereafter 0.0
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EXCHANGE FEE $ 10
ANNUAL CONTRACT FEE $ 35
SEPARATE ACCOUNT ANNUAL EXPENSES BASED ON DEATH BENEFIT
(AS PERCENTAGE OF AVERAGE NET ASSETS) ACCU. VA GUAR. MIN. RIDER 3% RIDER 5% RIDER
Mortality Risk Fee xx% xx% xx% xx%
Expense Risk Fee xx% xx% xx% xx%
Administrative Asset Fee 0.10% 10% 10% 10%
Total Separate Account xx%
Annual Expenses xx% xx% xx%
PORTFOLIO COMPANY ANNUAL EXPENSES
AMERICAN NATIONAL GROWTH PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees after reimbursement * ** 0.36%
Other Expenses 0.51%
Total Portfolio Annual Expenses 0.87%
* Without reimbursement, management fees would have been 0.50% and the total
portfolio annual expense would have been 1.01%.
AMERICAN NATIONAL BALANCED PORTFOLIO ANNUAL EXPENSES
(as a percentage of average net assets)
Management Fees after reimbursement * ** 0.44%
Other Expenses 0.74%
Total Portfolio Annual Expenses 1.18%
* Without reimbursement, management fees would have been 0.50% and the total
portfolio annual expense would have been 1.24%.
AMERICAN NATIONAL EQUITY INCOME PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees after reimbursement * ** 0.16%
Other Expenses 0.49%
Total Portfolio Annual Expenses 0.65%
* Without reimbursement, management fees would have been 0.50% and the total
portfolio annual expense would have been 0.99%.
AMERICAN NATIONAL HIGH YIELD BOND PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees xx%
Other Expenses xx%
Total Portfolio Annual Expenses xx%
AMERICAN NATIONAL INTERNATIONAL STOCK PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees xx%
Other Expenses xx%
Total Portfolio Annual Expenses xx%
AMERICAN NATIONAL SMALL-CAP/MID-CAP PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees xx%
Other Expenses xx%
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Total Portfolio Annual Expenses xx%
AMERICAN NATIONAL GOVERNMENT BOND PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees xx%
Other Expenses xx%
Total Portfolio Annual Expenses xx%
AMERICAN NATIONAL MONEY MARKET PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees after reimbursement * ** 0.00%
Other Expenses 0.87%
Total Portfolio Annual Expenses 0.87%
* Without reimbursement, management fees would have been 0.50% and the total
portfolio annual expense would have been 1.37%.
** Under its Administrative Service Agreement with American National Investment
Accounts, Inc., Securities Management and Research, Inc. ("SM&R"), the fund's
Investment Adviser and Manager, has agreed to pay (or to reimburse each
Portfolio for) each Portfolio's expenses (including the advisory fee and
administrative service fee paid to SM&R, but exclusive of interest, commissions
and other expenses incidental to portfolio transactions) in excess of 1.50% per
year of such Portfolio's average daily net assets. In addition, SM&R has entered
into a separate undertaking with the fund effective May 1, 1994 until April 30,
2000, pursuant to which SM&R has agreed to reimburse the American National Money
Market Portfolio and the American National Growth Portfolio for expenses in
excess of .87%; the American National Balanced Portfolio for expenses in excess
of 1.18% and the American National Managed Portfolio for expenses in excess of
.65%, of each of such Portfolios' average daily net assets during such period.
SM&R is under no obligation to renew this undertaking for any Portfolio at the
end of such period.
FIDELITY INDEX 500 PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.24%
Other Expenses after reimbursement 0.04%
Total Portfolio Annual Expenses* 0.28%
* The portfolio's investment advisor voluntarily reduced the portfolio's
expenses. Absent reimbursement, management fee, other expenses and total
expenses would have been 0.24%, 0.11% and 0.35% respectively.
FIDELITY ASSET MANAGER PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.54%
Other Expenses after reimbursement 0.10%
Total Portfolio Annual Expenses** 0.64%
FIDELITY CONTRAFUND PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.59%
Other Expenses after reimbursement 0.12%
Total Portfolio Annual Expenses** 0.71%
FIDELITY ASSET MANAGER: GROWTH PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.60%
Other Expenses after reimbursement 0.17%
Total Portfolio Annual Expenses** 0.77%
FIDELITY GROWTH OPPORTUNITIES PORTFOLIO ANNUAL EXPENSES
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(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.59%
Other Expenses after reimbursement 0.12%
Total Portfolio Annual Expenses** 0.71%
</TABLE>
** A portion of the brokerage commissions that certain of the Fidelity Funds pay
were used to reduce their expenses. In addition, certain of the Fidelity Funds
have entered into arrangements with their custodian and transfer agent whereby
interest earned on uninvested cash balances was used to reduce custodian and
transfer agent expenses. Including these reductions, the total operating
expenses presented in the table would have been .75% of the Asset Manager
Portfolio, .80% for Contrafund Portfolio, .89% for asset Manager: Growth
Portfolio and .80% for Growth Opportunities Portfolio.
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T. ROWE PRICE EQUITY INCOME PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.85%
Other Expenses 0.00%
Total Portfolio Annual Expenses* 0.85%
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 1.05%
Other Expenses 0.00%
Total Portfolio Annual Expenses* 1.05%
T. ROWE PRICE MID-CAP GROWTH PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.85%
Other Expenses 0.00%
Total Portfolio Annual Expenses* 0.85%
T. ROWE PRICE LIMITED - TERM BOND PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.70%
Other Expenses 0.00%
Total Portfolio Annual Expenses* 0.70%
*T. Rowe Price Equity Income and Mid-Cap Growth Portfolios pay T. Rowe Price an
annual all-inclusive fee of 0.85% based on such Portfolios' average daily net
assets. T. Rowe Price Limited-Term Bond Portfolio pays T. Rowe Price an annual
all-inclusive fee of 0.70% based on such Portfolios' average daily net assets.
T. Rowe Price International Stock Portfolio pays Rowe-Price-Flemming
International, Inc. an annual all-inclusive fee of 1.05% based on such
Portfolios' average daily net assets. These fees pay for investment management
services and other operating costs of the Portfolios.
MFS CAPITAL OPPORTUNITIES PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.75%
Other Expenses (after fee reduction) 0.27%
Total Portfolio Annual Expenses* 1.02%
*The portfolio's investment advisor voluntarily reduced the portfolio's
expenses. Absent reimbursement, management fee, other expense and total expense
would have been 0.75%, 1.36%, and 1.11%, respectively.
MFS EMERGING GROWTH PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.75%
Other Expenses 0.10%
Total Portfolio Annual Expenses 0.85%
MFS RESEARCH PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.75%
Other Expenses 0.11%
Total Portfolio Annual Expenses 0.86%
MFS GROWTH WITH INCOME PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.75%
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Other Expenses 0.13%
Total Portfolio Annual Expenses 0.88%
FEDERATED UTILITY FUND II PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees after reimbursement 0.68%
Other Expenses after reimbursement 0.25%
Total Portfolio Annual Expenses* 0.93%
*The portfolio's investment advisor voluntarily reduced the portfolio's
expenses. Absent reimbursement, management fee, other expenses and total
expenses would have been 0.75%, 0.50%, and 1.25% respectively.
FEDERATED GROWTH STRATEGIES FUND II PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.44%
Other Expenses after reimbursement 0.42%
Total Portfolio Annual Expenses* 0.86%
*The portfolio's investment advisor voluntarily reduced the portfolio's
expenses. Absent reimbursement, management fee, other expenses and total
expenses would have been 0.75%, 0.42%, and 1.17% respectively.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees after reimbursement 0.52%
Other Expenses after reimbursement 0.33%
Total Portfolio Annual Expenses* 0.85%
*The portfolio's investment advisor voluntarily reduced the portfolio's
expenses. Absent reimbursement, management fee, other expenses and total
expenses would have been 0.60%, 0.58%, and 1.18% respectively.
FEDERATED HIGH INCOME BOND FUND II PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.60%
Other Expenses 0.18%
Total Portfolio Annual Expenses 0.78%
FEDERATED EQUITY INCOME FUND II PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees after reimbursement 0.32%
12-b1 Fees after reimbursement 0.00%
Other Expenses after reimbursement 0.61%
Total Portfolio Annual Expenses* 0.93%
*The portfolio's investment advisor voluntarily reduced the portfolio's
expenses. Absent reimbursement, management fee, 12-b1 fee, other expenses and
total expenses would have been 0.75%, 0.25%, 0.36%, and 1.36% respectively.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.85%
Other Expenses 0.04%
Total Portfolio Annual Expenses 0.89%
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
ALGER AMERICAN GROWTH PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.75%
Other Expenses 0.04%
Total Portfolio Annual Expenses 0.79%
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.80%
Other Expenses 0.04%
Total Portfolio Annual Expenses 0.84%
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.85%
Other Expenses* 0.11%
Total Portfolio Annual Expenses 0.96%
*Included in other expenses is 0.03% of interest expense.
ALGER AMERICAN INCOME & GROWTH PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.625%
Other Expenses 0.075%
Total Portfolio Annual Expenses 0.70%
ALGER AMERICAN BALANCED PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.75%
Other Expenses 0.17%
Total Portfolio Annual Expenses* 0.92%
</TABLE>
EXPENSES DURING THE ANNUITY PERIOD
During the Annuity Period, we will charge the Separate Account a mortality risk
fee of .80% and an expense risk fee of .35%. We will also charge the Separate
Account with the expenses of the Eligible Portfolios in which you have invested.
No other fees or expenses are charged against the Contract during the Annuity
Period.
Example: Accumulation Period
If you surrender your Contract at the end of the applicable time period, you
would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets (regardless of whether the surrender proceeds are paid to the
Contract Owner, applied under the Systematic Withdrawal Program, or applied
under an annuity option):
FUND 1 YEAR 3 YEARS
- ---------------------------------------------------------------------
AN Growth Portfolio $xx $xxx
AN Balanced Portfolio $xx $xxx
AN Equity Income Portfolio $xx $xxx
AN Money Market Portfolio $xx $xxx
AN High Yield Bond Portfolio $xx $xxx
AN International Stock Portfolio $xx $xxx
AN Small-Cap/Mid-Cap Portfolio $xx $xxx
AN Government Bond Portfolio $xx $xxx
Fidelity Asset Manager Portfolio $xx $xxx
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Fidelity Index 500 Portfolio $xx $xxx
Fidelity Contrafund Portfolio $xx $xxx
Fidelity Asset Manager: Growth Portfolio $xx $xxx
Fidelity Growth Opportunities Portfolio $xx $xxx
T. Rowe Price Equity Income Portfolio $xx $xxx
T. Rowe Price International Stock Portfolio $xx $xxx
T. Rowe Price Mid-Cap Growth Portfolio $xx $xxx
T. Rowe Price Limited - Term Bond Portfolio $xx $xxx
MFS Capital Opportunities Portfolio $xx $xxx
MFS Emerging Growth Portfolio $xx $xxx
MFS Research Portfolio $xx $xxx
MFS Growth With Income Portfolio $xx $xxx
Federated Utility Fund II Portfolio $xx $xxx
Federated Growth Strategies Fund II Portfolio $xx $xxx
Federated Fund for U.S. Government
Securities II Portfolio $xx $xxx
Federated High Income Bond Fund II Portfolio $xx $xxx
Federated Equity Income Fund II Portfolio $xx $xxx
Alger American Small Capitalization Portfolio $xx $xxx
Alger American Growth Portfolio $xx $xxx
Alger American MidCap Growth Portfolio $xx $xxx
Alger American Leveraged AllCap Portfolio $xx $xxx
Alger American Income & Growth Portfolio $xx $xxx
Alger American Leveraged Balanced Portfolio $xx $xxx
If you do not surrender your Contract, you would pay the following expenses on a
$1,000 investment, assuming 5% annual return on assets.
FUND 1 YEAR 3 YEARS
- ---------------------------------------------------------------------
AN Growth Portfolio $xx $ xx
AN Balanced Portfolio $xx $ xx
AN Equity Income Portfolio $xx $ xx
AN Money Market Portfolio $xx $ xx
AN High Yield Bond Portfolio $xx $xxx
AN International Stock Portfolio $xx $xxx
AN Small-Cap/Mid-Cap Portfolio $xx $xxx
AN Government Bond Portfolio $xx $xxx
Fidelity Asset Manager Portfolio $xx $ xx
Fidelity Index 500 Portfolio $xx $ xx
Fidelity Contrafund Portfolio $xx $ xx
Fidelity Asset Manager: Growth Portfolio $xx $ xx
Fidelity Growth Opportunities Portfolio $xx $ xx
T. Rowe Price Equity Income Portfolio $xx $ xx
T. Rowe Price International Stock Portfolio $xx $ xx
T. Rowe Price Mid-Cap Growth Portfolio $xx $ xx
T. Rowe Price Limited - Term Bond Portfolio $xx $ xx
MFS Capital Opportunities Portfolio $xx $ xx
MFS Emerging Growth Portfolio $xx $ xx
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MFS Research Portfolio $xx $ xx
MFS Growth With Income Portfolio $xx $ xx
Federated Utility Fund II Portfolio $xx $ xx
Federated Growth Strategies Fund II Portfolio $xx $ xx
Federated Fund for U.S. Government
Securities II Portfolio $xx $ xx
Federated High Income Bond Fund II Portfolio $xx $ xx
Federated Equity Income Fund II Portfolio $xx $ xx
Alger American Small Capitalization Portfolio $xx $xxx
Alger American Growth Portfolio $xx $xxx
Alger American MidCap Growth Portfolio $xx $xxx
Alger American Leveraged AllCap Portfolio $xx $xxx
Alger American Income & Growth Portfolio $xx $xxx
Alger American Balanced Portfolio $xx $xxx
You should not consider the examples as representative of past or future
expenses. The examples do not include the deduction of state premium taxes
assessed.
The purpose of the preceding tables is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly. For
purposes of computing the expense of the annual contract fee, the dollar amounts
shown in the examples are based on a single Purchase Payment of $xx. The tables
reflect expenses of the Separate Account and the Eligible Portfolios. The
expenses shown above for the Eligible Portfolios are assessed at the underlying
fund level and are not direct charges against the Separate Account's assets or
reductions from Accumulation Value. These expenses are taken into consideration
in computing each Portfolio's net asset value, which is the share price used to
calculate the value of an Accumulation Unit. Actual expenses may be more or
less than shown. As required by the Securities and Exchange Commission, the
example assumes a 5% annual rate of return. This hypothetical rate of return is
not intended to be representative of past or future performance of an Eligible
Portfolio. For a more complete description of the various costs and expenses of
the American National Fund, the Fidelity Funds, the T. Rowe Price Funds, the MFS
Fund, the Federated Fund and the Alger American Fund, see their Prospectuses.
The examples reflect the election at issue of the 5% guaranteed death benefit
rider. If no Enhanced Death Benefit Option Rider or another Enhanced Death
Benefit Option Rider is elected, the actual expenses incurred will be less than
those represented in the examples.
CONTRACT
TYPE OF CONTRACT
This Prospectus offers an individual deferred variable annuity contract
providing for future annuity payments. You can choose to vary your Purchase
Payments or pay a single Purchase Payment. The Contract can be either Qualified
or Non-Qualified.
In certain states, the Contract may be offered as a group contract with
individual ownership represented by certificates. The discussion of Contracts
in this prospectus applies equally to certificates under group contracts, unless
the content specifies otherwise.
CONTRACT APPLICATION AND PURCHASE PAYMENTS
To purchase a Contract, you must complete an application and send the minimum
Purchase Payment to our home office. (See "Allocation of Purchase Payments",
page xx.) If your application cannot be processed within five days after
receipt, we will return your payment. We will credit your initial Purchase
Payment to the Contract within two business days after a completed application
is received at our home office.
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You have a "free look" period during which you can return the Contract to our
home office and get a refund. The refund will equal the greater of (1) all of
your Purchase Payments or (2) Accumulation Value plus charges deducted by us
during such period. The "free look" period is established by state law and
generally runs ten days after you receive a Contract. We require that Purchase
Payments received by us during the 15-day period after the Date of Issue be
allocated to the AN Money Market Portfolio. Thereafter, amounts allocated to
such subaccount and Purchase Payments paid are allocated as directed by you. No
Surrender Charges are assessed on refunds.
ALLOCATION OF PURCHASE PAYMENTS
After the "free look" period, Purchase Payments will be allocated to the
subaccounts and the Fixed Account according to your instructions in the
application. You can change these allocations at any time by written
instruction to our home office or by telephone, if a properly completed
telephone transfer authorization form is on file with us.
CREDITING OF ACCUMULATION UNITS
Before the Annuity Date, Purchase Payments will be used to purchase Accumulation
Units in subaccounts and be allocated to the Fixed Account as you have
instructed. We will determine the number of Accumulation Units purchased by
dividing the dollar amount of the Purchase Payment allocated to a subaccount by
the Accumulation Unit value for that subaccount computed following such
allocation.
ALLOCATION OF CHARGES AND OTHER DEDUCTIONS TO THE SUBACCOUNTS AND THE FIXED
ACCOUNT
Unless you instruct differently, deductions from the subaccounts and the Fixed
Account will be made, pro rata, to the extent necessary for us to
. collect charges (except annual contract fee)
. pay surrender value
. provide benefits
We will immediately reinvest dividends and capital gain distributions received
from an Eligible Portfolio at net asset value in shares of that Eligible
Portfolio.
DETERMINING ACCUMULATION UNIT VALUES
The Accumulation Unit value of each subaccount reflects the investment
performance of that subaccount. We calculate Accumulation Unit value on each
Valuation Date by:
. multiplying the per share net asset value of the corresponding Eligible
Portfolio by the number of shares held by the subaccount, after the purchase
or redemption of any shares on the Valuation Date;
. subtracting a charge for the administrative asset fee and the mortality and
expense risk fees for that subaccount; and
. dividing by the number of Accumulation Units held in the subaccount on the
Valuation Date, before the purchase or redemption of any units on that date.
We will calculate the Accumulation Unit value for each subaccount at the end of
each Valuation Period. Investment performance of the Eligible Portfolios will
increase or decrease the Accumulation Unit value for each subaccount, the
Eligible Portfolio expenses and the deduction of certain charges by us will
decrease the Accumulation Unit value for each subaccount.
TRANSFERS BEFORE ANNUITY DATE
You can make transfers among the subaccounts and the Fixed Account subject to
the following restrictions:
. Transfers from subaccounts must be at least $250, or the balance of the
subaccount, if less.
. The minimum amount which may remain in a subaccount after a transfer is
$1,000.
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. Each Contract year, transfers from the Fixed Account cannot exceed the
greater of (1) 10% of the amount in the Fixed Account or (2) $1,000.
. The first twelve (12) transfers in a Contract Year are free. A $10.00 fee
will be deducted from the amount transferred for each additional transfer.
(See "Exchange Fee", page xx.)
We will make transfers and determine values on the later of (1) the date
designated in your request or (2) the end of the Valuation Period in which your
transfer request is received.
We may revoke or modify the transfer privilege. You cannot transfer to the
dollar cost averaging fixed account. For a discussion of transfers after the
Annuity Date, see "Allocation of Benefits" at page xx.
SPECIAL PROGRAMS
. Dollar Cost Averaging Program - If you have at least $10,000 Accumulation
Value in your Contract, you can instruct us to periodically transfer an
amount or percentage from a subaccount or the Fixed Account to any
subaccount(s) or the Fixed Account. The transfers can be made monthly,
quarterly, semi-annually or annually. The amount transferred each time must
be at least $1,000. The minimum transfer to each subaccount must be at least
$100.
. Fixed Account Dollar Cost Averaging Program - If you participate in the fixed
account dollar cost averaging program, you may designate an amount to be held
in one of the dollar cost averaging fixed account options until it is
transferred to the subaccounts or the Fixed Account as selected by you. The
two options you must select from are a six-month or a twelve-month dollar
cost averaging period. When you make an allocation to on the dollar cost
averaging fixed accounts for this purpose, we will set an interest rate
applicable to that amount. We will then credit interest at that rate to that
amount until it has been entirely transferred to your chosen subaccounts or
the Fixed Account. We will complete the transfers within one year of the
allocation. In our discretion, we may change the rate that we set for new
allocations to the dollar cost averaging fixed account. We will never,
however, set a rate less than an effective annual rate of 3%. The program is
available only for Purchase Payments received on or prior to the Date of
Issue. The minimum Purchase Payment to participate in the program is $10,000.
Dollar cost averaging results in the purchase of more Accumulation Units when
Accumulation Unit Value is low, and fewer when Accumulation Unit value is
high. There is no guarantee that dollar cost averaging, will result in higher
Accumulation Value or otherwise be successful.
Rebalancing Program - Under the rebalancing program, you can instruct us to
allocate Purchase Payments and Accumulation Value among the subaccounts and
Fixed Account. In accordance with allocation instructions specified by you,
we will rebalance your Accumulation Value by allocating Purchase Payments and
transferring Accumulation Value among the subaccounts and the Fixed Account.
Rebalancing will be performed on a quarterly, semi-annual or annual basis as
specified in the application. Transfers of Accumulation Value pursuant to
this program will not be counted in determining whether the Exchange Fee
described below applies. At the time the program begins, there must be at
least $ 10,000 of Accumulation Value under the Contract. The program will be
stopped if, on a rebalancing date, the Accumulation Value is less than $
5,000. You can change the allocation instructions or stop the program by
sending written notice or calling us by telephone. You can request
participation in or discontinue such special program at any time.
There is no charge for participation in such special programs.
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CHARGES AND DEDUCTIONS
BEFORE ANNUITY DATE
SURRENDER CHARGE
Since no sales charge is deducted from your Purchase Payments, a Surrender
Charge may be imposed on withdrawals to cover expenses of distributing the
Contract. (See "Deferred Sales Load (`Surrender Charge')" on page x.)
When you make a withdrawal, we will divide such withdrawal by your Accumulation
Value and convert such result as a percentage. Assume you have $40,000
Accumulation Value, $38,000 of which represents total Purchase Payments and
$2,000 of which represents Accumulation Value less total Purchase Payments.
. Example 1 - Assume you want to withdraw $7,000. You can withdraw the
greater of (1) 10% of your $40,000 Accumulation Value or (2) Accumulation
Value minus total Purchase Payments with no Surrender Charge. Since 10% of
your Accumulation Value, $4,000, is greater than Accumulation Value minus
total Purchase Payments, $2,000, your Free Withdrawal Amount will be your
$4,000. Accordingly, $4,000 of your withdrawal will be free of surrender
charge. The remaining $3,000 is a withdrawal of Purchase Payments and will
be subject to a Surrender Charge.
. Example 2 - Assume you have made a $3,000 withdrawal and want to make an
additional $5,000 withdrawal in the same Contract Year. The first withdrawal
would have been free because it was less than the Free Withdrawal Amount.
However, such withdrawal would have utilized a portion of the Free
Withdrawal Amount available in that Contract Year. The first part of the
formula for calculating the Free Withdrawal Amount will be reduced by 7.5%,
which is the percentage the first surrender was of your Accumulation Value
at that time. If there have been no additional Purchase Payments or
increases in the amount by which your Accumulation Value exceeds your total
Purchase Payments since the first withdrawal, the Free Withdrawal Amount for
the second withdrawal will be the greater of (1) 2.5% of your Accumulation
Value, which is $925.00 or (2) Accumulation Value minus total Purchase
Payments, which is zero (0). Accordingly, $925 of your second withdrawal
will be free of Surrender Charges. The remaining $4,075 will be a withdrawal
of Purchase Payments and will be subject to a Surrender Charge.
OTHER CHARGES
Your Contract is subject to certain other charges:
. Administrative Charges
A $35 annual contract fee for each Contract Year unless all of your
Accumulation Value is in the Fixed Account or is greater than $50,000 on
the last day of a Contract Year.
An administrative asset fee charged daily at an annual rate of 0.10%.
. Premium Taxes
Premium taxes (which presently range from 0% to 3.5%) will be deducted if
assessed by a state on Purchase Payments.
. Mortality and expense risk fee
We assume the risks that Annuitants as a class may live longer than expected
and that fees may not be sufficient to cover our actual costs. In assuming
these risks, we agree to make annuity payments to the Annuitant or other
payee for as long as he or she may live. In addition, we are at risk for the
death benefits payable under the Contract.
For our promises to accept these risks, a 0.80% per annum, mortality risk fee
and a 0.35% per annum expense risk fee will be assessed daily against the
Separate Account during both the Accumulation Period and Annuity Period. If
you select one of our optional Enhanced Death Benefit Riders, we will charge
you a higher mortality risk fee during the Accumulation Period. The mortality
risk fee will be xx% for the minimum guaranteed death benefit rider. The
mortality risk fee will be xx% for the 3% guaranteed death benefit rider. The
mortality risk fee will be xx% for the 5% guaranteed death benefit rider. We
will calculate
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a separate Accumulation Unit Value for the Contracts without an Enhanced
Death Benefit Rider, and for Contracts with each type of Rider, in order to
reflect the difference in the mortality risk fees.
. Charges for Taxes
None at present. We may, however, make a charge in the future if income or
gains within the Separate Account incur federal, state, or local taxes or if
our tax treatment changes. Charges for such taxes, if any, would be deducted
from the Separate Account and the Fixed Account.
. Exchange Fee
A $10.00 exchange fee is charged for transfers among the subaccounts and
Fixed Account after twelve transfers per Contract Year. Such fee compensates
us for the costs of effecting the transfers. The exchange fee will be
deducted from the amount transferred.
DEDUCTION OF FEES
Deductions for annual contract fees will be prorated among the subaccounts.
EXCEPTIONS TO CHARGES
We may reduce charges in sales to a trustee, employer, or similar entity if we
determine that such sales reduce sales or administrative expenses. We also
reduce charges in sales to directors, officers and bona fide full-time employees
(and their spouses and minor children) of SM&R and the Company.
The Contract may be sold directly, without compensation, to a registered
representative, to employees, officers, directors, and trustees of the Company
and our affiliated companies, and spouses and immediate family members (i.e.,
children, siblings, parents, and grandparents) of the foregoing, and to
employees, officers, directors, trustees and registered representatives of any
broker-dealer authorized to sell the Contract, and spouses and immediate family
members of the foregoing. In such case, a Contract may be credited with some or
all of the cost savings resulting from such direct sale, but only if such credit
will not be unfairly discriminatory to any person.
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DISTRIBUTIONS UNDER THE CONTRACT
DISTRIBUTIONS BEFORE ANNUITY DATE
SURRENDERS
You can surrender your Contract, in whole or in part, before the Annuity Date
subject to the following limitations:
. If a partial surrender would leave less than $1,000 Accumulation Value, the
Contract must be fully surrendered.
. A partial surrender request should specify the allocation of that surrender
among the subaccounts and the Fixed Account. If not specified, we will
prorate the surrender among the subaccounts and the Fixed Account. Surrender
Charges will be deducted from the Accumulation Value remaining after a
partial surrender.
The Accumulation Unit value for Surrenders will be the applicable Accumulation
Unit value determined on the Valuation Date following receipt by us at our home
office of your surrender request.
Surrender Value is determined by:
. multiplying the number of Accumulation Units for each subaccount times the
Accumulation Unit value
. adding any Accumulation Value in the Fixed Account
. deducting any surrender charge
We expect to pay surrenders within seven days of receipt of your written request
in proper form. We may delay payment of a partial surrender from the Fixed
Account for up to six (6) months.
Unless you provide us a written election not to have federal and state income
taxes withheld, we are required by law to withhold such taxes from the taxable
portion of any surrender, and to remit that amount to the federal and/or state
government.
SYSTEMATIC WITHDRAWAL PROGRAM
Under the Systematic Withdrawal Program, you can instruct us to make payments of
a predetermined dollar amount of Accumulation Value from one or more subaccounts
and the Fixed Account monthly, quarterly, semi-annually or annually. The total
minimum systematic withdrawal payment is $100. The minimum systematic
withdrawal from any one subaccount or the Fixed Account is $50. Systematic
withdrawals can be started at any time. We must receive written notification
from you specifying the amount and frequency and timing of payment. You can
specify the subaccount from which systematic withdrawals will be made. If you do
not specify, withdrawals will be taken pro-rata from each subaccount. Surrender
Charges will apply.
Because distributions may be taxable, you should consult your tax adviser before
requesting systematic withdrawals. (See "Federal Tax Matters," page xx.)
Under the Systematic Withdrawal Program, you can participate in the Minimum
Distributions Program by instructing us to calculate and make minimum
distributions required if the Contract is used with a qualified plan. (See
"Taxation of Qualified Contracts," page xx.) We will determine the amount
required to be distributed based on information you provide and choices you
make. To participate in the Minimum Distributions Program, you must notify us
of such election in writing in the calendar year during which you attain age
70 1/2. The Minimum Distributions Program is subject to all rules applicable
to the Systematic Withdrawal Program. In addition, certain rules apply only to
the Minimum Distributions Program. For a description of the requirements
applicable to the Minimum Distributions Program, see "Minimum Distributions
Program" in the Statement of Additional Information, page x. Numerous special
tax rules apply to Contract Owners whose Contract is used with a qualified plan.
You should consult a tax advisor before electing to participate in the Minimum
Distributions Program.
WAIVER OF SURRENDER CHARGES
We will waive Surrender Charges in the following situations:
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. Confinement Waiver -The surrender charge will be waived upon written proof
from a licensed physician that you have been confined in any of the following
facilities for at least 60 consecutive days
. a hospital which
(1) is licensed or recognized by the state in which it is located
(2) provides or operates diagnostic and major surgery facilities for medical
care and treatment of injured and sick persons on an inpatient basis
(3) charges for its services
(4) provides 24-hour nursing service by or under the supervision of a
graduate registered nurse (R.N.)
. a convalescent care facility which
(1) is licensed by the state in which it is located as a convalescent nursing
facility, a skilled nursing facility, a convalescent hospital, a
convalescent unit of a hospital, an intermediate care facility, or a
custodial care facility
(2) provides continuous nursing service by or under the supervision of a
physician or a graduate registered nurse (R.N.)
(3) maintains a daily record of each patient and makes your record available
for review by us
(4) administers a planned program of observation and treatment by a physician
in accordance with existing standards of medical practice
. a hospice facility which
(1) is licensed, certified or registered by the state in which it is located
as a hospice facility
(2) provides a formal care program for terminally ill patients whose life
expectancy is less than 6 months
(3) provides services on an inpatient basis as directed by a physician
This waiver is not available
(1) if you are confined in a hospital, nursing home or hospice facility on
the Date of Issue;
(2) if the application is signed by power of attorney;
(3) if you are more than age 80 on the Date of Issue;
(4) if you enter the hospital, convalescent care facility or hospice facility
within 90 days from the Date of Issue; or
(5) concerning surrenders or withdrawals requested more than 90 days after
the last day of confinement in such facility.
. Disability Waiver - The surrender charge will be waived while you are
physically disabled or diagnosed with a disabling terminal illness. Such
waiver is subject to the following limitations
. we require proof of disability or disabling terminal illness, including
written confirmation of receipt of Social Security Disability Benefits
. we will require proof of continued disability
. we may have a Contract Owner claiming disability or disabling terminal
illness examined by a licensed physician chosen by us
This waiver is not available
(1) if you are receiving Social Security Disability Benefits on the Date of
Issue;
(2) if you are age 65 or older;
(3) or if you were diagnosed with a terminal illness before the Date of
Issue; or
(4) if you reside in certain states.
DEATH BENEFIT BEFORE ANNUITY DATE
If you or the Annuitant die before the Annuity Date, we will pay a standard
death benefit equal to the Accumulation Value.
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When you purchase your Contract, you may select an Enhanced Death Benefit Rider.
If you are not an individual, the Enhanced Death Benefit applies to the
Annuitant's death. If you select this rider, the death benefit will be the
greater of the Accumulation Value or the Enhanced Death Benefit. We will
charge a higher mortality and expense risk fee if you select one of these
riders. We offer three optional Enhanced Death Benefit Riders:
(1) minimum guaranteed death benefit rider:
(2) 3% guaranteed death benefit rider; and
(3) 5% guaranteed death benefit rider.
. Minimum Guaranteed Death Benefit Rider
We recalculate the "minimum guaranteed death benefit" of your Contract each time
you make a partial surrender, systematic withdrawal, and at the end of each six
Contract Years. During the first six Contract Years, the minimum guaranteed
death benefit will equal all Purchase Payments made less reductions to reflect
partial surrenders and systematic withdrawals, if any, during such period. In
subsequent six Contract Year periods, the minimum guaranteed death benefit will
equal the greater of:
(1) the Accumulation Value at the end of the preceding six Contract Year
period; or
(2) the minimum guaranteed death benefit for the immediately preceding six
Contract Year period, plus Purchase Payments less partial surrenders and
systematic withdrawals, made since such immediately preceding six
Contract Year period.
A reduction in the minimum guaranteed death benefit is made each time you make a
partial surrender or systematic withdrawal. The reduction is calculated by
dividing the minimum guaranteed death benefit immediately before a partial
surrender or systematic withdrawal by the Accumulation Value on the same date
and multiplying such amount times the amount of the partial surrender or
systematic withdrawal.
Example 1 - Assume you have made $4,000 in total Purchase Payments during the
first six Contract Year period and have made no partial surrenders or
systematic withdrawals. Your minimum guaranteed death benefit at the end of
the first six Contract Year period would be $4,000.
Example 2 - Assume you make a $2,000 partial surrender in the third Contract
Year of the first six Contract Year period, at which time you have made
$4,000 in total Purchase Payments, and your Contract's Accumulation Value is
$8,000. Your minimum guaranteed death benefit would be recalculated and
reduced at the time of such partial surrender. The amount of such reduction
would be $1,000, which is calculated by:
. dividing the minimum guaranteed death benefit immediately before the
partial surrender ($4,000) by Accumulation Value at that time ($8,000);
and
. multiplying such amount ($4,000 divided by $8,000, or .5) times the amount
of the partial surrender ($2,000).
Your minimum guaranteed death benefit before the partial surrender ($4,000)
would be reduced by the amount necessary to reflect the partial surrender
($1,000) which would result in a new minimum guaranteed death benefit of
$3,000.
Example 3 - Assume you make a $4,000 partial surrender in the second Contract
Year of the second six Contract Year period. Assume further that you have
made $1,000 in total Purchase Payments since the end of the first six
Contract Year period; that your Contract Accumulation Value is $10,000 and
that the minimum guaranteed death benefit at the start of the second six
Contract Year period is $8,000. Your minimum guaranteed death benefit would
be recalculated and reduced at the time of such partial surrender. The amount
of such reduction would be $3,600, which is calculated by
. dividing the minimum guaranteed death benefit immediately before the
partial surrender of $9,000 ($8,000 for the minimum guaranteed death
benefit at the end of the last six Contract Year period plus $1,000 in
Purchase Payments made since the end of the last six Contract Year period)
by Accumulation Value at that time ($10,000); and
. multiplying such amount ($9,000 divided by $10,000, or .9) times the
amount of the partial surrender ($4,000).
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Your minimum guaranteed death benefit before the partial surrender ($9,000)
would be reduced by the amount necessary to reflect the partial surrender
($3,600) which would result in a new minimum guaranteed death benefit of
$5,400.
. 3% Guaranteed Death Benefit Rider
The 3% guaranteed death benefit is equal to (a) your total Purchase Payments,
(b) reduced by any partial surrenders and systematic withdrawals, (c) plus
interest at an annual effective rate of 3%. The Purchase Payments will accrue
interest from the date each Purchase Payment is made until the earliest of such
time that such payment is surrendered, withdrawn, or;
(1) the first day of the month following the oldest Contract Owner's 85th
birthday, or
(2) if the Contract Owner is a company or other legal entity the Annuitant's
85th birthday.
Thereafter, we will only adjust the 3% guaranteed death benefit only to reflect
subsequent Purchase Payments, partial surrenders, or systematic withdrawals.
. 5% Guaranteed Death Benefit Rider
The 5% guaranteed death benefit is calculated in the same manner as the 3%
guaranteed death benefit except that the interest is accrued at an annual
effective rate of 5%, instead of 3%.
We expect to pay the death benefit in a lump sum to the beneficiary named in the
Contract within seven business days of receipt of proof of death in proper form.
In lieu of payment in a lump sum, you can elect that the death benefit be
applied under one of the annuity options described on page xx. If you do not
make such election, the beneficiary can do so. The person selecting the annuity
option settlement may also designate contingent beneficiaries to receive any
amounts due after death of the first beneficiary. The manner in which annuity
payments to the beneficiary are determined and may vary are described below
under "Distributions During the Annuity Period".
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DISTRIBUTIONS DURING THE ANNUITY PERIOD
All or part of any amount payable at the Annuity Date may be applied to any of
the Annuity Options. We will discharge in a single sum any liability under an
assignment of the Contract and any applicable federal, state, municipal or other
taxes, fees or assessments based on or predicated on the Purchase Payments which
have not otherwise been deducted or offset. The remaining amount is the net sum
payable. The minimum amount that we will apply to an Annuity Option is $5,000.
Our consent is required for any payment to a corporation, association,
partnership, or trustee.
ELECTION OF ANNUITY DATE AND FORM OF ANNUITY
. Non-Qualified Contracts - Annuity Date and form of annuity are elected in the
application. A Contract cannot be purchased after the Annuitant's age 85 and
annuity payments must begin not later than Annuitant's age 95.
. Qualified Contracts - Annuity Payment Date and form of annuity are elected in
the application. A Contract cannot be purchased after age 85 and, under the
Internal Revenue Code, annuity payments must begin not later than age 95, or
in some cases, the later of April 1st of the calendar year following the
calendar year in which the Annuitant reaches 70 1/2 or retires.
If you have not elected an Annuity Date, we may automatically begin payments at
age 95 under Option 2, Life Annuity with 120 monthly payments certain. (See
"Federal Tax Matters" on page xx.)
Once an annuity payment is made, the Annuity Option cannot be changed to another
Annuity Option.
ALLOCATION OF BENEFITS
Unless you elect to the contrary, the Accumulation Units of each subaccount will
be changed to Annuity Units and applied to provide a Variable Annuity based on
that subaccount.
In lieu of this allocation, you may elect to transfer your Accumulation Units to
either one or more Eligible Portfolios or to the Fixed Account. After the
Annuity Date, you can only make twelve transfers among subaccounts each Contract
Year. You can transfer Annuity Units of one subaccount to Annuity Units of
another subaccount and to the Fixed Account at any time other than during the
five-day interval before and including any annuity payment date.
No election can be made unless such election would produce an initial annuity
payment of at least $100.
ANNUITY OPTIONS
The following annuity options are available.
. Option 1 - Life Annuity - monthly payments during the lifetime of an
individual, ceasing with the last annuity payment due before the death of the
individual. This option offers the maximum level of monthly annuity payments
since there is no provision for a minimum number of annuity payments or a
death benefit for beneficiaries. It would be possible under this option for
an individual to receive only one annuity payment if death occurred before
the due date of the second annuity payment, two if death occurred before the
third annuity payment date, etc.
. Option 2 - Life Annuity with ten or 20 Years Certain - monthly payments
during the lifetime of an individual with payments made for a period certain
of not less than ten or 20 years, as elected. The annuity payments will be
continued to a designated beneficiary until the end of the period certain.
. Option 3 - Unit Refund Life Annuity - monthly payments during the lifetime of
an individual with annuity payments made for a period certain not less than
the number of months determined by dividing (1) the amount applied under this
option by (2) the amount of the first monthly annuity payment. This option
guarantees that the Annuity Units, but not the dollar value applied under a
Variable Annuity payout, will be repaid to the Annuitant or his beneficiary.
. Option 4 - Joint and Survivor Annuity - monthly payments during the joint
lifetime of an individual and another named individual and thereafter during
the lifetime of the survivor, ceasing with the last annuity payment due
before the survivor's death. It would be possible under this option for only
one annuity payment to be made if both individuals under the option died
before the second annuity payment date, or only two annuity payments if both
died before the third annuity payment date, etc.
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. Option 5 - Installment Payments, Fixed Period - monthly payments for a
specified number of years of at least 5, but not exceeding 30. The amount of
each Variable Annuity payment will be determined by multiplying the Annuity
Unit value on the day the annuity payment is made by the number of Annuity
Units applied under this Option divided by the number of remaining monthly
annuity payments.
. Option 6 - Equal Installment Payments, Fixed Amount - monthly installments
(not less than $6.25 per $1,000 applied) until the amount applied, adjusted
daily by the investment results, is exhausted. The final annuity payment will
be the remaining sum left with us.
. Option 7 - Deposit Option - The amount due may be left on deposit with us for
placement in our Fixed Account with interest not less than 2.5% per annum.
Interest will be paid annually, semiannually, quarterly or monthly as
elected. This option may not be available under certain Qualified Contracts.
. Other Annuity Forms - May be agreed upon.
Any amount remaining under Option 5, 6 or 7 may be withdrawn as a lump sum or,
if that amount is at least $5,000, may be applied under any one of the first
four Options. The lump sum payment requested will be paid within seven days of
receipt of the request at our home office based on the value computed on the
next Valuation Date after receipt of the request.
If the beneficiary dies while receiving annuity payments certain under Option 2,
3, 5, or 6 above, the present value of minimum guaranteed payments will be paid
in a lump sum to the estate of the beneficiary.
VALUE OF VARIABLE ANNUITY PAYMENTS:
ASSUMED INVESTMENT RATES
The annuity tables in the Contract used to calculate the annuity payments are
based on an "assumed investment rate" of 2.5%. If the actual investment
performance of the particular subaccount selected is such that the net
investment return is 2.5% per annum, the annuity payments will be as shown in
the tables. If the actual net investment return exceeds 2.5%, the annuity
payments will be higher than as shown in the tables. If the actual net
investment return is less than 2.5%, the annuity payments will be lower than in
the tables.
Annuity payments will be greater for shorter guaranteed periods than for longer
guaranteed periods. Annuity payments will be greater for life annuities than
for joint and survivor annuities, because the life annuities are expected to be
made for a shorter period.
At your election, where state law permits, an immediate annuity contract may
provide annuity benefits based on an assumed investment rate other than 2.5%.
The annuity rates for immediate annuity contracts are available upon request to
us.
ANNUITY PROVISIONS
We determine non-qualified life contingent annuity payments based on the Annuity
2000 Mortality Table and 2.5% interest) which reflects the age and sex of the
Annuitant and the type of annuity option selected. The attained age at
settlement will be adjusted downward by one year for each full five year period
that has elapsed since January 1, 2000. The annuity payment will also vary with
the investment performance of Eligible Portfolios you choose.
We determine qualified life contingent annuity payments based on the Annuity2000
Mortality Table and 2.5% interest which reflects the age of the Annuitant and
type of annuity option selected and will vary with the investment performance of
Eligible Portfolios you choose. The attained age at settlement will be adjusted
downward by one year for each full five-year period that has lapsed since
January 1, 2000.
Payment of surrender amounts, benefits payable in connection with death, annuity
payments, and transfers may be postponed whenever: (1) the NYSE is closed other
than customary week-end and holiday closings, or trading on the NYSE is
restricted as determined by the SEC; (2) the SEC by order permits postponement
for the protection of the Contract Owners; or (3) an
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emergency exists, as determined by the SEC, as a result of which disposal of
securities is not reasonably practicable or it is not reasonably practicable to
determine the value of the separate account's net assets.
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THE COMPANY, SEPARATE ACCOUNT, FUNDS AND FIXED ACCOUNT
AMERICAN NATIONAL INSURANCE COMPANY
The Company is a stock life insurance company chartered in 1905 in the State of
Texas. We write individual and group life and accident and health insurance and
annuities. Our home office is located in the American National Insurance
Building, One Moody Plaza, Galveston, Texas 77550-7999. The Moody Foundation, a
charitable foundation, owns approximately 23.7% and the Libbie S. Moody Trust, a
private trust, owns approximately 37.6% of our common stock.
We are regulated by the Texas Department of Insurance and are subject to the
insurance laws and regulations of other states where we operate. Each year, we
file a National Association of Insurance Commissioners convention blank with the
Texas Department of Insurance. Such convention blank covers our operations and
reports on our financial condition and the Separate Account's financial
condition as of December 31 of the preceding year. Periodically, the Texas
Department of Insurance examines and certifies the adequacy of the Separate
Account's and our liabilities and reserves. A full examination of our
operations is also conducted periodically by the National Association of
Insurance Commissioners.
Obligations under the Contract are our obligations.
THE SEPARATE ACCOUNT
We established the Separate Account under Texas law on July 30, 1991. The
Separate Account's assets are held exclusively for the benefit of persons
entitled to payments under variable annuity contracts issued by us. We are the
legal holder of the Separate Account's assets and will cause the total market
value of such assets to be at least equal to the Separate Account's reserve and
other contract liabilities. Such assets are held separate and apart from our
General Account assets. We maintain records of all purchases and redemptions of
shares of Eligible Portfolios by each of the subaccounts. Liabilities arising
out of any other business we conduct cannot be charged against the assets of the
Separate Account. Income, as well as both realized and unrealized gains or
losses from the Separate Account's assets, is credited to or charged against the
Separate Account without regard to income, gains or losses arising out of other
business that we conduct. However, if the Separate Account's assets exceed its
liabilities, the excess is available to cover the liabilities of our General
Account.
The Separate Account is registered with the Securities and Exchange Commission
("SEC") as a unit investment trust, which is a type of investment-company. Such
registration does not involve any SEC supervision of management or investment
policies or practices. There are currently 32 subaccounts within the Separate
Account available to Contract Owners and each invests only in a corresponding
Eligible Portfolio.
Since we are the legal holder of the Eligible Portfolio shares in the Separate
Account, we have the right to vote such shares at shareholders' meetings. To
the extent required by law, we will vote in accordance with instructions from
Contract Owners. The number of votes for which a Contract Owner has the right
to provide instructions will be determined as of the record date selected by the
Boards of Directors of the American National Fund, the Fidelity Funds, the T.
Rowe Price Funds, the MFS Fund, the Federated Fund and the Alger American Fund.
We will furnish you proper forms, materials, and reports to enable you to give
us instructions if you choose.
The number of shares of an Eligible Portfolio for which you can give
instructions is determined by dividing the Accumulation Value held in the
corresponding subaccount by the net asset value of one share in such Eligible
Portfolio. Fractional shares will be counted. Shares of an Eligible Portfolio
held in a subaccount for which you have not given timely instructions and other
shares held in a subaccount will be voted by us in the same proportion as those
shares in that subaccount for which timely instructions are received. Voting
instructions to abstain will be applied on a pro rata basis to reduce the votes
eligible to be cast. Should applicable federal securities laws or regulations
permit, we may vote shares of the Eligible Portfolios in our own right.
The Separate Account is not the only separate account that invests in the
Eligible Portfolios. Other separate accounts, including those funding other
variable annuity contracts, variable life policies and other insurance contracts
and retirement plans, invest in
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some of the Eligible Portfolios. We do not believe this results in any
disadvantages to you. However, there is a theoretical possibility that a
material conflict of interest could arise with owners of variable life insurance
policies funded by the Separate Account and owners of other variable annuity
contracts whose values are allocated to other separate accounts investing in the
Eligible Portfolios. There is also a theoretical possibility that a material
conflict could arise between the interests of Contract Owners or owners of other
contracts and the retirement plans, which invest in the Eligible Portfolios or
their participants. If a material conflict arises, we will take any necessary
steps, including removing the Eligible Portfolio from the Separate Account, to
resolve the matter. The Board of Directors of each Eligible Portfolio will
monitor events in order to identify any material conflicts that may arise and
determine what action, if any, to take in response to those events or conflicts.
See the accompanying prospectuses for the Eligible Portfolios for more
information.
THE FUNDS
Each subaccount invests in shares of a corresponding Eligible Portfolio of the
American National Fund, the Fidelity Funds, the T. Rowe Price Funds, the MFS
Fund, the Federated Fund, and the Alger American Fund. The investment
objectives and policies of each Eligible Portfolio are summarized below. You
will be notified of and have an opportunity to instruct us how to vote on any
proposed material change in the investment policy of any Eligible Portfolio in
which you have an interest.
. The American National Fund - currently has the following series or
portfolios, each of which is an Eligible Portfolio:
. AN MONEY MARKET PORTFOLIO ... seeks the highest current income consistent
with the preservation of capital and maintenance of liquidity.
. AN GROWTH PORTFOLIO ... seeks to achieve capital appreciation.
. AN BALANCED PORTFOLIO ... seeks to conserve principal, produce reasonable
current income, and achieve long-term capital appreciation.
. AN EQUITY INCOME PORTFOLIO ... seeks to achieve growth of capital and/or
current income.
. AN GOVERNMENT BOND PORTFOLIO ... seeks to provide as high a level of
current income, liquidity, and safety of principal as is consistent with
prudent investment risks through investment in a portfolio consisting
primarily of securities issued or guaranteed by the U.S. Government, its
agencies, or instrumentalities.
. AN SMALL-CAP/MID-CAP PORTFOLIO ... seeks to provide long-term capital
growth by investing primarily in stocks of small to medium-sized
companies.
. AN HIGH YIELD BOND PORTFOLIO ... seeks to provide a high level of current
income. As a secondary investment objective, the find seeks capital
appreciation.
. AN INTERNATIONAL STOCK PORTFOLIO ... seeks to obtain long-term growth of
capital through investments primarily in the equity securities of
established, non-U.S. companies.
Securities Management and Research, Inc. ("SM&R") is the American National
Fund's investment adviser. SM&R also provides investment advisory and portfolio
management services to us and to other clients. SM&R maintains a staff of
experienced investment personnel and related support facilities.
. The Fidelity Funds - currently have 13 series or portfolios, the following
five of which are Eligible Portfolios:
. FIDELITY ASSET MANAGER PORTFOLIO ... seeks high total return with reduced
risk over the long-term by allocating its assets among stocks, bonds, and
short-term instruments.
. FIDELITY INDEX 500 PORTFOLIO ... seeks investment results that correspond
to the total return of common stocks publicly traded in the United States,
as represented by the S&P 500. The portfolio normally invests at least 80%
of its assets in common stocks included in the S&P 500. The portfolio
seeks to achieve a 98% or better correlation between its total return and
the total return of the index.
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. FIDELITY CONTRAFUND PORTFOLIO ... seeks long-term capital appreciation.
The portfolio normally invests primarily in common stocks. The portfolio
invests in securities of companies whose value the portfolio believes is
not fully recognized by the public.
. FIDELITY ASSET MANAGER: GROWTH PORTFOLIO ... seeks to maximize total
return by allocating its assets among stocks, bonds, short-term
instruments, and other investments.
. FIDELITY GROWTH OPPORTUNITIES PORTFOLIO ... seeks to provide capital
growth. The portfolio normally invests its assets primarily in common
stocks. The portfolio may also invest in other types of securities,
including bonds, which may be lower-quality debt securities.
The Fidelity Management & Research Company ("FMR") is the Fidelity Funds'
investment adviser. FMR provides a number of mutual funds and other clients
with investment research and portfolio management services. Fidelity Management
& Research (U.K.) Inc. and Fidelity Management & Research (Far East), wholly-
owned subsidiaries of FMR, provide research with respect to foreign securities.
FMR maintains a large staff of experienced investment personnel and a full
complement of related support facilities.
. The T. Rowe Price Funds - currently have the following series or portfolios,
each of which are Eligible Portfolios:
. T. ROWE PRICE EQUITY INCOME PORTFOLIO ... seeks to provide substantial
dividend income as well as long-term growth of capital through investments
in common stocks of established companies. The portfolio will normally
invest at least 65% of its assets in the common stocks of well-established
companies paying above-average dividends.
. T. ROWE PRICE MID-CAP GROWTH PORTFOLIO ... seeks to achieve long term
capital appreciation by investing in mid-cap stocks with potential for
above-average earnings growth. The portfolio will invest at least 65% of
its assets in diversified portfolio of common stocks of mid-cap companies
whose earnings are expected to grow at a faster rate than the average
company. The portfolio considers "mid-cap companies" as companies with
market capitalization (number of shares outstanding multiplied by share
price) between $300 million and $5 billion. Most of the portfolio's assets
will be invested in U. S. common stocks.
. T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO ... seeks to provide long-term
growth of capital through investments primarily in common stocks of
established non-U.S. companies. The portfolio expects to invest
substantially all of the portfolio's assets (with a minimum of 65%) in
established companies beyond U.S. borders. The portfolio's focus will
typically be on large and, to a lesser extent, medium-sized companies.
. T. ROWE PRICE LIMITED-TERM BOND PORTFOLIO ... seeks a high level of income
consistent with modest price fluctuation by investing primarily in
investment grade debt securities.
T. Rowe Price Associates, Inc. is responsible for selection and management of
the portfolio investments of T. Rowe Price Equity Securities and T. Rowe Price
Fixed Income Securities. Rowe Price-Fleming International, Inc., a joint
venture between T. Rowe Price Associates, Inc. and Robert Fleming Holdings
Limited, is responsible for selection and management of the portfolio
investments of T. Rowe Price International Series.
. The MFS Fund - currently has the following portfolios, each of which are
Eligible Portfolios:
. MFS CAPITAL OPPORTUNITIES PORTFOLIO ... seeks capital appreciation.
Dividend income, if any, is a consideration incidental to the Portfolios'
objective of capital appreciation. While the Portfolios' policy is to
invest primarily in common stocks, it may seek appreciation in other types
of securities such as fixed income securities (which may be unrated),
convertible bonds, convertible preferred stocks and warrants when relative
values make such purchases appear attractive either as individual issues
or as types of securities in certain economic environments. The Portfolio
may invest in lower rated fixed income securities or comparable unrated
securities.
. MFS EMERGING GROWTH PORTFOLIO ... seeks to provide long-term growth of
capital through investing primarily in common stocks of emerging growth
companies, which involves greater risk than is customarily associated with
investments in more
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established companies. The Portfolio may invest in a limited extent in
lower rated fixed income securities or comparable unrated securities.
. MFS RESEARCH PORTFOLIO ... seeks to provide long-term growth of capital
and future income by investing a substantial proportion of its assets in
the common stocks or securities convertible into common stocks of
companies believed to possess better than average prospects for long-term
growth. No more than 5% of the Portfolio's convertible securities, if any,
will consist of securities in lower rated categories or securities
believed to be of similar quality to lower rated securities. The Portfolio
may invest in a limited extent in lower rated fixed income securities or
comparable unrated securities.
. MFS GROWTH WITH INCOME PORTFOLIO ... seeks to provide reasonable current
income and long-term growth and income. Under normal market conditions,
the Portfolio will invest at least 65% of its assets in common stocks or
securities convertible into common stocks that are believed to have long-
term prospects for growth and income. The Portfolio may also invest up to
75% of its net assets in foreign securities, which are not traded on an
U.S. exchange.
Massachusetts Financial Service Company is responsible for selection and
management of the portfolio investments of the MFS Variable Series.
. The Federated Fund - currently has the following portfolios, each of which
are Eligible Portfolios:
. FEDERATED UTILITY FUND II PORTFOLIO ... seeks to achieve high current
income and moderate capital appreciation. The Portfolio invests
primarily in equity and debt securities of utility companies.
. FEDERATED GROWTH STRATEGIES PORTFOLIO ... seeks capital appreciation.
The Portfolio invests at least 65% of its assets in equity securities
of companies with prospects for above average growth in earnings and
dividends.
. FEDERATED U.S. GOVERNMENT BOND PORTFOLIO ... seeks current income by
investing in a diversified portfolio limited to U.S. government
securities.
. FEDERATED HIGH INCOME BOND PORTFOLIO ... seeks high current income. The
Portfolio invests in fixed income securities, which are lower rated
corporate debt obligations, which are commonly referred to as "junk
bonds." The risk in investing in junk bonds is described in the
prospectus for the Federated Insurance Series, which should be read
carefully before investing.
. FEDERATED EQUITY INCOME FUND II PORTFOLIO ... seeks to provide above
average income and capital appreciation by investing in income
producing equity securities including common stocks, preferred stocks,
and debt securities that are convertible into common stocks, in cash
and cash items during times of unusual conditions to maintain
liquidity. Cash items may include commercial paper, Europaper,
certificates of deposit, obligations of the U.S. Government, repurchase
agreements, and other short-term instruments.
Federated Advisors makes all investment decisions for the Federated Insurance
Series, subject to direction by the Federated Insurance Series Trustees.
. The Alger American Fund - currently has the following series or portfolios,
each of which is an Eligible Portfolio:
. SMALL CAPITALIZATION PORTFOLIO ... seeks long-term capital appreciation.
It focuses on small, fast growing companies that offer innovative
products, services, or technologies to a rapidly expanding marketplace.
. GROWTH PORTFOLIO ... seeks to achieve long-term capital appreciation. It
focuses on growing companies that generally have broad product lines,
markets, financial resources, and depth of management.
. MIDCAP GROWTH PORTFOLIO ... seeks long-term capital appreciation. It
focuses on midsize companies with promising growth potential.
. LEVERAGED ALLCAP PORTFOLIO ... seeks to achieve long-term capital
appreciation. Under normal circumstances, the Portfolio invests in the
equity securities of companies of any size which demonstrate promising
growth potential. The Portfolio can leverage, that is, borrow money, up to
one-third of its total assets to buy additional securities. By borrowing
money, the Portfolio has the potential to increase its returns if the
increase in the value of the securities purchased exceeds the cost of
borrowing, including interest paid on the money borrowed.
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. INCOME AND & PORTFOLIO ... primarily seeks to provide a high level of
dividend income; its secondary goal is to provide capital appreciation.
The Portfolio invests in dividend paying equity securities, such as common
or preferred stocks, preferably those that the Manager believes also offer
opportunities for capital appreciation.
. BALANCED PORTFOLIO ... seeks current income and long-term capital
appreciation. It focuses on stocks of companies with growth potential and
fixed-income securities, with emphasis on income-producing securities that
appear to have some potential for capital appreciation.
Fred Alger Management, Inc. is the Alger American Fund's investment adviser.
Fred Alger Management, Inc. also provides investment advisory and portfolio
management services to us and to other clients. Fred Alger Management, Inc.
maintains a staff of experienced investment personnel and related support
facilities.
The accompanying prospectuses should be read in conjunction with this prospectus
before investing and contain a full description of the above funds, their
investment policies and restrictions, risks, charges and expenses and other
aspects of their operation.
We have arrangements to provide services to certain Eligible Portfolios for
which the advisor or distributor of such portfolios pays us fees. The fees are
based upon an annual percentage of the average aggregate net amount invested by
us in such Eligible Portfolios. Some advisors or distributors pay us higher
fees than others do.
The Eligible Portfolios and the mutual funds of which they are a part are sold
only to registered separate accounts of insurance companies offering variable
annuity and variable life insurance contracts and, in some cases, to certain
qualified pension and retirement plans. The Eligible Portfolios and mutual
funds are not sold to the general-public and should not be mistaken for other
mutual funds offered by the same sponsor or that have similar names.
CHANGES IN INVESTMENT OPTIONS
We may establish additional subaccounts, which would invest in portfolios of
other mutual funds chosen by us. We may also, from time to time, discontinue
the availability of existing subaccounts. If we do, we may, by appropriate
endorsement, make such changes to the Contract as we believe are necessary or
appropriate. In addition, if a subaccount is discontinued, we may redeem shares
in the corresponding Eligible Portfolio and substitute shares of another mutual
fund. We will not do so, or make other changes without prior notice to you and
without complying with other applicable laws. Such laws may require approval by
the SEC and the Texas Department of Insurance.
If we deem it to be in your best interest, and subject to any required
approvals, we may combine the Separate Account with another of our separate
accounts.
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FIXED ACCOUNT
Before the Annuity Date, you can allocate all or a portion of your Purchase
Payment to the Fixed Account. In addition, if you participate in our fixed
account dollar cost averaging program, you may designate amounts to be held in
dollar cost averaging fixed account options. Subject to certain limitations,
you can also transfer Accumulation Value from the subaccounts to the Fixed
Account. Transfers from the Fixed Account and from either of the dollar cost
averaging fixed account options to the subaccounts are restricted. (See
"Transfers Before Annuity Date", page xx. and "Special Programs", page xx.)
Purchase Payments allocated to and transfers from a subaccount to the Fixed
Account are placed in our General Account. Purchase Payments allocated to one
of the dollar cost averaging fixed account options are placed in our General
Account. We have sole discretion regarding the investment of and bear the
investment risk with respect to the assets in our General Account. You bear the
risk that the Fixed Account declared rate would fall to a lower rate after the
expiration of a declared rate period. Because of exemptive and exclusionary
provisions, interests in the General Account have not been registered under the
Securities Act of 1933 (the "'33 Act") and the General Account has not been
registered as an investment company under the Investment Company Act of 1940
(the "'40 Act"). Accordingly, neither the General Account nor any interest
therein is generally subject to the provisions of the '33 Act or '40 Act. We
understand that the staff of the SEC has not reviewed the disclosures in this
Prospectus relating to the Fixed Account or any of the dollar cost averaging
fixed account options portion of the Contract. However, disclosures regarding
the Fixed Account or any of the dollar cost averaging fixed account options
portion of the Contract may be subject to generally applicable provisions of the
federal securities laws regarding the accuracy and completeness of statements
made in prospectuses.
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FEDERAL TAX MATTERS
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT TAX ADVICE
INTRODUCTION
The following summary describes some of the federal income tax rules that apply
to a Contract. This summary is not complete and does not cover all tax
situations. Special tax rules, not discussed here, may apply to certain
individuals. This discussion is not tax advice. You should consult a competent
tax adviser for more complete information. This discussion is based upon our
understanding of the present federal income tax laws. We do not know if these
laws will change or how the Internal Revenue Service (the "IRS") will interpret
them. Moreover, the discussion below does not consider any applicable state or
other tax laws. We have included additional discussion regarding taxes in the
Statement of Additional Information.
TAX STATUS OF THE CONTRACTS
The following discussion assumes that the Contract will qualify as an annuity
contract for federal income tax purposes. The Statement of Additional
Information explains the requirements for qualifying as an annuity contract.
TAXATION OF ANNUITIES IN GENERAL
If you are a natural person, you generally will not be taxed on increases in the
Accumulation Value until you receive payments under the Contract. Any
distribution of payments, including a full or partial surrender of a Contract,
may subject you to income tax. If you assign or pledge (or agree to assign or
pledge) any portion of a Contract's Accumulation Value, this generally will be
considered a distribution of payments to you and may be taxable.
Corporations, partnerships, trusts, and other entities that own a Contract
generally must include in income increases in the excess of the Accumulation
Value over the investment in the contract. There are some exceptions to this
rule and such a prospective Contract Owner should discuss these with a tax
adviser.
The "investment in the contract" generally equals the amount, if any, of
Purchase Payments paid with after-tax dollars (that is, purchase payments that
were not excluded from the individual's gross income).
The following discussion applies to Contracts owned by natural persons.
WITHDRAWALS
If you make a partial surrender from a Non-Qualified Contract (including
Systematic Withdrawals), the amount received will be taxed as ordinary income,
up to an amount equal to the excess (if any) of the Accumulation Value
immediately before the distribution over the investment in the Contract at that
time. In the case of a full surrender under a Non-Qualified Contract, the amount
received generally will be taxable as ordinary income to the extent it exceeds
the investment in the Contract.
PENALTY TAX
For all distributions from Non-Qualified Contracts, there is a federal penalty
tax equal to 10% of the amount treated as taxable income. However, in general,
there is no penalty tax on distributions:
. made after the taxpayer reaches age 59 1/2;
. made because of the death of the Contract Owner;
. attributable to the taxpayer becoming disabled; or
. made as part of a series of substantially equal periodic payments for the
life, or life expectancy, of the taxpayer.
There are other exceptions and special rules may apply to the exceptions listed
above. You should consult a tax adviser with regard to exceptions from the
penalty tax.
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ANNUITY PAYMENTS
Although the tax consequences may vary depending on the annuity payment method
elected under the contract, generally only the portion of the annuity payment
that represents the amount by which the Accumulation Value exceeds the
investment in the contract will be taxed.
. For variable annuity payments, in general the taxable portion of each annuity
payment is determined by a formula which establishes a specific non-taxable
dollar amount of each annuity payment. This dollar amount is determined by
dividing the investment in the contract by the total number of expected
annuity payments.
. For fixed annuity payments, in general there is no tax on the portion of each
annuity payment which reflects the ratio that the investment in the contract
bears to the total expected value of annuity payments for the term of the
payments; however, the remainder of each annuity payment is taxable.
In all cases, after the investment in the Contract is recovered, the full amount
of any additional annuity payments is taxable.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a Contract because of your death or the death of
the Annuitant. Generally, such amounts are taxable to the recipient as follows:
. if distributed in a lump sum, they are taxed in the same manner as a full
surrender of the Contract; or
. if distributed under an annuity option, they are taxed in the same way as
annuity payments, as described above.
TRANSFERS OR ASSIGNMENTS OF A CONTRACT
A transfer or assignment of a Contract, the designation of certain Annuitants,
or the selection of certain Annuity Dates may result in tax consequences that
are not discussed herein. You should consult a tax advisor as to the tax
consequences of any such transaction.
REQUIRED DISTRIBUTIONS
In order to be treated as an annuity contract for federal income tax purposes,
the Code requires any non-qualified annuity contract to contain certain
provisions concerning how an interest in the contract is distributed on the
owner's death. The Non-Qualified Contracts contain provisions that are intended
to comply with these Code requirements, although no regulations interpreting
these requirements have yet been issued. We may modify the Contracts if
necessary to assure that they comply with the applicable requirements when such
requirements are clarified by regulation or otherwise.
WITHHOLDING
Annuity distributions generally are subject to withholding for the recipient's
federal income tax liability. Recipients can generally elect, however, not to
have tax withheld from distributions. Withholding is mandatory for certain
Qualified Contracts.
MULTIPLE CONTRACTS
All non-qualified, deferred annuity contracts that are issued by us (or our
affiliates) to the same owner during any calendar year are treated as one
annuity contract for purposes of determining the amount includible in income
when a taxable distribution occurs. In addition, there may be other situations
in which the U.S. Treasury Department may conclude that it would be appropriate
to aggregate two or more annuity contracts purchased by the same owner (it has
authority to issue regulations on aggregating multiple contracts). Accordingly,
you should consult a tax advisor before purchasing more than one annuity
contract.
EXCHANGES
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Section 1035 of the Internal Revenue Code (the "Code") provides generally for
tax-free exchanges of one annuity contract for another. A number of special
rules and procedures apply to section 1035 exchanges. Anyone wishing to take
advantage of section 1035 should consult a tax advisor.
TAXATION OF QUALIFIED CONTRACTS
The Qualified Contracts are designed for retirement plans that qualify for
special income tax treatment under Sections 401(a), 403(b), 408, 408A or 457 of
the Code. Certain requirements apply to the purchase of a Qualified Contract and
to distributions therefrom in order for you to receive favorable tax treatment.
The following discussion assumes that Qualified Contracts qualify for the
intended special federal income tax treatment.
The tax rules applicable to participants in these qualified plans vary according
to the type of plan and the terms and conditions of the plan itself. In
general, adverse tax consequences may result from:
. contributions made in excess of specified limits;
. distributions received prior to age 59 1/2 (subject to certain exceptions);
. distributions that do not conform to specified commencement and minimum
distribution rules;
. aggregate distributions in excess of a specified annual amount; and
. contributions or distributions made in other circumstances.
The terms and conditions of the retirement plans may limit the rights otherwise
available to you under a Qualified Contract. You are responsible for
determining that contributions, distributions, and other transactions with
respect to a Qualified Contract comply with applicable law. If you are
considering purchasing an annuity contract for use with any qualified retirement
plan, you should get legal and tax advice.
DISTRIBUTIONS FROM QUALIFIED CONTRACTS
Annuity payments from Qualified Contracts are generally taxed in the same manner
as under a Non-Qualified Contract. When a withdrawal from a Qualified Contract
occurs, all or some of the amount received is taxable. For Qualified Contracts,
the investment in the contract can be zero; in that case, the full amount of all
distributions would be taxable. Distributions from certain qualified plans are
generally subject to mandatory withholding.
For qualified plans under Sections 401(a), 403(b), and 457, the Code requires
that distributions generally must begin by the later of April 1 of the calendar
year following the calendar year in which the Contract Owner (or plan
participant): (a) reaches age 70 1/2; or (b) retires. Distributions must be
made in a specified form and manner. If the participant is a "5 percent owner"
(as defined in the Code), distributions generally must begin no later than April
1 of the calendar year following the calendar year in which the Contract Owner
(or plan participant) reaches age 70 1/2. For Individual Retirement Annuities
(IRAs) described in Section 408 of the Code, distributions generally must begin
no later than April 1 of the calendar year following the calendar year in which
the Contract Owner (or plan participant) reaches age 70 1/2.
. CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS - Section 401(a)
of the Code permits employers to establish retirement plans for employees and
permits self-employed individuals to establish retirement plans for
themselves and their employees. Adverse tax or other legal consequences to
the plan, to the Plan Participant, or to both may result if this Contract is
purchased by a 401(a) plan and later assigned or transferred to any
individual. Employers intending to use the Contract with such plans should
consult a tax advisor.
. TAX SHELTERED ANNUITIES - Under Code Section 403(b), public school systems
and certain tax-exempt organizations may purchase annuity contracts for their
employees. Generally, payments to Section 403(b) annuity contracts will be
excluded from the gross income of the employee, subject to certain
limitations. However, these payments may be subject to FICA (Social Security)
taxes. Under Section 403(b) annuity contracts, the following amounts may only
be distributed upon death of the employee, attainment of age 59 1/2, and
separation from service, disability, or financial hardship:
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(a) elective contributions made in years beginning after December 31, 1988;
(b) earnings on those contributions; and
(c) earnings in such years on amounts held as of the last year beginning
before January 1, 1989.
In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
. INDIVIDUAL RETIREMENT ANNUITIES - Section 408 of the Code permits certain
eligible individuals to contribute to an individual retirement program known
as an "Individual Retirement Annuity" or "IRA." Section 408 of the Code
limits the amount, which may be contributed to an IRA each year to the lesser
of $2,000 or 100% of the Contract Owner's adjusted gross income. These
contributions may be deductible in whole or in part depending on the
individual's income. The limit on the amount contributed to an IRA does not
apply to distributions from certain other types of qualified plans that are
"rolled over" on a tax-deferred basis into an IRA. Amounts in the IRA (other
than non-deductible contributions) are taxed when distributed from the IRA.
Distributions prior to age 59 1/2 (unless certain exceptions apply) are
subject to a 10% penalty tax.
Roth IRAs. Effective January 1, 1998, section 408A of the Code permits
certain eligible individuals to contribute to a Roth IRA. Contributions to a
Roth IRA, which are subject to certain limitations, are not deductible, and
must be made in cash or as a rollover or transfer from another IRA. A
rollover from or conversion of an IRA to a Roth IRA may be subject to tax,
and other special rules may apply. Distributions from a Roth IRA generally
are not taxed, except that, once aggregate distributions exceed contributions
to the Roth IRA, income tax and a 10% penalty tax may apply to distributions
made (1) before age 59 1/2 (subject to certain exceptions) or (2) during the
five taxable years starting with the year in which the first contribution is
made to the Roth IRA.
. SIMPLE INDIVIDUAL RETIREMENT ANNUITIES - Certain small employers may
establish SIMPLE plans (Savings Incentive Match Plans) as provided by Section
408(p) of the Code. Under these plans, employees may defer a percentage of
compensation of up to certain dollar amount. The sponsoring employer is
required to make a matching contribution. Distributions from a SIMPLE plan
are subject to the same restrictions that apply to IRA distributions and are
taxed as ordinary income. Subject to certain exceptions, distributions prior
to age 59 1/2 are subject to a 10% penalty tax, which increases to 25% if the
distribution occurs during the first two years the employee participates in
the plan.
. DEFERRED COMPENSATION PLANS - Section 457 of the Code provides for certain
deferred compensation plans available with respect to service for state
governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities, and tax-exempt
organizations. These plans are subject to various restrictions on
contributions and distributions. Under non-governmental plans, all amounts
are subject to the claims of general creditors of the employer and depending
on the terms of the particular plan, the employer may be entitled to draw on
deferred amounts for purposes unrelated to its Section 457 plan obligations.
In general, distributions from a deferred compensation plan are prohibited
unless made after the plan participant attains age 70 1/2, separates from
service, dies, or suffers an unforeseeable financial emergency. Distributions
under these plans are taxable as ordinary income in the year paid or made
available. Adverse tax consequences may result from certain distributions
that do not conform to applicable commencement and minimum distribution
rules.
POSSIBLE CHANGES IN TAXATION
Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the Contract could change by legislation
or other means (such as U.S. Treasury Department regulations, Internal Revenue
Service revenue rulings, and judicial decisions). It is possible that any
change could be retroactive (that is, effective prior to the date of the
change). You should consult a tax advisor regarding such developments and their
effect on the Contract.
ALL CONTRACTS
As noted above, the foregoing comments about the federal tax consequences under
the Contracts are not exhaustive, and special rules may apply with respect to
other tax situations not discussed in this prospectus. Further, the federal
income tax consequences discussed herein reflect our understanding of current
law, and the law may change. Federal estate and state and local estate,
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inheritance and other tax consequences of ownership or receipt of distributions
under a Contract depend on the individual circumstances of each Contract Owner
or recipient of a distribution. A tax adviser should be consulted for further
information.
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PERFORMANCE
Performance information for the subaccounts may appear in reports and
advertising to current and prospective Contract Owners. The performance
information is based on historical investment experience of the subaccounts and
the Eligible Portfolios and does not indicate or represent future performance.
Total returns are based on the overall dollar or percentage change in value of a
hypothetical investment. Total return quotations reflect changes in Eligible
Portfolio share prices, the automatic reinvestment by the Separate Account of
all distributions and the deduction of applicable annuity charges (including any
contingent deferred sales charges that would apply if a Contract Owner
surrendered the Contract at the end of the period indicated). Quotations of
total return may also be shown that do not take into account certain contractual
charges such as a contingent deferred sales load. The total return percentage
will be higher under this method than under the standard method described above.
A cumulative total return reflects performance over a stated period. An average
annual total return reflects the hypothetical annually compounded return that
would have produced the same cumulative total return if the performance had been
constant over the entire period. Because average annual total returns tend to
smooth out variations in a subaccount's returns, you should recognize that they
are not the same as actual year-by-year results.
Some subaccounts may also advertise yield. These measures reflect the income
generated by an investment in the subaccount over a specified period of time.
This income is annualized and shown as a percentage. Yields do not take into
account capital gains or losses or the contingent deferred sales load.
The American National Money Market subaccount may advertise their current and
effective yield. Current yield reflects the income generated by an investment
in the subaccount over a 7-day period. Effective yield is calculated in a
similar manner except that income earned is assumed to be reinvested.
DISTRIBUTOR OF THE CONTRACT
Securities Management and Research, Inc. ("SM&R"), 2450 South Shore Boulevard,
Suite 400, League City, Texas 77573, our wholly-owned subsidiary, is the
principal underwriter of the Contract. SM&R was organized under the laws of the
State of Florida in 1964; is a registered broker/dealer; and is a member of the
National Association of Securities Dealers.
SM&R's registered representatives selling a Contract will receive commissions
from SM&R. After issuance of the Contract, broker-dealers will receive
commissions aggregating up to 7.0% of the Purchase Payments. In addition, after
the first Contract Year, broker-dealers who have distribution agreements with us
may receive an annual commission of up to 0.25% of the Contract's Accumulation
Value.
LEGAL MATTERS
Various matters of Texas law pertaining to the Contract, including the validity
of the Contract and our right to issue the Contract under Texas insurance law,
have been reviewed by Greer, Herz and Adams, LLP, General Counsel.
LEGAL PROCEEDINGS
The Company and its affiliates, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, we believe at the present time no
lawsuits are pending or threatened that are reasonably likely to have a material
adverse impact on the separate account or us.
EXPERTS
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The consolidated financial statements of American National Insurance Company and
subsidiaries as of December 31, 1999 and 1998 and for the years then ended, and
the related statements of operations for the year then ended, included in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
ADDITIONAL INFORMATION
A registration statement describing the Contract has been filed with the
Securities and Exchange Commission, under the Securities Act of 1933. This
Prospectus does not contain all information in the registration statement, to
which reference is made for further information concerning us, the separate
account and the Contract offered hereby. The omitted information may be
obtained at the SEC's principal office in Washington, D.C. by paying the SEC's
prescribed fees. Statements contained in this Prospectus as to the terms of the
Contract and other legal instruments are summaries. For a complete statement of
such terms, reference is made to such instruments as filed.
FINANCIAL STATEMENTS
Our financial statements should be considered only as bearing on our ability to
meet our obligations under the Contract. The financial statements can be found
in the Statement of Additional Information.
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TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
Page
The Contract............................................................. x
Valuation of Accumulation Units.......................................... x
Computation of Variable Annuity Payments................................. x
Annuity Unit Value....................................................... x
Summary.................................................................. x
Exceptions to Charges.................................................... x
Assignment............................................................... x
Minimum Distributions Program............................................ x
Distribution of the Contract............................................. x
Tax Matters.............................................................. x
Records and Reports...................................................... x
Performance.............................................................. x
Total Return............................................................. x
Other Total Return....................................................... x
Yields................................................................... x
State Law Differences.................................................... xx
Separate Account......................................................... xx
Termination of Participating Agreements.................................. xx
Financial Statements..................................................... xx
Financials............................................................... xx
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WEALTHQUEST III VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
ISSUED BY AMERICAN NATIONAL INSURANCE COMPANY
HOME OFFICE ONE MOODY PLAZA GALVESTON TX 77550-7999
1-800-306-2959
RELATING TO THE PROSPECTUS DATED (DATE)
CUSTODIAN
American National Insurance Company
One Moody Plaza
Galveston, Texas 77550-7999
PRINCIPAL DISTRIBUTOR
Securities Management and Research, Inc.
2450 South Shore Boulevard, Suite 400
League City, Texas 77573
INDEPENDENT AUDITORS
Arthur Andersen LLP
711 Louisiana, Suite 1300
Houston, Texas 77002-2786
This Statement of Additional Information is not a prospectus and should be read
only in conjunction with the Prospectus for the Contract ("the Contract").
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT STATEMENT OF ADDITIONAL
INFORMATION
(DATE)
This Statement of Additional Information expands upon subjects discussed in the
current prospectus for the WealthQuest III Variable Annuity offered by American
National Insurance Company ("American National"). You may obtain a copy of the
prospectus dated (date), by calling 1-800-306-2959, or writing to American
National Insurance Company, One Moody Plaza, Galveston, Texas 77550-7999. Terms
used in the current prospectus for the Contract are incorporated in this
Statement. All terms not specifically defined in this statement shall have the
meaning set forth in the current prospectus.
Form (new number)-SAI
1
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
The Contract.............................................................. 3
Valuation of Accumulation Units........................................... 3
Computation of Variable Annuity Payments.................................. 3
Annuity Unit Value........................................................ 4
Summary................................................................... 4
Exceptions to Charges..................................................... 5
Assignment................................................................ 5
Minimum Distributions Program............................................. 5
Distribution of the Contract.............................................. 6
Tax Matters............................................................... 6
Records and Reports....................................................... 7
Performance............................................................... 7
Total Return.............................................................. 7
Other Total Return........................................................ 8
Yields.................................................................... 8
State Law Differences..................................................... 9
Separate Account.......................................................... 9
Termination of Participating Agreements................................... 9
The Fidelity Funds........................................................ 9
The T. Rowe Price Funds................................................... 10
The Federated Fund........................................................ 11
The MFS Fund.............................................................. 12
The Alger American Fund................................................... 12
Financial Statements...................................................... 13
</TABLE>
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THE CONTRACT
The following provides additional information about the Contract which
supplements the description in the prospectus and which may be of interest to
some Contract Owners.
VALUATION OF ACCUMULATION UNITS
The Accumulation Unit Value for a subaccount on any day is equal to (a) divided
by (b), where (a) is the net asset value of the corresponding Eligible Portfolio
of the underlying fund owned by each subaccount less any applicable deductions
and (b) is the number of Accumulation Units of that subaccount at the beginning
of that day.
COMPUTATION OF VARIABLE ANNUITY PAYMENTS
The amount of the first variable annuity payment to the Annuitant will depend on
the amount of his/her Accumulation Value applied to effect the variable annuity
as of the tenth day immediately preceding the date annuity payments commence,
the amount of any premium tax owed (if applicable), the annuity option selected,
and the age of the Annuitant. The Contract contains tables indicating the
dollar amount of the first annuity payment under annuity options 1, 2, 4, and 5
for each $1,000 of Accumulation Value at various ages. These tables are based
upon the Annuity 2000 Mortality Table (promulgated by the Society of Actuaries)
and an Assumed Investment Rate (the "AIR") of 2.5% per annum.
In any subsequent month, the dollar amount of the variable annuity payment is
determined by multiplying the number of annuity units in the applicable
subaccount(s) by the value of such annuity unit on the tenth day preceding the
due date of such payment. The annuity unit value will increase or decrease in
proportion to the net investment return of the subaccount(s) underlying the
variable annuity since the date of the previous annuity payment, less an
adjustment to neutralize the 2.50% or other AIR referred to above.
Therefore, the dollar amount of variable annuity payments after the first will
vary with the amount by which the net investment return is greater or less than
the 2.5% (or other AIR) per annum. For example, assuming a 3.5% AIR, if an
Eligible Portfolio has a
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cumulative net investment return of 5% over a one year period, the first annuity
payment in the next year will be approximately 1.5 percentage points greater
than the payment on the same date in the preceding year, and subsequent payments
will continue to vary with the investment experience of the Eligible Portfolio.
If such net investment return is 1% over a one year period, the first annuity
payment in the next year will be approximately 2.5 percentage points less than
the payment on the same date in the preceding year, and subsequent payments will
continue to vary with the investment experience of the applicable subaccount.
ANNUITY UNIT VALUE
The value of an annuity unit is calculated at the same time that the value of an
Accumulation Unit is calculated and is based on the same values for shares of
Eligible Portfolios and other assets and liabilities. The following
illustrations show, by use of hypothetical examples, the method of determining
the annuity unit value and the amount of variable annuity payments.
ILLUSTRATION: CALCULATION OF ANNUITY UNIT VALUE
Annuity at age 65: Life with 120 payments certain
1. Annuity unit value, beginning of period $ .980000
2. Net investment factor for Period 1.001046
3. Daily adjustment for 2.5% Assumed Investment Rate .999919
4. (2) x (3) 1.000965
5. Annuity unit value, end of period (1) x (4) $ .980946
ILLUSTRATION: ANNUITY PAYMENTS
Annuity at age 65: Life with 120 payments certain
1. Number of Accumulation Units at annuity date 10,000.00
2. Accumulation Unit value (10 days prior to date of
first monthly payment) $1.800000
3. Accumulation Value of Contract (1) x (2) $ 18,000.00
4. First monthly annuity payment per $1,000 of
Accumulation Value $5.63
5. First monthly annuity payment (3) x (4) / 1,000 $101.34
6. Annuity Unit value (10 days prior to date of first
monthly payment) $.980000
7. Number of annuity units (5) / (6) 103.408
8. Assume annuity unit value for second month equal to $.997000
9. Second monthly annuity payment (7) x (8) $103.10
10. Assume annuity unit value for third month equal to $.953000
11. Third monthly annuity payment (7) x (10) $98.55
SUMMARY
In conclusion, for a variable annuity the key element to pricing the annuity is
unknown; there is no interest rate guarantee made and interest credited will
depend upon actual future results. The technique used to overcome this obstacle
is the calculation of the premium for the annuity using an AIR. The initial
variable annuity payment is based upon this premium; subsequent payments will
increase or decrease depending upon the relationship between the AIR and the
actual investment performance of Eligible Portfolios to be passed to the
annuitant. Suppose an Eligible Portfolio showed a monthly return of 1% after
the first month, the participant's second monthly payment would be (assuming 30
days between payments):
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$100 x [1.01/(1.03)/ 30/365/] = $100.75
AIR methodology means that at each payment date the value in a participant's
annuity is updated to reflect actual investment results to date, but continued
assumption of the AIR for the remainder of the Annuity Period.
EXCEPTIONS TO CHARGES
The surrender charges, mortality and expense risk fees and administrative
charges may be reduced for, or additional amounts credited on, sales of
Contracts to a trustee, employer, or similar entity representing a group where
American National determines that such sales result in savings of sales or
administrative expenses. In addition, directors, officers and bona fide full-
time employees (and their spouses and minor children) of SM&R and American
National are permitted to purchase Contracts with substantial reduction of the
surrender charges, mortality and expense risk fees, or administrative charges.
The Contract may be sold directly, without compensation, to a registered
representative, to employees, officers, directors, and trustees of American
National and its affiliated companies, and spouses and immediate family members
(i.e., children, siblings, parents, and grandparents) of the foregoing, and to
employees, officers, directors, trustees and registered representatives of any
broker-dealer authorized to sell the Contracts, and spouses and immediate family
members of the foregoing. If sold under these circumstances, a Contract may be
credited with in part or in whole any cost savings resulting from the Contract
being sold directly, rather than through an agent with an associated commission,
but only if such credit will not be unfairly discriminatory to any person.
ASSIGNMENT
The Contract may be assigned by the Contract Owner except when issued to plans
or trusts qualified under Section 403(b) or 408 of the Internal Revenue Code.
401(k) Contracts are also not assignable.
MINIMUM DISTRIBUTIONS PROGRAM
Under the Systematic Withdrawal Program, the Contract Owner can elect to
participate in the "Minimum Distributions Program" by instructing American
National to calculate and make minimum distributions that may be required if the
Contract is used with a tax qualified plan. American National calculates such
amounts assuming the minimum distribution amount is based solely on the value of
the Contract Owner's Contract. However, the required minimum distribution
amounts applicable to the Contract Owner's particular situation may depend on
other annuities, savings, or investments of which American National is not
aware, so that the required amount may be greater than the minimum distribution
amount American National calculates based on the Contract Owner's Contract. The
Minimum Distributions Program is subject to all the rules applicable to the
Systematic Withdrawal Program. In addition, certain rules apply only to the
Minimum Distributions Program. These rules are described below.
In order to participate in the Minimum Distributions Program, the Contract Owner
must notify American National of such election in writing in the calendar year
in which the Contract Owner attains age 70 1/2. If the Contract Owner is taking
payments under the Systematic Withdrawal Program when the Minimum Distributions
Program is elected, the existing Systematic Withdrawal Program will be
discontinued.
American National will determine the amount that is required to be distributed
from a Contract each year based on the information provided by the Contract
Owner and elections made by the Contract Owner. The Contract Owner specifies
whether the withdrawal amount will be based on a life expectancy calculated on a
single life basis, or on a joint life basis. American National calculates a
required distribution amount each year based on the Internal Revenue Code's
minimum distribution rules.
Minimum Distributions Program is based on American National's understanding of
the present federal income tax laws, as the IRS currently interprets them.
Numerous special tax rules apply to Contract owners whose Contracts are used
with qualified plans. Contract Owners should consult a tax advisor before
electing to participate in the Minimum Distributions Programs.
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DISTRIBUTION OF THE CONTRACT
Subject to arrangements with American National, the Contract is sold as part of
a continuous offering by independent broker-dealers who are members of the
National Association of Security Dealers, Inc., and who become licensed to sell
life insurance and variable annuities for American National. Pursuant to a
Distribution and Administrative Services Agreement, Securities Management and
Research, Inc. ("SM&R") acts as the principal underwriter on behalf of American
National for distribution of the Contract. Under the Agreement, SM&R is to use
commercially reasonable efforts to sell the Contract through registered
representatives. In connection with these sales activities, SM&R is responsible
for:
. compliance with the requirements of any applicable state broker-dealer
regulations and the Securities Exchange Act of 1934,
. keeping correct records and books of account in accordance with Rules 17a-3
and 17a-4 of the Securities Exchange Act,
. training agents of American National for the sale of Contracts, and
. forwarding all Purchase Payments under the Contracts directly to American
National.
SM&R is not entitled to any renumeration for its services as underwriter under
the Distribution and Administrative Services Agreement; however, SM&R is
entitled to reimbursement for all reasonable expenses incurred in connection
with its duties as underwriter.
TAX MATTERS
Diversification Requirements. The Code requires that the investments underlying
a separate account be "adequately diversified" in order for contracts to be
treated as annuities for federal income tax purposes. We intend that the
separate account, through the Eligible Portfolios, will satisfy these
diversification requirements.
In certain circumstances, owners of variable annuity contracts may be considered
for federal income tax purposes to be the owners of the assets of the separate
account supporting their contracts due to their ability to exercise investment
control over those assets. When this is the case, the contract owners would be
currently taxed on income and gains attributable to the separate account assets.
There is little guidance in this area, and some features of the Contracts, such
as the flexibility of a Contract Owner to allocate premium payments and transfer
Accumulation Value, have not been explicitly addressed in published rulings.
While we believe that the Contracts do not give Contract Owners investment
control over separate account assets, we reserve the right to modify the
Contracts as necessary to prevent a Contract Owner from being treated as the
owner of the separate account assets supporting a Contract.
Required Distributions. In order to be treated as an annuity contract for
federal income tax purposes, each non-qualified deferred annuity Contract must
provide that:
(i) if a Contract Owner dies on or after the Annuity Date but before the
entire interest in the Contract has been distributed, the remaining
interest in the Contract will be distributed at least as rapidly as under
the distribution method that was used immediately before the Contract
Owner died; and
(ii) if a Contract Owner dies before the Annuity Date, the entire interest in
the Contract will be distributed within five years after the Contract
Owner dies.
These requirements are considered satisfied as to any portion of the Contract
Owner's interest that is (i) payable as annuity payments which begin within one
year of the Contract Owner's death, and (ii) which are made over the life of the
Beneficiary or over a period not extending beyond the Beneficiary's life
expectancy.
If the Beneficiary is the surviving spouse of the Contract Owner, the Contract
may be continued with the surviving spouse as the new Contract Owner and no
distribution is required.
Other rules may apply to Qualified Contracts.
6
<PAGE>
RECORDS AND REPORTS
Reports concerning each Contract will be sent annually to each Contract Owner.
Contract Owners will additionally receive annual and semiannual reports
concerning the underlying funds and annual reports concerning the separate
account. Contract Owners will also receive confirmations of receipt of Purchase
Payments, changes in allocation of Purchase Payments and transfer of
Accumulation Units and Annuity Units.
PERFORMANCE
Performance information for any subaccount may be compared, in reports and
advertising to:
. the Standard & Poor's 500 Composite Stock Price Index ("S & P 500"),
. Dow Jones Industrial Average ("DJIA"),
. Donoghue's Money Market Institutional Averages;
. other variable annuity separate accounts or other investment products tracked
by Lipper Analytical Services, Lehman-Brothers, Morningstar, or the Variable
Annuity Research and Data Service, widely used independent research firms
which rank mutual funds and other investment companies by overall
performance, investment objectives, and assets, and
. the Consumer Price Index (measure for inflation) to assess the real rate of
return from an investment in a Contact.
Unmanaged indices may assume the reinvestment of dividends but generally do not
reflect deductions for annuity charges and investment management costs.
Total returns, yields and other performance information may be quoted
numerically or in a table, graph, or similar illustration. Reports and
advertising may also contain other information including:
. the ranking of any subaccount derived from rankings of variable annuity
separate accounts or other investment products tracked by Lipper Analytical
Series or by rating services, companies, publications or other persons who
rank separate accounts or other investment products on overall performance or
other criteria, and
. the effect of tax deferred compounding on a subaccount's investment returns,
or returns in general, which may be illustrated by graphs, charts, or
otherwise, and which may include a comparison, at various points in time, of
the return from an investment in a Contract (or returns in general) on a tax-
deferred basis (assuming one or more tax rates) with the return on a taxable
basis.
TOTAL RETURN
Total Return quoted in advertising reflects all aspects of a subaccount's
return, including the automatic reinvestment by the separate account of all
distributions and any change in the subaccount's value over the period. Average
annual returns are calculated by determining the growth or decline in value of a
hypothetical historical investment in the subaccount over a stated period, and
then calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a cumulative return of 100% over ten
years would produce an average annual return of 7.18%, which is the steady rate
that would equal 100% growth on a compounded basis in ten years. While average
annual returns are a convenient means of comparing investment alternatives,
investors should realize that the subaccount's performance is not constant over
time, but changes from year to year, and that average annual returns represent
averaged figures as opposed to the actual year-to-year performance of a
subaccount.
Average annual total returns are computed by finding the average annual
compounded rates of return over the periods shown that would equate the initial
amount invested to the withdrawal value, in accordance with the following
formula:
P(1+T)/n/ = ERV
7
<PAGE>
where P is a hypothetical investment payment of $1,000, T is the average annual
total return, n is the number of years, and ERV is the withdrawal value at the
end of the periods shown. Since the Contract is intended as a long-term
product, the average annual total returns assume that no money was withdrawn
from the Contract prior to the end of the period.
In addition to average annual returns, the subaccounts may advertise unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period.
From time to time, sales literature or advertisements may also quote average
annual total returns for periods prior to the date the Separate Account
commenced operations. Such performance information for the subaccounts will be
calculated based on the performance of the Eligible Portfolios and the
assumption that the subaccounts were in existence for the same periods as those
indicated for the Eligible Portfolios, with the level of Contract charges
currently in effect.
OTHER TOTAL RETURN
From time to time, sales literature or advertisements may also quote average
annual total returns that reflect neither the annual contract fee nor the
Surrender Charge. These are calculated in exactly the same way as the average
annual total returns described above, except that the ending redeemable value of
the hypothetical account for the period is replaced with an ending value for the
period that does not take into account the annual contract fee and any charges
on amounts surrendered. Sales literature or advertisements may also quote
average annual total returns for periods prior to the date the Separate Account
commenced operations, calculated based on the performance of the Eligible
Portfolios and the assumption that the subaccounts were in existence for the
same periods as those indicated for the Eligible Portfolios, with the level of
Contract charges currently in effect except for the annual contract fee and the
Surrender Charge.
YIELDS
Some subaccounts may also advertise yields. Yields quoted in advertising
reflect the change in value of a hypothetical investment in the subaccount over
a stated period of time, not taking into account capital gains or losses.
Yields are annualized and stated as a percentage. Yields do not reflect the
impact of any contingent deferred sales load. Yields quoted in advertising may
be based on historical seven-day periods. Current yield for the American
National Money Market subaccount will reflect the income generated by a
Subaccount over a 7-day period. Current yield is calculated by determining the
net change, exclusive of capital changes, in the value of a hypothetical account
having one Accumulation Unit at the beginning of the period and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and multiplying the base period return by
(365/7). The resulting yield figure will be carried to the nearest hundredth of
a percent. Effective yield for the American National Money Market subaccount is
calculated in a similar manner to current yield except that investment income is
assumed to be reinvested throughout the year at the 7-day rate. Effective yield
is obtained by taking the base period returns as computed above, and then
compounding the base period return by adding 1, raising the sum to a power equal
to (365/7) and subtracting one from the result, according to the formula
Effective Yield = [(Base Period Return +1)/365/7/] - 1.
Since the reinvestment of income is assumed in the calculation of effective
yield, it will generally be higher than current yield.
A 30-day yield for bond subaccounts will reflect the income generated by a
subaccount over a 30-day period. Yield will be computed by dividing the net
investment income per Accumulation Unit earned during the period by the maximum
offering price per Accumulation Unit on the last day of the period, according to
the following formula:
Yield = 2[((a - b)/cd + 1)/6/ - 1]
where a = net investment income earned by the applicable portfolio, b = expenses
for the period including expenses charged to the contract owner accounts, c =
the average daily number of Accumulation Units outstanding during the period,
and d = the maximum offering price per Accumulation Unit on the last day of the
period.
8
<PAGE>
STATE LAW DIFFERENCES
Differences in state laws may require American National to offer a Contract in
one or more states which is more favorable to a Contract Owner than that offered
in other states.
SEPARATE ACCOUNT
The Separate Account will purchase and redeem shares of the Eligible Portfolios
at net asset value. The net asset value of a share is equal to the total assets
of the portfolio less the total liabilities of the portfolio divided by the
number of shares outstanding.
American National will redeem shares in the Eligible Portfolios as needed to:
. collect charges,
. pay the surrenders,
. provide benefits, or
. transfer assets from one subaccount to another, or to the Fixed Account.
Any dividend or capital gain distribution received from an Eligible Portfolio
will be reinvested immediately at net asset value in shares of that Eligible
Portfolio and retained as assets of the corresponding subaccount.
The separate account may include other subaccounts that are not available under
the Policy. American National may from time to time discontinue the
availability of some of the subaccounts. If the availability of a subaccount is
discontinued, American National may redeem any shares in the corresponding
Eligible Portfolio and substitute shares of another registered open-end
management company.
American National may also establish additional subaccounts. Each new
subaccount would correspond to a portfolio of a registered, open-end management
company. American National would establish the terms upon which existing
Policyowners could purchase shares in such portfolios.
If any of these substitutions or changes are made, American National may change
the Policy by sending an endorsement. American National may:
. operate the Separate Account as a management company,
. de-register the Separate Account if registration is no longer required,
. combine the Separate Account with other separate accounts,
. restrict or eliminate any voting rights associated with the Separate Account,
or
. transfer the assets of the Separate Account relating to the Contracts to
another separate account.
American National would, of course, not make any changes to the menu of Eligible
Portfolios or to the Separate Account without complying with applicable laws and
regulations. Such laws and regulations may require notice to and approval from
the Contract Owners, the SEC, and state insurance regulatory authorities.
TERMINATION OF PARTICIPATION AGREEMENTS
The participation agreements pursuant to which the Funds sell their shares to
the Variable Account contain varying provisions regarding termination. The
following generally summarizes those provisions:
THE FIDELITY FUNDS
All participation agreements for the Fidelity Funds provide for termination:
9
<PAGE>
. upon sixty days advance written notice by any party,
. by American National with respect to any Fidelity Portfolio if American
National determines that shares of such Fidelity Portfolio are not reasonably
available to meet the requirements of the Contracts,
. by American National with respect to any Fidelity Portfolio if any of the
shares of such Fidelity Portfolio are not registered, issued, or sold in
accordance with applicable state or federal law or such law precludes the use
of such shares as the underlying investment media of the Contracts,
. by American National with respect to any Fidelity Portfolio if such Fidelity
Portfolio ceases to be qualified as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code (the "Code"), or if American
National reasonably believes the Fidelity Funds may fail to so qualify,
. by American National with respect to any Fidelity Portfolio if such Fidelity
Portfolio fails to meet the diversification requirements specified in the
Fidelity participation agreement,
. by the Fidelity Funds or the underwriter, upon a determination by either,
that American National has suffered a material adverse change in its
business, operations, financial condition, or prospects, or is the subject of
material adverse publicity,
. by American National upon a determination by American National that either
the Fidelity Funds or the underwriter has suffered a material adverse change
in its business, operations, financial condition, or prospects, or is the
subject of material adverse publicity,
. by the Fidelity Funds or the underwriter forty-five days after American
National gives the Fidelity Funds and the underwriter written notice of
American National's intention to make another investment company available as
a funding vehicle for the Contracts, if at the time such notice was given, no
other notice of termination of the Fidelity participation agreement was then
outstanding, or
. upon a determination that a material irreconcilable conflict exists between
the interests of the Contract Owners and other investors in the Fidelity
Funds or between American National's interests in the Fidelity Funds and the
interests of other insurance companies invested in the Fidelity Funds.
THE T. ROWE PRICE FUNDS
This participation agreement provides for termination:
. upon six months advance written notice by any party,
. by American National with respect to any T. Rowe Price Portfolio if American
National determines that shares of such T. Rowe Price Portfolio are not
reasonably available to meet the requirements of the Contracts,
. by American National with respect to any T. Rowe Price Portfolio if any of
the shares of such T. Rowe Price Portfolio are not registered, issued, or
sold in accordance with applicable state or federal law or such law precludes
the use of such shares as the underlying investment media of the Contracts,
. by the T. Rowe Price Funds or the underwriter upon the institution of formal
proceedings against American National by the SEC, NASD, or any other
regulatory body regarding American National's duties under the T. Rowe Price
participation agreement or related to the sale of the Contracts, the
operation of the Separate Account, or the purchase of T. Rowe Price Funds
shares, if the T. Rowe Price Funds or the underwriter determines that such
proceedings will have a material adverse effect on American National's
ability to perform under the T. Rowe Price participation agreement,
. by American National upon the institution of formal proceedings against the
T. Rowe Price Funds or the underwriter by the SEC, NASD, or any other
regulatory body, if American National determines that such proceedings will
have a material adverse effect upon the ability of the T. Rowe Price Funds or
the underwriter to perform its obligations under the T. Rowe Price
participation agreement,
10
<PAGE>
. by American National with respect to any T. Rowe Price Portfolio if such T.
Rowe Price Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code, or if American National reasonably believes
the T. Rowe Price Funds may fail to so qualify,
. by American National with respect to any T. Rowe Price Portfolio if such T.
Rowe Price Portfolio fails to meet the diversification requirements specified
in the T. Rowe Price participation agreement, or American National reasonably
believes the T. Rowe Price Portfolio may fail to so comply,
. by the T. Rowe Price Funds or the underwriter, upon a determination by
either, that American National has suffered a material adverse change in its
business, operations, financial condition, or prospects, or is the subject of
material adverse publicity,
. by American National upon a determination by American National that either
the T. Rowe Price Funds or the underwriter has suffered a material adverse
change in its business, operations, financial condition, or prospects, or is
the subject of material adverse publicity,
. by the T. Rowe Price Funds or the underwriter sixty days after American
National gives the T. Rowe Price Funds and the underwriter written notice of
American National's intention to make another investment company available as
a funding vehicle for the Contracts if at the time such notice was given, no
other notice of termination of the T. Rowe Price participation agreement was
then outstanding,
. upon a determination that a material irreconcilable conflict exists between
the Contract Owners and other investors in the T. Rowe Price Funds or between
American National's interests in the T. Rowe Price Funds and interests of
other insurance companies invested in the T. Rowe Price Funds.
THE FEDERATED FUND
This participation agreement provides for termination:
. upon one hundred eighty days advance written notice by any party
. at American National's option if American National determines that shares of
the Federated Portfolios are not reasonably available to meet the
requirements of the Contracts
. at the option of the Federated Fund or the underwriter upon the institution
of formal proceedings against American National by the SEC, NASD, or any
other regulatory body regarding American National's duties under the
Federated participation agreement or related to the sale of the Contracts,
the operation of the Separate Account, or the purchase of Federated Fund
shares,
. at American National's option upon the institution of formal proceedings
against the Federated Fund or the underwriter by the SEC, NASD, or any other
regulatory body,
. upon a requisite vote of the Contract Owners to substitute shares of another
fund for shares of the Federated Fund,
. if any of the shares of a Federated Portfolio are not registered, issued, or
sold in accordance with applicable state or federal law or such law precludes
the use of such shares as the underlying investment media of the Contracts,
. by any party upon a determination by the Federated Fund that an
irreconcilable conflict exists between the Contract Owners and other
investors in the Federated Fund or between American National's interests in
the Federated Fund and the interests of other insurance companies invested in
the Federated Fund,
. at American National's option if the Federated Fund or a Federated Portfolio
ceases to qualify as a Regulated Investment Company under Subchapter M of the
Code, or
. at American National's option if the Federated Fund or a Federated Portfolio
fails to meet the diversification requirements specified in the Federated
participation agreement.
11
<PAGE>
THE MFS FUND
This participation agreement provides for termination:
. upon six months advance written notice by any party
. at American National's option to the extent the shares of any MFS Portfolio
are not reasonably available to meet the requirements of the Contracts or are
not "appropriate funding vehicles" for the Contracts, as determined by
American National
. at the option of the MFS Fund or the underwriter upon the institution of
formal proceedings against American National by the SEC, NASD, or any other
regulatory body regarding American National's duties under the MFS
participation agreement or related to the sale of the Contracts, the
operation of the Separate Account, or the purchase of shares of the MFS Fund,
. at American National's option upon the institution of formal proceedings
against the MFS Fund by the SEC, NASD, or any other regulatory body regarding
the MFS Fund's or the underwriter's duties under the MFS participation
agreement or related to the sale of shares of the MFS Fund
. at the option of any party upon receipt of any necessary regulatory approvals
or the vote of the Contract Owners to substitute shares of another fund for
the shares of the MFS Fund, provided American National gives the MFS Fund and
the underwriter thirty days advance written notice of any proposed vote or
other action taken to replace the shares of the MFS Fund
. by the MFS Fund or the underwriter upon a determination by either that
American National has suffered a material adverse change in its business,
operations, financial condition, or prospects, or is the subject of material
adverse publicity
. by American National upon a determination by American National that the MFS
Fund or the underwriter has suffered a material adverse change in its
business, operations, financial condition, or prospects, or is the subject of
material adverse publicity
. at the option of any party, upon another party's material breach of any
provision of the MFS participation agreement, or
. upon assignment of the MFS participation agreement, unless made with the
written consent of the parties to the MFS participation agreement.
THE ALGER AMERICAN FUND
This participation agreement provides for termination:
. at the option of any party upon 60 days advance written notice to the other
parties;
. at the option of Alger American Fund or its distributor if the Contracts
issued by American National cease to qualify as annuity contracts or life
insurance contracts, as applicable, under the Code or if the Contracts are
not registered, issued or sold in accordance with applicable state and/or
federal law; or
. at the option of any party upon a determination by a majority of the Trustees
of Alger American Fund, or a majority of its disinterested Trustees, that a
material irreconcilable conflict exists; or
. at the option of American National upon institution of formal proceedings
against Alger American Fund or its distributor by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body
regarding Alger American Fund's or its distributor's duties under this
Agreement or related to the sale of Trust shares or the operation of the
Trust; or
. at the option of American National if Alger American Fund or a Portfolio
fails to meet the diversification requirements specified in the
participation agreement; or
. at the option of American National if shares of the Series are not reasonably
available to meet the requirements of the Variable Contracts issued by
American National, as determined by American National, and upon prompt
notice by American National to the other parties; or
12
<PAGE>
. at the option of American National in the event any of the shares of the
Portfolio are not registered, issued or sold in accordance with applicable
state and/or federal, or such law precludes the use of such shares as the
underlying investment media of the Variable Contracts issued or to be
issued by American National; or
. at the option of American National, if the Portfolio fails to qualify as a
Regulated Investment Company under Subchapter M of the Code; or
. at the option of the Alger American Fund's distributor if it shall determine
in its sole judgment exercised in good faith, that American National and/or
its affiliated companies has suffered a material adverse change in its
business, operations, financing condition or prospects since the date of
this Agreement or is the subject of material adverse publicity.
FINANCIAL STATEMENTS
The financial statements of American National should be considered only as
bearing on the ability of American National to meet its obligations under the
Contracts. They should not be considered as bearing on the investment
performance of the assets held in the separate account.
{Financial Statement to be inserted by Pre-effective amendment}
13
<PAGE>
PART C ITEM AND CAPTION
Items 24. Financial Statements and Exhibits.
(a) Financial Statements FINANCIAL STATEMENTS and FINANCIAL STATEMENT
SCHEDULES sections of Statement of Additional
Information
(b) Exhibits
Exhibit "1" - Copy of the resolutions of the Board of
Directors of the Depositor authorizing the
establishment of the Registrant
Exhibit "2" - Not applicable
Exhibit "3" - Distribution and Administrative Services
Agreement
Exhibit "4" - Form of each variable annuity contract (to be
included in a subsequent pre-effective
amendment)
Exhibit "5" - Form of application used with any variable
annuity contract (to be included in a subsequent
pre-effective amendment)
Exhibit "6a" - Copy of the Articles of Incorporation of the
Depositor
Exhibit "6b" - Copy of the By-laws of the Depositor
Exhibit "7" - Not applicable
Exhibit "8a" Form of American National Investment Account,
Inc. Participation Agreement
Exhibit "8b" Form of Variable Insurance Products Fund II
Participation Agreement
Exhibit "8c" Form of Variable Insurance Products Fund III
Participation Agreement
Exhibit "8d" Form of T. Rowe Price International Series, Inc.
T. Rowe Price Equity Series, Inc., and T. Rowe
Price Fixed Income Series, Inc.
Exhibit "8e" Form of MFS Variable Insurance Trust
Participation Agreement
Exhibit "8f" Form of Federated Insurance Series Fund
Participation Agreement
Exhibit "8g" Form of Fred Alger American Fund Participation
Agreement
Exhibit "9" - An opinion of counsel and consent to its use as
to the legality of the securities being
registered, indicating whether they will be
legally issued and will represent binding
obligations of the depositor (to be filed in a
subsequent pre-effective amendment)
C-1
<PAGE>
Exhibit "10" - Consent of independent accountants (to be filed
in a subsequent pre-effective amendment)
Exhibit "11" - Not applicable
Exhibit "12" - Not applicable
Exhibit "13" - Not applicable
Exhibit "14" - Control chart of Depositor (to be filed in a
subsequent pre-effective amendment)
Exhibit "27" - Financial data schedule (to be filed in a
subsequent pre-effective amendment
Item 25. Directors and Officers of the Depositor.
Directors
- ---------
Name Business Address
- ---- ----------------
G. Richard Ferdinandtsen American National Insurance Company
One Moody Plaza
Galveston, Texas 77550
Irwin M. Herz, Jr. Greer, Herz & Adams, L.L.P.
One Moody Plaza, 18th Floor
Galveston, Texas 77550
R. Eugene Lucas Gal-Tex Hotel Corporation
2302 Postoffice, Suite 504
Galveston, Texas 77550
E. Douglas McLeod The Moody Foundation
2302 Postoffice, Suite 704
Galveston, Texas 77550
Frances Anne Moody 7031 Inwood
Dallas, Texas 75209
Robert L. Moody 2302 Postoffice, Suite 702
Galveston, Texas 77550
Russell S. Moody 6016 Mount Bonnell Hollow
Austin, Texas 78731
W.L. Moody, IV 2302 Postoffice, Suite 502
Galveston, Texas 77550
C-2
<PAGE>
Joe Max Taylor Galveston County Sheriff's Department
715 19th Street
Galveston, Texas 77550
Officers
- --------
The principal business address of the officers, unless indicated otherwise
in the "Directors" section, or unless indicated by an asterisk (*), is American
National Insurance Company, One Moody Plaza, Galveston, Texas 77550. Those
officers with an asterisk by their names have a principal business address of
2450 South Shore Boulevard, League City, Texas 77573.
Name Office
- ---- ------
R.L. Moody Chairman of the Board, President and Chief
Executive Officer
G.R. Ferdinandtsen Senior Executive Vice President and Chief
Operating Officer
D.A. Behrens Executive Vice President, Independent Marketing
R.A. Fruend Executive Vice President, Director of Multiple
Line Marketing
B.J. Garrison Executive Vice President, Director of Home
Service Division
M.W. McCroskey * Executive Vice President, Investments
J.E. Pozzi Executive Vice President, Corporate Planning
R.J. Welch Executive Vice President and Chief Actuary
C.H. Addison Senior Vice President, Systems Planning and
Computing
A.L. Amato, Jr. Senior Vice President, Life Policy
Administration
G.C. Langley Senior Vice President, Human Resources
S.E. Pavlicek Senior Vice President and Controller
S.H. Schouweiler Senior Vice President, Health Insurance
Operations
J.R. Thomason Senior Vice President, Credit Insurance Services
G.W. Tolman Senior Vice President, Corporate Affairs
V.E. Soler, Jr. Vice President, Secretary & Treasurer
J.J. Antkowiak Vice President, Director of Computing Services
D.M. Azur Vice President, Claims
C-3
<PAGE>
S.F. Brast * Vice President, Real Estate Investments
D. D. Brichler * Vice President, Mortgage Loan Production
F.V. Broll, Jr. Vice President & Actuary
W.F. Carlton Vice President & Assistant Controller,
Financial Reports
R.T. Crawford Vice President & Assistant Controller, General
Accounting
G.C. Crume Vice President, Independent Marketing
D.A. Culp Vice President, Independent Marketing
G.D. Dixon * Vice President, Stocks
S.L. Dobbe Vice President, Independent Marketing
F.J. Gerren Vice President, Independent Marketing
J.F. Grant, Jr. Vice President, Group Actuary
R.D. Hemme Vice President and Actuary
M.E. Hogan Vice President, Credit Insurance Operations
D.M. Jensen Vice President, Multiple Line Marketing
C.J. Jones Vice President, Health Administration
D.D. Judy Vice President, Financial Marketing
Dr. H.B. Kelso, Jr. Vice President & Medical Director
G.W. Kirkham Vice President, Director of Planning and Support
D.D. Lagrone Vice President, Home Office Services
George A. Macke Vice President, General Auditor
G.W. Marchand Vice President, Life Underwriting
D.N. McDaniel Vice President, Home Service Administration
J.W. Pangburn Credit Insurance/Special Markets
E.B. Pavelka Vice President, Life Premium Accounting &
Policy Service
C-4
<PAGE>
R.A. Price Vice President, Director of Training and
Market Development
J.T. Smith Vice President, 401(k), Pension Sales
G.A. Sparks, Sr. Vice President, Director of Finance and Field
Services
W.H. Watson III Vice President, Health Actuary
G.W. Williamson Vice President, Assistant Director, Home
Service Division
J.L. Broadhurst Asst. Vice President, Director Individual
Health/Group Systems
J.J. Cantu Asst. Vice President and Illustration Actuary
J.D. Ferguson Asst. Vice President, Creative Services
J.M. Flippin Asst. Vice President; Director, Life Marketing
D.S. Fuentes Asst. Vice President, Director of Group Claims
D.N. Fullilove Asst. Vice President, Director, Agents
Employment
K.E. Johnston Asst. Vice President, Asst. Director of
Financial Marketing
K.J. Juneau Asst. Vice President, Director, Agency Systems
P.E. Kennedy Asst. Vice President, Human Resources
D. Knowles Asst. Vice President, Director of
Marketing/Agency Support
C.A. Kratz Asst. Vice President, Human Resources
C.H. Lee Asst. Vice President and Actuary
D.L. Leining Asst. Vice President, Life Underwriting
R.G. McCrary Asst. Vice President, Application Development
Division
M. Mitchell Asst. Vice President, Director Insurance
Services
M.S. Nimmons Asst. Vice President; Associate General
Auditor, Home Office
R.J. Ostermayer Asst. Vice President, Director of Group
Quality Assurance
M.C. Paetz Asst. Vice President, Director of Group
Underwriting
C-5
<PAGE>
R.E. Pittman, Jr. Asst. Vice President, Director of
Marketing/Career Development
G.A. Schillaci Asst. Vice President & Actuary
M.J. Soler Asst. Vice President, Health Marketing
Administration
J.P. Stelling Asst. Vice President, Health Compliance
C.E. Tipton Asst. Vice President & Assistant Actuary
D.G. Trevino Asst. Vice President, Director,
Computing Services
J.A. Tyra Asst. Vice President, Life Insurance Systems
M.L. Waugh, Jr. Asst. Vice President, Claims
R.M. Williams Life Product Actuary
J.E. Cernosek Asst. Secretary
V.J. Krc Asst. Treasurer
Item 26. Persons Controlled by or Under Common Control with Depositor of
Registrant.
Exhibit "14" - control chart of depositor (to be filed in a
subsequent pre-effective amendment)
Item 27. Number of Contractowners.
The Registrant has no Contractowners as of the date of this Registration
Statement.
Item 28. Indemnification.
The following provision is in the Distribution and Administrative Services
Agreement:
"American National agrees to indemnify SM&R for any liability that
SM&R may incur to a Contractowner or party-in-interest under a
Contract (i) arising out of any act or omission in the course of, or
in connection with, rendering services under this Agreement, or (ii)
arising out of the purchase, retention or surrender of a Contract;
provided, however, that American National will not indemnify SM&R for
any such liability that results from the willful misfeasance, bad
faith or gross negligence of SM&R, or from the reckless disregard, by
SM&R, of its duties and obligations arising under this Agreement."
The officers and directors of American National are indemnified by American
National in the American National By-Laws for liability incurred by reason of
the officer and directors serving in such capacity. This indemnification would
cover liability arising out of the variable annuity sales of American National
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such
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<PAGE>
indemnification is against public policy as expressed in the Act and is,
therefor, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. Principal Underwriters.
(a) SM&R Equity Funds consisting of SM&R Growth Fund, Inc., SM&R Equity
Income Fund, Inc. and SM&R Balanced Fund, Inc.; SM&R Investments, Inc.
consisting of SM&R Government Bond Fund, SM&R Tax Free Fund, SM&R Primary Fund
and SM&R Money Market Fund; American National Investment Accounts, Inc.
(b) The Registrant's principal underwriter is Securities Management and
Research, Inc. The following are the officers and directors of Securities
Management and Research, Inc.
<TABLE>
<CAPTION>
Principal Business
Name Position Address
- --------------------------- --------------------- --------------------------
<S> <C> <C>
Gordon D. Dixon Director, Securities Management
Senior Vice and Research, Inc.
President 2450 South Shore Boulevard
and Chief League City, Texas 77573
Investment
Officer
Robert A. Fruend, C.L.U. Director American National
Insurance Company
One Moody Plaza
Galveston, Texas 77550
R. Eugene Lucas Director Gal-Tenn Hotel Corporation
504 Moody National Bank
Tower
Galveston, Texas 77550
Michael W. McCroskey Director, Securities Management
President and Research, Inc.
and Chief 2450 South Shore Boulevard
Executive League City, Texas 77573
Officer
Ronald J. Welch Director American National
Insurance Company
One Moody Plaza
Galveston, Texas 77550
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
K. David Wheeler Senior Vice President Securities Management and Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
Teresa E. Axelson Vice President and Securities Management and
Secretary Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
Brenda T. Koelemay Vice President, Securities Management and
Chief Administrative Research, Inc.
Officer and Chief 2450 South Shore Boulevard
Financial Officer League City, Texas 77573
Emerson V. Unger Vice President Securities Management and Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
Sally F. Praker Assistant Vice Securities Management and
President Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
Michele S. Lord Assistant Vice Securities Management and
President Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
</TABLE>
(c) Not Applicable
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder will be maintained at the offices of American National Insurance
Company, One Moody Plaza, Galveston, Texas 77550.
Item 31. Management Services.
Not Applicable
Item 32. Undertakings.
(a) Registrant undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted.
(b) Registrant undertakes to include as part of any application to purchase
a contract offered by the
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<PAGE>
prospectus, a space that an applicant can check to request a Statement of
Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
(d) The Registrant hereby represents that it is relying upon a No Action
Letter issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:
(i) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403 (b) (11) in each
registration statement, including the prospectus, used in
connection with the offer of the contract;
(ii) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403 (b) (11) in any sales
literature used in connection with the offer of the
contract;
(iii) Instruct sales representatives who solicit participants to
purchase the contract specifically to bring the redemption
restrictions imposed by Section 403(b) (11) to the attention
of the potential participants;
(iv) Obtain from each plan participant who purchases a Section
403 (b) annuity contract, prior to or at the time of such
purchase, a signed statement acknowledging the participant's
understanding of (1) the restrictions on redemption imposed
by Section 403 (b) (11), and (2) other investment
alternatives available under the employer's Section 403 (b)
arrangement to which the participant may elect to transfer
his contract value.
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<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has caused this Registration Statement to be signed on its
behalf, in the City of Galveston, and the State of Texas on the 11th day of
February, 2000.
AMERICAN NATIONAL VARIABLE ANNUITY
SEPARATE ACCOUNT (Registrant)
By: AMERICAN NATIONAL INSURANCE COMPANY
By: /s/ ROBERT L. MOODY
_______________________________________
Robert L. Moody, Chairman of the
Board, President and Chief Executive Officer
AMERICAN NATIONAL INSURANCE COMPANY
(Sponsor)
/s/ ROBERT L. MOODY
By:____________________________________
Robert L. Moody, Chairman of the
Board, President and Chief Executive Officer
ATTEST:
/s/ VINCENT E. SOLER, JR.
__________________________________________
Vincent E. Soler, Jr.,
Vice President, Secretary and Treasurer
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in their capacities and on the dates
indicated:
Signature Title Date
- --------- ----- ----
/s/ MICHAEL W. McCROSKEY 2-11-00
________________________ Executive Vice President - ____________
Michael W. McCroskey Investments
(Principal Financial Officer)
/s/ STEPHEN E. PAVLICEK 2-11-00
________________________ Senior Vice President and ____________
Stephen E. Pavlicek Controller
(Principal Accounting Officer)
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<PAGE>
Signature Title Date
- --------- ----- ----
/s/ ROBERT L. MOODY 2-11-00
________________________ Chairman of the Board, ____________
Robert L. Moody Director, President and Chief
Executive Officer
/s/ G. RICHARD FERDINANDTSEN 2-11-00
________________________ Director, Senior Executive Vice ____________
G. Richard Ferdinandtsen President and Chief Operating
Officer
/s/ IRWIN M. HERZ, JR. 2-11-00
________________________ Director ____________
Irwin M. Herz, Jr.
/s/ R. EUGENE LUCAS 2-11-00
________________________ Director ____________
R. Eugene Lucas
/s/ E. DOUGLAS McLEOD 2-11-00
________________________ Director ____________
E. Douglas McLeod
________________________ Director ____________
Frances Anne Moody
________________________ Director ____________
Russell S. Moody
________________________ Director ____________
W. L. Moody IV
________________________ Director ____________
Joe Max Taylor
C-11
<PAGE>
Exhibit 99.B1
STATE OF TEXAS (S)
(S)
COUNTY OF GALVESTON (S)
I, the undersigned, Assistant Secretary of the AMERICAN NATIONAL
INSURANCE COMPANY, Galveston, Texas, do hereby certify that the following is a
true and correct copy from the corporate records of said Corporation, of a
resolution duly adopted by the Board of Directors thereof, at a regular meeting
of said Board, a quorum thereof present and acting, on the 20th day of December,
1991, to wit:
Resolution Establishing Separate Account
Variable Annuity Contracts
RESOLVED, That the officers of the Company be, and they hereby are,
authorized to establish one or more separate accounts of this Company, in
accordance with the insurance laws of the State of Texas, to provide an
investment medium for variable annuity contracts issued by this company as
may be designated as participating therein. Any such separate account shall
receive, hold, invest and reinvest only the monies arising from: (1)
premiums, contributions or payments made pursuant to variable annuity
contracts participating therein; (2) such assets of the company as may be
necessary for the establishment of such separate account or accounts; and
(3) the dividends, interest and gains produced by the foregoing; and
FURTHER RESOLVED, that the separate account may be divided into various sub-
accounts as determined necessary by the officers of the Company to fund such
variable annuity contracts. Purchase payments (net of any applicable
deductions) remitted to the Company under the variable annuity contracts and
allocated to the separate account shall be allocated to the appropriate sub-
account in accordance with the terms of the variable annuity contracts.
Each sub-account, in turn, shall invest in the shares of one or more
registered management investment companies, or designated investment series
thereof, as specified for investment by its, at net asset value per share
next to be determined following receipt of an order for purchase by such
sub-account. To the extent that such registered management investment
company, or companies, establishes additional investment series, the
officers of the Company are empowered and authorized to establish such
additional sub-accounts as there are additional investment series, with each
such sub-account to invest solely in the shares of a specified additional
investment series; and
FURTHER RESOLVED, that the separate account shall be administered and
accounted for as part of the general business of the Company, but the
income, gains and losses of the separate account shall be credited to or
charged solely against the assets held in the separate account, without
regard to any other income arising out of other business that this Company
may conduct. The assets of the separate account shall not be chargeable
with the liabilities arising out of any other business that this Company may
conduct; and
FURTHER RESOLVED, each sub-account shall be administered and accounted for
as part of the general business of the Company, but the income (including
capital gains, or losses, if any) of each sub-account shall be credited to
or charged against the assets held in that sub-account in accordance with
the terms of the policies funded therein, without regard to other income of
the remaining sub-accounts or arising out of any other business that this
Company may conduct. The assets of each
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<PAGE>
sub-account shall not be chargeable with liabilities arising out of the
business conducted by another sub-account, nor shall a sub-account be
chargeable with liabilities arising out of any other business that this
Company may conduct; and
FURTHER RESOLVED, that the officers of the Company be, and they hereby are,
authorized:
(i) to register the variable annuity contracts issued or to be issued by
the Company under the provisions of the Securities Act of 1933 to the
extent that they shall determine that such registration is necessary;
(ii) to register any such separate account or accounts with the
Securities and Exchange Commission under the provisions of the Investment
Company Act of 1940 to the extent that they shall determine that such
registration is necessary;
(iii) to prepare, execute and file such amendments to any registration
statements filed under the aforementioned Acts (including such pre-
effective and post-effective amendments), supplements and exhibits
thereto as they may deem necessary or desirable;
(iv) to apply for exemption from those provisions of the aforementioned
Acts and the rules promulgated thereunder as they may deem necessary or
desirable and to take any and all other actions which they may deem
necessary, desirable or appropriate in connection with such Acts;
(v) to file the variable annuity contracts participating in any such
separate accounts with the appropriate state insurance departments and to
prepare and execute all necessary documents to obtain approval of the
insurance departments; and
(vi) to prepare or have prepared and execute all necessary documents to
obtain approval of, or clearance with, or other appropriate actions
required, or any other regulatory authority that may be necessary in
connection with the foregoing matters; and
(vii) to enter into agreements with appropriate entities for the
provisions of administrative and other required services on behalf of the
Separate Account(s) and for the safekeeping of assets of such Separate
Account(s); and
FURTHER RESOLVED, that the form of any resolutions required by any state
authority to be filed in connection with any variable annuity contracts or
any of the other documents or instruments referred to in any of the
preceding resolutions be, and the same hereby are, adopted as fully set
forth herein if (i) in the opinion of the officers of the Company the
adoption of the resolutions is advisable; and (ii) the Corporate Secretary
or Assistant Secretary of the Company evidences such adoption by inserting
into these minutes copies of such resolutions; and
FURTHER RESOLVED, that the officers of the Company, and each of them, are
hereby authorized to prepare and to execute the necessary documents and to
take such further actions as may be deemed necessary or appropriate, in
their discretion, to cause the issuance and sale of variable annuity
contracts and/or to fully implement the purpose of the foregoing
resolutions.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of the said
2
<PAGE>
Corporation, this ___ day of February, 2000.
_____________________________
Assistant Secretary
SUBSCRIBED AND SWORN TO BEFORE ME, this ___ day of February, 2000.
_____________________________
Notary Public
State of Texas
3
<PAGE>
Exhibit 99.B3
DISTRIBUTION AND ADMINISTRATIVE SERVICES AGREEMENT
This Agreement, made and entered into on this ___ day of __________, 19___,
by and between American National Insurance Company ("American National"), a life
insurance company organized under the laws of the State of Texas, American
National Variable Annuity Separate Account ("Separate Account"), a separate
account established by American National pursuant to the Texas Insurance Code
and Securities Management and Research, Inc. ("SM&R"), a corporation organized
under the laws of the State of Florida.
W I T N E S S E T H:
WHEREAS, American National proposes to issue to the public certain variable
contracts ("Contracts") and has authorized the creation of one or more separate
investment accounts in connection therewith; and
WHEREAS, American National has established the Separate Account for the
purpose of issuing the Contracts and is registering the Separate Account with
the Securities and Exchange Commission ("Commission") as a unit investment trust
under the Investment Company Act of 1940; and
WHEREAS, the Contracts to be issued by the Separate Account are to be
registered with the Commission under the Securities Act of 1933 for offer and
sale to the public, and otherwise in compliance with all applicable laws; and
WHEREAS, SM&R, a broker-dealer registered under the Securities Exchange Act
of 1934 and a member of the National Association of Securities Dealers, Inc.,
proposes to act as the distributor in the offering and sale of said Contracts;
WHEREAS, SM&R also proposes to perform certain administrative, processing
and clerical services for American National in connection with the offering and
sale of said Contracts; and
WHEREAS, American National desires to obtain such distribution and other
services from SM&R;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other good and valuable
consideration, American National, the Separate Account and SM&R hereby agree as
follows:
1. SM&R will serve as distributor for the Contracts which will be issued by
American National through the Separate Account and will be registered with
the Commission for offer and sale to the public. As Distributor, SM&R will
use its best efforts to effect offers and sales of the Contracts to the
public on a continuing basis. SM&R shall be responsible for compliance
with the requirements of any applicable state broker-dealer regulations and
the Securities Exchange Act of 1934 as each applies to SM&R in connection
with its duties as Distributor of said Contracts. Moreover, SM&R shall
conduct its affairs in accordance with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. (NASD).
2. SM&R will assist American National in identifying, training and
qualifying (under appropriate NASD and/or state requirements) insurance
agents desiring to sell the Contracts. SM&R will register such agents as
its registered representatives before they engage in the sale of the
Contracts and will supervise
1
<PAGE>
and control such agents in the sale of the Contracts in the manner and to
the extent required by the applicable rules of the NASD and the Commission.
If any such agent of American National should fail or refuse to submit to
the supervision of SM&R in accordance with the terms of this Agreement or
otherwise fail to meet the rules and standards imposed by SM&R on its
registered representatives, SM&R shall take whatever steps may be necessary
to terminate the sales activities of such agent relating to the Contracts.
3. As distributor, SM&R will be responsible for the preparation of marketing
materials (and where appropriate obtaining regulatory approval), for
actively recruiting additional sales agents and sales organizations and for
providing sales training (including continuing education required for
license maintenance).
4. SM&R may contract with other broker-dealers registered under the Securities
Exchange Act of 1934 and authorized by applicable law to sell variable
contracts issued by the Separate Account. Any such contractual arrangement
is expressly made subject to this Agreement, and SM&R will at all times be
responsible to American National for the distribution of all Contracts
issued by the Separate Account.
5. The amount of any commissions payable in connection with the sale of
Contracts will be made by American National to the sales personnel of SM&R
and this function is being performed as a purely ministerial service and
the Records in respect thereof are properly reflected on the Books and
Records maintained by or for SM&R. The gross amounts paid or advances made
by American National on behalf of SM&R will be transmitted to SM&R for
proper reporting.
6. Warranties.
(a) American National represents and warrants to SM&R that:
(i) Any and all Registration Statements required for the Contracts
or the Separate Account have been filed with the Commission in
the form previously delivered to SM&R and that copies of any
and all amendments thereto will be forwarded to SM&R at the
time that they were filed with the Commission;
(ii) The Registration Statements and any further amendments or
supplements thereto will, when they become effective, conform
in all material respects to the requirements of the Securities
Act of 1933, the Investment Company Act of 1940 and the rules
and regulations of the Commission thereunder, and will not
contain untrue statements of material facts or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however,
that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity
with information furnished in writing to American National by
SM&R expressly for use herein;
(iii) American National is validly existing as a stock life insurance
company in good standing under the laws of the State of Texas
with corporate power to own its properties and conduct its
business as described in the Prospectus, and has been duly
qualified for the transaction of business and is in good
standing under the laws of each other jurisdiction in which its
owns or leases properties, or conducts any business, so as to
require such qualification;
2
<PAGE>
(iv) The Contracts to be issued by the Separate Account through SM&R
hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor as provided
herein, will be duly and validly issued and will conform to the
description of such Contracts contained in the Prospectuses
relating thereto;
(v) Those persons who offer and sell the Contracts are
appropriately licensed in a manner as to comply with the state
insurance laws;
(vi) The performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any statutes, any indenture, mortgage, deed of
trust, note agreement or other agreement or instrument to which
American National is a party or by which American National is
bound, American National's Charter as a stock life insurance
company or By-Laws, or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over
American National or any of its properties; and no consent,
approval, authorization or order of any court or governmental
agency or body is required for the consummation by American
National of the transactions contemplated by this Agreement,
except such as may be required under the Securities Exchange
Act of 1934 or state insurance or securities laws in connection
with the purchase and distribution of the Contracts by SM&R;
and
(vii) There are no material legal or governmental proceedings pending
to which American National or the Separate Account is a party
or of which any property of American National or the Separate
Account is the subject, other than as set forth in the
Prospectus relating to the Contracts, and other than litigation
incident to the kind of business conducted by American National
which, if determined adversely to American National, would
individually or in the aggregate have a material adverse effect
on the financial position, surplus or operations of American
National.
(b) SM&R represents and warrants to American National that:
(i) It is a broker-dealer duly registered with the Commission
pursuant to the Securities Exchange Act of 1934 and a member in
good standing of the National Association of Securities Dealers
and is in compliance with the securities laws in those states
in which it conducts business as a broker-dealer;
(ii) It shall permit the offer and sale of Contracts only by and
through persons who are appropriately licensed under both the
securities laws and state insurance laws;
(iii) The performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach or
violation of any of the terms or provisions of or constitute a
default under, any statute, any indenture, mortgage, deed of
trust, note agreement or other agreement or instrument to which
SM&R is a party or by which SM&R is bound, the Certificate of
Incorporation and By-Laws of SM&R, or any other rule or
regulation of any court or governmental agency or body having
jurisdiction over SM&R or its property;
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<PAGE>
(iv) No offering, sale or other disposition of any Contracts will
be made until SM&R is notified by American National that the
subject Registration Statement has been declared effective and
that the Contracts have been released for sale by American
National; and such offering, sale or other disposition shall
be limited to those jurisdictions that have approved or
otherwise permit the offer and sale of the Contracts by
American National.
(v) To the extent that any statements or omissions made in the
Registration Statements with respect to the Contracts, or any
amendment or supplement thereto are made in reliance upon and
in conformity with written information furnished to American
National by SM&R expressly for use therein, such Registration
Statements and any amendments or supplements thereto will, when
they become effective or are filed with the Commission, as the
case may be, conform in all material respects to the
requirements of the Securities Act of 1933 and the rules and
regulations of the Commission thereunder and will not contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading.
7. SM&R shall keep, in manner and form prescribed or approved by American
National and in accordance with Rules 17a-3 and 17a-4 under the Securities
Exchange Act of 1934 correct records and books of account as required to be
maintained by a registered broker-dealer acting as distributor of all
transactions entered into on behalf of American National and with respect
to variable contract business it conducts of American National. SM&R shall
make such records and books of account available for inspection by the
Commission, and American National shall have the right to inspect, make
copies of or take possession of such records and books of accounts at any
time on demand.
SM&R, however, may request that some or all of the books and records
relating to the sales of the Contracts which are required to be maintained
by it as a registered broker-dealer pursuant to Rule 17a-3 and 17a-4 under
the 1934 Act be prepared and maintained in accordance with such rules by
American National on behalf of and as agent for SM&R. American National
agrees that for the purposes of this Agreement, such books and records
shall be deemed to be the property of SM&R and shall be subject at all
times to examination by the Securities and Exchange Commission in
accordance with Section 17(a) of the 1934 Act and SM&R shall have the right
to inspect and make copies of such books and records of accounts at any
time on demand.
8. Upon the request of SM&R, American National agrees to prepare and send
all confirmations required to be sent by SM&R in connection with crediting
purchase payments under the Contracts. Any such confirmation shall be sent
upon or before the completion of each "transaction", as that term is used
in Rule 15c1-4 of the 1934 Act, and shall reflect the facts of the
transaction and indicate that the confirmation is forwarded on behalf of
SM&R in its capacity of Distributor of Contracts.
9. Subsequent to having been authorized to commence with the offering
contemplated herein, SM&R will utilize the currently effective Prospectus
relating to the subject Contracts in connection with its selling efforts.
As to the other types of sales material, SM&R agrees that it will use only
sales materials which conform to the requirements of federal and state laws
and regulations, and which have been filed where necessary with the
appropriate regulatory authorities, including the National Association of
Securities Dealers.
10. SM&R will not use any Prospectus, sales literature, or any other
printed matter or material in the offer or sale of any Contract if, to the
knowledge of SM&R, any of the foregoing misstates the duties, obligations
4
<PAGE>
or liabilities of American National, the Separate Account or SM&R.
11. SM&R shall not be entitled to any remuneration for its services as
distributor. However, in payment for the administrative, processing and
clerical services provided by SM&R, American National shall pay SM&R a
processing fee of $50 for each Contract application submitted by SM&R and
accepted by American National. In addition, upon presentation of proper
evidence of expenditures, American National will reimburse SM&R for all of
SM&R's reasonable charges and expenses directly incurred in connection with
the performance of its duties and obligations contained in this Agreement.
12. SM&R makes no representation or warranties regarding the number of
Contracts to be sold or the amount to be paid thereunder. SM&R does,
however, represent that it will actively market such Contracts on a
continuous basis while there is an effective registration thereof with the
Commission.
13. SM&R may render similar services or act as a distributor or dealer for
issuers other than the Separate Account or sponsors other than American
National in the offering of their Contracts.
14. The Contracts shall be offered for sale on the terms described in the
currently effective Prospectus describing such Contracts.
15. American National will use its best efforts to register for sale, from
time to time if necessary, additional dollar amounts of the Contracts under
the Securities Act of 1933 and should it ever be required, under state Blue
Sky Laws and to file for approval under state insurance laws when
necessary. American National may require SM&R to assist it in obtaining
any necessary clearance or approval of prospectuses, sales literature and
proxy materials in accordance with the requirements of the Commission, the
NASD or other regulatory bodies.
16. American National reserves the right at any time to suspend or limit
the public offering of the subject Contracts upon one day's written notice
to SM&R.
17. American National agrees to advise SM&R immediately:
(a) of any request by the Commission (i) for amendment of the
Securities Act Registration Statement relating to the Contracts, or
(ii) for additional information;
(b) of issuance by the Commission of any stop order suspending the
effectiveness of its Registration Statement or the initiation of any
proceedings for that purpose; and
(c) of the happening of any material event, if known, which makes
untrue any statement made in its Registration Statement or which
requires the making of a change therein in order to make any statement
made therein not misleading.
18. American National will furnish to SM&R such information with respect to
the Separate Account and the Contracts in such form and signed by such of
its officers as SM&R may reasonably request; and will warrant that the
statements therein contained when so signed will be true and correct.
19. Each of the undersigned parties agrees to notify the other in writing
upon being apprised of the institution of any proceeding investigation or
hearing involving the offer or sale of the subject Contracts.
5
<PAGE>
20. Absent the prior written consent of American National, this Agreement
will terminate automatically upon its assignment.
21. This Agreement shall terminate without payment of any penalty by either
party:
(a) at the option of American National or of SM&R upon sixty (60)
days' advance written notice to the other; or
(b) at the option of American National upon institution of formal
proceedings against SM&R by the National Association of Securities
Dealers or by the Commission; or
(c) at the option of American National, if SM&R or any representative
thereof at any time (i) employs any device, scheme, or artifice to
defraud; makes any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements made,
in light of the circumstances under which they were made, not
misleading; or engages in any act, practice, or course of business
which operates or would operate as a fraud or deceit upon any person;
(ii) fails to promptly account and pay over the American National
money due it according to its records; or (iii) violates the
conditions of this Agreement.
22. Each notice required by this Agreement may be given by wire or
facsimile transmission and confirmed in writing to :
Securities Management and Research, Inc.
One Moody Plaza
Galveston, Texas 77550
Attn: President
[Name of Separate Account]
One Moody Plaza
Galveston, Texas 77550
American National Insurance Company
One Moody Plaza
Galveston, Texas 77550
Attn: President
23. American National agrees to indemnify SM&R for any liability that SM&R
may incur to a Contract Owner or party-in-interest under a Contract (i)
arising out of any act or omission in the course of, or in connection with,
rendering services under this Agreement, or (ii) arising out of the
purchase, retention or surrender of a Contract; provided, however, that
American National will not indemnify SM&R for any such liability that
results from the willful misfeasance, bad faith or gross negligence of
SM&R, or from the reckless disregard, by SM&R, of its duties and
obligations arising under this Agreement.
24. This Agreement shall be subject to the laws of the State of Texas and
construed so as to interpret the Contracts as insurance products written
within the business operation of American National.
25. This Agreement covers and includes all agreements, verbal and written,
between SM&R and American National with regard to the offer and sale of the
Contracts, and supersedes and annuls any and all
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<PAGE>
agreements between the parties with regards to the distribution of the
Contracts; except that this Agreement shall not effect the operation of
previous agreements entered into between SM&R and American National
unrelated to the sale of the Contracts. This Agreement may be amended from
time to time by the mutual fund agreement and consent of the undersigned
parties; provided, that such amendment shall not affect the rights of
existing Contract Owners, and that such amendment be in writing and duly
executed.
In witness whereof, the undersigned parties have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested on the date first stated above.
AMERICAN NATIONAL INSURANCE COMPANY
_____________________________________________
By: _________________________________________
Its: ________________________________________
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
_____________________________________________
By: _________________________________________
Its: ________________________________________
SECURITIES MANAGEMENT AND RESEARCH, INC.
_____________________________________________
By: _________________________________________
Its: ________________________________________
7
<PAGE>
Exhibit 99.B6a
AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
AMERICAN NATIONAL INSURANCE COMPANY
Pursuant to the applicable provision of the Texas Business Corporation Act
and the Texas Insurance Code, American National Insurance Company adopts the
following Articles of Amendment to its Restated Articles of Incorporation:
ARTICLE ONE
The name of the corporation is AMERICAN NATIONAL INSURANCE COMPANY.
ARTICLE TWO
A new Article, to be numbered ARTICLE X of the Restated Articles of
Incorporation, was adopted by the shareholders of the corporation on April 29,
1988. The full text of the new ARTICLE X being added to the Restated Articles of
Incorporation reads as follows:
ARTICLE X
"A director of the Company shall not be personally liable to the Company or its
shareholders for monetary damages for an act or omission in the director's
capacity as a director, except for liability:
"(i) for any breach of director's duty of loyalty to the Company or its
shareholders,
"(ii) for acts or omissions not in good faith or that involves intentional
misconduct or a knowing violation of the laws,
"(iii) for any transaction from which a director received an improper
benefit, whether or not the benefit resulted from an action taken
within the scope of the director's office,
"(iv) for any act or omission for which the liability of a director
is expressly provided for by statute, or
"(v) for an act related to an unlawful stock repurchase or payment of
a dividend."
ARTICLE THREE
The number of shares of the corporation outstanding at the time of such
adoption was 28,267,340; and the number of shares entitled to vote thereon was
28,267,340.
ARTICLE FOUR
The number of shares voted for such amendment was 21,471,433; and the
number of shares voted against such amendment was 89,944.
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<PAGE>
DATED: May 27, 1988.
AMERICAN NATIONAL INSURANCE COMPANY
By: Orson C Clay
--------------------------------
Orson C. Clay
President
By: Jean N. Bell
--------------------------------
Jean N. Bell
Assistant Secretary
THE STATE OF TEXAS (S)
(S)
COUNTY OF GALVESTON (S)
I, Cheri Brown, a Notary Public, do hereby certify that on the 27th day of
May, 1988, personally appeared before me ORSON C CLAY, known to me to be the
person whose name is subscribed to the foregoing document and, being by me first
duly sworn, declared to me that he is President of the corporation and that he
executed the foregoing document in the capacity therein stated, and he declared
that the statements therein contained are true and correct.
IN WITNESS WHEREOF I have hereunto set my hand and seal of office this 27th
day of May, 1988.
Cheri Brown
-------------------------------
Notary Public in and for
The State of Texas
Cheri Brown
Printed or Typed Name of Notary
My commission expires: 2-21-89
2
<PAGE>
RESTATED ARTICLES OF INCORPORATION
(with Amendments)
OF
AMERICAN NATIONAL INSURANCE COMPANY
1. American National Insurance Company (the "Corporation") hereby restates
and amends its previously filed Restated Articles of Incorporation, restating
the entire text of its Restated Articles of Incorporation, and amending such
Restated Articles of Incorporation as set forth herein (such Restated and
amended Restated Articles of Incorporation, all prior amendments, and the
amendments effected hereby being called the "Restated Articles").
2. These Restated Articles accurately copy the Articles of Incorporation
and all amendments thereto that are in effect to date and as further amended by
these Restated Articles, and contain no other changes of a substantive nature in
any provision thereof, except for the following:
(a) Article VI of the previously filed Restated Articles of Incorporation
is hereby amended by these Restated Articles to decrease and reclassify the
authorized capital stock of the Corporation from 62,000,000 common shares
(such 62,000,000 common shares being previously classified into 50,000,000
shares of Class A Common Stock with a par value of $1 per share and
12,000,000 shares of nonvoting Class B Common Stock with a par value of $1
per share) to 50,000,000 shares of voting common stock having a par value
of $1 per share (of which at least 50% has been fully subscribed and fully
paid for), and deleting all of the previously authorized 12,000,000 shares
of nonvoting Class B Common Stock (none of which has been issued), as more
fully described in such Article VI.
(b) The amendment made by these Restated Articles has been effected in
conformity with the applicable provisions of the Texas Business Corporation
Act and the Texas Insurance Code.
3. These Restated Articles were duly adopted by the shareholders of the
Corporation at a special stockholder's meeting held on January 3, 1979.
4. The number of shares of the Corporation outstanding and entitled to vote
on these Restated Articles was 32,793,416; the number of such shares voted FOR
and the number of such shares voted AGAINST such Restated Articles was as
follows:
Percentage Percent of Total
FOR AGAINST for Adoption Outstanding Shares
--- ------- ------------ ------------------
32,793,416 -0- 100% 100%
5. The previously filed Restated Articles of Incorporation, are hereby
superseded in their entirety by the following Restated Articles:
3
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
AMERICAN NATIONAL INSURANCE COMPANY
ARTICLE I
The name of the Corporation is AMERICAN NATIONAL INSURANCE COMPANY.
ARTICLE II
The names of the initial incorporators, all of Galveston, Texas, are shown
below:
W.L. Moody, Jr.
I.H. Kempner
M.O. Kopperl
ARTICLE III
The location of the Home Office of the Corporation shall be Galveston,
Galveston County, Texas.
ARTICLE IV
The purpose for which the Corporation is formed is to transact the
following types of insurance business:
A. Life insurance business, involving the payment of money or other thing
of value, conditioned on the continuance or cessation of human life, or
involving an insurance, guaranty, contract or pledge for the payment of
endowments or annuities.
B. Accident insurance business, involving the payment of money or other
thing of value, conditioned upon the injury, disablement or death of
persons resulting from general accident or from traveling by land, air, or
water.
C. Health insurance business, involving the payment of any amount of money,
or other thing of value, conditioned upon loss by reason of disability
caused by sickness or ill health.
D. Legal services insurance, involving the issuance of legal services
contracts on individual, group, or franchise bases.
ARTICLE V
The period of duration of the Corporation is five hundred (500) years.
ARTICLE VI
The total number of shares of stock which the Corporation shall have
authority to issue is 50,000,000 shares of voting common stock with a par value
of $1 each.
ARTICLE VII
32,793,416 shares of common stock of the Corporation having full voting
rights have been fully subscribed, are fully paid for and are presently
outstanding. All of such outstanding shares are hereby designated and shall
continue to constitute shares of the voting common stock of the Corporation.
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<PAGE>
ARTICLE VIII
No holder of any of the voting common stock of the corporation, whether now
or hereafter authorized and issued, shall be entitled as a matter of right to
purchase or subscribe for (1) any unissued shares of stock of any class, or (2)
any additional shares of any class, common or preferred, authorized to be
issued, or (3) any bonds, certificates of indebtedness, debentures, or other
securities convertible into stock of the Corporation, or carrying any right to
purchase stock of any class, but any such unissued stock or such additional
authorized issue of any stock or of other securities convertible into stock, or
carrying any right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors of the Corporation to such persons, firms,
corporations or associations and upon such terms as may be deemed advisable by
such Board of Directors in the exercise of its discretion.
ARTICLE IX
At each election for Directors every holder of voting common stock entitled
to vote at such election shall have the right to vote, in person or by proxy,
the number of shares owned by him for as many persons as there are Directors to
be elected and for whose election the stockholder has a right to vote. It is
expressly prohibited for any stockholder to cumulate his votes in any election
of Directors.
DATED 1/3/79
AMERICAN NATIONAL INSURANCE COMPANY
By: Orson C Clay
--------------------------------
Orson C Clay, President
C.D. Thompson
-----------------------------------
C. D. Thompson, Secretary
THE STATE OF TEXAS X
X
COUNTY OF GALVESTON X
I, Mildred Jones, a Notary Public, do hereby certify that on this 3rd day
of January, 1979, personally appeared before me ORSON C. CLAY, who declared he
is the President of the Corporation executing the foregoing document, and being
first duly sworn, acknowledged that he had signed the foregoing document in the
capacity therein set forth, and declared that the statements therein contained
are true and correct.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this day and year
before written.
Mildred Jones
---------------------------------
Notary Public in and for
Galveston County, Texas
My Commission Expires:
November 30, 1980
5
<PAGE>
Exhibit 99.B6b
AMERICAN NATIONAL INSURANCE COMPANY
GALVESTON, TEXAS
BYLAWS
ARTICLE I
Name and Object
Section 1. The name of this corporation shall be American National Insurance
Company (the "Company"), and its object shall be to transact a life insurance
business, making contracts upon any and all conditions appertaining to or
connected with life risks. The Company shall also transact the business of
issuing accident and health insurance and credit insurance, conditioned upon the
injury, disablement, or death of the insured resulting from accident or illness,
and the business of issuing legal services contracts on an individual, group, or
franchise basis. The Company may also reinsure any risk insured by the Company
with any other solvent life, accident and health company, and it may also
reinsure the risks insured of other life, health and accident companies or
purchase and take over all or part of the risks of such companies.
ARTICLE II
Home Office
Section 1. The general Home Office of the Company shall be in the City of
Galveston, Galveston County, Texas.
ARTICLE III
Stockholders
Section 1. The Annual Meeting of the Stockholders shall be held in the City of
Galveston, Texas, or at such other place within or without the State of Texas as
may be, from time to time determined by the Board of Directors, on April 30 of
each year (provided that if April 30 is a legal holiday, then such meeting shall
be held on Friday immediately preceding such legal holiday) or on such other day
prior to April 30 as shall be determined from time to time by the Board of
Directors.
Each Stockholder shall be entitled to one vote for each share of the subscribed
Capital Stock standing in his name on the books of the Company, which vote may
be cast in person or by proxy.
A majority of the subscribed Capital Stock represented at any meeting of the
Stockholders shall constitute a quorum.
At said Annual Meeting the Stockholders shall elect fourteen (14) Directors, or
such other number of Directors not less than seven (7), nor more than fifteen
(15), as the Board of Director shall, from time to time, determined, who shall
hold their office for one year, and until their successors are elected. It
shall require a majority vote of the Capital Stock represented at such meeting
to elect a Director, and such Director need not be a citizen of Texas or a
Stockholder of the Company.
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The Chairman of the Board or President shall call special meetings of the
Stockholders whenever, in his judgment, it is necessary and shall call a special
meeting when requested to do so by a majority of the Directors, or by
Stockholders holding or representing not less than thirty-five percent (35%) of
the outstanding stock.
Notice of special meetings shall be given by the Secretary to all Stockholders,
in person, or by mailing such notice to the last known address of the
Stockholders, at least ten (10) days in advance of the date for such meeting.
ARTICLE IV
Officers
Section 1. The officers of this corporation shall consist of a Chairman of the
Board, a President, one or more Senior Executive Vice Presidents, one or more
Executive Vice Presidents, one or more Senior Vice Presidents, one or more Vice
Presidents, one or more Assistant Vice Presidents, a Secretary, one or more
Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, a
Controller, one or more Assistant Controllers, one or more Actuaries, one or
more Assistant Actuaries, a Medical Director, and General Counsel, all of whom
shall be elected by the Board of Directors. One person may hold more than one
office, except that the offices of President and Secretary may not be held by
the same person.
Section 2. The Board of Directors may from time to time create additional
offices and elect persons to fill such posts, and the Board may appoint such
committees as it may deem appropriate or necessary. The Board may delegate to
any officer or committee such duties as it may deem appropriate.
Section 3. The employment and salary of all officers shall be from month to
month.
ARTICLE V
Directors
Section 1. The Directors shall hold an Annual Meeting for the election of
officers and such other business that may come before them immediately upon the
adjournment of the Annual Stockholders' Meeting, and they shall also have four
(4) regular meetings, and the first three (3) of which shall be held on the last
Thursday of the months of February, July and October and the fourth of which
shall be held on the second or third Friday of December as the Directors shall
determine; provided that if any of such last Thursdays shall fall on a holiday
observed by the Company, then such meeting shall be held on the weekday
immediately preceding such holiday; and provided further that the Board may, at
any special or regular meeting, cancel one or more subsequent regular meetings
or it may reschedule the date of one or more subsequent regular meetings, and
the Chairman of the Board and the President, acting jointly between meetings,
may cancel or reschedule not more than two (2) successive regular meetings; but
in any event, the Secretary shall give notice to all Directors that one or more
specified regular meetings have been canceled or rescheduled for stated dates;
and such notice shall be given by the Secretary to each Director, in person, by
telephone or by mailing such notice to the last address of the Director, such
notice to be given as soon as practicable after cancellation or rescheduling of
one or more such regular meetings.
A special meeting of the Directors may be held at any time, upon call of the
Chairman of the Board, the President, or upon call of a majority of the members
of the Board of Directors. Notice of such special meeting shall be given by the
Secretary to each Director, in person, by telephone, or by mailing such notice
to the last address of the Director at least four (4) days in advance of the
date of such meeting.
2
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Quorum
Section 2. A majority of the duly elected Directors shall constitute a quorum
for the transaction of business.
Place of Meeting
Section 3. All meetings of the Directors shall be held at the office of the
Company in the City of Galveston, or at such other place designated by the Board
of Directors.
Filling of Vacancies
Section 4. Should any vacancy occur in the Directorship, the same may be filled
for the unexpired term by a majority of the remaining Directors.
Finance Committee
Section 5. The Board of Directors may appoint a Finance Committee consisting of
not less than five (5) officers or directors of the Company. The members of such
Finance Committee shall serve at the pleasure of the Board of Directors. Such
Finance Committee shall have the authority to approve and authorize for and on
the Company's behalf (1) investments and loans permitted by the Texas Insurance
Code and regulations thereunder, and (2) all purchases, sales and other
transactions of any kind including or relating to real estate or interest in
real estate. Such Finance Committee shall also be charged with the duty of
supervising all of the Company's investments and loans.
It shall require three (3) or more members of the Finance Committee to
constitute a quorum at any meeting of the Finance Committee, and its every
decision must receive a majority vote of those present, and in no case less than
three (3) affirmative votes. Such Finance Committee shall keep minutes of all of
its meetings, fully reflecting all actions taken by it, which shall be recorded
in a permanent minute book.
In the exercise of its authority and the discharge of its duty, such Finance
Committee shall have the right to appoint one or more subcommittees and to
delegate to such subcommittees authority to make minor investments and small
loans, not to exceed a predetermined dollar amount, and to act on matters not
involving material investment decisions without prior approval of the Finance
Committee.
The Finance Committee shall determine the number and appoint the membership of
each such subcommittee, and the detailed authority of each shall be fully set
forth in the resolutions creating each and amendments thereto. There shall be
included in such resolutions requirements that:
(a) at least one member of each subcommittee shall also be a member of
the Finance Committee; (b) that the presence of at least four (4)
members of each subcommittee shall be necessary to constitute a quorum
at any meeting thereof; and (c) that no affirmative action shall be
authorized without at least three (3) affirmative votes.
The Finance Committee shall carefully supervise all operations of its
subcommittees and shall periodically review all actions taken by them.
Executive Committee
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Section 6. The Board of Directors may, by resolution adopted by a majority of
the whole Board, create an Executive Committee and designate the members
thereof. All members of such Committee shall serve at the pleasure of the Board.
The Executive Committee shall have such powers and shall perform such duties as
the Board may delegate to it by resolution from time to time; provided, however
that such Committee shall have no authority with respect to matters where action
of the Board of Directors is required to be taken by the provisions of the Texas
Business Corporation Act or other applicable law.
The Executive Committee shall be organized and shall perform its functions as
directed by the Board of Directors, and minutes of all meetings of the Executive
Committee shall be kept in a book provided for such purpose. Any action taken
by the Executive Committee within the course and scope of its authority shall be
binding on the Company.
The membership of the Executive Committee may, from time to time, be increased
or decreased and the powers and duties of the Committee may, from time to time,
be changed by the Board of Directors as it may deem appropriate. The Executive
Committee may be abolished at any time by the vote of a majority of the whole
Board of Directors.
Dividends
Section 7. The Board of Directors may, from time to time, declare and order paid
out of the Company's current earnings or surplus or both, dividends, either in
cash or stock, as it may determine to be in the best interest of the Company.
ARTICLE VI
Duties of Officers
Chairman of the Board
Section 1. The Chairman of the Board shall be the Chief Executive Officer of the
Company and shall preside at all meetings of the Stockholders and Board of
Directors. He shall have general and active management responsibilities for the
business and affairs of the Company, and shall see that all orders and
resolutions of the Board are carried into effect. He shall also do such other
things, perform such other duties and have such other powers as the bylaws, the
Board of Directors or Executive Committee may from time to time prescribe.
President
Section 2. The President shall be the Chief Administrative Officer of the
Company, his activities as such subject to the direction and approval of the
Chief Executive Officer, and shall be responsible for the implementation of the
details of managing the administrative affairs of the Company. He shall also do
such other things, perform such other duties and have such other powers as the
bylaws, the Board of Directors or Executive Committee may from time to time
prescribe. The President, in the absence and/or disability of the Chairman of
the Board, shall perform the duties and exercise the powers of the Chairman of
the Board.
Senior Executive Vice Presidents
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<PAGE>
Section 3. The Senior Executive Vice Presidents shall perform such duties and
have such powers as the Board of Directors may prescribe. One of such Senior
Executive Vice Presidents shall be the Chief Marketing Officer.
Executive Vice Presidents
Section 4. The Executive Vice President shall perform such duties and have such
powers as the Board of Directors may prescribe.
Senior Vice Presidents
Section 5. Senior Vice Presidents shall perform such duties and have such powers
as the Board of Directors may prescribe.
Vice Presidents
Section 6. Vice Presidents shall perform such duties and have such powers as the
Board of Directors may prescribe.
Assistant Vice Presidents
Section 7. Assistant Vice Presidents shall perform such duties and have such
powers as the Board of Directors may prescribe.
Secretary
Section 8. The Secretary shall be custodian of all the Company's records, books
and papers and shall see that the books, reports, statements, certificates and
all other documents and reports required by law are properly executed and filed.
He shall keep such other records and reports as the Board of Directors may
prescribe, and render reports as may be called for by the Chairman of the Board
or the President. He shall have custody of the corporate seal with authority to
affix the same, attested by his signature, to all instruments requiring
execution under seal, and shall act with the Chairman of the Board and the
President in the general care and supervision of the Company's business. He
shall attend the meetings of the Stockholders, Board of Directors, and Finance
Committee, keeping a full account of their proceedings, and furnishing such
information, accounts, and papers as may be required and calling to their
attention any matter coming under his province on which their action is needed.
He shall perform such other duties and have such other powers as the Board of
Directors may prescribe.
Assistant Secretaries
Section 9. The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board of Directors, shall in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary. He, or they, as the case may be, shall perform such
other duties and have such other powers as the board of Directors may prescribe.
Treasurer
Section 10. The Treasurer shall receive, in the name of the Company, all monies
due or owing to it from any source whatever, and deposit same in the name and to
the account of the Company in authorized depositories, and he shall keep an
accurate account of all cash transactions of the Company. He shall perform such
duties and
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<PAGE>
have such powers as the Board of Directors may prescribe.
Assistant Treasurer
Section 11. The Assistant Treasurer, or if there be more than one, the Assistant
Treasurers in the order determined by the Board of Directors, shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer. He, or they, as the case may be, shall perform such
other duties and have such other powers as the Board of Directors may prescribe.
Controller
Section 12. The Controller shall act as the principal accounting officer in
charge of the general accounting books, accounting records and forms of the
Company; have general supervision of the accounting records and forms of the
Company; have general supervision of the accounting practices of all subsidiary
corporations; obtain from agents and from departments of the Company all reports
needed for recording the general operations of the Company or for supervising or
directing its accounts. He shall cause to be enforced and maintained the
classification and other accounting rules and regulations prescribed by any
regulatory body; cause to be prepared, compiled and filed such statutory
accounting reports, statements, statistics, returns, and other data as may be
required by law, prepare the Company's financial reports, and such reports as
required and submit same to the President.
He shall approve for payment all vouchers, drafts, and other accounts payable
where authorized or approved by the President or persons authorized to do so by
the President; and countersign warrants with the Treasurer or Secretary for
deposit or withdrawal of securities from custodian banks; have charge over
preparation and supervision of budgets; and supervision over the purchasing
functions of the Company, and shall perform such other duties and have such
other powers as the Board of Directors may prescribe.
Assistant Controllers
Section 13. The Assistant Controller, or if there shall be more than one, the
Assistant Controllers, in the order determined by the Board of Directors, shall,
in the absence or disability of the Controller, perform the duties and exercise
the powers of the Controller. He, or they, as the case may be, shall perform
such other duties and have such other powers as the Board of Directors may
prescribe.
Actuary
Section 14. The Actuary, or if there shall be more than one, the Actuaries in
the order determined by the Board of Directors, shall have charge of the
Actuarial Department of the Company, and all special work connected therewith.
He shall make all calculations required in transacting the insurance operations
of the Company, and perform such other duties as shall be assigned him by the
Chairman of the Board, President, or Board of Directors.
Assistant Actuaries
Section 15. The Assistant Actuary, or if there be more than one, the Assistant
Actuaries in the order determined by the Board of Directors shall, in the
absence or disability of the Actuary, perform the duties and exercise the powers
of the Actuary. He, or they, as the case may be, shall perform such other duties
and have such other powers as the Board of Directors may prescribe.
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Medical Directors
Section 16. The Medical Director shall have general supervision of the Medical
Department of the Company. He shall make recommendations of medical standards to
be adopted by the Company in the selection of risks. He shall examine, or cause
to be examined, every application for insurance and approve or reject same;
shall examine all proofs of death submitted for his opinion, and shall perform
such other duties as the President or Board of Directors may require.
General Counsel
Section 17. General Counsel, which may be a firm of attorneys, shall, subject to
the instructions of the Board of Directors, have charge and control of the legal
business and affairs of the Company; shall give legal advice pertaining to the
Company's business submitted to Counsel by any officer of the Company, by the
Chairman of the Board of Directors, or by the Chairman of the Finance Committee;
shall prepare or cause to be prepared legal documents and papers for the
Company; shall, at the request of the Chairman of the Board or the President,
attend any meeting of the Board of Directors or the Finance Committee; and shall
perform such other services as are necessary or appropriate in the discharge of
the Counsel's responsibilities with respect to the business and affairs of the
Company.
ARTICLE VII
Designation of Banks and Withdrawal of Funds
Section 1. Jointly, any two (2) of the following officers: The Chairman of the
Board, the President, a Senior Executive Vice President, an Executive Vice
President, the Secretary, or the Treasurer are authorized and directed to
designate the banks in which funds of this corporation shall be deposited, and
the Treasurer shall deposit or cause to be deposited all of its funds in the
banks so selected. Said banks shall pay out such funds on deposit only upon
drafts or checks signed and countersigned by the persons designated for such
purposes.
Section 2. Jointly, any two (2) of the following officers: the Chairman of the
Board, the President, a Senior Executive Vice President, an Executive Vice
President, the Secretary or the Treasurer are authorized and directed to
designate in writing the persons who are authorized to sign and countersign the
drafts or checks for withdrawal of the funds on deposit.
ARTICLE VIII
Fidelity Bond
Section 1. The Board of Directors shall require a Fidelity Bond, in an amount
fixed by such Board of Directors and payable to the Company, on all officers and
employees, conditioned that each will well and faithfully discharge the duties
of his office and account for all the Company's monies coming into his hands.
ARTICLE IX
Directors' Fees
Section 1. All Directors who are not full-time salaried officers shall be paid a
basic fee for each year or part of a year they serve as Directors of the
Company. Such basic fee will be set from time to time by the Board, shall be
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payable in a lump sum immediately after the election of a Director. In
addition, all Directors who are not full-time salaried officers shall be paid an
amount set by the Board from time to time for each Board meeting or Executive
Committee meeting attended, payable after each meeting. The Board shall also
set from time to time the amount any Director who is a member of the Audit
Committee and/or Compensation Committee of the Board of Directors and who is not
a full-time salaried officer shall be paid per committee meeting attended.
Section 2. All Directors who are full-time salaried officers shall be paid no
fee for attendance at any regular or special meeting of the Board of Directors.
Section 3. The necessary expenses incurred by the Directors in attending the
meetings of the Board of Directors, and also their necessary expenses when
absent from the place of their residence in the discharge of the official duty
of the Company's business shall be paid by the Company.
ARTICLE X
Capital Stock
Section 1. The amount, classes and par value of the stock of this Company shall
be as stated in the Company's Restated Articles of Incorporation, as such
articles may be amended and restated from time to time.
Certificate of Shares
Section 2. Each Stockholder shall be entitled to a certificate or certificates
for the number of shares of Capital Stock held by him and fully paid for, signed
with the facsimile signature of the Chairman of the Board or the President and
the Secretary, attested with the facsimile seal of the Company.
All transfer of stock, before effective, shall be made upon the proper books of
the Company, by the written order or request of the Stockholders, and the Board
of Directors may require that the certificate of stock be returned and canceled
before a new certificate is issued in name of the person to whom the transfer is
to be made.
ARTICLE XI
Corporate Seal
Section 1. The seal of the Company shall be as follows:
ARTICLE XII
Amendments
Section 1. The Bylaws may be amended, altered or repealed and additional Bylaws
enacted at any Annual Meeting of the stockholders or any regular meeting of the
Board of Directors, or at any special or rescheduled meeting of either, if in
the notice for such special or rescheduled meeting there is incorporated notice
of the proposed action.
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ARTICLE XIII
Indemnification of Officers, Directors,
Employees and Agents
Section 1. (a) The Corporation shall indemnify any person who serves or has
served as a director or officer of the Corporation, or who at the Corporation's
request serves or has served as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary (herein
collectively called "director or officer") of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise (herein collectively called "business
enterprise"), and the respective heirs, administrators, successors and assigns
of any such director or officer against any and all expenses, including
attorneys' fees, judgments, penalties (including excise or similar taxes),
fines, costs and amounts paid in settlement (before or after suit is commenced)
actually and necessarily incurred by any such person in connection with the
defense, settlement or investigation of any actual or threatened claim, action,
suit or proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, asserted against such person or at which such person is made a
party by reason of being or having been a director or officer of the Corporation
or such other business enterprise; provided that:
(1) The Corporation shall not indemnify any such person (or his heirs,
administrators, successors or assigns) for obligations resulting from a
proceeding (i) in which the person is found liable on the basis that
personal benefit was improperly received by him, whether or not the benefit
resulted from an action taken in the person's official capacity, or (ii) in
which the person is found liable to the Corporation, unless and only to the
extent indemnification is permitted by the Court;
(2) In the case of settlement (before or after suit is commenced) of any
actual or threatened action, suit or proceeding in which any such person is
involved by reason of his having been a director or officer,
indemnification shall be provided if the Board of Directors determines, in
a manner set forth herein that such person conducted himself in good faith
and in a manner he reasonably believed: (i) in the case of conduct in his
official capacity as a director of the Corporation, that his conduct was in
the Corporation's best interest; and (ii) in all other cases that his
conduct was at least not opposed to the Corporation's best interests; and
(iii) in the case of any criminal proceeding, had no reasonable cause to
believe his conduct was unlawful;
(3) A determination of indemnification under Section 1(a)(2) of this
Article shall be made (i) by a majority vote of a quorum consisting of
directors who at the time of the vote are not named defendants or
respondents in the proceeding; (ii) if a quorum cannot be obtained by a
majority vote of a committee of the Board of Directors designated to act in
the matter by a majority vote of all directors consisting solely of two or
more directors who at the time of the vote are not named defendants or
respondents in the proceeding; (iii) by special legal counsel selected by
the Board of Directors or a committee of the Board by vote as set forth in
Subparagraph (i) or (ii) of this Section 1(a)(3), or, if such quorum cannot
be obtained and such a committee cannot be established, by a majority vote
of all directors; or (iv) by the shareholders in a vote that excludes the
shares held by directors who are named defendants or respondents in the
proceeding.
(b) Reasonable expenses, including attorney's fees, incurred by a director or
officer who was, is, or is threatened to be made a named defendant or respondent
in a proceeding may be paid or reimbursed by the Corporation in advance of the
final disposition or the proceeding after:
(1) The Corporation received a written affirmation by the director or
officer of his good faith belief that he has met the standard of conduct
necessary for indemnification under this Article and a written undertaking
by or on behalf of the director or officer to repay the amount paid or
reimbursed if it is
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ultimately determined that he has not met those requirements; and
(2) A determination that the facts then known to those making the
determination would not preclude indemnification under this Article.
(c) The written undertaking required by Section 1(b)(1) of this Article must be
an unlimited general obligation of the director or officer, but need not be
secured. It may be accepted without financial ability to make payment.
Determinations and authorization of payments under Section 1(b) must be made in
the manner specified by Section 1(a)(3) of this Article for determining that
indemnification is possible.
(d) The Corporation shall indemnify a director or officer against reasonable
expenses, including costs and attorney's fees, incurred by him in connection
with an action, suit, or proceeding in which he is a party because he is a
director or officer if he has been wholly successful on the merits or otherwise,
in the defense of the action, suit, or proceeding.
(e) The indemnification provided for in this Article is not exclusive of any
other rights to which persons covered by this Article may be entitled under any
bylaw, agreement, vote of shareholders or disinterested directors or otherwise.
The right to indemnification provided under this Article shall inure to the
benefit of the heirs, executors or administrators of any person covered by this
Article.
(f) The Board of Directors shall have the power to abide by resolution for the
indemnification of individual employees or agents who face exceptional risks of
liability because of the nature of their jobs.
(g) Any indemnification of or advance of expenses to a director in accordance
with this Article shall be reported in writing to the shareholders with or
before the notice or waiver of notice of the next stockholders' meeting or with
or before the next submission to stockholders of a consent to action without a
meeting pursuant to Section A, Article 9.10, of the Texas Business Corporation
Act and in any case, within the 12-month period immediately following the date
of the indemnification or advance.
Section 2. The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation or who is or was serving at the request of the
Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, other
enterprise, or employee benefit plan, against any liability asserted against him
and incurred by him in such a capacity or arising out of his status as such a
person, whether or not the Corporation would have the power to indemnify him
against that liability under this Article.
Section 3. This Article XIII is intended to provide the fullest indemnification
possible under the law in consistent with the provisions of this Article. If any
provision of this Article or the application of this Article to any person or
circumstance shall be found to be invalid or unenforceable, the remainder of
this Article or the application of this Article to any person or circumstance
which is not invalid or unenforceable shall not be affected and each provision
of this Article shall be valid and enforced to the full extent permitted by law.
ARTICLE XIV
General Auditor
Section 1. The General Auditor shall assist members of Management in achieving
the most efficient and effective
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discharge of their responsibilities by furnishing them with independent and
objective analyses, appraisals, and pertinent comments in order to provide a
basis for appropriate corrective action for the Company and its affiliates,
including the recommendation of changes for the improvement of various phases of
their operations. He shall be responsible for reviewing and appraising the
soundness, adequacy, and application of accounting, financial and operating
controls; ascertaining the extent of compliance with established policies,
plans, and procedures; the extent to which Company and affiliate assets are
accounted for and safeguarded from losses of all kinds; ascertaining the
reliability of accounting, financial, and operating data developed within the
Company and its affiliates; appraising the quality of performance in carrying
out assigned responsibilities. He shall report to the Board of Directors through
the President, and shall perform such other duties as the Board of Directors may
prescribe.
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Exhibit 99.B8a
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT, entered into on this ___ day of __________, 19___,
among AMERICAN NATIONAL INSURANCE COMPANY ("Company"), a life insurance company
organized under the laws of the State of Texas, on behalf of itself and AMERICAN
NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT ("Separate Account"), a separate
account established by the Company in accordance with the laws of the State of
Texas, AMERICAN NATIONAL INVESTMENT ACCOUNTS, INC. ("Fund"), an open-end
management investment company organized under the laws of the State of Maryland,
and SECURITIES MANAGEMENT AND RESEARCH, INC. ("Distributor"), a Florida
corporation.
W I T N E S S E T H:
WHEREAS, the Separate Account has been established by the Company
pursuant to the Texas Insurance Code in connection with certain variable
contracts ("Contracts") issued to the public by the Company; and
WHEREAS, the Separate Account is registered as a unit investment trust
under the Investment Company Act of 1940;
WHEREAS, the income, gains and losses, whether or not realized, from
assets allocated to the Separate Account are, in accordance with the applicable
Contracts, to be credited to or charged against such Separate Account without
regard to other income, gains or losses of the Company; and
WHEREAS, the Separate Account is subdivided into various Subaccounts
under which income, gains and losses, whether or not realized, form assets
allocated to each such Subaccount are, in accordance with the applicable
Contracts, to be credited to or charged against such Subaccounts without regard
to other income, gains or losses of other Subaccounts or of the Company; and
WHEREAS, the Fund is registered as an open-end diversified management
investment company under the Investment Company Act of 1940; and
WHEREAS, the Fund is divided into various series ("Portfolios"), each
Portfolio having a different investment objective and being subject to separate
investment policies and restrictions which may not be changed without the
majority vote of shareowners of such Portfolio; and
WHEREAS, the Fund agrees to make its shares available to serve as
underlying investment media for the Separate Account, with shares of each
Portfolio of the Fund to serve as the underlying investment medium for each of
the various Subaccounts in the Separate Account; and
WHEREAS, Distributor, the principal underwriter for the Contracts to
be funded in the Separate Account, is a broker-dealer registered as such under
the Securities Exchange Act of 1934;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and conditions set forth herein and for other good and valuable
consideration, the Company, the Separate Account, the Fund and the Distributor
hereby agree as follows:
1. The Contracts funded through the Separate Account will provide
for the allocation of net amounts among the various Subaccounts of the
Separate Account for investment in the shares of the
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Portfolios of the Fund underlying each Subaccount. The selection of the
particular Subaccount is to be made by the Contract Owner and such
selection may be changed in accordance with the terms of the Contracts.
2. No representation is made as to the number or amount of such
Contracts to be sold. The Company and the Distributor will make reasonable
efforts to market such Contracts and will comply with all applicable
federal or state laws in connection therewith.
3. Fund shares to be made available to each Subaccount of the
Separate Account shall be sold by each of the respective Portfolio of the
Fund and purchased by the Company for the corresponding Subaccount at the
net asset value (without the imposition of a sales load) next computed
after receipt of each order, as established in accordance with the
provisions of the then current prospectus of the Fund. Shares of a
particular Portfolio shall be ordered in such quantities and at such times
as determined by the Company to be necessary to meet the requirements of
those Contracts issued by the Company in that Subaccount of the Separate
Account for which the Portfolio shares serve as the underlying investment
medium. Orders or payments for shares purchases will be sent promptly to
the Fund and will be made payable in the manner established from time to
time by the Fund for the receipt of such payments. The Fund reserves the
right to delay transfer of its shares until the payment check has cleared.
The Fund has the obligation to insure that its shares are registered at all
times.
4. Transfer of the Fund's shares will be by book entry only. No
stock certificate will be issued to the Separate Account. Shares ordered
from a particular Portfolio of the Fund will be recorded in an appropriate
title for the corresponding Subaccount of the Separate Account by the
Company.
5. The Fund shall furnish notice promptly to the Company of any
dividend or distribution payable on its shares. All such dividends and
distributions as are payable on each Portfolio's shares in the title for
the corresponding Subaccount of the Separate Account shall be automatically
reinvested in additional shares of that Portfolio. The Fund shall notify
the Company of the number of shares so issued.
6. All expenses incident to the performance by the Fund under
this Agreement shall be paid by the Fund. The Fund shall ensure that all
its shares are registered and authorized for issue in accordance with
applicable federal and state laws prior to their purchase for the Separate
Account. The Company shall bear none of the expenses for the cost of
registration of the Fund's shares, preparation of the Fund's prospectuses,
proxy materials and reports, the preparation of all statements and notices
required by any federal or state law, or taxes on the issue or transfer of
the Fund's shares subject to this Agreement.
7. The Company and the Distributor shall make no representations
concerning the Fund's shares except those contained in the then current
prospectus of the Fund and in printed information subsequently issued on
behalf of the Fund as supplemental to such prospectus.
8. This Agreement shall terminate:
(a) at the option of the Company or of the Fund upon sixty
(60) days' advance written notice to all other parties to this
Agreement;
(b) at the option of the Company if any of the Fund's shares
are not reasonably available to meet the requirements of the Contracts
as determined by the Company. Prompt notice of election to terminate
shall be furnished by the Company;
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(c) at the option of the Company upon institution of formal
proceedings against the Fund by the Securities and Exchange
Commission;
(d) upon requisite vote of the Contract Owners having an
interest in a particular Subaccount of the Separate Account to
substitute the shares of another investment company for the
corresponding Fund shares in accordance with the terms of the
Contracts for which those Fund shares had been selected to serve as
the underlying investment medium. The Company will give thirty (30)
days' prior written notice to the Fund of the date of any proposed
vote to replace the Fund shares;
(e) in the event the Fund's shares are not registered,
issued or sold in accordance with applicable state and/or federal law
or such law precludes the use of such shares as the underlying
investment medium of the Contracts issued or to be issued by the
Company. Prompt notice shall be given by any party to all other
parties in the event that the conditions stated in this subsection (e)
or in any subsection of this Section 8. should occur.
9. Each notice required by this agreement may be given by wire or
facsimile transmission and confirmed in writing to:
Securities Management and Research, Inc.
One Moody Plaza
Galveston, Texas 77550
ATTN: President
American National Investment Accounts, Inc.
One Moody Plaza
Galveston, Texas 77550
ATTN: President
American National Variable Annuity Separate Account
One Moody Plaza
Galveston, Texas 77550
ATTN: President
American National Insurance Company
One Moody Plaza
Galveston, Texas 77550
ATTN: President
10. This agreement shall be construed in accordance with the laws
of the State of Texas.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be duly executed and attested on the date first stated above.
AMERICAN NATIONAL INSURANCE COMPANY
--------------------------------------------
By:
-----------------------------------------
Its:
----------------------------------------
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
--------------------------------------------
By:
-----------------------------------------
Its:
----------------------------------------
AMERICAN NATIONAL INVESTMENT ACCOUNTS, INC.
--------------------------------------------
By:
-----------------------------------------
Its:
----------------------------------------
SECURITIES MANAGEMENT AND RESEARCH, INC.
--------------------------------------------
By:
-----------------------------------------
Its:
----------------------------------------
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Exhibit 99.B8b
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND II,
FIDELITY DISTRIBUTORS CORPORATION
and
AMERICAN NATIONAL INSURANCE COMPANY
THIS AGREEMENT, made and entered into this 16th day of August, 1993 by
and among AMERICAN NATIONAL INSURANCE COMPANY, (hereinafter the "Company"), a
Texas corporation, on its own behalf and on behalf of each segregated asset
account of the Company set forth on Schedule A hereto as may be amended from
time to time (each such account hereinafter referred to as the "Account"), and
the VARIABLE INSURANCE PRODUCTS FUND II, an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts (hereinafter the
"Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the "Underwriter"), a
Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life and variable annuity contracts under the 1933 Act; and
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WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to one or more variable life and annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Underwriter agrees to sell to the Company those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1., the Company
shall be the designee of the Fund for receipt of such orders from each Account
and receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such order by 10:00 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2 The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
1.4 The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
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<PAGE>
1.5 The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6 The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable life and variable annuity contracts with the form
number(s) which are listed on Schedule B attached hereto and incorporated herein
by this reference, as such Schedule B may be amended from time to time hereafter
by mutual written agreement of all the parties hereto, (the "Contracts") shall
be invested in the Fund, in such other Funds advised by the Adviser as may be
mutually agreed to in writing by the parties hereto, or in the Company's general
account, provided that such amounts may also be invested in an investment
company other than the Fund if (a) such other investment company, or series
thereof, has investment objectives or policies that are substantially different
from the investment objectives and policies of all the Portfolios of the Fund;
or (b) the Company gives the Fund and the Underwriter 45 days written notice of
its intention to make such other investment company available as a funding
vehicle for the Contracts; or (c) such other investment company was available as
a funding vehicle for the Contracts prior to the date of this Agreement and the
Company so informs the Fund and Underwriter prior to their signing this
Agreement; or (d) the Fund or Underwriter consents to the use of such other
investment company.
1.7 The company shall pay for Fund shares on the next business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8 Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10 The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally 6:30 p.m.
Boston time) and shall use its best efforts to make such net asset value per
share available by 7 p.m. Boston time.
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that the Contracts are or will
be registered under the
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1933 Act; that the Contracts will be issued and sold in compliance in all
material respects with all applicable Federal and State laws and that the sale
of the Contracts shall comply in all material respects with state insurance
suitability requirements. The Company further represents and warrants that it is
an insurance company duly organized and in good standing under applicable law
and that it has legally and validly established each Account prior to any
issuance or sale thereof as a segregated asset account under Section 3.75 of the
Texas Insurance Code and has registered or, prior to any issuance or sale of the
Contracts, will register each Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts.
2.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Texas and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3 The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4 The Company represents that the Contracts are currently treated as
endowment, annuity or life insurance contracts, under applicable provisions of
the Code and that it will make every effort to maintain such treatment and that
it will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. The Fund has adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a board of
trustees, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
2.6 The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Texas and the Fund and the Underwriter represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of Texas to the extent required to perform this Agreement.
2.7 The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Texas and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8 The Fund represents that it is lawfully organized and validly
existing under the laws of the
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Commonwealth of Massachusetts and that it does and will comply in all material
respects with the 1940 Act.
2.9 The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Texas and any applicable state and federal securities laws.
2.10 The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Fund, in an amount not less than the minimal coverage as required currently
by entities subject to the requirements of Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid Bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
ARTICLE III. Prospectuses and Proxy Statements: Voting
3.1 The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document (such printing to be at the
Company's expense).
3.2 The Fund's prospectus shall state that the statement of Additional
Information for the Fund is available from the Underwriter (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3 The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4 If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such portfolio for
which instructions have been received;
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote
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Fund shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule C attached hereto and incorporated herein by this reference, which
standards will also be provided to the other Participating Insurance Companies.
3.5 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee object to such use within fifteen business
days after receipt of such material.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee object to such use
within fifteen Business Days after receipt of such material.
4.4 The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
application for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6 The company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions,
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sales literature and other promotional materials, applications for exemptions,
requests for no action letters, and all amendments to any of the above, that
relate to the Contracts or each Account, contemporaneously with the filing of
such document with the SEC or other regulatory authorities.
4.7 For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
5.1 The Fund and Underwriter shall pay no fee or other compensation to
the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund. Currently,
no such payments are contemplated.
5.2 All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Fund's shares.
5.3 The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification
6.1 The Fund will at all times invest money from the Contracts in such
a manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will at all times comply with Section 817(h) of the
Code and Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications to such Section or Regulations.
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ARTICLE VII. Potential Conflicts
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2 The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3 If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
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7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
8.1 Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each trustee of the Board and officers and each person, if any, who controls the
Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of Section 8.1) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement or prospectus for the Contracts or contained in the Contracts or
sales literature for the Contracts (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund for use in the
Registration Statement or prospectus for the Contracts or in the Contracts
or sales literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
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<PAGE>
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the Registration Statement,
prospectus or sales literature of the Fund not supplied by the Company, or
persons under its control) or wrongful conduct of the Company or persons
under its control, with respect to the sale or distribution of the
Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus, or sales
literature of the Fund or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance upon
information furnished to the Fund by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.
8.2. Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses,
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<PAGE>
claims, damages, liabilities (including amounts paid in settlement with the
written consent of the Underwriter) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or
prospectus or sales literature of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to the Underwriter or Fund by or on behalf of the Company for use
in the Registration Statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the Registration Statement,
prospectus or sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful conduct of the Fund,
Adviser or Underwriter or persons under their control, with respect to the
sale or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus, or sales
literature covering the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or omission was made
in reliance upon information furnished to the Company by or on behalf of
the Fund; or
(iv) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement (including a
failure, whether unintentional or in good faith or otherwise, to comply
with the diversification requirements specified in Article VI of this
Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Underwriter; as limited by and in accordance with the provisions of
Section 8.2(b) and 8.2(c) hereof.
8.2(b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account whichever is applicable.
8.2(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is
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brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Underwriter will be
entitled to participate, at its own expense, in the defense thereof. The
Underwriter also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Underwriter
to such party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3 Indemnification By the Fund
8.3(a) The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement (including a
failure to comply with the diversification requirements specified in
Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
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<PAGE>
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d) The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2 This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1 This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by sixty (60) days advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the Company's determination
that shares of such Portfolio are not reasonably available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the Portfolio's
shares are not registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such shares as the
underlying investment media of the Contracts issued or to be issued by the
Company; or
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company under Subchapter M of the
Code or under any successor or similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such Portfolio fails
to meet the diversification requirements specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written notice to
the Company, if either one or both of the Fund or the Underwriter respectively,
shall determine, in their sole judgment exercised in good
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faith, that the Company and/or its affiliated companies has suffered a material
adverse change in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material adverse
publicity; or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment exercised in
good faith, that either the Fund or the Underwriter has suffered a material
adverse change in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material adverse
publicity; or
(h) termination by the Fund or the Underwriter by written notice to the
Company, if the Company gives the Fund and the Underwriter the written notice
specified in Section 1.6(b) hereof and at the time such notice was given there
was no notice of termination outstanding under any other provision of this
Agreement; provided, however any termination under this Section 10.1(h) shall
be effective forty-five (45) days after the notice specified in Section 1.6(b)
was given.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated
transactions, or (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"). Upon request, the Company will promptly
furnish to the Fund and the Underwriter the opinion of counsel for the Company
(which counsel shall be reasonably satisfactory to the Fund and the Underwriter)
to the effect that any redemption pursuant to clause (ii) above is a Legally
Required Redemption. Furthermore, except in cases where permitted under the
terms of the Contracts, the Company shall not prevent Contract Owners from
allocating payments to a Portfolio that was otherwise available under the
Contracts without first giving the Fund or the Underwriter 90 days notice of its
intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
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If to the Company:
One Moody Plaza
Galveston, Texas 77550
Attention: Sr. VP & Chief Actuary
with a copy to:
Jerry L. Adams
Greer, Herz & Adams, L.L.P.
One Moody Plaza, 18th Floor
Galveston, Texas 77550
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable life
insurance operations of the Company are being conducted in a manner consistent
with the California Variable Life Insurance Regulations and any other applicable
law or regulations.
12.7 The Fund and Underwriter agree that to the extent any advisory or
other fees received by the Fund, the Underwriter or the Adviser are determined
to be unlawful in legal or administrative proceedings under the 1973 NAIC model
variable life insurance regulation in the states of California, Colorado,
Maryland or Michigan, the Underwriter shall indemnify and reimburse the Company
for any out of pocket expenses and actual
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damages the Company has incurred as a result of any such proceeding; provided
however that the provisions of Section 8.2(b) of this and 8.2(c) shall apply to
such indemnification and reimbursement obligation. Such indemnification and
reimbursement obligation shall be in addition to any other indemnification and
reimbursement obligations of the Fund and/or the Underwriter under this
Agreement.
12.8 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.9 This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Underwriter may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement.
12.10 The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory accounting
principles) and annual report (prepared under generally accepted
accounting principles ("GAAP"), as soon as practical and in any event
within 105 days after the end of each fiscal year;
(b) the Company's quarterly statements (statutory and GAAP), as soon as
practical and in any event within 45 days after the end of each quarterly
period;
(c) any financial statement, proxy statement, notice or report of the
Company sent to stockholders and/or policyholders, as soon as practical
after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial reports
of the Company filed with the Securities and Exchange Commission or any
state insurance regulator, as soon as practical after the filing thereof;
(e) any other report submitted to the Company by independent accountants
in connection with any annual, interim or special audit made by them of the
books of the Company, as soon as practical after the receipt thereof.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Company:
AMERICAN NATIONAL INSURANCE COMPANY
By its authorized officer,
By____________________________
Title:Vice President and
Chief Actuary
Date: ________________________
Fund:
VARIABLE INSURANCE PRODUCTS FUND II
By its authorized officer,
By:___________________________
Title:Senior Vice President
Date:_________________________
Underwriter:
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
By:___________________________
Title: President
Date:_________________________
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Schedule A
Accounts
--------
Name of Account Date of Resolution of Company's
Board which Established the Account
Variable Universal Life July 30, 1987
Insurance
Variable Annuity Contracts December 20, 1991
18
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Schedule B
Contracts
1. Contract Forms:
FL89
VA93-NQ
VA93-PQ
GUA93
SPIVA93
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SCHEDULE C
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder meeting to
facilitate the establishment of tabulation procedures. At this time the
Underwriter will inform the Company of the Record, Mailing and Meeting dates.
This will be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of units
which are attributed to each contractowner/policyholder (the "Customer") as of
the Record Date. Allowance should be made for account adjustments made after
this date that could affect the status of the Customers' accounts as of the
Record Date.
Note: The number of proxy statements is determined by the activities described
in Step#2. The Company will use its best efforts to call in the number of
Customers to Fidelity, as soon as possible, but no later than two weeks after
the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy statement.
Underwriter will provide at least one copy of the last Annual Report to the
Company.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall produce
and personalize the Voting Instruction Cards. The Legal Department of the
Underwriter or its affiliate ("Fidelity Legal") must approve the Card before it
is printed. Allow approximately 2-4 business days for printing information on
the Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed and
folded notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by the
Insurance Company). Contents of envelope sent to Customers by Company will
include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
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d. "urge buckslip" - optional, but recommended. (this is a small,
single sheet of paper that requests Customers to vote as quickly as
possible and that their vote is important. One copy will be supplied
by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company as
the shareholder. (A 5-week period is recommended.) Solicitation time is
calculated as calendar days from (but not including) the meeting, counting
backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories of
all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee", then that is the exact legal name to be printed on the Card and is the
signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new Card
and return envelope. The mutilated or illegible Card is disregarded and
considered to be not received for purposes of vote tabulation. Any Cards that
have "kicked out" (e.g. mutilated, illegible) of the procedure are "hand
verified," i.e., examined as to why they did not complete the system. Any
questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the Cards
as they first arrive into categories depending upon their vote; an estimate of
how the vote is progressing may then be calculated. If the initial estimates
and the actual vote do not coincide, then an internal audit of that vote should
occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated in
terms of a percentage and the number of shares.) Fidelity Legal must review and
approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the vote
in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well
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as an original copy of the final vote. Fidelity Legal will provide a standard
form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise necessary
for legal, regulatory, or accounting purposes, Fidelity Legal will be permitted
reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
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Exhibit 99.B8c
PARTICIPATION AGREEMENT
-----------------------
Among
VARIABLE INSURANCE PRODUCTS FUND III,
------------------------------------
FIDELITY DISTRIBUTORS CORPORATION
---------------------------------
and
AMERICAN NATIONAL INSURANCE COMPANY
-----------------------------------
THIS AGREEMENT, made and entered into as of the 1st day of January, 1998 by
and among AMERICAN NATIONAL INSURANCE COMPANY, (hereinafter the "Company"), a
Texas corporation, on its own behalf and on behalf of each segregated asset
account of the Company set forth on Schedule A hereto as may be amended from
time to time (each such account hereinafter referred to as the "Account"), and
the VARIABLE INSURANCE PRODUCTS FUND III, an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts (hereinafter the
"Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the "Underwriter"), a
Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and the
Underwriter (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each representing the interest in a particular managed portfolio of
securities and other assets, any one or more of which may be made available
under this Agreement, as may be amended from time to time by mutual agreement of
the parties hereto (each such series hereinafter referred to as a "Portfolio");
and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated September 17, 1986 (File No. 812-6422), granting Participating
Insurance Companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
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WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable life
insurance and variable annuity contracts and/or variable life insurance policies
under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable annuity contracts and
variable life insurance policies; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
-------------------
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the Company
shall be the designee of the Fund for receipt of such orders from each Account
and receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such order by 10:00 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
2
<PAGE>
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio shares
offered by the then current prospectus of the Fund shall be made in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable annuity contracts and variable life insurance
policies with the form number(s) which are listed on Schedule A attached hereto
and incorporated herein by this reference, as such Schedule A may be amended
from time to time hereafter by mutual written agreement of all the parties
hereto, (the "Contracts") shall be invested in the Fund, in such other Funds
advised by the Adviser as may be mutually agreed to in writing by the parties
hereto, or in the Company's general account, provided that such amounts may also
be invested in an investment company other than the Fund if (a) such other
investment company, or series thereof, has investment objectives or policies
that are substantially different from the investment objectives and policies of
all the Portfolios of the Fund; or (b) the Company gives the Fund and the
Underwriter 45 days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c) such
other investment company was available as a funding vehicle for the Contracts
prior to the date of this Agreement and the Company so informs the Fund and
Underwriter prior to their signing this Agreement (a list of such funds
appearing on Schedule C to this Agreement); or (d) the Fund or Underwriter
consents to the use of such other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For
purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal funds
so wired, such funds shall cease to be the responsibility of the Company and
shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated (normally by 6:30 p.m. Boston time)
and shall use its best efforts to make such net asset value per share available
by 7 p.m. Boston time.
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ARTICLE II. Representations and Warranties
------------------------------
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable Federal and State laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established each
Account prior to any issuance or sale thereof as a segregated asset account
under Section 3.75 of the Texas Insurance Code and has registered or, prior to
any issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Texas and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated as
annuity or life insurance contracts, under applicable provisions of the Code and
that it will make every effort to maintain such treatment and that it will
notify the Fund and the Underwriter immediately upon having a reasonable basis
for believing that the Contracts have ceased to be so treated or that they might
not be so treated in the future.
2.5. With respect to Initial Class Shares, the Fund has adopted a "no fee"
or "defensive" Rule 12b-1 Plan under which it makes no payments for distribution
expenses. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, the Fund undertakes to have a board of trustees, a
majority of whom are not interested persons of the Fund, formulate and approve
any plan under Rule 12b-1 to finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Texas and the Fund and the Underwriter represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of Texas to the extent required to perform this Agreement.
2.7. The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Texas and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
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2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and shall
remain duly registered in all material respects under all applicable federal and
state securities laws and that the Adviser shall perform its obligations for the
Fund in compliance in all material respects with the laws of the State of Texas
and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. The Company agrees
to make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
-----------------------------------------
3.1. The Underwriter shall provide the Company with as many printed copies
of the Fund's current prospectus and Statement of Additional Information as the
Company may reasonably request. If requested by the Company in lieu thereof,
the Fund shall provide camera-ready film containing the Fund's prospectus and
Statement of Additional Information, and such other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
prospectus and/or Statement of Additional Information for the Fund is amended
during the year) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document, and to have the Statement of
Additional Information for the Fund and the Statement of Additional Information
for the Contracts printed together in one document. Alternatively, the Company
may print the Fund's prospectus and/or its Statement of Additional Information
in combination with other fund companies' prospectuses and statements of
additional information. Except as provided in the following three sentences,
all expenses of printing and distributing Fund prospectuses and Statements of
Additional Information shall be the expense of the Company. For prospectuses
and Statements of Additional Information provided by the Company to its existing
owners of Contracts in order to update disclosure annually as required by the
1933 Act and/or the 1940 Act, the cost of printing shall be borne by the Fund.
If the Company chooses to receive camera-ready film in lieu of receiving printed
copies of the Fund's prospectus, the Fund will reimburse the Company in an
amount equal to the product of A and B where A is the number of such
prospectuses distributed to owners of the Contracts, and B is the Fund's per
unit cost of typesetting and printing the Fund's prospectus. The same
procedures shall be followed with respect to the Fund's Statement of Additional
Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or
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Statements of Additional Information other than those actually distributed to
existing owners of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter or the Company (or in
the Fund's discretion, the Prospectus shall state that such Statement is
available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications (except
for prospectuses and Statements of Additional Information, which are covered in
Section 3.1) to shareholders in such quantity as the Company shall reasonably
require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule B attached hereto and incorporated herein by this reference, which
standards will also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company
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and/or its separate account(s), is named at least fifteen Business Days prior to
its use. No such material shall be used if the Company or its designee
reasonably objects to such use within fifteen Business Days after receipt of
such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
-----------------
5.1. To the extent that the Fund or any Portfolio has adopted and
implemented a plan pursuant to Rule 12b-1 to finance distribution expenses, the
Underwriter may make payments to the Company or to the underwriter with respect
to the Contracts if and in amounts agreed to by the Underwriter in writing and
such payments will be made out of existing fees otherwise payable to the
Underwriter, past profits of the Underwriter or other resources available to the
Underwriter. No such payments shall be made directly by the Fund.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and
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reports, setting the prospectus in type, setting in type and printing the proxy
materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all statements
and notices required by any federal or state law, and all taxes on the issuance
or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. Diversification
---------------
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
-------------------
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of
8
<PAGE>
making such a change; and (2), establishing a new registered management
investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By The Company
------------------------------
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each trustee of the
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<PAGE>
Board and officers and each person, if any, who controls the Fund within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
for purposes of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or litigation (including legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on behalf of
the Fund for use in the Registration Statement or prospectus for the
Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the Registration Statement, prospectus or sales literature of the Fund
not supplied by the Company, or persons under its control) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment thereof or
supplement thereto or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission was
made in reliance upon information furnished to the Fund by or on behalf
of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified
Party as such may arise from such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
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<PAGE>
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Company in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any designated
agent), but failure to notify the Company of any such claim shall not
relieve the Company from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Company shall be entitled
to participate, at its own expense, in the defense of such action. The
Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice
from the Company to such party of the Company's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses
of any additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against
them in connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.
8.2. Indemnification by the Underwriter
----------------------------------
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus or sales literature of the
Fund (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Underwriter
or Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or Underwriter
or persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
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<PAGE>
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made
in reliance upon information furnished to the Company by or on
behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter; as limited by and
in accordance with the provisions of Sections 8.2(b) and 8.2(c)
hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at
12
<PAGE>
common law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the diversification
requirements specified in Article VI of this Agreement);or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
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<PAGE>
ARTICLE X. Termination
-----------
10.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by sixty (60) days advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund may
fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements specified
in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole judgment
exercised in good faith, that the Company and/or its affiliated
companies has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Underwriter
has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice to
the Company, if the Company gives the Fund and the Underwriter the
written notice specified in Section 1.6(b) hereof and at the time
such notice was given there was no notice of termination
outstanding under any other provision of this Agreement; provided,
however any termination under this Section 10.1(h) shall be
effective forty five (45) days after the notice specified in
Section 1.6(b) was given.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement
14
<PAGE>
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.2 shall not apply to any
terminations under Article VII and the effect of such Article VII terminations
shall be governed by Article VII of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act.
Upon request, the Company will promptly furnish to the Fund and the Underwriter
the opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
ARTICLE XI.Notices
-------
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
One Moody Plaza
Galveston, TX 77550
Attention: Sr. VP & Chief Actuary
with a copy to:
Jerry L. Adams
Greer, Herz & Adams, L.L.P.
One Moody Plaza
Galveston, TX 77550
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
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<PAGE>
ARTICLE XII. Miscellaneous
-------------
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
The Company shall promptly notify the Fund and the Underwriter of any change in
control of the Company.
12.9. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under
statutory accounting principles) and annual report (prepared
under generally accepted accounting principles ("GAAP"), if
any), as soon as practical and in any event within 90 days
after the end of each fiscal year;
(b) the Company's quarterly statements (statutory) (and
GAAP, if any), as soon as practical and in any event within 45
days after the end of each quarterly period:
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(c) any financial statement, proxy statement, notice or
report of the Company sent to stockholders and/or
policyholders, as soon as practical after the delivery thereof
to stockholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the Securities and
Exchange Commission or any state insurance regulator, as soon
as practical after the filing thereof;
(e) any other report submitted to the Company by
independent accountants in connection with any annual, interim
or special audit made by them of the books of the Company, as
soon as practical after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
AMERICAN NATIONAL LIFE INSURANCE COMPANY
By: _________________________
Name: _________________________
Title: _________________________
VARIABLE INSURANCE PRODUCTS FUND III
By: ________________________
Robert C. Pozen
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: _______________________
Kevin J. Kelly
Vice President
17
<PAGE>
Schedule A
----------
Separate Accounts and Associated Contracts
------------------------------------------
Name of Separate Account and Policy Form Numbers of Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
American National Variable Life FPVA-NQ
Separate Account established FPVA-PQ
July 30, 1987 VA95-NQ
VA95-PQ
FL89
GUA95
SPIVA94
18
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of units
which are attributed to each contractowner/policyholder (the "Customer") as
of the Record Date. Allowance should be made for account adjustments made
after this date that could affect the status of the Customers' accounts as
of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by the
Company either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide the last Annual Report to the Company
pursuant to the terms of Section 3.3 of the Agreement to which this Schedule
relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the Card
before it is printed. Allow approximately 2-4 business days for printing
information on the Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by the
Insurance Company). Contents of envelope sent to Customers by Company will
include:
a. Voting Instruction Card(s)
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b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation
time is calculated as calendar days from (but not including) the
meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be not received for purposes of vote tabulation. Any
Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of shares.) Fidelity Legal must
review and approve tabulation format.
20
<PAGE>
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be required
from the Company as well as an original copy of the final vote. Fidelity
Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal will
be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
21
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SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company.
American National Investment Accounts, Inc.
Variable Insurance Products Fund
Variable Insurance Products Fund II
MFS Variable Insurance Products Trust
T. Rowe Price International Series, Inc.
T. Rowe Price Equity Series, Inc.
T. Rowe Price Fixed Income Series, Inc.
Van Eck Worldwide Insurance Trust
Federated Insurance Series
Lazard Retirement Series, Inc.
22
<PAGE>
Exhibit 99.B8d
PARTICIPATION AGREEMENT
-----------------------
Among
T. ROWE PRICE INTERNATIONAL SERIES, INC.,
T. ROWE PRICE EQUITY SERIES, INC.,
T. ROWE PRICE FIXED INCOME SERIES, INC.,
T. ROWE PRICE INVESTMENT SERVICES, INC.,
and
AMERICAN NATIONAL LIFE
THIS AGREEMENT, made and entered into as of this ________ day of
________________________, 1997 by and among American National Life (hereinafter,
the "Company"), a Texas insurance company, on its own behalf and on behalf of
each segregated asset account of the Company set forth on Schedule A hereto as
may be amended from time to time (each account hereinafter referred to as the
"Account"), and the undersigned funds, each, a corporation organized under the
laws of Maryland (hereinafter referred to as the "Fund") and T. Rowe Price
Investment Services, Inc. (hereinafter the "Underwriter"), a Maryland
corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is or will be available to act as the investment vehicle for
separate accounts established for variable life insurance and variable annuity
contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission ("SEC") granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from the
provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T) (b)(15) thereunder, to the extent necessary to permit shares of the Fund
to be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, T. Rowe Price Associates, Inc. and Rowe Price-Fleming
International, Inc. (each hereinafter referred to as the "Adviser") are each
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940, as amended, and any applicable state securities laws; and
1
<PAGE>
WHEREAS, the Company has registered or will register certain variable life
insurance or variable annuity contracts supported wholly or partially by the
Account (the "Contracts") under the 1933 Act, and said Contracts are listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid Contracts; and
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
-------------------
1.1 The Underwriter agrees to sell to the Company those shares of the
Designated Portfolios which the Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Designated Portfolios.
1.2 The Fund agrees to make shares of the Designated Portfolios available
for purchase at the applicable net asset value per share by the Company and the
Account on those days on which the Fund calculates its net asset value pursuant
to rules of the SEC, and the Fund shall use its best efforts to calculate such
net asset value on each day which the New York Stock Exchange is open for
trading. Notwithstanding the foregoing, the Board of Directors of the Fund
(hereinafter the "Board") may refuse to sell shares of any Designated Portfolio
to any person, or suspend or terminate the offering of shares of any Designated
Portfolio if such action is required by law or by regulatory authorities having
jurisdiction, or is, in the sole discretion of the Board acting in good faith
and in light of their fiduciary duties under federal and any applicable state
laws, necessary in the best interests of the shareholders of such Designated
Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Designated Portfolios will be sold to the general public. The
Fund and the Underwriter will not sell Fund shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Articles I and VII of this Agreement is in effect to govern such sales.
2
<PAGE>
1.4 The Fund agrees to redeem, on the Company's request, any full or
fractional shares of the Designated Portfolios held by the Company, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the request for redemption, except that
the Fund reserves the right to suspend the right of redemption or postpone the
date of payment or satisfaction upon redemption consistent with Section 22(e) of
the 1940 Act and any sales thereunder, and in accordance with the procedures and
policies of the Fund as described in the then current prospectus.
1.5 For purposes of Sections 1.1 and 1.4, the Company shall be the
designee of the Fund for receipt of purchase and redemption orders from the
Account, and receipt by such designee shall constitute receipt by the Fund;
provided that the Company receives the order by 4:00 p.m. Baltimore time and the
Fund receives notice of such order by 9:30 a.m. Baltimore time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the SEC.
1.6 The Company agrees to purchase and redeem the shares of each
Designated Portfolio offered by the then current prospectus of the Fund and in
accordance with the provisions of such prospectus.
1.7 The Company shall pay for Fund shares on the next Business Day after
receipt of an order to purchase Fund shares. Payment shall be in federal funds
transmitted by wire by 4:00 p.m. Baltimore time. If payment in Federal Funds
for any purchase is not received or is received by the Fund after 4:00 p.m.
Baltimore time on such Business Day, the Company shall promptly, upon the Fund's
request, reimburse the Fund for any charges, costs, fees, interest or other
expenses incurred by the Fund in connection with any advances to, or borrowings
or overdrafts by, the Fund, or any similar expenses incurred by the Fund, as a
result of portfolio transactions effected by the Fund based upon such purchase
request. For purposes of Section 2.8 and 2.9 hereof, upon receipt by the Fund
of the federal funds so wired, such funds shall cease to be the responsibility
of the Company and shall become the responsibility of the Fund.
1.8 Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account. Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account.
1.9 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or capital gain
distributions payable on the Designated Portfolios' shares. The Company hereby
elects to receive all such income, dividends, and capital gain distributions as
are payable on Designated Portfolio shares in additional shares of that
Portfolio. The Company reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Fund shall notify the Company of the number of shares so issued as payment of
such dividends and distributions. The Fund shall use its best efforts to
furnish advance notice of the day such dividends and distributions are expected
to be paid.
1.10 The Fund shall make the net asset value per share for each Designated
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Baltimore time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Baltimore time.
1.11 The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies, provided,
however, that (a) such other investment company, or series thereof, has
investment objectives or policies that are different
3
<PAGE>
from the investment objectives and policies of the Fund; or (b) the Company
gives the Fund and the Underwriter 45 days written notice of its intention to
make such other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company was available as a funding
vehicle for the Contracts prior to the date of this Agreement and the Company so
informs the Fund and Underwriter prior to their signing this Agreement; or (d)
the Fund or Underwriter consents to the use of such other investment company,
such consent not to be unreasonably withheld.
ARTICLE II. Representations and Warranties
------------------------------
2.1 The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established the Account
prior to any issuance or sale thereof as a segregated asset account under the
Texas insurance laws and has registered or, prior to any issuance or sale of the
Contracts, will register the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts.
2.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the state of Texas and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may
make such payments in the future. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund will undertake to have a
Board, a majority of whom are not interested persons of the Fund, formulate and
approve any plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses.
2.4 The Fund makes no representations as to whether any aspect of its
operations, including but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the Fund's investment policies,
fees and expenses are and shall at all times remain in compliance with the laws
of the state of Texas to the extent required to perform this Agreement.
2.5 The Fund represents that it is lawfully organized and validly existing
under the laws of the State of Maryland and that it does and will comply in all
material respects with the 1940 Act.
2.6 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Texas and any applicable state and
federal securities laws.
2.7 The Underwriter represents and warrants that the Adviser is and shall
remain duly registered under all applicable federal and state securities laws
and that the Adviser shall perform its obligations for the
4
<PAGE>
Fund in compliance in all material respects with the laws of the State of Texas
and any applicable state and federal securities laws.
2.8 The Fund and the Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other individuals or
entities dealing with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimum
coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.9 The Company represents and warrants that all of its directors,
officers, employees, and other individuals/entities employed or controlled by
the Company dealing with the money and/or securities of the Fund are covered by
a blanket fidelity bond or similar coverage in an amount not less than $5
million. The aforesaid bond includes coverage for larceny and embezzlement and
is issued by a reputable bonding company. The Company agrees that any amounts
received under such bond in connection with claims that arise from the
arrangements described in this Agreement will be held by the Company for the
benefit of the Fund. The Company agrees to make all reasonable efforts to see
that this bond or another bond containing these provisions is always in effect,
and agrees to notify the Fund and the Underwriter in the event that such
coverage no longer applies. The Company agrees to exercise its best efforts to
ensure that other individuals/entities not employed or controlled by the Company
and dealing with the money and/or securities of the Fund maintain a similar bond
or coverage in a reasonable amount.
ARTICLE III. Prospectuses, Statements of Additional Information, and Proxy
Statements; Voting
3.1 The Underwriter shall provide the Company (at the Company's expense)
with as many copies of the Fund's current prospectus (describing only the
Designated Portfolios listed on Schedule A) as the Company may reasonably
request. If requested by the Company in lieu thereof, the Fund shall provide
such documentation (including a final copy of the new prospectus as set in type
at the Fund's expense) and other assistance as is reasonably necessary in order
for the Company once each year (or more frequently if the prospectus for the
Fund is amended) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document.
3.2 The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available from the Company (or,
in the Fund's discretion, from the Fund), and the Underwriter (or the Fund), at
its expense, shall print, or otherwise reproduce, and provide a copy of such SAI
free of charge to the Company for itself and for any owner of a Contract who
requests such SAI.
3.3 The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4 The Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such Designated
Portfolio for which instructions have been received,
5
<PAGE>
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners or to the
extent otherwise required by law. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law.
3.5 Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by the Shared Funding Exemptive Order
and consistent with any reasonable standards that the Fund may adopt.
3.6 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act
in accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors or trustees and with whatever
rules the SEC may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1 The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material
that the Company develops or uses and in which the Fund (or a Portfolio thereof)
or the Adviser or the Underwriter is named, at least fifteen calendar days prior
to its use. No such material shall be used if the Fund or its designee
reasonably object to such use within fifteen calendar days after receipt of such
material. The Fund or its designee reserves the right to reasonably object to
the continued use of such material, and no such material shall be used if the
Fund or its designee so object.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus or SAI for the Fund
shares, as such registration statement and prospectus or SAI may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall cause
to be furnished, to the Company, each piece of sales literature or other
promotional material in which the Company, and/or its Account, is named at least
fifteen calendar days prior to its use. No such material shall be used if the
Company reasonably objects to such use within fifteen calendar days after
receipt of such material. The Company reserves the right to reasonably object
to the continued use of such material and no such material shall be used if the
Company so objects.
4.4. The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus, or SAI for the Contracts, as
such registration statement, prospectus or SAI may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution to Contract owners, or
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
6
<PAGE>
4.5 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, SAIs, reports, proxy statements, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Fund or its shares, contemporaneously with the filing of such
document(s) with the SEC or other regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Contracts or the Account, contemporaneously with the
filing of such document(s) with the SEC or other regulatory authorities.
4.7 For purposes of this Article IV, the phrase "sales literature and
other promotional materials" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Funds.
ARTICLE V. Fees and Expenses
-----------------
5.1 The Fund and the Underwriter shall pay no fee or other compensation to
the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing, and such payments will be made out of existing fees otherwise payable
to the Underwriter, past profits of the Underwriter, or other resources
available to the Underwriter. No such payments shall be made directly by the
Fund. Currently, no such payments are contemplated.
5.2 All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund, except as otherwise provided herein. The Fund shall
see to it that all its shares are registered and authorized for issuance in
accordance with applicable federal law and, if and to the extent deemed
advisable by the Fund, in accordance with applicable state laws prior to their
sale. The Fund shall bear the expenses for the cost of registration and
qualification of the Fund's shares, preparation and filing of the Fund's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, setting in type and printing the proxy materials and reports
to shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Fund's
shares.
5.3 The Company shall bear the expenses of printing the Fund's prospectus
(in accordance with 3.1) and of distributing the Fund's prospectus, proxy
materials, and reports to Contract owners and prospective Contract owners.
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ARTICLE VI. Diversification and Qualification
---------------------------------
6.1 Subject to the Company's maintaining the treatment of the Contracts as
life insurance, endowment, or annuity contracts under applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code") and the regulations
issued thereunder (or any successor provisions), the Fund will invest its assets
in such a manner as to ensure that the Contracts will be treated as annuity,
endowment, or life insurance contracts, whichever is appropriate, under the Code
and the regulations issued thereunder (or any successor provisions). Without
limiting the scope of the foregoing, the Fund will comply with Section 817(h) of
the Code and Treasury Regulation (S)1.817-5, and any Treasury interpretations
thereof, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts, and any amendments or other
modifications or successor provisions to such Section or Regulations. In the
event of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify the Company of such breach and (b) to adequately diversify
the Fund so as to achieve compliance within the grace period afforded by
Regulation 817.5.
6.2 The Fund represents that it is or will be qualified as a Regulated
Investment Company under Subchapter M of the Code, and that it will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provisions) and that it will notify the Company immediately upon having
a reasonable basis for believing that it has ceased to so qualify or that it
might not so qualify in the future.
6.3 Subject to the Fund's compliance with Section 817(h) of the Code and
Treasury Regulation (S)1.817-5, and any Treasury interpretations thereof,
relating to the diversification requirements for variable annuity, endowment, or
life insurance contracts, any amendments or other modifications or successor
provisions to such Sections or Regulations, the Company represents that the
Contracts are currently, and at the time of issuance shall be, treated as life
insurance, endowment contracts, or annuity insurance contracts, under applicable
provisions of the Code, and that it will make every effort to maintain such
treatment, and that it will notify the Fund and the Underwriter immediately upon
having a reasonable basis for believing the Contracts have ceased to be so
treated or that they might not be so treated in the future. The Company agrees
that any prospectus offering a contract that is a "modified endowment contract"
as that term is defined in Section 7702A of the Code (or any successor or
similar provision), shall identify such contract as a modified endowment
contract.
ARTICLE VII. Potential Conflicts.
-------------------
The following provisions apply effective upon investment in the Fund by a
separate account of a Participating Insurance Company supporting variable life
insurance contracts.
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded.
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7.3 If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
provided, however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested members of the Board. Any such withdrawal
and termination must take place within six (6) months after the Fund gives
written notice that this provision is being implemented, and until the end of
that six month period the Fund shall continue to accept and implement orders by
the Company for the purchase (and redemption) of shares of the Fund.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Fund shall continue to
accept and implement orders by the company for the purchase (and redemption) of
shares of the Fund.
7.6 For purposes of Section 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a new funding
medium for the Contract if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Fund and terminate this
Agreement within six (6) months after the Board informs the Company in writing
of the foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.7 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially
9
<PAGE>
different from those contained in the Shared Funding Exemptive Order, then (a)
the Fund and/or the Participating Insurance Companies, as appropriate, shall
take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such rules are applicable; and
(b) Sections 3.4, 3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
---------------
8.1 Indemnification By the Company
------------------------------
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and the Underwriter and each of their officers and directors and each person, if
any, who controls the Fund or the Underwriter within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration Statement,
prospectus, or statement of additional information for the Contracts or
contained in the Contracts or sales literature for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with information furnished
to the Company by or on behalf of the Fund for use in the Registration
Statement, prospectus or statement of additional information for the Contracts
or in the Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Fund shares;
or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied by the
Company or persons under its control) or wrongful conduct of the Company or
persons under its authorization or control, with respect to the sale or
distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus, or sales
literature of the Fund or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading if
such a statement or omission was made in reliance upon information furnished to
the Fund by or on behalf of the Company; or
(iv) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise, to
comply with the qualification requirements specified in Article VI of this
Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Company, as limited by and in accordance with the provisions of Sections 8.1(b)
and 8.1(c) hereof.
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<PAGE>
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of its obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action and to settle the claim at its own expense; provided,
however, that no such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulation referring to the Indemnified Parties or
their conduct. After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Company will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.
8.2 Indemnification by the Underwriter
----------------------------------
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of it directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts; and
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement or
prospectus or SAI or sales literature of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company for use in the Registration
Statement or prospectus for the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the Contracts or
Fund shares; or
11
<PAGE>
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful conduct of the Fund or
Underwriter or persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement, prospectus or sales
literature covering the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement (including
a failure, whether unintentional or in good faith or otherwise, to comply with
the diversification and other qualification requirements specified in Article VI
of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this Agreement or
arise out of or result from any other material breach of this Agreement by the
Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance or such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is
brought against the Indemnified Party, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action and to settle the claim at its own expense;
provided, however, that no such settlement shall, without the Indemnified
Parties' written consent, include any factual stipulation referring to the
Indemnified Parties or their conduct. After notice from the Underwriter to such
party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
12
<PAGE>
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3 Indemnification By the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation (including legal
and other expenses) to which the Indemnified Parties may be required to pay or
may become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, expenses, damages, liabilities or expenses (or
actions in respect thereof) or settlements, are related to the operations of the
Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement (including
a failure, whether unintentional or in good faith or otherwise, to comply with
the diversification and other qualification requirements specified in Article VI
of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or arise out
of or result from any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or the Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the expense thereof, with counsel satisfactory to the party named in the
action and to settle the claim at its own expense; provided, however, that no
such settlement shall, without the Indemnified Parties' written consent, include
any factual stipulation referring to the Indemnified Parties or their conduct.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
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<PAGE>
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with the Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
--------------
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Maryland.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, any Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
-----------
10.1 This Agreement shall continue in full force and effect until the first
to occur of:
(a) termination by any party, for any reason with respect to some or
all Designated Portfolios, by six (6) months' advance written notice delivered
to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Designated Portfolio based upon the Company's
determination that shares of the Fund are not reasonably available to meet the
requirements of the Contracts; provided that such termination shall apply only
to the Designated Portfolio not reasonably available; or
(c) termination by the Company by written notice to the Fund and the
Underwriter in the event any of the Designated Portfolio's shares are not
registered, issued or sold in accordance with applicable state and/or federal
law or such law precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company; or
(d) termination by the Fund or Underwriter in the event that formal
administrative proceedings are instituted against the Company by the NASD, the
SEC, the Insurance Commissioner or like official of any state or any other
regulatory body regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the operation of any Account, or the purchase of
the Fund shares, provided, however, that the Fund or Underwriter determines in
its sole judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of the Company
to perform its obligations under this Agreement; or
(e) termination by the Company in the event that formal administrative
proceedings are instituted against the Fund or Underwriter by the NASD, the SEC,
or any state securities or insurance department or any other regulatory body,
provided, however, that the Company determines in its sole judgment exercised in
good faith, that any such administrative proceedings will have a material
adverse effect upon the ability of the Fund or Underwriter to perform its
obligations under this Agreement; or
(f) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Designated Portfolio in the event that such
Designated Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M or fails to comply with the Section 817(h) diversification
requirements
14
<PAGE>
specified in Article VI hereof, or if the Company reasonably believes that such
Designated Portfolio may fail to so qualify or comply; or
(g) termination by the Fund or Underwriter by written notice to the
Company in the event that the Contracts fail to meet the qualifications
specified in Article VI hereof; or
(h) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the Underwriter
respectively, shall determine, in their sole judgment exercised in good faith,
that the Company has suffered a material adverse change in its business,
operations, financial condition, or prospects since the date of this Agreement
or is the subject of material adverse publicity; or
(i) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment exercised in
good faith, that the Fund or the Underwriter has suffered a material adverse
change in its business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse publicity; or
(j) termination by the Fund or the Underwriter by written notice to
the Company, if the Company gives the Fund and the Underwriter the written
notice specified in Section 1.11 hereof and at the time such notice was given
there was no notice of termination outstanding under any other provision of this
Agreement; provided, however, any termination under this Section 10.1(j) shall
be effective sixty days after the notice specified in Section 1.11 was given.
10.2 Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, the owners of the Existing Contracts may be
permitted to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not
apply to any termination under Article VII and the effect of such Article VII
termination shall be governed by Article VII of this Agreement. The parties
further agree that this Section 10.2 shall not apply to any termination under
Section 10.1(g) of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the Contracts
(as opposed to Fund shares attributable to the Company's assets held in the
Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act.
Upon request, the Company will promptly furnish to the Fund and the Underwriter
the opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
10.4 Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.
10.5 Any successor by law of the parties hereto shall be entitled to the
benefits of the indemnification provisions contained in Article VIII.
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<PAGE>
ARTICLE XI. Notices
-------
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Henry H. Hopkins, Esq.
If to the Company:
If to Underwriter:
T. Rowe Price Investment Services
100 East Pratt Street
Baltimore, Maryland 21202
Attention: John Cammack
Copy to: Henry H. Hopkins, Esq.
ARTICLE XII. Miscellaneous
-------------
12.1 All persons dealing with the Fund must look solely to the property of
such Fund, and in the case of a series company, the respective Designated
Portfolio listed on Schedule A hereto as though such Designated Portfolio had
separately contracted with the Company and the Underwriter for the enforcement
of any claims against the Fund. The parties agree that neither the Board,
officers, agents or shareholders assume any personal liability or responsibility
for obligations entered into by or on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information may come into the
public domain.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
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<PAGE>
12.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Texas Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with Texas
variable annuity laws and regulations and any other applicable law or
regulations.
12.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies, and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8 This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date specified below.
COMPANY:
AMERICAN NATIONAL LIFE
By its authorized officer
By:_______________________________________________
Title:____________________________________________
Date:_____________________________________________
FUND:
T. ROWE PRICE INTERNATIONAL SERIES, INC.
By its authorized officer
By:_______________________________________________
Title:____________________________________________
Date:_____________________________________________
FUND:
T. ROWE PRICE EQUITY SERIES, INC.
By its authorized officer
By:_______________________________________________
Title:____________________________________________
Date:_____________________________________________
FUND:
T. ROWE PRICE FIXED INCOME SERIES, INC.
By its authorized officer
By:_______________________________________________
Title:____________________________________________
Date:_____________________________________________
18
<PAGE>
UNDERWRITER:
T. ROWE PRICE INVESTMENT SERVICES, INC.
By its authorized officer
By:_______________________________________________
Title:____________________________________________
Date:_____________________________________________
19
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Name of Separate Account and Contracts Funded by
Date Established by Board of Directors Separate Account Designated Portfolios
- -------------------------------------- ------------------- ---------------------
<S> <C> <C>
T. Rowe Price International Series, Inc.
----------------------------------------
T. Rowe Price International Stock Portfolio
T. Rowe Price Equity Series, Inc.
---------------------------------
T. Rowe Price Equity Income Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price Fixed Income Series, Inc.
---------------------------------------
T. Rowe Price Limited-Term Bond Portfolio
</TABLE>
20
<PAGE>
Exhibit 99.B8e
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
[ ]
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this ___ day of __________, 19___, by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), ________________ __________Company, a __________ corporation (the
"Company) on its own behalf and on behalf of each of the segregated asset
accounts of the Company set forth in Schedule A hereto, as may be amended from
time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a
Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolution of the Board of Directors of the Company, to
set aside and invest assets attributable to the aforesaid variable annuity
and/or variable life insurance contracts that are allocated to the Accounts (the
Policies and the Accounts covered by this Agreement, and each corresponding
Portfolio covered by this Agreement in which the Accounts invest, is specified
in Schedule A attached hereto as may be modified from time to time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Investor Services, Inc. (the "Underwriter") is registered as a
broker-dealer with the
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<PAGE>
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934, as amended (hereinafter the "1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD");
WHEREAS, CIGNA Financial Advisors, Inc. the underwriter for the individual
variable annuity and the variable life policies, is registered as a broker-
dealer with the SEC under the 1934 Act and is a member in good standing of the
NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust, MFS,
and the Company agree as follows:
ARTICLE I. Sale of Trust Shares
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that Business
Day, as defined below) and which are available for purchase by such
Accounts, executing such orders on a daily basis at the net asset value
next computed after receipt by the Trust or its designee of the order for
the Shares. For purposes of this Section 1.1, the Company shall be the
designee of the Trust for receipt of such orders from Policy owners and
receipt by such designee shall constitute receipt by the Trust; provided
that the Trust receives notice of such orders by 9:30 a.m. New York time on
the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange, Inc. (the "NYSE") is open for trading and on
which the Trust calculates its net asset value pursuant to the rules of the
SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and the
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC and the Trust shall calculate such net asset
value on each day which the NYSE is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Trust (the "Board") may refuse to
sell any Shares to the Company and the Accounts, or suspend or terminate
the offering of the Shares if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of
the Board acting in good faith and in light of its fiduciary duties under
federal and any applicable state laws, necessary in the best interest of
the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to insurance
companies which have entered into participation agreements with the Trust
and MFS (the "Participating Insurance Companies") and their separate
accounts, qualified pension and retirement plans and MFS or its affiliates.
The Trust and MFS will not sell Trust shares to any insurance company or
separate account unless and agreement containing provisions substantially
the same as Articles III and VII of this Agreement is in effect to govern
such sales. The Company will not resell the Shares except to the Trust or
its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed by
Policy holders on that Business Day), executing such requests on a daily
basis at the net asset value next computed after receipt by the Trust or
its designee of the request for redemption. For purposes of this Section
1.4, the Company shall be the designee of the
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<PAGE>
Trust for receipt of requests for redemption from Policy owners and receipt
by such designee shall constitute receipt by the Trust; provided that the
Trust receives notice of such request for redemption by 9:30 a.m. New York
time on the next following Business Day.
1.5. Purchase, redemption and exchange orders placed by the Company shall
be placed separately for each Portfolio and shall not be netted among
Portfolios. However, with respect to payment of the purchase price by the
Company and of redemption proceeds by the Trust, the Company and the Trust
shall net purchase and redemption orders with respect to each Portfolio and
shall transmit one net payment for all of the Portfolios in accordance with
Section 1.6.
1.6. In the event of net purchases, the Company shall pay for the Shares by
2:00 p.m. New York time on the next Business Day after an order to purchase
the Shares is made in accordance with the provisions of Section 1.1.
hereof. In the event of net redemptions, the Trust shall pay the redemption
proceeds by 2:00 p.m. New York time on the next Business Day after an order
to redeem the shares is made in accordance with the provisions of Section
1.4. hereof. All such payments shall be in federal funds transmitted by
wire.
1.7. Issuance and transfer of the Shares will be by book entry only. Stock
certificates will not be issued to the Company or the Accounts. The Shares
ordered from the Trust will be recorded in an appropriate title for the
Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone followed
by written confirmation) to the Company of any dividends or capital gain
distributions payable on the Shares. The Company hereby elects to receive
all such dividends and distributions as are payable on a Portfolio's Shares
in additional Shares of that Portfolio. The Trust shall notify the Company
of the number of Shares so issued as payment of such dividends and
distributions.
1.9. The Trust or its custodian shall make the net asset value per share
for each Portfolio available to the Company on each Business Day as soon as
reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share available
by 6:30 p.m. New York time. In the event that the Trust is unable to meet
the 6:30 p.m. time stated herein, it shall provide additional time for the
Company to place orders for the purchase and redemption of Shares. Such
additional time shall be equal to the additional time which the Trust takes
to make the net asset value available to the Company. If the Trust provides
materially incorrect share net asset value information, the Trust shall
make an adjustment to the number of shares purchased or redeemed for the
Accounts to reflect the correct net asset value per share. Any material
error in the calculation or reporting of net asset value per share,
dividend or capital gains information shall be reported promptly upon
discovery to the Company.
ARTICLE II. Certain Representations, Warranties and Covenants
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable
state and federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940
Act. The Company further represents and warrants that it is an insurance
company duly organized and in good standing under applicable law and that
it has legally and validly established the
3
<PAGE>
Account as a segregated asset account under applicable law and has
registered or, prior to any issuance or sale of the Policies, will register
the Accounts as unit investment trusts in accordance with the provisions of
the 1940 Act (unless exempt therefrom) to serve as segregated investment
accounts for the Policies, and that it will maintain such registration for
so long as any Policies are outstanding. The Company shall amend the
registration statements under the 1933 Act for the Policies and the
registration statements under the 1940 Act for the Accounts from time to
time as required in order to effect the continuous offering of the Policies
or as may otherwise be required by applicable law. The Company shall
register and qualify the Policies for sales accordance with the securities
laws of the various states only if and to the extent deemed necessary by
the Company.
2.2. The Company represents and warrants that the Policies are currently
and at the time of issuance will be treated as life insurance, endowment or
annuity contract under applicable provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), that it will maintain such treatment and
that it will notify the Trust or MFS immediately upon having a reasonable
basis for believing that the policies have ceased to be so treated or that
they might not be so treated in the future.
2.3. The Company represents and warrants that [ ], the underwriter for the
individual variable annuity and the variable life policies, is a member in
good standing of the NASD and is a registered broker-dealer with the SEC.
The Company represents and warrants that the Company and [ ] will sell and
distribute such policies in accordance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized
for issuance and sold in compliance with the laws of The Commonwealth of
Massachusetts and all applicable federal and state securities laws and that
the Trust is and shall remain registered under the 1940 Act. The Trust
shall amend the registration statement for its Shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the
continuous offering of its Shares. The Trust shall register and qualify the
Shares for sale in accordance with the laws of the various states only if
and to the extent deemed necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Trust and MFS represent that the Trust and the Underwriter will sell and
distribute the Shares in accordance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act and any
applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it shall
perform its obligations for the Trust in compliance in all material
respects with any applicable federal securities laws and with the
securities laws of The Commonwealth of Massachusetts. MFS represents and
warrants that it is not subject to state securities laws other than the
securities laws of The Commonwealth of Massachusetts and that it is exempt
from registration as an investment adviser under the securities laws of The
Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or
4
<PAGE>
data as the Board may reasonably request so that it may carry out fully the
obligations imposed upon it by the conditions contained in the exemptive
application pursuant to which the SEC has granted exemptive relief to
permit mixed and shared funding (the "Mixed and Shared Funding Exemptive
Order").
ARTICLE III. Prospectus and Proxy Statements; Voting
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the Shares
as the Company may reasonably request for distribution to existing Policy
owners whose Policies are funded by such Shares. The Trust or its designee
shall provide the Company, at the Company's expense, with as many copies of
the current prospectus for the Shares as the Company may reasonably request
for distribution to prospective purchasers of Policies. If requested by the
Company in lieu thereof, the Trust or its designee shall provide such
documentation (including a "camera ready" copy of the new prospectus as set
in type or, at the request of the Company, as a diskette in the form sent
to the financial printer) and other assistance as is reasonably necessary
in order for the parties hereto once each year (or more frequently if the
prospectus for the Shares is supplemented or amended) to have the
prospectus for the Policies and the prospectus for the Shares printed
together in one document; the expenses of such printing to be apportioned
between (a) the Company and (b) the Trust or its designee in proportion to
the number of pages of the Policy and Shares' prospectuses, taking account
of other relevant factors affecting the expense of printing, such as
covers, columns, graphs and charts; the Trust or its designee to bear the
cost of printing the Shares' prospectus portion of such document for
distribution to owners of existing Policies funded by the Shares and the
Company to bear the expenses of printing the portion of such document
relating to the Accounts; provided, however, that the Company shall bear
all printing expenses of such combined documents where used for
distribution to prospective purchasers or to owners of existing Policies
not funded by the Shares. In the event that the Company requests that the
Trust or its designee provides the Trust's prospectus in a "camera ready"
or diskette format, the Trust shall be responsible for providing the
prospectus in the format in which it or MFS is accustomed to formatting
prospectuses and shall bear the expense of providing the prospectus in such
format (e.g., typesetting expenses), and the Company shall bear the expense
of adjusting or changing the format to conform with any of its
prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or its
designee. The Trust or its designee, at its expense, shall print and
provide such statement of additional information to the Company (or a
master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust or
its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser who
requests such statement or to an owner of a Policy not funded by the
Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's proxy
materials, reports to Shareholders and other communications to Shareholders
in such quantity as the Company shall reasonably require for distribution
to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above, or
of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but
are not limited to, the printing of the Shares' prospectus or prospectuses
for distribution to prospective purchasers or to owners of existing
Policies not funded by such Shares.
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<PAGE>
3.5. The Trust hereby notifies the Company that it may be appropriate to
include in the prospectus pursuant to which a Policy is offered disclosure
regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from
Policy owners; and
(c) vote the Shares for which no instructions have been received in
the same proportion as the Shares of such Portfolio for which
instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass through voting privileges for variable contract owners.
The Company will in no way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Policy owners. The Company reserves the right to vote shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts holding Shares calculates voting privileges
in the manner required by the Mixed and Shared Funding Exemptive Order.
The Trust and MFS will notify the Company of any changes of interpretations
or amendments to the Mixed and Shared Funding Exemptive Order.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust, MFS, any other investment adviser to the
Trust, or any affiliate of MFS are named, at least three (3) Business Days
prior to its use. No such material shall be used if the Trust, MFS, or
their respective designees reasonably objects to such use within three (3)
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any representations
or statement on behalf of the Trust, MFS, any other investment adviser to
the Trust, or any affiliate of MFS or concerning the Trust or any other
such entity in connection with the sale of the Policies other than the
information or representations contained in the registration statement,
prospectus or statement of additional information for the Shares, as such
registration statement, prospectus and statement of additional information
may be amended or supplemented from time to time, or in reports or proxy
statements for the Trust, or in sales literature or other promotional
material approved by the Trust, MFS or their respective designees, except
with the permission of the Trust, MFS or their respective designees. The
Trust, MFS or their respective designees each agrees to respond to any
request for approval on a prompt and timely basis. The Company shall adopt
and implement procedures reasonably designed to ensure that information
concerning the Trust, MFS or any of their affiliates which is intended for
use only by brokers or agents selling the Policies (i.e., information that
is not intended for distribution to Policy holders or prospective Policy
holders) is so used, and neither the Trust, MFS nor any of their affiliates
shall be liable for any losses, damages or expenses relating to the
improper use of such broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or the Accounts is
named, at least three (3) Business Days prior to its use. No such material
shall be used if the
6
<PAGE>
company or its designee reasonably objects to such use within three (3)
Business Days after receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter shall
not give, any information or make any representations on behalf of the
Company or concerning the Company, the Accounts, or the Policies in
connection with the sale of the Policies other than the information or
representations contained in a registration statement, prospectus, or
statement of additional information for the Policies, as such registration
statement, prospectus and statement of additional information may be
amended or supplemented from time to time, or in reports for the Accounts,
or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company. The
Company or its designee agrees to respond to any request for approval on a
prompt and timely basis. The parties hereto agree that this Section 4.4. is
neither intended to designate nor otherwise imply that MFS is an
underwriter or distributor of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company or
the Trust, as appropriate) will each provide to the other at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and
other promotional materials, applications for exemptions, requests for no-
action letters, and all amendments to any of the above, that relate to the
Policies, or to the Trust or its Shares, prior to or contemporaneously with
the filing of such document with the SEC or other regulatory authorities.
The Company and the Trust shall also each promptly inform the other or the
results of any examination by the SEC (or other regulatory authorities)
that relates to the Policies, the Trust or its Shares, and the party that
was the subject of the examination shall provide the other party with a
copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Portfolio, and of
any material change in the Trust's registration statement, particularly any
change resulting in change to the registration statement or prospectus or
statement of additional information for any Account. The Trust and MFS will
cooperate with the Company so as to enable the Company to solicit proxies
from Policy owners or to make changes to its prospectus, statement of
additional information or registration statement, in an orderly manner. The
Trust and MFS will make reasonable efforts to attempt to have changes
affecting Policy prospectuses become effective simultaneously with the
annual updates for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media), and sales literature (such as brochures, circulars,
reprints or excerpts or any other advertisement, sales literature, or
published articles), distributed or made generally available to customers
or the public, educational or training materials or communications
distributed or made generally available to some or all agents or employees.
ARTICLE V. Fees and Expenses
5.1. The Trust shall pay no fee or other compensation to the Company under
this Agreement, and the Company shall pay no fee or other compensation to
the Trust, except that if the Trust or any Portfolio adopts and implements
a plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution
and Shareholder servicing expenses, then, subject to obtaining any required
exemptive orders or regulatory approvals, the Trust may make payments to
the Company or to the underwriter for the Policies if and in
7
<PAGE>
amounts agreed to by the Trust in writing. Each party, however, shall, in
accordance with the allocation of expenses specified in Articles III and V
hereof, reimburse other parties for expense initially paid by one party but
allocated to another party. In addition, nothing herein shall prevent the
parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust and/or
to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal
and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration fees;
preparation and filing of the Trust's proxy materials and reports to
Shareholders; setting in type and printing its prospectus and statement of
additional information (to the extent provided by and as determined in
accordance with Article III above); setting in type and printing the proxy
materials and reports to Shareholders (to the extent provided by and as
determined in accordance with Article III above); the preparation of all
statements and notices required of the Trust by any federal or state law
with respect to its Shares; all taxes on the issuance or transfer of the
Shares; and the costs of distributing the Trust's prospectuses and proxy
materials to owners of Policies funded by the Shares and any expenses
permitted to be paid or assumed by the Trust pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act. The Trust shall not bear any expenses
of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies and
of distributing the Trust's Shareholder reports and proxy materials to
Policy owners. The Company shall bear all expenses associated with the
registration, qualification, and filing of the Policies under applicable
federal securities and state insurance laws; the cost of preparing,
printing and distributing the Policy prospectus and statement of additional
information; and the cost of preparing, printing and distributing annual
individual account statements for Policy owners as required by state
insurance laws.
ARTICLE VI. Diversification and Related Limitations
6.1. The Trust and MFS represent and warrant that they will use their best
efforts to ensure that each Portfolio of the Trust will meet the
diversification requirements of Section 817(h)(1) of the Code and Treas.
Reg. 1.817-5, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts, as they may be amended
from time to time (and any revenue rulings, revenue procedures, notices,
and other published announcements of the Internal Revenue Service
interpreting these sections).
ARTICLE VII. Potential Material Conflicts
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests of
the variable annuity contract owners and the variable life insurance policy
owners of the Company and/or affiliated companies ("contract owners")
investing in the Trust. The Board shall have the sole authority to
determine if a material irreconcilable conflict exists, and such
determination shall be binding on the Company only if approved in the form
of a resolution by a majority of the Board, or a majority of the
disinterested trustees of the Board. The Board will give prompt notice of
any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the Board
in carrying out its
8
<PAGE>
responsibilities under the conditions set forth in the Trust's exemptive
application pursuant to which the SEC has granted the Mixed and Shared
Funding Exemptive Order by providing the Board, as it may reasonably
request, with all information necessary for the Board to consider any
issues raised and agrees that it will be responsible for promptly reporting
any potential or existing conflicts of which it is aware to the Board
including, but not limited to, an obligation by the Company to inform the
Board whenever contract owner voting instructions are disregard. The
Company also agrees that, if a material irreconcilable conflict arises, it
will at is own cost remedy such conflict up to an including (a) withdrawing
the assets allocable to some or all of the Accounts from the Trust or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Trust, or
submitting to a vote of all affected contract owners whether to withdraw
assets from the Trust or any Portfolio and reinvesting such assets in a
different investment medium and, as appropriate, segregating the assets
attributable to any appropriate group of contract owners that votes in
favor of such segregation, or offering to any of the affected contract
owners the option of segregating the assets attributable to their contracts
or policies, and (b) establishing a new registered management investment
company and segregating the assets underlying the Policies, unless a
majority of Policy owners materially adversely affected by the conflict
have voted to decline the offer to establish a new registered management
investment company.
7.3. A majority of the disinterested trustees of the Board shall determine
whether any proposed action by the Company adequately remedies any material
irreconcilable conflict. In the event that the Board determines that any
proposed action does not adequately remedy any material irreconcilable
conflict, the Company will withdraw from investment in the Trust each of
the Accounts designated by the disinterested trustees and terminate this
Agreement within six (6) months after the Board informs the Company in
writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required to
remedy any such material irreconcilable conflict as determined by a
majority of the disinterested trustees of the Board.
7.4. If and to the extent that rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or
shares funding (as defined in the Mixed and Shared Funding Exemptive Order)
on terms and conditions materially different from those contained in the
Mixed Shared Funding Exemptive Order, then (a) the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with Rule 6e-2 and 6e-3(T), as amended, and Rule
6e-3, as adopted, to the extent such rules are applicable; and (b) Sections
3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall continue in
effect only to the extent that terms and conditions substantially identical
to such Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification by the Company
The Company agrees to indemnify and hold harmless the Trust, MFS, any
affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or MFS within the
meaning of Section 15 of the 1933 Act, and any agents or employees of the
foregoing (each an "Indemnified Party," or collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of the Company) or expenses (including reasonable counsel
fees) to which an Indemnified Party may become subject under any statute,
regulation, at common law or otherwise, insofar
9
<PAGE>
as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of
the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Policies or contained in the Policies or
sales literature or other promotional material for the Policies
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the commission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished to the
Company or its designee by or on behalf of the Trust or MFS for
use in the registration statement, prospectus or statement of
additional information for the Policies or in the Policies or
sales literature or other promotional material (or any amendment
or supplement) or otherwise for use in connection with the sale
of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material of
the Trust not supplied by the Company or this designee, or
persons under its control and on which the Company has reasonably
relied) or wrongful conduct of the Company or persons under its
control, with respect to the sale or distribution of the Policies
or Shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Trust, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Trust by or on behalf
of the Company; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.2. Indemnification by the Trust
The Trust agrees to indemnify and hold harmless the Company and each
of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, and any agents or
employees of the foregoing (each an "Indemnified Party," or collectively,
the "Indemnified Parties" for purposes of this Section 8.2) against any and
all losses, claims, damages,
10
<PAGE>
liabilities (including amounts paid in settlement with the written consent
of the Trust) or expenses (including reasonable counsel fees) to which any
Indemnified Party may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) or settlements are related to the sale or
acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material of
the Trust (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished to the
Trust, MFS, the Underwriter or their respective designees by or
on behalf of the Company for use in the registration statement,
prospectus or statement of additional information for the Trust
or in sales literature or other promotional material for the
Trust (or any amendment or supplement) or otherwise for use in
connection with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statement or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material for
the Policies not supplied by the Trust, MFS the Underwriter or
any of their respective designees or persons under their
respective control and on which any such entity has reasonably
relied) or wrongful conduct of the Trust or persons under its
control, with respect to the sale or distribution of the Policies
or Shares; or
(c) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) or arise
out of or result from any other material breach of this Agreement
by the Trust; or
(d) arise out of or result from the materially incorrect or untimely
calculation or reporting of the daily net asset value per share
or dividend or capital gain distribution rate; or
(e) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating Insurance
Company or any Policy holder, with respect to any losses, claims, damages,
liabilities or expenses that arise out of or result from (i) a breach of
any representation, warranty, and/or covenant made by the Company hereunder
or by any Participating Insurance Company under an agreement containing
substantially similar representations, warranties and covenants; (ii) the
failure by the Company
11
<PAGE>
or any Participating Insurance Company to maintain its segregated asset
account (which invests in any Portfolio) as a legally and validly
established segregated asset account under applicable state law and as a
duly registered unit investment trust under the provisions of the 1940 Act
(unless exempt therefrom); or (iii) the failure by the Company or any
Participating Insurance Company to maintain its variable annuity and/or
variable life insurance contracts (with respect to which any Portfolio
serves as an underlying funding vehicle) as life insurance, endowment or
annuity contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to any
losses, claims, damages, liabilities or expenses to which an Indemnified
Party would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, willful misconduct, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section 8.5.
of commencement of action, such Indemnified Party will, if a claim in
respect thereof is to be made against the indemnifying party under this
section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any Indemnified Party otherwise than under
this section. In case any such action is brought against any Indemnified
Party, and it notified the indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate therein and, to the
extent that it may wish, assume the defense thereof, with counsel
satisfactory to such Indemnified Party. After notice from the indemnifying
party of its intention to assume the defense of an action, the Indemnified
Party shall bear the expenses of any additional counsel obtained by it, and
the indemnifying party shall not be liable to such Indemnified Party under
this section for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of the
commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or 1933 Act control
persons in connection with the Agreement, the issuance or sale of the
Policies, the operation of the Accounts, or the sale or acquisition of
Shares.
8.7. A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
SEC may grant and the terms hereof shall be interpreted and construed in
accordance therewith.
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<PAGE>
ARTICLE X. Notice of Formal Proceedings
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. Termination
11.1. This Agreement shall terminate with respect to the Accounts, or one,
some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance written
notice to the other parties; or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not reasonably available to meet the requirements
of the Policies or are not "appropriate funding vehicles" for the
Policies, as reasonably determined by the Company. Without
limiting the generality of the foregoing, the Shares of a
Portfolio would not be "appropriate funding vehicles" if, for
example, such Shares did not meet the diversification or other
requirements referred to in Article VI hereof; or if the Company
would be permitted to disregard Policy owner voting instructions
pursuant to Rule 6e-2 or 6e-3(T) under the 1940 Act. Prompt
notice of the election to terminate for such cause and an
explanation of such cause shall be furnished to the Trust by the
Company; or
(c) at the option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of
the Policies, the operation of the Accounts, or the purchase of
the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body
regarding the Trust's or MFS' duties under this Agreement or
related to the sale of the shares; or
(e) at the option of the Company, the Trust or MFS upon receipt of
any necessary regulatory approvals and/or the vote of the Policy
owners having an interest in the Accounts (or any subaccounts) to
substitute the shares of another investment company for the
corresponding Portfolio Shares in accordance with the terms of
the Policies for which those Portfolio Shares had been selected
to serve as the underlying investment media. The Company will
give thirty (30) day's prior written notice to the Trust of the
Date of any proposed vote or other action taken to replace the
Shares; or
(f) termination by either the Trust or MFS by written notice to the
Company, if either one or both of the Trust or MFS respectively,
shall determine, in their sole judgment exercised in good faith,
that the Company has suffered a material adverse change in its
business, operations, financial condition, or prospects since the
date of this Agreement or is the subject of material adverse
publicity; or
(g) termination by the Company by written notice to the Trust and
MFS, if the Company shall
13
<PAGE>
determine, in its sole judgment exercised in good faith, that the
Trust or MFS has suffered a material adverse change in this
business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse
publicity; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(i) upon assignment of this Agreement, unless made with the written
consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies and,
if applicable, the Accounts as to which the Agreement is to be terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised for
cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated transactions,
or as required by state insurance laws or regulations, the Company shall
not redeem the Shares attributable to the Policies (as opposed to the
Shares attributable to the Company's assets held in the Accounts), and the
Company shall not prevent Policy owners from allocating payments to a
Portfolio that was otherwise available under the Policies, until thirty
(30) days after the Company shall have notified the Trust of its intention
to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and MFS
shall, at the option of the Company, continue to make available additional
shares of the Portfolios pursuant to the terms and conditions of this
Agreement, for all Policies in effect on the effective date of termination
of this Agreement (the "Existing Policies"), except as otherwise provided
under Article VII of this Agreement. Specifically, without limitation, the
owners of the Existing Policies shall be permitted to transfer or
reallocate investment under the Policies, redeem investments in any
Portfolio and/or invest in the Trust upon the making of additional purchase
payments under the Existing Policies.
ARTICLE XII. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust:
MFS VARIABLE INSURANCE TRUST
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, Secretary
If to the Company:
[ ]
Attn:
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<PAGE>
If to MFS:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. Miscellaneous
13.1. Subject to the requirement of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of
the owners of the Policies and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted
by this Agreement or as otherwise required by applicable law or regulation,
shall not disclose, disseminate or utilize such names and addresses and
other confidential information without the express written consent of the
affected party until such time as it may come into the public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in connection
with inquiries by appropriate governmental authorities (including without
limitation the SEC, the NASD, and state insurance regulators) relating to
this Agreement or the transactions contemplated hereby.
13.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument are
not binding upon any of the Trust's trustees, officers, employees, agents
or shareholders individually, but are binding solely upon the assets and
property of the Trust in accordance with its proportionate interest
hereunder. The Company further acknowledges that the assets and liabilities
of each Portfolio are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or
property of the Portfolio on whose behalf the Trust has executed this
instrument. The Company also agrees that the obligations of each Portfolio
hereunder shall be several and not joint, in accordance with its
proportionate interest hereunder, and the Company agrees not to proceed
against any Portfolio for the obligations of another Portfolio.
15
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
[ ]
By its authorized officer,
By: _______________________________
Title: ____________________________
Date: _____________________________
MFS VARIABLE INSURANCE TRUST, on behalf of the
Portfolios
By its authorized officer and not individually,
By: _______________________________
Title: ____________________________
Date: _____________________________
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: _______________________________
Title: ____________________________
Date: _____________________________
16
<PAGE>
As of ____________________
SCHEDULE A
Accounts, Policies and Portfolios
Subject to the Participation Agreement
<TABLE>
<CAPTION>
Name of Separate
Account and Date Policies Funded Portfolios
Established by Board of Directors by Separate Account Applicable to Policies
- ------------------------------------------ ------------------- ----------------------
<S> <C> <C>
</TABLE>
17
<PAGE>
Exhibit 99.B8f
FUND PARTICIPATION AGREEMENT
This AGREEMENT is made this __ day of ________, 199_, by and between
______________________________________________ (the "Insurer"), a life insurance
company domiciled in ________, on its behalf and on behalf of the segregated
asset accounts of the Insurer listed on Exhibit A to this Agreement (the
"Separate Accounts"); Insurance Series (the "Fund"), a Massachusetts business
trust; and Federated Securities Corp. (the "Distributor"), a Pennsylvania
corporation.
W I T N E S S E T H
WHEREAS, the Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended ("1940 Act") and the Fund is authorized to issue
separate classes of shares of beneficial interest ("shares"), each representing
an interest in a separate portfolio of assets known as a "portfolio" and each
portfolio has its own investment objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its
portfolios to separate accounts of insurance companies that fund variable
annuity contracts ("Variable Contracts") and to serve as an investment medium
for Variable Contracts offered by insurance companies that have entered into
participation agreements substantially similar to this agreement ("Participating
Insurance Companies"), and the Fund will be made available in the future to
offer shares of one or more of its portfolios to separate accounts of insurance
companies that fund variable life insurance policies (at which time such
policies would also be "Variable Contracts" hereunder), and
WHEREAS, the Fund is currently comprised of eight separate portfolios, and
other portfolios may be established in the future; and
WHEREAS, the Fund has obtained an order from the SEC dated December 29, 1993
(File No. 812-8620), granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from the
provisions of sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and Rules
6e-2(b)(15)
1
<PAGE>
and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Fund to be sold to and held by variable annuity and variable life insurance
separate accounts of life insurance companies that may or may not be affiliated
with one another (hereinafter the "Mixed and Shared Funding Exemptive Order");
and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC under
the Securities Exchange Act of 1934, as amended ("1934 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc. ("NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurer wishes to purchase shares of one or more of the Fund's
portfolios on behalf of its Separate Accounts to serve as an investment medium
for Variable Contracts funded by the Separate Accounts, and the Distributor is
authorized to sell shares of the Fund's portfolios;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises and
covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Distributor agrees to sell to the Insurer those shares of the
portfolios offered and made available by the Fund and identified on Exhibit B
("Portfolios") that the Insurer orders on behalf of its Separate Accounts, and
agrees to execute such orders on each day on which the Fund calculates its net
asset value pursuant to rules of the SEC ("business day") at the net asset value
next computed after receipt and acceptance by the Fund or its agent of the order
for the shares of the Fund.
1.2 The Fund agrees to make available on each business day shares of the
Portfolios for purchase at the applicable net asset value per share by the
Insurer on behalf of its Separate Accounts; provided, however, that the Board of
Trustees of the Fund may refuse to sell shares of any Portfolio to any person,
or suspend or terminate the offering of shares of any Portfolio, if such action
is required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Trustees, acting in good faith and in light of the
Trustees' fiduciary duties under applicable law, necessary in the best interests
of the shareholders of any Portfolio.
2
<PAGE>
1.3 The Fund and the Distributor agree that shares of the Portfolios of the
Fund will be sold only to Participating Insurance Companies, their separate
accounts, and other persons consistent with each Portfolio being adequately
diversified pursuant to Section 817(h) of the Internal Revenue Code of 1986, as
amended ("Code"), and the regulations thereunder. No shares of any Portfolio
will be sold directly to the general public to the extent not permitted by
applicable tax law.
1.4 The Fund and the Distributor will not sell shares of the Portfolios to
any insurance company or separate account unless an agreement containing
provisions substantially the same as the provisions in Article IV of this
Agreement is in effect to govern such sales.
1.5 Upon receipt of a request for redemption in proper form from the
Insurer, the Fund agrees to redeem any full or fractional shares of the
Portfolios held by the Insurer, ordinarily executing such requests on each
business day at the net asset value next computed after receipt and acceptance
by the Fund or its agent of the request for redemption, except that the Fund
reserves the right to suspend the right of redemption, consistent with Section
22(e) of the 1940 Act and any rules thereunder. Such redemption shall be paid
consistent with applicable rules of the SEC and procedures and policies of the
Fund as described in the current prospectus.
1.6 For purposes of Sections 1.2 and 1.5, the Insurer shall be the agent of
the Fund for the limited purpose of receiving and accepting purchase and
redemption orders from each Separate Account and receipt of such orders by 4:00
p.m. Eastern time by the Insurer shall be deemed to be receipt by the Fund for
purposes of Rule 22c-1 of the 1940 Act; provided that the Fund receives notice
of such orders on the next following business day prior to 4:00 p.m. Eastern
time on such day, although the Insurer will use its best efforts to provide such
notice by 9:00 a.m. Eastern time.
1.7 The Insurer agrees to purchase and redeem the shares of each Portfolio
in accordance with the provisions of the current prospectus for the Fund.
1.8 The Insurer shall pay for shares of the Portfolio on the next business
day after it places an order to purchase shares of the Portfolio. Payment shall
be in federal funds transmitted by wire.
1.9 Issuance and transfer of shares of the Portfolios will be by book entry
only unless otherwise
3
<PAGE>
agreed by the Fund. Stock certificates will not be issued to the Insurer or the
Separate Accounts unless otherwise agreed by the Fund. Shares ordered from the
Fund will be recorded in an appropriate title for the Separate Accounts or the
appropriate subaccounts of the Separate Accounts.
1.10 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Insurer of any income dividends or capital gain
distributions payable on the shares of the Portfolios. The Insurer hereby elects
to reinvest in the Portfolio all such dividends and distributions as are payable
on a Portfolio's shares and to receive such dividends and distributions in
additional shares of that Portfolio. The Insurer reserves the right to revoke
this election in writing and to receive all such dividends and distributions in
cash. The Fund shall notify the Insurer of the number of shares so issued as
payment of such dividends and distributions.
1.11 The Fund shall instruct its recordkeeping agent to advise the Insurer
on each business day of the net asset value per share for each Portfolio as soon
as reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share available by
7:00 p.m. Eastern time.
ARTICLE II. Representations and Warranties
2.1 The Insurer represents and warrants that it is an insurance company
duly organized and in good standing under applicable law and that it is taxed as
an insurance company under Subchapter L of the Code.
2.2 The Insurer represents and warrants that it has legally and validly
established each of the Separate Accounts as a segregated asset account under
the ____________________ Insurance Code, and that each of the Separate Accounts
is a validly existing segregated asset account under applicable federal and
state law.
2.3 The Insurer represents and warrants that the Variable Contracts issued
by the Insurer or interests in the Separate Accounts under such Variable
Contracts (1) are or, prior to issuance, will be registered as securities under
the Securities Act of 1933 ("1933 Act") or, alternatively, (2) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act.
4
<PAGE>
2.4 The Insurer represents and warrants that each of the Separate Accounts
(1) has been registered as a unit investment trust in accordance with the
provisions of the 1940 Act or, alternatively, (2) has not been registered in
proper reliance upon an exclusion from registration under the 1940 Act.
2.5 The Insurer represents that it believes, in good faith, that the
Variable Contracts issued by the Insurer are currently treated as annuity
contracts or life insurance policies (which may include modified endowment
contracts), whichever is appropriate, under applicable provisions of the Code.
2.6 The Fund represents and warrants that it is duly organized as a
business trust under the laws of the Commonwealth of Massachusetts, and is in
good standing under applicable law.
2.7 The Fund represents and warrants that the shares of the Portfolios are
duly authorized for issuance in accordance with applicable law and that the Fund
is registered as an open-end management investment company under the 1940 Act.
2.8 The Fund represents that it believes, in good faith, that the
Portfolios currently comply with the diversification provisions of Section
817(h) of the Code and the regulations issued thereunder relating to the
diversification requirements for variable life insurance policies and variable
annuity contracts.
2.9 The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
ARTICLE III. General Duties
3.1 The Fund shall take all such actions as are necessary to permit the
sale of the shares of each Portfolio to the Separate Accounts, including
maintaining its registration as an investment company under the 1940 Act, and
registering the shares of the Portfolios sold to the Separate Accounts under the
1933 Act for so long as required by applicable law. The Fund shall amend its
Registration Statement filed with the SEC under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of the
shares of the Portfolios. The Fund shall register and qualify the shares for
sale in accordance with the laws of the
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various states to the extent deemed necessary by the Fund or the Distributor.
3.2 The Fund shall make every effort to maintain qualification of each
Portfolio as a Regulated Investment Company under Subchapter M of the Code (or
any successor or similar provision) and shall notify the Insurer immediately
upon having a reasonable basis for believing that a Portfolio has ceased to so
qualify or that it might not so qualify in the future.
3.3 The Fund shall make every effort to enable each Portfolio to comply
with the diversification provisions of Section 817(h) of the Code and the
regulations issued thereunder relating to the diversification requirements for
variable life insurance policies and variable annuity contracts and any
prospective amendments or other modifications to Section 817 or regulations
thereunder, and shall notify the Insurer immediately upon having a reasonable
basis for believing that any Portfolio has ceased to comply.
3.4 The Insurer shall take all such actions as are necessary under
applicable federal and state law to permit the sale of the Variable Contracts
issued by the Insurer, including registering each Separate Account as an
investment company to the extent required under the 1940 Act, and registering
the Variable Contracts or interests in the Separate Accounts under the Variable
Contracts to the extent required under the 1933 Act, and obtaining all necessary
approvals to offer the Variable Contracts from state insurance commissioners.
3.5 The Insurer shall make every effort to maintain the treatment of the
Variable Contracts issued by the Insurer as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code, and
shall notify the Fund and the Distributor immediately upon having a reasonable
basis for believing that such Variable Contracts have ceased to be so treated or
that they might not be so treated in the future.
3.6 The Insurer shall offer and sell the Variable Contracts issued by the
Insurer in accordance with applicable provisions of the 1933 Act, the 1934 Act,
the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the
offering of variable life insurance policies and variable annuity contracts.
3.7 The Distributor shall sell and distribute the shares of the Portfolios
of the Fund in accordance with the applicable provisions of the 1933 Act, the
1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and state law.
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<PAGE>
3.8 During such time as the Fund engages in Mixed Funding or Shared
Funding, a majority of the Board of Trustees of the Fund shall consist of
persons who are not "interested persons" of the Fund ("disinterested Trustees"),
as defined by Section 2(a)(19) of the 1940 Act and the rules thereunder, and as
modified by any applicable orders of the SEC, except that if this provision of
this Section 3.8 is not met by reason of the death, disqualification, or bona
fide resignation of any Trustee or Trustees, then the operation of this
provision shall be suspended (a) for a period of 45 days if the vacancy or
vacancies may be filled by the Fund's Board; (b) for a period of 60 days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
3.9 The Insurer and its agents will not in any way recommend any proposal
or oppose or interfere with any proposal submitted by the Fund at a meeting of
owners of Variable Contracts or shareholders of the Fund, and will in no way
recommend, oppose, or interfere with the solicitation of proxies for Fund shares
held by Contract Owners, without the prior written consent of the Fund, which
consent may be withheld in the Fund's sole discretion.
3.10 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
ARTICLE IV. Potential Conflicts
4.1 During such time as the Fund engages in Mixed Funding or Shared
Funding, the parties hereto shall comply with the conditions in this Article IV.
4.2 The Fund's Board of Trustees shall monitor the Fund for the existence
of any material irreconcilable conflict (1) between the interests of owners of
variable annuity contracts and variable life insurance policies, and (2) between
the interests of owners of Variable Contracts ("Variable Contract Owners")
issued by different Participating Life Insurance Companies that invest in the
Fund. A material irreconcilable conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in
7
<PAGE>
applicable federal or state insurance, tax, or securities laws or regulations,
or a public ruling, private letter ruling, no-action or interpretive letter, or
any similar action by insurance, tax, or securities regulatory authorities; (c)
an administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Portfolio of the Fund are being managed;
(e) a difference in voting instructions given by variable annuity and variable
life insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of Variable Contract Owners.
4.3 The Insurer agrees that it shall report any potential or existing
conflicts of which it is aware to the Fund's Board of Trustees. The Insurer will
be responsible for assisting the Board of Trustees of the Fund in carrying out
its responsibilities under the Mixed and Shared Funding Exemptive Order, or, if
the Fund is engaged in Mixed Funding or Shared Funding in reliance on Rule 6e-2,
6e-3(T), or any other regulation under the 1940 Act, the Insurer will be
responsible for assisting the Board of Trustees of the Fund in carrying out its
responsibilities under such regulation, by providing the Board with all
information reasonably necessary for the Board to consider any issues raised.
This includes, but is not limited to, an obligation by the Insurer to inform the
Board whenever Variable Contract Owner voting instructions are disregarded. The
Insurer shall carry out its responsibility under this Section 4.3 with a view
only to the interests of the Variable Contract Owners.
4.4 The Insurer agrees that in the event that it is determined by a
majority of the Board of Trustees of the Fund or a majority of the Fund's
disinterested Trustees that a material irreconcilable conflict exists, the
Insurer shall, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees of the Board of the
Fund), take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (1) withdrawing the
assets allocable to some or all of the Separate Accounts from the Fund or any
Portfolio and reinvesting such assets in a different investment medium,
including another portfolio of the Fund, or submitting the question as to
whether such segregation should be implemented to a vote of all affected
Variable Contract Owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners or life insurance contract
owners of contracts issued by one or more Participating Insurance Companies),
that votes in favor of such segregation, or offering to the affected Variable
Contract Owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account. If a
material irreconcilable conflict arises because of the Insurer's decision to
disregard Variable Contract Owners' voting instructions and that decision
represents a minority position or would preclude a majority vote, the Insurer
shall be required, at the Fund's
8
<PAGE>
election, to withdraw the Separate Accounts' investment in the Fund, provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees, and no charge or penalty will be imposed
as a result of such withdrawal. These responsibilities shall be carried out with
a view only to the interests of the Variable Contract Owners. A majority of the
disinterested Trustees of the Fund shall determine whether or not any proposed
action adequately remedies any material irreconcilable conflict, but in no event
will the Fund or its investment adviser or the Distributor be required to
establish a new funding medium for any Variable Contract. The Insurer shall not
be required by this Section 4.4 to establish a new funding medium for any
Variable Contract if any offer to do so has been declined by vote of a majority
of Variable Contract Owners materially adversely affected by the material
irreconcilable conflict.
4.5 The Insurer, at least annually, shall submit to the Fund's Board of
Trustees such reports, materials, or data as the Board reasonably may request so
that the Trustees of the Fund may fully carry out the obligations imposed upon
the Board by the conditions contained in the application for the Mixed and
Shared Funding Exemptive Order and said reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
4.6 All reports of potential or existing conflicts received by the Fund's
Board of Trustees, and all Board action with regard to determining the existence
of a conflict, notifying Participating Insurance Companies of a conflict, and
determining whether any proposed action adequately remedies a conflict, shall be
properly recorded in the minutes of the Board of Trustees of the Fund or other
appropriate records, and such minutes or other records shall be made available
to the SEC upon request.
4.7 The Board of Trustees of the Fund shall promptly notify the Insurer in
writing of its determination of the existence of an irreconcilable material
conflict and its implications.
ARTICLE V. Prospectuses and Proxy Statements; Voting
5.1 The Insurer shall distribute such prospectuses, proxy statements and
periodic reports of the Fund to the owners of Variable Contracts issued by the
Insurer as required to be distributed to such Variable Contract Owners under
applicable federal or state law.
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<PAGE>
5.2 The Distributor shall provide the Insurer with as many copies of the
current prospectus of the Fund as the Insurer may reasonably request. If
requested by the Insurer in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type or
in camera-ready copy) and other assistance as is reasonably necessary in order
for the Insurer to either print a stand-alone document or print together in one
document the current prospectus for the Variable Contracts issued by the Insurer
and the current prospectus for the Fund, or a document combining the Fund
prospectus with prospectuses of other funds in which the Variable Contracts may
be invested. The Fund shall bear the expense of printing copies of its current
prospectus that will be distributed to existing Variable Contract Owners, and
the Insurer shall bear the expense of printing copies of the Fund's prospectus
that are used in connection with offering the Variable Contracts issued by the
Insurer.
5.3 The Fund and the Distributor shall provide, at the Fund's expense, such
copies of the Fund's current Statement of Additional Information ("SAI") as may
reasonably be requested, to the Insurer and to any owner of a Variable Contract
issued by the Insurer who requests such SAI.
5.4 The Fund, at its expense, shall provide the Insurer with copies of its
proxy materials, periodic reports to shareholders, and other communications to
shareholders in such quantity as the Insurer shall reasonably require for
purposes of distributing to owners of Variable Contracts issued by the Insurer.
The Fund, at the Insurer's expense, shall provide the Insurer with copies of its
periodic reports to shareholders and other communications to shareholders in
such quantity as the Insurer shall reasonably request for use in connection with
offering the Variable Contracts issued by the Insurer. If requested by the
Insurer in lieu thereof, the Fund shall provide such documentation (including a
final copy of the Fund's proxy materials, periodic reports to shareholders, and
other communications to shareholders, as set in type or in camera-ready copy)
and other assistance as reasonably necessary in order for the Insurer to print
such shareholder communications for distribution to owners of Variable Contracts
issued by the Insurer.
5.5 For so long as the SEC interprets the 1940 Act to require pass-through
voting by Participating Insurance Companies whose Separate Accounts are
registered as investment companies under the 1940 Act, the Insurer shall vote
shares of each Portfolio of the Fund held in a Separate Account or a subaccount
thereof, whether or not registered under the 1940 Act, at regular and special
meetings of the Fund in accordance with
10
<PAGE>
instructions timely received by the Insurer (or its designated agent) from
owners of Variable Contracts funded by such Separate Account or subaccount
thereof having a voting interest in the Portfolio. The Insurer shall vote shares
of a Portfolio of the Fund held in a Separate Account or a subaccount thereof
that are attributable to the Variable Contracts as to which no timely
instructions are received, as well as shares held in such Separate Account or
subaccount thereof that are not attributable to the Variable Contracts and owned
beneficially by the Insurer (resulting from charges against the Variable
Contracts or otherwise), in the same proportion as the votes cast by owners of
the Variable Contracts funded by that Separate Account or subaccount thereof
having a voting interest in the Portfolio from whom instructions have been
timely received. The Insurer shall vote shares of each Portfolio of the Fund
held in its general account, if any, in the same proportion as the votes cast
with respect to shares of the Portfolio held in all Separate Accounts of the
Insurer or subaccounts thereof, in the aggregate.
5.6 During such time as the Fund engages in Mixed Funding or Shared
Funding, the Fund shall disclose in its prospectus that (1) the Fund is intended
to be a funding vehicle for variable annuity and variable life insurance
contracts offered by various insurance companies, (2) material irreconcilable
conflicts possibly may arise, and (3) the Board of Trustees of the Fund will
monitor events in order to identify the existence of any material irreconcilable
conflicts and to determine what action, if any, should be taken in response to
any such conflict. The Fund hereby notifies the Insurer that prospectus
disclosure may be appropriate regarding potential risks of offering shares of
the Fund to separate accounts funding both variable annuity contracts and
variable life insurance policies and to separate accounts funding Variable
Contracts of unaffiliated life insurance companies.
ARTICLE VI. Sales Material and Information
6.1 The Insurer shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material in
which the Fund (or any Portfolio thereof) or its investment adviser or the
Distributor is named at least 15 days prior to the anticipated use of such
material, and no such sales literature or other promotional material shall be
used unless the Fund and the Distributor or the designee of either approve the
material or do not respond with comments on the material within 10 days from
receipt of the material.
6.2 The Insurer agrees that neither it nor any of its affiliates or agents
shall give any information or make any representations or statements on behalf
of the Fund or concerning the Fund other than the information
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<PAGE>
or representations contained in the Registration Statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee and by the Distributor or its designee, except with the permission of
the Fund or its designee and the Distributor or its designee.
6.3 The Fund or the Distributor or the designee of either shall furnish to
the Insurer or its designee, each piece of sales literature or other promotional
material in which the Insurer or its Separate Accounts are named at least 15
days prior to the anticipated use of such material, and no such material shall
be used unless the Insurer or its designee approves the material or does not
respond with comments on the material within 10 days from receipt of the
material.
6.4 The Fund and the Distributor agree that each and the affiliates and
agents of each shall not give any information or make any representations on
behalf of the Insurer or concerning the Insurer, the Separate Accounts, or the
Variable Contracts issued by the Insurer, other than the information or
representations contained in a registration statement or prospectus for such
Variable Contracts, as such registration statement and prospectus may be amended
or supplemented from time to time, or in reports for the Separate Accounts or
prepared for distribution to owners of such Variable Contracts, or in sales
literature or other promotional material approved by the Insurer or its
designee, except with the permission of the Insurer.
6.5 The Fund will provide to the Insurer at least one complete copy of the
Mixed and Shared Funding Exemptive Application and any amendments thereto, all
prospectuses, Statements of Additional Information, reports, proxy statements
and other voting solicitation materials, and all amendments and supplements to
any of the above, that relate to the Fund or its shares, promptly after the
filing of such document with the SEC or other regulatory authorities.
6.6 The Insurer will provide to the Fund all prospectuses (which shall
include an offering memorandum if the Variable Contracts issued by the Insurer
or interests therein are not registered under the 1933 Act), Statements of
Additional Information, reports, solicitations for voting instructions relating
to the Fund, and all amendments or supplements to any of the above that relate
to the Variable Contracts issued by the Insurer or the Separate Accounts which
utilize the Fund as an underlying investment medium, promptly after the
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<PAGE>
filing of such document with the SEC or other regulatory authority.
6.7 For purposes of this Article VI, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use, in a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, computerized media, or other public
media), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees.
ARTICLE VII. Indemnification
7.1 Indemnification by the Insurer
7.1(a) The Insurer agrees to indemnify and hold harmless the Fund,
each of its Trustees and officers, any affiliated person of the Fund within the
meaning of Section 2(a)(3) of the 1940 Act, and the Distributor (collectively,
the "Indemnified Parties" for purposes of this Section 7.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Insurer) or litigation expenses (including legal and
other expenses), to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Insurer
and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus (which shall include an offering
memorandum) for the Variable Contracts issued by the Insurer or sales
literature for such Variable Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Insurer by or
on behalf of the Fund for use in the registration statement or
prospectus for the Variable Contracts issued by the Insurer or sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of such Variable Contracts or Fund shares; or
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<PAGE>
(ii) arise out of or as a result of any statement or
representation (other than statements or representations contained in
the registration statement, prospectus or sales literature of the Fund
not supplied by the Insurer or persons under its control) or wrongful
conduct of the Insurer or any of its affiliates, employees or agents
with respect to the sale or distribution of the Variable Contracts
issued by the Insurer or the Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Insurer; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Insurer in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Insurer;
except to the extent provided in Sections 7.1(b) and 7.1(c) hereof.
7.1(b) The Insurer shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Fund.
7.1(c) The Insurer shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the Insurer in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon such Indemnified Party (or after such
Party shall have received notice of such service on any designated agent), but
failure to notify the Insurer of any such claim shall not relieve the Insurer
from any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, the Insurer
shall be entitled to participate, at its own expense, in the defense of such
action. The Insurer also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Insurer to such party of the Insurer's election to assume the defense thereof,
the Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Insurer will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
14
<PAGE>
independently in connection with the defense thereof other than reasonable costs
of investigation.
7.1(d) The Indemnified Parties shall promptly notify the Insurer of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Variable Contracts issued by the
Insurer or the operation of the Fund.
7.2 Indemnification By the Distributor
7.2(a) The Distributor agrees to indemnify and hold harmless the
Insurer, its affiliated principal underwriter of the Variable Contracts, and
each of their directors and officers and any affiliated person of the Insurer
within the meaning of Section 2(a)(3) of the 1940 Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Distributor) or litigation expenses (including legal
and other expenses) to which the Indemnified Parties may become subject under
any statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Insurer
and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the Fund
(or any amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Distributor or the Fund or the designee of either by or on behalf
of the Insurer for use in the registration statement or prospectus for
the Fund or in sales literature (or any amendment or supplement) or
otherwise for use in the registration statement or prospectus for the
Fund or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Variable
Contracts issued by the Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or
representations (other than statements or representations contained in
the registration statement, prospectus or sales literature for the
Variable Contracts not supplied by the Distributor or any employees or
agents thereof) or wrongful conduct of the Fund or Distributor, or the
affiliates, employees, or agents of the Fund or the Distributor with
respect to the sale or distribution of the Variable Contracts issued
by the Insurer or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature covering the Variable Contracts issued
by the Insurer, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to
15
<PAGE>
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
to the Insurer by or on behalf of the Fund; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Distributor;
except to the extent provided in Sections 7.2(b) and 7.2(c) hereof.
7.2(b) The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Insurer or the
Separate Accounts.
7.2(c) The Distributor shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the Distributor in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Party shall have received notice of such service on any designated agent),
but failure to notify the Distributor of any such claim shall not relieve the
Distributor from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Distributor will be entitled to participate, at is own
expense, in the defense thereof. The Distributor also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Distributor to such party of the Distributor's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Distributor
will not be liable to such party under this Agreement for any legal or other
expense subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
7.2(d) The Insurer shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Variable Contracts
issued by the Insurer or the operation of the Separate Accounts.
7.3 Indemnification by the Fund
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<PAGE>
7.3(a) The Fund agrees to indemnify and hold harmless the Insurer, its
affiliated principal underwriter of the Variable Contracts, and each of their
directors and officers and any affiliated person of the Insurer within the
meaning of Section 2(a)(3) of the 1940 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Fund) or litigation expenses (including legal and other expenses)
to which the Indemnified Parties may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or litigation expenses are related to the sale or acquisition of the
Fund's shares or the Variable Contracts issued by the Insurer and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the Fund
(or any amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Distributor or the Fund or the designee of either by or on behalf
of the Insurer for use in the registration statement or prospectus for
the Fund or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Variable
Contracts issued by the Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations contained in
the registration statement, prospectus or sales literature for the
Variable Contracts not supplied by the Distributor or any employees or
agents thereof) or wrongful conduct of the Fund, or the affiliates,
employees, or agents of the Fund, with respect to the sale or
distribution of the Variable Contracts issued by the Insurer or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus or sales literature covering the Variable Contracts issued
by the Insurer, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Insurer by or on behalf of
the Fund; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Fund;
except to the extent provided in Sections 7.3(b) and 7.3(c) hereof.
7.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be
17
<PAGE>
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Indemnified Party's duties or by reason of the Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Insurer or the Separate Accounts.
7.3(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such party shall have notified the Fund in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon such Indemnified Party (or after such
Party shall have received notice of such service on any designated agent), but
failure to notify the Fund of any such claim shall not relieve the Fund from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Fund will be
entitled to participate, at its own expense, in the defense thereof. The Fund
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the Fund to such party of
the Fund's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Fund will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
7.3(d) The Insurer shall promptly notify the Fund of the commencement
of any litigation or proceedings against it or any of its officers or directors
in connection with the issuance or sale of the Variable Contracts issued by the
Insurer or the sale of the Fund's shares.
ARTICLE VIII. Applicable Law
8.1 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Pennsylvania.
8.2 This Agreement shall be subject to the provisions of the 1933, 1934,
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Mixed and Shared Funding Exemptive Order),
and the terms hereof shall be interpreted and construed in accordance therewith.
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ARTICLE IX. Termination
9.1 This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written notice
to the other parties; or
(b) at the option of the Insurer if shares of the Portfolios are not
reasonably available to meet the requirements of the Variable Contracts issued
by the Insurer, as determined by the Insurer, and upon prompt notice by the
Insurer to the other parties; or
(c) at the option of the Fund or the Distributor upon institution of
formal proceedings against the Insurer or its agent by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body regarding
the Insurer's duties under this Agreement or related to the sale of the Variable
Contracts issued by the Insurer, the operation of the Separate Accounts, or the
purchase of the Fund shares; or
(d) at the option of the Insurer upon institution of formal
proceedings against the Fund or the Distributor by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body; or
(e) upon requisite vote of the Variable Contract Owners having an
interest in the Separate Accounts (or any subaccounts thereof) to substitute the
shares of another investment company for the corresponding shares of the Fund or
a Portfolio in accordance with the terms of the Variable Contracts for which
those shares had been selected or serve as the underlying investment media; or
(f) in the event any of the shares of a Portfolio are not registered,
issued or sold in accordance with applicable state and/or federal law, or such
law precludes the use of such shares as the underlying investment media of the
Variable Contracts issued or to be issued by the Insurer; or
(g) by any party to the Agreement upon a determination by a majority
of the Trustees of the Fund, or a majority of its disinterested Trustees, that
an irreconcilable conflict, as described in Article IV hereof, exists; or
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(h) at the option of the Insurer if the Fund or a Portfolio fails to
meet the requirements under Subchapter M of the Code for qualification as a
Regulated Investment Company specified in Section 3.2 hereof or the
diversification requirements specified in Section 3.3 hereof.
9.2 Each party to this Agreement shall promptly notify the other parties to
the Agreement of the institution against such party of any such formal
proceedings as described in Sections 9.1(c) and (d) hereof. The Insurer shall
give 60 days prior written notice to the Fund of the date of any proposed vote
of Variable Contract Owners to replace the Fund's shares as described in Section
9.1(e) hereof.
9.3 Except as necessary to implement Variable Contract Owner initiated
transactions, or as required by state insurance laws or regulations, the Insurer
shall not redeem Fund shares attributable to the Variable Contracts issued by
the Insurer (as opposed to Fund shares attributable to the Insurer's assets held
in the Separate Accounts), and the Insurer shall not prevent Variable Contract
Owners from allocating payments to a Portfolio, until 60 days after the Insurer
shall have notified the Fund or Distributor of its intention to do so.
9.4 Notwithstanding any termination of this Agreement, the Fund and the
Distributor shall at the option of the Insurer continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Variable Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, based upon instructions from the owners of the
Existing Contracts, the Separate Accounts shall be permitted to reallocate
investments in the Portfolios of the Fund and redeem investments in the
Portfolios, and shall be permitted to invest in the Portfolios in the event that
owners of the Existing Contracts make additional purchase payments under the
Existing Contracts. If this Agreement terminates, the parties agree that
Sections 3.10, 7.1, 7.2, 7.3, 8.1, and 8.2, and, to the extent that all or a
portion of the assets of the Separate Accounts continue to be invested in the
Fund or any Portfolio of the Fund, Articles I, II, and IV and Sections 5.5 and
5.6 will remain in effect after termination.
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the
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address of such party set forth below or at such other address as such party may
from time to time specify in writing to the other party.
If to the Fund:
Insurance Management Series
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Distributor:
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Insurer:
ARTICLE XI: Miscellaneous
11.1 The Fund and the Insurer agree that if and to the extent Rule 6e-2 or
Rule 6e-3(T) under the 1940 Act is amended or if Rule 6e-3 is adopted in final
form, to the extent applicable, the Fund and the Insurer shall each take such
steps as may be necessary to comply with the Rule as amended or adopted in final
form.
11.2 A copy of the Fund's Agreement and Declaration of Trust is on file
with the Secretary of the Commonwealth of Massachusetts and notice is hereby
given that any agreements that are executed on behalf of the Fund by any Trustee
or officer of the Fund are executed in his or her capacity as Trustee or officer
and not individually. The obligations of this Agreement shall only be binding
upon the assets and property of the Fund and shall not be binding upon any
Trustee, officer or shareholder of the Fund individually.
11.3 Nothing in this Agreement shall impede the Fund's Trustees or
shareholders of the shares of the Fund's Portfolios from exercising any of the
rights provided to such Trustees or shareholders in the Fund's
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Agreement and Declaration of Trust, as amended, a copy of which will be provided
to the Insurer upon request.
11.4 Administrative services to Variable Contract Owners shall be the
responsibility of Insurer. Insurer, on behalf of its separate accounts will be
the sole shareholder of record of Fund shares. Fund and Distributor recognize
that they will derive a substantial savings in administrative expense by virtue
of having a sole shareholder rather than multiple shareholders. In
consideration of the administrative savings resulting from having a sole
shareholder rather than multiple shareholders, Distributor agrees to pay to
Insurer an amount computed at an annual rate of .25 of 1% of the average daily
net asset value of shares held in subaccounts for which Insurer provides
administrative services. Distributor's payments to Insurer are for
administrative services only and do not constitute payment in any manner for
investment advisory services.
11.5 It is understood that the name "Federated" or any derivative thereof
or logo associated with that name is the valuable property of the Distributor
and its affiliates, and that the Insurer has the right to use such name (or
derivative or logo) only so long as this Agreement is in effect. Upon
termination of this Agreement the Insurer shall forthwith cease to use such name
(or derivative or logo).
11.6 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.7 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.8 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
11.9 This Agreement may not be assigned by any party to the Agreement
except with the written consent of the other parties to the Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
INSURANCE MANAGEMENT SERIES
ATTEST: BY:
-------------------------- ---------------------------------
Name: Name:
---------------------------- -------------------------------
Title: Title:
--------------------------- ----------------------------
FEDERATED SECURITIES CORP.
ATTEST: BY:
-------------------------- ---------------------------------
Name: Name:
---------------------------- -------------------------------
Title: Title:
--------------------------- ----------------------------
[INSURER NAME]
ATTEST: BY:
-------------------------- ---------------------------------
Name: Name:
---------------------------- -------------------------------
Title: Title:
--------------------------- ----------------------------
23
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Exhibit 99.B8g
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this _____ day of ______________ , 2000, by and
among The Alger American Fund (the "Trust"), an open-end management investment
company organized as a Massachusetts business trust, _______________________, a
life insurance company organized as a corporation under the laws of the State of
_______________, (the "Company"), on its own behalf and on behalf of each
segregated asset account of the Company set forth in Schedule A, as may be
amended from time to time (the "Accounts"), and Fred Alger & Company,
Incorporated, a Delaware corporation, the Trust's distributor (the
"Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, the Trust and the Distributor desire that Trust shares be used as
an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, shares of beneficial interest in the Trust are divided into the
following series which are available for purchase by the Company for the
Accounts: Alger American Small Capitalization Portfolio, Alger American Growth
Portfolio, Alger American Income and Growth Portfolio, Alger American Balanced
Portfolio, Alger American MidCap Growth Portfolio, and Alger American Leveraged
AllCap Portfolio;
WHEREAS, the Trust has received an order from the Commission, dated
February 17, 1989 (File No. 812-7076), granting Participating Insurance
Companies and their separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Portfolios of the Trust to be sold to and held by variable annuity and variable
life insurance separate accounts of both affiliated and unaffiliated life
insurance companies (the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies and variable annuity contracts to be
issued by the Company under which the Portfolios are to be made available as
investment vehicles (the "Contracts");
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act unless an exemption from registration under
the 1940 Act is available and the Trust has been so advised;
WHEREAS, the Company desires to use shares of the Portfolios indicated on
Schedule A as investment vehicles for the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties agree
as follows:
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ARTICLE I.
Purchase and Redemption of Trust Portfolio Shares
1.1. For purposes of this Article I, the Company shall be the Trust's agent for
the receipt from each account of purchase orders and requests for
redemption pursuant to the Contracts relating to each Portfolio, provided
that the Company notifies the Trust of such purchase orders and requests
for redemption by 9:30 a.m. Eastern time on the next following Business
Day, as defined in Section 1.3.
1.2. The Trust shall make shares of the Portfolios available to the Accounts at
the net asset value next computed after receipt of a purchase order by the
Trust (or its agent), as established in accordance with the provisions of
the then current prospectus of the Trust describing Portfolio purchase
procedures. The Company will transmit orders from time to time to the
Trust for the purchase and redemption of shares of the Portfolios. The
Trustees of the Trust (the "Trustees") may refuse to sell shares of any
Portfolio to any person, or suspend or terminate the offering of shares of
any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or if, in the sole discretion of the
Trustees acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Portfolio.
1.3. The Company shall pay for the purchase of shares of a Portfolio on behalf
of an Account with federal funds to be transmitted by wire to the Trust,
with the reasonable expectation of receipt by the Trust by 2:00 p.m.
Eastern time on the next Business Day after the Trust (or its agent)
receives the purchase order. Upon receipt by the Trust of the federal
funds so wired, such funds shall cease to be the responsibility of the
Company and shall become the responsibility of the Trust for this purpose.
"Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Trust calculates its net asset value
pursuant to the rules of the Commission.
1.4. The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at the
net asset value next computed after receipt by the Trust (or its agent) of
the request for redemption, as established in accordance with the
provisions of the then current prospectus of the Trust describing Portfolio
redemption procedures. The Trust shall make payment for such shares in the
manner established from time to time by the Trust. Proceeds of redemption
with respect to a Portfolio will normally be paid to the Company for an
Account in federal funds transmitted by wire to the Company by order of the
Trust with the reasonable expectation of receipt by the Company by 2:00
p.m. Eastern time on the next Business Day after the receipt by the Trust
(or its agent) of the request for redemption. Such payment may be delayed
if, for example, the Portfolio's cash position so requires or if
extraordinary market conditions exist, but in no event shall payment be
delayed for a greater period than is permitted by the 1940 Act. The Trust
reserves the right to suspend the right of redemption, consistent with
Section 22(e) of the 1940 Act and any rules thereunder.
1.5. Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of the
Trust's Portfolios under Section 1.4 on any Business Day may be netted
against one another for the purpose of determining the amount of any wire
transfer.
1.6. Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or the
Accounts. Portfolio Shares purchased from the Trust will be recorded in
the appropriate title for each Account or the appropriate subaccount of
each Account.
1.7. The Trust shall furnish, on or before the ex-dividend date, notice to the
Company of any income
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dividends or capital gain distributions payable on the shares of any
Portfolio of the Trust. The Company hereby elects to receive all such
income dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of that Portfolio. The Trust shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.8. The Trust shall calculate the net asset value of each Portfolio on each
Business Day, as defined in Section 1.3. The Trust shall make the net
asset value per share for each Portfolio available to the Company or its
designated agent on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts
to make such net asset value per share available to the Company by 6:30
p.m. Eastern time each Business Day.
1.9. The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their segregated asset accounts, to
the Fund Sponsor or its affiliates and to such other entities as may be
permitted by Section 817(h) of the Code, the regulations hereunder, or
judicial or administrative interpretations thereof. No shares of any
Portfolio will be sold directly to the general public. The Company agrees
that it will use Trust shares only for the purposes of funding the
Contracts through the Accounts listed in Schedule A, as amended from time
to time.
1.10. The Trust agrees that all Participating Insurance Companies shall have the
obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding materially to those contained in
Section 2.9 and Article IV of this Agreement.
ARTICLE II.
Obligations of the Parties
2.1. The Trust shall prepare and be responsible for filing with the Commission
and any state regulators requiring such filing all shareholder reports,
notices, proxy materials (or similar materials such as voting instruction
solicitation materials), prospectuses and statements of additional
information of the Trust. The Trust shall bear the costs of registration
and qualification of shares of the Portfolios, preparation and filing of
the documents listed in this Section 2.1 and all taxes to which an issuer
is subject on the issuance and transfer of its shares.
2.2. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Trust to the Contract owners as required to be
distributed to such Contract owners under applicable federal or state law.
2.3. The Trust shall provide such documentation (including a final copy of the
Trust's prospectus as set in type or in camera-ready copy) and other
assistance as is reasonably necessary in order for the Company to print
together in one document the current prospectus for the Contracts issued
by the Company and the current prospectus for the Trust. The Trust shall
bear the expense of printing copies of its current prospectus that will be
distributed to existing Contract owners, and the Company shall bear the
expense of printing copies of the Trust's prospectus that are used in
connection with offering the Contracts issued by the Company.
2.4. The Trust and the Distributor shall provide (1) at the Trust's expense,
one copy of the Trust's current Statement of Additional Information
("SAI") to the Company and to any Contract owner who requests such SAI,
(2) at the Company's expense, such additional copies of the Trust's
current SAI as the Company shall reasonably request and that the Company
shall require in accordance with applicable law
3
<PAGE>
in connection with offering the Contracts issued by the Company.
2.5. The Trust, at its expense, shall provide the Company with copies of its
proxy material, periodic reports to shareholders and other communications
to shareholders in such quantity as the Company shall reasonably require
for purposes of distributing to Contract owners. The Trust, at the
Company's expense, shall provide the Company with copies of its periodic
reports to shareholders and other communications to shareholders in such
quantity as the Company shall reasonably request for use in connection
with offering the Contracts issued by the Company. If requested by the
Company in lieu thereof, the Trust shall provide such documentation
(including a final copy of the Trust's proxy materials, periodic reports
to shareholders and other communications to shareholders, as set in type
or in camera-ready copy) and other assistance as reasonably necessary in
order for the Company to print such shareholder communications for
distribution to Contract owners.
2.6. The Company agrees and acknowledges that the Distributor is the sole owner
of the name and mark "Alger" and that all use of any designation comprised
in whole or part of such name or mark under this Agreement shall inure to
the benefit of the Distributor. Except as provided in Section 2.5, the
Company shall not use any such name or mark on its own behalf or on behalf
of the Accounts or Contracts in any registration statement, advertisement,
sales literature or other materials relating to the Accounts or Contracts
without the prior written consent of the Distributor. Upon termination of
this Agreement for any reason, the Company shall cease all use of any such
name or mark as soon as reasonably practicable.
2.7. The Company shall furnish, or cause to be furnished, to the Trust or its
designee a copy of each Contract prospectus and/or statement of additional
information describing the Contracts, each report to Contract owners,
proxy statement, application for exemption or request for no-action letter
in which the Trust or the Distributor is named contemporaneously with the
filing of such document with the Commission. The Company shall furnish, or
shall cause to be furnished, to the Trust or its designee each piece of
sales literature or other promotional material in which the Trust or the
Distributor is named, at least five Business Days prior to its use. No
such material shall be used if the Trust or its designee reasonably
objects to such use within three Business Days after receipt of such
material.
2.8. The Company shall not give any information or make any representations or
statements on behalf of the Trust or concerning the Trust or the
Distributor in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from
the registration statement or prospectus for the Trust shares (as such
registration statement and prospectus may be amended or supplemented from
time to time), annual and semi-annual reports of the Trust, Trust-
sponsored proxy statements, or in sales literature or other promotional
material approved by the Trust or its designee, except as required by
legal process or regulatory authorities or with the prior written
permission of the Trust, the Distributor or their respective designees.
The Trust and the Distributor agree to respond to any request for approval
on a prompt and timely basis. The Company shall adopt and implement
procedures reasonably designed to ensure that "broker only" materials
including information therein about the Trust or the Distributor are not
distributed to existing or prospective Contract owners.
2.9. The Trust shall use its best efforts to provide the Company, on a timely
basis, with such information about the Trust, the Portfolios and the
Distributor, in such form as the Company may reasonably require, as the
Company shall reasonably request in connection with the preparation of
registration statements, prospectuses and annual and semi-annual reports
pertaining to the Contracts.
2.10. The Trust and the Distributor shall not give, and agree that no affiliate
of either of them shall give, any
4
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information or make any representations or statements on behalf of the
Company or concerning the Company, the Accounts or the Contracts other
than information or representations contained in and accurately derived
from the registration statement or prospectus for the Contracts (as such
registration statement and prospectus may be amended or supplemented from
time to time), or in materials approved by the Company for distribution
including sales literature or other promotional materials, except as
required by legal process or regulatory authorities or with the prior
written permission of the Company. The Company agrees to respond to any
request for approval on a prompt and timely basis.
2.11. So long as, and to the extent that, the Commission interprets the 1940 Act
to require pass-through voting privileges for Contract owners, the Company
will provide pass-through voting privileges to Contract owners whose cash
values are invested, through the registered Accounts, in shares of one or
more Portfolios of the Trust. The Trust shall require all Participating
Insurance Companies to calculate voting privileges in the same manner and
the Company shall be responsible for assuring that the Accounts calculate
voting privileges in the manner established by the Trust. With respect to
each registered Account, the Company will vote shares of each Portfolio of
the Trust held by a registered Account and for which no timely voting
instructions from Contract owners are received in the same proportion as
those shares for which voting instructions are received. The Company and
its agents will in no way recommend or oppose or interfere with the
solicitation of proxies for Portfolio shares held to fund the Contacts
without the prior written consent of the Trust, which consent may be
withheld in the Trust's sole discretion. The Company reserves the right,
to the extent permitted by law, to vote shares held in any Account in its
sole discretion.
2.12. The Company and the Trust will each provide to the other information about
the results of any regulatory examination relating to the Contracts or the
Trust, including relevant portions of any "deficiency letter" and any
response thereto.
2.13. No compensation shall be paid by the Trust to the Company, or by the
Company to the Trust, under this Agreement (except for specified expense
reimbursements). However, nothing herein shall prevent the parties hereto
from otherwise agreeing to perform, and arranging for appropriate
compensation for, other services relating to the Trust, the Accounts or
both.
ARTICLE III.
Representations and Warranties
3.1. The Company represents and warrants that it is an insurance company duly
organized and in good standing under the laws of the State of
_______________ and that it has legally and validly established each
Account as a segregated asset account under such law as of the date set
forth in Schedule A, and that _________________________________, the
principal underwriter for the Contracts, is registered as a broker-dealer
under the Securities Exchange Act of 1934 and is a member in good standing
of the National Association of Securities Dealers, Inc.
3.2. The Company represents and warrants that it has registered or, prior to
any issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act and
cause each Account to remain so registered to serve as a segregated asset
account for the Contracts, unless an exemption from registration is
available.
3.3. The Company represents and warrants that the Contracts will be registered
under the 1933 Act unless an exemption from registration is available prior
to any issuance or sale of the Contracts; the Contracts will
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be issued and sold in compliance in all material respects with all
applicable federal and state laws; and the sale of the Contracts shall
comply in all material respects with state insurance law suitability
requirements.
3.4. The Trust represents and warrants that it is duly organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act and the
rules and regulations thereunder.
3.5. The Trust and the Distributor represent and warrant that the Portfolio
shares offered and sold pursuant to this Agreement will be registered under
the 1933 Act and sold in accordance with all applicable federal and state
laws, and the Trust shall be registered under the 1940 Act prior to and at
the time of any issuance or sale of such shares. The Trust shall amend its
registration statement under the 1933 Act and the 1940 Act from time to
time as required in order to effect the continuous offering of its shares.
The Trust shall register and qualify its shares for sale in accordance with
the laws of the various states only if and to the extent deemed advisable
by the Trust.
3.6. The Trust represents and warrants that the investments of each Portfolio
will comply with the diversification requirements for variable annuity,
endowment or life insurance contracts set forth in Section 817(h) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations thereunder, including without limitation Treasury Regulation
1.817-5, and will notify the Company immediately upon having a reasonable
basis for believing any Portfolio has ceased to comply or might not so
comply and will immediately take all reasonable steps to adequately
diversify the Portfolio to achieve compliance within the grace period
afforded by Regulation 1.817-5.
3.7. The Trust represents and warrants that it is currently qualified as a
"regulated investment company" under Subchapter M of the Code, that it will
make every effort to maintain such qualification and will notify the
Company immediately upon having a reasonable basis for believing it has
ceased to so qualify or might not so qualify in the future.
3.8. The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of a
Portfolio shall at all times be covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount not less than
the minimum coverage required by Rule 17g-1 or other applicable regulations
under the 1940 Act. Such bond shall include coverage for larceny and
embezzlement and be issued by a reputable bonding company.
3.9. The Distributor represents that it is duly organized and validly existing
under the laws of the State of Delaware and that it is registered, and will
remain registered, during the term of this Agreement, as a broker-dealer
under the Securities Exchange Act of 1934 and is a member in good standing
of the National Association of Securities Dealers, Inc.
ARTICLE IV.
Potential Conflicts
4.1. The parties acknowledge that a Portfolio's shares may be made available
for investment to other Participating Insurance Companies. In such event,
the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. A material irreconcilable conflict may
arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative
6
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letter, or any similar action by insurance, tax, or securities regulatory
authorities; (c) an administrative or judicial decision in any relevant
proceeding; (d) the manner in which the investments of any Portfolio are
being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract
owners. The Trust shall promptly inform the Company of any determination by
the Trustees that a material irreconcilable conflict exists and of the
implications thereof.
4.2. The Company agrees to report promptly any potential or existing conflicts
of which it is aware to the Trustees. The Company will assist the Trustees
in carrying out their responsibilities under the Shared Funding Exemptive
Order by providing the Trustees with all information reasonably necessary
for and requested by the Trustees to consider any issues raised including,
but not limited to, information as to a decision by the Company to
disregard Contract owner voting instructions. All communications from the
Company to the Trustees may be made in care of the Trust.
4.3. If it is determined by a majority of the Trustees, or a majority of the
disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of contract owners, the Company shall, in cooperation
with other Participating Insurance Companies whose contract owners are also
affected, at its own expense and to the extent reasonably practicable (as
determined by the Trustees) take whatever steps are necessary to remedy or
eliminate the material irreconcilable conflict, which steps could include:
(a) withdrawing the assets allocable to some or all of the Accounts from
the Trust or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Trust, or submitting the question of whether or not such segregation should
be implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e., annuity
contract owners, life insurance contract owners, or variable contract
owners of one or more Participating Insurance Companies) that votes in
favor of such segregation, or offering to the affected Contract owners the
option of making such a change; and (b) establishing a new registered
management investment company or managed separate account.
4.4. If a material irreconcilable conflict arises because of a decision by the
Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the
Company may be required, at the Trust's election, to withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect
to such Account; provided, however that such withdrawal and termination
shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Any such withdrawal and termination must take place within six
(6) months after the Trust gives written notice that this provision is
being implemented. Until the end of such six (6) month period, the Trust
shall continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Trust.
4.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Trust and terminate this Agreement
with respect to such Account within six (6) months after the Trustees
inform the Company in writing that the Trust has determined that such
decision has created a material irreconcilable conflict; provided, however,
that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by
a majority of the disinterested Trustees. Until the end of such six (6)
month period, the Trust shall continue to accept and implement orders by
the Company for the purchase and redemption of shares of the Trust.
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4.6. For purposes of Section 4.3 through 4.6 of this Agreement, a majority of
the disinterested Trustees shall determine whether any proposed action
adequately remedies any material irreconcilable conflict, but in no event
will the Trust be required to establish a new funding medium for any
Contract. The Company shall not be required to establish a new funding
medium for the Contracts if an offer to do so has been declined by vote of
a majority of Contract owners materially adversely affected by the material
irreconcilable conflict. In the event that the Trustees determine that any
proposed action does not adequately remedy any material irreconcilable
conflict, then the Company will withdraw the Account's investment in the
Trust and terminate this Agreement within six (6) months after the Trustees
inform the Company in writing of the foregoing determination; provided,
however, that such withdrawal and termination shall be limited to the
extent required by any such material irreconcilable conflict as determined
by a majority of the disinterested Trustees.
4.7. The Company shall at least annually submit to the Trustees such reports,
materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Shared
Funding Exemptive Order, and said reports, materials and data shall be
submitted more frequently if reasonably deemed appropriate by the Trustees.
4.8. If and to the extent that Rule 6e-3(T) is amended, or Rule 6e-3 is
adopted, to provide exemptive relief from any provision of the 1940 Act or
the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive
Order, then the Trust and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rule
6e-3(T), as amended, or Rule 6e-3, as adopted, to the extent such rules are
applicable.
ARTICLE V.
Indemnification
5.1. Indemnification By the Company. The Company agrees to indemnify and hold
harmless the Distributor, the Trust and each of its Trustees, officers,
employees and agents and each person, if any, who controls the Trust within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 5.1) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of the Company, which consent shall not be unreasonably
withheld) or expenses (including the reasonable costs of investigating or
defending any alleged loss, claim, damage, liability or expense and
reasonable legal counsel fees incurred in connection therewith)
(collectively, "Losses"), to which the Indemnified Parties may become
subject under any statute or regulation, or at common law or otherwise,
insofar as such Losses are related to the sale or acquisition of the
Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in a registration statement
or prospectus for the Contracts or in the Contracts themselves or in
sales literature generated or approved by the Company on behalf of the
Contracts or Accounts (or any amendment or supplement to any of the
foregoing) (collectively, "Company Documents" for the purposes of this
Article V), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately
derived from written information furnished to the Company by or on
behalf of the Trust for use in Company Documents or otherwise for use
in connection
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with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations (other than
statements or representations contained in and accurately derived from
Trust Documents as defined in Section 5.2(a)) or wrongful conduct of
the Company or persons under its control, with respect to the sale or
acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Trust Documents as defined
in Section 5.2(a) or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written information
furnished to the Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company to provide the
services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise out of
or result from any other material breach of this Agreement by the
Company; or
(f) arise out of or result from the provision by the Company to the Trust
of insufficient or incorrect information regarding the purchase or
sale of shares of any Portfolio, or the failure of the Company to
provide such information on a timely basis.
5.2. Indemnification by the Distributor. The Distributor agrees to indemnify
and hold harmless the Company and each of its directors, officers,
employees, and agents and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for the purposes of this Section 5.2) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Distributor, which consent shall
not be unreasonably withheld) or expenses (including the reasonable costs
of investigating or defending any alleged loss, claim, damage, liability or
expense and reasonable legal counsel fees incurred in connection therewith)
(collectively, "Losses"), to which the Indemnified Parties may become
subject under any statute or regulation, or at common law or otherwise,
insofar as such Losses are related to the sale or acquisition of the
Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration
statement or prospectus for the Trust (or any amendment or supplement
thereto) (collectively, "Trust Documents" for the purposes of this
Article V), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately
derived from written information furnished to the Distributor or the
Trust by or on behalf of the Company for use in Trust Documents or
otherwise for use in connection with the sale of the Contracts or
Trust shares; or
(b) arise out of or result from statements or representations (other than
statements or representations contained in and accurately derived form
Company Documents) or wrongful conduct of the
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Distributor or persons under its control, with respect to the sale or
acquisition of the Contracts or Portfolio shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Company Documents or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading if such statement or omission was made in reliance upon and
accurately derived from written information furnished to the Company
by or on behalf of the Trust; or
(d) arise out of or result from any failure by the Distributor or the
Trust to provide the services or furnish the materials required under
the terms of this Agreement; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by the Distributor or the Trust in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Distributor or the Trust.
5.3. None of the Company, the Trust or the Distributor shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable, with
respect to any Losses incurred or assessed against an Indemnified Party
that arise from such Indemnified Party's willful misfeasance, bad faith or
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement.
5.4. None of the Company, the Trust or the Distributor shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable, with
respect to any claim made against an Indemnified party unless such
Indemnified Party shall have notified the other party in writing within a
reasonable time after the summons, or other first written notification,
giving information of the nature of the claim shall have been served upon
or otherwise received by such Indemnified Party (or after such Indemnified
Party shall have received notice of service upon or other notification to
any designated agent), but failure to notify the party against whom
indemnification is sought of any such claim shall not relieve that party
from any liability which it may have to the Indemnified Party in the
absence of Sections 5.1 and 5.2.
5.5. In case any such action is brought against an Indemnified Party, the
indemnifying party shall be entitled to participate, at its own expense, in
the defense of such action. The indemnifying party also shall be entitled
to assume the defense thereof, with counsel reasonably satisfactory to the
party named in the action. After notice from the indemnifying party to the
Indemnified Party of an election to assume such defense, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained
by it, and the indemnifying party will not be liable to the Indemnified
Party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
ARTICLE VI.
Termination
6.1. This Agreement shall terminate:
(a) at the option of any party upon 60 days advance written notice to the
other parties, unless a shorter time is agreed to by the parties;
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(b) at the option of the Trust or the Distributor if the Contracts issued
by the Company cease to qualify as annuity contracts or life insurance
contracts, as applicable, under the Code or if the Contracts are not
registered, issued or sold in accordance with applicable state and/or
federal law; or
(c) at the option of any party upon a determination by a majority of the
Trustees of the Trust, or a majority of its disinterested Trustees,
that a material irreconcilable conflict exists; or
(d) at the option of the Company upon institution of formal proceedings
against the Trust or the Distributor by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body
regarding the Trust's or the Distributor's duties under this Agreement
or related to the sale of Trust shares or the operation of the Trust;
or
(e) at the option of the Company if the Trust or a Portfolio fails to meet
the diversification requirements specified in Section 3.6 hereof; or
(f) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Variable
Contracts issued by the Company, as determined by the Company, and
upon prompt notice by the Company to the other parties; or
(g) at the option of the Company in the event any of the shares of the
Portfolio are not registered, issued or sold in accordance with
applicable state and/or federal law, or such law precludes the use of
such shares as the underlying investment media of the Variable
Contracts issued or to be issued by the Company; or
(h) at the option of the Company, if the Portfolio fails to qualify as a
Regulated Investment Company under Subchapter M of the Code; or
(i) at the option of the Distributor if it shall determine in its sole
judgment exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in its
business, operations, financial condition or prospects since the date
of this Agreement or is the subject of material adverse publicity.
6.2. Notwithstanding any termination of this Agreement, the Trust shall, at the
option of the Company, continue to make available additional shares of any
Portfolio and redeem shares of any Portfolio pursuant to the terms and
conditions of this Agreement for all Contracts in effect on the effective
date of termination of this Agreement.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.9 shall survive
the termination of this Agreement as long as shares of the Trust are held
on behalf of Contract owners in accordance with Section 6.2.
ARTICLE VII.
Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
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If to the Trust or its Distributor:
Fred Alger Management, Inc.
30 Montgomery Street
Jersey City, NJ 07302
Attn: Gregory S. Duch
If to the Company:
ARTICLE VIII.
Miscellaneous
8.1. The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2. This Agreement may be executed in two or more counterparts, each of which
taken together shall constitute one and the same instrument.
8.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York. It shall
also be subject to the provisions of the federal securities laws and the
rules and regulations thereunder and to any orders of the Commission
granting exemptive relief therefrom and the conditions of such orders.
Copies of any such orders shall be promptly forwarded by the Trust to the
Company.
8.5. All liabilities of the Trust arising, directly or indirectly, under this
Agreement, of any and every nature whatsoever, shall be satisfied solely
out of the assets of the Trust and no Trustee, officer, agent or holder of
shares of beneficial interest of the Trust shall be personally liable for
any such liabilities.
8.6. Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Commission, the
National Association of Securities Dealers, Inc. and state insurance
regulators) and shall permit such authorities reasonable access to its
books and records in connection with any investigation or inquiry relating
to this Agreement or the transactions contemplated hereby.
8.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
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8.8. This Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other
party.
8.10. No provisions of this Agreement may be amended or modified in any manner
except by a written agreement properly authorized and executed by both
parties.
8.11. Each party hereto shall, except as required by law or otherwise permitted
by this Agreement, treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto, and shall not disclose
such confidential information without the written consent of the affected
party unless such information has become publicly available.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Participation Agreement as of the date and year first above
written.
Fred Alger & Company, Incorporated
By:_________________________________
Name:
Title:
The Alger American Fund
By:_________________________________
Name:
Title:
By:___________________________________
Name:
Title:
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SCHEDULE A
The Alger American Fund:
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American Income and Growth Portfolio
Alger American Small Capitalization Portfolio
Alger American Balanced Portfolio
Alger American MidCap Growth Portfolio
The Accounts:
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